Wrap Text
Interim Report for the Six Months Ended 30 June 2013
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
30 July 2013
CAPITAL & COUNTIES PROPERTIES PLC ("Capco")
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2013
Ian Hawksworth, Chief Executive of Capco commented: "We have seen strong progress at Capco in the first half of 2013
which has delivered excellent total returns for our shareholders. Value has grown at Covent Garden through the creative
asset management strategy, with a number of key lettings in the period including Dior and the opening of Shake Shack. The
outline planning process for the Earls Court Masterplan is nearly complete following the Mayor of London's endorsement, and
the land assembly is well advanced with the acquisition of Empress State and the recent progress with Transport for
London."
Strong valuation performance providing superior shareholder returns
- 14 per cent increase in EPRA adjusted, diluted NAV to 232 pence per share (Dec 2012: 203 pence)
- 13 per cent (like-for-like) increase in total property value to GBP2.1 billion (Dec 2012: GBP1.7 billion)
- Proposed interim 2013 dividend of 0.5 pence per share
- 15 per cent total return in the period
Value growth through continued transformation at Covent Garden
- Total property value of GBP1.1 billion up 14.1 per cent (like-for-like) (Dec 2012: GBP952 million)
- New lettings at 9.1 per cent above ERV
- ERV GBP55.9 million up 6.9 per cent (on a like-for-like basis), on target for ERV of GBP60-65 million by end of 2015
- 12 new retailers and restaurants have taken space in the first 6 months, including Dior, Y-3 and Shake Shack
- Kings Court planning applications for a new mixed use development submitted in May
Value creation at Earls Court through planning and land assembly
- Earls Court interests valued at GBP417 million, up 18.5 per cent (like-for-like) (Dec 2012: GBP336 million)
- Mayor of London consent for the Earls Court Masterplan and the Section 106 agreement
- Agreement with TfL to pursue proposals to settle heads of terms for a joint venture regarding Earls Court 1 and 2
- Completion of land deal with Network Rail in regards to its air space over the West London Line
- Secretary of State consent for land deal with London Borough of Hammersmith & Fulham
- Contracts exchanged on the 50 per cent of the Empress State Building not already owned for GBP117 million
Momentum at Lillie Square
- Lillie Square valued at GBP125 million (our share), up 16.9 per cent (like-for-like) (Dec 2012: GBP104 million)
- Design amendments to enhance the Lillie Square scheme submitted to LBHF for approval
Strong financial position
- LTV 14% (Dec 2012: 10%)
- Cash and available facilities of GBP344 million (Dec 2012: GBP401 million)
- Further capital recycled with contracts exchanged for the sale of the final asset in The Great Capital Partnership
FINANCIAL HIGHLIGHTS
Comprising June 2013 December 2012
15% Total return for the 6 months to 30 June 2013
EPRA adjusted net asset value GBP1,785m GBP1,553m
EPRA adjusted net asset value per share 14% 232p 203p
Dividend per share paid during the period 1% 1.0p 1.5p
14% Total property return for the 6 months to 30 June 2013
Total property portfolio 12% GBP2,071m GBP1,721m
Profits on disposal GBP5m GBP35m
Net rental income 2% GBP32.2m GBP65.3m
Underlying earnings per share 0.6p 1.8p
Outlook
Capco remains well positioned to create and grow value, driving superior shareholder returns through its focus on retail and
residential properties in central London.
The volatility within the capital markets over the past few months illustrates the continued uncertainty of the macroeconomic
outlook. Nevertheless, demand for prime assets within central London continues to be very strong, with a deep pool of
domestic and foreign buyers. Rental growth remains underpinned by requirements for new space on central London's prime
pitches from retailers and restaurants.
Covent Garden has again demonstrated its appeal to global brands, and this is expected to continue to drive rental growth
towards the 2015 ERV target of GBP60-65 million. The Kings Court and Carriage Hall scheme is intended to improve circulation
and rental values on the western end of the estate, and Capco looks forward to a decision from Westminster City Council
which would allow it to progress the scheme in 2014.
The Earls Court Masterplan continues to move forward. Following the recent news of progress with TfL, we look forward to
finalising the agreement in the second half of 2013. Alongside this process, the detailed planning applications will allow
Capco to consider the first stages of the implementation of the Earls Court Masterplan within the Earls Court Village and
North End Village on the eastern and western sides of the site, respectively.
Lillie Square will provide the first evidence of the demand for premium residential product in the Earls Court area, and the
partners are focused on achieving a successful sales launch.
ENQUIRIES
Capital & Counties Properties PLC
Ian Hawksworth Chief Executive +44 (0)20 3214 9188
Soumen Das Finance Director +44 (0)20 3214 9183
Public relations
UK: Michael Sandler/Wendy Baker, Hudson Sandler +44 (0)20 7796 4133
SA: Nicholas Williams/Vanessa Hillary, College Hill Associates +27 (0)11 447 3030
A presentation to analysts and investors will take place today at 9:00am BST at UBS, 100 Liverpool Street, London, EC2M
2RH. The presentation will also be available to international analysts and investors through a live audio call and webcast and
after the event on the Group's website www.capitalandcounties.com.
A copy of this announcement 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).
OPERATING REVIEW
Overview
Capco is a property company with a focus on central London which aims to deliver market-leading total returns through value
growth at Covent Garden and value creation at Earls Court. Capco unlocks the potential of its assets through an
entrepreneurial and active asset management strategy creating sustainable long-term value for shareholders.
Capco is focused on the retail and residential markets of central London which continue to perform well. The London retail
market has remained positive, with anecdotal evidence of strong retail sales growth in the West End over recent months.
International retailers are still looking for space in the prime retail streets in London with several flagship stores opening in
2013, therefore demand remains strong for high quality space in high footfall locations. The residential market has also
performed well with an increase in volumes.
Valuations
The external valuation of Capco's assets has risen strongly in the first half of the year, with the portfolio valued at GBP2.1 billion,
a like-for-like increase of 13.3 per cent. This compares favourably with the IPD index of UK property which fell 0.4 per cent in
the period.
Market Market
Value Value Market
Jun-13 Dec-12 Value ERV Initial Equivalent
GBPm GBPm Change (1,2) Change (1) Yield Yield
Covent Garden 1,101 952 14.1% 6.9% 3.3% 4.8%
EC Properties
Earls Court 417 336 18.5%
Lillie Square(3) 125 104 16.9%
Empress State(4) 234 110 6.4%
Other 47 25 18.3%
Venues 147 146 (2.5)%
Other(5) 48
Total property 2,071 1,721 13.3%
(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.
(4) Previously shown as 50 per cent, prior to acquisition of control in May 2013.
(5) GCP (Capco's 50 per cent share).
Covent Garden has been revalued at GBP1.1 billion, with the strong letting performance in the first half reflected in the ERV
growth. The equivalent yield has reduced by 0.3 per cent reflecting the continued demand for prime investment assets in
central London.
The land interests within EC Properties have shown positive valuation movement in the first half of 2013, due to the positive
milestones achieved in the planning and land assembly process, as well as the strong conditions in the central London
residential market.
COVENT GARDEN
Covent Garden has become a world class destination as a result of the first stage transformation under Capco's
management. The next objective is to establish Covent Garden as the best retail and residential district in the capital,
allowing shareholders to benefit from the growth in capital values and rents.
In the first six months of the year, value growth in the Covent Garden estate has continued, with the estate valued at GBP1.1billion,
an increase of 14.1 per cent on a like-for-like basis. ERV has increased to GBP55.9 million, a like-for-like increase of
6.9 per cent and the estate remains on target to reach GBP60-65 million of ERV by December 2015. Gross income at 30 June 2013
was GBP39.4 million.
Year to date, 33 letting transactions (excluding those with non-standard terms such as development breaks) representing
GBP4.2 million of rental income per annum were executed at 9.1 per cent above ERV at the point of the lease activity. Footfall
remains consistently strong with 44 million visits annually and the estate maintains 99 per cent occupancy.
Retail
In line with the strategy to grow the premium retail offering in the area, and following the success of the Chanel boutique,
French fashion house Dior will be opening a new luxury beauty concept store, setting a new Zone A rent of over GBP500psf for
the north range of the Market Building. Continuing the beauty trend in the area, Aveda will be taking space on Russell Street
and Australian skincare brand Aesop opened its doors in July on King Street. In addition to the luxury beauty offering in the
Market Building, premium stationary brand Il Papiro took Unit 14 in the Market Building in June.
King Street also welcomed Twenty8Twelve and Sandro which opened in February and July, respectively and Brazilian
footwear brand Galeria Melissa will be opening a flagship store in 43 King Street in early 2014. Cult yogawear brand
lululemon athletica opened a showroom and yoga studio on Floral Street in April and will be joined by luxury sportswear
concept Y-3 in September.
Dining
In July Covent Garden welcomed Danny Meyer's American burger phenomenon Shake Shack to the Market Building, taking
space previously occupied by New York Deli and the Icecreamists. It is the first in the UK and opened to hour-long queues. It
has enhanced footfall to the area, furthering the estate's reputation as the neighbourhood for destination dining.
Godiva, the luxury chocolatier, has taken Unit 2 in the Market Building and will be opening in the coming months. Premium
coffee house, Andronicas, will be taking a second location on Floral Street following the ongoing success of its location in the
Market Building. Following its opening in February, Keith McNally's Balthazar and the Balthazar Boulangerie continue to be a
destination for Londoners and visitors alike.
Residential
In line with the strategy of introducing luxury residential to Covent Garden, The Russell was launched in April. The second
office-to-residential conversion, The Russell comprises two duplex penthouses and three lateral apartments which overlook
the Piazza. The first sale completed in May with a 9 per cent increase on the price per square foot achieved at The Henrietta
and interest in the remaining apartments remains high. Work is continuing on site at The Beecham, another landmark
building on the south-west corner of the Piazza, and The Southampton, both of which will come to market in 2014.
Future developments and acquisitions
The acquisition of a 125 year lease over 38 King Street was completed in January 2013 from the Trustees of the Africa
Centre.
In May a series of planning applications were submitted to Westminster City Council for the creation of a new mixed-use
development between Floral Street and King Street. The proposed development, known as Kings Court, covers over 90,000
square feet, of which 20,000 square feet is new space. In addition, a planning application was submitted for the
refurbishment of Carriage Hall. Comprehensive public consultation has been undertaken regarding the proposals with
stakeholders in the Covent Garden area including the Covent Garden Area Trust, local ward councillors, planning officers,
retailers and residents.
The proposals enhance the retail offering on Floral Street including a new retail anchor, and will create a new retail passage
connecting Long Acre and King Street which aims to improve pedestrian movement in the district and opens the existing
courtyard area to the public. High quality new residential space will be created on the upper levels with views over the
courtyard and retail and restaurant space on the ground level.
EARLS COURT MASTERPLAN
Capco's interests on the eastern side of the Masterplan, covering 23 acres, comprise the leasehold interests of the Earls
Court Exhibition Centres and the freehold of the Northern Access Road. Progress in the planning and land assembly process
along with the strong conditions in the central London residential market have resulted in a considerable uplift in the valuation
of these interests. At 30 June these interests were valued at GBP417 million, an increase of 18.5 per cent since December 2012
on a like-for-like basis. This implies a value of GBP18.4 million per acre. In arriving at their valuation of Capco's interests, the
external valuers have taken into account the terms of the joint venture structure announced on 18 July following Transport for
London's ("TfL") Finance & Policy Committee meeting.
The land relating to the Conditional Land Sale Agreement ("CLSA") has not been revalued, as this remains subject to a
detailed process with the first tranche of land drawdown not before December 2015. The GBP15 million paid originally for the
Exclusivity Agreement is now held as a prepayment against a future trigger of the option, whilst the properties acquired
earlier this year after signing the CLSA are accounted for as investment properties and accordingly were revalued as at
30 June.
Empress State has been revalued to GBP234 million, an increase of 6.4 per cent on a like-for-like basis since 31 December
2012.
Planning momentum
The outline planning process for the Earls Court Masterplan, one of the largest regeneration projects in London, is now
almost complete.
In July, the Mayor of London formally completed his review of the Earls Court Masterplan outline planning applications and
the Section 106 agreement and confirmed his acceptance that the outline planning applications be granted by the London
Borough of Hammersmith & Fulham ("LBHF") and the Royal Borough of Kensington & Chelsea ("RBKC"). This follows the
resolutions to grant consent from both councils in 2012. The next step in the process is the current review by the Secretary of
State for the Department of Communities and Local Government ("DCLG") of the outline planning applications and the
Section 106 agreement to determine whether to call them in. The Section 106 agreement is the package of benefits to the
local area that will be delivered as the implementation of the Masterplan is progressed.
A judicial review hearing was held in July in relation to the Supplementary Planning Document ("SPD"). The SPD is an
additional planning framework which supported the existing and approved LBHF and RBKC Core Strategies in regard to the
regeneration of the Earls Court & West Kensington Opportunity Area ("ECOA"). A decision has not yet been made. The risk
of further judicial challenge against planning decisions or land assembly cannot be discounted and will in part depend on the
outcome of the existing judicial review.
Work is currently underway on detailed planning applications covering the Earls Court Village and the first phase of the North
End Village. It is envisaged these will be submitted later this year.
Progress on land assembly
The land assembly process in relation to the Earls Court Masterplan is well advanced. Most recently, in July TfL and Capco
agreed to pursue proposals to settle heads of terms for a joint venture to enable the development of Earls Court 1 & 2 in line
with the Earls Court Masterplan. This approach was endorsed by TfL's Finance & Policy Committee which met on 18 July.
The agreement remains subject to Capco and TfL Board approvals.
TfL owns the freehold to the exhibition centres known as Earls Court 1 & 2, and Capco is the leaseholder of both sites. The
agreement will enable the two organisations to establish a joint entity which will own a new 999 year lease over the 23 acre
site described above, incorporating Earls Court 1 & 2, the Northern Access Road and Earls Court 2's air rights over the West
London Line. It is envisaged that ownership of the joint venture will be split 63 per cent to Capco and 37 per cent to TfL,
which reflects the value created by combining both organisations' respective freehold and leasehold interests. No cash
consideration will be payable by either party. Under the joint venture, Capco will be the exclusive development manager,
which will enable a comprehensive approach to be taken for the implementation of the Masterplan for the wider ECOA. At
this stage, no agreement is in place regarding the Lillie Bridge Depot, however TfL has stated it will form part of the Earls
Court Masterplan if and when it is operationally feasible to do so.
In March the agreement with Network Rail was completed regarding the air rights above the West London Line where it runs
within the ECOA. As part of the agreement, Capco has secured a new 999 year lease to replace the existing lease in respect
of the Earls Court 2 site for an initial consideration of GBP5.3 million. Within the terms of the agreement, Capco can exercise
options for a period of 50 years for further 999 year leases over the remainder of the West London Line to allow for
development of the Lost River Park within the Earls Court Masterplan. Network Rail is entitled to further payments of 5.55%
of the residual land value which will be payable at the time of development or disposal of each phase of the Masterplan.
In April the Secretary of State for DCLG gave consent to the Conditional Land Sale Agreement ("CLSA"). The CLSA provides
Capco with the option to acquire approximately 22 acres of land in the ECOA for GBP105 million and the replacement of the 760
homes currently on the West Kensington and Gibbs Green housing estates. In July, an exhibition was held for residents of
the estates to illustrate the potential phasing of the redevelopment of the land within the CLSA and the potential location of
the replacement homes. This consultation, together with the planning work for the North End Village, may put Capco in a
position to trigger its option under the CLSA in the next year. However the first land drawdown and first payment of the
remaining consideration would not occur until December 2015.
The application for the judicial review in relation to the CLSA was refused for a second time in April at an oral hearing, after
being denied initially in January.
Capco acquired control of 100 per cent of the Empress State Building in May having exchanged contracts with Land
Securities Group PLC for the 50 per cent not already owned for a price of GBP117 million. Completion is expected in early
August, and a new 5 year debt facility has been agreed. The Empress State Building is a 451,000 sq ft, 31 storey, office
building located adjacent to the ECOA. 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 Earls Court
Masterplan.
LILLIE SQUARE
The valuation of Capco's 50 per cent interest in Lillie Square (formerly Seagrave Road) increased to GBP125 million as at
30 June 2013, a like-for-like increase of 16.9 per cent since December 2012.
The joint venture with the Kwok Family Interests (KFI) on the Lillie Square project continues to make positive progress. In
collaboration with our JV partner, the focus of the Lillie Square joint venture is on finalising the design of the scheme and
preparing for the sales and marketing launch alongside the construction contracts. Design amendments were submitted to
LBHF earlier this year to enhance the consented scheme and it is hoped that these will be approved shortly. The build costs
for this enhanced scheme are estimated to be GBP360 million, with a peak capital requirement of GBP100 million due to the
phasing of the scheme.
Opportunities to enhance the development through strategic acquisitions to the north of the site continue to be investigated.
As part of this ongoing investigation a planning application was submitted in July for the property at 1-9 Lillie Road. Should
they proceed, the proposals for 65 residential units and new commercial space will further enhance the overall scheme and
public realm around West Brompton Station.
The sales and marketing programme is being finalised for the launch of pre-sales within the next six to twelve months.
As outlined in the annual results in February 2013, Capco notes the ongoing legal situation in Hong Kong regarding charges
brought by the ICAC against certain members of the Kwok family, but the operation of the joint venture continues to be
unaffected.
VENUES
The valuation of Olympia London was GBP147 million as at 30 June 2013, down 2.5 per cent on a like-for-like basis. This now
incorporates Olympia London's ancillary assets, principally its marshalling area, which were previously included as other
assets under the former Earls Court & Olympia segment, and valued at GBP22 million as at 30 June 2013. The EBITDA of the
Venues business was GBP6.6 million, down 18 per cent compared to the first half of 2012. This decline in performance was
expected due to the continued uncertainty within the Venues business at Earls Court as a result of the ongoing progress with
the Earls Court Masterplan. Earls Court is currently taking bookings for 2014.
Olympia London continues to attract new shows and retain its existing business following its successful rebrand. In March
Olympia London hosted Art 13, a new global art fair and later welcomed The Telegraph Cruise Show which attracted over
17,000 visitors, a 15 per cent increase on the previous year.
In line with the on-going improvement works to enhance Olympia London, a series of planning applications will be submitted
in the coming months. The proposals will reinstate and enhance the entrance to the Olympia Grand and provide
improvements to Olympia Way such as cycle lanes, improved surfaces and signage.
GREAT CAPITAL PARTNERSHIP AND CHINA
Contracts were exchanged for the sale of the final asset in the Great Capital Partnership, Park Crescent West, during the first
half at a price of GBP52.5 million (Capco share). This represents the culmination of asset sales in the joint venture partnership.
In total the Great Capital Partnership has successfully recycled GBP338 million of capital (Capco share) back into the core
business over the last 3 years.
In light of the final sale of the investments in China, the Group continues to evaluate future opportunities which could deliver
comparable returns.
DIVIDENDS
The Board has proposed an interim dividend of 0.5 pence per share to be paid on 25 September 2013 to shareholders on the
register at 30 August 2013. Subject to SARB approval, a scrip dividend alternative will be offered.
FINANCIAL REVIEW
Strong valuation results for the first half of 2013 have contributed to a 14.4 per cent increase in EPRA adjusted, diluted net
asset value per share, increasing from 203 pence at 31 December 2012 to 232 pence. This 29 pence increase together with
the 1 pence dividend paid in June represents a total return of 15 per cent in the period.
Both yield compression and ERV growth at Covent Garden increased the value of the estate by 13.9 per cent (14.1 per cent
like-for-like), the result of a strong Central London retail market for which there is limited supply and increased residential
sales values being achieved in prime locations.
The value of the Group's existing land interests at Earls Court has increased by 12.7 per cent (16.0 per cent like-for-like), as
a result of the positive milestones achieved in the planning and land assembly process, as well as the strong conditions in the
central London residential market. In respect of the Group's Earls Court leasehold interests, Jones Lang LaSalle, the Group's
external valuers at Earls Court, has attributed a land value of GBP18.4 million per acre which compares to GBP14.8 million at
31 December 2012.
Restatement of 2012 comparatives
The recent adoption of the amendments to IAS 12 'Income Taxes', has required the Group to re-present 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 30 June 2012 IFRS reported net asset position
and profit after tax by GBP1.6 million.
Control acquired of former joint venture
In May 2013 the Group acquired 100 per cent control of The Empress State Limited Partnership which owns and manages
the Empress State Building, a building adjacent to the Group's property interests at Earls Court. Having exchanged contracts
with Land Securities Group PLC to acquire its 50 per cent limited partnership interest, the transaction is accounted for as a
business combination. From the date of exchange the Partnership is fully consolidated with Land Securities' share reported
as a non-controlling interest. Completion is expected in August 2013.
A brief summary of the impact on the Group's 30 June 2013 balance sheet is set out below:
Balance sheet GBPm
Investment property Increased by 117.0
Borrowings Increased by (65.7)
Other net liabilities Increased by (6.9)
Change in net assets 44.4
Less: Non-controlling interest (44.4)
Net change
Since the acquisition of control, GBP0.5 million has been recorded in the Group's income statement representing profit which is
attributable to the non-controlling interest.
Total cash outflow following completion is expected to be approximately GBP65 million. This comprises consideration payable
for the non-controlling interest's share of net asset value (as above), reorganisation of the partners' loan accounts,
transaction costs and paydown of debt upon refinancing.
Discontinued operations
In June, The Great Capital Partnership, the joint venture between the Group and Great Portland Estates, announced the sale
of its final asset, Park Crescent West, which marked the culmination of the partnership's activities.
As The Great Capital Partnership has historically represented a separate major line of business, its results and cash flows
have been reported as at 30 June 2013 as having arisen from a discontinued operation. The requirement extends to the
comparative periods which have been re-presented in line with reporting requirements. For the purposes of this financial
review, continuing and discontinued operations have been combined.
Segmental analysis
With the cessation of The Great Capital Partnership and the changes more widely in the business over the past six months,
the Group has revised its segmental analysis. As a result of these changes the discontinued activity within The Great Capital
Partnership is now disclosed within 'Other'. The segment previously called Earls Court & Olympia has been split in two: EC
Properties and Venues. EC Properties comprises land interests at Earls Court and Lillie Square (previously Seagrave Road)
together with the Empress State Building. Venues comprises the exhibition business including the Olympia property interests.
Covent Garden remains unchanged.
Conditional Land Sale Agreement (CLSA)
On 23 January 2013 the Group entered into the CLSA with the London Borough of Hammersmith & Fulham ("LBHF") for the
purchase of the West Kensington and Gibbs Green housing estates.
The overall consideration payable is expected to be GBP105 million cash plus the planning requirement to provide up to 760
replacement homes.
Of the consideration, GBP15 million was paid during 2012 under an Exclusivity Agreement and is carried on the Group's balance
sheet as a prepayment towards future land draw down. A further GBP15 million was paid in January 2013 upon exchange for the
acquisition of two property assets. The residual GBP75 million due will not crystallise until exercise of the option.
Prior to exercise of the option the Group has certain obligations. These are in part linked to the exercise of the option but
subject to an overall cap of GBP55 million. Should any payments be made in respect of these obligations they will be deducted
from the total consideration due to LBHF.
FINANCIAL POSITION
At 30 June 2013 the Group's EPRA adjusted net assets were GBP1.8 billion representing 232 pence per share adjusted and
diluted, an increase of 29 pence per share since 31 December 2012.
This 29 pence increase can be attributed to the gains on revaluation of, and sales from, the Group's property portfolio, with
underlying income of 0.6 pence being offset by the payment of the 2012 final dividend.
30 June 31 December
2013 2012
GBPm GBPm
Investment and trading property 1,992.2 1,670.6
Net debt (281.1) (163.5)
Other assets and liabilities (24.7) (29.3)
IFRS net assets 1,686.4 1,477.8
Fair value of derivative financial instruments 22.9 30.8
Unrecognised surplus on trading properties 62.8 37.5
Deferred tax liabilities on exceptional items and other 12.5 6.9
EPRA adjusted net assets 1,784.6 1,553.0
EPRA adjusted, diluted net assets per share (pence) 232 203
Investment and Trading Property
Total property return for the period was 14.1 per cent which compares favourably to the IPD Total Return index for the
corresponding period which recorded a 2.9 per cent increase.
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 net realisable value. Any difference
between the carrying value and market value are however captured within the EPRA adjusted, diluted net asset measure.
At 30 June 2013, the unrecognised surplus on trading property was GBP62.8 million, up from GBP37.5 million at 31 December
2012. This principally arises on property assets at Lillie Square, which has been consented for the development of residential
units for sale.
Property acquisitions in the period totalled GBP32 million, in the majority small but strategic acquisitions at Earls Court. Property
disposals were GBP56 million, primarily the sale of The Great Capital Partnership's final asset, Park Crescent West, with
consideration due on completion which is expected in the third quarter.
Debt & Gearing
Excluding the debt assumed on the acquisition of control of Empress State, net debt increased by GBP52 million in the period
principally the result of property acquisitions and capital expenditure (GBP61 million) offset by proceeds from the sale of two
residential units at Covent Garden (GBP9 million).
Debt repayments in the period were GBP7.1 million, GBP4.8 million of which was paid on maturity of The Great Capital
Partnership's debt facility in March 2013.
The gearing measure most widely used in the industry is loan-to-value ("LTV"). LTV as at 30 June 2013 was 14 per cent. The
LTV remains comfortably within the Group's current target of no more than 40 per cent.
30 June 31 December
2013 2012
Property Loan-to-value 14% 10%
Interest cover 157% 172%
Weighted average debt maturity 5 years * 4.8 years
Weighted average cost of debt 4.3% * 5.2%
Proportion of gross debt with interest rate protection 100% 100%
* Proforma adjusted for the new finance facility secured over the Empress State Building.
A new five year GBP119 million facility has been agreed to refinance the existing debt facility secured on the Empress State
Building. The next debt maturity is the GBP300 million facility secured over Covent Garden which falls due in 2016. This facility,
which is currently drawn to GBP158 million, can be extended for a further two years at the Group's option subject to meeting
certain financial covenants.
The Group is compliant with all of its debt covenants. A detailed breakdown of debt by maturity together with the latest
covenant test results is shown in Appendix 3.
The Group's policy is to substantially eliminate the short and medium-term risk arising from interest rate volatility. The
Group's banking facilities are arranged on a floating-rate basis, but swapped to fixed-rate or capped using derivative
contracts coterminous with the relevant debt facility. At 30 June 2013, the proportion of gross debt with interest rate protection
was 100 per cent.
The Group has capital commitments of GBP74.5 million at 30 June 2013 which compares to GBP21.4 million at 31 December 2012.
In respect of the acquisition of the residual 50 per cent non-controlling interest in the Empress State Partnership, the above
includes consideration of GBP44 million due on completion.
CASHFLOW
A summary of the Group's cash flow for the period to 30 June 2013 is presented below:
30 June 30 June
2013 2012
GBPm GBPm
Recurring cash flows after interest and tax 4.6 6.1
Property investments and developments (61.0) (32.7)
Sale proceeds of property and investments 9.6 125.1
VAT paid on internal restructure (22.2)
Cash flow before financing (46.8) 76.3
Financing (7.1) (106.9)
Dividends paid (3.9) (5.7)
Net cash flow (57.8) (36.3)
Typically the main cash flow items are operating cash flows, dividends paid and capital transactions undertaken.
Recurring cash flow was GBP4.6 million compared to GBP6.1 million for the equivalent period of 2012, the result of the reduction in
net rental income being significantly offset by lower finance charges.
Capital transactions comprise property acquisitions and disposals, together with investment and divestment in other long-
term assets.
During the period, the Group completed property acquisitions of GBP32 million and incurred development expenditure of
GBP29 million, mainly in respect of Earls Court and Lillie Square.
Of the proceeds from the sale of property and investments, GBP9 million was received following the sale of two residential units
at Covent Garden.
Financing cash flows relate to the repayment on maturity of The Great Capital Partnership facility in March 2013 together with
scheduled amortisation payments on the Empress State debt facility.
Dividends paid of GBP3.9 million reflect the final dividend payment made in respect of the 2012 financial year. This was lower
than the previous six month period due to the scrip dividend alternative, the take up of which was significantly higher at
48 per cent.
Cash and undrawn committed facilities at 30 June 2013 were GBP344 million.
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
30 June 2013 30 June 2012
GBPm GBPm
Net rental income 32.2 34.1
Other income 2.6 2.1
Gain on revaluation and sale of investment property 197.5 79.1
Administration expenses (15.5) (12.4)
Net finance costs (1.5) (14.3)
Profit on available for sale investments 10.4
Other (0.9)
Taxation (2.6) (2.2)
IFRS profit for the period attributable to owners of the Parent 211.8 96.8
Adjustments:
Other income (2.6) (2.1)
Gain on revaluation and sale of investment property (197.5) (79.1)
Change in fair value of derivative financial instruments (9.2) (1.2)
Profit on sale of investments (10.4)
Other adjustments 1.1 1.8
Taxation on non-underlying items 1.2 0.3
Underlying profit after tax 4.8 6.1
Underlying earnings per share (pence) 0.6 0.9
Income
Net rental income fell by GBP1.9 million (4.6 per cent like-for-like) in the period when compared to the comparative six month
period of 2012. Of this reduction GBP5.2 million is attributed to the sale of properties within The Great Capital Partnership and
the weaker performance of the Venues business. This has been offset by increased income at Covent Garden and income
arising from EC Properties which includes the Empress State Building and a number of small income producing assets.
Given the acquisition of control of Empress State in May 2013, this segment is expected to benefit from the increased rental
income associated with full control of the Empress State building and its RPI-linked lease.
Other income of GBP2.6 million includes trading property profits of GBP2.4 million which arose on the sale of two residential units at
Covent Garden.
Gain on revaluation and sale of investment property
The gain on revaluation of the Group's investment property portfolio was GBP194.7 million. Profits recorded on the sale of
investment property were GBP2.8 million, the result of the sale of the last Great Capital Partnership asset, Park Crescent West.
Administration expenses
Underlying administration expenses increased 25 per cent to GBP15.5 million. The increase is in line with expectation and
indicative of normalised operating costs. GBP4.2 million of the administration expenses for the period related to charges
associated with the Group's equity based compensation schemes, which are linked in part to share price performance.
Net finance costs
Excluding gains of GBP9.2 million recorded on the change in fair value of derivatives, the Group's underlying net finance costs
for the period fell to GBP10.7 million from GBP13.7 million in 2012.
This reduction reflects the impact of various debt prepayments and repayments together with the benefit of refinancing in a
historically low interest rate environment.
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:
- Other income of GBP2.6 million, of which profit on sale of trading property arising on the sale of two residential units
at Covent Garden represented GBP2.4 million;
- Exceptional charges of GBP0.4 million.
Taxation
The total tax charge for the period was GBP2.6 million which is made up of both underlying tax and exceptional tax.
The underlying tax charge for the period was GBP1.4 million reflecting an underlying tax rate of 23 per cent. This is broadly in
line with the average rate of UK corporation tax for 2013 of 23.25%. The UK corporation tax rate is expected to fall to 20%
from April 2015.
The exceptional tax charge of GBP1.2 million predominantly relates to disposals 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. 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 12 would result in a corporation tax charge to the Group
of GBP14.5 million (23 per cent of GBP62.8 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.
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 over 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.
The Board has reviewed the principal risks in the context of the first half of the current financial year. There have been no
significant changes to the principal risks and uncertainties as disclosed in the Annual Report and Accounts for the year ended
31 December 2012. What follows are the principal risks and uncertainties from across the business. These are not
exhaustive. The Group monitors a number of additional risks and adjusts those considered 'principal' as the risk profile of the
business changes.
Financing risks
Risk Impact potential Mitigation factors
Impact: Reduced or limited availability of debt or equity finance may reduce the Group's profitability or 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 general rise Reduced financial and operational flexibility Maintain appropriate liquidity to cover
in interest rates could impact the availability and delay to works. commitments.
and cost of debt financing. Target longer and staggered debt 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.
Economic Risks
Risk Impact potential Mitigation factors
Impact: Economic factors may threaten the Group's ability to meet its strategic objectives or return targets.
Increased competition, changes in social Declining profitability. Focus on prime assets and quality tenants
behaviour or deteriorating profitability and ERV targets not achieved. with initial assessment of credit risk and
confidence during a period of economic Reduced rental income and/or capital values. active credit control.
uncertainty.
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 real Declining valuations. Focus on prime assets.
estate market heightened by continued Regular assessment of investment market
global macro-economic conditions or conditions including bi-annual external
currency fluctuations. valuations.
Restricted availability of credit and higher tax Decline in demand for the Group's Regular monitoring of covenants with
rates and macroeconomic factors may lead properties, declining valuations, and reduced headroom maintained.
to reduced consumer spending and higher profitability.
levels of business failure.
PRINCIPAL RISKS AND UNCERTAINTIES
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 cost base. Sound governance and internal policies with
challenges. appropriately skilled resource and support
from external advisers as appropriate.
Responding to reputational, communication Reputational damage and increased costs. Appointment of experienced individuals with
and governance challenges. clear responsibility and accountability. 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 correctly Constraints on growth and reduced Regular strategic reviews and monitoring of
allocate capital. profitability. performance indicators.
Corporate level oversight of capital
allocation. Detailed capital planning and
financial modelling. Maintain adequate cash
and available facilities together with
conservative leverage.
Adequacy of partner evaluation and Reduced profitability, delay or reputational Appropriate due diligence and consultation.
management of key suppliers. damage.
Ineffective operation of joint ventures. Inability to execute business plans. Appropriate governance structure and
documentation. Regular dialogue and
reporting.
Risk associated with attracting and retaining Inability to execute business plan. Succession planning, performance
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 or Loss or injury to employees, tenants or Comprehensive health and safety
other statutory regulations or notices. contractors and resultant reputational procedures in place across the Group and
damage. monitored regularly. External consultants
undertake annual audits in all locations. Safe
working practices well established, including
staff communication and training.
Group structure brings heightened tax Competitive disadvantage. Group tax policy.
exposure. Non-REIT status has a potential Open and transparent engagement with HM
competitive disadvantage when bidding for Revenue & Customs.
new assets. Lower returns.
Concentration of investments
Risk Impact potential Mitigation factors
Impact: Heightened exposure to events that threaten or disrupt central London.
Events which damage or diminish London's Loss or injury, business disruption or Terrorist insurance in place.
status as a global financial, business and damage to property. Security and health & safety policies and
tourist centre could affect the Group's ability procedures in offices. Close liaison with
to let vacant space, reduce the value of the police and National Counter Terrorism
Group's properties and potentially disrupt Security Office (NaCTSO).
access or operations at the Group's head
office. Changes to or failure of infrastructure. Disaster recovery and business continuity
planning.
Concentration of higher profile events in
central London. Active involvement in organisations and
industry bodies promoting London.
PRINCIPAL RISKS AND UNCERTAINTIES
Development risks
Risk Impact potential Mitigation factors
Impact: Inability to deliver against development plans, particularly regarding ECOA.
Unable to secure planning consent due to Delayed implementation or reduced Pre-application and continued consultation
political, legislative or other risks inherent in development opportunity with corresponding and involvement with key stakeholders and
the planning environment. impact on valuation. landowners.
Engagement with relevant authorities at a
Risk of change or delay due to Mayor of local and national level to ensure
London or Secretary of State intervention or development proposals are in accordance
judicial reviews. Inability to gain the support with current and emerging policy.
of influential stakeholders. Project team of internal staff and external
consultants with capabilities across all
relevant areas.
Failure to demonstrate or implement viable
development due to legal, contractual, Technical studies with regular review.
environmental, transportation, affordable Responsive consultation with evidence
housing or other technical factors. based information and focus on agreed
statements of common ground.
Inability to reach agreement on lease Likely negative impact on valuations and Informed market valuation and open
extension, renegotiation of use or land deals Group's returns or delay to works. dialogue with adjacent landowners.
with adjacent landowners on acceptable Restricted optionality in delivery of
terms (including risk of Section 34A of the development. Earls Court Masterplan designed to allow
Housing Act 1985 in relation to land subject phased implementation.
to CLSA).
Construction costs increase e.g. due to Reduced profitability of development. Extensive consultation, design and technical
market pricing, unforeseen site issues or work undertaken.
longer build period. Punitive cost, design or Properly tendered or negotiated processes to
other implications. select contractors and manage costs.
Market demand assessments. Pre-sales and
Volatility in sales price marketing.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the condensed set of financial statements, in accordance with applicable law and
regulations. The Directors confirm that, to the best of their knowledge:
- the condensed set of financial statements on pages 17 to 41 has been prepared in accordance with IAS 34 'Interim
Financial Reporting', as adopted by the European Union; and
- the condensed set of financial statements on pages 17 to 41 includes a true and fair view of the information required
by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
The operating and financial review on pages 3 to 11 refers to important events which have taken place in the period.
The principal risks and uncertainties facing the business are referred to on pages 12 to 14.
Related party transactions are set out in note 24 of the condensed set of financial statements.
A list of current Directors is maintained on the Capital & Counties Properties PLC website: www.capitalandcounties.com.
By order of the Board
I D Hawksworth
Chief Executive
S Das
Finance Director
30 July 2013
INDEPENDENT REVIEW REPORT TO CAPITAL & COUNTIES PROPERTIES PLC
Introduction
We have been engaged by the company to review the condensed consolidated financial statements in the interim report for
the six months ended 30 June 2013, which comprises the Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated
Statement of Cash Flows and related notes. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed
set of financial statements.
Directors' responsibilities
The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by
the European Union. The condensed set of financial statements included in this interim report has been prepared in
accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim
report based on our review. This report, including the conclusion, has been prepared for and only for the company for the
purpose of the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not,
in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410,
'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices
Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might
be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial
statements in the interim report for the six months ended 30 June 2013 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
30 July 2013
London
Notes:
(a) The maintenance and integrity of the Capital & Counties Properties PLC website is the responsibility of the
directors; the work carried out by the auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
CONSOLIDATED INCOME STATEMENT (unaudited)
for the six months ended 30 June 2013
Re-presented
and restated Re-presented
Six months Six months Year ended
ended ended 31 December
30 June 2013 30 June 2012 2012
Notes GBPm GBPm GBPm
Continuing operations
Revenue 2 54.5 52.0 109.4
Rental income 45.4 45.7 91.6
Rental expenses (14.3) (15.6) (31.7)
Net rental income 2 31.1 30.1 59.9
Other income 3 2.6 2.1 6.1
Gain on revaluation and sale of investment and development property 4 194.7 60.7 190.9
Profit on sale of available for sale investments 5 8.7 10.0
Profit on sale of subsidiaries 1.7 1.7
Loss of control of former subsidiary (1.0)
Write down of trading property (0.9)
Write back of impairment of other receivables 0.6
Other exception charges (0.4)
228.0 103.3 267.3
Administration expenses (15.4) (12.7) (26.2)
Operating profit 212.6 90.6 241.1
Finance costs 6 (11.3) (11.6) (20.9)
Finance income 0.6 0.4 0.8
Other finance costs 6 (1.8) (2.0)
Change in fair value of derivative financial instruments 9.2 (0.1) (0.3)
Net finance costs (1.5) (13.1) (22.4)
Profit before tax 211.1 77.5 218.7
Current tax (2.5) (2.8) (3.9)
Deferred tax 0.1 1.2 (4.1)
Taxation 7 (2.4) (1.6) (8.0)
Profit for the period from continuing operations 208.7 75.9 210.7
Discontinued operations
Profit for the period from discontinued operations 9 3.6 20.9 29.3
Profit for the period 212.3 96.8 240.0
Profit attributable to:
Owners of the Parent 211.8 96.8 240.0
Non-controlling interests 8 0.5
Earnings per share from continuing operations
Basic earnings per share 11 27.7p 11.1p 29.9p
Diluted earnings per share 11 27.4p 11.1p 29.9p
Weighted average number of shares 11 752.8m 684.2m 703.7m
Earnings per share from discontinued operations and adjusted earnings per share from continuing and discontinued operations and are shown in note 14.
Notes on pages 23 to 41 form part of these consolidated financial statements.
The notes provide full details of the June 2012 comparatives restatement.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
for the six months ended 30 June 2013
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
GBPm GBPm GBPm
Profit for the period 212.3 96.8 240.0
Other comprehensive income/(expense)
Items that may be reclassified subsequently to the income statement
Fair value gains on available for sale investments and other movements 0.3 0.1 -
Realise revaluation reserve on disposal of available for sale investments (9.1)
Tax relating to items that may be reclassified (0.1) 0.4 2.0
Items that will not be reclassified subsequently to the income statement
Actuarial losses on defined benefit pension schemes - - (1.7)
Tax relating to items that will not be reclassified 0.4
Other comprehensive income/(expense) for the period 0.2 0.5 (8.4)
Total comprehensive income for the period 212.5 97.3 231.6
Attributable to:
Owners of the Parent 212.0 97.3 231.6
Non-controlling interests 0.5 - -
Arising from:
Continuing operations 208.9 76.4 202.3
Discontinued operations 3.6 20.9 29.3
Notes on pages 23 to 41 form part of these consolidated financial statements.
The notes provide full details of the June 2012 comparatives restatement.
CONSOLIDATED BALANCE SHEET (unaudited)
as at 30 June 2013
As at As at
30 June 31 December
2013 2012
Notes GBPm GBPm
Non-current assets
Investment and development property 12 1,886.5 1,586.2
Plant and equipment 1.2 1.0
Available for sale investments 3.9 3.6
Derivative financial instruments 16 1.0 0.5
Trade and other receivables 13 42.3 39.4
1,934.9 1,630.7
Current assets
Trading property 12 105.7 84.4
Trade and other receivables 13 74.6 25.9
Cash and cash equivalents 14 126.7 184.5
307.0 294.8
Total assets 2,241.9 1,925.5
Non-current liabilities
Borrowings, including finance leases 15 (270.0) (269.6)
Derivative financial instruments 16 (23.0) (29.3)
Pension deficit (0.4) (0.4)
(293.4) (299.3)
Current liabilities
Borrowings, including finance leases 15 (137.8) (78.4)
Derivative financial instruments 16 (0.9) (2.0)
Other provisions 17 (7.3) (7.3)
Trade and other payables 18 (69.1) (58.6)
Tax liabilities (2.6) (2.1)
(217.7) (148.4)
Total liabilities (511.1) (447.7)
Net assets 1,730.8 1,477.8
Equity
Share capital 20 188.6 188.3
Other components of equity 1,497.8 1,289.5
Capital and reserves attributable to owners of the Parent 1,686.4 1,477.8
Non-controlling interests 8 44.4
Total equity 1,730.8 1,477.8
Notes on pages 23 to 41 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
for the six months ended 30 June 2013
Equity attributable to owners of the Parent
Revalua- Non-
Share Share Treasury Merger tion Other Retained controlling Total
capital premium shares reserve reserve reserves earnings Total interests equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2013 188.3 117.7 (1.0) 277.8 1.7 5.2 888.1 1,477.8 1,477.8
Profit for the period 211.8 211.8 0.5 212.3
Other comprehensive income:
Fair value gains on available for
sale investments 0.3 0.3 0.3
Tax on items taken directly to equity 19 (0.1) (0.1) (0.1)
Total comprehensive income for the
period ended 30 June 2013 0.3 211.7 212.0 0.5 212.5
Transactions with owners:
Ordinary shares issued 20 0.3 3.3 3.6 3.6
Fair value of share-based payments 1.6 (1.1) 0.5 0.5
Non-controlling interest 43.9 43.9
Dividends paid 10 (7.5) (7.5) (7.5)
Total transactions with owners 0.3 3.3 1.6 (8.6) (3.4) 43.9 40.5
Balance at 30 June 2013 188.6 121.0 (1.0) 277.8 2.0 6.8 1,091.2 1,686.4 44.4 1,730.8
Equity attributable to owners of the Parent
Revalua- Non-
Share Share Treasury Merger tion Other Retained controlling Total
capital premium shares reserve reserve reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2012 170.9 95.1 196.2 10.8 2.2 632.7 1,107.9 1,107.9
Profit for the period (restated) 96.8 96.8 96.8
Other comprehensive income:
Fair value gains on available for
sale financial assets 0.1 0.1 0.1
Tax on items taken directly to equity 0.4 0.4 0.4
Total comprehensive income for the
period ended 30 June 2012 (restated) 0.1 97.2 97.3 97.3
Transactions with owners:
Ordinary shares issued 0.2 0.9 1.1 1.1
Realise revaluation reserves on
disposal of available for sale
investments (7.9) (7.9) (7.9)
Fair value of share-based payments 1.3 1.3 1.3
Dividends paid (6.8) (6.8) (6.8)
Total transactions with owners 0.2 0.9 (7.9) 1.3 (6.8) (12.3) (12.3)
Balance at 30 June 2012 (restated) 171.1 96.0 196.2 3.0 3.5 723.1 1,192.9 1,192.9
Notes on pages 23 to 41 form part of these consolidated financial statements.
The notes provide full details of the June 2012 comparatives restatement.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
for the six months ended 30 June 2013
Equity attributable to owners of the Parent
Share Share Treasury Merger Revaluation Other Retained
capital premium shares reserve reserve reserves earnings Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2012 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 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) 21 (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
(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.
Notes on pages 23 to 41 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
for the six months ended 30 June 2013
Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Notes GBPm GBPm GBPm
Cash flows from continuing operations
Cash generated from operations 23 18.6 16.1 28.8
Interest paid (11.7) (11.9) (22.1)
Interest received 0.6 0.4 0.8
Taxation (2.3) (0.9) (2.9)
Cash flows from operating activities 5.2 3.7 4.6
Cash flows from investing activities
Purchase and development of property (60.3) (31.8) (132.7)
Sale of property 8.9 7.6 18.7
Sale of available for sale investments 15.5 17.6
Loss of control of former subsidiary 65.4
Control acquired of former joint venture 0.1
Sale of subsidiary companies 0.6 0.2 0.2
VAT paid on internal restructure(1) (22.2) (22.2)
Cash flows from investing activities (50.7) (30.7) (53.0)
Cash flows from financing activities
Issue of shares 145.0
Treasury shares purchased 21 (1.0)
Borrowings drawn 30.0 48.2
Borrowings repaid (2.3) (100.5) (141.9)
Purchase of derivatives (1.6) (1.6)
Other finance costs (1.9)
Equity dividends paid (3.9) (5.7) (8.6)
Cash flows from financing activities (6.2) (77.8) 38.2
Net decrease in unrestricted cash and cash equivalents from continuing
operations (51.7) (104.8) (10.2)
Cash flows from discontinued operations
Operating activities (0.6) 2.4 0.2
Investing activities (0.7) 100.9 215.9
Financing activities (4.8) (34.8) (111.0)
Net (decrease)/increase in cash and cash equivalents from discontinued
operations (6.1) 68.5 105.1
Net (decrease)/increase in cash and cash equivalents (57.8) (36.3) 94.9
Unrestricted cash and cash equivalents at 1 January 178.5 83.6 83.6
Unrestricted cash and cash equivalents at end of period 120.7 47.3 178.5
(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 23 to 41 form part of these consolidated financial statements.
NOTES (unaudited)
1 PRINCIPAL ACCOUNTING POLICIES
The Group's condensed consolidated financial statements are prepared in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union (EU). The condensed
consolidated financial statements should be read in conjunction with the Annual Report for the year ended 31 December 2012, which have
been prepared in accordance with IFRSs as adopted by the EU.
The condensed consolidated financial statements for the six months ended 30 June 2013 are reviewed, not audited and do not constitute
statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012
were approved by the Board of Directors on 28 February 2013 and delivered to the Registrar of Companies. The auditors' report on these
accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement made under Section 498 of the
Companies Act 2006.
The condensed consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation of
properties, available for sale investments and financial assets held for trading which are held at fair value.
The Directors are satisfied that the Group has the resources to continue in operational existence for the foreseeable future, for this reason
the condensed consolidated financial statements are prepared on a going concern basis.
There is no material seasonal impact on the Group's financial performance.
These condensed consolidated financial statements were approved by the Board of Directors on 30 July 2013.
Except as described below, the condensed financial statements have been prepared using the accounting policies, significant judgements,
key assumptions and estimates set out on pages 86 to 89 of the Group's Annual Report for 2012.
Taxes on income in interim periods are accrued using tax rates expected to be applicable to total annual earnings.
Standards and guidelines relevant to the Group that were in issue and endorsed by the European Union but not yet effective or adopted
early at the date of approval of the condensed consolidated financial statements:
IAS 27 'Separate Financial Statements' (revised)
IAS 28 'Investments in Associates and Joint Ventures' (revised)
IAS 32 'Financial Instruments: Presentation' (amendment)
IFRS 10 'Consolidated Financial Statements'
IFRS 11 'Joint Arrangements'
IFRS 12 'Disclosure of Interests in other Entities'
The assessment of pronouncements 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 has chosen not to adopt this standard early.
During the six months to 30 June 2013, the following accounting standards and guidance were adopted by the Group:
IAS 1 'Presentation of Financial Statements' (amendment)
IAS 19 'Employee Benefits' (revised)
IFRS 7 'Financial Instruments: Disclosures' (amendment)
IFRS 13 'Fair Value Measurement'
Collectively, together with the International Accounting Standards Board's annual improvements, these pronouncements either had no
impact on the condensed consolidated Financial Statements or resulted in changes to presentation and disclosure only.
1 PRINCIPAL ACCOUNTING POLICIES
Discontinued operations
A discontinued operation is a component of the Group's business that represents a separate major line of business that has been disposed
of or meets the criteria for classification as held for sale. Discontinued operations are presented separately from continuing operations in
both the Income Statement and Statement of Cash flows. In respect of the Great Capital Partnership, the comparative periods have also
been re-presented where appropriate, in line with reporting requirements.
Restatement of prior period comparatives
In 2012 the Group chose to early adopt the amendment to IAS 12 'Income Taxes' as it was more representative of the Group's recovery
basis. This amendment introduced 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 period ending 30 June 2012 was as follows:
Balance Sheet GBPm
Deferred tax provision Reduced by 1.6
Consolidated Income Statement
Deferred tax charge Reduced by 1.6
Earnings per share Pence Per Share
Basic Increased to 14.1
Diluted Increased to 14.1
The amendment had no impact on the opening balance sheet. Consequently no additional balance sheet has been disclosed.
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.
With the cessation of The Great Capital Partnership and the changes more widely in the business over the past six months, the chief
operating decision maker has revised the segmental analysis. As a result of these changes, the discontinued activity within The Great
Capital Partnership is now disclosed within 'Other', along with the Group's residual China investments, the business unit historically known
as Opportunities, and other head office companies.
The segment previously called Earls Court & Olympia has been split in two: EC Properties and Venues. EC Properties comprises land
interests at Earls Court and Lillie Square (previously Seagrave Road) together with the Empress State Building. Venues comprises the
exhibitions business including the Olympia property assets. Covent Garden remains unchanged.
The Group's operating segments derive their revenue primarily from rental income from lessees, with the exception of Venues 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
Six months ended 30 June 2013
Covent Group
EC Properties(1) Venues Garden Other total
Continuing operations GBPm GBPm GBPm GBPm GBPm
Revenue 6.1 17.6 30.6 0.2 54.5
Rent receivable and venues income 6.1 17.6 20.3 44.0
Service charge income 1.4 1.4
Rental income 6.1 17.6 21.7 45.4
Service charge and other non-recoverable costs (0.2) (10.1) (4.0) (14.3)
Net rental income 5.9 7.5 17.7 31.1
Other income 2.4 0.2 2.6
Gain on revaluation and sale of investment and
development property 75.1 (3.8) 123.4 194.7
Other exceptional charges (0.4) (0.4)
Segment result 80.6 3.7 143.5 0.2 228.0
Unallocated costs
Administration expenses (15.4)
Operating profit 212.6
Net finance costs(2) (1.5)
Profit before tax 211.1
Taxation (2.4)
Profit for the period from continuing operations 208.7
Discontinued operations
Profit for the period from discontinued operations 3.6 3.6
Profit for the period 212.3
Profit attributable to:
Owners of the Parent 211.8
Non-controlling interests 0.5
Summary balance sheet
Total segment assets(3) 807.9 158.8 1,110.4 82.0 2,159.1
Total segment liabilities(3) (172.3) (33.0) (319.2) (3.4) (527.9)
635.6 125.8 791.2 78.6 1,631.2
Unallocated net assets(2) 99.6
Net assets 1,730.8
Other segment items:
Depreciation (0.1) (0.1)
Capital expenditure (156.1) (4.0) (21.7) (0.8) (182.6)
(1) Included in the net rental income for EC Properties is GBP3.7 million attributable to The Empress State Building, of which GBP0.6 million represents non-controlling interests.
(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.
Six months ended 30 June 2012 (Re-presented and restated)
Covent Group
EC Properties(1) Venues Garden Other total
Continuing operations GBPm GBPm GBPm GBPm GBPm
Revenue 4.6 21.1 26.3 52.0
Rent receivable and venues income 4.6 21.1 18.6 44.3
Service charge income 1.4 1.4
Rental income 4.6 21.1 20.0 45.7
Service charge and other non-recoverable costs (11.3) (4.3) (15.6)
Net rental income 4.6 9.8 15.7 30.1
Other income 2.1 2.1
Gain on revaluation and sale of investment and
development property 18.3 9.2 33.5 (0.3) 60.7
Profit on sale of available for sale investments 8.7 8.7
Profit on sale of subsidiaries 1.1 0.6 1.7
Segment result 22.9 20.1 51.9 8.4 103.3
Unallocated costs
Administration expenses (12.7)
Operating profit 90.6
Net finance costs(2) (13.1)
Profit before tax 77.5
Taxation (1.6)
Profit for the period from continuing operations 75.9
Discontinued operations
Profit for the period from discontinued operations 20.9 20.9
Profit for the period 96.8
Summary balance sheet
Total segment assets (restated)(3) 312.9 349.9 876.6 184.0 1,723.4
Total segment liabilities (restated)(3) (90.1) (39.5) (336.5) (92.7) (558.8)
222.8 310.4 540.1 91.3 1,164.6
Unallocated net assets(2) 28.3
Net assets 1,192.9
Other segment items:
Capital expenditure (12.0) (8.5) (14.5) (0.8) (35.8)
(1) Empress State represents GBP3.6 million of the GBP4.6 million net rental income for EC Properties.
(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.
Year ended 31 December 2012 (Re-presented)
Covent Group
EC Properties(1) Venues Garden Other total
Continuing operations GBPm GBPm GBPm GBPm GBPm
Revenue 9.4 41.7 54.8 3.5 109.4
Rent receivable and venues income 9.4 41.7 38.0 89.1
Service charge income 2.5 2.5
Rental income 9.4 41.7 40.5 91.6
Service charge and other non-recoverable costs (0.2) (23.1) (8.4) (31.7)
Net rental income 9.2 18.6 32.1 59.9
Other income 2.9 3.2 6.1
Gain on revaluation and sale of investment and
development property 139.8 0.3 50.7 0.1 190.9
Profit on sale of available for sale investments 10.0 10.0
Profit on sale of subsidiaries 1.1 0.6 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 147.1 20.0 86.3 13.9 267.3
Unallocated costs
Administration expenses (26.2)
Operating profit 241.1
Net finance costs(2) (22.4)
Profit before tax 218.7
Taxation (8.0)
Profit for the period from continuing operations 210.7
Discontinued operations
Profit for the period from discontinued operations 29.3 29.3
Profit for the period 240.0
Summary balance sheet
Total segment assets(3) 573.4 163.0 977.5 70.8 1,784.7
Total segment liabilities(3) (75.8) (54.4) (316.0) (17.0) (463.2)
497.6 108.6 661.5 53.8 1,321.5
Unallocated net assets(2) 156.3
Net assets 1,477.8
Other segment items:
Depreciation (0.1) (0.1)
Capital expenditure (32.3) (10.2) (100.8) (2.2) (145.5)
(1) Empress State represents GBP7.3 million of the GBP9.2 million net rental income for EC Properties.
(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.
3 OTHER INCOME
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Continuing operations GBPm GBPm GBPm
Sale of trading property 8.8 6.3 17.8
Cost of sales (6.4) (4.2) (11.7)
Profit on sale of trading property 2.4 2.1 6.1
Non-recurring income 0.2
Other income 2.6 2.1 6.1
4 GAIN ON REVALUATION AND SALE OF INVESTMENT AND DEVELOPMENT PROPERTY
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Continuing operations GBPm GBPm GBPm
Gain on revaluation of investment and development property 194.7 59.7 177.7
Gain on loss of control and appropriation to trading property 12.6
Gain on sale of investment property 1.0 0.6
Gain on revaluation and sale of investment and development property 194.7 60.7 190.9
5 PROFIT ON SALE OF AVAILABLE FOR SALE INVESTMENTS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Continuing operations GBPm GBPm GBPm
Profit on sale of available for sale investments 8.7 10.0
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.
6 FINANCE COSTS
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Continuing operations GBPm GBPm GBPm
Finance costs:
On bank overdrafts, loans and other 11.0 12.2 21.9
Amortisation of issue costs 0.5 0.6 1.2
On obligations under finance leases 0.1 0.4
Gross finance costs 11.6 12.8 23.5
Interest capitalised on developments (0.3) (1.2) (2.6)
Finance costs 11.3 11.6 20.9
Costs of termination of derivative financial instruments 0.7 0.7
Other exceptional finance costs 1.1 1.3
Other finance costs(1) 1.8 2.0
(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 5.4 per cent (December 2012: 5.2 per cent) on the
relevant debt, applied to the cost of developments during the period.
7 TAXATION
Re-presented
and restated Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Continuing operations GBPm GBPm GBPm
Current income tax:
Current income tax charge 0.7 2.1 2.6
Current income tax on profits excluding exceptional items 0.7 2.1 2.6
Deferred income tax:
On investment and development property 1.1 (0.1) (1.5)
On accelerated capital allowances 0.5 (0.7)
On losses (0.6) 1.1
On derivative financial instruments 4.4 0.8 2.8
On non-exceptional items 0.7 (1.0)
On exceptional items (6.2) (0.2) 1.7
Deferred income tax on profits (0.1) (1.2) 4.1
Current income tax charge on exceptional items 1.8 0.8 1.4
Adjustments in respect of previous years (0.1) (0.1)
Total tax expense reported in the income statement 2.4 1.6 8.0
Tax on items that are taken directly to equity are shown in the statement of comprehensive income; these include deferred tax on an element
of the share options and deferred tax on pensions.
Further amendments to the UK Corporation Tax system were announced in the March 2013 Budget which included changes to the main
rates of UK Corporation Tax. The main rate of corporation tax decreased from 24 per cent to 23 per cent from 1 April 2013. The Budget
announced the reduction in the main rate of corporation tax to 21 per cent from 1 April 2014, with a further 1 per cent reduction in rate from
1 April 2015 resulting in a final corporation tax rate of 20 per cent.
Future reductions beyond 23 per cent are not yet substantively enacted at 30 June 2013, hence are not used when measuring deferred tax.
8 BUSINESS COMBINATION
The Empress State Limited Partnership
On 29 May 2013, the Group exchanged contracts to acquire the 50 per cent interest not already owned in The Empress State Limited
Partnership, which owns and manages, through its general partner, the Empress State Building in West London. This 451,000 sq.ft.
31 storey office building is adjacent to the Group's Earls Court Masterplan interests and benefits from an index linked lease to the Metropolitan
Police Authority until June 2019. Consideration will be paid on completion in August 2013.
In accordance with IAS 27 'Consolidated and Separate Financial Statements', the Partnership has been fully consolidated as the Group is
deemed to have the ability to control the financial and operating policies so as to obtain the benefits from the Partnership's activities. The
third party Partnership share as at the balance sheet date has been accounted for through non-controlling interests, which represents the
portion of profit and loss and net assets which is not held by the Group.
The Partnership contributed revenues of GBP1.2 million from the date control was deemed to be acquired and a net profit of GBP0.5 million is
attributed to the non-controlling interest. Had the acquisition occurred on 1 January 2013 the Group's revenue would have been GBP3.1 million
higher and the net profit attributed to the non-controlling interest would have been GBP7.9 million higher.
On the date control was acquired, the assets and liabilities of the business combination were fair valued with movements taken to the
Group's income statement. The fair value of assets and liabilities acquired by the business combination were as follows:
As at
30 June
2013
Non-controlling interests GBPm
Non-current assets 117.0
Current assets 2.3
Current liabilities (74.9)
Net assets 44.4
9 DISCONTINUED OPERATIONS
On 29 April 2013, the Group exchanged contracts for the disposal of the final asset, Park Crescent West, in The Great Capital Partnership.
This was effected as part of the Group's strategy to dispose of non-core assets in support of the Group's core estates. The residual assets
and liabilities of the partnership are reflected within the 'Other' segment in note 2.
The results of the discontinued operation, which have been included in the consolidated income statement, were as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
GBPm GBPm GBPm
Revenue 1.1 4.5 5.9
Net rental income 1.1 4.0 5.4
Gain on revaluation and sale of investment and development property 2.8 18.4 23.0
Administration expenses (0.1) 0.3 0.1
Operating profit 3.8 22.7 28.5
Net finance costs (1.2) (1.7)
Profit before tax 3.8 21.5 26.8
Taxation (0.2) (0.6) 2.5
Net profit attributable to discontinued operations 3.6 20.9 29.3
A profit of GBP2.8 million (year to 31 December 2012: GBP15.8 million) arose on the disposal of the assets of GCP, being the proceeds of disposal
less the carrying amount of the assets.
10 DIVIDENDS
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2013 2012 2012
GBPm GBPm GBPm
Ordinary shares
Prior period final dividend paid of 1.0 pence per share 7.5 6.8 6.8
Interim dividend paid of 0.5 pence per share 2.9
Dividends expense 7.5 6.8 9.7
Shares issued in lieu of cash (3.6) (1.1) (1.1)
Cash dividends paid 3.9 5.7 8.6
Proposed dividend of 0.5 pence per share 3.8 3.4 7.5
Details of the shares in issue are given in note 20.
11 EARNINGS PER SHARE AND NET ASSETS PER SHARE
a) Earnings per share
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Millions(1) Millions(1),(2) Millions(1)
Weighted average ordinary shares in issue for calculation of basic earnings per share 752.8 684.2 703.7
Dilutive effect of share option awards 8.3 5.6 5.9
Dilutive effect of contingently issuable shares 1.3 1.6 1.8
Dilutive effect of matching nil cost options 3.6 3.0 3.0
Dilutive effect of deferred shares 0.6 0.3 0.4
Weighted average ordinary shares in issue for calculation of diluted earnings per share 766.6 694.7 714.8
(1) Weighted average number of shares in issue during the period has been adjusted for shares held in Treasury.
(2) Weighted average number of shares in issue during the period to June 2012 have been adjusted for issue of bonus shares issued in connection with the interim scrip dividend
(0.2 million).
Restated
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
GBPm GBPm GBPm
Continuing and discontinued operations attributable to the Parent
Profit used for calculation of basic earnings per share 211.8 96.8 240.0
Dilutive effect of share option awards 2.2 1.3 3.1
Profit used for calculation of diluted earnings per share 214.0 98.1 243.1
Basic earnings per share (pence) 28.1 14.1 34.1
Diluted earnings per share (pence) 27.9 14.1 34.0
Continuing operations attributable to the Parent
Profit used for calculation of basic earnings per share 208.2 75.9 210.7
Dilutive effect of share option awards 2.2 1.3 3.1
Profit used for calculation of diluted earnings per share 210.4 77.2 213.8
Basic earnings per share (pence) 27.7 11.1 29.9
Diluted earnings per share (pence) 27.4 11.1 29.9
Discontinued operations attributable to the Parent
Profit used for calculation of basic and diluted earnings per share 3.6 20.9 29.3
Basic earnings per share (pence) 0.5 3.0 4.2
Diluted earnings per share (pence) 0.5 3.0 4.1
11 EARNINGS PER SHARE AND NET ASSETS PER SHARE
Six months Restated
ended Six months Year ended
30 June ended 30 31 December
2013 June 2012 2012
GBPm GBPm GBPm
Profit from continuing operations attributable to the Parent used for calculation of basic
earnings per share 208.2 75.9 210.7
Adjustments:
Gain on sale of trading property (2.4) (2.1) (6.1)
Gain on revaluation and sale of investment and development property (194.7) (60.7) (190.9)
Profit on sale of subsidiaries (1.7) (1.7)
Loss of control of former subsidiary 1.0
Other exceptional charges 0.4
Write down of trading property 0.9
Costs of termination of derivative financial instruments 0.7 0.7
Change in fair value of derivative financial instruments (9.2) 0.1 0.3
Current tax adjustments 1.8 0.8 1.4
Deferred tax adjustments 6.0 (0.1) 1.2
Less amounts above due to non-controlling interests 0.7
EPRA adjusted earnings on continuing operations 10.8 12.9 17.5
Discontinued operations 0.9 1.3 3.7
Less exceptional other income (0.2)
Profit on sale of available for sale investments (8.7) (10.0)
Write back of impairment of other receivables (0.6)
Refinancing fees 1.1 1.3
Current tax adjustments (1.1) (1.1)
Deferred tax adjustments (6.7) 0.6 1.7
Underlying earnings 4.8 6.1 12.5
Underlying earnings per share (pence) 0.6 0.9 1.8
EPRA adjusted earnings per share (pence) 1.4 1.9 2.5
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.
Six months Restated Year
ended Six months ended
30 June ended 30 June 31 December
2013 2012 2012
GBPm GBPm GBPm
Profit attributable to the Parent used for calculation of basic earnings per share 211.8 96.8 240.0
Adjustments:
Gain on revaluation and sale of investment and development property (197.5) (79.1) (213.9)
Profit on sale of available for sale investments (8.7) (10.0)
Profit on sale of subsidiaries (1.7) (1.7)
Loss of control of former subsidiary 1.0
Write back of impairment of other receivables (0.6)
Deferred tax adjustments 1.1 0.8 (3.6)
Headline earnings used for calculation of headline earnings per share attributable to
the Parent 15.4 8.1 11.2
Dilutive effect of share options awards 2.2 1.3 3.1
Diluted headline earnings used for calculation of diluted headline
earnings per share 17.6 9.4 14.3
Headline earnings per share (pence) 2.1 1.2 1.6
Diluted headline earnings per share (pence) 2.3 1.4 2.0
11 EARNINGS PER SHARE AND NET ASSETS PER SHARE
b) Net assets per share
As at As at
30 June 31 December
2013 2012
GBPm GBPm
Basic net asset value attributable to the Parent used for calculation of basic net assets per share 1,686.4 1,477.8
Fair value of derivative financial instruments 22.9 30.8
Unrecognised surplus on trading property 62.8 37.5
Deferred tax adjustments 12.9 6.9
Non-controlling interests on the above (0.4)
EPRA adjusted, diluted NAV 1,784.6 1,553.0
Fair value of derivative financial instruments (22.9) (30.8)
Deferred tax adjustments (10.0) (5.1)
EPRA adjusted, diluted NNNAV 1,751.7 1,517.1
Basic net assets per share (pence) 223.7 193.3
EPRA adjusted, diluted NAV per share (pence) 232.3 203.1
Diluted EPRA NNNAV per share (pence) 228.0 198.4
c) Shares in issue
As at As at
30 June 31 December
2013 2012
Millions(1) Millions(1)
Shares in issue 753.9 752.7
Effect of dilution:
On exercise of options 8.8 6.7
On issue of contingently issuable shares 1.3 1.8
On issue of matching nil cost options 3.6 3.0
On issue of deferred shares 0.6 0.4
Adjusted, diluted number of shares 768.2 764.6
(1) Number of shares in issue has been adjusted for shares held in Treasury, 0.4 million (December 2012: 0.4 million).
12 PROPERTY PORTFOLIO
a) Investment and development property
Total
GBPm
At 1 January 2013 1,586.2
Additions from acquisitions 32.3
Additions from subsequent expenditure 26.2
Control acquired of former joint venture 117.0
Transfers to trading property (20.8)
Disposals (49.1)
Gain on valuation 194.7
At 30 June 2013 1,886.5
Total
GBPm
At 1 January 2012 1,616.8
Additions from acquisitions 96.0
Additions from subsequent expenditure 40.4
Disposals (210.1)
Loss of control of former subsidiary (60.8)
Transfers to trading property (81.0)
Gain on valuation 184.9
At 31 December 2012 1,586.2
As at As at
30 June 31 December
2013 2012
GBPm GBPm
Balance sheet carrying value of investment and development property 1,886.5 1,586.2
Adjustment in respect of tenant incentives 19.7 17.1
Adjustment in respect of head leases (3.7) (3.8)
Market value of investment and development property 1,902.5 1,599.5
Included within investment and development property is GBP0.3 million (2012: GBP2.6 million) of interest capitalised during the period on
developments and redevelopments in progress.
The fair value of the Group's investment and development property as at 30 June 2013 was determined by independent, appropriately
qualified external valuers Jones Lang LaSalle for Venues and EC Properties (excluding The Empress State Building) 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 (in the case of
development valuations, properties similar to those contemplated under the development) 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 use 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.
In respect of development valuations, the valuer ordinarily considers the gross development value of the completed scheme based upon
assumptions of capital and rental values and yields of the properties which would be created through the implementation of the development.
Deductions are then made for anticipated costs, including an allowance for developer's profit before arriving at a valuation. The valuer has
applied this methodology to derive a residual land valuation of the Group's interests at Earls Court covering 23 acres on the eastern side of
the Masterplan on the basis of a standalone development of these interests.
12 PROPERTY PORTFOLIO
There are often restrictions on both freehold and leasehold investment property which could have a material impact on the realisation of
these assets. The 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 14.
b) Trading property
As at As at
30 June 31 December
2013 2012
GBPm GBPm
At 1 January 84.4 0.2
Transfers from investment and development property 20.8 87.3
Additions from acquisitions 2.4
Additions from subsequent expenditure 7.1 6.7
Disposals (6.6) (11.3)
Write down of trading property (0.9)
At 30 June 2013 105.7 84.4
Unrecognised revaluation surplus(1) 62.8 37.5
Market value of trading property 168.5 121.9
(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.
13 TRADE AND OTHER RECEIVABLES
As at As at
30 June 31 December
2013 2012
GBPm GBPm
Non-current
Loan notes receivable 4.0 4.0
Other receivables(1) 18.6 18.0
Prepayments and accrued income 19.7 17.4
Trade and other receivables 42.3 39.4
Current
Rents receivable(2) 4.5 8.8
Other receivables 57.9 7.0
Prepayments and accrued income 12.2 10.1
Trade and other receivables 74.6 25.9
(1) Includes GBP15 million exclusivity payment with LBHF which now forms part of the CLSA contract discussed in the operating and financial review
(2) Includes Venues trade 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 GBP19.7 million (2012: GBP17.1 million).
14 CASH AND CASH EQUIVALENTS
As at As at
30 June 31 December
2013 2012
GBPm GBPm
Cash at hand 28.7 28.0
Cash on short-term deposit 92.0 150.5
Unrestricted cash and cash equivalents 120.7 178.5
Restricted cash 6.0 6.0
Cash and cash equivalents 126.7 184.5
Restricted cash relates to amounts placed on deposit in accounts which are subject to withdrawal conditions.
15 BORROWINGS, INCLUDING FINANCE LEASES
As at 30 June 2013
Carrying Fixed Floating Fair
value Secured Unsecured rate rate value
GBPm GBPm GBPm GBPm GBPm GBPm
Current
Bank loans and overdrafts 131.3 131.3 131.3 131.3
Loan notes 6.0 6.0 6.0 6.0
Borrowings, excluding finance leases 137.3 137.3 137.3 137.3
Finance lease obligations 0.5 0.5 0.5 0.5
Current 137.8 137.8 0.5 137.3 137.8
Non-current
Bank loan 2016 155.1 155.1 155.1 155.1
Bank loan 2017 111.7 111.7 111.7 111.7
Borrowings, excluding finance leases 266.8 266.8 266.8 266.8
Finance lease obligations 3.2 3.2 3.2 3.2
Non-current 270.0 270.0 3.2 266.8 270.0
Total borrowings 407.8 407.8 3.7 404.1 407.8
Cash and cash equivalents (126.7)
Net debt 281.1
As at 31 December 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
16 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
The tables below set out the Group's accounting classification of each class of financial assets and liabilities, and their fair values at 30 June
2013 and 31 December 2012.
The fair values of derivative financial instruments are determined from observable market prices or estimated using appropriate yield curves
obtained from an independent source at 30 June and 31 December each year by discounting the future contractual cash flows to the net
present values.
Gain Gain to other
Carrying to income comprehensive
value Fair value statement income
30 June 2013 GBPm GBPm GBPm GBPm
Derivative financial instrument asset 1.0 1.0 0.5
Total held for trading assets 1.0 1.0 0.5
Cash and cash equivalents 126.7 126.7
Other financial assets 116.9 116.9
Total cash and receivables 243.6 243.6
Available for sale investments 3.9 3.9 0.3
Total available for sale investments 3.9 3.9 0.3
Derivative financial instrument liabilities (23.9) (23.9) 8.7
Total held for trading liabilities (23.9) (23.9) 8.7
Borrowings (407.8) (407.8)
Other financial liabilities (79.8) (79.8)
Total loans and payables (487.6) (487.6)
(Loss)/gain Gain to other
Carrying to income comprehensive
value Fair value statement income
31 December 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)
Fair value estimation
Derivative financial instruments are classified by valuation method. The different levels are defined as follows:
Level 1: valuation based on quoted market prices traded in active markets.
Level 2: valuation based on inputs other than quoted prices included within Level 1 that maximise the use of observable data either directly
or from market prices or indirectly derived from market prices.
Level 3: where one or more inputs to valuation are not based on observable market data. Valuations at this level are more subjective and
therefore more closely managed, including sensitivity analysis of inputs to valuation models. Such testing has not indicated that any material
difference would arise due to a change input variables.
At 30 June 2013, all derivative financial instrument asset and liability measurements are classified as Level 2.
When the degree of subjectivity or nature of the measurement inputs changes, consideration is given as to whether a transfer between fair
value levels is deemed to have occurred.
17 OTHER PROVISIONS
Deferred
consideration Total
GBPm GBPm
Current
At 1 January 2012 7.3 7.3
At 31 December 2012 7.3 7.3
At 30 June 2013 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.
18 TRADE AND OTHER PAYABLES
As at As at
30 June 31 December
2013 2012
GBPm GBPm
Current
Rents received in advance 17.3 17.2
Accruals and deferred income 34.6 27.4
Trade payables 1.5 1.1
Other payables(1) 15.2 12.6
Other taxes and social security 0.5 0.3
Trade and other payables 69.1 58.6
(1) Includes sundry payables and amounts due to joint venture partners.
19 DEFERRED TAX PROVISION
Under the new IAS 12 provisions the recognised deferred tax liability on investment property is GBP2.9 million at 30 June 2013. The calculation
is on a disposal basis, by reference to the original historic tax base cost of each property. Elements factored into the calculation include
indexation relief, the Group's holding structure and the application of the REIT provisions to disposals occurring 2 years or more post exit
from the regime (7 May 2012). The Group's contingent tax liability, which is calculated on the same basis as the IAS 12 charge above, is nil
(2012 restated - nil).
A disposal of the Group's trading property at their market value as per note 12 would result in a corporation tax charge to the Group of
GBP14.5 million (23 per cent of GBP62.8 million).
Fair value of Fair value of
Accelerated investment & derivative Other
capital development financial temporary Group
allowances property instruments differences losses Total
GBPm GBPm GBPm GBPm GBPm GBPm
Provided deferred tax (assets)/liabilities:
At 31 December 2012 11.2 1.8 (6.1) (4.1) (2.8)
Recognised in income 0.5 1.1 4.4 0.7 (6.8) (0.1)
Recognised in other comprehensive income 0.1 0.1
At 30 June 2013 11.7 2.9 (1.7) (3.3) (9.6)
Unprovided deferred tax asset:
At 31 December 2012 (2.2) (10.3) (12.5)
Movement in the year (4.6) 6.6 2.0
At 30 June 2013 (6.8) (3.7) (10.5)
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 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 2012 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
Shares issued scrip dividends 1,130,749 0.3 3.3
At 30 June 2013 754,258,552 188.6 121.0
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 June 2013, the Company offered a scrip dividend alternative in respect of the 2012 final dividend. 1,130,749 shares were issued at a price
of 318 pence per share.
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.
21 TREASURY SHARES
Treasury
Number shares
of shares GBPm
Ordinary shares of 25 pence:
At 1 January 2012
Shares purchased 431,450 1.0
At 31 December 2012 431,450 1.0
At 30 June 2013 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.
22 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
The Group has capital commitments of GBP74.5 million at 30 June 2013 (31 December 2012: GBP21.4 million) relating to future expenditure for the
purchase, construction, development and enhancement of investment property. In respect of the acquisition of Empress State, this includes
consideration of GBP44 million due on completion.
GBP1.3 million relates to the Group's share of joint venture commitments (31 December 2012: GBP0.2 million).
The capital commitments also include GBP15 million in relation to the CLSA with LBHF. On 23 January 2013 the Group entered into the CLSA
with LBHF for the purchase of the West Kensington and Gibbs Green housing estates. The overall consideration payable is expected to be
GBP105 million, of which GBP75 million remains outstanding. This residual GBP75 million due will not crystallise until exercise of the option. Prior to
exercise of the option the Group has certain obligations subject to an overall cap of GBP15 million prior to exercise (rising to GBP55 million post
exercise). Should any payments be made in respect of these obligations they will be deducted from the total consideration due to LBHF.
Further details are available on the Company's website.
As at 30 June 2013, the Group has no contingent liabilities (31 December 2012: GBPnil).
23 CASH GENERATED FROM OPERATIONS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Continuing operations Notes GBPm GBPm GBPm
Profit before tax 211.1 77.5 218.7
Adjustments for:
Profit on sale of trading property 3 (2.4) (2.1) (6.1)
Gain on revaluation of investment and development property 4 (194.7) (59.7) (177.7)
Gain on sale of investment property 4 (1.0) (0.6)
Gain on loss of control and appropriation to trading property 4 (12.6)
Other exceptional charges 0.4
Profit on sale of available for sale investments 5 (8.7) (10.0)
Profit on sale of subsidiaries 6 (1.7) (1.7)
Loss of control of former subsidiary 7 1.0
Write down of trading property 15 0.9
Write back of impairment of other receivables 8 (0.6)
Depreciation 0.1 0.1
Amortisation of lease incentives and other direct costs 2.5 (1.0) 1.7
Finance costs 9 11.3 11.6 20.9
Finance income (0.6) (0.4) (0.8)
Other finance costs 9 1.8 2.0
Change in fair value of derivative financial instruments (9.2) 0.1 0.3
Change in working capital:
Change in trade and other receivables (3.8) (2.5) (3.1)
Change in trade and other payables 3.9 2.2 (3.6)
Cash generated from operations 18.6 16.1 28.8
24 RELATED PARTY TRANSACTIONS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
Key management compensation(1) GBPm GBPm GBPm
Salaries and short term employee benefits 1.1 1.0 2.9
Share based payment 1.8 1.3 2.3
2.9 2.3 5.2
(1) Key management comprises the Directors of Capital & Counties Properties PLC who have been deemed to be the only individuals with authority and responsibility for planning, directing
and controlling the activities of the Company.
25 EVENTS AFTER THE REPORTING PERIOD
On 18 July 2013, the Group together with Transport for London (TfL) issued a joint statement setting out an intention to pursue proposals to
settle heads of terms for a joint venture to enable the development of Earls Court 1 & 2 in line with the Earls Court Masterplan. The
agreement will enable the two organisations to establish a joint entity which will own a new 999 year lease over the sites, as well as other
land owned by the Group. It is envisaged that ownership of the development will be split 63 per cent to the Group and 37 per cent to TfL. No
cash consideration will be payable by either party. The agreement remains subject to Capco and TfL Board approval.
On 24 July 2013, the Group agreed a refinancing of the debt facility secured over the Empress State Building. A GBP118.5 million facility has
been arranged with BNP Paribas and Santander with a maturity of July 2018. The facility is split between a term element (GBP63.5 million) and
a revolving credit facility (GBP55 million).
On 3 July 2013, the Mayor of London completed his review of the Earls Court Masterplan outline planning applications and the Section 106
agreement and confirmed his acceptance of the outline planning applications granted by LBHF and RBKC.
ANALYSIS OF PROPERTY PORTFOLIO (unaudited)
1 PROPERTY DATA AS AT 30 JUNE 2013
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(3)
Covent Garden 1,100.8 100% 3.26% 4.81% 38.1 55.9 99.0% 7.1 0.9
EC Properties(1) 823.5 100% 16.5 17.0 1.2
Venues(2) 146.7 100% 0.6
Total property 2,071.0 54.6 72.9 2.7
Investment property 1,902.5 70.9
Trading property 168.5 2.0
(1) Includes the Group's 50% interest in Lillie Square. The Empress State Building is now reflected at 100%.
(2) Venues does not report a passing rent, ERV, occupancy, or lease maturity due to the nature of the business.
(3) Area shown is net internal area of the portfolio, not adjusted for proportional ownership.
2 ANALYSIS OF CAPITAL RETURN IN THE PERIOD
Revaluation
Market Market surplus/
value value (deficit)(1)
30 June 31 December 30 June
2013 2012 2013 Increase/
GBPm GBPm GBPm (Decrease)
Like-for-like capital
Covent Garden 1,090.3 945.2 132.7 14.1%
EC Properties 687.0 574.3 94.6 16.0%
Venues 146.7 146.5 (3.8) (2.5)%
Total like-for-like capital 1,924.0 1,666.0 223.5 13.3%
Investment property 1,755.5 1,551.2 196.9 12.8%
Trading property 168.5 114.8 26.6(3) 18.7%
Non like-for-like capital
Acquisitions 30.0 (2.2)
Control acquired of former joint venture 117.0
Disposals 55.4
Total property 2,071.0 1,721.4 221.3 12.1%
Investment property 1,902.5 1,599.5 194.7 11.5%
Trading property 168.5 121.9 26.6(2) 18.7%
All property
Covent Garden 1,100.8 952.3 132.0 13.9%
EC Properties 823.5 574.3 93.1 12.7%
Venues 146.7 146.5 (3.8) (2.5)%
Other 48.3
Total property 2,071.0 1,721.4 221.3 12.1%
(1) Revaluation surplus/(deficit) includes amortisation of lease incentives and fixed head leases.
(2) Represents realised gains, impairment charges and unrecognised surplus on trading property. Presented for information only.
(3) Property transferred to trading during the period is included as like-for-like capital in current and comparative periods where appropriate.
4 ANALYSIS OF NET RENTAL INCOME IN THE PERIOD
30 June 30 June
2013 2012 Change
GBPm GBPm %
Like-for-like income
Covent Garden 16.1 15.6 3.2%
EC Properties 5.2 4.4 18.2%
Venues 7.5 10.0 (25.0)%
Like-for-like investment property income 28.8 30.0 (4.0)%
Like-for-like trading property income 0.2(1)
Total like-for-like property income 28.8 30.2 (4.6)%
Non like-for-like income
Acquisitions 0.6
Disposals 1.1 3.8
Like-for-like capital 1.7 0.1
Total property income 32.2 34.1 (5.6)%
Investment property income 32.2 33.9 (5.0)%
Trading property income 0.2
All property
Covent Garden 17.7 15.7 12.7%
EC Properties 5.9 4.6 28.3%
Venues 7.5 9.8 (23.5)%
Other 1.1 4.0
Total property income 32.2 34.1 (5.6)%
(1) Represents the 30 June 2012 net rental income attributable to like-for-like trading property.
5 ANALYSIS OF PROPERTY BY USE
30 June 2013
Retail Office Exhibition Residential Other(1) Total
Market Value GBPm GBPm GBPm GBPm GBPm GBPm
Covent Garden 874.8 146.7 42.2 37.1 1,100.8
EC Properties 2.3 239.9 6.1 575.2 823.5
Venues 146.7 146.7
877.1 386.6 146.7 48.3 612.3 2,071.0
30 June 2013
Retail Office Exhibition Residential Other Total
ERV GBPm GBPm GBPm GBPm GBPm GBPm
Covent Garden 43.7 8.8 1.3 2.1 55.9
EC Properties 0.2 15.2 0.2 1.4 17.0
Venues
43.9 24.0 1.5 3.5 72.9
(1) Consists of property where the highest and best use valuation differs from the current use.
CONSOLIDATED UNDERLYING PROFIT STATEMENT (unaudited)
for the six months ended 30 June 2013
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2013 2012 2012
GBPm GBPm GBPm
Net rental income 32.2 34.1 65.3
Administration expenses (15.5) (12.4) 26.1)
Operating profit 16.7 21.7 39.2
Finance costs (11.3) (14.1) (23.6)
Finance income 0.6 0.4 0.8
Net finance costs (10.7) (13.7) (22.8)
Profit before tax 6.0 8.0 16.4
Tax on adjusted profit (1.4) (1.9) (3.9)
Non-controlling interests 0.2
Underlying earnings (used for calculation of underlying earnings per share) 4.8 6.1 12.5
Underlying earnings per share (pence) 0.6 0.9 1.8
FINANCIAL COVENANTS
Financial covenants on non-recourse debt
Loan
outstanding Loan to
at 30 June 30 June 2013 Interest Interest
2013(1) LTV Market cover cover
Maturity GBPm covenant value(2) covenant reported(3)
The Empress State Partnership(4) 2013 131.3 N/A N/A 120% 177%
Covent Garden(5),(6) 2016 158.2 70% 34% 130% 236%
Covent Garden(5),(7) 2017 112.0 70% 45% 120% 174%
Covent Garden (RCF)(5),(8) 2017 65% 0% 130% 483%
Total 401.5
(1) The loan values are the actual principal balances outstanding at 30 June 2013. The balance sheet value of the loans includes any unamortised fees.
(2) The loan to 30 June 2013 market value provides an indication of the impact the 30 June 2013 property valuations on the LTV covenants. The actual timing and manner of testing LTV
covenants varies and is loan specific.
(3) Based on the latest certified figures, calculated in accordance with loan agreements, which have been submitted during June 2013. The calculations are loan specific and include a
variety of historic, forecast and in certain instances a combined historic and forecast basis.
(4) Loan facility provided by a consortium of three banks with Hypothekenbank Frankfurt AG London Branch acting as agent, LTV covenant removed until maturity.
(5) There are three separate loans secured against Covent Garden properties.
(6) Loan facility provided by a consortium of six banks with BNP Paribas acting as agent, with a further 2 year extension available at Capco's option subject to meeting certain financial
covenants
(7) Loan facility provided by NyKredit Realkredit A/s.
(8) Loan facility provided by a consortium of two banks with BNP Paribas acting as agent.
DIVIDENDS
THE DIRECTORS OF CAPITAL & COUNTIES PROPERTIES PLC HAVE PROPOSED AN INTERIM DIVIDEND PER ORDINARY SHARE
(ISIN GB00B62G9D36) OF 0.5 PENCE PAYABLE ON 25 SEPTEMBER 2013.
Dates
The following are the salient dates for payment of the proposed interim dividend:
Sterling/Rand exchange rate struck: 15 August 2013
Sterling/Rand exchange rate and dividend amount in Rand announced: 16 August 2013
Ordinary shares listed ex-dividend on the JSE, Johannesburg: 26 August 2013
Ordinary shares listed ex-dividend on the London Stock Exchange: 28 August 2013
Record date for final dividend in UK and South Africa: 30 August 2013
Dividend payment date for shareholders: 25 September 2013
South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-dividend will be
23 August 2013 and that no dematerialisation of shares will be possible from 26 August 2013 to 30 August 2013 inclusive. No transfers between
the UK and South Africa registers may take place from 15 August 2013 to 30 August 2013 inclusive.
Subject to SARB approval, the Board intends to offer an optional scrip dividend alternative in respect of the 2013 interim dividend.
The above dates are proposed and subject to change and any changes will be published accordingly.
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 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 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
16 August 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 period including the excess of the fair value of trading property over its cost and excluding the fair value
of financial instruments, deferred taxation on revaluations and diluting for the effect of those shares potentially issuable under employee
share schemes divided by the diluted number of shares at the period 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 period excluding gains or losses on the revaluation and sale of investment and development property, write down on trading
property, changes in fair value of financial instruments and associated close-out costs and the related taxation on these items divided by the
weighted average number of shares in issue during the period.
ERV (estimated rental value)
The external valuers' estimate of the Group's share of the current annual market rent of all lettable space net of any non-recoverable
charges, before bad debt provision and adjustments required by International Financial Reporting Standards regarding tenant lease
incentives.
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 swap (IRS)
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 Lillie Square 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.
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.
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.
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.
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.
TfL
Transport for London
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 paid during the period.
Total shareholder return
The increase in the price of an ordinary share plus dividends paid during the period assuming re-investment in ordinary shares.
Underlying earnings
Profit for the period 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')
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 GBP2.1 billion.
Covent Garden
The Covent Garden estate represents 53 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.
EC Properties & Venues
EC Properties & Venues represents 47 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 the Mayor of London has endorsed the proposals and
resolutions to grant 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 Lillie Square 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.
This announcement 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 announcement 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: 30/07/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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