Wrap Text
Audited Preliminary Results for the year ended 31 December 2012
Capital & Counties Properties PLC
(Incorporated and registered in the United Kingdom and
Wales with registration Number 07145041 and registered in
South Africa as an external company with Registration
Number 2010/003387/10)
JSE code: CCO
ISIN: GB00B62G9D36
PRESS RELEASE
28 February 2013
AUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
Ian Durant, Chairman of Capco, commented: "Capco's strong performance in 2012 continues the positive momentum
generated since the Company was established in 2010. I am confident that Capco's strategy to unlock value from its core
estates whilst maintaining a strong financial position will enable it to capitalise on opportunities for its shareholders and
achieve market leading returns."
Ian Hawksworth, Chief Executive of Capco, commented: "The clear and focused business model and strategy has delivered
strong results in 2012 with the continued transformation of Covent Garden and significant planning milestones achieved at
Earls Court. We have maintained the pace of capital recycling, underpinning our strong balance sheet and conservative
leverage. Capco is well positioned within its core central London retail and residential property markets, and our assets
continue to offer the potential for outperformance."
Strong valuation performance
- 22 per cent increase in EPRA adjusted, diluted NAV to 203 pence per share (2011 restated: 167 pence)
- 15 per cent increase in total property value to GBP1.7 billion (17 per cent like-for-like) (2011: GBP1.6 billion)
- Proposed final 2012 dividend of 1 pence per share giving full-year dividend of 1.5 pence per share
- 23 per cent total return in the period
Transformation of Covent Garden continues to drive value
- Property value of GBP952 million up 7.2 per cent (on a like-for-like basis) (2011: GBP808 million)
- 9.99 per cent equity placing for further investment raised GBP149 million in September
- Revised ERV target of GBP60-65 million by 2015, new lettings at 4.6 per cent above December 2011 ERV
- 14 new retailer and restaurant signings in 2012 including Chanel and Jo Malone
- Acquisitions of GBP89 million including the Wellington Portfolio and a number of units on Henrietta Street and Floral
Street
- New benchmark set of GBP2,250 per square foot for premium residential
Resolutions to grant outline planning consent at Earls Court
- 57.6 per cent increase in Earls Court valuation (on a like-for-like basis) to GBP336 million (GBP14.8 million per acre)
(2011: GBP195 million)
- Resolutions to grant outline planning consent for the Earls Court Masterplan from LBHF and RBKC
- CLSA signed with LBHF for inclusion of its land in the Masterplan
- Discussions continue with TfL on regear of Earls Court leasehold interests
- Improvement works to Olympia London completed
Planning consent at Seagrave Road and joint venture focused on implementation
- 61.5 per cent increase in valuation (on a like-for-like basis) to GBP104 million (Capco share) (2011: GBP116 million)
- Formal planning consent granted for Seagrave Road development and joint venture completed
GBP320 million of disposals continue capital recycling
- GBP320 million (Capco share) of disposals in 2012, principally from investments in GCP and China as well as
completion of the Seagrave Road JV
Strong financial position with low leverage and high liquidity
- Property LTV reduced to 10 per cent (2011: 29 per cent)
- Cash and available facilities of GBP401 million as at 31 December 2012 (2011: GBP245 million)
- GBP70 million revolving credit facility arranged giving increased financial flexibility
FINANCIAL HIGHLIGHTS
Comprising 2012 2011
23% Total return in 2012
EPRA adjusted net asset value GBP1,553m GBP1,153m
EPRA adjusted net asset value per share 22% 203p 167p
Dividend per share 1% 1.5p 1.5p
22% Total property return in 2012
Total property portfolio 15% GBP1,721m GBP1,624m
Profits on disposal 3% GBP35m GBP4m
Net rental income 4% GBP65.3m GBP69.0m
Underlying earnings per share 1.8p 1.4p
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, +44 (0)20 7796 4133
Hudson Sandler
SA: Nicholas Williams / Vanessa Hillary, +27 (0)11 447 3030
College Hill
A presentation to analysts and investors will take place today at 8:30am GMT at UBS, 1 Finsbury Avenue, 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).
NOTES TO EDITORS
Capital & Counties Properties PLC is one of the largest listed property investment and development companies in central
London. Our landmark estates held directly or through joint ventures are valued at GBP1.7 billion.
Covent Garden
The Covent Garden estate represents 55 per cent of Capco's property portfolio and showcases its place-making strategy,
which is realised through creative asset management, acquisitions, investment, strategic development and creative
marketing.
Earls Court and Olympia
The Earls Court and Olympia estate, including Capco's share of Empress State, represent 42 per cent of Capco's property
portfolio. Capco's strategy is to maintain a robust exhibitions business at Olympia London whilst unlocking value from its
Earls Court interests now that resolutions to grant outline planning consent have been obtained from the local authorities for
the Earls Court Masterplan, Sir Terry Farrell's vision to create 'Four Urban Villages and a 21st Century High Street.'
The Seagrave Road project is a joint venture between Capco and KFI to take forward the development of the 7.5 acre site. It
has formal planning consent for a residential-led scheme including 808 new homes and a new garden square.
Other Investments
Capco's non-core investments in The Great Capital Partnership and China funds have delivered significant returns which
have been reinvested in the core estates.
CHAIRMAN'S STATEMENT
Capco's strong performance in 2012 continues the positive momentum generated since the Company was established in
2010. Over this period, the Company has delivered market leading returns to its shareholders as a result of a focus on
executing its strategy of unlocking value across its business supported by effective capital management.
At the asset level Covent Garden has performed well with the continued evolution of the tenant mix and expansion of the
estate through key acquisitions. An equity placing in September raised GBP149 million of new capital to support this strategy.
Key planning milestones for the Earls Court Masterplan have been achieved alongside formal planning consent and the
formation of a joint venture to develop the Seagrave Road project. This year has also seen continued reallocation of capital
from non-core assets, particularly from GCP, to Earls Court and Covent Garden.
The Olympic Games were a highlight of 2012, and I am pleased that our Earls Court venue was the host of the successful
volleyball tournament which attracted over half a million visitors.
RESULTS AND DIVIDENDS
In 2012 Capco delivered strong results with a total return of 22.6 per cent. EPRA adjusted, diluted NAV per share was the
main component of this, rising from 167 pence to 203 pence driven by the increase in valuation of the assets which were up
16.7 per cent on a like-for-like basis. Total shareholder return was 32.1 per cent. It should be noted that these results have
been achieved with exceptionally low leverage; at December 2012 the Group's LTV was 10 per cent.
I would like to thank the Executive Directors and all staff for their hard work and commitment over the past year which has
contributed to this strong performance.
The Directors propose a final dividend of 1.0 pence per share, bringing the total dividend paid and payable for 2012 to 1.5
pence per share.
GOVERNANCE
The Board has established an open culture which encourages dialogue and debate between the Executive and Non-
executive Directors. The values of the Board in regard to both governance and corporate responsibility are embedded
throughout the Group.
As stated in the 2011 report, the diversity and composition of the Board have been reviewed and we were 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 its European Apparel, Fashion and Luxury Goods Practice for five years, advising leading high street,
aspirational and luxury retailers and brands.
The Group's ongoing strategy was a focus of debate and discussion for the Board during the year, and the business model
focusing on central London retail and residential property was affirmed whilst keeping an open mind on opportunities to allow
the business to develop further.
MOVING FORWARD
In 2012 London took its place on the world stage as host city of the Olympics and centre of the Queen's Diamond Jubilee
celebrations, and its success under the spotlight has enhanced its standing as a global city and an attractive location for
investment. The global capital flows into London have underpinned the central London real estate markets despite the
continued poor macroeconomic outlook for the UK, but London's 'safe haven' status should not be taken for granted.
Nevertheless, as we move forward I am confident that Capco's strategy to unlock value from its core estates whilst
maintaining a strong financial position will enable it to capitalise on opportunities for its shareholders and continue to achieve
market leading returns.
Ian Durant
Chairman
28 February 2013
CHIEF EXECUTIVE'S STATEMENT
2012 was a year of continued progress for Capco as our focus on unlocking value generated further momentum to deliver
superior returns for shareholders. Capco has a clear business model focusing on retail and residential London property. This
delivered significant uplift at the Group level, with adjusted NAV per share up 22 per cent.
Capco's creative asset management and place-making skills at Covent Garden continued to drive value, whilst our ability to
deliver complex planning projects was evident in the significant milestones achieved with the Earls Court Masterplan and
Seagrave Road project in 2012.
A strong balance sheet allowing Capco to retain high levels of liquidity alongside conservative gearing ratios underpins
Capco's estate strategies. This year GBP320 million was realised mainly from disposals within the non-core investments of
GCP and China as well as the completion of the Seagrave Road joint venture. In May, a new five-year GBP70 million
revolving credit facility was agreed, establishing a more flexible financing structure, and in September, the equity placing
raised gross proceeds of GBP149 million to be invested in Covent Garden.
OPERATING AND FINANCIAL REVIEW
Valuations
The Group benefitted from strong revaluations across its business during 2012, with a like-for-like valuation increase of 16.7
per cent representing the main component of a total property return of 21.7 per cent.
Market Value
Market
Value Market
Dec-12 Value Market
Dec-11 Value ERV Initial Equivalent
GBPm GBPm Change(1,2) Change(1) Yield Yield
Covent Garden 952 808 7.2% 4.2% 3.8% 5.1%
Earls Court 336 195 57.6%
Seagrave Road 104(3) 116 61.5%
Olympia London 126 121 (4.1%)
Other(4) 203 384 9.8%
Total properties 1,721 1,624 16.7%
(1) Like-for-Like
(2) Valuation change takes account of amortisation of lease incentives, capital expenditure and fixed head leases.
(3) Represents Capco's 50 per cent share.
(4) GCP (Capco's 50 per cent share), Empress State Building (Capco's 50 per cent share) and peripheral assets.
Covent Garden increased in value reflecting rental growth as well as the continued strong demand for prime assets from a
wide range of investors. The Earls Court and Seagrave Road land interests experienced a significant valuation increase due
to the positive momentum of each project as well as the strong central London residential market. Other assets, mainly
comprising Empress State and the last remaining asset in GCP, increased in value reflecting the strong investment market
for those properties.
Covent Garden
Since taking ownership in 2006 over 50 new brands have opened in the Covent Garden area making it one of London's most
vibrant estates. There have been a number of new lettings in 2013 demonstrating continued demand for space on the estate.
The successful introduction of new retail and dining at the ground level has enabled the strategy to expand into premium
residential conversions of the upper floors. This has continued to deliver value uplift with the overall estate valued at GBP952
million, an increase of 7.2 per cent on a like-for-like basis.
In line with the successful repositioning strategy at Covent Garden, the equity placing in September raised capital for further
investment in the district. The ERV target was also revised to GBP60-65 million by the end of 2015. In 2012 GBP89 million of
acquisitions were completed growing Capco's ownership in the area by 13 per cent, creating a scale in line with historic
London landed estates.
Capco's active asset management approach achieved landmark lettings including the first permanent stand alone fragrance
and beauty concept from Chanel and a flagship store for Jo Malone. Balthazar, Keith McNally's French brasserie concept
backed by Caprice Holdings, opened in February 2013. Further growth is expected through the tenant engineering strategy
which drives the continued repositioning of other areas of the estate as well as the introduction of new larger-scale
developments and interventions.
Earls Court & Olympia
The Earls Court Masterplan received resolutions to grant outline planning consent from the London Borough of Hammersmith
& Fulham (LBHF) and the Royal Borough of Kensington & Chelsea (RBKC) in September and November respectively. We
are now working towards obtaining formal planning consent in the first half of 2013, which will require the issue of the Stage
Two report by the Greater London Authority (GLA) and finalisation of the Section 106 agreements. The valuation of Capco's
Earls Court interests has increased considerably to GBP336 million as at December 2012, an increase of 58 per cent in
2012.
Formal planning consent for the Seagrave Road development was received in March. The 50:50 joint venture with the KFI in
respect of this project completed in August realising net cash proceeds to Capco of GBP65 million. The joint venture has now
moved into its implementation phase, resulting in certain proposed enhancements to the design of the scheme as well as a
detailed planning application to extend the scheme up to Lillie Road which will be submitted shortly to LBHF. The sales and
marketing strategy is being finalised with a view to launching the scheme in the next 12 months. The progress in taking
forward this project has led to Capco's 50 per cent interest increasing in value by 62 per cent (on a like-for-like basis) during
2012 to GBP104 million.
In January 2013, the Conditional Land Sale Agreement (CLSA) was signed with LBHF enabling the inclusion of its land in a
comprehensive redevelopment of the Earls Court & West Kensington Opportunity Area (ECOA). The Council is applying for
approval of this deal from the Secretary of State and a decision is expected in the coming months. Discussions continue with
Transport for London (TfL) for a regear of Capco's existing leasehold interests at Earls Court, as this was not concluded in
2012.
Olympia has officially relaunched as Olympia London following a significant GBP30 million investment over the past two
years. It will be the focus of the Group's exhibitions business, providing dynamic and flexible events space to cater for the
needs of the exhibitions industry.
OPPORTUNITIES AND OUTLOOK
Capco is well positioned within its core central London retail and residential property markets, and our assets continue to
offer the potential for outperformance going forward. The fundamental drivers of long-term growth in London are strong,
however we remain mindful of the short-term risks presented by the challenging macroeconomic conditions as we progress
our plans.
In Covent Garden we will continue the creative place-making, active asset management and strategic acquisitions as well as
initiating selective development. At Earls Court, we will look to deliver the formal planning consents for the Earls Court
Masterplan, create the detailed design of the first phase of the redevelopment and finalise a transaction with TfL in relation to
our land interests whilst assisting the local authorities as appropriate to respond to the judicial review challenges faced. The
Seagrave Road project will focus on achieving a successful launch under its new branding of Lillie Square.
Ian Hawksworth
Chief Executive
28 February 2013
OPERATING REVIEW
COVENT GARDEN
Highlights
- Capital value of GBP952 million, up 7.2 per cent on a like-for-like basis
- Net rental income GBP32.1 million, up 9.4 per cent on a like-for-like basis
- ERV GBP51.9 million, up 4.2 per cent on a like-for-like basis
The Covent Garden estate continues to perform well with a capital value of GBP952 million as at December 2012, a 7.2 per
cent like-for-like uplift year-on-year. In total, Capco owns 62 buildings comprising 380 lettable units and over 898,000 sq ft of
lettable space in Covent Garden. At 31 December 2012, gross income (representing passing rent plus non-leased income)
was GBP39.4 million.
In line with the successful repositioning strategy at Covent Garden an equity placing was undertaken in September raising
GBP149 million of capital for further investment in the district. Proceeds from the placing in September were used to fund
several acquisitions including:
- The Wellington Portfolio consisting of three properties with 52,700 sq ft of mixed use space
- 17-18 Floral Street and 25-29 Henrietta Street which together include 15 retail & F&B units
- 14 Garrick Street leased to The Forge restaurant
In total, GBP89 million of acquisitions were completed in 2012 which expanded the estate by over 105,000 sq ft and,
combined with the purchase of Kings Court in 2011, allow for further residential and retail opportunities as well as larger-
scale interventions to unlock value from the estate. In January 2013, Capco exercised its option to acquire a 125 year lease
for 38 King Street from the Trustees of the Africa Centre.
At the time of the placing, the ERV target was revised to GBP60-65 million by the end of 2015 which would support an estate
valuation at current yields of approximately GBP1.3 billion over this three-year timeframe. In 2012, 27 new lettings (excluding
those with non-standard terms such as development breaks) were negotiated at 4.6 per cent above December 2011 ERV.
Tenant demand remains strong across the estate which is operating at near full occupancy at 99 per cent.
Retail activity
King Street, the home of Covent Garden's contemporary luxury offering, saw the opening of Opening Ceremony, Jo Malone,
7 for All Mankind and a new concept from Hackett in 2012. The upcoming additions of Aesop and Twenty8Twelve as well as
the recent signing of Sandro, part of the LVMH group, continue the evolution of the street with 40 per cent of the brands
changing in the last 12 months. In addition, public realm works to King Street were completed in May bringing the streetscape
in line with the retail mix and creating a better experience for visitors.
In November, Ralph Lauren announced it would be closing its Rugby brand globally in February 2013. Whilst disappointing,
the unit is leased to Ralph Lauren until 2021, and offers the opportunity to introduce a new brand into an attractive Piazza
location in due course.
A successful pop-up luxury fragrance and beauty concept by Chanel which opened in July in the Market Building has now led
to a permanent lease for the brand in the same location. In addition, Casio opened its G Shock West concept store in April,
alongside Links of London.
Footfall in Covent Garden is consistently strong at 45 million. The ABC1 audience is now 89 per cent of UK visitors and dwell
time has increased to over 90 minutes for Londoners and visitors, up from 78 minutes in 2011.
Dining
The food and dining offer at Covent Garden now ranges from cult concepts to fine dining. May saw the opening of
MEATmarket on the balcony of Jubilee Hall, the latest cult burger concept from the team behind MEATliquor and MEATeasy.
In July, Jamie Oliver's new British concept, Union Jacks, opened in the Market Building, taking over part of the space vacated
by Ponti's in the North Hall. Brasserie Blanc, from chef Raymond Blanc, opened on the Opera Terrace in spring and late
summer saw the arrival of Venchi in the Market Building, its only location outside of Italy.
In February 2013, the Balthazar restaurant opened in the former Flower Cellars Building, with Balthazar Bakery next door. It
is the only outpost of Keith McNally's Balthazar outside Manhattan.
In November, it was announced that Covent Garden will be the home of Union Square Group's Shake Shack, a highly
successful concept in its native New York City. The restaurant will be taking space in the South Wells of the Market Building
in space formerly occupied by New York Deli and The Icecreamists and will be opening in summer 2013.
The most recent new signing, Sticks 'n' Sushi, is a Danish and Japanese fusion concept and will be opening later this year on
Henrietta Street in space formerly occupied by Walkabout.
Residential
In line with the successful repositioning of the estate, Capco has been actively seeking opportunities to bring Covent Garden
back to its residential roots, identifying office conversions to create luxury residential space overlooking a London landmark.
The first residential conversion, The Henrietta, was completed in early 2012 and included three luxury lateral apartments and
a duplex penthouse which set a new benchmark for quality in the area. All of the apartments in The Henrietta have now been
sold at an average value of GBP2,250 per square foot, a significant uplift on prevailing values in the area. The sales
generated trading profits on sale of GBP2.9 million during 2012, and provided the basis for a 19 per cent increase in the
value of the residential space at Covent Garden.
The Russell, on the corner of the Piazza and Russell Street, will be completed in spring 2013 and will create a further five
luxury apartments including two penthouses. Conversion work on The Beecham has started on site to create a further seven
apartments and work on The Southampton, a fourth residential project, will begin in the coming months.
Future Priorities
Capco's strategy in Covent Garden remains on track, driving momentum and unlocking value through creative asset
management and place-making. Consistent with the revised ERV target for the end of 2015, Capco will be seeking geared
total returns of at least 10 per cent from its Covent Garden holdings.
Going forward the focus will remain on tenant engineering and the retail and dining mix in order to bring rental values in line
with the wider West End retail areas. Growing the estate through tactical acquisitions will remain a priority with an active
approach to buying within and around the boundaries of the existing estate.
Strategic development and large-scale intervention opportunities are being considered for the estate. A planning application
for Kings Court is being prepared for submission in the first half of 2013. The scheme would create new retail and residential
space and improve pedestrian flows between King Street and Floral Street.
EARLS COURT & OLYMPIA
The Group's interests at Earls Court & Olympia increased significantly in value during the year.
Market Market
Value Value Market
Dec-12 Dec-11 Value
GBPm GBPm Change(1,2)
Earls Court 336 195 57.6%
Seagrave Road 1043 116 61.5%
Olympia London 126 121 (4.1%)
Empress State 1103 1033 7.3%
Other 45 39 8.1%
Total properties 721 574 30.3%
(1) Like-for-Like
(2) Valuation change takes account of amortisation of lease incentives, capital expenditure and fixed head leases.
(3) Represents Capco's 50 per cent share
EXHIBITIONS BUSINESS
Highlights
- EBITDA of GBP14 million, down 15 per cent on a like-for-like basis
- Olympia London rebranded following completion of works to improve the venue
Operating Performance
Capco's exhibitions, conference and events business currently operates from the enhanced Olympia venue and the two
exhibition halls at Earls Court. EBITDA for 2012 was GBP14 million, down 15 per cent on a like-for-like basis year-on-year in
line with expectations due to the ongoing uncertainty around the future of the Earls Court venue.
Olympia celebrated its 125 year anniversary in 2012 and recently announced its rebranding as Olympia London, offering
flexible and dynamic events spaces in central London. Capco has invested GBP30 million over the past two years to
enhance Olympia, including the completion of Olympia West (previously the West Hall) in 2011 to create 97,000 sq ft of
modern exhibition space, works to create enhanced event spaces at Olympia Central (previously Olympia Two), and an
improved conference centre which was completed in September 2012.
Earls Court successfully hosted the Olympic volleyball tournament in summer 2012 which generated approximately GBP3
million of EBITDA. During the two weeks of the Games, 76 volleyball matches were played welcoming over half a million
visitors overall, more than 35 per cent of the venue's annual attendance.
In 2012 a number of shows recorded increases in visitor figures including Olympia Beauty, which achieved a 7 per cent
increase from 2011 by welcoming 23,500 visitors and the London Vet Show, which posted a record attendance of 3,300 vets.
Future Priorities
The focus is to maintain a robust exhibitions business focusing on the enhanced Olympia London, attracting new customers
whilst preparing for the transition of business from Earls Court. Olympia London is now a more flexible space allowing it to
cater for the changes in the exhibitions business, especially the trend for smaller shows.
In the short-term the business performance will continue to reflect the ongoing uncertainty of Earls Court's future as an
events venue, particularly following the positive planning consents for the Earls Court Masterplan and without the one-off
impact of the Olympics. 67 per cent of 2013 budgeted licence fees are currently contracted. At this time, bookings for Earls
Court are being taken until mid-2014.
THE EARLS COURT MASTERPLAN
Highlights
- Earls Court interests valued at GBP336 million, up 58 per cent on a like-for-like basis, representing GBP14.8 million
per acre
- Resolutions to grant outline planning consent from RBKC and LBHF
- CLSA signed with LBHF
The Earls Court Masterplan represents a unique opportunity to regenerate a substantial part of central London, creating
thousands of new homes and jobs. Bordered by some of the most prime real estate neighbourhoods in London, the
redevelopment offers the potential for significant value creation by implementing Sir Terry Farrell's vision to create 'Four New
Urban Villages and a 21st Century High Street' across the 70 acre 'Earls Court & West Kensington Opportunity Area' (ECOA).
In addition to 7,500 homes and 12,000 jobs, the Masterplan will also create new health, education, cultural and community
facilities as well as 23 acres of green space including the 5 acre Lost River Park.
In 2012 the Royal Borough of Kensington and Chelsea (RBKC) and the London Borough of Hammersmith & Fulham (LBHF)
resolved to grant planning consent for the Earls Court Masterplan. These are the most significant milestones achieved to
date in the strategy to unlock value through the outline planning process from Capco's interests in the area which comprise
the leaseholds of the Earls Court Exhibition Centres, the freehold of the Northern Access Road and certain other assets in
the area.
The Earls Court Masterplan covers the ECOA as designated in the Mayor's London Plan, earmarking the site as one for
redevelopment and regeneration in London. The redevelopment of the ECOA is also in line with the core strategies of both
local authorities and the Supplementary Planning Document (SPD) which was adopted by both RBKC and LBHF outlining the
preferred option for comprehensive redevelopment of the Opportunity Area.
As a result of the progress in the planning process, most notably the two resolutions to grant consent for the Earls Court
Masterplan, and greater clarity around the potential costs of implementing the development such as Section 106 agreement
and other costs, the valuation of Capco's interests within the ECOA undertaken by Jones Lang Lasalle, the external valuer,
has increased significantly. These interests are now valued at GBP336 million, a valuation surplus of GBP123 million on the
December 2011 valuation, and represent GBP14.8 million per acre.
As previously reported, judicial review applications have been submitted against LBHF and RBKC regarding the SPD and
against LBHF regarding the Conditional Land Sale Agreement (CLSA). In January the High Court refused to grant permission
for the judicial review relating to the CLSA to proceed; the applicant has exercised his right to review his application for
permission at an oral hearing, which is expected to take place in April. The judicial review relating to the SPD is expected to
be heard in July 2013.
Consultation has taken place with the local community throughout the Earls Court Masterplan planning process and will
continue throughout the project.
In terms of land assembly, continued discussions during 2012 have not yet led to a conclusion of arrangements with
Transport for London (TfL) regarding its land at Earls Court. TfL is the freeholder of Capco's leasehold interests of the Earls
Court Exhibition Centres; TfL also owns the Lillie Bridge Depot which is currently used for operational purposes. However
formal agreement has now been reached with LBHF regarding its land in the ECOA (see below).
Conditional Land Sale Agreement with LBHF
Capco and LBHF formally signed the Conditional Land Sale Agreement (CLSA) in January 2013. Under the CLSA, Capco is
entitled to acquire the Council's 22 acres of land in the ECOA 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 West Kensington and Gibbs
Green estates (the Estates).
The total cash consideration of GBP105 million is payable as follows: Capco paid GBP15 million in July 2011 at the time of
entering into the Exclusivity Agreement with LBHF which has been regarded as the first instalment of the consideration. A
further payment of GBP15 million was paid on signing of the CLSA for the Farm Lane and Gibbs Green School sites: legal
title of Farm Lane was transferred on signing; Gibbs Green School will continue to be used by Queensmill School until the
school relocates to new premises in 2014 and legal title will be transferred at that time.
The remaining GBP75 million is payable in five equal annual instalments of GBP15 million each once Capco exercises its
option to acquire the land. This option is exercisable until the earlier of (a) five years from the date of entering into the CLSA
and (b) nine months from completion of the affordable housing on Seagrave Road. If the option is not exercised by December
2015 the annual payments will be increased in line with RPI. Land can be drawn down in phases until 2035 but no phase can
be transferred unless Capco has first provided replacement homes for the residents of the relevant phase. If the CLSA
terminates or expires before all the land is drawn down, there are provisions dealing with the pro rata refund of the GBP75
million cash consideration where specified events subsist at the date of termination. Overage of up to GBP65 million is
payable in the event that the total area developed across the ECOA exceeds that set out within the Masterplan planning
applications.
Whilst the purchase of the Farm Lane and Gibbs Green school sites is unconditional, the disposal of the Estates is
conditional on receiving approval from the Secretary of State for the Department of Communities and Local Government.
LBHF has resolved to send the decision to the Secretary of State for formal approval and a decision is anticipated in the
coming months. GBP10 million of the initial cash consideration is recoverable if the Secretary of State does not approve the
sale of the Estates and the CLSA is terminated.
In addition, the CLSA provides that Capco will acquire any private residential units on the Estates in the event that LBHF is
required to purchase these properties as a result of an owner bringing forward a valid claim under certain provisions of the
Town and Country Planning Act 1990 which relate to Statutory Blight. This replaces the agreement signed in March 2012
between Capco and LBHF. There is a cap of GBP55 million for such purchases, which includes certain other related costs of
up to GBP10 million.
Separately, if a resident who owns their home on the Estates chooses not to take up the offer of a new home within the
development and wishes to move away early, Capco has offered to purchase such homes up to a cap of GBP7.5 million from
the date of signing of the CLSA. Once the Secretary of State has issued a satisfactory consent and a satisfactory planning
consent has been granted, and both these consents are free from challenge, this cap will increase to GBP15 million. Once
the option is exercised, the cap for all purchases under these provisions relating to Statutory Blight and early purchases will
be GBP55 million. Sums paid by Capco to acquire existing homes would be offset against the cash consideration where
these homes are included in a phase that is transferred to Capco.
Future Priorities
Formal planning consent is targeted for the first half of 2013 which will require finalisation of the Section 106 agreements and
the issue of the Stage Two report by the Greater London Authority (GLA). The Section 106 agreements are being progressed
with the local authorities, the GLA and TfL, and will outline the local community benefits of the development, including
improvements in transport as well as investment in training and employment for the community.
The risk of further judicial challenge against the planning decisions and land assembly transactions cannot be discounted,
and will in part depend on the outcome of the existing judicial reviews.
Now that the planning process is well advanced and agreement has been reached with LBHF, the next objective is to
conclude discussions with TfL as freeholder of land in the ECOA. To facilitate this, the parties are currently focused on the
restructuring of Capco's leasehold interests at Earls Court whilst TfL considers how it could cease its operational activities at
Lillie Bridge Depot. The intention remains to secure an extension of Capco's existing leasehold leases and inclusion of
development rights to enable Sir Terry Farrell's Masterplan to be implemented whilst providing TfL with some participation in
the value generated from any future development of the land.
Discussions with Network Rail in regard to the air rights above the West London Line are agreed in principle and the detailed
terms are currently being negotiated.
In anticipation of finalising the outline planning process and land assembly discussions, Capco is considering how it can best
participate in the implementation of the Earls Court Masterplan which offers the potential for significant value creation over
the medium and long-term. Detailed design work has begun on what would likely be the first phase of development, the 'Earls
Court Village', with the aim of submitting detailed planning applications later in 2013.
EMPRESS STATE BUILDING
Capco has a 50 per cent stake in this landmark office building which is adjacent to the ECOA. The 31 storey tower is the
highest building in LBHF. Fully renovated in 2003, the entire building is let to the Metropolitan Police Authority on a long lease
which expires in June 2019. Capco's share of net rental income for 2012 was GBP7.3 million.
In the medium-term, opportunities to extend or review the existing lease will be considered or alternatively the property may
be suitable for a residential conversion in line with the plans for the ECOA.
SEAGRAVE ROAD
Highlights
- Seagrave Road site valued at GBP104 million (Capco 50 per cent share), up 62 per cent on a like-for-like basis
- Formal planning consent received in March
- Joint venture completed in August
In March the Seagrave Road project received formal planning consent from LBHF. In August the 50:50 joint venture with the
Kwok Family Interests (KFI) completed following the satisfaction of all conditions precedent and Capco received GBP65
million at closing. The joint venture with KFI brings in the expertise of a partner experienced in high quality residential
developments.
Capco notes the ongoing legal situation in Hong Kong regarding charges brought by the ICAC against certain members of
the Kwok family, but this has not impacted the operation of the Seagrave Road joint venture.
As a result of the positive planning consent and work undertaken on implementation of the development, including work on
unit sizes, mix and internal specification which have significantly enhanced the quality of the scheme, Capco's share of the
Seagrave Road site has been valued at GBP104 million. This represents a significant 62 per cent like-for-like increase since
the December 2011 valuation.
Certain amendments to the existing planning consent will be submitted shortly to LBHF which the joint venture partners
believe will improve the scheme. The joint venture is considering certain small acquisitions on the edge of the existing site, in
particular to extend the northern end of the scheme to Lillie Road, and a detailed planning application for this new part of the
scheme will be submitted shortly.
Future Priorities
Adjacent to the wider Earls Court Masterplan, the Seagrave Road project is one of the largest development projects in West
London and offers an exciting opportunity to transform the area, with the potential to achieve sales values in line with
established neighbourhoods near the site.
The sales and marketing strategy for the Seagrave Road project is being finalised with the aim of launching the first phase of
the scheme to the market in the next 12 months. As part of this, the development will be branded "Lillie Square". Construction
activity will follow the launch.
The enhanced quality of the scheme, together with the proposed extension to the north, have increased total development
costs (excluding land) which are now estimated to be in the region of GBP380 million. However the peak capital requirement
for the joint venture (excluding land) is still envisaged to be circa GBP100 million (Capco share: GBP50 million) due to the
phased construction programme.
OTHER INVESTMENTS
Highlights
- GBP218 million realised from GCP in 2012
- GBP18 million realised from China in 2012
The majority of capital employed in the Group's non-core assets, GCP and China, has now been recycled at a considerable
profit.
The Great Capital Partnership
The Great Capital Partnership is a joint venture between Capco and Great Portland Estates plc. Capco's strategy over the
last two years has been to release value from the portfolio, capitalising on the strong demand for central London real estate.
In 2012 GBP218 million (Capco share) was realised from the joint venture through sales including Park Crescent East, the
Jermyn Street Estate and the Regent Street assets. The sales were completed at a 9 per cent premium to the December
2011 valuation.
There is one asset left within the joint venture, Park Crescent West, which was valued at GBP48 million (Capco share) as at
December 2012, up 17.6 per cent during the year reflecting the potential for a residential conversion demonstrated in the
price achieved on the sale of Park Crescent East.
At the time of demerger, the GCP portfolio consisted of 34 assets valued at GBP247 million as at December 2009; net of
external debt, Capco had equity of GBP135 million invested in the joint venture. Based on the distributions from the
partnership over the past 3 years and assuming realisation of the remaining asset at its December 2012 valuation, Capco's
investment in GCP has generated an equity multiple of 1.7 times and an IRR of 30 per cent.
China
The investment into two China real estate funds offered the opportunity to generate superior returns while building long-term
strategic relationships. The last investment was sold in 2012, and Capco received GBP18 million during 2012. Capco's
remaining interest of GBP4 million as at December 2012 mainly represents retentions that are expected to be paid during
2013.
Since demerger, over GBP72 million has been realised from the China investment. This has generated an equity multiple of
1.6 times and an IRR of 31 per cent.
Future Opportunities
Capco's track record in its non-core investments in GCP and China has been strong, delivering significant returns both in
terms of realised profits and IRRs. Accordingly, new opportunities may be considered and allocated a modest proportion of
the Group's balance sheet should they offer the potential to generate advantageous returns or complement the core activities
of the Group.
FINANCIAL REVIEW
During 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 property portfolio increased in value by 15.4 per cent, GBP228 million during the year to 31 December 2012,
16.7 per cent on a like-for-like basis. This capital growth was a significant element of the Group's total property return, which
including rental income and profits from disposal as well as the revaluation, was 21.7 per cent.
The valuation increase also helped deliver a pre-tax profit of GBP245.5 million compared to GBP161.9 million in 2011.
EPRA adjusted, diluted net assets per share rose 22 per cent during the year, increasing from 167 pence at 31 December
2011 to 203 pence. This 36 pence increase together with the 1.5 pence dividend paid during the year represents a total
return of 22.6 per cent.
Underlying earnings were GBP12.5 million which compares favourably to GBP9.6 million in 2011, the stronger outturn
attributed to the reduction in underlying finance costs exceeding the loss of net rental income.
In May 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 4.8 years, from 3.6 years at 31
December 2011. In September a capital raising was completed providing liquidity for the continued expansion of Covent
Garden.
The Group's property LTV now stands at 10 per cent versus 29 per cent in 2011 and 35 per cent in 2010.
Restatement of 2011 comparatives
The adoption of the recent amendments to IAS 12 'Income Taxes', has required the Group to represent its deferred tax
position as though the amended standard had been in effect at 31 December 2011. The amendment introduces a
presumption that investment property assets accounted for under IAS 40 'Investment Property' will normally be recovered
through sale rather than use. This change in calculation basis increased the 31 December 2011 IFRS reported net asset
position and profit after tax by GBP4.8 million. As a result, the 2011 EPRA adjusted, diluted net assets per share increased
by 1 pence to 167 pence.
Financial Position
At 31 December 2012 the Group's EPRA adjusted net assets were GBP1.6 billion representing 203 pence per share
adjusted and diluted, an increase of 36 pence per share on 2011.
The primary driver behind this increase was the gain on revaluation and sale of the Group's property portfolio which lifted net
asset value per share by 34 pence. There was a positive valuation performance across all three estates but most notably at
Earls Court & Olympia.
Following the resolutions by LBHF and RBKC to grant outline planning consent in September and November respectively,
the Group's valuer of Earls Court & Olympia, Jones Lang LaSalle, continues to recognise that the value of the redevelopment
potential of the Group's interests at Earls Court exceeds that of its existing use as an exhibition centre. This step change in
valuation basis first occurred in the second half of 2011. The valuation at 31 December 2012 attributed a land value of
GBP14.8 million per acre to the site which compares to GBP8.6 million at 31 December 2011.
At Covent Garden higher rental levels were achieved on retail and F&B assets together with the residential conversion
potential of certain buildings. Like-for-like property values increased 7.2 per cent, a good performance against the backdrop
of macroeconomic uncertainty that compares favourably to the IPD Capital Growth index for the corresponding period which
recorded 4.2 per cent decrease.
2012 2011
GBPm GBPm
Investment and trading property 1,670.6 1,617.0
Investments 3.6 19.5
Net debt (163.5) (463.7)
Other assets and liabilities (32.9) (64.9)
IFRS net assets 1,477.8 1,107.9
Fair value of derivative financial instruments 30.8 36.4
Unrecognised surplus on trading properties 37.5 1.0
Deferred tax liabilities on exceptional items 6.9 7.3
EPRA adjusted net assets 1,553.0 1,152.6
EPRA adjusted, diluted net assets per share (pence) 203 167
Trading Property
When the Group undertakes the development for sale of certain property interests, these will cease to be held for investment
purposes and will instead be appropriated to trading property. Most notably in 2012 this applied to Seagrave Road which was
appropriated following completion of the Seagrave Road joint venture with the Kwok Family Interests. Certain properties at
Covent Garden which have been or will be converted from office to residential use are also now held as trading assets.
Valuation surpluses on properties held for trading cease to be recorded in the consolidated income statement and their
balance sheet valuation no longer reflects market value but rather the lower of cost or market value. Any difference between
the carrying value and market value is however captured within the EPRA adjusted, diluted net asset measure.
At 31 December 2012, the unrecognised surplus on trading property was GBP37.5 million, up from GBP1 million at 31
December 2011.
Capital raising
In September 2012 the Group completed a placing of 68.4 million new ordinary shares at a price of 218 pence per share to
fund expansion opportunities at Covent Garden. The placing, which was priced at market value, generated net proceeds of
GBP145 million. The number of ordinary shares on issue now stands at 753.1 million (752.7 million when adjusted for
treasury shares acquired through the odd-lot offer discussed below).
Odd-lot offer
At the Company's Annual General Meeting in April, shareholder approval was received for an odd-lot offer to facilitate a
reduction in the number of shareholders in the Company in a fair and equitable manner. This offer was launched in
November 2012 and upon closing in December 2012 a 35 per cent reduction in the Company's shareholder base was
achieved.
The Company acquired 0.4 million shares for GBP1.0 million (representing 236 pence per share), a GBP0.2 million premium
to net asset value per share. At the balance sheet date these shares are held as treasury shares.
At 31 December 2012, following the odd-lot offer, 27.9 per cent of the Group's shares were held on the South African
register.
Capital recycling
2012 saw continued momentum towards unlocking liquidity from non-core assets in support of the Group's core strategy.
During the year GBP320 million was released, principally from The Great Capital Partnership for use in the Group's core
estates, and on completion of the Seagrave Road joint venture in August.
2012 2011
GBPm GBPm
Acquisitions 93.5 96.5
Redevelopment expenditure 41.4 64.6
Less: Sale of property & investments (254.6) (103.2)
Completion of Seagrave Road joint venture (65.4) -
Net liquidity (generated) / invested (185.1) 57.9
The Great Capital Partnership contributed GBP218 million towards proceeds from property sales. These sales represented a
9 per cent premium to the December 2011 valuation.
The Group was contractually committed to GBP21.4 million as at 31 December 2012 (2011: GBP14.0 million).
Debt & Gearing
Net debt reduced by GBP300 million to GBP164 million, gross debt by GBP205 million to GBP348 million with cash and
undrawn committed facilities increasing to GBP401 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. At 31
December 2012 the revolving credit facility was undrawn.
Further debt prepayments totalling GBP112 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"). LTV as at 31 December 2012 was 10 per
cent, an unusually low figure, mainly as a result of the proceeds of the capital raising in September 2012 and the liquidity
generated from property disposals, together with the increase in value of the Group's property assets. Given the current
economic climate, the Group considers LTV of below 40 per cent to be prudent.
2012 2011
Property Loan-to-value 10% 29%
Interest cover 172% 134%
Weighted average debt maturity 4.8 years 3.6 years
Weighted average cost of debt 5.2% 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 reduce the cost of debt, extend
the weighted average debt maturity to 4.8 years and reduce refinancing risk. The Group now has GBP72 million of debt
maturing in 2013, GBP67 million relating to debt secured over the Empress State Building held in a joint venture. This debt is
due to mature in August 2013 and refinancing discussions are underway.
A detailed breakdown of debt by maturity together with the latest covenant test results is shown in Appendix 3.
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 31 December 2012 the proportion of gross debt with interest rate
protection was 100 per cent, with the Group's derivative contracts comprising 76 per cent swaps and 24 per cent caps or
collars.
Investments in China
The exit of the Group's existing interests has continued as planned with GBP18 million returned during the year. All assets
have now been sold and the final distributions relating mainly to retentions totalling GBP4 million are expected to be received
during 2013.
Cash flow
A summary of the Group's cash flow for the year ended 31 December 2012 follows.
2012 2011
GBPm GBPm
Recurring cash flows after interest and tax 4.8 1.2
Property investment and developments (134.9) (161.1)
Sale proceeds of property and investments 254.6 103.2
Demerger costs (1.3)
Loss of control of former subsidiary 65.4
Exclusivity agreement with LBHF (15.0)
Pension funding (3.6)
VAT paid on internal restructure (22.2) 22.2
Cash flow before financing 167.7 (54.4)
Financing (64.2) (34.9)
Dividends paid (8.6) (9.6)
Net cash flow 94.9 (98.9)
Typically the main cash flow items are operating cash flows, dividends paid and capital transactions undertaken.
Recurring cash inflows were GBP4.8 million compared to GBP1.2 million for 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.
Property investments and developments comprise acquisitions of GBP94 million, GBP86 million of which was invested in
strategic acquisitions within the Covent Garden estate. Development expenditure totalled GBP41 million, GBP32 million of
which was invested towards the redevelopment of Earls Court and Seagrave Road and improving Olympia London.
Sale proceeds of property and investments comprised GBP255 million, principally from The Great Capital Partnership as well
as GBP18 million returned from investments in China.
Completion of a joint venture arrangement with the Kwok Family Interests occurred in August. The venture, to develop land
interests at Seagrave Road, resulted in the loss of control of the former subsidiary Seagrave Road GP Limited, and the
disposal of a 50 per cent limited partnership interest in Seagrave Road LP. The disposal of the net assets of the partnership,
less costs of arrangement and the reorganisation of internal funding resulted in a net cash inflow of GBP65.4 million.
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 investment properties. The internal sale and purchase
was determined to constitute a VAT supply between two internal VAT groups. During 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.
Financing cash outflows relate primarily to the effect of net debt prepayments and repayments (GBP201 million) offset by
proceeds from the September 2012 capital raising (GBP145 million), as discussed above.
Dividends paid of GBP8.6 million reflect the final dividend payment made in respect of the 2011 financial year and the interim
dividend paid in September. This is slightly lower than the previous year due to the scrip dividend alternative now 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.
Restated
2012 2011
GBPm GBPm
Net rental income 65.3 69.0
Other income 6.1 0.8
Gain on revaluation and sale of investment property 213.9 123.3
Administration expenses (26.1) (22.2)
Net finance costs (24.1) (35.2)
Profit on available for sale investments 10.0 30.5
Re-measurement of deferred consideration (4.2)
Other 0.4 (0.1)
Taxation (5.5) (3.4)
IFRS profit for the year attributable to owners of the Parent 240.0 158.5
Adjustments:
Other income (6.1) (0.8)
Gain on revaluation and sale of investment property (213.9) (123.3)
Profit on available for sale investments (10.0) (30.5)
Other adjustments 0.9 4.7
Taxation on non-underlying items 1.6 1.0
Underlying profit after tax 12.5 9.6
Underlying earnings per share (pence) 1.8 1.4
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 GBP6.1 million;
- Finance charges of GBP2.0 million relating to the termination of interest rate swaps following debt prepayments and
arrangement fees for the Group's revolving credit facility;
- GBP10.0 million following further divestment of China investments
- Impairment charges arising on trading property of GBP0.9 million
Income
Net rental income fell 5.3 per cent in the year largely the result of the sale of properties from The Great Capital Partnership
which occurred in both the current and prior year. Like-for-like net rental income increased 1.8 per cent (GBP0.9 million) to
GBP56.2 million, with the reduction in exhibition income at Earls Court and Olympia offset by increased income at Covent
Garden. Of the residual GBP8.8 million non like-for-like net rental income, GBP4.4 million arose following acquisitions in
2011 and 2012 with GBP4.4 million attributed to disposals during 2012, 7 per cent of total net rental income.
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 5.8 per cent fall in like-for-like net income for the EC&O segment.
Net rental income at Covent Garden has increased 9.4 per cent on a like-for-like basis most notably from new letting activity
in 2011 and 2012.
Other income of GBP6.1 million comprises trading property profits, GBP2.9 million of which arose on the sale of residential
developments at Covent Garden.
Property valuation and sales
As outlined earlier the gain on revaluation and sale of the Group's investment property portfolio (GBP213.9 million) taken
together with profits achieved on the sale of trading property (GBP6.1 million) and the movement in the unrecognised trading
property valuation surplus of GBP36.5 million have collectively contributed 34 pence to the Group's EPRA net asset value
per share.
Profits of GBP16.4 million were realised on the sale of investment properties during the year, notably from The Great Capital
Partnership. In total since demerger the Group has recognised valuation gains of GBP81.8 million from GCP.
Administration expenses
Underlying administration expenses increased 18 per cent to GBP26.1 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 now 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 year fell to
GBP22.8 million from GBP34.8 million in 2011.
This reduction reflects the impact of various debt prepayments and repayments together with the benefit of refinancing during
a period of historically low interest rates.
Profit on sale of investments
Profits recognised in the income statement have arisen from investments held in China. These have largely been recycled
from the Group's revaluation reserve following receipt of distributions.
Taxation
The total tax charge for the year ended 31 December 2012 was GBP5.5 million which is made up of both underlying tax and
exceptional tax. Underlying tax is the amount of tax charged on the underlying profits of the Group and was GBP3.9 million
for the year on underlying profits of GBP16.4 million. This tax charge reflects an underlying tax rate of 24 per cent which is in
line with the standard rate of UK corporation tax. The standard rate of UK corporation tax will fall to 22 per cent from April
2014 onwards. Exceptional tax of GBP1.6 million arises from the profits on disposal of trading properties.
Contingent tax, the amount of tax that would become payable on a theoretical disposal of all investment properties held by
the Group is GBPnil (2011: GBPnil). The contingent tax position is arrived at after allowing for indexation relief and Group
loss relief.
A disposal of the Group's trading properties at their market values as per note 13 would result in a corporation tax charge to
the Group of GBP9 million (24 per cent of GBP37.5 million).
The Group's Tax Policy, which has been approved by the Board and has been disclosed to HM Revenue & Customs, is
aligned with the business strategy. The Group seeks to protect shareholder value by structuring operations in a tax efficient
manner which complies with all relevant tax law and regulations and does not adversely impact our reputation as a
responsible taxpayer. As a Group, we are committed to acting in an open and transparent manner.
Consistent with the Group's policy of complying with relevant tax obligations and its goal in respect of its stakeholders, the
Group maintains a constructive and open working relationship with HM Revenue & Customs which regularly includes
obtaining advance clearance on key transactions where the tax treatment may be uncertain.
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 and again for the interim
dividend of 2012. Take-up was 16 per cent, with 799,301 new ordinary shares issued during the year in respect of the
scheme.
The Board has proposed a final dividend of 1.0 pence per share to be paid on 20 June 2013 to Shareholders on the register
at 24 May 2013. Subject to SARB approval, the Board again intends to offer a scrip dividend alternative.
Going Concern
With an improved weighted average debt maturity, sufficient headroom against financial covenants and in excess of GBP400
million in cash and available facilities at 31 December 2012, there continues to be a reasonable expectation that the
Company and the Group have adequate resources to meet both ongoing and future commitments for the foreseeable future.
Accordingly the Directors present the 2012 annual report and accounts on a going concern basis.
PRINCIPAL RISKS AND UNCERTAINTIES
Through risk management and internal control systems the Group is able to identify, assess and prioritise risk within the
business and seeks to minimise, control and monitor their impact on profitability whilst maximising the opportunities they
present.
The Board has overall responsibility for Group risk management. It reviews principal risks and uncertainties regularly,
together with the actions taken to mitigate them. 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 risks 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.
On the following pages are the principal risks and uncertainties from across the business and are reflective of where the
Board has invested time during the year. These are not exhaustive. The Group monitors a number of additional risks and
adjusts those considered 'principal' as the risk profile of the business changes.
1 Corporate risks
Risk Impact potential Mitigation factors
Impact: The Group's ability to maintain its reputation, revenue and value could be damaged by corporate risks
Responding to regulatory and legislative Reduced flexibility and increased Sound governance and internal policies
challenges. cost base. with appropriately skilled resource and
support from external advisers as
appropriate.
Responding to reputational, Reputational damage and increased Appointment of experienced individuals
communication and governance costs. with clear responsibility and accountability.
challenges. Clear statements of corporate and social
responsibility, skilled Executive and Non-
executive Directors, with support from
external advisers as appropriate.
Continuous stakeholder communication
and consultation.
Inability to implement strategy or Constraints on growth and reduced Regular strategic reviews and monitoring
correctly allocate capital. profitability. of 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, delay or Appropriate due diligence and
management of key suppliers. reputational damage. consultation.
Group structure brings heightened tax Competitive disadvantage. Group tax policy.
exposure. Non-REIT status has a
potential competitive disadvantage Lower returns. Open and transparent engagement with
when bidding for new assets. HM Revenue & Customs.
Risk associated with attracting and Inability to execute business plan. Succession planning, performance
retaining staff. evaluations, training & development, long-
term incentive rewards. Sound systems
and processes to effectively capture and
manage information.
Failure to comply with health and safety Loss or injury to employees, tenants Comprehensive health and safety
or other statutory regulations or notices. or contractors and resultant procedures in place across the Group and
reputational damage. monitored regularly. External consultants
undertake annual audits in all locations.
Safe working practices well established,
including staff communication and training.
2 Financing risks
Risk Impact potential Mitigation factors
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
Decline in market conditions or a Reduced financial and operational Maintain appropriate liquidity to cover
general rise in interest rates could flexibility and delay to works. commitments.
impact the availability and cost of debt Target longer and staggered debt
financing. maturities to avoid refinancing
concentration and consideration of early
refinancing.
Derivative contracts to provide interest
rate protection.
Development phasing to enable
flexibility and reduce financial exposure.
Reduced availability of equity capital. Constrained growth, lost opportunities, Maintain appropriate liquidity to cover
higher finance costs. commitments.
Target conservative overall leverage
levels.
3 Economic Risks
Risk Impact potential Mitigation factors
Impact: Economic factors may threaten the Group's ability to meet its strategic objectives
Increased competition, changes in Declining profitability. Focus on prime assets and quality
social behaviour or deteriorating ERV targets not achieved. tenants with initial assessment of credit
profitability and confidence during a Reduced rental income and/or capital risk and active credit control.
period of economic uncertainty. values. Diversity of occupier mix with limited
exposure to any single tenant.
Strategic focus on creating retail
destinations and residential districts
with unique attributes.
Decline in UK commercial or residential Declining valuations. Focus on prime assets.
real estate market heightened by Regular assessment of investment
continued global macro-economic market conditions including bi-annual
conditions or currency fluctuations. external valuations.
Restricted availability of credit and Decline in demand for the Group's Regular monitoring of covenants with
higher tax rates and macroeconomic rental properties, declining valuations, headroom maintained.
factors may lead to reduced consumer reduced profitability.
spending and higher levels of business
failure.
4 Concentration of investments
Risk Impact potential Mitigation factors
Impact: Heightened exposure to events that threaten or disrupt central London
Events which damage or diminish Loss or injury, business disruption or Terrorist insurance in place.
London's status as a global financial, damage to property. Security and health & safety policies
business and tourist centre could affect and procedures in offices. Close liaison
the Group's ability to let vacant space, with police and National Counter
reduce the value of the Group's Terrorism Security Office (NaCTSO).
properties and potentially disrupt access Disaster recovery and business
or operations at the Group's head office. continuity planning.
Changes to or failure of infrastructure.
Concentration of higher profile events in Active involvement in organisations and
central London. industry bodies promoting London.
5 Development risks
Risk Impact potential Mitigation factors
Impact: Inability to deliver against development plans, particularly regarding ECOA
Unable to secure planning consent due Delayed implementation or reduced Pre-application and continued
to political, legislative or other risks development opportunity with consultation and involvement with key
inherent in the planning environment. corresponding impact on valuation. stakeholders and landowners.
Risk of change or delay due to Mayor of Engagement with relevant authorities at
London or Secretary of State a local and national level to ensure
intervention or judicial reviews. Inability development proposals are in
to gain the support of influential accordance with current and emerging
stakeholders. policy.
Project team of internal staff and
Failure to demonstrate or implement external consultants with capabilities
viable development due to across all relevant areas.
environmental, transportation and Technical studies with regular review.
affordable housing impact or other Responsive consultation with evidence
technical factors. based information and focus on agreed
statements of common ground.
Inability to reach agreement on lease Higher volatility in valuations and Informed market valuation and open
extension, renegotiation of use or land Group's returns or delay to works. dialogue with adjacent landowners.
deals with adjacent landowners on
acceptable terms (including risk of Earls Court Masterplan designed to
Section 34A of the Housing Act 1985 in allow phased implementation.
relation to land subject to CLSA).
Construction costs increase e.g. due to Reduced profitability of development. Extensive consultation, design and
market pricing, unforeseen site issues technical work undertaken.
or longer build period. Punitive cost, Properly tendered or negotiated
design or other implications. processes to select contractors and
manage costs.
Volatility in sales price Market demand assessments. Pre-
sales and marketing.
DIRECTORS' RESPONSIBILITIES
Statement of Directors' responsibilities
The statement of Directors' responsibilities has been prepared in relation to the Group's full Annual Report for the year ended
31 December 2012. Certain parts of the Annual Report are not included within this announcement.
We confirm to the best of our knowledge:
- the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and profit of the Group; and
- the Business and Financial Review includes a fair review of the development and performance of the business and the
position of the Group, together with a description of the principal risks and uncertainties that it faces.
Signed on behalf of the Board on 28 February 2013.
Ian Hawksworth
Chief Executive
Soumen Das
Finance Director
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2012
Restated
2012 2011
Notes GBPm GBPm
Revenue 2 115.3 108.4
Rental income 97.5 108.4
Rental expenses (32.2) (39.4)
Net rental income 2 65.3 69.0
Other income 3 6.1 0.8
Gain on revaluation and sale of investment and development property 4 213.9 123.3
Profit on sale of available for sale investments 5 10.0 30.5
Profit on sale of subsidiaries 6 1.7
Loss of control of former subsidiary 7 (1.0)
Remeasurement of deferred consideration 20 (4.2)
Write down of trading property (0.9) (0.1)
Write back of impairment of other receivables 8 0.6
295.7 219.3
Administration expenses (26.1) (22.2)
Operating profit 269.6 197.1
Finance costs 9 (23.6) (36.5)
Finance income 0.8 1.7
Other finance costs 9 (2.0) (14.5)
Change in fair value of derivative financial instruments 0.7 14.1
Net finance costs (24.1) (35.2)
Profit before tax 245.5 161.9
Current tax (3.1) (2.5)
Deferred tax (2.4) (0.9)
Taxation 10 (5.5) (3.4)
Profit for the year 240.0 158.5
Earnings per share from continuing operations
Basic earnings per share 12 34.1p 23.9p
Diluted earnings per share 12 34.0p 24.0p
Weighted average number of shares 12 703.7m 662.1m
Adjusted earnings per share are shown in note 12.
Notes on pages 27 to 47 form part of these consolidated financial statements.
The notes provide full details of the prior year comparatives restatement.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2012
Restated
2012 2011
Notes GBPm GBPm
Profit for the year 240.0 158.5
Other comprehensive income
Realise revaluation reserve on disposal of available for sale investments (9.1) (28.5)
Actuarial losses on defined benefit pension schemes (1.7) (1.4)
Fair value gains on available for sale investments and other movements 6.3
Tax on items taken directly to equity 19 2.4 0.9
Other comprehensive income for the year (8.4) (22.7)
Total comprehensive income for the year 231.6 135.8
Notes on pages 27 to 47 form part of these consolidated financial statements.
The notes provide full details of the prior year comparatives restatement.
BALANCE SHEET
as at 31 December 2012
Restated
2012 2011
Notes GBPm GBPm
Non-current assets
Investment and development property 13 1,586.2 1,616.8
Plant and equipment 1.0 1.2
Available for sale investments 3.6 19.5
Derivative financial instruments 18 0.5 0.4
Pension asset 1.0
Trade and other receivables 14 39.4 34.2
1,630.7 1,673.1
Current assets
Trading property 13 84.4 0.2
Derivative financial instruments 18 0.6
Trade and other receivables 14 25.9 26.7
Cash and cash equivalents 15 184.5 89.6
294.8 117.1
Total assets 1,925.5 1,790.2
Non-current liabilities
Borrowings, including finance leases 17 (269.6) (534.6)
Derivative financial instruments 18 (29.3) (36.9)
Pension deficit (0.4)
(299.3) (571.5)
Current liabilities
Borrowings, including finance leases 17 (78.4) (18.7)
Derivative financial instruments 18 (2.0) (0.5)
Other provisions 20 (7.3) (7.3)
Trade and other payables 16 (58.6) (82.4)
Tax liabilities (2.1) (1.9)
(148.4) (110.8)
Total liabilities (447.7) (682.3)
Net assets 1,477.8 1,107.9
Equity
Share capital 21 188.3 170.9
Other components of equity 1,289.5 937.0
Total equity 1,477.8 1,107.9
Notes on pages 27 to 47 form part of these consolidated financial statements.
The notes provide full details of the prior year comparatives restatement.
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2012
Share Share Treasury Merger R Revaluation Other Retained Total
capital premium shares reserve reserve reserves earnings equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2012
(restated) 170.9 95.1 196.2 10.8 2.2 632.7 1,107.9
Profit for the year 240.0 240.0
Other comprehensive income:
Realise revaluation reserves on
available for sale investments (9.1) (9.1)
Actuarial losses on defined
benefit pension schemes (1.7) (1.7)
Tax on items taken directly to
equity 19 2.4 2.4
Total comprehensive income for
the year ended 31 December
2012 (9.1) 240.7 231.6
Transactions with owners
Ordinary shares issued 17.4 22.6 106.0 146.0
Merger reserve realised(1) (24.4) 24.4
Fair value of share-based payments 3.0 3.0
Purchase of treasury shares(2) 22 (1.0) (1.0)
Dividends paid (10.3) (10.3)
Adjustment for scrip dividend 0.6 0.6
Total transactions with owners 17.4 22.6 (1.0) 81.6 3.0 14.7 138.3
Balance at 31 December 2012 188.3 117.7 (1.0) 277.8 1.7 5.2 888.1 1,477.8
Restated Restated
Share Share Merger Revaluation Other Retained Total
capital premium reserve reserve reserves earnings equity
Notes 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 (restated) 158.5 158.5
Other comprehensive income:
Realise revaluation reserves on
available for sale investments (28.5) (28.5)
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 19 0.9 0.9
Total comprehensive income for the
year ended 31 December 2011 (22.2) 158.0 135.8
Transactions with owners
Ordinary shares issued 15.5 6.0 75.1 96.6
Merger reserve realised(1) (20.3) 20.3
Fair value of share-based payments 1.7 1.7
Dividends paid 11 (9.6) (9.6)
Total transactions with owners 15.5 6.0 54.8 1.7 10.7 88.7
Balance at 31 December 2011 170.9 95.1 196.2 10.8 2.2 632.7 1,107.9
Notes on pages 27 to 47 form part of these consolidated financial statements.
The notes provide full details of the prior year comparatives restatement.
(1) Represents qualifying consideration received by the Group following capital raising in September 2012 and 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.
(2) Treasury shares purchased as a result of the odd-lot offer launched in November 2012.
STATEMENT OF CASH FLOWS
for the year ended 31 December 2012
2012 2011
Notes GBPm GBPm
Cash generated from operations 25 31.7 38.0
Interest paid (24.8) (38.4)
Interest received 0.8 1.7
Taxation (2.9) (1.3)
Cash flows from operating activities 4.8
Cash flows from investing activities
Purchase and development of property (134.9) (161.1)
Sale of property 236.8 48.2
REIT entry charge paid (0.1)
Sale of available for sale investments 17.6 55.0
Loss of control of former subsidiary 65.4
Pension funding (3.6)
Sale of subsidiary companies 0.2
Exclusivity agreement with LBHF (15.0)
VAT (paid)/received on internal restructure(1) (22.2) 22.2
Cash flows from investing activities 162.9 (54.4)
Cash flows from financing activities
Issue of shares 145.0 96.6
Treasury shares purchased 22 (1.0)
Borrowings drawn 48.2 145.8
Borrowings repaid (249.6) (259.4)
Purchase of derivatives (1.6) (3.4)
Other finance costs (5.2) (14.5)
Equity dividends paid 11 (8.6) (9.6)
Cash flows from financing activities (72.8) (44.5)
Net increase/(decrease) in unrestricted cash and cash equivalents 94.9 (98.9)
Unrestricted cash and cash equivalents at 1 January 83.6 182.5
Unrestricted cash and cash equivalents at 31 December 15 178.5 83.6
(1) VAT received on an internal property transfer was deemed to be a VAT supply. Input VAT was received in December 2011 whilst output VAT was not settled until January 2012.
Notes on pages 27 to 47 form part of these consolidated financial statements.
NOTES TO THE ACCOUNTS
General information
The Capital & Counties Properties PLC Group's assets principally comprise investment properties at Covent Garden; Earls
Court & Olympia; a 50 per cent interest in Empress State, a building adjacent to the Group's interests at Earls Court; a 50 per
cent interest in the Seagrave Road development; and a 50 per cent interest in The Great Capital Partnership, a joint venture
focused on London's West End.
Capital & Counties Properties PLC was incorporated and registered in England and Wales on 3 February 2010 under the
Companies Act as a public company limited by shares with registration number 7145051. The registered office of the
Company is 15 Grosvenor Street, London, W1K 4QZ, United Kingdom. The principal activity of the Company is to act as the
ultimate parent company of Capital & Counties Properties PLC Group, whose principal activity is the development and
management of property.
Basis of preparation
The Group's consolidated financial statements are prepared in accordance with International Financial Reporting Standards
("IFRS"), as adopted by the European Union, International Financial Reporting Interpretations Committee ("IFRIC")
interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Directors
have taken advantage of the exemption offered by Section 408 of the Companies Act 2006 not to present a separate income
statement or statement of comprehensive income for the Parent Company.
The consolidated financial statements have been prepared under the historical cost convention as modified for the
revaluation of properties, available for sale investments and financial instruments held for trading.
Standards and guidelines relevant to the Group that were in issue and endorsed at the date of approval of the consolidated
financial statements but not yet effective and have not been adopted early:
IFRS 7 'Financial Instruments: Disclosures' (amendment re: offset of financial assets and liabilities)
IFRS 10 'Consolidated Financial Statements'
IFRS 11 'Joint Arrangements'
IFRS 12 'Disclosure of Interests in other Entities'
IFRS 13 'Fair Value Measurement'
IAS 19 'Employee Benefits' (revised)
IAS 27 'Separate Financial Statements' (amendment)
IAS 28 'Investment in Associates and Joint Ventures' (amendment)
IAS 32 'Financial Instruments: Presentation' (amendment)
The assessment of amendments issued but not effective are not anticipated to have a material impact on the financial
statements with the exception of IFRS 11 'Joint Arrangements'. The standard, which has recently been endorsed by the EU,
removes the proportional consolidation option currently available under IAS 31 'Interests in Joint Ventures'. This will impact
the Group's existing accounting policy in respect of joint ventures. Rather than proportionally consolidating the Group's share
of assets, liabilities, income and expenses on a line-by-line basis, the Group's net interest in the joint venture will be
disclosed as a single line item in both the consolidated balance sheet and the consolidated income statement. This change
will reduce total assets and total liabilities as currently presented, with no change in net assets. The Group does not intend to
early adopt this standard.
During 2012, the following accounting standards and guidance were adopted by the Group:
IFRS 7 'Financial Instruments: Disclosures' (amendment re: transfers of financial assets)
IAS 12 'Income Taxes' (amendment)
Collectively these pronouncements either had no impact on the consolidated financial statements or resulted in changes to
presentation and disclosure only, with the exception of IAS 12 'Income Taxes' (amendment) which requires retrospective
application and restatement of prior period comparatives, the details of which are set out below.
Restatement of prior year comparatives
The Group has chosen to early adopt the amendment to IAS 12 'Income Taxes' as it is more representative of the Group's
recovery basis. This amendment introduces a presumption that investment property assets accounted for at fair value under
IAS 40 'Investment Property' will normally be recovered through their eventual sale rather than their use.
The impact of this change on the key financial statement line items for the year ending 31 December 2011 was as follows:
Balance Sheet GBPm
Deferred tax provision Reduced by 4.8
Consolidated Income Statement
Deferred tax charge Reduced by 4.8
Earnings per share Pence Per Share
Basic Increased to 23.9
Diluted Increased to 24.0
The amendment had no impact on the opening balance sheet at 1 January 2011, consequently no additional balance sheet
has been disclosed.
1 PRINCIPAL ACCOUNTING POLICIES
A summary of the Group's principal accounting policies, which have been applied consistently across the Group are set out
below.
Going concern basis
As stated in the Directors' Report, 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.
Basis of consolidation
These accounts include the consolidation of the following limited partnerships: Capital & Counties CGP, Capital & Counties
CGP 9, Capco CGP 2010 LP, Capco CGP 2012 LP and EC Properties LP. The members of these qualifying partnerships
have taken advantage of disclosure exemptions available in Statutory Instrument 2008/569 and therefore will not produce
consolidated accounts at the partnership level.
The consolidated financial statements are prepared in British pounds sterling which is also determined to be the functional
currency of the Parent.
Subsidiaries
Subsidiary undertakings are fully consolidated from the date on which the Group is deemed to govern the financial and
operating policies of an entity, whether through a majority of the voting rights or otherwise. They cease to be consolidated
from the date this control is lost.
All intragroup balances resulting from intragroup transactions are eliminated in full.
Joint ventures
The Group's interest in jointly controlled entities is accounted for using proportional consolidation. The Group's share of the
assets, liabilities, income and expenses is combined with the equivalent items in the consolidated financial statements on a
line-by-line basis.
Investments in subsidiaries and joint ventures are reviewed at least annually for impairment. Where there exists an indication
of impairment an assessment of the recoverable amount is performed. The recoverable amount is based on the higher of the
investment's continued value in use or its fair value less cost to sell; fair value is derived from the entity's net asset value at
the balance sheet date.
Estimation and uncertainty
The preparation of consolidated financial statements in conformity with IFRS requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. Although these
estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
The most significant area of estimation and uncertainty in the consolidated set of financial statements is in respect of the
valuation of the property portfolio and investments, where external valuations are obtained. The valuation of the Group's
property portfolio is inherently subjective due to the assumptions as outlined within the investment and development property
note. As a result, the valuations the Group places on its property portfolio are subject to a degree of uncertainty and are
made on the basis of assumptions which may not prove to be accurate and could therefore have a material effect on the
Group's financial condition.
Other areas of estimation and uncertainty are included within the accounting policies below, the more significant being:
Revenue recognition
Share-based payments
Provisions
Pensions
Contingent liabilities and capital commitments
Income tax
Trade and other receivables
Derivative financial instruments
Operating segments
Management has determined the operating segments with reference to reports on divisional financial performance and
position which are regularly reviewed by the Chief Executive, who is deemed to be the chief operating decision maker.
Foreign currencies
Transactions in currencies other than the Company's functional currency are recorded at the exchange rate prevailing at the
transaction date. Foreign exchange gains and losses resulting from settlement of these transactions and from retranslation of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement except for
differences arising on the retranslation of available for sale investments which are recognised in other comprehensive
income.
Revenue recognition
Property rental income and exhibition income consists of gross income calculated on an accruals basis, together with
services where the Group acts as principal in the ordinary course of business, excluding sales of investment properties.
Rental income receivable is spread evenly over the period from lease commencement to lease expiry.
Lease incentive payments, including surrender premiums paid which can be directly linked to enhanced rental income, are
amortised on a straight-line basis over the lease term. Upon receipt of a surrender premium for the early termination of a
lease, the profit and non-recoverable outgoings relating to the lease concerned are immediately reflected in income.
Contingent rents, being those lease payments that are not fixed at the inception of a lease, for example increases arising on
rent reviews, are recorded as income in the periods in which they are earned.
Rent reviews are recognised as income, based on management's estimates, when it is reasonable to assume they will be
received. Estimates are derived from knowledge of market rents for comparable properties determined on an individual
property basis and updated for progress of negotiations.
Where revenue is obtained by the sale of properties, it is recognised when the significant risks and returns have been
transferred to the buyer. This will normally take place on exchange of contracts unless there are conditions attached. For
conditional exchanges, sales are recognised when these conditions are satisfied.
Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate.
Dividend income is recognised when the relevant Group company's right to receive payment has been established.
Exceptional items
Exceptional items are those items that in the Directors' view are required to be separately disclosed by virtue of their size or
incidence to enable a full understanding of the Group's financial performance. These are excluded from the calculation of
underlying earnings.
Income taxes
Current tax is the amount payable on the taxable income for the year and any adjustment in respect of prior years. It is
calculated using rates that have been enacted or substantively enacted by the balance sheet date.
In accordance with IAS 12, deferred tax is provided using the balance sheet liability method on temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the tax bases of those assets and
liabilities. However temporary differences are not recognised to the extent that they arise from the initial recognition of assets
and liabilities (other than on a business combination) that at the time of the transaction affect neither accounting nor taxable
profit and loss.
Deferred tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and
are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that management believes it is probable that future taxable profit will be
available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when
there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same tax authority on either the same taxable group or different taxable entities
where there is an intention to settle balances on a net basis.
Tax is included in the income statement except when it relates to items recognised in other comprehensive income, or
directly in equity, in which case the related tax is also recognised in other comprehensive income or directly in equity.
An investment property accounted for at fair value will normally be recovered through sale rather than use.
Share-based payments
The cost of granting share options and other share-based remuneration to employees and Directors is recognised through
the income statement with reference to the fair value of the instrument at the date of grant. The income statement is charged
over the vesting period of the options.
An option pricing model is used applying assumptions around expected yields, forfeiture rates, exercise price and volatility.
Own shares held in connection with employee share plans and other share-based payment arrangements are treated as
treasury shares and deducted from equity.
Impairment of financial assets
An annual review is conducted for financial assets to determine whether there is any evidence of a loss event as described
by IAS 39. Where there is objective evidence of impairment the amount of any loss is calculated by estimating future cash
flows or by using fair value where this is available through observable market prices.
Investment and development property
Investment and development properties are owned or leased by the Group and held for long-term rental income and capital
appreciation and exclude properties occupied by the Group.
The Group has chosen to use the fair value model. Properties are initially recognised when the significant risks and rewards
attached to the property are transferred to the Group. They are recorded at cost and subsequently revalued at the balance
sheet date to fair value as determined by professionally qualified external valuers on the basis of market value after allowing
for future transaction costs. The valuation is based upon assumptions as outlined within the investment and development
property note. These assumptions conform with the Royal Institution of Chartered Surveyors ("RICS") Valuation Professional
Standards.
The fair value of properties is arrived at by adjusting the market value as above for directly attributable lease incentive assets
and fixed head leases.
Properties held under leases are stated gross of the recognised finance lease liability.
The cost of development properties includes capitalised interest and other directly attributable outgoings, except in the case
of properties and land where no development is imminent, in which case no interest is included. Interest is capitalised (before
tax relief) on the basis of the average rate of interest paid on the relevant debt outstanding, until the date of practical
completion.
When the Group redevelops an existing investment property for continued future use as an investment property, the property
remains an investment property measured at fair value.
Gains or losses arising from changes in the fair value of investment and development property are recognised in the income
statement of the period in which they arise. Depreciation is not provided in respect of investment properties including plant
and equipment integral to such investment properties.
When the use of a property changes from that of trading property to investment property, such property is transferred at fair
value, with any resulting gain being recognised as property trading profit.
Investment properties cease recognition as investment property either when they have been disposed of or when they cease
to be held for the purpose of generating rental income or for capital appreciation.
Where the Group disposes of a property at fair value in an arm's length transaction the carrying value immediately prior to the
sale is adjusted to the transaction price, offset by any directly attributable costs, and the adjustment is recorded in the income
statement.
A property ceases to be recognised as investment property and is transferred at its fair value to Trading Property when, in the
Directors' judgement, an investment property commences development with the intention of sale. Criteria considered in this
assessment include, the Board's stated intention, contractual commitments, financial and technical feasibility.
Leases
Leases are classified according to the substance of the transaction. A lease that transfers substantially all the risks and
rewards of ownership to the lessee is classified as a finance lease. All other leases are normally classified as operating
leases.
Group as a lessee:
In accordance with IAS 40, finance and operating leases of property are accounted for as investment property. Finance
leases are recognised as an asset and an obligation to pay future minimum lease payments. The investment property asset
is included in the balance sheet at the lower of fair value and the present value of minimum lease payments, gross of the
recognised finance lease liability. Lease payments are allocated between the liability and finance charges so as to achieve a
constant financing rate.
Other finance leased assets are capitalised at the lower of the fair value of the leased asset or the present value of the
minimum lease payments and depreciated over the shorter of the lease term and the useful life of the asset.
Rental expense under operating leases is charged to the income statement on a straight-line basis over the lease term.
Trading property
Trading property comprises those properties that in the Directors' view are expected to be disposed of within one year of the
balance sheet date or are to be developed with the intention to sell.
Such properties are transferred from investment property at fair value which forms its deemed cost. Subsequently it is carried
at the lower of cost and net realisable value.
Plant and equipment
Plant and equipment consists of fixtures, fittings and other office equipment. Plant and equipment is stated at cost less
accumulated depreciation and any accumulated impairment losses. Cost includes the original purchase price of the asset
plus any attributable cost in bringing the asset to its working condition for its intended use. Depreciation is charged to the
income statement on a straight-line basis over an asset's estimated useful life to a maximum of five years.
Investment in Group companies
Investment in Group companies, which is eliminated on consolidation, is stated in the Company's separate financial
statements at cost less impairment losses, if any. Impairment losses are determined with reference to the investment's fair
value less estimated selling costs. Fair value is derived from the subsidiary's net assets at the balance sheet date. On
disposal, the difference between the net disposal proceeds and its carrying amount is included in profit or loss.
Investments
Available for sale investments, being investments intended to be held for an indefinite period, are initially recognised and
subsequently measured at fair value.
Gains or losses arising from changes in the fair value of available for sale investments are included in other comprehensive
income, except to the extent that losses are determined to be attributable to impairment, in which case they are recognised in
the income statement.
Disposals are recorded upon distribution, at which time accumulated fair value adjustments are recycled from reserves to the
income statement.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost. The Directors
exercise judgement as to the collectability of the Group's trade and other receivables and determine when it is appropriate to
impair these assets. Factors such as days past due, credit status of the counterparty, historical evidence of collection and
probability of deriving future economic benefit are considered.
Cash and cash equivalents
Cash and cash equivalents are recognised at fair value. Cash and cash equivalents comprise cash on hand, deposits with
banks and other short-term highly liquid investments with original maturities of three months or less.
Derivative financial instruments
The Group uses non-trading derivative financial instruments to manage exposure to interest rate risk. These instruments
have not been designated as qualifying for hedge accounting. They are initially recognised on the trade date at fair value and
subsequently remeasured at fair value based on market price. Changes in fair value are recognised directly in the income
statement.
Trade payables
Trade payables are obligations for goods or services acquired in the ordinary course of business. Trade payables are
recognised at fair value and subsequently measured at amortised cost until settled.
Dividend distribution
Dividend distributions to shareholders are recognised as a liability once approved by shareholders.
Provisions
Provisions are recognised when the Group has a current obligation arising from a past event and it is probable that the Group
will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required
to settle that obligation at the balance sheet date.
Borrowings
Borrowings are recognised initially at their net proceeds on issue, as an approximation of fair value, and subsequently carried
at amortised cost. Any transaction costs, premiums or discounts are capitalised and recognised over the contractual life using
the effective interest method. In the event of early repayment all unamortised transaction costs are recognised immediately in
the income statement.
Pensions
The costs of the defined contribution scheme and the Group's personal pension plans are charged against profits in the year
in which they fall due.
Past service costs, current service costs and curtailment gains of the defined benefit scheme are recognised immediately in
income. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged
or credited to equity in other comprehensive income for the period in which they arise. The defined benefit obligation is
calculated annually by independent actuaries using the projected unit credit method and applying assumptions which are
agreed between the Group and its actuaries.
Contingent liabilities and capital commitments
Contingent liabilities are disclosed where there are present or possible obligations arising from past events, but the economic
impact is uncertain in timing, occurrence or amount. A description of the nature and, where possible, an estimate of the
financial effect of contingent liabilities is disclosed.
Capital commitments are disclosed when the Group has a contractual future obligation which has not been provided for at the
balance sheet date.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised
as a deduction from equity, net of any tax effects.
Where the Group's own shares are re-purchased, the consideration paid is classified as treasury shares and deducted from
equity. Where such shares are subsequently sold or re-issued, any consideration received is included in equity.
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 Covent Garden, Earls
Court & Olympia, The Great Capital Partnership, 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 in 2011 exceeded 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 consist primarily of costs incurred centrally which are neither directly nor meaningfully attributable to
individual segments.
Reportable segments
2012
The Great
Covent
Garden Earls Court & Olympia 1 Capital Partnership 4 China Other Group total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 54.8 51.1 5.9 3.5 115.3
Rent receivable and exhibition income 38.0 51.1 5.6 94.7
Service charge income 2.5 0.3 2.8
Rental income 40.5 51.1 5.9 97.5
Service charge and other non-recoverable costs (8.4) (23.3) (0.5) (32.2)
Net rental income 32.1 27.8 5.4 65.3
Other income 2.9 3.2 6.1
Gain on revaluation and sale of investment and
development property 50.7 140.8 22.3 0.1 213.9
Profit on sale of available for sale investments 10.0 10.0
Profit on sale of subsidiaries 0.6 1.1 1.7
Loss of control of former subsidiary (1.0) (1.0)
Write down of trading property (0.9) (0.9)
Write back of impairment of other receivables 0.6 0.6
Segment result 86.3 167.8 27.7 10.0 3.9 295.7
Unallocated costs
Administration expenses (26.1)
Operating profit 269.6
Net finance costs (2) (24.1)
Profit before tax 245.5
Taxation (5.5)
Profit for the year 240.0
Summary balance sheet
Total segment assets(3) 977.5 736.4 57.2 3.6 10.0 1,784.7
Total segment liabilities(3) (316.0) (130.2) (7.0) (10.0) (463.2)
661.5 606.2 50.2 3.6 1,321.5
Unallocated net assets(2) 156.3
Net assets 1,477.8
Other segment items:
Capital expenditure (100.8) (42.5) (2.2) (145.5)
Depreciation (0.1) (0.1)
1 Empress State represents GBP7.3 million of the GBP27.8 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 the Group's cash balances.
3 Total assets and total liabilities exclude loans between and investments in Group companies.
4 During 2012 The Great Capital Partnership disposed of a number of properties to Great Portland Estates plc, the Group's joint venture partner, a related party. Consideration of
GBP135.0 million (Capco share) was received in cash. The aggregate market value of these properties at date of disposal was GBP124.4 million (Capco share).
2011 Restated
The Great
Covent
Garden Earls Court & Olympia 1 Capital Partnership China Other Group total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 35.9 59.2 13.3 108.4
Rent receivable and exhibition income 32.8 59.2 12.5 104.5
Service charge income 3.1 0.8 3.9
Rental income 35.9 59.2 13.3 108.4
Service charge and other non-recoverable costs (8.1) (29.0) (2.3) (39.4)
Net rental income 27.8 30.2 11.0 69.0
Other income 0.4 0.4 0.8
Gain on revaluation and sale of investment and
development property 51.2 46.3 25.3 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 79.0 72.7 36.3 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 (3.4)
Profit for the year 158.5
Summary balance sheet
Total segment assets(3) 832.9 616.4 256.5 19.6 9.0 1,734.4
Total segment liabilities(3) (301.4) (254.1) (128.3) (10.1) (693.9)
531.5 362.3 128.2 19.6 (1.1) 1,040.5
Unallocated net assets(2) 67.4
Net assets 1,107.9
Other segment items:
Capital expenditure (131.7) (46.4) (1.4) (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 the Group's cash balances.
(3) Total assets and total liabilities exclude loans between and investments in Group companies.
The Group's geographical segments are set out below. This represents where the Group's assets and revenues are
predominantly domiciled.
Revenue primarily represents income from tenants and total assets primarily constitute investment property.
Revenue Total assets Capital expenditure
2012 2011 2012 2011 2012 2011
GBPm GBPm GBPm GBPm GBPm GBPm
Central London 111.8 108.4 1,921.9 1,770.4 145.5 179.5
Other 3.5 3.6 19.8
115.3 108.4 1,925.5 1,790.2 145.5 179.5
3 OTHER INCOME
2012 2011
GBPm GBPm
Sale of trading property 17.8
Cost of sales (11.7)
Profit on sale of trading property 6.1
Non-recurring income 0.8
Other income 6.1 0.8
4 GAIN ON REVALUATION AND SALE OF INVESTMENT AND DEVELOPMENT PROPERTY
2012 2011
GBPm GBPm
Gain on revaluation of investment and development property 184.9 119.4
Gain on loss of control and appropriation to trading property 12.6
Gain on sale of investment property 16.4 3.9
Gain on revaluation and sale of investment and development property 213.9 123.3
5 PROFIT ON SALE OF AVAILABLE FOR SALE INVESTMENTS
2012 2011
GBPm GBPm
Profit on sale of available for sale investments 10.0 30.5
Profit on sale of available for sale investments represents part divestment from Harvest China Real Estate Fund I following
property disposals made by the fund as a result of actions taken by the fund manager. Harvest China Real Estate Fund II
divested in full during 2011.
6 PROFIT ON SALE OF SUBSIDIARIES
On 9 February 2012, the Group disposed of its shareholding in The Brewery by EC&O Limited for a consideration of GBP2.0
million, resulting in a profit of GBP1.1 million.
On 29 February 2012, the Group disposed of its shareholding in Covent Garden Restaurants Limited for a consideration of
GBP1.0 million, resulting in a profit of GBP0.6 million.
7 LOSS OF CONTROL OF FORMER SUBSIDIARY
On 30 August 2012, the Group completed a joint venture arrangement with the Kwok Family Interests. The venture, to
develop land interests at Seagrave Road in West London, resulted in the loss of control of the former subsidiary Seagrave
Road GP Limited, and the disposal of a 50 per cent limited partnership interest in Seagrave Road LP. Consideration received
of GBP7.5 million and associated costs resulted in a net loss of GBP1.0 million.
On the date control was lost, the 50 per cent investment retained was re-measured and reflected at fair value.
The disposal of the net assets of the partnership together with reorganisation of internal funding (previously fully provided by
the Group and now reorganised to reflect the respective 50:50 partnership interests) resulted in a net cash inflow of GBP65.4
million.
8 WRITE BACK OF IMPAIRMENT OF OTHER RECEIVABLES
Following an impairment review of loan notes receivable by the Group, a write back of a previously recognised charge of
GBP0.6 million was recognised in 2012. The write back was calculated with reference to the market value of certain property
assets that the Group would have priority over in the event of default. There was no impairment adjustment in 2011.
9 FINANCE COSTS
2012 2011
GBPm GBPm
Finance costs:
On bank overdrafts, loans and other 24.3 36.6
Amortisation of issue costs 1.2 0.8
On obligations under finance leases 0.7 0.8
Gross finance costs 26.2 38.2
Interest capitalised on developments (2.6) (1.7)
Finance costs 23.6 36.5
Costs of termination of derivative financial instruments 0.7 14.5
Other exceptional finance costs 1.3
Other finance costs(1) 2.0 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 5.2 per cent (2011: 5.9 per cent) on
the relevant debt, applied to the cost of developments during the year.
10 TAXATION
Restated
2012 2011
GBPm GBPm
Current income tax:
Current income tax charge 2.8 2.5
Current income tax on profits excluding exceptional items 2.8 2.5
Deferred income tax:
On investment and development property (1.5) 3.3
On accelerated capital allowances (2.0) 0.4
On losses 2.8 (5.6)
On derivative financial instruments 3.1 3.3
On non-exceptional items (0.5)
Deferred income tax on profits 2.4 0.9
Current income tax charge on exceptional items 1.4
Adjustments in respect of previous years (1.1)
Total tax expense reported in the income statement 5.5 3.4
Factors affecting the tax charge for the year
The tax assessed for the year is GBP5.5 million which is lower than the standard rate of corporation tax in the United
Kingdom.
The differences are explained below:
Restated
2012 2011
GBPm GBPm
Profit before tax 245.5 161.9
Profit on ordinary activities multiplied by the standard rate in the UK of 24.5% (2011: 26.5%) 60.1 42.9
UK capital allowances not reversing on sale (0.4) (0.6)
Revaluation surplus not recognised in deferred tax (43.5) (31.7)
Prior year corporation tax items (1.1)
Expenses disallowed 0.5 0.5
Non-taxable items (9.3) (8.1)
(Reduction)/increase in deferred tax following change in corporate tax rate (0.8) 0.4
Total tax expense reported in the income statement 5.5 3.4
Tax items that are taken directly to equity include deferred tax on an element of the share options and deferred tax on
pensions.
'Revaluation surplus not recognised in deferred tax' of GBP43.5 million arises from the Group's decision to early adopt the
new IAS 12 provisions which changed the basis on which deferred tax on investment properties is calculated in the accounts.
The amendment introduces a presumption that investment property assets accounted for under IAS 40 'Investment Property'
will normally be recovered through sale rather than use. Based on the Group's holding structure for a number of its
investment properties, the majority of the fair valuation movements in the year are not reflected in the deferred tax calculation
and so appear as a permanent timing difference in the tax reconciliation. Early adoption of the new IAS 12 provisions has
resulted in a restatement of the 2011 amount for this item and the removal of 'Utilisation of losses (brought)/carried forward'.
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 per cent to 24 per cent from 1
April 2012. The Budget will reduce the main rate of corporation tax from 24 per cent to 23 per cent from 1 April 2013 with a
further 1 per cent reduction in rate from 1 April 2014 resulting in a final corporation tax rate of 22 per cent.
11 DIVIDENDS
2012 2011
GBPm GBPm
Ordinary shares
Prior year final dividend paid of 1.0p per share (2011: 1.0p) 6.8 6.2
Interim dividend paid of 0.5p per share (2011: 0.5p) 2.9 3.4
Dividends expense 9.7 9.6
Shares issued in lieu of cash (1.1)
Cash dividends paid 8.6 9.6
Proposed final dividend of 1.0p per share (2011: 1.0p) 7.5 6.8
Details of the shares in issue are given in note 21.
12 EARNINGS PER SHARE AND NET ASSETS PER SHARE
Restated
2012 2011
Earnings Shares 1 Pence Restated Earnings Shares 2 Pence
(a) Earnings per share GBPm million per share GBPm million per share
Basic earnings 240.0 703.7 34.1 158.5 662.1 23.9
Dilutive effect of share option awards 3.1 5.9 1.7 4.0
Dilutive effect of contingently issuable shares 1.8 0.6
Dilutive effect of matching nil cost options 3.0 1.9
Dilutive effect of deferred shares 0.4
Diluted earnings 243.1 714.8 34.0 160.2 668.6 24.0
Basic earnings 240.0 158.5
Adjustments:
Other income (6.1)
Gain on revaluation and sale of investment and
development property (213.9) (123.3)
Profit on sale of subsidiaries (1.7)
Loss of control of former subsidiary 1.0
Write down of trading property 0.9 0.1
Costs of termination of derivative financial
instruments 0.7 14.5
Fair value movement on derivative financial
instruments (0.7) (14.1)
Current tax adjustments 1.4 (0.3)
Deferred tax adjustments (0.5) 7.0
EPRA adjusted earnings 21.1 703.7 3.0 42.4 662.1 6.4
Exceptional other income (0.8)
Profit on sale of available for sale investments (10.0) (30.5)
Remeasurement of deferred consideration 4.2
Write back of impairment of other receivables (0.6)
Refinancing fees 1.3
Current tax adjustments (1.1) 0.3
Deferred tax adjustments 1.8 (6.0)
Underlying earnings 12.5 703.7 1.8 9.6 662.1 1.4
(1) Weighted average number of shares in issue during the year has been adjusted for shares held in Treasury.
(2) Weighted average number of shares in issue during the prior year has been adjusted for issue of bonus shares issued in connection with the interim scrip dividend, 0.3 million (2011: nil)
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.
Restated
2012 2011
Earnings Shares 1 Pence Restated Earnings Shares 2 Pence
GBPm million per share GBPm million per share
Basic earnings per share 240.0 703.7 34.1 158.5 662.1 23.9
Adjustments:
Gain on revaluation and sale of investment
and development property (213.9) (123.3)
Profit on sale of available for sale investments (10.0) (30.5)
Profit on sale of subsidiaries (1.7)
Loss of control of former subsidiary 1.0
Write back of impairment of other receivables (0.6)
Deferred tax adjustments (3.6) 12.0
Headline earnings 11.2 703.7 1.6 16.7 662.1 2.5
Dilutive effect of share options awards 3.1 5.9 1.7 4.0
Dilutive effect of contingently issuable shares 1.8 0.6
Dilutive effect of matching nil cost options 3.0 1.9
Dilutive effect of deferred shares 0.4
Diluted headline earnings 14.3 714.8 2.0 18.4 668.6 2.8
(1) Weighted average number of shares in issue during the year has been adjusted for shares held in Treasury.
(2) Weighted average number of shares in issue during the prior year has been adjusted for issue of bonus shares in the current year, 0.3 million (2011: nil)
Restated
2012 2011
NAV NAV
Net assets Shares per share Net assets Shares per share
b) Net assets per share GBPm million1 (pence) GBPm million (pence)
Net assets attributable to owners of the Group 1,477.8 752.7 196.3 1,107.9 683.9 162.0
Adjustments:
Effect of dilution on exercise of options 6.7 4.4
Effect of dilution on issue of contingently
issuable shares 1.8 0.6
Effect of dilution on issue of matching nil cost
options 3.0 1.9
Effect of dilution on issue of deferred shares 0.4
Diluted NAV 1,477.8 764.6 193.3 1,107.9 690.8 160.4
Fair value of derivative financial instruments 30.8 36.4
Unrecognised surplus on trading properties 37.5 1.0
Deferred tax adjustments 6.9 7.3
EPRA adjusted, diluted NAV 1,553.0 764.6 203.1 1,152.6 690.8 166.9
Fair value of derivative financial instruments (30.8) (36.4)
Deferred tax adjustments (5.1) (4.0)
EPRA adjusted, diluted NNNAV 1,517.1 764.6 198.4 1,112.2 690.8 161.0
(1) Number of shares in issue at the year end has been adjusted for shares held in Treasury, 0.4 million (2011: nil).
13 PROPERTY PORTFOLIO
a) Investment and development property
Freehold Leasehold Total
GBPm GBPm GBPm
At 1 January 2011 697.3 680.3 1,377.6
Reclassification (15.0) 15.0
Additions from acquisitions 114.5 114.5
Additions from subsequent expenditure 28.2 36.8 65.0
Disposals (59.7) (59.7)
Gain on valuation 29.4 90.0 119.4
At 31 December 2011 794.7 822.1 1,616.8
Reclassification (0.5) 0.5
Additions from acquisitions 82.6 13.4 96.0
Additions from subsequent expenditure 17.6 22.8 40.4
Disposals (54.4) (155.7) (210.1)
Loss of control of former subsidiary (59.2) (1.6) (60.8)
Transfers to trading property (59.1) (21.9) (81.0)
Gain on valuation 33.7 151.2 184.9
At 31 December 2012 755.4 830.8 1,586.2
2012 2011
GBPm GBPm
Balance sheet carrying value of investment and development property 1,586.2 1,616.8
Adjustment in respect of tenant incentives 17.1 14.9
Adjustment in respect of head leases (3.8) (8.9)
Market value of investment and development property 1,599.5 1,622.8
Included within investment and development properties is GBP2.6 million (2011: GBP1.7 million) of interest capitalised during
the year on developments and redevelopments in progress.
The fair value of the Group's investment and development properties as at 31 December 2012 was determined by
independent, appropriately qualified external valuers Jones Lang LaSalle for Earls Court & Olympia (excluding Empress
State), 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) Valuation Professional Standards. 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, likely incentives
offered to tenants, construction costs, forecast growth rates, yields and sales prices based on known market transactions for
similar properties while taking account of tenure and structural condition.
Valuations are based on what is determined to be the highest and best use. When considering the highest and best a valuer
will consider, on a property by property basis, the highest valuation which will include its actual and potential uses given
current market conditions. Where the highest and best use differs from the existing use, the valuer will consider the cost and
the likelihood of achieving and implementing this change in arriving at its valuation.
There are often restrictions on both freehold and leasehold investment property which could have a material impact on the
realisation of these assets. Most significant of these occur when a credit facility is in place or when planning permission,
lease extension or renegotiation of use are required (as is the case currently regarding Earls Court). These restrictions are
factored in to the property's valuation by the external valuer. Also see disclosures surrounding development risks on page 20.
b) Trading property
2012 2011
GBPm GBPm
At 1 January 0.2 0.3
Transfers from investment and development property 87.3
Additions from acquisitions 2.4
Additions from subsequent expenditure 6.7
Disposals (11.3)
Write down of trading property (0.9) (0.1)
At 31 December 84.4 0.2
Unrecognised revaluation surplus(1) 37.5 1.0
Market value of trading property 121.9 1.2
(1) The market value of trading property is shown for informational purposes only and 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.
14 TRADE AND OTHER RECEIVABLES
2012 2011
GBPm GBPm
Non-current
Loan notes receivable 4.0 3.4
Other receivables(1) 18.0 15.4
Prepayments and accrued income 17.4 15.4
Trade and other receivables 39.4 34.2
Current
Rents receivable(2) 8.8 15.2
Other receivables 7.0 2.9
Prepayments and accrued income 10.1 8.6
Trade and other receivables 25.9 26.7
(1) Includes GBP15 million exclusivity payment with LBHF which now forms part of the CLSA contract discussed in note 27.
(2) Includes exhibition trade and receivables.
Amounts owed by subsidiary undertakings are unsecured, repayable on demand and, for amounts falling within formalised
loan agreements, interest bearing.
Included within prepayments and accrued income are tenant lease incentives of GBP17.1 million (2011: GBP14.9 million).
15 CASH AND CASH EQUIVALENTS
2012 2011
GBPm GBPm
Cash at hand 28.0 20.6
Cash on short-term deposit 150.5 63.0
Unrestricted cash and cash equivalents 178.5 83.6
Restricted cash 6.0 6.0
Cash and cash equivalents 184.5 89.6
Restricted cash relates to amounts placed on deposit in accounts which are subject to withdra awal conditions.
16 TRADE AND OTHER PAYABLES
2012 2011
GBPm GBPm
Current
Rents received in advance 17.2 21.9
Accruals and deferred income 27.4 28.0
Trade payables 1.1 0.4
Other payables(1) 12.6 9.3
Other taxes and social security 0.3 22.8
Trade and other payables 58.6 82.4
1 Includes sundry payables and amounts due to joint venture partners.
17 BORROWINGS, INCLUDING FINANCE LEASES
2012
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Current
Bank loans and overdrafts 71.9 71.9 71.9 71.9
Loan notes 6.0 6.0 6.0 6.0
Borrowings, excluding finance leases 77.9 77.9 77.9 77.9
Finance lease obligations 0.5 0.5 0.5 0.5
Current 78.4 78.4 0.5 77.9 78.4
Non-current
Bank loan 2016 154.6 154.6 154.6 154.6
Bank loan 2017 111.7 111.7 111.7 111.7
Borrowings, excluding finance leases 266.3 266.3 266.3 266.3
Finance lease obligations 3.3 3.3 3.3 3.3
Non-current 269.6 269.6 3.3 266.3 269.6
Total borrowings 348.0 348.0 3.8 344.2 348.0
Cash and cash equivalents (184.5)
Net debt 163.5
2011
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Current
Bank loans and overdrafts 11.5 11.5 11.5 11.5
Loan notes 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
Current 18.7 18.7 1.2 17.5 18.7
Non-current
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
Non-current 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
18 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 31 December 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 31 December each year by
discounting the future contractual cash flows to the net present values.
(Loss)/gain Gain to other
Carrying to income co omprehensive
value Fair value statement income
2012 GBPm GBPm GBPm GBPm
Derivative financial instrument asset 0.5 0.5 (2.1)
Total held for trading assets 0.5 0.5 (2.1)
Cash and cash equivalents 184.5 184.5
Other financial assets 65.3 65.3
Total cash and receivables 249.8 249.8
Available for sale investments 3.6 3.6
Total available for sale investments 3.6 3.6
Derivative financial instrument liabilities (31.3) (31.3) 2.8
Total held for trading liabilities (31.3) (31.3) 2.8
Borrowings (348.0) (348.0)
Other financial liabilities (68.4) (68.4)
Total loans and payables (416.4) (416.4)
(Loss)/gain Gain to other
Carrying to income comprehensive
value Fair value statement income
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 (restated) (91.6) (91.6)
Total loans and payables (restated) (644.9) (644.9)
19 DEFERRED TAX PROVISION
Under IAS 12 'Income Taxes', provision is made for the deferred tax assets and liabilities associated with the revaluation of
investment properties at the corporate tax rate expected to apply to the Group at the time of sale. For UK properties the
relevant tax rate will be 23 per cent (2011: 25 per cent).
The IASB released an amendment to IAS 12, 'Income taxes', on 20 December 2010, which provides an exception to the
principles in the existing standard for measuring deferred tax assets or liabilities when investment property is measured at fair
value. The amendment introduces a presumption that investment property assets accounted for under IAS 40 'Investment
Property' will normally be recovered through sale rather than use. The amendment applies to annual periods beginning on or
after 1 January 2014 with early adoption permitted. For the purposes of the financial year ended 31 December 2012 the
Group has early adopted the new IAS 12 provision. Early adoption requires retrospective application of the amendments
resulting in deferred tax being recalculated under the new provisions resulting in the restatement of the 2011 deferred tax
balance on investment & development properties and Group losses.
Under the new IAS 12 provisions the recognised deferred tax liability on investment properties is GBP1.8 million at 31
December 2012 (2011 restated: GBP3.3 million). The calculation is on a disposal basis and includes indexation relief, the
Group's holding structure and the application of the REIT provisions to disposals occurring 2 years or more post exit (7 May
2012). The Group's contingent tax liability is GBPnil (2011: GBPnil). This is after taking into account the availability of Group
losses, indexation relief and the rebasing of properties formerly within the REIT regime to their May 2010 Market Value.
A disposal of the Group's trading properties at their market value as per note 13 would result in a corporation tax charge to
the Group of GBP9.0 million (24 per cent of GBP37.5 million).
Fair value of
Accelerated investment & Derivative Other
capital development financial temporary Group
allowances properties instruments differences losses Total
GBPm GBPm GBPm GBPm GBPm GBPm
Provided deferred tax (liabilities) / assets:
At 1 January 2011 12.8 (12.5) (0.3)
Recognised in income (restated) 0.4 3.3 3.3 (0.5) (5.6) 0.9
Recognised in other comprehensive income (0.9) (0.9)
At 31 December 2011 (restated) 13.2 3.3 (9.2) (1.7) (5.6)
Recognised in income (2.0) (1.5) 3.1 2.8 2.4
Recognised in other comprehensive income (2.4) (2.4)
At 31 December 2012 11.2 1.8 (6.1) (4.1) (2.8)
Unprovided deferred tax asset:
At 31 December 2011 (restated) (6.0) (6.0)
Movement in the year (2.2) (4.3) (6.5)
At 31 December 2012 (2.2) (10.3) (12.5)
45
In accordance with the requirements of IAS 12 'Income Taxes', the deferred tax asset has not been recognised in the Group
financial statements due to uncertainty on the level of profits that will be available in the future periods.
20 OTHER PROVISIONS
Deferred
consideration Other Total
GBPm GBPm GBPm
Non-current
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 31 December 2012
Current
At 1 January 2011
Reclassified from non-current liabilities 3.1 3.1
Charged to income statement
re-measurement of deferred consideration 4.2 4.2
At 31 December 2011 7.3 7.3
At 31 December 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 ECOA, with the final details of such a redevelopment dependent on discussions with the owners of the adjacent land
and the outcome of the planning process. The maximum potential payment is GBP20.0 million.
21 SHARE CAPITAL AND SHARE PREMIUM
Share Share
Number capital premium
of shares GBPm GBPm
Issued and fully paid ordinary shares of 25 pence:
At 1 January 2011 621,828,502 155.4 89.1
Shares issued placing 62,100,000 15.5 6.0
At 31 December 2011 683,928,502 170.9 95.1
Shares issued placing 68,400,000 17.1 21.8
scrip dividends 799,301 0.3 0.8
At 31 December 2012 753,127,803 188.3 117.7
In September 2012, the Company completed a placing of 68.4 million new ordinary shares at a price of 218 pence per share.
The placing generated gross proceeds of GBP149.1 million, GBP145.0 million net of expenses.
In June 2012, the Company offered a scrip dividend alternative in respect of the 2011 final dividend. 541,709 shares were
issued at a price of 198 pence per share.
In September 2012, the Company offered a scrip dividend alternative in respect of the 2012 interim dividend. 257,592 shares
were issued at a price of 217 pence per share.
In May 2011, the Company completed a placing of 62.1 million new ordinary shares at a price of 162 pence per share. The
placing generated gross proceeds of GBP100.6 million, GBP96.6 million net of expenses.
Full details of the rights and obligations attached to the ordinary shares are contained in the Company's Articles of
Association. These rights include an entitlement to receive the Company's Report and Accounts, to attend and speak at
General Meetings of the Company, to appoint proxies and to exercise voting rights. Holders of ordinary shares may also
receive dividends and may receive a share of the Company's assets on the Company's liquidation. There are no restrictions
on the transfer of the ordinary shares.
At 28 February 2013 the Company had an unexpired authority to repurchase shares up to a maximum of 67,961,400 shares
with a nominal value of GBP17.0 million, and the Directors had an unexpired authority to allot up to a maximum of
386,297,081 shares with a nominal value of GBP96.6 million of which 227,748,191 with a nominal value of GBP56.9 million
can only be allotted pursuant to a fully pre-emptive rights issue.
22 TREASURY SHARES
Treasury
Number shares
of shares GBPm
Ordinary shares of 25 pence:
At 31 December 2011
Shares purchased 431,450 1.0
At 31 December 2012 431,450 1.0
Treasury shares were purchased as a result of the odd-lot offer launched in November 2012 and completed in December
2012.
23 CAPITAL COMMITMENTS
At 31 December 2012, the Group was contractually committed to GBP21.4 million (2011: GBP14.0 million) of future
expenditure for the purchase, construction, development and enhancement of investment property. Of the GBP21.4 million
committed, GBP21.2 million is committed 2013 expenditure. The Group's share of joint venture commitments included within
this amount was GBP0.2 million (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 the CLSA in respect
of the LBHF land. The agreement was replaced by equivalent provisions within the CLSA which was signed on 23 January
2013. Refer to note 27 for further details.
24 CONTINGENT LIABILITIES
As at 31 December 2012, the Group has no contingent liabilities (2011: GBPnil).
25 CASH GENERATED FROM OPERATIONS
2012 2011
Notes GBPm GBPm
Profit before tax 245.5 161.9
Adjustments for:
Profit on sale of trading properties 3 (6.1)
Gain on revaluation of investment and development property 4 (184.9) (119.4)
Gain on sale of investment property 4 (16.4) (3.9)
Gain on loss of control and appropriation to trading property 4 (12.6)
Profit on sale of available for sale investments 5 (10.0) (30.5)
Profit on sale of subsidiaries 6 (1.7)
Loss of control of former subsidiary 7 1.0
Re-measurement of deferred consideration 4.2
Write down of trading property 13 0.9 0.1
Write back of impairment of other receivables (0.6)
Depreciation 0.1 0.2
Amortisation of lease incentives and other direct costs 1.7 0.5
Finance costs 9 23.6 36.5
Finance income (0.8) (1.7)
Other finance costs 9 2.0 14.5
Change in fair value of derivative financial instruments (0.7) (14.1)
Change in working capital:
Change in trade and other receivables (2.6) (7.2)
Change in trade and other payables (6.7) (3.1)
Cash generated from operations 31.7 38.0
26 RELATED PARTY TRANSACTIONS
2012 2011
Key management compensation (1) GBPm GBPm
Salaries and short-term employee benefits 2.9 2.8
Pensions and other post-employment benefits 0.1
Share-based payments 2.3 1.4
5.2 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.
27 EVENTS AFTER THE REPORTING PERIOD
On 23 January 2013 the Group together with LBHF entered into a Conditional Land Sale Agreement (CLSA) which provides
for the inclusion of LBHF's land holdings at Earls Court in the redevelopment of the ECOA. The CLSA provides the Group
with the option to acquire approximately 22 acres of land from LBHF for a total cash consideration of GBP105 million.
Of the total consideration payable, GBP15 million was paid in 2011 as part of the exclusivity agreement entered in to at that
time (see note 14), and a further GBP15 million was paid on signing to acquire 11 Farm Lane and Gibbs Green School. The
balance will only become payable upon exercise of the option, which is exercisable until 2017. Further details of this
transaction are available on the Company's website and on page 9 of this document.
On 28 January 2013, the Group acquired a long leasehold interest in 38 King Street, Covent Garden for GBP10.5 million.
ANALYSIS OF PROPERTY PORTFOLIO (UNAUDITED)
1. PROPERTY DATA AS AT 31 DECEMBER 2012
Weighted
average Gross
Market Initial Nominal Passing Occupancy unexpired area
value yield equivalent rent ERV rate lease million
GBPm Ownership (EPRA) yield GBPm GBPm (EPRA) years sq ft(2)
Covent Garden 952.3 100% 3.80% 5.12% 51.9 99.0% 7.3 0.9
Earls Court & Olympia(1) 720.8 9.0 1.8
The Great Capital
Partnership(3) 48.3 50% 1.8 66.0% 15.1 0.1
Total properties 1,721.4 48.4 62.7 2.8
Investment properties 1,599.5 47.9 62.0 2.8
Trading properties 121.9 0.5 0.7 -
1 Includes the Group's 50 per cent economic interests in the Empress State building (GBP110 million) and the Seagrave Road JV. Earls Court & Olympia does not report a passing rent,
ERV, occupancy, or lease maturity due to the nature of its exhibition business.
2 Area shown is net internal area of the portfolio, not adjusted for proportional ownership.
3 No GCP yields are disclosed as the one remaining asset has been valued on the basis of a development appraisal.
Revaluation
Market Market surplus/
2. ANALYSIS OF CAPITAL RETURN IN THE YEARLike-for- value value (deficit)(1)
2012 2011 2012
like properties GBPm GBPm GBPm Increase
Covent Garden 867.1 805.7 57.4 7.2%
Earls Court & Olympia 712.7 516.0 165.6 30.3%
The Great Capital Partnership 48.3 41.0 7.3 17.6%
Like-for-like properties 1,628.1 1,362.7 230.3 16.7%
Investment properties 1,512.5 1,286.4 189.6 14.5%
Trading properties 115.6 76.33 40.72 54.2%
Acquisitions 93.3 (2.5)
Disposals 203.8
Loss of control of former subsidiary 57.5
Total properties 1,721.4 1624.0 227.8 15.4%
Investment properties 1,599.5 1,622.8 184.9 13.2%
Trading properties 121.9 1.2 42.92 54.2%
All properties
Covent Garden 952.3 808.0 54.0 6.1%
Earls Court & Olympia 720.8 573.5 166.5 30.0%
The Great Capital Partnership 48.3 241.3 7.3 17.6%
Other trading property 1.2
Total properties 1,721.4 1,624.0 227.8 15.4%
1 Revaluation surplus / (deficit) includes amortisation of lease incentives and fixed head leases.
2 Represents realised gains on appropriate and impairment charges and unrecognised surplus on trading properties, and is presented for information only.
3 Market values at 31 December 2011 of properties transferred to trading properties during the year are shown as like-for-like where applicable.
3. ANALYSIS OF NET RENTAL INCOME IN THE YEARLike-for-like 2012 2011 Change
properties GBPm GBPm %
Covent Garden 27.8 25.4 9.4%
Earls Court & Olympia 27.5 29.2 (5.8)%
The Great Capital Partnership 0.9 0.7
Like-for-like investment properties 56.2 55.3 1.6%
Like-for-like trading properties 0.3 0.2(1)
Total like-for-like properties 56.5 55.5 1.8%
Acquisitions 0.8
Disposals 4.3 11.4
Like-for-like capital 3.6 2.0
Loss of control of former subsidiary 0.1 0.1
Total properties 65.3 69.0 (5.3)%
Investment properties 65.0 69.0 (5.7)%
Trading properties 0.3 -
All properties
Covent Garden 32.1 27.8 15.8%
Earls Court & Olympia 27.8 30.2 (7.9)%
The Great Capital Partnership 5.4 11.0
Total properties 65.3 69.0 (5.3)%
1 Represents the 31 December 2011 Net Rental Income attributable to like-for-like trading properties.
4. ANALYSIS OF PROPERTY BY USE
31 December 2012 Market Value 31 December 2012 ERV
Retail Office Exhibition Residential Total Retail Office Exhibition Residential Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Covent Garden 787.3 126.7 38.3 952.3 40.1 10.9 0.9 51.9
Earls Court & Olympia 24.6 115.6 570.6 10.0 720.8 1.3 7.5 0.2 9.0
The Great Capital
Partnership 19.8 28.5 48.3 1.5 0.3 1.8
811.9 262.1 570.6 76.8 1,721.4 41.4 19.9 1.4 62.7
CONSOLIDATED UNDERLYING PROFIT STATEMENT (UNAUDITED)
FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011
GBPm GBPm
Net rental income 65.3 69.0
Administration expenses (26.1) (22.2)
Operating profit 39.2 46.8
Finance costs (23.6) (36.5)
Finance income 0.8 1.7
Net finance costs (22.8) (34.8)
Profit before tax 16.4 12.0
Tax on adjusted profit (3.9) (2.4)
Underlying earnings (used for calculation of underlying earnings per share) 12.5 9.6
Underlying earnings per share (pence) 1.8 1.4
FINANCIAL COVENANTS
Financial covenants on non-recourse debt excluding joint ventures
Loan
outstanding Loan to
at 31 January 31 December Interest Interest
2013 1 LTV 2012 cover cover
Maturity GBPm covenant Market value 2 covenant reported 3
Covent Garden (4,5) 2016 158.2 70% 34% 130% 248%
Covent Garden (4,6) 2017 112.0 70% 45% 120% 170%
Covent Garden (RCF) (4,7) 2017 0 65% 0% 130% 483%
Total 270.2
Financial covenants on joint ventures non-recourse debt
Loan Loan to
outstanding 31 December
at 31 January 2012 Interest Interest
2013 1, 8 LTV Market cover cover
Maturity GBPm covenant value 2 covenant reported 3
The Empress State Partnership (9) 2013 66.5 N/A N/A 120% 166%
The Great Capital Partnership (10) 2013 4.8 70% 10% 120% 1436%
Total 71.3
1 The loan values are the actual principal balances outstanding at 31 January 2013. The balance sheet value of the loans includes any unamortised fees.
2 The loan to 31 December 2012 market value provides an indication of the impact the 31 December 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 December 2012 and January 2013. The calculations are loan
specific and include a variety of historic, forecast and in certain instances a combined historic and forecast basis.
4 There are three separate loans secured against Covent Garden properties
5 Loan facility provided by a consortium of six banks with BNP Paribas acting as agent, with a further 2 year extension available at Capco's option subject to meeting certain financial
covenants
6 Loan facility provided by NyKredit Realkredit A/s.
7 Loan facility provided by a consortium of two banks with BNP Paribas acting as agent.
8 50 per cent of the debt is shown which is consistent with accounting treatment and the Group's economic interest.
9 Loan facility provided by a consortium of three banks with Eurohypo AG acting as agent, LTV covenant removed until maturity.
10 Loan facility provided by a consortium of four banks with Eurohypo AG acting as agent.
DIVIDENDS
THE DIRECTORS OF CAPITAL & COUNTIES PROPERTIES PLC HAVE PROPOSED A FINAL DIVIDEND PER
ORDINARY SHARE (ISIN GB00B62G9D36) OF 1.0 PENCE PAYABLE ON 20 JUNE 2013.
Dates
The following are the salient dates for payment of the proposed final dividend:
Annual General Meeting: 3 May 2013
Sterling/Rand exchange rate struck: 9 May 2013
Sterling/Rand exchange rate and dividend amount in Rand announced: 10 May 2013
Ordinary shares listed ex-dividend on the JSE, Johannesburg: 20 May 2013
Ordinary shares listed ex-dividend on the London Stock Exchange: 22 May 2013
Record date for final dividend in UK and South Africa: 24 May 2013
Dividend payment date for shareholders: 20 June 2013
South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-
dividend will be 17 May 2013 and that no dematerialisation of shares will be possible from 20 May 2013 to 24 May 2013
inclusive. No transfers between the UK and South Africa registers may take place from 10 May 2013 to 24 May 2013
inclusive.
Subject to SARB approval, the Board intends to offer an optional scrip dividend alternative in respect of the 2012 final
dividend.
The above dates are proposed and subject to change.
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 final 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 final 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 not constitute a
foreign dividend in terms of current legislation. Under the current legislation, the scrip dividend will not be subject to
Dividends Tax, nor income tax on receipt. The new shares which are acquired under the scrip dividend alternative will 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 May 2013.
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.
CLSA
Conditional Land Sale Agreement, an agreement with LBHF relating to its land in the ECOA.
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 year 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 year end.
EPRA adjusted, diluted NNNAV
EPRA 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 year 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 and Beverage
GCP
The Great Capital Partnership, a 50:50 joint venture with GPE
GPE
Great Portland Estates plc. The Group's joint venture partner in The Great Capital Partnership.
Gross income
The Group's share of passing rent plus sundry non-leased income.
Interest rate cap
A derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed
strike price.
Interest rate collar
A combination of a purchase of an interest rate cap and a sale of an interest rate floor to create a range for interest rate
fluctuations between the cap and floor strike prices to have greater certainty on the floating rate payable by the Group.
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.
IRR
Internal Rate of Return
ITZA
In Terms of Zone A. ITZA is a method of calculating the floor area of a retail unit with relation to the frontage and first 20
feet/6.1 metres of depth and the value relating to that floor area.
Kwok Family Interests (KFI)
Joint venture partner in the Seagrave Road project.
LBHF
The London Borough of Hammersmith & Fulham.
LIBOR
London Interbank Offer Rate
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 net debt to the book value of property.
Net Debt
Total borrowings less cash and cash equivalents
Nominal equivalent yield
Effective annual yield to a purchaser on the gross market value, 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.
Net rental income (NRI)
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.
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 such as from car parks etc. Contracted annual rents in respect of tenants
in administration are excluded.
Pro forma
The pro forma basis as outlined on page 140 of the Group's prospectus dated 12 March 2010.
RBKC
The Royal Borough of Kensington & Chelsea.
REIT
Real Estate Investment Trust.
SARB
South African Reserve Bank
Section 34A Housing Act 1985
An amendment to the 1985 Act 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), or, to take
over responsibility for managing the housing services provided by their local authority landlord. The legislation only applies to
social rented tenants of local authorities. It does 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 introduced.
Tenant (or lease) incentives
Any incentives offered to tenants 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.
Total property return
Capital growth including gains and losses on disposals plus rent received less associated costs, including ground rent.
Total return
The growth in EPRA adjusted, diluted NAV per share plus dividends per share during the period
Total shareholder return
The increase in the price of an ordinary share plus dividends during the period assuming re-investment in ordinary shares.
Underlying earnings
Profit for the year excluding impairment charges, net valuation gains/losses (including profits/losses on disposals), net
refinancing charges and swap termination costs.
Weighted average unexpired lease term
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 in to 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')
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.
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
Date: 28/02/2013 09:00:00 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,
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