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CSO - Capital Shopping Centres Group Plc - Interim report for the half year

Release Date: 02/08/2011 08:02
Code(s): CSO
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CSO - Capital Shopping Centres Group Plc - Interim report for the half year ended 30 June 2011 CAPITAL SHOPPING CENTRES GROUP PLC (Registration number UK3685527) ISIN Code: GB0006834344 JSE Code: CSO Issuer Code: CSCSCG 2 August 2011 CAPITAL SHOPPING CENTRES GROUP PLC INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2011 Six months ended 30 June 2011 (2) 2010 Change
Net rental income from continuing operations (GBPm) 178 135 Up 32% Underlying earnings (GBPm) 66 43 Up 53% Underlying EPS (pence) 8.0 7.0 Up 14% Interim dividend per share (pence) 5.0 5.0 Unchanged Property revaluation surplus (GBPm) 58 348 n/a IFRS profit (GBPm) 193 291 Down 34% 30 June 31 December
2011 2010 Change 391 390 Up 1p NAV per share (diluted, adjusted) (pence) Market value of investment properties (GBPm) 6,861 5,099 Up 35% Net external debt (GBPm) 3,286 2,437 Up 35% Debt to assets ratio (per cent) 48 48 Unchanged (1) Please refer to glossary for definition of terms (2) 30 June 2011 income data includes Trafford Centre results for the 5 month period since completion SOUND OPERATING PERFORMANCE AND PROGRESS WITH 2011 PRIORITIES Sound operating performance in challenging retail environment: - occupancy remains high at 97 per cent - continuing footfall growth, up 3 per cent for the third consecutive year - 80 long term lettings secured GBP5m additional rent, in aggregate at 98 per cent of ERV - short term lets are a continuing feature of the market given economic conditions Progress on CSC`s three priorities for 2011: - growth in like-for-like net rental income - up 6 per cent mostly reflecting 2010 letting activity - progress with active management projects through planning, letting and construction. Major extensions moving towards planning consents - The Trafford Centre performing strongly post acquisition - footfall up 8 per cent - and integrated into Group`s overall activities Financial performance: - underlying earnings increased 53 per cent from GBP43 million to GBP66 million with net rental income growing from GBP135 million to GBP178 million including 5 months of Trafford Centre operations - underlying earnings per share increased 14 per cent to 8.0 pence - total financial return including dividends 3 per cent - robust financial position with debt to assets ratio unchanged at 48 per cent, interest cover improved to 1.7 times Valuation performance: - 1.2 per cent like-for-like valuation increase (IPD 1.1 per cent increase) reflecting 11bp yield shift - Trafford Centre valuation unchanged David Fischel, Chief Executive Officer of Capital Shopping Centres Group PLC, commented: "With 6 per cent growth in like-for-like net rental income and increased footfall at our centres, CSC has delivered a sound operating performance in the first half of 2011. The Trafford Centre has proved an excellent addition and the Group has a range of active management projects and extensions in the pipeline to deliver future growth. Although the economic environment remains challenging, large centres such as those owned by CSC with a strong catering and leisure component are continuing to outperform". Contents: Highlights Operating and Financial Review Directors` Responsibility Statement Independent Review Report Unaudited Financial Information Investment and Development Property Other Information Glossary Top Ten Properties Enquiries: Capital Shopping Centres Group PLC: David Fischel Chief Executive +44 (0)20 7960 1207 Matthew Roberts Finance Director +44 (0)20 7960 1353 Kate Bowyer Investor Relations Manager +44 (0)20 7960 1250 Public relations: UK: Michael Sandler/Wendy Baker, Hudson Sandler +44 (0)20 7796 4133
SA: Morne Reinders, College Hill +27 (0)11 447 3030 A presentation to analysts and investors will take place at The Brewery, Chiswell Street, London EC1Y 4SD at 09.30BST on 2 August 2011. The presentation will also be available to international analysts and investors through a live audio call and webcast. The presentation and the full press release will be available for download from our website www.capital-shopping- centres.co.uk. NOTES TO EDITORS Capital Shopping Centres is the leading specialist UK regional shopping centre REIT Capital Shopping Centres Group PLC (CSC) is the UK`s leading specialist developer, manager and owner of pre-eminent regional shopping centres. With a portfolio of 14 centres representing 16 million sq. ft. of retail space and a valuation of GBP6.9 billion CSC`s assets attract well over 300 million customers a year. CSC`s assets comprise five major out-of-town centres including four of the UK`s top six - The Trafford Centre, Manchester; Lakeside, Thurrock; Metrocentre, Gateshead; Braehead, Glasgow and The Mall at Cribbs Causeway, Bristol - and nine in- town centres including centres in prime destinations such as Cardiff, Manchester, Newcastle, Norwich and Nottingham. With a dedicated and skilled management team CSC aims to be the landlord of choice for retailers and to provide compelling destinations for shoppers. It is a responsible and environmentally conscious participant in the communities where it invests. In April 2011 CSC was recognised as the UK`s Top Shopping Centre Investment Manager in Going Shopping 2011 - The Definitive Guide to Shopping Centres published by Trevor Wood Associates. For further information see www.capital-shopping-centres.co.uk This announcement contains "forward-looking statements" regarding the belief or current expectations of Capital Shopping Centres Group PLC, its Directors and other members of its senior management about Capital Shopping Centres Group PLC`s businesses, financial performance and results of operations. These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of Capital Shopping Centres Group PLC and are difficult to predict, that may cause actual results, performance or developments to differ materially from any future results, performance or developments expressed or implied by the forward-looking statements. These forward-looking statements speak only as at the date of this announcement. Except as required by applicable law, Capital Shopping Centres Group PLC makes no representation or warranty in relation to them and expressly disclaims any obligation to update or revise any forward- looking statements contained herein to reflect any change in Capital Shopping Centres Group PLC`s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Any information contained in this announcement on the price at which shares or other securities in Capital Shopping Centres Group PLC have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance. OPERATING AND FINANCIAL REVIEW OPERATING REVIEW Introduction Capital Shopping Centres has delivered a sound operating performance in the first half. We have made good progress on our three priorities for 2011: - like-for-like net rental income has grown 6.1 per cent, an increase from the 2.1 per cent recorded in 2010, as the effect of two years of intensive letting activity is now being seen in the income statement. - value has been created from a range of active management projects which have delivered strong returns at relatively low risk with further projects in the pipeline at most CSC centres, while more substantial extension projects have moved from the feasibility stage to detailed planning. - The Trafford Centre has proved an excellent addition. The Trafford Centre management team has taken on increased responsibilities for other centres within the Group and has made a positive start on taking forward opportunities for these assets. Over some 40 years of developing, owning and managing regional shopping centres in the UK, CSC has focused on the highest quality centres with the best long term potential - strong catchment and demographics, exceptional accessibility, compelling retail, leisure and catering mix - with a view to generating sustained growth in like-for-like net rental income. Our centres have evolved to reflect latest design and city planning concepts and adapted to continuous change in consumer preferences and retailers` requirements. As a result CSC`s shopping centres suffered less and recovered quicker from the 2008/09 downturn than secondary centres, emerging with high occupancy and a refreshed combination of on-trend UK brands and exciting international retailers. (GRAPHIC REMOVED - PLEASE SEE PAGE 3 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK) After the setback in the UK`s economic recovery in the last quarter of 2010, it became clear during the first half of 2011 that national growth for the period would be weak at best which has been confirmed by reported GDP growth of 0.5 per cent for the first quarter and 0.2 per cent for the second. This has inevitably affected the occupier market and has slowed the pace of improvement in the terms of lettings. Established retailers have been facing the combined effect of reduced household incomes, product cost inflation and the challenge of online retailing and have therefore been carefully analysing their space requirements, with a structural shift towards top destinations offering a broader leisure experience as well as the full range of comparison retail offer. A number of retailers have recently set out plans to reduce their overall space requirement while focusing their attentions more on flagship locations. Dynamic retailers realise that in order to achieve the best growth throughout their multi-channel offer, they need their brand and full range to be showcased where footfall is strongest. International retailers entering the UK have also tended to establish their brands in the most prime destinations, particularly large regional shopping centres near and within the top cities. Consumer confidence has been low throughout the period, reflecting a reduction in real wages, job insecurity and further house price weakness. The dent made by austerity measures and petrol prices in household disposable incomes is driving consumers to seek more value for their money, in the broader sense of overall experience as well as product. With the ability to research and buy online, customers are knowledgeable about product and price and do not need to travel to a shop unless they get something else - convenience, physical comparison, a social experience, a good day out. With four of the UK`s top six out of town shopping centres, including The Trafford Centre, Manchester acquired earlier this year, and ten of the UK`s top 25 shopping centres, CSC`s portfolio is focused on those centres which are best placed to gain from this structural change. Footfall in CSC`s centres in the first six months of 2011 has shown further growth in line with the consistent increases experienced over the last three years, a demonstration of the defensive nature of the business with the visit to a prime retail destination a core recreational activity. The pipeline of new shopping centre space was dramatically curtailed by the property market downturn of 2008 and 2009 with only a limited number of openings in 2011. A characteristic of the industry is a long lead time for bringing new space on stream. As a result, 2012 will be the first year with no significant new openings since the start of the shopping centre industry some forty years ago, with a further low level of committed openings anticipated in 2013 and beyond. This lack of supply is a positive factor for existing owners of top quality assets such as CSC. Property investment market background Robust levels of demand for prime shopping centres coupled with limited stock availability provide considerable support to valuations. Unlike prime Central London assets, prime regional shopping centre valuations are still well below peak levels. With top quality assets rarely coming to market, downward pressure on yields remains a positive factor for valuations, particularly given the current low level of interest rates. Against this backdrop and in the absence of prime product, certain of the stronger secondary shopping centres recently brought to the market have attracted encouraging interest. Property valuations First Second First Second First half half half half half 2011 2010 2010 2009 2009
Revaluation surplus/(deficit) - like-for-like 1.2% 3.1% 7.7% 2.6% (12.8)% IPD monthly index retail capital growth 1.1% 1.1% 6.3% 11.3% (14.0)% Nominal equivalent yield - like-for-like 6.19% 6.30% 6.52% 7.08% 7.37% Nominal equivalent yield - all centres 6.06% Like-for-like change in nominal equivalent yield ("yield shift") -11bp -22bp -56bp -29bp +70bp Initial yield - like-for-like 5.23% 5.32% 5.35% 5.70% 6.30% Initial yield - all centres 5.20% Valuation effect of change in aggregate ERV - - (1)% (1)% (3)% The strongest valuation performance came from Metrocentre, reflecting steps taken to manage pro-actively the forthcoming lease expiry profile and Manchester Arndale where underlying rental levels have improved. The Trafford Centre valuation is unchanged since the acquisition at the end of January 2011. ERV in aggregate is unchanged in the period, as rental value growth in some locations, driven by active management or particular sectors such as catering, has been offset by market-wide reductions in some less prime pitches. The Group`s independent valuers calculate the ERV of each centre unit by unit on the basis of the evidence of lettings, applying their judgement to determine the reversion. Operating performance: Despite a difficult trading environment, CSC has delivered a sound operating performance. - Like-for-like net rental income is up 6 per cent or GBP8 million compared to the same period of 2010 reflecting lettings undertaken throughout 2010 and further openings at Cardiff. - Occupancy has remained high at 97 per cent (31 March 2011 - 97 per cent, 31 December 2010 - 98 per cent). The slight increase in vacancy reflects a number of tenant failures around the June quarter date and the seasonal effect following Christmas. - Footfall in CSC`s centres is estimated to be up 3 per cent year-on-year for the third consecutive year, while Experian data indicates UK retail footfall overall has fallen by around 1 per cent. - 80 long term lettings have been achieved in the period for GBP18 million annual rent, an increase of GBP5 million over previous rent for those units and in aggregate around 2 per cent below ERV. A number of positive deals on larger units in bigger centres have enhanced the overall terms achieved in the period, with the average of other deals remaining in the range of 90 per cent to 95 per cent of ERV. Long term lettings in the period include 18 new retailers to CSC centres including 4 international brands. We continue to see competitive demand for space in CSC`s centres for larger units suitable for flagship stores and well located smaller units for catering outlets. CSC has a strong track record of creative active management and professional project execution to deliver appropriately configured space to meet retailers` requirements. Specific examples of income-enhancing new flagship stores are mentioned by centre below. - A strong growth area for CSC has been the increase in requirements for catering space. Catering operators now account for 8 per cent of CSC`s total rent and some 370 units out of CSC`s 2,400. With current deals being struck at higher levels, the aggregate rent of catering units across all CSC centres now averages GBP43 per square foot. - At 30 June 2011 CSC had 240 short-term leases which represented 3 per cent of passing rent, 5 per cent of ERV and 3 per cent of space (31 December 2010 - 202 leases, 2 per cent of passing rent, 7 per cent of ERV, 4 per cent of space). This remains a challenging area, with the slower progress than anticipated in achieving long term re-lettings closer to ERV reflecting economic conditions in the period. - Retailer sales in CSC centres increased by an estimated 3 per cent in total out-performing the benchmark on a like-for- like basis. National statistics have continued to confirm the evident weak retail market conditions with the BRC like-for- like non-food index indicating declines of 1.1 and 0.6 per cent respectively for the first and second quarters. - Estimated occupancy cost ratio (rent to retailer turnover) of 13.3 per cent excluding anchor stores remains unchanged from 2010. Estimates including The Trafford Centre and St. David`s Cardiff for the first time indicate a slightly higher ratio of 13.7 per cent. - After 2010`s low level of retailer failures, the first half of 2011 has seen a return to a more typical level. The impact on CSC`s first half year results has been small at 2.0 per cent of rent roll with GBP1.1 million of debt and incentives written off (first half 2010 1.4 per cent and GBP1.7 million. Tenants occupying 61 units and accounting for 2.0 per cent of rent entered administration in the first half (2010 - 41 units and 1.4 per cent of rent). At the time of writing over half the units affected in 2011 are currently trading. (GRAPHIC REMOVED - PLEASE SEE PAGE 5 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK) The chart above illustrates the valuers` assessment of reversion across the enlarged Group. - Annual property income has increased from GBP297 million to GBP382 million in the period. The acquisition of The Trafford Centre added GBP85 million. Letting activity and ending of rent free periods of GBP8 million was offset by expiries and tenant failures. - The reversion of 19 per cent of current rent is spread across the Group with two thirds of the upside concentrated in the top five centres by value. - The largest component of the uplift (GBP43 million) is anticipated to arise on re-letting of expiries, around a third of which relates to short-term leases. The uplift relating to vacancies has increased marginally in the period due to tenant failures. - The valuers` expectation is for two thirds of the reversion to be captured within three years, 80 per cent within five. Major assets - activity and value creation Following the acquisition of The Trafford Centre, 64 per cent of CSC`s asset valuation and 62 per cent of its annual property income are attributable to CSC`s 5 pre-eminent out-of-town regional shopping centres including 4 of the UK`s top 6. A further 21 per cent of CSC`s asset valuation is attributable to the premier in-town shopping centres of 5 of the UK`s top cities and the remaining 15 per cent comprises 4 other centres in the UK`s top 50. (GRAPHICS REMOVED - PLEASE SEE PAGE 6 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK) A key area of focus for 2011 is value creation through continued enhancement of all CSC`s centres as retail and leisure destinations by progressing development and active management opportunities. Reference was made in the Annual Report to three large opportunities for around GBP500 million of capital expenditure and GBP128 million of smaller active management projects. The latter tend to be focused on specific retailer needs and as such are characterised by relatively attractive returns at low risk. Updates for the projects are given below and, for illustration, the six examples at Lakeside, Metrocentre, Braehead, Eldon Square, Newcastle and Glades, Bromley account for GBP39 million of capital expenditure and are expected to generate an average stabilised initial yield on cost of 10 per cent. The Trafford Centre: Market value - GBP1,650 million, annual property income GBP85 million The Trafford Centre is one of the most successful retail and leisure destinations in the UK. It is located approximately six miles west of Manchester in the North West of England, immediately adjoining the M60 motorway. Anchored by Selfridges, Debenhams, John Lewis and Marks & Spencer, The Trafford Centre opened to the public in 1998 and annual visitor numbers have grown consistently since then. It is CSC`s largest asset by value and income, representing a quarter of the Group`s total. Approximately 5 million people live within 45 minutes` drive time and an estimated 35 million customer visits are made each year. The Trafford Centre has continued its strong performance since acquisition by CSC on 28 January 2011 with notable progress made in further developing its retail and leisure mix: - Footfall has increased by 8 per cent year-on-year with an estimated 6 per cent increase in retailer sales Occupancy has decreased marginally to 96 per cent. - New stores have been opened by Thomas Sabo, Boux Avenue and Ted Baker with another new brand to the Centre, Banana Republic, due to open next month. The Circle 360 Champagne Bar opened in July, successfully bringing one of Manchester`s most popular venues to The Trafford Centre, and Lego Land`s second ride has further increased its popularity. - M&S and Debenhams have both opened their extended stores showcasing new ranges and Dune`s new concept flagship store follows later this month. - Annual property income is GBP85 million and ERV is GBP105 million. CSC has plans to invest around GBP50 million in revenue-enhancing active management projects at The Trafford Centre, including GBP30 million at Barton Square. An application to part-enclose the central courtyard of Barton Square with a glass roof has been approved and permission has been renewed for the reconfiguration and enclosure for recycling use of two service yards on the south side of the Centre. The Trafford Centre management team have taken additional responsibility for three other CSC centres - Manchester Arndale and Cribb`s Causeway, Bristol, the two assets jointly owned by CSC and the Prudential, and Braehead, Glasgow. The Trafford Centre team are making good progress on taking forward the opportunities for these assets. Lakeside: Market value - GBP1,071 million, annual property income GBP58 million Lakeside is a prime regional shopping centre occupying a strong position on the eastern perimeter of London`s M25 orbital motorway at the heart of Europe`s largest aggregation of retail space with an estimated 25 million customer visits made each year. Lakeside has had a strong start to 2011, the key features of which are: - Footfall has increased by 6 per cent year-on-year with an estimated 1 per cent increase in retailer sales - Occupancy is 99 per cent. - 16 long term lettings have been completed, with unsatisfied demand from MSU, catering, leisure and lifestyle operators. - New stores have been opened by, for example, Boux Avenue, La Senza and Confetti & Lace. - Annual property income up 1 per cent to GBP58 million, ERV up 2 per cent to GBP65 million. Active management projects totalling GBP11 million are underway: - Three new flagship stores totalling 100,000 sq. ft. for Forever 21, Top Shop/Top Man and BHS: planning permission has been received for a "roof box" to create a new 35,000 sq. ft. store for Forever 21 in the existing Top Shop/Top Man unit. Top Shop/Top Man will relocate to a new 31,500 sq. ft. store created from Clinton Cards` unit and the upper level of BHS. A fully refitted, new concept BHS will occupy the lower level of its existing store and Clinton Cards is relocating to a new, smaller unit better suited to its business model. - New 8,000 sq. ft. fashion anchor for Brompton Walk: 5 units are being amalgamated to create a flagship store opening later this month for Choice, the high end multi-brand retailer, which has upsized four times in its 20 years at Lakeside. A planning application is expected to be lodged in late 2011 for a 360,000 sq. ft. extension: - 160,000 sq. ft. department store - around 40 new shops and restaurants - fully integrated transport hub - investment of around GBP140 to GBP160 million, anticipated stabilised initial yield on cost 7 to 8.5 per cent Metrocentre: Market value - GBP871 million, annual property income GBP52 million Metrocentre is the largest covered shopping and leisure centre in Europe and the leading shopping centre in the UK in terms of tenant mix, transport links and catering offer. With 2.1 million sq. ft. of retail space and 9,250 free car parking spaces, it is the premier regional shopping centre destination for north east England attracting an estimated 23 million customer visits a year. Significant activity in the first half of 2011 includes: - 12 long term lettings and renewals have been completed, in aggregate GBP3 million new rent marginally ahead of ERV. - The above includes progress with Metrocentre`s key 2011/2012 expiry cycle. A further GBP15 million of rent expires in the remainder of 2011 and 2012, a total of 23 per cent of Metrocentre`s rent roll reduced by pro-active management from 54 per cent two years ago. While deals are taking longer to complete as retailers carefully review their space requirements in the current challenging environment, there are a further GBP2 million of renewals in advanced negotiations, generally at terms a few percentage points below ERV. - Primark are fitting out their new 60,000 sq. ft. flagship store for an October 2011 opening, creating a strong new anchor for the yellow and blue malls. - Planning permission received for "MetrOasis", a 15,000 sq. ft. terrace of new retail and catering of which 75 per cent by income is under offer. Sited between Metrocentre and the retail park, this will improve linkages between the two locations. Braehead: Market value - GBP577 million, annual property income GBP30 million With around half of Scotland`s population within its catchment and an estimated 18 million customer visits per year, the Braehead shopping centre and retail park are at the heart of the successful regeneration area led by CSC which also includes the Xscape leisure destination, Ikea, business parks, new homes, flagship car dealerships and a major garden centre. There is considerable opportunity for Braehead to fulfil its role as a strategic centre and CSC continues to work constructively with the local authority on a master plan for the area which should lead over time to increased economic and social activity. Following the opening in May of H&M`s new flagship store and the first full year of the new Primark, footfall at Braehead is up over 5 per cent year-on- year. Hollister and another major US brand are currently fitting out for openings in early September. The first of the new restaurants, Filling Station, is now open on the former non-income producing "Fun Ice" and the other units are being fitted out for openings later this month. This project demonstrated the strength of appetite by catering operators, with competitive demand increasing the rent achieved for the final unit by more than 15 per cent. Nottingham: Market value - GBP333 million, annual property income GBP19 million The Victoria Centre, opened in 1972 and now 981,000 sq. ft., is the strongest retail destination in Nottingham, the UK`s sixth-ranked city by shopping population. Anchored by John Lewis and House of Fraser and currently 96 per cent occupied, an estimated 23 million shoppers visit the centre each year. Following a highly positive response to the public consultation exercise, a detailed planning application was submitted in June 2011 for a proposed 500,000 sq. ft. extension to the Victoria Centre, providing: - an additional department store, 39 shops and enhanced leisure & catering facilities with a cinema and restaurants - a new bus station, health club and offices - improved pedestrian linkages running north/south and east/west through the city - 500 construction jobs and an estimated 2,200 new jobs on an ongoing basis The outline timetable is for detailed planning consent to be granted by the end of 2011, enabling works in 2012 and construction from 2013 to 2015 with an opening for Christmas 2015. The capital expenditure of GBP225 to GBP250 million is expected to generate ERV of around GBP17 to GBP18 million, equivalent to a stabilised initial return on cost of 7 to 8 per cent. Other centres: Recently completed or projects in progress to create value at other centres include: - The major extension to St David`s, Cardiff, which opened in September 2009, is now 90 per cent committed by income. Since Christmas new commitments have been secured for a first shopping centre store for Cath Kidson, a UK first store for Baci Lingerie and two of the four remaining MSUs. More than half of all stores at St David`s are the retailers` first in Wales. - In Newcastle, Next moved in May from Northumberland Street into Eldon Square, creating a major store with full line merchandise and are delighted with their relocation. In Bromley, design work is underway and a detailed planning application will be submitted later this month for 5 new restaurants in Queen`s Gardens, The Glades. International On 4 January 2011, CSC completed its transaction with Equity One, a US retail REIT, restructuring its GBP150 million ($250 million) net investment in Californian property. In exchange for its direct interest, CSC has received 4.1 million shares in Equity One and 11.4 million redeemable units in a new joint venture, in aggregate providing an effective 12 per cent interest in Equity One valued at GBP179 million based on a share price of $18.64. Equity One has a market capitalisation of $2.3 billion and its annualised dividend is currently $0.88 per share with underlying FFO for 2010 of $1.08 per share. Equity One owns, develops and manages neighbourhood shopping centres anchored by supermarket chains. At 31 March 2011, the company had 177 shopping centres (20.1m sq. ft.) and 25 other properties/development sites. The top 4 geographies, totalling 60 per cent of rent, were South Florida, the San Francisco Bay area, Atlanta and North East, USA. CSC`s interests in India comprise a 25 per cent interest in the shopping centre developer, Prozone, and a 9.9 per cent interest in the listed Indian retailer, Provogue, our joint venture partner in Prozone. Prozone`s first shopping centre, Aurangabad, is now well established with over 60 per cent occupancy and a number of further tenants fitting out. Footfall has been growing consistently since the launch in the last quarter of 2010. Prozone is well underway with preparations for commencing further development projects in Coimbatore, Nagpur and Indore. As Prozone`s business has become more established, CSC`s results have now incorporated third party direct property valuations producing an encouraging GBP9 million surplus on CSC`s interest. CSC`s shareholding in Provogue amounts to 11.4 million shares (9.9 percent) which at 30 June 2011 stood at R37 per share. The share price has come under pressure in the period as India has gone out of favour with international investors and small market capitalisation stocks, particularly real estate- related, have been neglected by investors. Dividends The Directors have declared an interim dividend of 5.0 pence (2010 - 5.0 pence) per share payable on 22 November 2011 to shareholders on the register on 14 October 2010. This dividend will be a property income distribution ("PID") subject to applicable withholding tax. With effect from December 2010, the rules governing UK REITs were amended such that scrip dividends are now eligible to be classified as a PID. This removes one of the major barriers to CSC offering a scrip alternative. Further, of relevance given CSC`s large South African shareholder base, recent changes in the South Africa tax regime are affecting the way that ordinary and PID dividends are taxed in the hands of South African shareholders in a manner positive for likely take up of scrip dividends. We are currently reviewing the options available to the company with a view to offering a scrip alternative for the 2011 dividends, which would result in the requirement to convene an EGM. Prospects CSC is a market-leading business based on the most prime retail assets with strong asset management skills to respond to market changes. The results for the first half of 2011 demonstrate a continuation of recovery by CSC, although a more cautious occupier market is reflecting challenging macro-economic conditions. Our three priorities for 2011 remain: - Growth in like-for-like net rental income: after a very strong first half result, the quieter letting market implies a lower increase in the second half of the year. - Creation of value from the range of active management projects and more substantial extension projects detailed above, with planning permissions and retailer negotiations providing continuing evidence of progress - The Trafford Centre: we look for continued strong performance from this pre- eminent retail and leisure destination and to further access the broader benefits to the Group from this acquisition. FINANCIAL REVIEW FINANCING STRATEGY AND FINANCIAL MANAGEMENT In 2011 the Group`s financial management has focused on achieving the successful integration of The Trafford Centre and continuing to address the appropriate financial management and medium term funding structure for the Group. Initial work has started on identifying options for re-financing the Group`s Revolving Credit Facility ("RCF") which matures in 2013 and the first significant asset specific debt maturities in 2015. Notable financial highlights for the period include: - Underlying earnings up by 53 per cent - NAV per share at 391 pence; total return for the six months of 3 per cent - Trafford Centre acquisition completed. Integration work progressing as planned - Debt to assets ratio at 48 per cent in target range of 40-50 per cent and interest cover for the six months of 170 per cent exceeds target minimum of 160 per cent Acquisition of The Trafford Centre and associated Capital Raising The Group successfully completed the acquisition of The Trafford Centre on 28 January 2011 and therefore these financial statements include the impact of the acquisition for the first time. Details of the opening balance sheet are provided in Note 20. The Income Statement includes the results of The Trafford Centre for the period from 28 January 2011 to 30 June 2011. Further details of the contribution in the period are given in the Underlying Profit Statement. As part of the acquisition in January 2011 Peel subscribed GBP43.7 million for 12.3 million ordinary shares and GBP23.7 million for convertible bonds with a nominal value of GBP26.7 million converting into 6.7 million ordinary shares at a conversion price of 400 pence, giving a total cash inflow of GBP67.4 million. RESULTS FOR THE PERIOD ENDED 30 JUNE 2011 The results for the six months ended 30 June 2011 reflect operational improvements achieved, in particular improved letting terms, since the end of 2009. This is most clearly illustrated by the 6 per cent growth in like-for- like net rental income in the period, a strong performance especially given the general retail environment remains challenging. This growth in like-for- like rental income was the main factor in driving the 14 per cent growth over 2010 underlying earnings per share. Income statement The Group recorded a profit for the period of GBP193 million, compared to the GBP291 million achieved for the comparable prior year period which included GBP73 million from the discontinued operations, Capco and C&C US. The 2011 results include a GBP58 million gain on property valuations and a GBP22 million non-cash gain on the movement in the fair value of derivative financial instruments. The 2010 profit included a GBP348 million gain on property valuations, which was partially offset by a GBP89 million adverse movement in the fair value of derivative financial instruments. Underlying earnings which excludes valuation and exceptional items, increased by GBP23 million to GBP66 million, as shown in the chart below. The growth in underlying earnings per share takes into account the issue of the 167 million new shares in connection with the Trafford Centre acquisition, resulting in an increase of 14 per cent from 7.0 pence per share in 2010 to 8.0 pence per share in the current period. The Group`s net rental income which increased by 32 per cent to GBP178 million in the period, benefitted from the GBP35 million five month contribution from The Trafford Centre. As noted above the Group`s existing centres achieved an excellent 6 per cent growth in like-for-like net rental income. More detail on the rental performance is included in the Business Review. Underlying net finance costs, which exclude exceptional items, increased by GBP16 million in 2011, with the benefit of the interest rate swap amendments undertaken in January 2011 offsetting the GBP19 million five month cost of the Trafford Centre CMBS notes. Administration expenses, excluding the GBP16 million exceptional costs, increased from GBP11 million in 2010 to GBP12 million in 2011 largely due to inclusion of the Trafford Centre. Administration costs remain under tight control. (GRAPHIC REMOVED - PLEASE SEE PAGE 9 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK) Exceptional costs in the period include finance costs of GBP34 million incurred in January 2011 on interest rate swap amendment costs. Expenses relating to the acquisition, including financial advice costs in relation to the Simon Property Group`s proposal, amounted to GBP16 million in the period. These costs are classified as exceptional administration costs. As the fair value of the Trafford Centre net assets acquired of GBP757 million exceeded the GBP703 million fair value of the consideration, based on the Group`s share price on 28 January 2011 of 376 pence per share, negative goodwill of GBP54 million arose on the acquisition. This is recorded in the Income Statement as gain on acquisition of subsidiaries. A share price of 405 pence per share would have resulted in nil goodwill on the acquisition. As noted in the 2010 annual report the disposal of the C&C US business that was completed in January 2011 resulted in a gain of GBP40 million before tax. The results for the period also includes a deferred tax provision of GBP14 million in respect of the investment in Equity One shares and joint venture units received as consideration, giving a net post tax gain of GBP26 million on the combined impact of this transaction. The income statement also includes two items arising from the Group`s interests in India. The GBP9.0 million share of associate income from Prozone, the shopping centre developer, is offset by the impairment of GBP8.7 million in the market value of the 9.9 per cent interest in Provogue, the listed Indian retailer, as the Indian stock market came under pressure especially for stocks of small market capitalisation. Balance sheet The Group`s net assets attributable to equity shareholders have increased from the GBP2.3 billion disclosed in the 2010 annual report to GBP3.1 billion, with the increase largely resulting from the acquisition of The Trafford Centre and the associated equity capital raised. As detailed in the table below, net assets (diluted, adjusted) have increased by GBP813 million from 31 December 2010 with the Trafford Centre acquisition and the profit for the period less the payment of the 2010 final dividend comprising the majority of the movement. Balance sheet Pro forma (1) 30 June 31 December 31 December
2011 2010 2010 GBPm GBPm GBPm Investment, development and trading properties 6,814.5 5,076.5 6,718.9 Investments 221.7 45.2 218.6 Net external debt (3,285.7) (2,436.5) (3,188.6) Other assets and liabilities (583.9) (539.2) (650.3) C&C US net assets - 147.3 - Net assets 3,166.6 2,293.3 3,098.6 Minority interest (29.6) (19.9) (19.9) Attributable to equity shareholders 3,137.0 2,273.4 3,078.7 Fair value of derivatives (net of tax) 298.7 314.9 339.0 Other adjustments 54.4 88.7 55.5 Net assets (diluted, adjusted) 3,490.1 2,677.0 3,473.2 (1) The pro forma analysis includes the Trafford Centre and re-classifies the C&C US assets that were held-for-sale to investments. The investments of GBP222 million as at 30 June 2011 comprise the Group`s interests in the US and India. The investment in the US comprises 4.1 million shares in Equity One, and 11.4 million shares in a joint venture with Equity One, that the Group received in exchange for its interest in C&C US. Based on the Equity One share price of $18.64 the Group`s investment has been valued at GBP179 million at 30 June 2011. The fair value provision for financial derivatives, principally interest rate swaps, included in other assets and liabilities above, decreased by GBP15 million largely as a consequence of cash payments made in the period. Adjusted net assets per share As illustrated in the chart below, diluted adjusted net assets per share were 391 pence at 30 June 2011, an increase of 1 pence in the period. The increase is attributable to the property valuation gain, offset by the 2010 final dividend and the exceptional costs. (GRAPHIC REMOVED - PLEASE SEE PAGE 11 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK) Cash flow The cash flow summary below shows a reduction in the Group`s cash balance in the period. This can be attributed to the payments made in respect of exceptional costs (GBP50 million) and the REIT entry charge (GBP21 million) in the period. Six months Six months to June to June 2011 2010
GBPm GBPm Underlying operating cash generated 167.0 122.3 Net finance charges paid (100.4) (84.3) Exceptional finance and other costs (49.9) (74.4) Net movement in working capital 2.3 (4.8) Taxation/REIT entry charge (23.1) (18.2) Cash flow from operations (4.1) (59.4) Property development/investments (11.3) (30.5) Sale proceeds of property/investments 1.7 65.7 Other derivative financial instruments (8.3) (19.5) Cash acquired with businesses 37.6 - Cash sold with businesses (20.3) - Dividends (90.9) (66.9) Cash flow before financing and equity raises (95.6) (110.6) Net debt repaid (52.2) (79.4) Equity capital raised 68.4 1.8 Impact of discontinued operations - (256.5) Others (1.8) (54.1) Net decrease in cash and cash equivalents (81.2) (498.8) Investment in property related assets was mainly limited to existing commitments in the period, with the most significant expenditure in the period being in respect of Eldon Square (GBP2 million) and Braehead (GBP2 million). The cash acquired/sold with businesses relates to the Trafford Centre and C&C US respectively. Net debt repayments of GBP52 million are discussed in the Debt structure section below. The table below illustrates that recurring operating cash flow covers the proposed interim dividend. Six months to June 2011 Dividends - cash cover pence per share
Underlying operating cash generated 20.2 Net finance charges excluding exceptional items (12.2) Convertible bond coupon (0.3) Net movement in working capital 0.3 Recurring cash flow 8.0 2011 proposed Interim dividend 5.0 Capital commitments The Group has an aggregate commitment to capital projects of GBP55 million at 30 June 2011, down from the GBP90 million at 31 December 2010. The most significant element of the reduction is due to the majority of costs to complete the St. David`s, Cardiff project, including land assembly costs, now accrued on the balance sheet. In addition to the committed expenditure, the Group has an identified project pipeline of GBP134 million. Itis anticipated that GBP30 million relating to capital projects will be incurred in the balance of 2011. Group debt ratios were as follows: 30 June 31 December 2011 2010 Debt to assets 48% 48% Interest cover 170% 156% Weighted average debt maturity 7.5 years 5.8 years Weighted average cost of gross debt 5.6% 5.7% Proportion of gross debt with interest rate protection 98% 94% Financial position and financing structure At 30 June 2011, the Group had net external debt of GBP3,286 million, an increase of GBP97 million compared to the 31 December 2010 pro forma of GBP3,189 million. In addition to cash balances of GBP165 million the Group had undrawn facilities of GBP275 million at 30 June 2011, the GBP248 million revolving credit facility and GBP27 million on the St David`s, Cardiff, joint venture loan facility, giving total headroom of GBP440 million. Debt structure The Group`s debt is largely arranged on an asset-specific basis, with limited or non-recourse from the borrowing entities to other Group companies. It is largely syndicated bank debt and CMBS structures with corporate-level debt limited to the revolving credit facility. The flexibility of this structure was evidenced by the absence of lender issues during the demerger of Capco. (GRAPHIC REMOVED - PLEASE SEE PAGE 12 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK) The revolving credit facility matures in mid 2013 and we have started approaching banks that we consider have the ability to provide similar corporate level facilities, with a view to putting these in place by the end of the first half of 2012. These banks would then be in place to assist with the longer term funding strategy. The above table shows that the value of maturities peaks in 2015-2016. Over the last few months consideration has been given to replacing some facilities early but it has been concluded that the associated one-off costs would outweigh the benefit of longer maturities. Given the high quality of our assets we consider we should have funding optionality from a variety of debt funding sources such as secured bonds and bank loans, CMBS-linked notes, unsecured bonds and bank loans, and private placements. During the period net debt repayments of GBP52 million were made, the most significant item being the repayment of the GBP81 million loan secured on Barton Square. An additional GBP56 million has been drawn on the St David`s, Cardiff joint venture loan facility, with the balance of the net repayment being due to scheduled debt amortisation payments. Hedging The majority of the Group`s debt is floating rate. The Group uses interest rate swaps to fix short and medium-term interest obligations, reducing cash flow volatility caused by changes in interest rates. The Group is currently effectively fully hedged, with a small forecast excess in 2012 to 2014. The table below sets out the nominal amount and average rate of hedging in place under current and forward starting swap contracts: Average Nominal amount rate GBPm %
In effect on or after: 1 year 2,989 4.48 2 years 2,994 4.57 5 years 1,306 4.48 10 years 688 4.77 15 years 681 4.78 20 years 620 4.77 25 years 125 4.57 Since 2009, the Group has reduced the number of forward starting swaps as anticipated borrowing requirements have been reduced by capital raisings and market practice relating to swaps has changed. Costs of rescheduling and terminating such instruments have been treated as exceptional finance charges as incurred. Currently GBP555 million nominal amount of forward starting swaps remain, carrying a market value liability of around GBP72 million. As lenders` practice no longer allows the use of existing hedging contracts in new facilities, these contracts are and will remain surplus, unrelated to the current or anticipated borrowing needs. As such, the estimated annual cash payments from 2012 of around GBP14 million, reducing to GBP10 million by 2015, will be reported as an exceptional finance charge and will impact NAV (diluted, adjusted) as incurred. Covenants Full details of the loan financial covenants are included in the Other Information section of this report. The Group is in compliance with all of its corporate and asset-specific loan covenants. As detailed in that analysis, as a result of improved property valuations and rental income levels, the headroom over the minimum covenant levels has generally increased in the period. Taxation Since the Group became a UK REIT on 1 January 2007, the Group has made REIT entry charge payments of GBP168 million, with GBP21 million paid in the period. This now completes all payments due in respect of the Group`s original REIT charges. Payments in respect of the Trafford Centre totalling GBP33 million will be made in the next twelve months. The cash flow benefits to date have amounted to GBP176 million, comprising net rental income and capital gains sheltered from UK tax. Key risks and uncertainties The key risks and uncertainties facing the Group are as set out in the table below: Risk Description Financing Liquidity Reduced availability Economic and Property values decrease property market downturn Reduction in rental income Macro economic conditions deteriorate Interest cover Interest rates fluctuate Market price risk Interest rates fluctuate of fixed rate resulting in significant derivatives assets and/or liabilities on derivative contracts REIT Breach REIT conditions PID requirements Group`s ordinary The Group`s ordinary shares are dual- shares are listed on the listed London and Johannesburg stock exchanges Joint Ventures Reliance on JV partners` performance and
reporting Asset Management Tenants Tenant failure Voids Increased voids, failure to let developments Reputation Responsibility for Failure of Health & Safety visitors to shopping centres Business Lost access to centres interruption or head office People/HR Staff Loss of key staff Developments Time Planning Cost and letting Construction cost risk overrun, low occupancy levels Strategy Defining and Inappropriate strategy executing the defined or poor execution Group`s strategy of strategic plans Impact Mitigation Insufficient funds to Regular reporting of current and projected position meet operational and to the Board financing needs Efficient treasury management and strict credit control process Impact on covenants Regular monitoring of LTV and ICR covenants Covenant headroom monitored and maintained Regular market valuations Focus on quality assets Lack of certainty over Hedging to establish high degree of certainty interest costs throughout term of loan Potential cash outflow Manage derivative contracts to achieve a balance if derivative contract between hedging interest rate exposure and contains break clause minimising potential cash calls Tax penalty or be forced Regular monitoring of compliance and tolerances to leave the REIT regime Requirement to pay 90 Alternative sources of investment funding constantly per cent of income under review restricts ability to retain cash for investment Additional complexity Professional advice sought in both jurisdictions to when assessing ensure Group capital needs are met in optimal options for capital manner raising Partners under - Agreements in place and regular communication perform or provide with partners incorrect information Financial loss Initial and subsequent assessment of tenant covenant strength Active credit control process
Financial loss Policy of active tenant mix management Active management to minimise financial impact if voids should arise. Impact on reputation Annual audits by external consultants or potential criminal/ Health & Safety policies in place civil proceedings Impact on footfall and Documented Business Recovery Plans in place tenant income Security team training and procedure in Adverse publicity shopping centres Terrorist Insurance is in place Adverse impact on the Succession planning Group`s performance Performance evaluation Training and development Incentives and rewards Securing planning Policy of sustainable development and regeneration consent for of brownfield sites developments Constructive dialogue with planning authorities Returns reduced by Approval process based on detailed project costs increased costs or Regular monitoring and forecasting of project costs delay in securing and rental income tenants Fixed cost contracts Financial loss Experienced management team familiar with shopping centre industry Sub-optimal returns Use of research and third party diligence expertise as required Reputational impact Board review process DIRECTORS` RESPONSIBILITY STATEMENT The Directors are responsible for preparing the condensed set of financial statements, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge: - this condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union; and - this condensed set of financial statements includes a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom`s Financial Services Authority. The operating and financial review refers to important events which have taken place in the period. The principal risks and uncertainties facing the business are referred to in the operating and financial review. Related party transactions are set out in note 22 of the condensed set of financial statements. A list of current Directors is maintained on the Capital Shopping Centres Group PLC website: www.capital-shopping- centres.co.uk. By order of the Board D A Fischel Chief Executive M Roberts Finance Director 2 August 2011 INDEPENDENT REVIEW REPORT TO CAPITAL SHOPPING CENTRES GROUP PLC Introduction We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated statement of cash flows and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. Directors` responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom`s Financial Services Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, `Review of Interim Financial Information Performed by the Independent Auditor of the Entity` issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom`s Financial Services Authority. PricewaterhouseCoopers LLP Chartered Accountants London 2 August 2011 Notes: (a) The maintenance and integrity of the Capital Shopping Centres Group PLC website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. CONSOLIDATED INCOME STATEMENT (unaudited) For the six months ended 30 June 2011 Six months Six months Year ended ended ended 30 June 30 June 31 December
2011 2010 2010 Notes GBPm GBPm GBPm Continuing operations Revenue 4 256.0 205.0 420.3 Net rental income 4 177.9 134.5 276.9 Net other income 3.7 0.3 0.7 Revaluation and sale of investment and development property 5 58.4 344.8 497.2 Gain on acquisition of subsidiaries 20 54.3 - - Gain on sale of subsidiaries 21 40.4 - - Sale and impairment of other investments (8.7) - (2.6) Administration expenses - ongoing (11.8) (11.2) (23.0) Administration expenses - exceptional 20 (15.5) (8.1) (15.6) Operating profit 298.7 460.3 733.6 Finance costs 6 (98.1) (82.3) (165.4) Finance income 0.6 1.3 3.1 Other finance costs 7 (38.4) (70.7) (75.1) Change in fair value of derivative financial instruments 21.7 (89.1) (50.0) Net finance costs (114.2) (240.8) (287.4) Profit before tax and associates 184.5 219.5 446.2 Current tax 8 (0.7) - (0.1) Deferred tax 8 0.2 0.8 2.8 REIT entry charge 8 - (1.7) (3.3) Taxation 8 (0.5) (0.9) (0.6) Share of profit of associates 9.0 - - Profit for the period from continuing operations 193.0 218.6 445.6 Profit for the period from discontinued operations - 72.6 83.0 Profit for the period 193.0 291.2 528.6 Attributable to: Equity shareholders of CSC Group PLC - Continuing operations 183.3 219.9 428.8 - Discontinued operations - 72.6 83.0 183.3 292.5 511.8
Non-controlling interest 9.7 (1.3) 16.8 Basic earnings per share 193.0 291.2 528.6 From continuing operations 10 21.8p 35.4p 68.3p From discontinued operations 10 - 11.6p 13.2p Diluted earnings per share 21.8p 47.0p 81.5p From continuing operations 10 21.3p 34.8p 67.5p From discontinued operations 10 - 11.5p 13.0p 21.3p 46.3p 80.5p CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited) For the six months ended 30 June 2011 Six months Six months Year ended ended ended 30 June 30 June 31 December 2011 2010 2010
GBPm GBPm GBPm 193.0 291.2 528.6 Profit for the period Other comprehensive income: Revaluation of other investments 0.6 13.9 17.2 Recognised in impairment of other investments 8.7 - - Recognised in gain on disposal of subsidiaries (note 21) (10.9) - - Realised revaluation reserve on disposal of other investments - - 2.6 Exchange differences (3.4) (1.9) (1.1) Tax on items taken directly to other comprehensive income (0.2) (0.8) (2.8) Other comprehensive income for the period (5.2) 11.2 15.9 Total comprehensive income for the period 187.8 302.4 544.5 Attributable to: Equity shareholders of CSC Group PLC 178.1 303.7 527.7 Non-controlling interest 9.7 (1.3) 16.8 187.8 302.4 544.5
Total comprehensive income attributable to equity shareholders of CSC Group PLC arises from: Continuing operations 178.1 212.6 432.6 Discontinued operations - 91.1 95.1 178.1 303.7 527.7 CONSOLIDATED BALANCE SHEET (unaudited) As at 30 June 2011 As at As at As at 30 June 31 December 30 June 2011 2010 2010 Notes GBPm GBPm GBPm
Non-current assets Investment and development property 12 6,804.1 5,051.0 4,886.7 Plant and equipment 5.4 4.1 2.5 Investments in associate companies 37.1 28.8 29.0 Other investments 13 184.6 16.4 19.0 Derivative financial instruments 22.7 24.2 23.0 Trade and other receivables 86.1 76.7 42.4 Current assets 7,140.0 5,201.2 5,002.6 Trading property 10.4 25.5 28.8 Current tax assets 4.0 4.1 5.7 Trade and other receivables 56.6 50.2 68.6 Derivative financial instruments 0.1 - - Cash and cash equivalents 14 164.5 222.3 127.7 C&C US - assets - 423.9 429.6 235.6 726.0 660.4 Total assets 7,375.6 5,927.2 5,663.0 Current liabilities Trade and other payables (267.3) (194.4) (213.8) Borrowings 15 (65.3) (46.0) (115.5) Derivative financial instruments (0.8) (9.3) (19.0) C&C US - liabilities - (276.6) (285.6) Non-current liabilities (333.4) (526.3) (633.9) Borrowings 15 (3,527.6) (2,751.5) (2,769.0) Derivative financial instruments (346.8) (354.6) (394.5) Other provisions (1.1) (1.2) (1.4) Other payables (0.1) (0.3) (2.2) (3,875.6) (3,107.6) (3,167.1) Total liabilities (4,209.0) (3,633.9) (3,801.0) Net assets 3,166.6 2,293.3 1,862.0 Equity Share capital 17 430.2 346.3 311.7 Share premium 564.1 20.4 1.4 Treasury shares (29.6) (29.9) (5.4) Convertible bonds 18 143.7 - 6.1 Other reserves 521.3 526.5 336.7 Retained earnings 1,507.3 1,410.1 1,209.7 Amounts attributable to equity shareholders of CSC Group PLC 3,137.0 2,273.4 1,860.2 Non-controlling interest 29.6 19.9 1.8 Total equity 3,166.6 2,293.3 1,862.0 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) For the six months ended 30 June 2011 Attributable to equity shareholders of CSC Group PLC Share Share Treasury Convertible capital premium shares bonds
GBPm GBPm GBPm GBPm At 1 January 2011 346.3 20.4 (29.9) - Profit for the period - - - - Other comprehensive income: Revaluation of other investments - - - - Recognised in impairment of other investments - - - - Recognised in gain on disposal of subsidiaries - - - - Exchange differences - - - - Tax on items taken directly to other comprehensive income - - - - Total comprehensive income for the period - - - - Ordinary shares issued 83.9 543.7 - - Dividends paid (note 9) - - - - Convertible bonds issued - - - 143.7 Interest on convertible bonds - - - - Disposal of treasury shares - - 0.3 - Share-based payments - - - - 83.9 543.7 0.3 143.7 At 30 June 2011 430.2 564.1 (29.6) 143.7 Attributable to equity shareholders of CSC Group PLC
Other Retained reserves earnings Total GBPm GBPm GBPm At 1 January 2011 526.5 1,410.1 2,273.4 Profit for the period - 183.3 183.3 Other comprehensive income: Revaluation of other investments 0.6 - 0.6 Recognised in impairment of other investments 8.7 - 8.7 Recognised in gain on disposal of subsidiaries (10.9) - (10.9) Exchange differences (3.4) - (3.4) Tax on items taken directly to other comprehensive income (0.2) - (0.2) Total comprehensive income for the period (5.2) 183.3 178.1 Ordinary shares issued - - 627.6 Dividends paid (note 9) - (85.2) (85.2) Convertible bonds issued - - 143.7 Interest on convertible bonds - (2.4) (2.4) Disposal of treasury shares - (0.2) 0.1 Share-based payments - 1.7 1.7 - (86.1) 685.5 At 30 June 2011 521.3 1,507.3 3,137.0 Non- controlling Total interest equity GBPm GBPm
At 1 January 2011 19.9 2,293.3 Profit for the period 9.7 193.0 Other comprehensive income: Revaluation of other investments - 0.6 Recognised in impairment of other investments - 8.7 Recognised in gain on disposal of subsidiaries - (10.9) Exchange differences - (3.4) Tax on items taken directly to other comprehensive income - (0.2) Total comprehensive income for the period 9.7 187.8 Ordinary shares issued - 627.6 Dividends paid (note 9) - (85.2) Convertible bonds issued - 143.7 Interest on convertible bonds - (2.4) Disposal of treasury shares - 0.1 Share-based payments - 1.7 - 685.5
At 30 June 2011 29.6 3,166.6 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) For the year ended 31 December 2010 Attributable to equity shareholders of CSC Group PLC
Share Share Treasury Convertible capital premium shares bonds GBPm GBPm GBPm GBPm At 1 January 2010 311.3 1,005.7 (9.7) 6.7 Profit for the year - - - - Other comprehensive income: Revaluation of other investments - - - - Realised revaluation reserve on disposal of other investments - - - - Exchange differences - - - - Tax on items taken to other comprehensive income - - - - Total comprehensive income for the year - - - - Ordinary shares issued 35.0 20.4 - - Dividends paid (note 9) - - - - Redemption and conversion of convertible bonds - - - (6.7) Non-controlling interest additions - - - - Share-based payments - - - - Acquisition of treasury shares - - (20.9) - Disposal of treasury shares - - 0.7 - Other - - - - Reduction of capital - (1,005.7) - - Demerger effected by way of repayment of capital - - - - 35.0 (985.3) (20.2) (6.7) At 31 December 2010 346.3 20.4 (29.9) - Attributable to equity shareholders of CSC Group PLC Other Retained
reserves earnings Total GBPm GBPm GBPm At 1 January 2010 286.9 820.2 2,421.1 Profit for the year - 511.8 511.8 Other comprehensive income: Revaluation of other investments 17.2 - 17.2 Realised revaluation reserve on disposal of other investments 2.6 - 2.6 Exchange differences (1.1) - (1.1) Tax on items taken to other comprehensive income (2.8) - (2.8) Total comprehensive income for the year 15.9 511.8 527.7 Ordinary shares issued 185.1 - 240.5 Dividends paid (note 9) - (102.8) (102.8) Redemption and conversion of convertible bonds - 6.7 - Non-controlling interest additions - - - Share-based payments - 1.0 1.0 Acquisition of treasury shares - - (20.9) Disposal of treasury shares - 5.3 6.0 Other - 0.6 0.6 Reduction of capital - 1,005.7 - Demerger effected by way of repayment of capital 38.6 (838.4) (799.8) 223.7 78.1 (675.4) At 31 December 2010 526.5 1,410.1 2,273.4 Non-
controlling Total interest equity GBPm GBPm At 1 January 2010 - 2,421.1 Profit for the year 16.8 528.6 Other comprehensive income: Revaluation of other investments - 17.2 Realised revaluation reserve on disposal of other investments - 2.6 Exchange differences - (1.1) Tax on items taken to other comprehensive income - (2.8) Total comprehensive income for the year 16.8 544.5 Ordinary shares issued - 240.5 Dividends paid (note 9) - (102.8) Redemption and conversion of convertible bonds - - Non-controlling interest additions 3.1 3.1 Share-based payments - 1.0 Acquisition of treasury shares - (20.9) Disposal of treasury shares - 6.0 Other - 0.6 Reduction of capital - - Demerger effected by way of repayment of capital - (799.8) 3.1 (672.3) At 31 December 2010 19.9 2,293.3 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited) For the six months ended 30 June 2010 Attributable to equity shareholders of CSC Group PLC Share Share Treasury Convertible
capital premium shares bonds GBPm GBPm GBPm GBPm At 1 January 2010 311.3 1,005.7 (9.7) 6.7 Profit/(loss) for the period - - - - Other comprehensive income: Revaluation of other investments - - - - Exchange differences - - - - Tax on items taken to other comprehensive income - - - - Total comprehensive income for the period - - - - Ordinary shares issued 0.4 1.4 - - Dividends paid (note 9) - - - - Conversion of bonds - - - (0.6) Non-controlling interest additions - - - - Acquisition of treasury shares - - (1.5) - Disposal of treasury shares - - 5.8 - Share-based payments - - - - Reduction of capital - (1,005.7) - - Demerger effected by way of repayment of capital - - - - 0.4 (1,004.3) 4.3 (0.6) At 30 June 2010 311.7 1.4 (5.4) 6.1 Attributable to equity shareholders of CSC Group PLC Other Retained reserves earnings Total GBPm GBPm GBPm
At 1 January 2010 286.9 820.2 2,421.1 Profit/(loss) for the period - 292.5 292.5 Other comprehensive income: Revaluation of other investments 13.9 - 13.9 Exchange differences (1.9) - (1.9) Tax on items taken to other comprehensive income (0.8) - (0.8) Total comprehensive income for the period 11.2 292.5 303.7 Ordinary shares issued - - 1.8 Dividends paid (note 9) - (71.4) (71.4) Conversion of bonds - 0.6 - Non-controlling interest additions - - - Acquisition of treasury shares - - (1.5) Disposal of treasury shares - - 5.8 Share-based payments - 0.5 0.5 Reduction of capital - 1,005.7 - Demerger effected by way of repayment of capital 38.6 (838.4) (799.8) 38.6 97.0 (864.6)
At 30 June 2010 336.7 1,209.7 1,860.2 Non- controlling Total interest equity
GBPm GBPm At 1 January 2010 - 2,421.1 Profit/(loss) for the period (1.3) 291.2 Other comprehensive income: Revaluation of other investments - 13.9 Exchange differences - (1.9) Tax on items taken to other comprehensive income - (0.8) Total comprehensive income for the period (1.3) 302.4 Ordinary shares issued - 1.8 Dividends paid (note 9) - (71.4) Conversion of bonds - - Non-controlling interest additions 3.1 3.1 Acquisition of treasury shares - (1.5) Disposal of treasury shares - 5.8 Share-based payments - 0.5 Reduction of capital - - Demerger effected by way of repayment of capital - (799.8) 3.1 (861.5) At 30 June 2010 1.8 1,862.0 CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) For the six months ended 30 June 2011 Six months Six months Year ended ended ended 30 June 30 June 31 December 2011 2010 2010
Notes GBPm GBPm GBPm Cash flows from continuing operations Cash generated from operations 16 153.8 109.4 226.8 Interest paid (135.4) (151.5) (229.1) Interest received 0.6 0.9 1.5 Taxation (2.0) 1.5 2.2 REIT entry charge (21.1) (19.7) (40.1) Cash flows from operating activities (4.1) (59.4) (38.7) Cash flows from investing activities Purchase and development of property, plant & equipment (11.3) (26.6) (47.4) Sale of property 1.7 64.4 64.4 Sale of other investments - 1.3 10.4 Purchase of other investments - (3.9) (4.2) Cash sold with businesses (20.3) - - Cash acquired with businesses 37.6 - - Other derivative financial instruments (8.3) (19.5) (26.2) Cash flows from investing activities (0.6) 15.7 (3.0) Cash flows from financing activities Partnership equity introduced - 3.1 3.1 Issue of ordinary shares 44.7 1.8 222.4 Issue of convertible bonds 23.7 - - Acquisition of treasury shares - (0.6) (1.4) Sale of treasury shares 0.1 - 0.2 Cash transferred from/(to) restricted accounts 0.5 (56.6) 19.8 Borrowings drawn 56.3 518.5 518.7 Borrowings repaid (108.5) (597.9) (690.3) Interest on convertible bonds (2.4) - - Equity dividends paid (90.9) (66.9) (102.2) Cash flows from financing activities (76.5) (198.6) (29.7) Net decrease in cash and cash equivalents from continuing operations (81.2) (242.3) (71.4) Cash flows from discontinued operations Operating activities - (12.0) 0.3 Investing activities - (3.1) (1.2) Financing activities - (63.2) (69.0) Cash and cash equivalents transferred on demerger - (179.2) (179.2) Effect of exchange rate changes on cash and cash equivalents - 1.0 0.4 Net decrease in cash and cash equivalents from discontinued operations - (256.5) (248.7) Net decrease in cash and cash equivalents (81.2) (498.8) (320.1) Cash and cash equivalents at beginning of period 242.6 562.7 562.7 Cash and cash equivalents at end of period 14 161.4 63.9 242.6 NOTES (unaudited) 1 Basis of preparation The condensed set of financial statements for the six months ended 30 June 2011 is unaudited and does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The condensed set of financial statements has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 as adopted by the European Union. The comparative information presented for the year ended 31 December 2010 is not the Group`s statutory accounts for that year. Those accounts have been reported on by the Group`s auditors and delivered to the registrar of companies. The auditors` opinion on those accounts was unqualified and did not contain an emphasis of matter paragraph or a statement made under Section 498 (2) or (3) of the Companies Act 2006. The condensed set of financial statements should be read in conjunction with the Group`s statutory accounts for the year ended 31 December 2010 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expense. Actual results may differ from these estimates. Except as described below, in preparing the condensed set of financial statements, the significant judgements made by management in applying the Group accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2010. The largest area of estimation and uncertainty in the condensed set of financial statements is in respect of the valuation of the property portfolio, where external valuations were obtained. The Directors have concluded, based on the Group`s forecasts and projections and taking into account reasonably possible changes in trading performance, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. 2 Accounting policies Except as described below, the accounting policies applied are consistent with those of the Group`s statutory accounts for the year ended 31 December 2010 as set out on pages 69 to 72 of the Annual Report. Taxes on income in interim periods are accrued using tax rates expected to be applicable to total annual earnings. The following standards, amendments and interpretations endorsed by the EU are effective for the first time for the Group`s 31 December 2011 year end: IAS 24 Related Party Disclosures; IAS 32 Financial Instruments: Presentation (amendment); IFRIC14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction; IFRIC 19 Extiguishing Financial Liabilities with Equity Instruments; and Amendments arising from the 2010 annual improvements projects. These either had no material impact on the condensed financial statements or resulted in changes to presentation and disclosure only. 3 Seasonality and cyclicality There is no material seasonality or cyclicality impacting interim financial reporting. 4 Segmental reporting Operating segments are determined based on the internal reporting and operational management of the Group. The Group has one main reportable operating segment being UK Shopping Centres. Revenue represents total income from tenants and net rental income is the principal profit measure used to measure performance. A more detailed analysis of net rental income is given below. Six months Six months Year ended ended ended
30 June 30 June 31 December 2011 2010 2010 GBPm GBPm GBPm Revenue 256.0 205.0 420.3 Rent receivable 211.3 170.7 350.4 Service charge income 36.8 29.9 59.6 248.1 200.6 410.0 Rent payable (13.0) (11.7) (23.7) Service charge and other non-recoverable costs (57.2) (54.4) (109.4) Net rental income 177.9 134.5 276.9 5 Revaluation and sale of investment and development property Six months Six months Year ended ended ended 30 June 30 June 31 December 2011 2010 2010
GBPm GBPm GBPm Revaluation of investment and development property 58.3 348.3 500.6 Sale of investment property 0.1 (3.5) (3.4) Revaluation and sale of investment and development property 58.4 344.8 497.2 6 Finance costs Six months Six months Year
ended ended ended 30 June 30 June 31 December 2011 2010 2010 GBPm GBPm GBPm
On bank loans and overdrafts 96.1 80.3 160.8 On convertible debt - 1.6 2.3 On obligations under finance leases 2.0 2.0 4.0 Gross finance costs 98.1 83.9 167.1 Interest capitalised on developments - (1.6) (1.7) Finance costs 98.1 82.3 165.4 7 Other finance costs Six months Six months Year
ended ended ended 30 June 30 June 31 December 2011 2010 2010 GBPm GBPm GBPm
Amortisation of Metrocentre compound financial instrument 4.0 4.4 8.8 Revolving credit facility arrangement fee(1) - 1.2 1.2 Costs of termination of derivative financial instruments(1) 34.4 65.1 65.1 Other finance costs 38.4 70.7 75.1 (1) Amounts totalling GBP34.4 million for the six months ended 30 June 2011 are treated as exceptional and therefore excluded from the calculation of underlying earnings (six months ended 30 June 2010 - GBP66.3 million, year ended 31 December 2010 - GBP66.3 million). 8 Taxation Taxation charge for the period: Six months Six months Year ended ended ended
30 June 30 June 31 December 2011 2010 2010 GBPm GBPm GBPm Current tax 0.7 - 0.1 Deferred tax: On derivative financial instruments (12.5) (1.2) (2.6) On other temporary differences 0.1 0.6 0.4 On other investments 13.4 - - On exceptional items (1.2) (0.2) (0.6) Deferred tax (0.2) (0.8) (2.8) REIT entry charge - 1.7 3.3 Total tax charge 0.5 0.9 0.6 Movements in the provision for deferred tax: Derivative Other Other financial temporary investments instruments differences Total
GBPm GBPm GBPm GBPm Deferred tax provision: At 1 January 2011 - (4.2) 4.2 - Recognised in the income statement 13.4 (12.5) (1.1) (0.2) Recognised in other comprehensive income (0.1) 0.3 - 0.2 At 30 June 2011 13.3 (16.4) 3.1 - Unrecognised deferred tax asset: At 1 January 2011 - (15.7) (13.9) (29.6) Income statement items - 13.3 (0.9) 12.4 At 30 June 2011 - (2.4) (14.8) (17.2) In accordance with the requirements of IAS 12 Income Taxes, the deferred tax asset has not been recognised in the Group financial statements due to uncertainty on the level of profits that will be available in the non-REIT elements of the Group in future periods. 9 Dividends Six months Six months Year ended ended ended
30 June 30 June 31 December 2011 2010 2010 GBPm GBPm GBPm Ordinary shares Final dividend paid of 10.0 pence per share (2009 - 11.5 pence per share) 85.2 71.4 71.4 2010 Interim dividend paid of 5 pence per share - - 31.4 Dividends paid 85.2 71.4 102.8 Proposed interim dividend of 5 pence per share 42.7 10 Earnings per share (a) Earnings per share Basic and diluted earnings per share as calculated in accordance with IAS 33 Earnings per Share. Six months ended 30 June 2011
Pence Earnings Shares per GBPm million share Continuing operations: Basic earnings per share (1) 180.9 828.2 21.8p Dilutive convertible bonds, share options and share awards 2.4 33.1 Diluted earnings per share 183.3 861.3 21.3p Discontinued operations: Basic earnings per share (1) - 828.2 - Dilutive convertible bonds, share options and share awards - 33.1 Diluted earnings per share - 861.3 - Continuing and discontinued operations: Basic earnings per share (1) 180.9 828.2 21.8p Dilutive convertible bonds, share options and share awards 2.4 33.1 Diluted earnings per share 183.3 861.3 21.3p Six months ended 30 June 2010 Pence
Earnings Shares per GBPm million share Continuing operations: Basic earnings per share (1) 219.9 621.7 35.4p Dilutive convertible bonds, share options and share awards 1.1 13.1 Diluted earnings per share 221.0 634.8 34.8p Discontinued operations: Basic earnings per share (1) 72.6 621.7 11.6p Dilutive convertible bonds, share options and share awards - 13.1 Diluted earnings per share 72.6 634.8 11.5p Continuing and discontinued operations: Basic earnings per share (1) 292.5 621.7 47.0p Dilutive convertible bonds, share options and share awards 1.1 13.1 Diluted earnings per share 293.6 634.8 46.3p Year ended 31 December 2010 Pence Earnings Shares per
GBPm million share Continuing operations: Basic earnings per share (1) 428.8 627.8 68.3p Dilutive convertible bonds, share options and share awards 1.7 9.7 Diluted earnings per share 430.5 637.5 67.5p Discontinued operations: Basic earnings per share (1) 83.0 627.8 13.2p Dilutive convertible bonds, share options and share awards - 9.7 Diluted earnings per share 83.0 637.5 13.0p Continuing and discontinued operations: Basic earnings per share (1) 511.8 627.8 81.5p Dilutive convertible bonds, share options and share awards 1.7 9.7 Diluted earnings per share 513.5 637.5 80.5p (1) The weighted average number of shares used for the calculation of basic earnings per share has been adjusted for shares held in the ESOP and treasury shares. Basic earnings per share are stated after deducting interest on convertible bonds recognised directly in equity of GBP2.4 million in the six months ended 30 June 2011. (b) Headline earnings per share Headline earnings per share has been calculated and presented as required by the Johannesburg Stock Exchange listing requirements and is given for continuing plus discontinued operations. Six months ended 30 June 2011 Gross Net (1) GBPm GBPm
Basic earnings 180.9 Remove: Revaluation and sale of investment and development property (58.4) (48.8) Gain on acquisition of subsidiaries (54.3) (54.3) Gain on sale of subsidiaries (40.4) (25.9) Sale and impairment of other investments 8.7 8.7 Headline earnings/(loss) 60.6 Dilution (2) 2.4 Diluted headline earnings/(loss) 63.0 Weighted average number of shares 828.2 Dilution (2) 33.1 Diluted weighted average number of shares 861.3 Headline earnings/(loss) per share (pence) 7.3p Diluted headline earnings/(loss) per share (pence) 7.3p Six months ended 30 June 2010
Gross Net (1) GBPm GBPm Basic earnings 292.5 Remove: Revaluation and sale of investment and development property (417.9) (406.2) Gain on acquisition of subsidiaries - - Gain on sale of subsidiaries - - Sale and impairment of other investments - - Headline earnings/(loss) (113.7) Dilution (2) 1.1 Diluted headline earnings/(loss) (112.6) Weighted average number of shares 621.7 Dilution (2) 13.1 Diluted weighted average number of shares 634.8 Headline earnings/(loss) per share (pence) (18.3)p Diluted headline earnings/(loss) per share (pence) (17.7)p Year ended 31 December 2010 Gross Net (1) GBPm GBPm
Basic earnings 511.8 Remove: Revaluation and sale of investment and development property (580.5) (547.5) Gain on acquisition of subsidiaries - - Gain on sale of subsidiaries - - Sale and impairment of other investments 2.6 2.6 Headline earnings/(loss) (33.1) Dilution (2) 1.7 Diluted headline earnings/(loss) (31.4) Weighted average number of shares 627.8 Dilution (2) 9.7 Diluted weighted average number of shares 637.5 Headline earnings/(loss) per share (pence) (5.3)p Diluted headline earnings/(loss) per share (pence) (4.9)p (1) Net of tax and non-controlling interest (2) The dilution impact is required to be included as for earnings per share as calculated in note 10(a) even where this is not dilutive for headline earnings per share. (c) Underlying earnings per share Underlying earnings per share is a non-GAAP measure but has been included as it is considered to be a key measure of the Group`s operating results and indication of the extent to which dividend payments are supported by current earnings. Six months ended 30 June 2011 Pence Earnings Shares per GBPm million share
Basic earnings per share from continuing operations (1) 180.9 828.2 21.8p Remove: Revaluation and sale of investment and development property (58.4) (7.1)p Share of associates revaluation of investment and development property (9.1) (1.1)p Sale and impairment of other investments 8.7 1.1p Gain on acquisition of subsidiaries (54.3) (6.6)p Gain on sale of subsidiaries (40.4) (4.9)p Exceptional administration costs 15.5 1.9p Exceptional finance charges 34.4 4.2p Change in fair value of derivative financial instruments (21.7) (2.6)p Tax on the above (0.2) - REIT entry charge - - Non-controlling interest in respect of the above 10.9 1.3p Add: C&C US underlying earnings included within discontinued operations - - Underlying earnings per share 66.3 828.2 8.0p Dilutive convertible bonds, share options and share awards 2.4 33.1 Underlying, diluted earnings per share 68.7 861.3 8.0p Six months ended 30 June 2010 Pence Earnings Shares per
GBPm million share Basic earnings per share from continuing operations (1) 219.9 621.7 35.4p Remove: Revaluation and sale of investment and development property (344.8) (55.5)p Share of associates revaluation of investment and development property - - Sale and impairment of other investments - - Gain on acquisition of subsidiaries - - Gain on sale of subsidiaries - - Exceptional administration costs 8.1 1.3p Exceptional finance charges 66.3 10.7p Change in fair value of derivative financial instruments 89.1 14.4p Tax on the above (1.0) (0.2)p REIT entry charge 1.7 0.3p Non-controlling interest in respect of the above (0.4) (0.1)p Add: C&C US underlying earnings included within discontinued operations 4.4 0.7p Underlying earnings per share 43.3 621.7 7.0p Dilutive convertible bonds, share options and share awards - 0.9 Underlying, diluted earnings per share 43.3 622.6 7.0p Year ended 31 December 2010 Pence
Earnings Shares per GBPm million share Basic earnings per share from continuing operations (1) 428.8 627.8 68.3p Remove: Revaluation and sale of investment and development property (497.2) (79.2)p Share of associates revaluation of investment and development property - - Sale and impairment of other investments 2.6 0.4p Gain on acquisition of subsidiaries - - Gain on sale of subsidiaries - - Exceptional administration costs 15.6 2.5p Exceptional finance charges 66.3 10.6p Change in fair value of derivative financial instruments 50.0 8.0p Tax on the above (2.8) (0.4)p REIT entry charge 3.3 0.5p Non-controlling interest in respect of the above 19.1 3.0p Add: C&C US underlying earnings included within discontinued operations 10.9 1.7p Underlying earnings per share 96.6 627.8 15.4p Dilutive convertible bonds, share options and share awards 1.7 9.7 Underlying, diluted earnings per share 98.3 637.5 15.4p (1) The weighted average number of shares used for the calculation of basic earnings per share has been adjusted for shares held in the ESOP and treasury shares. Basic earnings per share are stated after deducting interest on convertible bonds recognised directly in equity of GBP2.4 million in the six months ended 30 June 2011. 11 Net assets per share As at 30 June 2011 Net NAV per assets Shares share
GBPm million (pence) NAV attributable to equity shareholders of CSC Group PLC (1) 3,137.0 853.5 368p Dilutive convertible bonds, share options and share awards - 39.1 Diluted NAV 3,137.0 892.6 351p Add: Unrecognised surplus on trading properties (net of tax) - - Remove: Fair value of derivative financial instruments (net of tax) 298.7 33p Deferred tax on investment and development property and other investments 13.3 2p Non-controlling interest on the above (30.2) (3)p Add: Non-controlling interest recoverable balance not recognised 71.3 8p NAV per share (diluted, adjusted) 3,490.1 892.6 391p As at 31 December 2010
Net NAV per assets Shares share GBPm million (pence) NAV attributable to equity shareholders of CSC Group PLC (1) 2,273.4 685.8 331p Dilutive convertible bonds, share options and share awards - - Diluted NAV 2,273.4 685.8 331p Add: Unrecognised surplus on trading properties (net of tax) 1.4 - Remove: Fair value of derivative financial instruments (net of tax) 314.9 46p Deferred tax on investment and development property and other investments 47.7 7p Non-controlling interest on the above (31.7) (5)p Add: Non-controlling interest recoverable balance not recognised 71.3 11p NAV per share (diluted, adjusted) 2,677.0 685.8 390p As at 30 June 2010 Net NAV per
assets Shares share GBPm million (pence) NAV attributable to equity shareholders of CSC Group PLC (1) 1,860.2 622.4 299p Dilutive convertible bonds, share options and share awards 12.7 4.3 Diluted NAV 1,872.9 626.7 299p Add: Unrecognised surplus on trading properties (net of tax) 1.4 - Remove: Fair value of derivative financial instruments (net of tax) 355.6 57p Deferred tax on investment and development property and other investments 43.8 7p Non-controlling interest on the above (35.9) (6)p Add: Non-controlling interest recoverable balance not recognised 71.3 11p NAV per share (diluted, adjusted) 2,309.1 626.7 368p (1) The number of shares used has been adjusted for shares held in the ESOP and treasury shares. 12 Investment and development property GBPm At 1 January 2011 5,051.0 Trafford Centre acquisition 1,650.0 Additions from subsequent expenditure 34.9 Transfer from trading properties 11.5 Disposals (1.6) Surplus on revaluation 58.3 At 30 June 2011 6,804.1 As at As at As at 30 June 31 December 30 June 2011 2010 2010
GBPm GBPm GBPm Balance sheet carrying value of investment and development property 6,804.1 5,051.0 4,886.7 Adjustment in respect of tenant incentives 95.0 86.8 71.6 Adjustment in respect of head leases (38.3) (38.7) (39.3) 6,860.8 5,099.1 4,919.0 Market value of investment and development property The fair value of the Group`s investment and development properties as at 30 June 2011 was determined by independent external valuers at that date. The valuation conforms with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards 7th Edition and with IVS 1 of International Valuation Standards, and was arrived at by reference to market transactions for similar properties. The main assumptions underlying the valuations are in relation to market rent, taking into account forecast growth rates and yields based on known transactions for similar properties and likely incentives offered to tenants. 13 Other investments GBPm At 1 January 2011 16.4 Additions 179.3 Reclassification to intercompany (6.3) Revaluation 0.6 Foreign exchange movements (5.4) At 30 June 2011 184.6 Additions are the consideration received for C&C US consisting of 11.35 million joint venture shares and 4.05 million shares in Equity One (note 21). The reclassification to intercompany results from the Trafford Centre acquisition and the elimination of the Group`s investment in Trafford CMBS. 14 Cash and cash equivalents As at As at As at 30 June 31 December 30 June 2011 2010 2010
GBPm GBPm GBPm Unrestricted cash 161.4 222.3 51.4 Restricted cash 3.1 - 76.3 164.5 222.3 127.7
Cash and cash equivalents per the statement of cash flows: Unrestricted cash 161.4 222.3 51.4 C&C US - classified as held for sale - 20.3 12.5 161.4 242.6 63.9 Restricted cash at 30 June 2011 reflects amounts held to match the 2014 loan notes shown within borrowings. Restricted cash at 30 June 2010 relates to amounts deposited in a trust account equal to the outstanding principal plus interest due on maturity which was used to settle the 3.95 per cent convertible bonds on maturity in September 2010. 15 Borrowings As at As at As at
30 June 31 December 30 June 2011 2010 2010 GBPm GBPm GBPm Current borrowings Bank loans and overdrafts 18.4 16.5 11.6 Commercial mortgage backed securities ("CMBS") notes 40.1 25.4 24.7 Loan notes 2014 3.1 - - 3.95% convertible bonds due 2010 - - 74.7 Borrowings excluding finance leases 61.6 41.9 111.0 Finance lease obligations 3.7 4.1 4.5 Current borrowings 65.3 46.0 115.5 Non-current borrowings CMBS notes 2015 1,012.9 1,005.9 1,018.9 CMBS notes 2022 52.2 - - CMBS notes 2029 105.8 - - CMBS notes 2033 381.7 - - CMBS notes 2035 178.4 - - Bank loan 2014 114.7 58.4 58.2 Bank loans 2016 742.0 749.1 756.1 Bank loan 2017 508.9 511.1 513.2 Debentures 2027 227.0 226.9 226.7 CSC bonds 2013 26.7 26.7 26.7 Borrowings excluding finance leases and Metrocentre compound financial instrument 3,350.3 2,578.1 2,599.8 Metrocentre compound financial instrument 142.7 138.7 134.4 Finance lease obligations 34.6 34.7 34.8 Non-current borrowings 3,527.6 2,751.5 2,769.0 Total borrowings 3,592.9 2,797.5 2,884.5 Cash and cash equivalents (164.5) (222.3) (127.7) Net debt 3,428.4 2,575.2 2,756.8 Net external debt (adjusted for Metrocentre compound financial instrument) at 30 June 2011 was GBP3,285.7 million (31 December 2010 - GBP2,436.5 million, 30 June 2010 - GBP2,622.4 million). 16 Cash generated from operations Six months Six months Year ended ended ended 30 June 30 June 31 December 2011 2010 2010
Notes GBPm GBPm GBPm Continuing operations Profit before tax 184.5 219.5 446.2 Remove: Revaluation and sale of investment and development property 5 (58.4) (344.8) (497.2) Gain on acquisition of subsidiaries 20 (54.3) - - Gain on sale of subsidiaries 21 (40.4) - - Sale and impairment of other investments 8.7 - 2.6 Depreciation 0.7 0.2 0.4 Share-based payments 0.8 0.6 1.0 Amortisation of lease incentives and other direct costs (4.3) (2.1) (5.3) Finance costs 6 98.1 82.3 165.4 Finance income (0.6) (1.3) (3.1) Other finance costs 7 38.4 70.7 75.1 Change in fair value of derivative financial instruments (21.7) 89.1 50.0 Changes in working capital: Change in trading property 3.6 1.2 4.5 Change in trade and other receivables (5.7) (10.8) (21.1) Change in trade and other payables 4.4 4.8 8.3 Cash generated from operations 153.8 109.4 226.8 17 Share capital GBPm Issued and fully paid At 31 December 2010 - 692,673,009 ordinary shares of 50p each 346.3 Shares issued 83.9 At 30 June 2011 - 860,347,169 ordinary shares of 50p each 430.2 On 28 January 2011 the Company issued 155,000,000 ordinary shares as part of the consideration for the acquisition of The Trafford Centre (note 20). As a condition of the acquisition the Company issued to the Peel Group a further 12,316,817 ordinary shares for cash at GBP3.55 per share. During the period the Company issued a total of 357,343 ordinary shares in connection with the exercise of options by former employees under the Capital Shopping Centres Group PLC Approved Share Option Scheme and the Capital Shopping Centres Group PLC Unapproved Share Option Scheme. 18 Convertible bonds On 28 January 2011 the Company issued GBP127.6 million, 3.75 per cent perpetual subordinated convertible bonds (the "convertible bonds") as part of the consideration for the acquisition of The Trafford Centre (note 20). As a condition of the acquisition the Company also issued to the Peel Group GBP25.7 million of convertible bonds for a subscription amount of GBP23.7 million and an implied issue price of the underlying shares of GBP3.55 per share. A total of GBP154.3 million convertible bonds were issued and remain outstanding at 30 June 2011. These are accounted for as equity at their fair value on issue which totalled GBP143.7 million. The convertible bonds can be converted at the option of the bondholder at any time from 28 January 2013 at GBP4.00 per ordinary share, a conversion rate of 250 ordinary shares for every GBP1,000 nominal. Full conversion would result in 38,579,250 ordinary shares being issued. The convertible bonds may be redeemed at their principal amount at the Company`s option on 28 January 2014 or any subsequent interest payment date thereafter, or at any time once 85 per cent or more of the principal amount of the bonds originally issued have been converted or cancelled. 19 Capital commitments At 30 June 2011, the Group was contractually committed to GBP54.5 million (31 December 2010 - GBP90.1 million, 30 June 2010 - GBP110.7 million) of future expenditure for the purchase, construction, development and enhancement of investment property. The Group`s share of joint venture commitments included above at 30 June 2011 was GBP21.0 million (31 December 2010 - GBP63.0 million, 30 June 2010 - GBP79.3 million). 20 Acquisition of The Trafford Centre On 28 January 2011 the Group acquired 100% of the share capital of Tokenhouse Holdings Limited (renamed CSC Trafford Centre Group Limited) for consideration consisting of 155.0 million ordinary shares in the Company and GBP127.6 million, 3.75 per cent perpetual subordinated convertible bonds (the "convertible bonds"). As a condition of the acquisition the Company also issued to the Peel Group 12,316,817 ordinary shares for GBP3.55 each and convertible bonds with a nominal value of GBP26.7 million convertible into 6,679,250 ordinary shares, for a subscription amount of GBP23.7 million and an implied issue price of the underlying shares of GBP3.55 each. Total exceptional administration expenses associated with the acquisition are GBP19.5 million of which GBP4.0 million were recognised in 2010 and the balance of GBP15.5 million in 2011. Through its subsidiaries CSC Trafford Centre Group Limited owns and operates The Trafford Centre in Manchester. Further details of the business are given in the Operating and Financial Review. The fair value of the consideration paid has been assessed as GBP702.7 million, consisting of GBP582.8 million in respect of the ordinary shares and GBP119.9 million in respect of the convertible bonds. The fair value has been assessed using the Capital Shopping Centres Group PLC opening share price on 28 January 2011 of GBP3.76, being the share price at the point the acquisition took place. The fair value of assets and liabilities acquired is set out in the table below. Fair value Book value adjustments Fair value GBPm GBPm GBPm Assets Investment and development property 1,653.6 (3.6) 1,650.0 Plant and equipment 0.4 - 0.4 Cash and cash equivalents (including restricted cash of GBP3.6 million) 41.2 - 41.2 Trade and other receivables 18.8 (12.9) 5.9 Total assets 1,714.0 (16.5) 1,697.5 Liabilities Borrowings (833.3) (16.6) (849.9) Trade and other payables (88.7) 15.6 (73.1) Derivative financial instruments (17.5) - (17.5) Total liabilities (939.5) (1.0) (940.5) Net assets 774.5 (17.5) 757.0 Fair value of consideration paid 702.7 Gain on acquisition of subsidiaries 54.3 The book values disclosed are under IFRS and after allowing for the impact of joining the REIT regime. The trade and other liabilities book value includes the REIT entry charge of GBP33.0 million. The fair value of the assets and liabilities acquired exceeds the fair value of the consideration and as a result a gain of GBP54.3 million is recognised in the income statement on acquisition. This gain reflects the CSC share price at the date of the acquisition of GBP3.76 which, in accordance with IFRS 3 Business Combinations, is required to be used to assess the fair value of the consideration for acquisition accounting purposes. The acquisition was however agreed based on an issue price of the CSC Group ordinary shares of GBP4.00. The difference between the agreed issue price of GBP4.00 and the share price at the date the acquisition was completed of GBP3.76 is the principal reason for recording an accounting gain on the acquisition. During the period the acquired companies contributed GBP42.6 million to the revenue of the Group and GBP8.1 million to the profit for the period. Had the acquisition taken place at 1 January 2011 the revenue of the Group for the period would have been GBP265.0 million and the profit for the period would have been GBP195.7 million. 21 Disposal of C&C US In 2010 the Group entered into an agreement with Equity One, pursuant to which Equity One agreed to acquire the Group`s interests in its US subsidiaries (C&C US), through a joint venture with CSC. The transaction was completed on 4 January 2011. Consideration consisted of approximately 11.35 million shares in the joint venture and 4.05 million shares in Equity One common stock. Based on the Equity One share price on 4 January of $18.15 and an exchange rate on that day of 1.56, the consideration had a fair value of GBP179.3 million at the date of the transaction and the net assets exchanged had a book value of GBP147.3 million including a deferred tax liability on investment property of GBP47.7 million. After taking into account costs of the transaction of GBP2.5 million, and the transfer of related hedging and foreign currency balances from equity of GBP10.9 million, a profit of GBP40.4 million has been recognised in the income statement as summarised in the table below. GBPm Fair value of consideration received 179.3 Book value of net assets (147.3) Costs of the transaction (2.5) Cumulative foreign currency and hedging balances transferred from reserves 10.9 Gain on sale of subsidiaries 40.4 22 Related party transactions There have been no related party transactions during the period that require disclosure under Section DTR 4.2.8 R of the Disclosure and Transparency Rules or under IAS34 Interim Financial Reporting except those disclosed elsewhere in this condensed set of financial statements. INVESTMENT AND DEVELOPMENT PROPERTY (unaudited) Property data Market Initial* value yield GBPm Ownership Notes (EPRA) As at 30 June 2011 The Trafford Centre, Manchester 1,650.0 100% 5.09% Lakeside, Thurrock 1,071.0 100% 5.00% Metrocentre, Gateshead 870.9 90% A 5.55% Braehead, Glasgow 576.5 100% 5.08% The Harlequin, Watford 353.0 93% 5.09% Manchester, Arndale 347.6 48% B 5.51% Victoria Centre, Nottingham 333.0 100% 5.19% St David`s, Cardiff 276.0 50% 3.92% Eldon Square, Newcastle upon Tyne 261.9 60% 4.41% Chapelfield, Norwich 240.6 100% 5.40% Cribbs Causeway, Bristol 221.2 33% C 5.48% The Chimes, Uxbridge 217.3 100% 5.95% The Potteries, Stoke-on-Trent 198.5 100% 6.89% The Glades, Bromley 178.8 64% 5.70% Other 64.5 D Total investment and development property 6,860.8 5.20% Total investment and development property (excluding The Trafford Centre) 5,210.8 5.23% As at 31 December 2010 Total investment and development property 5,099.1 5.32% Gross
Nominal* area equivalent million yield Occupancy* sq. ft. E As at 30 June 2011 The Trafford Centre, Manchester 5.62% 95.8% 1.9 Lakeside, Thurrock 5.69% 98.7% 1.4 Metrocentre, Gateshead 6.03% 98.5% 2.1 Braehead, Glasgow 6.12% 96.1% 1.1 The Harlequin, Watford 6.65% 95.1% 0.7 Manchester, Arndale 5.97% 97.7% 1.6 Victoria Centre, Nottingham 6.40% 95.9% 1.0 St David`s, Cardiff 5.85% 89.0% 1.4 Eldon Square, Newcastle upon Tyne 6.76% 96.1% 1.4 Chapelfield, Norwich 6.80% 96.3% 0.5 Cribbs Causeway, Bristol 6.04% 97.0% 1.0 The Chimes, Uxbridge 6.45% 98.6% 0.4 The Potteries, Stoke-on-Trent 7.25% 99.8% 0.6 The Glades, Bromley 7.25% 96.7% 0.5 Other 0.4 Total investment and development property 6.06% 96.8% 16.0 Total investment and development property (excluding The Trafford Centre) 6.19% 97.1% 14.1 As at 31 December 2010 Total investment and development property 6.30% 98.6% 14.1 * As defined in glossary. Notes A) Interest shown is that of the Metrocentre Partnership in the Metrocentre (90 per cent) and the Metro Retail Park (100 per cent). The Group has a 60 per cent interest in the Metrocentre Partnership which is consolidated as a subsidiary of the Group. B) The Group`s interest is through a joint venture ownership of a 95 per cent interest in Manchester Arndale, and a 90 per cent interest in New Cathedral Street, Manchester. C) The Group`s interest is through a joint venture ownership of a 66 per cent interest in The Mall at Cribbs Causeway and a 100 per cent interest in The Retail Park, Cribbs Causeway. D) Includes the Group`s 50 per cent economic interest in Xscape, Braehead. E) Area shown is not adjusted for the proportional ownership. As at As at 30 June 31 December 2011 2010
GBPm GBPm Passing rent 354.1 271.7 ERV 459.1 354.1 Weighted average unexpired lease 7.6 years 7.0 years Analysis of capital return in the period Market value 30 June 31 December 2011 2010
GBPm GBPm Like-for-like property 5,194.7 5,092.4 The Trafford Centre 1,650.0 - Transferred from trading property 11.2 - Developments 4.9 6.7 Total investment and development property 6,860.8 5,099.1 Revaluation surplus * 30 June 2011
GBPm % Like-for-like property 63.9 1.2 The Trafford Centre (2.0) (0.1) Transferred from trading property (0.4) (3.4) Developments (3.2) (39.5) Total investment and development property 58.3 0.9 * Revaluation surplus includes amortisation of lease incentives and fixed head leases. Analysis of net rental income in the period Six months Six months ended ended 30 June 30 June
2011 2010 Change GBPm GBPm % Like-for-like property 135.0 127.2 6.1 The Trafford Centre 35.4 - 100.0 Disposals - 1.0 (100.0) Developments 7.5 6.3 19.0 Total investment and development property 177.9 134.5 32.3 OTHER INFORMATION FINANCIAL COVENANTS (unaudited) Financial covenants on asset-specific debt excluding joint ventures Loan
outstanding at 31 July 2011 (1) LTV Maturity GBPm covenant Metrocentre 2015 542.8 90% Braehead 2015 328.8 N/A Watford 2015 251.5 N/A Nottingham 2016 248.2 90% Chapelfield 2016 210.9 N/A Uxbridge 2016 158.3 85% Bromley 2016 136.4 85% Lakeside 2017 517.1 75% Total 2,394.0 Loan to 30 June Interest Interest 2011 cover cover market value (2) covenant actual (3)
Metrocentre 62% 120% 136% Braehead 57% 120% 173% Watford 71% 120% 135% Nottingham 75% 120% 230% Chapelfield 88% 120% 146% Uxbridge 73% 120% 145% Bromley 76% 120% 143% Lakeside 48% 140% 196% Total The Trafford Centre There are no financial covenants on the Trafford Centre debt. However a debt service charge ratio is assessed quarterly and where this falls below specified levels certain restrictions come into force. The loan to market value ratio is 48 per cent. Financial covenants on joint ventures asset-specific debt Loan
outstanding at 31 July 2011 (1) LTV Maturity GBPm covenant
Cardiff 2014 93.4 (4) 75% Xscape 2014 22.8 (4) n/a (5) Total 116.2 Loan to
30 June Interest Interest 2011 cover cover market value (2) covenant actual (3) Cardiff 34% 150% 250% Xscape 89% 120% 170% Total Notes (1) The loan values are the actual principal balances outstanding at 31 July 2011, which take into account any principal repayments made in July 2011. The balance sheet value of the loans includes any unamortised fees. (2) The Loan to 30 June 2011 market value provides an indication of the impact the 30 June 2011 property valuations undertaken for inclusion in the condensed financial statements could have on the LTV covenants. The actual timing and manner of testing LTV covenants varies and is loan specific. (3) Based on latest certified figures, calculated in accordance with loan agreements, which have been submitted between 30 June 2011 and 31 July 2011. The calculations are loan specific and include a variety of historic, forecast and in certain instances a combined historic and forecast basis. (4) 50 per cent of the debt is shown which is consistent with accounting treatment and the Group`s economic interest. (5) The Xscape LTV covenant is suspended until 1 April 2012. Financial covenants on corporate facilities at 30 June 2011 Interest Net worth Net worth cover
covenant* actual covenant* GBP248m facility, maturing in 2013 GBP600 GBP1,353m 120% Interest Borrowings/ Borrowings/ cover net worth net worth
actual covenant* actual GBP248m facility, maturing in 2013 155% 110% 31% * Tested on the Borrower Group which excludes, at the Group`s election, certain subsidiaries with asset-specific finance. The facility is secured on the Group`s investments in Arndale, Manchester and Cribbs Causeway, Bristol. Capital Shopping Centres Debenture PLC at 30 June 2011 Capital Capital Interest Interest Loan cover cover cover cover
Maturity GBPm covenant actual covenant actual 2027 231.4 167% 198% 100% 117% The debenture is currently secured on the Group`s interests in The Potteries, Stoke-on-Trent and Eldon Square, Newcastle. Should the capital cover or interest cover test be breached Capital Shopping Centres Debenture PLC (the issuer) has three months from the date of delivery of the valuation or the latest certificate to the Trustees to make good any deficiencies. The issuer may withdraw property secured on the debenture by paying a sum of money or through the substitution of alternative property provided that the loan to value and income tests are satisfied immediately following the substitution. UNDERLYING PROFIT STATEMENT (unaudited) For the six months ended 30 June 2011 Six months Six months ended ended 30 June 30 June
2011 2010 GBPm GBPm Net rental income 177.9 134.5 Net other income 3.7 0.3 181.6 134.8 Administration expenses (11.8) (11.2) Underlying operating profit 169.8 123.6 Finance costs (98.1) (82.3) Finance income 0.6 1.3 Other finance costs (4.0) (4.4) Underlying net finance costs (101.5) (85.4) Underlying profit before tax 68.3 38.2 Tax on adjusted profit (0.7) (0.2) Remove amounts attributable to non-controlling interest 1.2 0.9 Share of underlying loss of associates (0.1) - C&C US underlying earnings included within discontinued operations - 4.4 Interest on convertible bonds deducted directly in equity (2.4) - Underlying earnings 66.3 43.3 Underlying earnings per share (pence) 8.0p 7.0p Six months Year ended ended 31 December 31 December
2010 2010 GBPm GBPm Net rental income 142.4 276.9 Net other income 0.4 0.7 142.8 277.6 Administration expenses (11.8) (23.0) Underlying operating profit 131.0 254.6 Finance costs (83.1) (165.4) Finance income 1.8 3.1 Other finance costs (4.4) (8.8) Underlying net finance costs (85.7) (171.1) Underlying profit before tax 45.3 83.5 Tax on adjusted profit 0.1 (0.1) Remove amounts attributable to non-controlling interest 1.4 2.3 Share of underlying loss of associates - - C&C US underlying earnings included within discontinued operations 6.5 10.9 Interest on convertible bonds deducted directly in equity - - Underlying earnings 53.3 96.6 Underlying earnings per share (pence) 8.4p 15.4p Included within underlying earnings for the six months ended 30 June 2011 are the following amounts related to the Trafford Centre acquisition. GBPm Net rental income 35.4 Administration expenses (0.6) Underlying operating profit 34.8 Underlying net finance costs (19.5) Underlying profit before tax 15.3 Interest on convertible bonds deducted directly in equity (2.4) Underlying earnings 12.9 DIVIDENDS The Directors of Capital Shopping Centres Group PLC have announced an interim dividend per ordinary share (ISIN GB0006834344) of 5 pence (2010 - 5.0 pence) payable on 22 November 2011 (see salient dates below). This dividend will be paid totally as a Property Income Distribution ("PID") and will be wholly subject to a 20 per cent withholding tax unless exemptions apply (please refer to the SPECIAL NOTE below). Dates The following are the salient dates for the payment of the interim dividend: Thursday, 29 September 2011 Sterling/Rand exchange rate struck. Friday, 30 September 2011 Sterling/Rand exchange rate and dividend amount in SA currency announced. Monday, 10 October 2011 Ordinary shares listed ex-dividend on the JSE, Johannesburg
Wednesday, 12 October 2011 Ordinary shares listed ex-dividend on the London Stock Exchange. Friday, 14 October 2011 Record date for interim dividend in London and Johannesburg.
Friday, 14 October 2011 UK shareholders only: Last date for receipt of Tax Exemption Declaration forms to permit dividends to be paid gross. Tuesday, 22 November 2011 Dividend payment day for shareholders South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum- dividend will be Friday, 7 October 2011 and that no dematerialisation or rematerialisation of shares will be possible from Monday, 10 October to Friday, 14 October 2011 inclusive. No transfers between the UK and South African registers may take place from Thursday, 29 September to Sunday, 16 October 2011 inclusive. PID SPECIAL NOTE: UK shareholders: For those who are eligible for exemption from the 20 per cent withholding tax and have not previously registered for exemption, an HM Revenue & Customs ("HMRC") Tax Exemption Declaration is available for download from the REITs page of the "Investors" section of the Capital Shopping Centres Group website (www.capital-shopping-centres.co.uk), or on request to our UK registrars, Capita Registrars, or HMRC. Validly completed forms must be received by Capita Registrars no later than the Record Date, Friday 14 October 2011; otherwise the dividend will be paid after deduction of tax. South African and other non-UK shareholders: South African shareholders may apply to HMRC after payment of the dividend for a refund of the difference between the 20 per cent withholding tax and the UK/South African double taxation treaty rate of 15 per cent. Other non-UK shareholders may also be able to claim a refund of withholding tax (either as an individual or as a company) from HMRC subject to the terms of a double tax treaty, if any, between the UK and the country in which the shareholder is relevant. Refund application forms for all non-UK shareholders are available for download from the REITs page of the "Investors" section of the Capital Shopping Centres Group website (www.capital-shopping-centres.co.uk), or on request to our SA registrars, Computershare, or HMRC. UK withholding tax refunds are not claimable from Capital Shopping Centres Group, the South African Revenue Service ("SARS") or other national authorities, only from the UK`s HMRC. NOTE: The taxation of PIDs in South Africa for South African resident shareholders changed on 1 January 2011 and they are therefore advised to contact their own tax advisers or SARS to confirm the current tax treatment. Neither Capital Shopping Centres Group nor Computershare are able to provide any guidance at this time as the effect of the change is a matter to be determined between South African resident shareholders and SARS. The above does not constitute advice and shareholders should seek their own professional guidance. Capital Shopping Centres Group does not accept liability for any loss suffered arising from reliance on the above. GLOSSARY Adjusted, diluted net asset value per share NAV per share adjusted to exclude the fair value of derivative instruments and related tax and deferred tax on investment and development property and other investments and to include any unrecognised post tax surplus on trading properties. Annual property income The Group`s share of passing rent plus the external valuers` estimate of annual excess turnover rent, additional rent in respect of unsettled rent reviews and sundry income such as that from car parks and mall commercialisation. Debt to assets ratio Net external debt divided by the balance sheet value of investment and development property plus trading property. Diluted figures Reported amounts adjusted to include the effects of dilutive potential shares issuable under convertible bonds and employee incentive arrangements. Earnings per share Profit for the period attributable to equity shareholders of CSC Group PLC divided by the weighted average number of shares in issue during the period. EPRA European Public Real Estate Association, the publisher of Best Practice Recommendations intended to make financial statements of public real estate companies in Europe clearer, more transparent and comparable. ERV (estimated rental value) The external valuers` estimate of the Group`s share of the current annual market rent of all lettable space net of any non-recoverable charges, before bad debt provision and adjustments required under IFRS regarding tenant lease incentives. Exceptional items Exceptional items are those items that in the Directors` view are required to be separately disclosed by virtue of their size or incidence to enable a full understanding of the Group`s financial performance. Initial yield to the Group Annualised net rent (as net initial yield (EPRA)) on investment properties expressed as a percentage of the net market value, representing the yield that would be foregone by the Group were the asset to be sold. Interest cover Underlying operating profit excluding trading property related items divided by the net finance cost plus interest on convertible bonds recognised in equity excluding the change in fair value of derivatives, exceptional finance costs and amortisation of compound financial instruments. Interest rate swap A derivative financial instrument enabling parties to exchange interest rate obligations for a predetermined period. These are used by the Group to convert floating rate debt to fixed rates. IPD Investment Property Databank Ltd, producer of an independent benchmark of property returns. Like-for-like properties Investment properties which have been owned throughout both periods without significant capital expenditure in either period, so both income and capital can be compared on a like-for-like basis. For the purposes of comparison of capital values, this will also include assets owned at the previous reporting period end but not throughout the prior period. Loan-to-value (LTV) LTV is the ratio of attributable debt to the market value of an investment property. Net asset value (NAV) per share Net assets attributable to equity shareholders of CSC Group PLC divided by the number of ordinary shares in issue at the period end. Net external debt Net debt after removing the Metrocentre compound financial instrument. Net initial yield (EPRA) Annualised net rent (after deduction of revenue costs such as head rent, running void, service charge after shortfalls, empty rates and merchant association contribution) on investment properties expressed as a percentage of the gross market value before deduction of theoretical acquisition costs, consistent with EPRA`s net initial yield. Net rental income The Group`s share of net rents receivable as shown in the income statement, having taken due account of non-recoverable charges, bad debt provisions and adjustments to comply with IFRS including those regarding tenant lease incentives. Nominal equivalent yield Effective annual yield to a purchaser from the assets individually at market value after taking account of notional acquisition costs assuming rent is receivable annually in arrears, reflecting estimated rental values (ERV) but disregarding potential changes in market rents. Occupancy The passing rent of let and under offer units expressed as a percentage of the passing rent of let and under offer units plus ERV of un-let units, excluding development and recently completed properties and treating units let to tenants in administration as un-let. GLOSSARY Passing rent The Group`s share of contracted annual rents receivable at the balance sheet date. This takes no account of accounting adjustments made in respect of rent free periods or tenant incentives, the reclassification of certain lease payments as finance charges or any irrecoverable costs and expenses, and does not include excess turnover rent, additional rent in respect of unsettled rent reviews or sundry income such as from car parks etc. Contracted annual rents in respect of tenants in administration are excluded. Property Income Distribution (PID) A dividend, generally subject to UK withholding tax at the basic rate of income tax, that a UK REIT is required to pay to its shareholders from its qualifying rental profits. Certain classes of shareholder may qualify to receive a PID gross - shareholders should refer to www.capital-shopping- centres.co.uk for further information. The Group can also pay non-PID dividends which are not subject to UK withholding tax. Real Estate Investment Trust (REIT) A tax regime which exempts from corporation tax the rental profits and capital gains of the REIT`s qualifying investment property activities. In the UK, the regime must be elected into and the REIT must meet certain ongoing qualifications, including the requirement to distribute at least 90 per cent of qualifying rental profits to shareholders. The Group elected for REIT status with effect from 1 January 2007. Tenant (or lease) incentives Any incentives offered to occupiers to enter into a lease. Typically incentives are in the form of an initial rent free period and/or a cash contribution to fit-out the premises. Under IFRS the value of incentives granted to tenants is amortised through the income statement on a straight- line basis over the lease term. Total financial return The change in adjusted NAV per share plus dividends per share paid in the period expressed as a percentage of opening NAV per share less dividends paid in the period. Trading property Properties held for trading purposes rather than to earn rentals or for capital appreciation and shown as current assets in the balance sheet. Underlying earnings per share (EPS) Earnings per share adjusted to exclude valuation movements, exceptional items and related tax. Underlying figures Amounts described as underlying exclude valuation movements, exceptional items and related tax. Yield shift A movement (usually expressed in basis points) in the yield of a property asset. Top ten properties (GRAPHIC REMOVED - PLEASE SEE PAGES 44 & 45 OF FULL ANNOUNCEMENT WHICH CAN BE FOUND AT WWW.CAPITAL-SHOPPING-CENTRES.CO.UK) Sponsor: Merrill Lynch South Africa (Pty) Limited Date: 02/08/2011 08:01:55 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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