Wrap Text
CapCo Interim Results 30 June 2012
PRESS RELEASE
31 July 2012
CAPITAL & COUNTIES PROPERTIES PLC ("Capco")
INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2012
Ian Hawksworth, Chief Executive of Capco, commented: "This is another strong set of results from Capco as we work to unlock
value from our prime central London assets. The creative regeneration of Covent Garden is driving growth, there is positive
momentum at Earls Court and Seagrave Road, and our successful recycling of capital gives us a strong balance sheet and the
ability to capitalise on future opportunities across our estates".
Performance highlights
- Good valuation performance across all three estates
- 6.8% increase in EPRA adjusted, diluted NAV to 177 pence per share (Dec 2011 - 166 pence)
- 4.8% increase in total property value (on a like-for-like basis) to GBP1.6 billion (Dec 2011 - GBP1.6 billion)
- Proposed 2012 interim dividend of 0.5 pence per share (2011 interim - 0.5 pence)
- 7.4% total return in the period
Strong performance at Covent Garden as transformation continues
- 4.5% increase in valuation (on a like-for-like basis) to GBP856 million (Dec 2011 - GBP808 million) driven by retail, F&B
and residential repositioning
- New lettings at 9.4% above December ERV
- 34 leasing transactions year to date with net rental income of GBP4.7 million
- 9 new retailers and restaurant have taken space in the first 6 months of the year, including Jo Malone, Melissa Shoes,
Jamie's Union Jacks and Brasserie Blanc
- ERV currently GBP47.1 million (Dec 2011 - GBP45.8 million); on track to deliver GBP50 million target in 2013
Further progress at Earls Court and Olympia
- 4.6% increase in valuation (on a like-for-like basis) to GBP620 million (Dec 2011 - GBP574 million) driven by Earls Court
and Seagrave Road land valuations and Empress State
- Earls Court land now valued at GBP9.5 million per acre (Dec 2011 - GBP8.6 million per acre)
- Seagrave Road granted formal planning consent. JV with Kwok family to complete in coming months
- Draft terms of Conditional Land Sale Agreement published and to go to future LBHF Cabinet for decision
Momentum in capital recycling
- GBP125 million of disposals in the first half of 2012, principally from investments in The Great Capital Partnership and
China, to reinvest in core estates
- GBP60 million further disposal from GCP in July
Financial
- GBP70 million revolving credit facility arranged giving increased financial flexibility
- Net debt reduced by GBP67 million to GBP397 million. Cash and undrawn committed facilities increased to GBP248
million (Dec 2011 - GBP245 million)
- Loan-to-value ratio of 24% (Dec 2011 - 29%)
- Weighted average cost of debt 4.5% on a pro forma basis (Dec 2011 - 5.8%)
Outlook
Capco has continued to drive performance across its estates during 2012, and this has been reflected in the financial results.
The balance sheet remains strong and liquid through continued recycling of capital and further debt refinancing.
The Covent Garden estate offers the potential for continued growth through the further evolution of the retail and F&B tenant
mix, together with the residential opportunity on the upper floors. Given the performance over the past two years, long-term
plans for more significant intervention in certain parts of the estate are being evaluated and planning applications may be
submitted in due course.
The first formal planning consent in the Earls Court area at Seagrave Road was an important milestone for the Group. We
remain hopeful that further positive decisions will be made by the local authorities over the remainder of 2012.
Whilst mindful of the continued uncertain macroeconomic environment, Capco's estates are strongly positioned within central
London which is firmly established as an important global city. We continue to make good progress towards realising our longer
term goals.
Enquiries
Capital & Counties Properties PLC:
Ian Hawksworth Chief Executive +44 (0)20 3214 9188
Soumen Das Finance Director +44 (0)20 3214 9183
Public relations:
UK: Michael Sandler/Wendy Baker, Hudson Sandler +44 (0)20 7796 4133
SA: Nicholas Williams/Morne Reinders, College Hill +27 (0)11 447 3030
A presentation to analysts and investors will take place today at 9:00am BST at UBS, 100 Liverpool Street, London, EC2M 2RH.
The presentation will also be available to international analysts and investors through a live audio call and webcast and after the
event on the Group's website www.capitalandcounties.com.
A copy of this press release is available for download from our website at www.capitalandcounties.com and hard copies can be
requested via the website or by contacting the company (email feedback@capitalandcounties.com or telephone +44 (0)20 3214
9153).
COMPANY OVERVIEW
Capco is one of the largest listed investment and development companies in central London. Our landmark estates, held directly
or through joint ventures, are valued at GBP1.6 billion. We aim to unlock the potential for significant value creation through
entrepreneurial asset management and to deliver superior, long-term returns to our shareholders.
Our assets are concentrated around three main estates in central London:
Covent Garden London
This vibrant and historic location is globally recognised as a shopping, dining and leisure destination. It is valued at GBP856
million.
Earls Court and Olympia
Including one of London's most important opportunity areas and a leading exhibition business, the EC&O estate has property
assets totalling GBP620 million, including Capco's share of the Empress State Building.
The Great Capital Partnership
A 50/50 joint venture with Great Portland Estates plc (GPE) which includes properties in prime locations around London's West
End worth GBP159 million (Capco share).
FINANCIAL SUMMARY
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Net rental income 34.1 36.7 69.0
Underlying earnings after tax* 6.1 6.2 9.5
Gain on revaluation of investment property 70.4 39.5 119.4
Profit after tax 95.2 68.5 153.7
Total investment and trading properties 1,621 1,502 1,617
Net debt 397 452 464
Net assets (EPRA adjusted) 1,232 1,064 1,145
Underlying earnings per share 0.9p 1.0p 1.4p
Net assets per share (EPRA adjusted, diluted) 177p 154p 166p
Loan-to-value ratio 24% 30% 29%
* Appendix 2 provides an analysis of underlying earnings
This press release includes statements that are forward-looking in nature. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Capital &
Counties Properties PLC to be materially different from any future results, performance or achievements expressed or implied
by such forward-looking statements. Any information contained in this press release on the price at which shares or other
securities in Capital & Counties Properties 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 REVIEW
Overview
Capco is a central London property company with a focus on delivering market-leading total returns. Capco unlocks the potential
of its assets through an entrepreneurial and active asset management strategy creating sustainable long-term value for
shareholders.
Capco is well positioned in the central London property market particularly across the retail and residential sectors, both of
which continue to perform strongly. The strategy of creative regeneration in its Covent Garden estate has seen a transformation
of the retail and restaurant offering in the area, whilst also enhancing and improving the public realm and the fabric of the
historic district, retaining its character and attracting a new customer demographic into the area.
The Earls Court Masterplan for the Earls Court & West Kensington Opportunity Area (ECOA) is centred around Sir Terry
Farrell's concept of Four Villages and a 21st Century High Street', and will create 7,500 new homes and 12,000 new jobs in the
area. In March, Seagrave Road received planning consent and work is likely to begin on site in 2013 creating 808 new homes
and a new garden square for London.
Market overview
London continues to outperform the UK and further cement its reputation as a global city and a destination for international
investment. Whilst the macroeconomic climate continues to be uncertain, the London property market remains robust in both the
retail and residential sectors. The Olympic Games place a spotlight on London this summer, showcasing the city to an
international audience and increasing exposure and awareness that is likely to have a long lasting positive effect on the capital.
The central London retail market remains strong, continuing the differentiation from the rest of the UK, and new international
retailers continue to be attracted to the capital. London as a world city remains a flagship destination, where retailers are
prepared to pay substantial premiums and rents for stores on the best prime streets. In continuation of the trend established in
late 2011, demand continues to outweigh supply in all of the major West End shopping streets.
In terms of the residential market, London continues to outperform the rest of the UK and is an attractive and stable option for
international investment. On average residential prices currently exceed the September 2007 peak in all prime central London
markets and international purchasers still make up a large portion of buyers in prime locations in London.
Valuations
A revaluation surplus of GBP75.9 million was achieved on the Group's property portfolio in the first half of 2012, spread across
all three estates.
Market Market
value value Value ERV Initial Equivalent
Jun 12 (1) Dec 11 (1) change Change yield yield
GBPm GBPm % (2),(3) % (3) % %
Covent Garden 855.6 808.0 4.5 2.3 3.7 5.2
GCP 158.8 241.3 7.1 9.2 3.4 5.2
EC&O 620.0 573.5 4.6 14.6
Other 3.0 1.2
Total properties 1,637.4 1,624.0 4.8 5.3
(1) Represents Capco's 50% share where applicable.
(2) Valuation change takes account of amortisation of lease incentives, capital expenditure and fixed head leases
(3) Like-for-like including both investment and trading properties.
Covent Garden's revaluation was driven by the higher rental levels for the retail and food & beverage (F&B) mix together with
the residential conversion potential on certain buildings. At Earls Court the valuer has increased the land valuation to GBP9.5
million per acre from GBP8.6 million per acre, due to the continued positive progress in the planning process. Seagrave Road
has been revalued to the contracted price for the joint venture following receipt of formal planning consent.
In addition to the revaluation surplus, profits of GBP10.8 million on the sale of investment and trading properties in the period
contributed to a total property return of 8.0 per cent.
Covent Garden
- Capital value of GBP856 million as at 30 June 2012, up 4.5 per cent on a like-for-like basis
- Net rental income of GBP15.7 million
- ERV of GBP47.1 million
The Covent Garden estate has continued to perform well with a capital value of GBP856 million, up 4.5 per cent on a like-for-like
basis. Occupancy remains high at 99.3 per cent. Year to date, 34 leasing transactions have taken place on the estate securing
rental income of GBP4.7 million, with new lettings at 9.4 per cent over the December 2011 ERV. Nine new retailers and
restaurants have taken space in Covent Garden in the first half of the year. ERV is currently GBP47.1 million and Capco
remains on track to achieve the target of GBP50 million in 2013. Footfall remains consistently strong at 44 million with 89 per
cent of UK visitors classified ABC1 and we expect the Olympic Games to bring even more visitors into Covent Garden's historic,
traffic-free Piazza.
Following the purchase of Kings Court in 2011, three new properties were acquired on Bedford Street and Henrietta Street in
March and contracts have been exchanged on 14 Garrick Street for GBP7.7 million in July 2012. Long and mid-term
development opportunities are being considered to unlock further significant value in the Covent Garden estate.
Retail activity
Demand remains strong and the estate is now attracting a series of new premium retailers to the area. In July Chanel opened
its only fragrance and beauty pop-up store in the UK in the Market Building and the American fashion multi-brand concept,
Opening Ceremony, opened its first European store on King Street. This continues the significant changes to the street, with
Jo Malone, 7 for All Mankind and Melissa Shoes' pop-up boutique opening in the past three months. Hackett has agreed terms
to move to 37 King Street setting a new Zone A of GBP600 per sq ft on King Street. Since 2009, 47 per cent of the brands on
King Street have changed. Public realm improvements on King Street were completed in May further enhancing its
appearance in line with its emergence as the destination for contemporary luxury in the West End.
Food & beverage
The strategy to enhance and improve the quality of Covent Garden has resulted in it becoming a destination for new restaurants
in London, and demand for space remains high across the estate. Jamie Oliver's new concept, Jamie's Union Jacks, opened in
the Market Building in July and is a popular option for both locals and visitors. Tuttons reopened its doors in June following a
renovation and MEATmarket, the take-away burger bar from the team behind MEATliquor, opened in Jubilee Hall in May.
Raymond Blanc opened Brasserie Blanc on the east terrace of the Market Building in the spring and Keith McNally's Balthazar
and Balthazar Bakery are fitting out premises in the former Flower Cellars building next to the recently opened London Film
Museum.
Residential
Earlier this year Capco launched the first of its residential projects at Covent Garden, The Henrietta, bringing the area back to its
residential roots. Positioned on the historic Piazza, The Henrietta offers three lateral luxury apartments and a duplex penthouse
which was sold in February, setting a record price in excess of GBP2,500 per sq ft for the area. As part of the ongoing strategy
to create value through office to residential conversions, work began on The Russell in January to create a further five luxury
apartments and work will begin on The Beecham later this year. Planning consent was also achieved on 30-32 Southampton
Street earlier this year to deliver a further seven apartments.
Earls Court & Olympia
- Capital value of GBP620 million as at 30 June 2012, up 4.6 per cent on a like-for-like basis; comprising:
- Earls Court GBP213 million, an increase of 4.8 per cent on 31 December 2011
- Olympia GBP121 million, value unchanged since 31 December 2011
- Seagrave Road GBP135 million, an increase of 11.1 per cent on 31 December 2011
- Empress State GBP110 million, an increase of 7.3 per cent on 31 December 2011
- Other peripheral assets GBP 41 million, an increase of 4.7 per cent on 31 December 2011
- Net rental income of GBP14.4 million
- EC&O Venues EBITDA GBP8.0 million down 26 per cent on a like-for-like basis
EC&O Venues
EC&O Venues has contracted 95.4 per cent of its budgeted business for 2012, however due to ongoing uncertainty surrounding
Earls Court, EBITDA of the business was GBP8 million, 26 per cent behind the first half of 2011 on a like-for-like basis, a
performance which is in line with expectations. Olympia continues to perform well and ahead of expectations, up 3.8 per cent on
a like-for-like basis. Properties representing GBP1 million of net rental income in the first half of 2012 were moved out of the
Venues business in 2011 and are no longer reported within the Venues EBITDA. The Brewery, which was operated by EC&O
Venues, was sold in February 2012.
To date the venues have hosted a number of new events including Toy Fair and Marketing Week Live. Olympia also hosted the
40th International Fine Art & Antiques Fair in June, attracting over 32,000 visitors to the event. Following the completion of the
West Hall the next phase of improvement works to Olympia Two and the conference centre continues on schedule and on
budget. In June EC&O Venues became the first exhibition venues to be certified to ISO 20121, the new international standard
for event sustainability. Earls Court is an official Olympics venue and is currently hosting the volleyball tournament.
Earls Court Masterplan
The Earls Court Masterplan is the vision of Sir Terry Farrell to create Four New Villages and a 21st Century High Street' in the
Earls Court & West Kensington Opportunity Area (ECOA), as identified in the Mayor's London Plan, covering 77 acres of land
(including Seagrave Road) in west London. The development will deliver 7,500 new homes as well as 12,000 new jobs to the
area.
The planning applications in respect of the Earls Court Masterplan were submitted in June 2011. The Royal Borough of
Kensington & Chelsea (RBKC) recently made observations on the London Borough of Hammersmith & Fulham (LBHF) outline
planning application and made no objections to the scheme. LBHF has indicated that it will hold a planning committee meeting
in September and it is anticipated that RBKC will follow during the second half of the year. Negotiations on the Section 106
agreement have been progressing well, and Heads of Terms should be agreed in the coming weeks, but the detailed agreement
will take time to finalise and therefore is unlikely to be completed until early 2013.
Draft terms of the Conditional Land Sale Agreement (CLSA) were published by LBHF in April with the agreement to make a
decision to include LBHF's land in the development at a future full Cabinet meeting. Under the draft terms, Capco would be
entitled to acquire the Council's 22 acres of land in the Opportunity Area on a phased basis for a total cash consideration of
GBP105 million, plus reprovision (as part of the future development) of the 760 homes currently on the estates, which reflects
the prevailing property prices in this part of the Opportunity Area.
The Supplementary Planning Document (SPD) was adopted by both LBHF and RBKC in March. Capco has been informed as
an interested party that an application for judicial review has been received by LBHF and RBKC in regards to the SPD. The
Earls Court Masterplan planning applications are in line with the Core Strategies of both RBKC and LBHF. The previous judicial
review application, in respect of the exclusivity agreement, has been withdrawn.
In March, Capco agreed with LBHF to acquire any private residential units on the West Kensington and Gibbs Green Estates in
the unlikely event that LBHF is required to purchase these properties if an owner brings forward a valid claim under certain
provisions of the Town and Country Planning Act 1990. These provisions relate to statutory blight suffered as a result of the
adoption of the SPD, up to a maximum of GBP50 million, including certain other related costs. It is intended that costs incurred
would be offset against the consideration relating to any future land purchase agreement in respect of the LBHF land. The
exclusivity agreement with LBHF has been extended to 29 January 2013.
Discussions continue with Transport for London (TfL) on the lease regear and its land within the Earls Court Masterplan.
Seagrave Road
The Seagrave Road development to create 808 high-quality new homes and a new garden square for London received formal
planning consent in March, following the signing of the Section 106 agreement. The joint venture agreement with the Kwok
Family Interests is expected to complete in the coming months as the conditions precedent have been substantially satisfied
and Capco will receive GBP67 million in cash on closing.
Acquisitions of small adjacent sites have been completed to enhance connectivity between the Seagrave Road site and Lillie
Road. Following ongoing detailed design work on the scheme, work is expected to commence on site in 2013.
Empress State
Capco's 50 per cent stake in this landmark 31 storey office tower adjacent to the ECOA was valued at GBP110 million, up 7.3
per cent on a like-for-like basis.
The entire building is let to the Metropolitan Police Authority on a long lease which expires in June 2019. The lease is subject to
annual RPI increases subject to a collar. Capco's share of net rental income was GBP3.6 million.
The Great Capital Partnership
- GBP102 million raised from disposals in the first half of 2012, further GBP60 million in July 2012
- Net rental income of GBP4.0 million
- ERV of GBP9.3 million
Following the sale of five properties in April together with Old Court Place and Park Crescent East earlier in the year, the Group
has sold the Jermyn Street Estate to GPE for GBP120 million (Capco share GBP60 million), a 3 per cent premium to the June
valuation. Proceeds net of debt paydown were GBP38 million.
So far in 2012 61 per cent of the December book value of properties have been sold out of GCP, including the Jermyn Street
estate sold in July. These asset sales have generated GBP162 million (Capco share).
China
The Group continues to receive capital from its remaining investments in China to recycle into the core business. GBP16 million
has been received during 2012 to date, and the value of the remaining investments is GBP5.6 million as at 30 June 2012.
Corporate Governance
The Board is pleased to welcome Demetra Pinsent who joined as a Non-Executive Director in May. Demetra is a former partner
of McKinsey & Co and was leader of McKinsey's European Apparel, Fashion and Luxury Goods Practice for five years, advising
leading high street, aspirational and luxury retailers and brands. Demetra has also acted as an adviser to emerging British
luxury businesses.
Dividends
The Board has proposed an interim dividend of 0.5 pence per share to be paid on 18 September 2012 to shareholders on the
register at 24 August 2012. Subject to SARB approval, a scrip dividend alternative will be offered.
Outlook
Capco has continued to drive performance across its estates during 2012, and this has been reflected in the financial results.
The balance sheet remains strong and liquid through continued recycling of capital and further debt refinancing.
The Covent Garden estate offers the potential for continued growth through the further evolution of the retail and F&B tenant
mix, together with the residential opportunity on the upper floors. Given the performance over the past two years, long-term
plans for more significant intervention in certain parts of the estate are being evaluated and planning applications may be
submitted in due course.
The first formal planning consent in the Earls Court area at Seagrave Road was an important milestone for the Group. We
remain hopeful that further positive decisions will be made by the local authorities over the remainder of 2012.
Whilst mindful of the continued uncertain economic environment, Capco's estates are strongly positioned within central London
which is firmly established as an important global city. We continue to make good progress towards realising our longer-term
goals.
FINANCIAL REVIEW
During the first half of 2012 the retail and residential sectors of the London property market continued to perform well with strong
tenant and investor demand for well managed properties in prime central London locations.
The Group's investment property portfolio recognised a like-for-like valuation increase of GBP70.1 million, a 4.6 per cent
increase (4.8 per cent when adjusted for unrecognised valuation gains on the Group's trading property portfolio). This valuation
increase helped deliver a pre-tax profit of GBP99.0 million compared to GBP70.2 million for the first half of 2011.
Capital recycling has continued apace with GBP125 million released, principally from investments in The Great Capital
Partnership and China, for use in the Group's core estates.
EPRA adjusted, diluted net assets per share rose 6.8 per cent during the period increasing from 166 pence at 31 December
2011 to 177 pence. The 11 pence increase together with the 1.0 pence dividend paid during the period represents a 7.4 per
cent total return for the period.
Underlying earnings of GBP6.1 million remain consistent with that achieved in the first half of 2011. The anticipated reduction in
net rental income has been offset by a reduction in underlying finance costs. An increase in the weighted average shares on
issue, the result of the capital raising in May 2011, accounts for the slightly lower per share earnings for the first half of 2012 of
0.9 pence.
In May 2012 the Group secured its first revolving credit facility, providing increased financial flexibility and allowing its cash
reserves to be utilised more efficiently. Weighted average debt maturity has been extended to 4.5 years from 3.6 years at 31
December 2011.
Financial Position
At 30 June 2012 the Group's EPRA adjusted net assets stand at GBP1.2 billion representing 177 pence per share adjusted and
diluted, an increase of 11 pence during the first half of 2012.
This increase has been driven by the revaluation of the Group's property portfolio which lifted net asset value per share by 10.9
pence. The valuation surplus on a like-for-like basis of 4.6 per cent (4.9 per cent overall) was the result of a solid valuation
performance across all three estates.
At Covent Garden higher rental levels were achieved on retail and F&B assets together with the residential conversion potential
on certain buildings.This was a good performance against the backdrop of macroeconomic uncertainty, illustrated by the IPD
Capital Growth index for the corresponding six month period which fell 2 per cent.
The Group's valuer at Earls Court & Olympia, Jones Lang LaSalle, continues to recognise the redevelopment potential of the
Group's land interests at Earls Court to exceed that of its existing use as an exhibition centre. This step change in valuation
basis, first achieved in the second half of 2011, reflects the progress made towards achieving planning consents on the ECOA.
The valuation at 30 June 2012 attributed a land value of GBP9.5 million per acre to the site which compared to GBP8.6 million
at 31 December 2011.
30 June 31 December
2012 2011
GBPm GBPm
Investment and trading property 1,621.1 1,617.0
Investments 5.6 19.5
Net debt (397.1) (463.7)
Other assets and liabilities (43.1) (69.7)
IFRS net assets 1,186.5 1,103.1
Fair value of derivative financial instruments 32.1 36.4
Deferred tax liabilities on exceptional items 6.7 4.9
Unrecognised surplus on trading properties 6.5 1.0
EPRA adjusted net assets 1,231.8 1,145.4
EPRA adjusted, diluted net assets per share (pence) 177 166
Capital recycling
The first half of 2012 saw continued momentum towards unlocking liquidity from non-core assets in support of the Group's core
strategy.
30 June 31 December
2012 2011
GBPm GBPm
Acquisitions 11.9 96.5
Redevelopment expenditure 20.8 64.6
Less: Divestment (124.9) (103.2)
Net liquidity (generated) / invested (92.2) 57.9
In December 2011 the Group entered into a conditional agreement with the Kwok Family Interests to acquire a 50 per cent stake
in the Group's interests at Seagrave Road for GBP67 million. The agreement was subject to certain conditions, including
obtaining planning consent free from challenge. The conditions were substantially fulfilled in July 2012, and the joint venture is
now scheduled to complete as planned during the second half of the year.
During the period GBP102 million of assets were sold from The Great Capital Partnership at an 8.5 per cent premium to the
December 2011 valuation. As outlined in note 20, a further sale from The Great Capital Partnership has been completed in July
2012.
Neither transaction is yet reflected in the table above.
Future capital commitments at 30 June 2012 amount to GBP17.7 million (31 December 2011 GBP14.0 million).
Debt & Gearing
The first half of 2012 saw net debt reduce by GBP67 million to GBP397 million, gross debt by GBP103 million to GBP450 million
and cash and undrawn committed facilities increase to GBP248 million.
In May 2012 the Group signed a GBP70 million revolving credit facility secured over certain assets within the Covent Garden
estate, therefore retaining the Group's non-recourse debt structure. This facility provided sufficient financial flexibility and
liquidity to allow the Group to repay in full the remaining debt of GBP93 million secured over Earls Court & Olympia, reducing
the cash drag created by unrestricted cash reserves. At 30 June 2012 the revolving credit facility was drawn to GBP30 million.
Further debt prepayments totalling GBP37 million reduced the Group's joint venture debt, primarily following the sale of non-
core properties from within The Great Capital Partnership.
The gearing measure most widely used in the industry is loan-to-value ("LTV"). As a result of the debt repayments described
above together with the increase in value of the Group's property assets, LTV has continued to improve. Given the current
economic climate, the modest level of LTV at 24 per cent is considered prudent.
30 June 31 December
2012 2011
Loan-to-value 24% 29%
Interest cover 158% 134%
Weighted average debt maturity 4.5 years 3.6 years
Weighted average cost of debt 5.0% 5.8%
Proportion of gross debt with interest rate protection 100% 95%
Debt prepayment and repayment have been targeted at shorter dated maturities, helping to extend the weighted average debt
maturity to 4.5 years and reduce refinancing risk. Following the latest GCP prepayment of GBP21 million in July 2012, the
Group now has GBP128 million of debt maturing in 2013 relating to its two joint ventures, and refinancing discussions are
underway. A detailed breakdown of debt by maturity together with the latest covenant test results is shown in appendix 3.
The cost of debt at 30 June 2012 has fallen significantly since December 2011 to 5.0 per cent. Re-profiling of the interest rate
swaps in The Great Capital Partnership in July has lowered this further to 4.5 per cent on a pro forma basis.
Derivatives
The Group's policy is to substantially eliminate the short and medium-term risk arising from interest rate volatility. The Group's
banking facilities are arranged on a floating-rate basis, but swapped to fixed-rate or capped using derivative contracts
coterminous with the relevant debt facility. At 30 June 2012 the proportion of gross debt with interest rate protection was 100 per
cent.
During the period, to take advantage of the low interest rate environment, the Group re-profiled certain derivative contracts
lowering the overall fixed rate coupon paid on certain interest rate swaps.
Investments in China
Divestment has continued as planned with GBP16 million returned during the first half of 2012. The final asset, a retail
development in Beijing, is expected to go under contract during the second half of the year.
Cash flow
A summary of the Group's cash flow for the half year ended 30 June 2012 is set out below.
30 June 30 June
2012 2011
GBPm GBPm
Recurring cash flows after interest and tax 6.1 2.7
Property investment and developments (32.7) (109.0)
Sale proceeds of property and investments 125.1 47.1
Demerger costs (0.7)
Pension funding (3.6)
VAT paid on internal restructure (22.2)
Cash flow before financing 76.3 (63.5)
Financing (106.9) 72.4
Dividends paid (5.7) (6.2)
Net cash flow (36.3) 2.7
Typically the main cash flow items are operating cash flows, dividends paid and capital transactions undertaken.
Recurring cash inflows were GBP6.1 million compared to GBP2.7 million for the first half of 2011, due mainly to the lower
interest costs.
Capital transactions comprise property acquisitions and disposals, together with investment and divestment in other long-term
assets.
During the first half of 2012, sale proceeds of property and investments comprised GBP102 million received from the sale of
assets within The Great Capital Partnership, GBP16 million returned from investments in China and GBP7 million from smaller
disposals from both the Covent Garden and Earls Court estates.
Property investments and development comprise acquisitions of GBP12 million, GBP8 million of which was invested in strategic
acquisitions within the Covent Garden estate. Development expenditure totalled GBP21 million in the first half of 2012, GBP16
million of which was towards the redevelopment of Earls Court and Seagrave Road and improving the Olympia exhibition halls.
With disposal proceeds exceeding acquisition costs and development expenditure in the first half of 2012, the flexibility provided
to the Group from the recently agreed revolving credit facility has allowed this cash to be used for repayment of shorter-term
debt, reducing cash drag and refinancing risk.
To align the corporate structure to long-term strategy an internal reorganisation was undertaken in November 2011 to segregate
the operating business at Earls Court and Olympia from the development opportunity. As a result an internal sale and purchase
was determined to constitute a VAT supply between two internal VAT groups. During the six months to December 2011 input
VAT of GBP22 million had been received from HMRC but, due to the timing of returns, the equal and offsetting output VAT was
not settled until January 2012.
Dividends paid of GBP5.7 million reflect the final dividend payment made in respect of the 2011 financial year. This is slightly
lower than the previous corresponding period due to the scrip dividend alternative offered to shareholders.
Financial Performance
The Group has presented an underlying calculation of profit after tax and adjusted earnings per share figures in addition to the
amounts reported under IFRS. The Directors consider this presentation to provide useful information on the underlying
performance of the business as it removes exceptional and other one-off items.
30 June 30 June
2012 2011
GBPm GBPm
Net rental income 34.1 36.7
Other income 2.1 0.3
Gain on revaluation and sale of investment property 79.1 42.4
Administration expenses (12.4) (11.0)
Net finance costs (14.3) (12.8)
Profit on sale of investments 10.4 18.8
Remeasurement of deferred consideration (4.2)
Taxation (3.8) (1.7)
IFRS profit for the period attributable to owners of the Parent 95.2 68.5
Adjustments:
Gain on revaluation and sale of property (81.2) (42.4)
Change in fair value of derivative financial instruments (1.2) (5.7)
Exceptional finance costs 1.8 0.8
Profit on sale of investments (10.4) (18.8)
Remeasurement of deferred consideration 4.2
Other adjustments 1.9 (0.4)
Underlying profit after tax 6.1 6.2
Underlying earnings per share (pence) 0.9 1.0
Exceptional items
In addition to revaluation surpluses on investment and development property and fair value movements on derivative financial
instruments, exceptional items which have been removed from the calculation of underlying profit include:
- Profit on sale of trading property of GBP2.1 million;
- Finance charges of GBP1.8 million relating to the termination of interest rate swaps following debt prepayments and
arrangement fees for the Group's revolving credit facility;
- Profit on sale of investments of GBP10.4 million: GBP8.7 million following further divestment of China investments and
GBP1.7 million relating to profits on disposal of two operating businesses completed in February 2012.
Income
Like-for-like net rental income fell 4.9 per cent to GBP34.1 million, a reduction of GBP2.6 million on the first half of 2011.
The Great Capital Partnership fell GBP0.5 million on a like-for-like basis. Asset sales completed to date in 2012 contributed
GBP2.3 million to net rental income during the six months to 30 June 2012.
The continued uncertainty surrounding the venues business at Earls Court resulted in lost shows and a reduction in the size of
certain exhibitions retained. This was offset in part by a good performance at Olympia and the RPI-linked rental uplift at
Empress State, resulting in a 15 per cent fall in like-for-like net income for the EC&O segment.
Net rental income at Covent Garden has increased 12.1 per cent on a like-for-like basis on the previous corresponding six
month period, most notably from new letting activity and acquisitions completed during the first half of 2011.
Other income of GBP2.1 million comprises trading property profits achieved on the sale of residential developments at Covent
Garden.
Property valuation and sales
As outlined earlier the value of the Group's property portfolio has increased the net asset value per share by 10.9 pence, a rise
of GBP75.9 million in the first half of 2012. During the period investment properties of GBP19 million were transferred to trading
property following commencement of development with a view to sale. The unrecognised valuation surplus during the period of
GBP5.5 million on the Group's trading properties will not be recognised in income until disposal although this is included within
adjusted net asset value per share.
Profits of GBP8.7 million were realised on the sale of investment properties during the period, notably from The Great Capital
Partnership where sales in the first half of 2012 were achieved at an average of 8.5 per cent above 31 December 2011 market
values. In total since demerger the Group has realised valuation gains of GBP56 million from this Estate.
Administration expenses
Underlying administration expenses increased 13 per cent to GBP12.4 million. This is the result of becoming a standalone
business in May 2010 and the expiration of transitional services provided by the Group's former parent in June 2011. This
increase is in line with expectation and broadly indicative of normalised operating costs.
Net finance costs
Excluding gains and losses on the change in fair value of derivatives, one-off costs incurred on the termination of interest rate
swaps and arrangement fees relating to the Group's revolving credit facility, underlying net finance costs for the period fell to
GBP13.7 million from GBP17.7m for the six months ending 30 June 2011.
This reduction reflects the impact of debt prepayments and repayments together with the benefit of refinancing during a period
of historically low interest rates.
Taxation
The net tax charge for the period is GBP3.8 million, GBP1.9 million arising on underlying income. This represents an underlying
tax rate of 24 per cent.
Although not included in underlying tax, a charge of GBP0.5 million was incurred on the disposal of residential properties at
Covent Garden.
Contingent tax, the amount of tax that would become payable on a theoretical disposal of all investment properties held by the
Group, is nil. The contingent tax position is arrived at after allowing for Group loss relief and indexation.
Dividends
At the Company's Annual General Meeting in April 2012, the proposed scrip dividend scheme was approved by shareholders
and a scrip dividend alternative was offered to shareholders in respect of the final 2011 dividend. Take-up was relatively low
(circa 16 per cent) with 541,709 new ordinary shares issued.
The Board has proposed an interim dividend of 0.5 pence per share to be paid on 18 September 2012 to shareholders on the
register at 24 August 2012. Subject to SARB approval, the Board again intends to offer a scrip dividend alternative.
PRINCIPAL RISKS AND UNCERTAINTIES
Effective risk management is integral to delivering Capco's strategic priorities.
The Board has delegated responsibility for assurance for the risk management process and the review of mitigating controls to
the Audit Committee.
Executive Directors together with Senior Management from every division and corporate function of the business complete a
Group risk register. Risks are considered in terms of their impact and likelihood from both a financial and reputational
perspective. Risks are assessed both gross and net of mitigating controls. Review meetings are held to ensure consistency of
response and adequacy of grading. Detailed risk registers are reviewed twice yearly and upon any material change in the
business with a full risk review undertaken annually, at which point it is also reviewed in detail by the Audit Committee with new
or emerging risk considered by the Committee as appropriate. This allows the Audit Committee to monitor the most important
controls and prioritise risk management and internal audit activities accordingly.
The Board has reviewed the principal risks in the context of the second half of current financial year. There has been no
significant changes to the principal risks and uncertainties as disclosed in the annual report and accounts for the year ended 31
December 2011. What follows are the principal risks and uncertainties from across the business. These are not exhaustive, the
Group monitors a number of additional risks and adjusts those considered principal' as the risk profile across the business
changes.
1. Corporate Risks
Impact: The Group's ability to maintain its reputation, revenue and value could be damaged by corporate risks
Risk Impact potential Mitigation factors
Responding to regulatory and Reduced flexibility and increased cost Sound governance and internal policies with
legislative challenges. base. appropriately skilled resource and support from
external advisers as appropriate.
Responding to reputational, Reputational damage and increased Appointment of experienced individuals with clear
communication and governance costs. responsibility and accountability. Clear statements of
challenges. corporate and social responsibility, skilled Executive
and Non-executive Directors, with support from
external advisors as appropriate.
Inability to implement strategy or Constraints on growth and reduced Regular strategic reviews and monitoring of
correctly allocate capital. profitability. performance indicators.
Corporate level oversight of capital allocation.
Detailed capital planning and financial modelling.
Maintain adequate cash and available facilities
together with conservative leverage.
Adequacy of partner evaluation and Reduced profitability and reputational Appropriate due diligence and consultation.
management of key suppliers. damage.
Non-REIT status brings heightened tax Competitive disadvantage. Focus on assets and estates where skills can be
exposure and a potential competitive applied to create enhanced value.
disadvantage when bidding for new
assets.
Risk associated with attracting and Inability to execute business plan. Succession planning, performance evaluations,
retaining staff. training & development, long-term incentive rewards.
Sound systems and processes to effectively capture
and manage information.
Failure to comply with health and Loss or injury to employees, tenants Comprehensive health and safety procedures in
safety or other statutory regulations or or contractors and resultant place across the Group and monitored regularly.
notices. reputational damage. External consultants undertake annual audits in all
locations. Safe working practices well established,
including staff communication and training.
2. Financing Risks
Impact: Reduced or limited availability of debt or equity finance may threaten the Group's ability to meet its financial commitments or
objectives and potentially to operate as a going concern
Risk Impact potential Mitigation factors
Decline in market conditions or a Reduced financial and operational Maintain appropriate liquidity to cover commitments.
general rise in interest rates could flexibility.
impact the availability and cost of debt Target longer and staggered debt maturities to avoid
financing. refinancing concentration and consideration of early
refinancing.
Derivative contracts to provide interest rate
protection.
Covenants breached. Cash reserves required to prepay Regular monitoring of covenants with headroom
debt facilities. maintained.
Reduced availability of equity capital. Constrained growth, lost Maintain appropriate liquidity to cover commitments.
opportunities, higher finance costs.
Target conservative overall leverage levels.
3. Economic Risks
Impact: Economic factors may threaten the Group's ability to meet its strategic objectives
Risk Impact potential Mitigation factors
Rents decline as a result of lower Declining profitability. Focus on quality tenants with initial assessment of
demand from occupiers due to credit risk and active credit control.
increased competition, changes in
social behaviour or deteriorating Diversity of occupier mix with limited exposure to any
profitability and confidence during a single tenant.
period of economic uncertainty.
Strategic focus on creating retail destinations and
residential districts with unique attributes.
Decline in UK commercial or Declining valuations. Focus on prime assets.
residential real estate market.
Regular assessment of investment market conditions
including bi-annual external valuations.
Restricted availability of credit and Decline in demand for the Group's Regular monitoring of covenants with headroom
higher tax rates and macroeconomic rental properties, reduced profitability. maintained.
factors may lead to reduced consumer
spending and higher levels of business
failure.
4. Concentration of Investments
Impact: Heightened exposure to events that threaten or disrupt central London
Risk Impact potential Mitigation factors
Events which damage or diminish Significant business disruption. Terrorist insurance in place.
London's status as a global financial,
business and tourist centre could Security and health & safety policies and procedures
affect the Group's ability to let vacant in offices. Close liaison with police & National Counter
space, reduce the value of the Group's Terrorism Security Office (NaCTSO).
properties and potentially disrupt
access or operations at the Group's Disaster recovery and business continuity planning.
head office. Changes to or failure of
infrastructure. Concentration of higher Active involvement in organisations and industry
profile events in central London (e.g. bodies promoting London.
Olympics).
5. Development Risks
Impact: Inability to deliver against development plans, particularly regarding ECOA
Risk Impact potential Mitigation factors
Unable to secure planning consent Delayed implementation. Pre-application consultation and involvement with key
due to political, legislative or other stakeholders and landowners.
risks inherent in the planning
environment. Risk of delay due to Engagement with relevant authorities at a local and
Secretary of State call-in or judicial national level to ensure development proposals are in
review. Inability to gain the support of accordance with current and emerging policy.
influential stakeholders.
Project team of internal staff and external consultants
with capabilities across all relevant areas.
Technical studies with regular review.
Responsive consultation with evidence based
information and focus on agreed statements of
common ground.
Failure to demonstrate or implement Higher volatility in valuations and Extensive consultation, design and technical work
viable development due to Group's returns. undertaken along with informed market valuation and
environmental, transportation and open dialogue with adjacent landowners.
affordable housing impact or other
technical factors. Punitive cost, Properly tendered processes to select contractors and
design or other implications. Inability manage costs.
to reach agreement on lease
extension or land deals with adjacent ECOA Masterplan design allows the development of
landowners (including risk of Section each landowner's site individually.
34A of the Housing Act 1985 in
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:
- the condensed set of financial statements on pages 18 to 39 has been prepared in accordance with IAS 34 "Interim
Financial Reporting", as adopted by the European Union; and
- the condensed set of financial statements on pages 18 to 39 includes a true and fair view 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 on pages 4 to 12 refers to important events which have taken place in the period.
The principal risks and uncertainties facing the business are referred to on pages 13 to 15.
Related party transactions are set out in note 19 of the condensed set of financial statements.
A list of current Directors is maintained on the Capital & Counties Properties PLC website: www.capitalandcounties.com.
By order of the Board
I D Hawksworth
Chief Executive
S Das
Finance Director
31 July 2012
INDEPENDENT REVIEW REPORT TO CAPITAL & COUNTIES PROPERTIES PLC
Introduction
We have been engaged by the company to review the condensed set of consolidated financial statements in the interim report
for the half year ended 30 June 2012, 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 interim report for the half year and
considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed
set of financial statements.
Directors' responsibilities
The interim report for the half year is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim report for the half year 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 interim report for the half year 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 interim report
for the half year 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 interim report for the half year ended 30 June 2012 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
31 July 2012
London
Notes:
(a) The maintenance and integrity of the Capital & Counties Properties 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 2012
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
Note GBPm GBPm GBPm
Revenue 2 56.5 58.4 108.4
Rental income 50.2 58.4 108.4
Rental expenses (16.1) (21.7) (39.4)
Net rental income 2 34.1 36.7 69.0
Other income 3 2.1 0.3 0.8
Gain on revaluation and sale of investment and development property 4 79.1 42.4 123.3
Profit on sale of available for sale investments 8.7 18.8 30.5
Profit on sale of subsidiaries 1.7
Remeasurement of deferred consideration 15 (4.2) (4.2)
Write down of trading property (0.1)
125.7 94.0 219.3
Administration expenses
Ongoing expenses (12.4) (11.0) (22.2)
Operating profit 113.3 83.0 197.1
Finance costs 5 (14.1) (18.5) (36.5)
Finance income 0.4 0.8 1.7
Other finance costs 5 (1.8) (0.8) (14.5)
Change in fair value of derivative financial instruments 1.2 5.7 14.1
Net finance costs (14.3) (12.8) (35.2)
Profit before tax 99.0 70.2 161.9
Current tax (1.8) (1.7) (2.5)
Deferred tax (2.0) (5.7)
Taxation 6 (3.8) (1.7) (8.2)
Profit for the period 95.2 68.5 153.7
Earnings per share from continuing operations
Basic earnings per share 17 13.9p 10.7p 23.2p
Diluted earnings per share 17 13.9p 10.7p 23.3p
Weighted average number of shares 17 684.0m 639.3m 661.8m
Adjusted earnings per share are shown in note 17.
The above consolidated income statement should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
For the six months ended 30 June 2012
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Profit for the period 95.2 68.5 153.7
Other comprehensive income
Actuarial losses on defined benefit pension schemes (1.4)
Fair value gains on available for sale investments 0.1 1.8 6.3
Tax on items taken directly to equity 0.4 0.9
Other comprehensive income for the period 0.5 1.8 5.8
Total comprehensive income for the period 95.7 70.3 159.5
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
CONSOLIDATED BALANCE SHEET (unaudited)
As at 30 June 2012
As at As at
30 June 31 December
2012 2011
Note GBPm GBPm
Non-current assets
Investment and development property 8 1,604.1 1,616.8
Plant and equipment 0.6 1.2
Available for sale investments 5.6 19.5
Derivative financial instruments 14 1.3 0.4
Pension asset 1.0 1.0
Trade and other receivables 9 39.6 34.2
1,652.2 1,673.1
Current assets
Trading property 8 17.0 0.2
Derivative financial instruments 14 0.3 0.6
Trade and other receivables 9 24.1 26.7
Cash and cash equivalents 10 53.3 89.6
94.7 117.1
Total assets 1,746.9 1,790.2
Non-current liabilities
Borrowings, including finance leases 12 (330.8) (534.6)
Derivative financial instruments 14 (32.2) (36.9)
Deferred tax provision 6 (6.4) (4.8)
Other payables (1.2)
(370.6) (576.3)
Current liabilities
Borrowings, including finance leases 12 (119.6) (18.7)
Derivative financial instruments 14 (1.5) (0.5)
Other provisions 15 (7.3) (7.3)
Trade and other payables 11 (58.6) (82.4)
Tax liabilities (2.8) (1.9)
(189.8) (110.8)
Total liabilities (560.4) (687.1)
Net assets 1,186.5 1,103.1
Equity
Share capital 18 171.1 170.9
Other components of equity 1,015.4 932.2
Capital and reserves 1,186.5 1,103.1
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2012
Share Share Merger Revaluation Other Retained Total
capital premium reserve reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2012 170.9 95.1 196.2 10.8 2.2 627.9 1,103.1
Profit for the period 95.2 95.2
Other comprehensive income:
Fair value gains on available
for sale financial assets 0.1 0.1
Tax on items taken directly
to equity 0.4 0.4
Total comprehensive income for
the period ended 30 June 2012 0.1 95.6 95.7
Transactions with owners
Ordinary shares issued 0.2 0.9 1.1
Realise revaluation reserves on
disposal of available for sale
investments (7.9) (7.9)
Fair value of share-based payments 1.3 1.3
Dividends paid (6.8) (6.8)
Total transactions with owners 0.2 0.9 (7.9) 1.3 (6.8) (12.3)
Balance at 30 June 2012 171.1 96.0 196.2 3.0 3.5 716.7 1,186.5
Share Share Merger Revaluation Other Retained Total
capital premium reserve reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2011 155.4 89.1 141.4 33.0 0.5 464.0 883.4
Profit for the period 68.5 68.5
Other comprehensive income:
Fair value gains on available
for sale financial assets 1.8 1.8
Total comprehensive income for
the period ended 30 June 2011 1.8 68.5 70.3
Ordinary shares issued 15.5 6.0 75.1 96.6
Realise revaluation reserves on
disposal of available for sale
investments (18.2) (18.2)
Fair value of share-based payments 0.6 0.6
Dividends paid (6.2) (6.2)
Total transactions with owners 15.5 6.0 75.1 (18.2) 0.6 (6.2) 72.8
Balance at 30 June 2011 170.9 95.1 216.5 16.6 1.1 526.3 1,026.5
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2012
Share Share Merger Revaluation Other Retained Total
capital premium reserve reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2011 155.4 89.1 141.4 33.0 0.5 464.0 883.4
Profit for the year 153.7 153.7
Other comprehensive income:
Fair value gains on available
for sale investments 6.3 6.3
Actuarial losses on defined
benefit pension schemes (1.4) (1.4)
Tax on items taken directly to
equity 0.9 0.9
Total comprehensive income
for the year ended
31 December 2011 6.3 153.2 159.5
Transactions with owners
Ordinary shares issued 15.5 6.0 75.1 96.6
Merger reserve realised(1) (20.3) 20.3
Realise revaluation reserves on
disposal of available for sale
investments (28.5) (28.5)
Fair value of share-based
payments 1.7 1.7
Dividends paid (9.6) (9.6)
Total transactions with
owners 15.5 6.0 54.8 (28.5) 1.7 10.7 60.2
Balance at 31 December 2011 170.9 95.1 196.2 10.8 2.2 627.9 1,103.1
(1) Represents qualifying consideration received by the company following capital raising in May 2011. The residual balance taken to the merger reserve does not currently meet the criteria for qualifying
consideration as it forms part of a linked transaction.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the six months ended 30 June 2012
Six months Year Six months
ended ended ended
30 June 31 December 30 June
2012 2011 2011
Note GBPm GBPm GBPm
Cash generated from operations 13 21.0 38.0 21.0
Interest paid (14.4) (38.4) (19.1)
Interest received 0.4 1.7 0.8
Taxation (0.9) (1.3) (0.6)
Cash flows from operating activities 6.1 2.1
Cash flows from investing activities
Purchase and development of property (32.7) (161.1) (109.0)
Sale of property 109.4 48.2 8.7
REIT entry charge paid (0.1) (0.1)
Sale of available for sale investments 15.5 55.0 38.4
Sale of subsidiary companies 0.2
Pension funding (3.6) (3.6)
Exclusivity agreement with LBHF (15.0)
VAT (paid)/received on internal restructure(1) (22.2) 22.2
Cash flows from investing activities 70.2 (54.4) (65.6)
Cash flows from financing activities
Issue of shares 96.6 96.6
Borrowings drawn 30.0 145.8
Borrowings repaid (132.0) (259.4) (23.4)
Purchase of derivatives (1.6) (3.4)
Other finance costs (3.3) (14.5) (0.8)
Equity dividends paid (5.7) (9.6) (6.2)
Cash flows from financing activities (112.6) (44.5) 66.2
Net (decrease)/increase in unrestricted cash and cash (36.3) (98.9) 2.7
Unrestricted cash and cash equivalents at beginning of period 83.6 182.5 182.5
Unrestricted cash and cash equivalents at end of period 10 47.3 83.6 185.2
(1) VAT received on an internal property transfer was deemed to be a VAT supply. Input VAT was received prior to 31 December 2011 whilst output VAT was not settled until January 2012.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
NOTES (unaudited)
1 Principal accounting policies
Basis of preparation
The Group's condensed consolidated financial statements are prepared in accordance with the Disclosure and Transparency
Rules of the Financial Services Authority and with IAS 34 Interim Financial Reporting' as adopted by the European Union (EU).
The condensed consolidated financial statements should be read in conjunction with the annual financial statements for the year
ended 31 December 2011, which have been prepared in accordance with IFRSs as adopted by the EU.
The condensed consolidated financial statements for the six months ended 30 June 2012 are reviewed, not audited and do not
constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year
ended 31 December 2011 were approved by the Board of Directors on 29 February 2012 and delivered to the Registrar of
Companies. The auditors' report on these accounts was unqualified did not contain an emphasis of matter paragraph and did
not contain a statement made under Section 498 of the Companies Act 2006.
The condensed consolidated financial statements have been prepared under the historical cost convention as modified for the
revaluation of properties, available for sale investments and financial assets held for trading which are held at fair value.
The Directors are satisfied that the Group has the resources to continue in operational existence for the foreseeable future, for
this reason the consolidated financial statements are prepared on a going concern basis.
There is no material seasonal impact on the Group's financial performance.
These condensed consolidated financial statements were approved by the Board of Directors on 31 July 2012.
Except as described below, the condensed set of financial statements has been prepared using the accounting policies,
significant judgements, key assumptions and estimates set out on pages 78 to 81 of the Group's financial statements for 2011.
Taxes on income in interim periods are accrued using tax rates expected to be applicable to total annual earnings.
There were no standards and guidelines relevant to the Group that were in issue and endorsed by the European Union but not
yet effective at the date of approval of the condensed consolidated financial statements.
During the six months to 30 June 2012, the following accounting standards and guidance were adopted by the Group:
IFRS 7 Financial Instruments: Disclosures' (amendment)
IAS 32 Financial Instruments: Presentation' (amendment)
Collectively, together with the International Accounting Standards Board's annual improvements, these pronouncements either
had no impact on the condensed consolidated Financial Statements or resulted in changes to presentation and disclosure only.
2 Segmental reporting
Management has determined the operating segments based on reports reviewed by the Chief Executive, who is deemed to be
the chief operating decision maker. The principal performance measures have been identified as net rental income and net
asset value.
For management and reporting purposes the Group is organised into five operating divisions being The Great Capital
Partnership, Earls Court & Olympia, Covent Garden, China and Other. The Other segment primarily constitutes the business
unit historically known as Opportunities and other head office companies. Due to actions taken by the fund manager who
controls the divestment decisions pertaining to the Group's interests in China, this segment has been presented separately as
the segment's results exceeds the quantitative threshold requiring separate disclosure. The Earls Court & Olympia segment also
includes the Group's interest in The Empress State Limited Partnership which holds the Empress State building adjacent to the
Group's property at Earls Court.
The Group's operating segments derive their revenue primarily from rental income from lessees, with the exception of Earls
Court & Olympia whose revenue primarily represents exhibition income.
Unallocated expenses are costs incurred centrally which are neither directly nor reasonably attributable to individual segments.
Reportable segments
Six months ended 30 June 2012
The Great
Capital Earls Court Covent Group
Partnership (1) & Olympia Garden China Other total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 4.5 25.7 26.3 56.5
Rent receivable and exhibition income 4.2 25.7 18.7 48.6
Service charge income 0.3 1.3 1.6
Rental income 4.5 25.7 20.0 50.2
Service charge and other non-recoverable costs (0.5) (11.3) (4.3) (16.1)
Net rental income 4.0 14.4 15.7 34.1
Other income 2.1 2.1
Gain on revaluation and sale of investment and
development property 18.0 27.5 33.5 0.1 79.1
Profit on sale of available for sale investments 8.7 8.7
Profit on sale of subsidiary 1.1 0.6 1.7
Segment result 22.0 43.0 51.9 8.7 0.1 125.7
Unallocated costs
Administration expenses (12.4)
Operating profit 113.3
(2)
Net finance costs (14.3)
Profit before tax 99.0
Taxation (3.8)
Profit for the period 95.2
Summary balance sheet
Total segmental assets(3) 170.0 659.4 871.8 5.6 11.8 1,718.6
Total segmental liabilities(3) (93.5) (124.8) (339.3) (2.8) (560.4)
76.5 534.6 532.5 5.6 9.0 1,158.2
Unallocated net assets(2) 28.3
Net assets 1,186.5
Other segment items:
Capital expenditure (0.9) (20.4) (14.5) (35.8)
(1) Empress State represents GBP3.6 million of the GBP14.4 million net rental income for Earls Court & Olympia.
(2) The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and a majority of Group's cash balances.
(3) Total assets and liabilities exclude loans and investments between Group companies.
2 Segmental reporting (continued)
Six months ended 30 June 2011
The Great
Capital Earls Court Covent Group
Partnership (1) & Olympia Garden China Other total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 7.4 31.5 19.5 58.4
Rent receivable and exhibition income 6.9 31.5 17.9 56.3
Service charge income 0.5 1.6 2.1
Rental income 7.4 31.5 19.5 58.4
Service charge and other non-recoverable costs (1.2) (14.1) (6.4) (21.7)
Net rental income 6.2 17.4 13.1 36.7
Other income 0.3 0.3
Gain on revaluation and sale of investment and
development property 16.9 (12.2) 37.6 0.1 42.4
Profit on sale of available for sale investments 18.8 18.8
Remeasurement of deferred consideration (4.2) (4.2)
Segment result 23.1 1.0 50.7 18.8 0.4 94.0
Unallocated costs
Administration expenses (11.0)
Operating profit 83.0
(2)
Net finance costs (12.8)
Profit before tax 70.2
Taxation (1.7)
Profit for the period 68.5
Summary balance sheet
Total segmental assets(3) 283.7 515.9 789.8 30.4 5.6 1,625.4
(3)
Total segmental liabilities (128.7) (244.5) (391.1) (5.2) (769.5)
155.0 271.4 398.7 30.4 0.4 855.9
Unallocated net assets(2) 170.6
Net assets 1,026.5
Other segment items:
Capital expenditure (0.6) (19.3) (117.3) (137.2)
Depreciation (0.1) (0.1)
(1) Empress State represented GBP3.6 million of the GBP17.4 million net rental income for Earls Court & Olympia.
(2) The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and a majority of Group's cash balances.
(3) Total assets and liabilities exclude loans and investments between Group companies.
Year ended 31 December 2011
The Great Capital Earls Court Covent Group
Partnership (1) & Olympia Garden China Other total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 13.3 59.2 35.9 108.4
Rent receivable and exhibition income 12.5 59.2 32.8 104.5
Service charge income 0.8 3.1 3.9
Rental Income 13.3 59.2 35.9 108.4
Service charge and other non-recoverable
costs (2.3) (29.0) (8.1) (39.4)
Net rental income 11.0 30.2 27.8 69.0
Other income 0.4 0.4 0.8
Gain on revaluation and sale of investment and
development property 25.3 46.3 51.2 0.5 123.3
Profit on sale of available for sale investments 30.5 30.5
Remeasurement of deferred consideration (4.2) (4.2)
Write down of trading property (0.1) (0.1)
Segment result 36.3 72.7 79.0 30.5 0.8 219.3
Unallocated costs
Administration expenses (22.2)
Operating profit 197.1
Net finance costs(2) (35.2)
Profit before tax 161.9
Taxation (8.2)
Profit for the year 153.7
Summary balance sheet
(3)
Total segmental assets 253.5 616.4 827.6 19.6 5.7 1,722.8
Total segmental liabilities(3) (130.2) (248.8) (302.2) (5.9) (687.1)
123.3 367.6 525.4 19.6 (0.2) 1,035.7
Unallocated net assets(2) 67.4
Net assets 1,103.1
Other segment items:
Capital expenditure (1.4) (46.4) (131.7) (179.5)
Depreciation (0.2) (0.2)
(1) Empress State represents GBP7.1 million of the GBP30.2 million net rental income for Earls Court & Olympia.
(2) The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and a majority of Group's cash balances
(3) Total assets and liabilities exclude loans between and investments in Group companies.
3 Other income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Sale of trading property 6.3
Cost of sales (4.2)
Profit on sale of trading property 2.1
Non-recurring income 0.3 0.8
Other income 2.1 0.3 0.8
4 Gain on revaluation and sale of investment and development property
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Gain on revaluation of investment and development property 70.4 39.5 119.4
Gain on sale of investment and development property 8.7 2.9 3.9
Gain on revaluation and sale of investment and development property 79.1 42.4 123.3
5 Finance costs
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Finance costs
On bank overdrafts and loans 14.5 18.7 36.6
Amortisation of issue costs 0.6 0.2 0.8
On obligations under finance leases 0.2 0.2 0.8
Gross finance costs 15.3 19.1 38.2
Interest capitalised on developments (1.2) (0.6) (1.7)
Finance costs 14.1 18.5 36.5
Costs of termination of derivative financial instruments 0.7 0.8 14.5
Revolving Credit Facility arrangement fee 1.1
Other finance costs(1) 1.8 0.8 14.5
(1) Treated as exceptional and therefore excluded from the calculation of underlying earnings
Interest is capitalised, before tax relief, on the basis of the average rate of interest paid of 5.0 per cent (2011 5.9 per cent) on
the relevant debt, applied to the cost of developments during the year.
6 Taxation
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Current income tax charge 2.1 1.8 2.5
Deferred income tax:
On investment and development property 0.9 16.9 14.1
On accelerated capital allowances 0.8 (0.4) 0.4
On exceptional losses 0.4 (18.2) (11.6)
On derivative financial instruments 0.9 0.4 3.3
On non-exceptional items (1.0) (0.5)
On exceptional items 1.3
Deferred tax on profits 2.0 5.7
Current tax charge/(credit) on exceptional items 0.8 (0.1)
Adjustment in respect of previous years (1.1)
Total tax expense reported in the income statement 3.8 1.7 8.2
Further amendments to the UK Corporation Tax system were announced in the March 2012 Budget which included changes to
the main rates of UK Corporation Tax. The main rate of corporation tax decreased from 26% to 24% from 1 April 2012. The
Budget will reduce the main rate of corporation tax from 24% to 23% from 1 April 2013 with a further 1% reduction in rate
proposed from 1 April 2014 resulting in a final corporation tax rate of 22%.
Under IAS12 "Income Taxes", provision is made for the deferred tax assets and liabilities at the corporation tax rate expected to
apply to the Group at the time of use. The decrease in tax rate to 24% has been substantively enacted for the purposes of IAS
12 and therefore has been reflected in these financial statements.
Fair value of Fair value of
Accelerated investment derivative Other
capital and development financial temporary Group
allowances properties instruments differences losses Total
GBPm GBPm GBPm GBPm GBPm GBPm
Provided deferred tax provision:
At 31 December 2011 13.2 14.1 (9.2) (1.7) (11.6) 4.8
Recognised in income 0.8 0.9 0.9 (1.0) 0.4 2.0
Taken to equity (0.4) (0.4)
At 30 June 2012 14.0 15.0 (8.3) (3.1) (11.2) 6.4
Unrecognised deferred tax asset:
At 31 December 2011
At 30 June 2012
6 Taxation (continued)
The recognised deferred tax liability on investment properties calculated under IAS 12 is GBP15.0 million at 30 June 2012 (2011
- GBP14.1 million). This IAS 12 calculation does not necessarily reflect the expected amount of tax that would be payable if the
assets were sold. The Group estimates that calculated on a disposal basis, by reference to the properties' original historic tax
base costs, the tax liability on a sale at 30 June 2012 would be nil (31 December 2011 - nil). This is due to a number of factors
including the REIT exit tax rebasing, availability of losses, indexation relief and the Group holding structure for certain
properties.
The tax base of properties formerly within the REIT regime was revised in May 2012 (the second anniversary of the demerger)
from the original historic tax base cost to the value at the time of exit 7 May 2010.
7 Dividends
As at As at As at
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Ordinary shares
Prior period final dividend paid of 1.0p per share 6.8 6.2 6.2
Interim dividend paid of nil per share (December 2011 0.5p) 3.4
Dividends paid 6.8 6.2 9.6
Proposed dividend of 0.5p per share (June 2011 0.5p; December 2011 - 1.0p) 3.4 3.2 6.8
Details of the shares in issue are given in note 18.
8 Property Portfolio
(a) Investment and development property
Total
GBPm
At 1 January 2012 1,616.8
Additions from acquisitions 14.4
Additions from subsequent expenditure 19.4
Disposals (98.0)
Transfers to trading property (18.9)
Gain on valuation 70.4
At 30 June 2012 1,604.1
Total
GBPm
At 1 January 2011 1,377.6
Additions from acquisitions 114.5
Additions from subsequent expenditure 65.0
Disposals (59.7)
Gain on valuation 119.4
At 31 December 2011 1,616.8
8 Property Portfolio (continued)
As at As at
30 June 31 December
2012 2011
GBPm GBPm
Balance sheet carrying value of investment and development property 1,604.1 1,616.8
Adjustment in respect of tenant incentives 17.0 14.9
Adjustment in respect of head leases (7.2) (8.9)
Market value of investment and development property 1,613.9 1,622.8
Included within investment and development properties is GBP1.2 million (2011 GBP1.7 million) of interest capitalised on
developments and redevelopments in progress.
The fair value of the Group's investment properties as at 30 June 2012 was determined by independent external valuers Jones
Lang LaSalle for Earls Court & Olympia, and CB Richard Ellis for the remainder of the Group's investment and development
property. The valuation conforms with the Royal Institution of Chartered Surveyors ("RICS") Valuations - Professional Standards,
and was arrived at by reference to market transactions for similar properties. Fees paid to valuers are based on fixed price
contracts.
The main assumptions underlying the valuations are in relation to market rent or business profitability, taking into account
forecast growth rates and yields based on known transactions for similar properties and likely incentives offered to tenants.
Valuations are based on what is determined to be the highest and best use. The Group's investments at Earls Court and
Seagrave Road, a car park supporting Earls Court, have been valued as sites with development potential.
There are certain restrictions on the realisability of investment property when a credit facility is in place. See financial covenant
disclosures in Appendix 3.
(b) Trading property
Total
GBPm
At 1 January 2012 0.2
Transfers from investment and development property 18.9
Additional from subsequent expenditure 2.0
Disposals (4.1)
Impairment charges
At 30 June 2012 17.0
Unrecognised revaluation surplus 6.5
Market value of trading property(1) 23.5
Total
GBPm
At 1 January 2011 0.3
Impairment charges (0.1)
At 31 December 2011 0.2
Unrecognised revaluation surplus 1.0
Market value of trading property(1) 1.2
(1) The market value of trading property is shown for information purposes only and it is not a requirement of IFRS. Trading property continues to be measured at the lower of cost and net realisable value
in the financial statements.
9 Trade and other receivables
As at As at
30 June 31 December
2012 2011
GBPm GBPm
Amounts falling due after more than one year
Loan notes receivable 3.4 3.4
(1)
Other receivables 18.5 15.4
Prepayments and accrued income 17.7 15.4
Trade and other receivables 39.6 34.2
Amounts falling due within one year
Rents receivable 8.1 15.2
(2)
Other receivables 5.0 2.9
Prepayments and accrued income 11.0 8.6
Trade and other receivables 24.1 26.7
(1) Includes GBP15 million exclusivity payment with LBHF.
(2) Includes exhibition and trade receivables.
Included within prepayments and accrued income are tenant lease incentives of GBP17.0 million (2011 - GBP14.9 million).
10 Cash and cash equivalents
As at As at
30 June 31 December
2012 2011
GBPm GBPm
Cash at hand 22.2 20.6
Cash on short-term deposit 25.1 63.0
Unrestricted cash and cash equivalents 47.3 83.6
Restricted cash 6.0 6.0
Cash and cash equivalents 53.3 89.6
Restricted cash relates to amounts placed on deposit in accounts which are subject to withdrawal conditions.
11 Trade and other payables
As at As at
30 June 31 December
2012 2011
GBPm GBPm
Amounts falling due within one year
Rents received in advance 20.0 21.9
Accruals and deferred income 22.1 28.0
Trade payables 0.7 0.4
Other payables(1) 13.2 9.3
Other taxes and social security 2.6 22.8
Trade and other payables 58.6 82.4
(1) Includes sundry payables and amounts due to joint venture partners
12 Borrowings, including finance leases
As at 30 June 2012
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Amounts falling due within one year
Bank loans and overdrafts 112.8 112.8 112.8 112.8
Loan notes 2017 6.0 6.0 6.0 6.0
Borrowings, excluding finance leases 118.8 118.8 118.8 118.8
Finance lease obligations 0.8 0.8 0.8 0.8
Amounts falling due within one year 119.6 119.6 0.8 118.8 119.6
Amounts falling due after more than one year
Bank loan 2013 66.7 66.7 66.7 66.7
Bank loan 2016 146.1 146.1 146.1 146.1
Bank loan 2017 111.6 111.6 111.6 111.6
Borrowings excluding finance leases 324.4 324.4 324.4 324.4
Finance lease obligations 6.4 6.4 6.4 6.4
Amounts falling due after more than one year 330.8 330.8 6.4 324.4 330.8
Total borrowings 450.4 450.4 7.2 443.2 450.4
Cash and cash equivalents (53.3)
Net debt 397.1
As at 31 December 2011
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Amounts falling due within one year
Bank loans and overdrafts 11.5 11.5 11.5 11.5
Loan notes 2017 6.0 6.0 6.0 6.0
Borrowings, excluding finance leases 17.5 17.5 17.5 17.5
Finance lease obligations 1.2 1.2 1.2 1.2
Amounts falling due within one year 18.7 18.7 1.2 17.5 18.7
Amounts falling due after more than one year
Bank loans 2013 270.0 270.0 270.0 270.0
Bank loan 2016 145.3 145.3 145.3 145.3
Bank loan 2017 111.6 111.6 111.6 111.6
Borrowings excluding finance leases 526.9 526.9 526.9 526.9
Finance lease obligations 7.7 7.7 7.7 7.7
Amounts falling due after more than one year 534.6 534.6 7.7 526.9 534.6
Total borrowings 553.3 553.3 8.9 544.4 553.3
Cash and cash equivalents (89.6)
Net debt 463.7
13 Cash generated from operations
Six months Year Six months
ended ended ended
30 June 31 December 30 June
2012 2011 2011
Notes GBPm GBPm GBPm
Profit before tax 99.0 161.9 70.2
Adjustments for:
Profit on sale of trading properties (2.1)
Gain on revaluation of investment and development property 4 (70.4) (119.4) (39.5)
Gain on sale of investment property 4 (8.7) (3.9) (2.9)
Profit on sale of available for sale investments (8.7) (30.5) (18.8)
Profit on sale of subsidiary (1.7)
Remeasurement of deferred consideration 4.2 4.2
Write down of trading property 0.1
Depreciation 0.2 0.1
Amortisation of lease incentives and other direct costs (1.0) 0.5 (1.4)
Finance costs 5 14.1 36.5 18.5
Finance income (0.4) (1.7) (0.8)
Other finance costs 5 1.8 14.5 0.8
Change in fair value of derivative financial instruments (1.2) (14.1) (5.7)
Changes in working capital:
Change in trade and other receivables (0.7) (7.2) (1.3)
Change in trade and other payables 1.0 (3.1) (2.4)
Cash generated from operations 21.0 38.0 21.0
14 Classification of financial assets and liabilities
The tables below set out the Group's accounting classification of each class of financial assets and liabilities, and their fair
values at 30 June 2012 and 31 December 2011.
The fair values of quoted borrowings are based on the bid price. The fair values of derivative financial instruments are
determined from observable market prices or estimated using appropriate yield curves at 30 June and 31 December each year
by discounting the future contractual cash flows to the net present values.
(Loss)/gain Gain to other
Carrying to income comprehensive
value Fair value statement income
30 June 2012 GBPm GBPm GBPm GBPm
Derivative financial instrument asset 1.6 1.6 (1.0)
Total held for trading assets 1.6 1.6 (1.0)
Cash and cash equivalents 53.3 53.3
Other financial assets 64.7 64.7
Total cash and receivables 118.0 118.0
Available for sale investments 5.6 5.6 0.1
Total available for sale investments 5.6 5.6 0.1
Derivative financial instrument liabilities (33.7) (33.7) 2.2
Total held for trading liabilities (33.7) (33.7) 2.2
Borrowings (450.4) (450.4)
Other financial liabilities (76.3) (76.3)
Total loans and payables (526.7) (526.7)
(Loss)/gain Gain to other
Carrying to income comprehensive
value Fair value statement income
31 December 2011 GBPm GBPm GBPm GBPm
Derivative financial instrument asset 1.0 1.0 (2.4)
Total held for trading assets 1.0 1.0 (2.4)
Cash and cash equivalents 89.6 89.6
Other financial assets 61.9 61.9
Total cash and receivables 151.5 151.5
Available for sale investments 19.5 19.5 6.3
Total available for sale investments 19.5 19.5 6.3
Derivative financial instrument liabilities (37.4) (37.4) 16.5
Total held for trading liabilities (37.4) (37.4) 16.5
Borrowings (553.3) (553.3)
Other financial liabilities (96.4) (96.4)
Total loans and payables (649.7) (649.7)
15 Other provisions
Deferred
consideration Other Total
GBPm GBPm GBPm
Amounts falling due after more than one year
At 1 January 2011 3.1 0.2 3.3
Extinguished during the year (0.2) (0.2)
Reclassified to current liabilities (3.1) (3.1)
At 31 December 2011
At 30 June 2012
Amounts falling due with one year
At 1 January 2011
Reclassified from non-current liabilities 3.1 3.1
Charged to income statement
- remeasurement of deferred consideration 4.2 4.2
At 31 December 2011 7.3 7.3
At 30 June 2012 7.3 7.3
Deferred consideration is the amount payable on the 2009 acquisition of the non-controlling interests' share in Earls Court &
Olympia. The amount of deferred consideration payable is based on a number of factors including a potential redevelopment of
the Earls Court & Olympia site, with the final details of such a redevelopment dependent on discussions with the owners of the
adjacent land and the outcome of the planning permission process. The maximum potential payment is GBP20.0 million.
16 Capital commitments and contingent liabilities
At 30 June 2012, the Group was contractually committed to GBP17.7 million (31 December 2011 - GBP14.0 million) of future
expenditure for the purchase, construction, development and enhancement of investment property.
The Group's share of joint venture commitments included within this amount was GBPnil (31 December 2011 - GBP0.4 million).
In March 2012 a subsidiary of the Group entered into an agreement with LBHF to acquire any private residential units on the
West Kensington or Gibbs Green estates in the event that LBHF is required to purchase these properties if an owner brings
forward a valid claim under certain provisions of the Town and Country Planning Act 1990 which relate to Statutory Blight
suffered as a result of the adoption of the Strategic Planning Document, up to a maximum of GBP50 million including certain
other related costs. It is intended that costs incurred would be offset against the consideration relating to any future land
purchase agreement in respect of the LBHF land. The Group can give notice to terminate the agreement if a Conditional Land
Sale Agreement is not entered into by the end of the exclusivity period in January 2013.
17 Per share details
Earnings per share
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
millions millions millions
Weighted average ordinary shares in issue for calculation
of basic earnings per share 684.0 639.3 661.8
Dilutive effect of share option awards 5.6 3.8 4.0
Dilutive effect of contingently issuable shares 1.6 0.6 0.6
Dilutive effect of matching nil cost options 3.0 1.1 1.9
Dilutive effect of deferred shares 0.3
Weighted average ordinary shares in issue for calculation
of diluted earnings per share 694.5 644.8 668.3
Earnings per share (continued)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Profit used for calculation of basic earnings per share 95.2 68.5 153.7
Dilutive effect of share option awards 1.3 0.6 1.7
Profit used for calculation of diluted earnings per share 96.5 69.1 155.4
Basic earnings per share (pence) 13.9 10.7 23.2
Diluted earnings per share (pence) 13.9 10.7 23.3
Profit used for calculation of basic earnings per share 95.2 68.5 153.7
Adjustments:
Other income (2.1)
Gain on revaluation and sale of investment and development property (79.1) (42.4) (123.3)
Profit on sale of subsidiary (1.7)
Write down of trading property 0.1
Fair value movement on derivative financial instruments (1.2) (5.7) (14.1)
Costs of termination of derivative financial instruments 0.7 0.8 14.5
Current tax adjustments 0.8 (0.2) (0.3)
Deferred tax adjustments 1.8 0.4 17.4
EPRA adjusted earnings 14.4 21.4 48.0
Exceptional other income (0.3) (0.8)
Profit on sale of available for sale investments (8.7) (18.8) (30.5)
Remeasurement of deferred consideration 4.2 4.2
Write down of trading property (0.1)
Refinancing fees 1.1
Current tax adjustments (1.1) 0.1 0.3
Deferred tax adjustments 0.4 (0.4) (11.6)
Underlying earnings 6.1 6.2 9.5
Underlying earnings per share (pence) 0.9 1.0 1.4
EPRA adjusted earnings per share (pence) 2.1 3.3 7.3
Earnings per share (continued)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm Million GBPm
Profit used for calculation of basic earnings per share 95.2 68.5 153.7
Adjustments:
Gain on revaluation and sale of investment and development property (79.1) (42.4) (123.3)
Profit on sale of available for sale investments (8.7) (18.8) (30.5)
Profit on sale of subsidiary (1.7)
Deferred tax adjustments 1.7 (0.2)
Current tax adjustments 0.1 13.1
Headline earnings used for calculation of headline earnings per
share 7.4 7.2 13.0
Dilutive effect of share options awards 1.3 0.6 1.7
Diluted headline earnings used for calculation of diluted headline
earnings per share 8.7 7.8 14.7
Headline earnings per share (pence)(1) 1.1 1.1 2.0
Diluted headline earnings per share (pence)(1) 1.3 1.2 2.2
(1) Headline earnings per share is calculated in accordance with Circular 3/2012 issued by the South African Institute of Chartered Accountants (SAICA), a requirement of the Group's JSE listing. This
measure is not a requirement of IFRS.
Net assets per share
As at As at
30 June 31 December
2012 2011
GBPm GBPm
Basic net asset value used for calculation of basic net assets per share 1,186.5 1,103.1
Fair value of derivative financial instruments 32.1 36.4
Unrecognised surplus on trading properties 6.5 1.0
Deferred tax adjustments 6.7 4.9
EPRA adjusted net asset value 1,231.8 1,145.4
Effect of dilution:
On exercise of options
EPRA adjusted, diluted NAV used for calculation of EPRA adjusted,
diluted NAV per share 1,231.8 1,145.4
Fair value of derivative financial instruments (32.1) (36.4)
Deferred tax adjustments 8.3 9.2
Diluted EPRA NNNAV 1,208.0 1,118.2
Basic net assets per share (pence) 173.3 161.3
EPRA adjusted, diluted NAV per share (pence) 177.1 165.8
Diluted EPRA NNNAV per share (pence) 173.7 161.9
Shares in issue
As at As at
30 June 31 December
2012 2011
millions millions
Shares in issue 684.5 683.9
Effect of dilution:
On exercise of options 6.0 4.4
On issue of contingently issuable shares 1.6 0.6
On issue of matching nil cost options 3.0 1.9
On issue of deferred shares 0.3
Diluted number of shares 695.4 690.8
18 Share capital and share premium
Share Share
capital premium
GBPm GBPm
Issued and fully paid
At 31 December 2011 683,928,502 ordinary shares of 25p each 170.9 95.1
Shares issued - 541,709 ordinary shares of 25p each 0.2 0.9
At 30 June 2012 684,470,211 ordinary shares of 25p each 171.1 96.0
19 Related party transactions
Key management compensation (1)
Six months Six months Year ended
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Salaries and short term employee benefits 1.0 0.9 2.8
Pensions and other post-employment benefits 0.1 0.1
Share based payments 1.3 0.5 1.4
2.3 1.5 4.3
(1) The Directors of Capital & Counties Properties PLC have been determined to be the only individuals with authority and responsibility for planning, directing and controlling the activities of the Company.
20 Events occurring after the reporting period
On 23 July 2012, The Great Capital Partnership announced it had exchanged contracts to sell the Jermyn Street Estate to GPE
for GBP120 million (GBP60 million Capco's share). The sale subsequently completed on 27 July 2012.
On 24 July 2012, the Group exchanged contracts to acquire the freehold interest in 14 Garrick Street, Covent Garden for
GBP7.7 million.
On the 25 July 2012, an extension to the exclusivity agreement between Capco and LBHF was agreed. The agreement,
originally due to expire on 29 July 2012, gives both parties exclusivity in relation to discussions around the inclusion of LBHF's
land interests in the ECOA Masterplan and time to secure the necessary statutory consents to progress with comprehensive
regeneration. The agreement will now expire on 29 January 2013.
APPENDIX 1
ANALYSIS OF PROPERTY PORTFOLIO (unaudited)
1. Property data as at 30 June 2012
Weighted
average Gross
Market Initial Nominal Passing Occupancy unexpired area
value yield equivalent rent (1) ERV (1) rate lease (1) million (3)
GBPm Owner (EPRA) yield (1) GBPm GBP (EPRA) 1 years sq ft
Covent Garden 855.6 100% 3.66% 5.17% 47.1 0.8
Investment property 835.1 100% 3.75% 5.23% 46.3 99.3% 7.7 0.8
Trading property 20.5 100% 0.8
Earls Court & Olympia (2) 620.0 100% 8.8 1.8
The Great Capital Partnership 158.8 50% 3.44% 5.22% 9.3 82.0% 8.3 0.4
Other trading property 3.0 100%
Total investment properties 1,613.9 48.3 64.4 3.0
Total trading properties 23.5 0.8
Total properties 1,637.4 48.3 65.2 3.0
(1) As defined in the glossary.
(2) Includes the Group's 50 per cent economic interest in the Empress State Building (GBP110 million). Earls Court & Olympia does not report a passing rent, ERV, occupancy or lease maturity due to the
nature of its exhibition business.
(3) Area shown is gross area of the portfolio, not adjusted for proportional ownership.
2. Analysis of capital return in the period
Like-for-like properties
Market value Revaluation surplus (1)
30 June 31 December 30 June
2012 2011 2012
GBPm GBPm GBPm Increase
Covent Garden 824.0 786.9 32.4 4.2%
Earls Court & Olympia 616.3 573.5 27.0 4.6% (2)
The Great Capital Partnership 158.8 147.3 10.7 7.1%
Like-for-like investment properties 1,599.1 1,507.7 70.1 4.6%
Acquisitions 14.8 0.3
Disposals 96.3
Transfers to trading properties 18.8
Total investment properties 1,613.9 1,622.8 70.4 4.6%
Total trading properties 23.5 1.2 5.5 (3)
Total properties 1,637.4 1,624.0 75.9 4.9%
All properties
Covent Garden 855.6 808.0 37.1 4.6%
Investment property 835.1 808.0 33.3 4.2%
Trading property 20.5 3.8 (3) 22.7%
Earls Court & Olympia 620.0 573.5 26.4 4.4%
The Great Capital Partnership 158.8 241.3 10.7 7.1%
Other trading property 3.0 1.2 1.7 (3)
Total properties 1,637.4 1,624.0 75.9 4.9%
(1) Revaluation surplus includes amortisation of lease incentives and fixed head leases.
(2) Increase comprises EC&O Venues 3.7% and non-exhibition 7.8%.
(3) Unrecognised revaluation surplus on trading properties is presented for information only.
3. Analysis of income in the period
Like-for-like properties
30 June 30 June
2012 2011
GBPm GBPm Change
Covent Garden 13.9 12.4 12.1%
Earls Court & Olympia 14.5 17.1 (15.2)%
The Great Capital Partnership 2.8 3.3 (15.2)%
Like-for-like investment properties 31.2 32.8 (4.9)%
Acquisitions 0.1
Disposals 1.0 3.6
Like-for-like capital 1.8 0.3
Transfers to trading properties
Total investment properties 34.1 36.7 (7.0)%
Total trading properties
Total properties 34.1 36.7 (7.0)%
All properties
Covent Garden 15.7 13.1 19.8%
Earls Court & Olympia 14.4 17.4 (17.2)%
The Great Capital Partnership 4.0 6.2 (35.5)%
Total properties 34.1 36.7 (7.0)%
4. Analysis of property by use
30 June 2012 Market value 30 June 2012 ERV
Retail Office Exhibition Residential Total Retail Office Exhibition Residential Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Covent Garden 714.6 107.8 33.2 855.6 37.8 8.2 1.1 47.1
Earls Court &
Olympia 20.6 117.4 479.7 2.3 620.0 1.4 7.3 0.1 8.8
The Great Capital
Partnership 41.5 108.6 8.7 158.8 2.5 6.5 0.3 9.3
Other trading 3.0 3.0
property
776.7 333.8 479.7 47.2 1,637.4 41.7 22.0 1.5 65.2
APPENDIX 2
UNDERLYING PROFIT STATEMENT (unaudited)
For the six months ended 30 June 2012
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2012 2011 2011
GBPm GBPm GBPm
Net rental income 34.1 36.7 69.0
Administration expenses (12.4) (11.0) (22.2)
Operating profit 21.7 25.7 46.8
Finance costs (14.1) (18.5) (36.5)
Finance income 0.4 0.8 1.7
Net finance costs (13.7) (17.7) (34.8)
Write down of trading properties (0.1)
Profit before tax 8.0 8.0 11.9
Tax on adjusted profit (1.9) (1.8) (2.4)
Underlying earnings used for calculation of underlying earnings
per share 6.1 6.2 9.5
Underlying earnings per share (pence) 0.9 1.0 1.4
APPENDIX 3
FINANCIAL COVENANTS (unaudited)
Financial covenants on non-recourse debt excluding joint ventures
Loan Loan to
outstanding at 30 June Interest Interest
30 June 2012 (1) LTV 2012 cover cover
Maturity GBPm covenant market value (2) covenant reported (3)
Covent Garden (5),(6) 2016 150.0 70% 36% 130% 238%
Covent Garden (5),(7) 2017 112.0 70% 45% 120% 170%
Covent Garden (RCF)(5),(10) 2017 30.0 65% 14% 130% 312%
Total 292.0
Financial covenants on joint ventures' non-recourse debt
Loan Loan to
outstanding at 30 June Interest Interest
30 June 2012 (1) (4) LTV 2012 cover cover
Maturity GBPm covenant market value (2) covenant reported (3)
The Empress State Partnership (8) 2013 68.5 N/A N/A 120% 164%
The Great Capital Partnership(9) 2013 81.0 70% 60% 120% 285%
Total 149.5
Notes:
(1) The loan values are the actual principal balances outstanding at 30 June 2012. The balance sheet value of the loans includes any unamortised fees.
(2) The loan to 30 June 2012 market value provides an indication of the impact the 30 June 2012 property valuations on the LTV covenants. The actual timing
and manner of testing LTV covenants varies and is loan specific.
(3) Based on the latest certified figures, calculated in accordance with loan agreements, which have been submitted during June 2012 and July 2012. 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) There are three separate loans secured against Covent Garden properties
(6) Loan facility provided by a consortium of six banks with BNP Paribas acting as agent.
(7) Loan facility provided by NyKredit Realkredit A/s.
(8) Loan facility provided by a consortium of three banks with Eurohypo AG acting as agent, LTV covenant removed until maturity.
(9) Loan facility provided by a consortium of four banks with Eurohypo AG acting as agent.
(10) Loan facility provided by a consortium of two banks with BNP Paribas acting as agent.
DIVIDENDS
INTERIM DIVIDEND
The Directors of Capital & Counties Properties PLC have announced an interim dividend of 0.5 pence per ordinary share
(ISIN GB00B62G9D36) payable on 18 September 2012. Subject to SARB approval, it is intended that a scrip dividend
alternative will be offered to eligible shareholders who wish to elect to receive new ordinary shares in the Company in lieu
of cash in respect of the interim dividend.
Dates
The following are the salient dates for the payment of the dividend:
8 August 2012 Sterling/Rand exchange rate struck
Sterling/Rand exchange rate, dividend amount in Rand, scrip price and scrip ratio
10 August 2012
announced
20 August 2012 Ordinary shares listed ex-dividend on the JSE, Johannesburg
22 August 2012 Ordinary shares listed ex-dividend on the London Stock Exchange
24 August 2012 Record date for interim dividend in London and Johannesburg
24 August 2012 Election date for scrip dividend alternative (SA) (by noon)
3 September 2012 Election date for scrip dividend alternative (UK) (by 5.30pm)
Dividend payment date for shareholders / Issue date for new ordinary
18 September 2012
shares under the scrip dividend scheme
Important Information for South African Shareholders:
South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-
dividend will be 17 August 2012 and that no dematerialisation or rematerialisation of shares will be possible from 20
August 2012 to 24 August 2012 inclusive. No transfers between the UK and South African registers may take place from
9 August 2012 to 24 August 2012 inclusive.
The full terms of the scrip dividend alternative are contained in a Scrip Dividend Scheme booklet which is available (along
with the related mandate forms) on the Company's website at www.capitalandcounties.com or from the Company's
registrars.
Important Information for South African Shareholders:
Holders of the Company's shares in South Africa should note that National Treasury introduced a new Dividends Tax with effect
from 1 April 2012, at a rate of 15 per cent.
The interim cash dividend received by a South African shareholder will constitute a foreign dividend and will therefore be subject
to Dividends Tax. Dividends Tax will be withheld from the amount of the interim dividend at a rate of 15 per cent, unless a
shareholder qualifies for an exemption or a reduced rate of Dividends Tax and the prescribed requirements for effecting the
exemption or reduction, as set out in the Scrip Dividend Scheme booklet, are in place.
It is the Company's understanding that a receipt of shares pursuant to the scrip dividend alternative will also constitute a foreign
dividend in terms of current legislation. Under the current legislation, the scrip dividend will not be subject to Dividends Tax, but
will instead be subject to income tax at a rate of 15 per cent. The new shares which are acquired under the scrip dividend
alternative will also be treated as having been acquired for nil consideration.
This information is included only as a general guide to taxation for Shareholders resident in South Africa based on Capco's
understanding of the law and the practice currently in force. Any Shareholder who is in any doubt as to their tax position should
seek independent professional advice.
Further disclosures required in terms of the JSE Listings Requirements will be detailed in the finalisation announcement to be
published on 10 August 2012.
GLOSSARY
Capco
Capco represents Capital & Counties Properties PLC (also referred to as "the Company") and all its subsidiary companies,
together referred to as "the Group".
Diluted figures
Reported amounts adjusted to include the effects of potential shares issuable under employee incentive arrangements.
ECOA
The Earls Court and West Kensington Opportunity Area.
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.
EPRA adjusted, diluted NAV
The net assets as at the end of the period including the excess of the fair value of trading property over its cost and excluding the
fair value of financial instruments, deferred taxation on revaluations and diluting for the effect of those shares potentially issuable
under employee share schemes divided by the diluted number of shares at period end.
EPRA adjusted, diluted NNNAV
EPRA adjusted, diluted NAV adjusted to reflect the fair value of derivatives and to include deferred taxation on revaluations.
EPRA adjusted earnings per share
Profit for the period excluding gains or losses on the revaluation and sale of investment and development property, write down on
trading property, changes in fair value of financial instruments and associated close-out costs and the related taxation on these
items divided by the weighted average number of shares in issue during the period.
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 by International Financial Reporting Standards
regarding tenant lease incentives.
F&B
Food & Beverage
GPE
Great Portland Estates plc
Gross income
The Group's share of passing rent plus sundry non-lease income.
Interest cover ratio (ICR)
Net rental income less administration costs divided by the net finance cost excluding the change in fair value of derivatives and
any exceptional finance costs.
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.
Initial yield (EPRA)
Annualised net rent (after deduction of revenue costs such as head rent, running void, service charge after shortfalls and empty
rates) 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.
IPD
Investment Property Databank Ltd, producer of an independent benchmark of property returns.
LBHF
The London Borough of Hammersmith and Fulham
Like-for-like properties
Investment properties which have been owned throughout both periods without significant capital expenditure in either period, so
income 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 balance sheet date but not necessarily throughout the prior period.
Loan-to-value (LTV)
LTV is the ratio of attributable debt to the market value of an investment property.
Net Debt
Total borrowings less cash and cash equivalents.
Net rental income
The Group's share of gross rental income less ground rents payable, service charge expenses and other non-recoverable
charges, having taken due account of bad debt provisions and adjustments to comply with International Financial Reporting
Standards 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, and that the property becomes fully occupied and that all rents revert to the
current market level (ERV) at the next review date or lease expiry.
Occupancy rate (EPRA)
The ERV of let and under offer units expressed as a percentage of the ERV of let and under offer units plus ERV of un-let units,
excluding units under development.
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. Contracted annual rents in respect of tenants in administration are excluded.
SARB
South African Reserve Bank.
Section 34A of the Housing Act 1985
The Government are consulting on a proposed amendment to the 1985 Housing Act that could enable social tenants to take
control of the management of their properties. The proposed amendment could establish a procedure enabling an organised
group of tenants to require a local authority to transfer their homes to a housing association or similar body registered with the
Tenant Services Authority (the social housing regulator). Tenants may form such a body and seek the transfer of the property to
that body. The legislation would only apply to social rented tenants of local authorities. It would not apply to tenants of housing
associations even where the ultimate owner may be a local authority. Section 34A requires implementation by regulations yet to
come into effect. These regulations will be enacted by the Department of Communities and Local Government. No regulations
have yet been made.
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 International Financial Reporting Standards the value of incentives granted to
tenants is amortised through the income statement on a straight-line basis over the lease term.
Underlying earnings
Profit for the period excluding impairment charges, net valuation gains/losses (including profits/losses on disposals), net
refinancing charges, swap termination costs, remeasurement of deferred consideration and the related tax on these items.
Weighted average unexpired lease
The unexpired lease term to lease expiry weighted by ERV for each lease.
Zone A
A means of analysing and comparing the rental value of retail space by dividing it into zones parallel with the main frontage. The
most valuable zone, Zone A, falls within a 6m depth of the shop frontage. Each successive zone is valued at half the rate of the
zone in front of it. The blend is referred to as being ITZA' (In Terms of Zone A').
Date: 31/07/2012 08:00:00 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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