Wrap Text
Interim Report for the six months ended 30 June 2014
Capital & Counties Properties PLC
(Incorporated and registered in the United Kingdom and
Wales with registration Number 07145041 and registered in
South Africa as an external company with Registration
Number 2010/003387/10)
JSE code: CCO
ISIN: GB00B62G9D36
PRESS RELEASE
1 August 2014
CAPITAL & COUNTIES PROPERTIES PLC ("Capco")
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2014
Ian Hawksworth, Chief Executive of Capco, commented:
"Capco has had a positive start to the year which is demonstrated in our strong results today. At Covent Garden, rigorous
asset management and tactical investment activity continues to drive value growth and enhance our presence across the
estate. The successful launch of Lillie Square has established positive pricing evidence for the area around Earls Court which,
along with detailed consents and the establishment of the venture with TfL, has created further value from our interests in the
area. As we enter the second half of the year, our balance sheet is significantly strengthened and our strategy remains clear
and focused to deliver long-term value creation for our shareholders"
Highlights
Strong valuation performance
- 9.5 per cent increase in EPRA adjusted, diluted NAV to 272 pence per share (Dec 2013: 249 pence)
- 7.5 per cent (like-for-like) increase in total property market value to GBP2.6 billion (Dec 2013: GBP2.3 billion)
- 9.9 per cent total return in the period
- Proposed interim 2014 dividend of 0.5 pence per share
Value growth through rigorous asset management and investment activity at Covent Garden
- Total property market value of GBP1.3 billion up 6.2 per cent (like-for-like) (Dec 2013: GBP1.2 billion)
- 4.2 per cent (like-for-like) growth in ERV to GBP65.7 million
- Adjusted ERV target of GBP85 million by December 2016 following acquisition activity
- GBP76 million cash invested in acquisitions enhancing presence on the estate
Value creation through achievement of key milestones at Earls Court
- Market value of Earls Court interests GBP1.1 billion, up 10.1 per cent (like-for-like) (Dec 2013: GBP0.9 billion)
- Earls Court Partnership, the venture with TfL in relation to EC1 & EC2 established (Capco share 63 per cent)
- Detailed planning consents granted for Earls Court Village and the Empress State Building
Positive pricing evidence of GBP1,400 – GBP1,500 per square foot at Lillie Square
- Over 90 per cent of phase 1 reserved or exchanged, including premium units
- GBP130 million (Capco share: GBP65 million) construction facility completed for Lillie Square
Strong financial position
- Group LTV nine per cent (Dec 2013: 15 per cent)
- Cash and available facilities of GBP641 million (Dec 2013: GBP287 million)
- 9.99 per cent equity placing raised GBP258 million to accelerate value creation at Covent Garden and Earls Court
- GBP665 million unsecured revolving credit facility completed for Covent Garden
FINANCIAL HIGHLIGHTS
30 June 31 December
Comprising 2014 2013
9.9% Total return for six months to 30 June 2014 (full year 2013: 23.1%)
EPRA adjusted net asset value GBP2,307m GBP1,912m
EPRA adjusted, diluted net asset value per share 9.5% 272p 249p
Dividend per share 0.4% 1.0p 1.5p
8.5% Total property return for six months to 30 June 2014 (full year 2013: 21.9%)
Property Market Value 6.9% GBP2,552m GBP2,251m
Profits on disposal – GBP1m GBP13m
Net rental income 1.6% GBP37.4m GBP64.8m
Underlying earnings per share(1) 1.0p 1.0p
1 Underlying earnings per share is a non-IFRS measure. See Financial Review for more details.
Outlook
Capco has had a positive start to the year, which is demonstrated in our results today. EPRA adjusted NAV has grown to
GBP2.3 billion following strong performance at both our estates underpinned by a clear and focused strategy for value growth and
creation.
Covent Garden has re-established itself as a vibrant district where people can shop, eat, live and work within a unique cultural
and historic setting. Our tenant mix continues to evolve as brands are attracted to the energy and quality footfall on the estate.
In addition, a rigorous asset management strategy, with a plan for every street means our offering at Covent Garden is exciting
and creative for visitors and attractive to retailers. This is reflected in the recent letting activity we have seen from both new and
existing tenants.
It has been an active period for investment activity at Covent Garden and we have expanded our footprint having acquired six
properties with potential for repositioning and conversion. Accordingly, the ERV target has been adjusted to GBP85 million by
December 2016. We have a solid pipeline of opportunities ahead of us with the Kings Court and Carriage Hall schemes, our
largest development to date, redeveloping over 100,000 square feet, including 22,000 square feet of new space on the estate.
At Earls Court, our land interests in this part of central London have increased in value through the achievement of significant
milestones.
The Earls Court Masterplan is moving forward. At EC1 & EC2, the venture with TfL has now been established, providing Capco
with a 63 per cent share in Earls Court Partnership. Detailed planning consent has been granted for Earls Court Village and
pre-enabling works have started on site to prepare for demolition next year. The Empress State Building has also achieved
detailed planning consent for a conversion to residential and will bring a further 610,000 square feet into the overall Masterplan
area.
The positive launch of Lillie Square has set a new pricing benchmark for the area around Earls Court and demonstrated the
breadth and depth of demand for well-located premium residential product in central London. Our focus is now set on the
construction of phase 1 and the launch of subsequent phases.
London is a thriving global city and with the population expected to grow significantly, it needs more housing. The Earls Court
Masterplan is a significant opportunity to create a dynamic new neighbourhood and underpins the delivery of new homes, jobs,
and investment in infrastructure for an important part of London.
The balance sheet, strengthened by the recent equity raise, provides Capco with the financial flexibility it needs to continue to
grow and create value. We remain alert to political risk which may arise from the uncertainty ahead of the upcoming elections.
However, we are confident that with two unique central London assets and a clear and focused strategy we are well positioned
to deliver long-term value for our shareholders.
ENQUIRIES
Capital & Counties Properties PLC:
Ian Hawksworth Chief Executive +44 (0)20 3214 9188
Soumen Das Finance Director +44 (0)20 3214 9183
Michelle McGrath Head of Investor Relations +44 (0)20 7297 6093
Media enquiries:
Sarah Hagan Director of Communications +44 (0)20 3214 9185
UK: Hudson Sandler Michael Sandler, Wendy Baker +44 (0)20 7796 4133
SA: Instinctif Frederic Cornet +27 (0) 11 447 3030
A presentation to analysts and investors will take place today at 9:00am at UBS, 1 Finsbury Avenue, London, EC2M 2PP. 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 (feedback@capitalandcounties.com or
telephone +44 (0)20 3214 9153).
OPERATING REVIEW
Overview
Capco's strategy is focused on growing and creating value at its two major central London assets. Through rigorous asset
management and investment activity at Covent Garden and through the planning and assembly of land at Earls Court, Capco
unlocks the potential within both of its estates, creating long-term value for shareholders.
Capco is focused on the retail and residential markets of central London. London is a thriving global city and its attraction
remains strong to those who want to invest, live and work in the city. According to The London Plan, the Mayor of London's
strategic plan for the Capital, the population of London is growing and it needs more housing. Against this backdrop and with a
focused strategy, both Covent Garden and Earls Court are well positioned to continue to grow and create value.
Valuations
Market Market
Value Value
30 June 31 December Market Initial Nominal
2014 2013 Value ERV Yield Equivalent
GBPm GBPm Change(1,2) Change(1) (EPRA) Yield
Covent Garden 1,325 1,156 6.2% 4.2% 2.98% 4.09%
Earls Court Properties
EC1 & EC2 522 453 13.1%
Empress State 274 265 3.3%
Lillie Square(3) 170 153 8.4%
Other Earls Court property 89 63 20.8%
Venues 167 161 2.0%
Other 5 –
Total property 2,552 2,251 7.5%
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.
COVENT GARDEN
Covent Garden has re-established itself as a world class destination. The estate's vibrancy and energy continues to attract
strong tenant demand from both retailers and restaurants and a premium residential offering is restoring the estate's residential
heritage. Occupancy on the estate remains high at 99 per cent and footfall remains strong with 43 million customer visits
annually.
Covent Garden's value growth strategy is underpinned by place-making, creative asset management, tactical acquisitions and
strategic development, positioning the estate for growth in capital and rental values. In the six months to 30 June 2014, Covent
Garden has shown solid growth with the estate valued at GBP1.3 billion, an increase of 6.2 per cent on a like-for-like basis.
ERV has grown to GBP65.7 million following good letting and acquisition activity, a like-for-like increase of 4.2 per cent. The
December 2016 ERV target has been adjusted to GBP85 million reflecting acquisition activity. Annual gross income as at 30 June
2014 was GBP42.9 million.
In the year to date, 38 letting transactions including new leases, renewals and rent reviews representing GBP5.8 million of rental
income per annum were executed at 6.0 per cent above 31 December 2013 ERV.
Retail
Demand for space from retailers is strong from both existing and new tenants. Vintage menswear brand Nigel Cabourn and
Fred Perry, who will be relocating from its current location in the Royal Opera House Arcade, have both taken up space on
Henrietta Street. This is in line with the 'Street to Suit' strategy for Henrietta Street which aims to refocus its offering to premium
menswear.
Orlebar Brown opened a pop up store on Floral Street as part of the Floral Street Goes Pop initiative to introduce new pop up
brands to the street ahead of the development at Kings Court and Carriage Hall. Premium swimwear brand Heidi Klein, Stylist
Magazine and online retailer My-Wardrobe have all taken up temporary pop up space.
Lululemon athletica opened its flagship store on Long Acre and Moleskine has opened its doors on King Street. Parisian shoe
brand, Bobbies, opened a 12 month pop up, its first store in the UK in the Royal Opera House Arcade.
Dining
This year has seen increased momentum in the dining quality and choice provided at Covent Garden, further enhancing the
estate's reputation for destination dining.
Lima Floral, located on the corner of Floral Street, recently opened its doors and will offer Peruvian cuisine in a contemporary
style as well as a dedicated cocktail and tapas bar.
Caprice Holdings, the team behind The Ivy, one of the most famous and successful restaurants in Covent Garden, is currently
fitting-out One South Piazza for its new flagship restaurant which will offer all-day dining from breakfast until after theatre.
Residential
Covent Garden continues to restore the estate's residential heritage through the development and refurbishment of premium
residential apartments.
The Beecham will provide nine luxury apartments for sale or for rent and there has been a high level of interest in the
development. Contracts have been exchanged for one apartment at a sales price of GBP2,850 per square foot ahead of practical
completion. The Southampton will provide a further seven luxury apartments for rental. Both developments are on track for
delivery in autumn this year.
The final apartment in The Russell, which comprised of five apartments, was sold in May 2014. The average sales price for the
entire development was in excess of GBP2,400 per square foot.
Refurbishment of 7 Garrick Street has been completed following its acquisition to create three new apartments. The
apartments are for rental and all have been let achieving an average rent of GBP65 per square foot. 4 Henrietta Street, an office to
residential conversion overlooking the Piazza, has also been let at GBP65 per square foot.
Acquisitions
It has been an active period for acquisitions. Six new properties were acquired (one by way of a property swap), for a total cash
consideration of GBP76 million, as the business has taken advantage of further opportunities on the estate as referenced in the
May 2014 capital raise. The ERV attributable to these acquisitions at 30 June 2014 is GBP3.5 million.
In addition to 7 Garrick Street, 23-24 Henrietta Street and 26-27 Southampton Street add to the office to residential conversion
pipeline, and present the opportunity to activate the ground floor frontages for retail use. 21 and 22-23 James Street expand
Capco's presence on this prime street.
The freehold of 32-33 Long Acre was swapped for that of 16-18 King Street. The property, further consolidating Capco's
position on this key street, anchors the southwest corner of King Street.
Future developments
Kings Court and Carriage Hall is Capco's largest development to date at Covent Garden and the team is working towards
starting on site in autumn this year.
The development will transform the area between Floral Street and King Street, creating a new connecting passage between
the two streets improving pedestrian flow around the estate. Providing over 100,000 square feet, including 22,000 square feet
of new space, the development will provide high quality residential and retail product through 45 premium apartments and
10 retail units. The total development cost of the scheme is expected to be in the order of GBP85-GBP90 million. Within the
30 June 2014 valuation, an additional GBP2.6 million of ERV was attributable to Kings Court and Carriage Hall. Taking this into account,
the like-for-like ERV growth for the period would have been 8.5%.
EARLS COURT PROPERTIES
The Earls Court Masterplan is one of the largest development opportunities in central London. Comprising over 70 acres of
consented land and over 10.1 million square feet of new space, the mixed-use, primarily residential scheme will provide 7,500
new homes (including Lillie Square), 10,000 jobs, and over GBP450 million of community benefits. The Earls Court Masterplan is
one of the Greater London Authority's ("GLA") designated Opportunity Areas making it a key strategic scheme for London.
The Earls Court Masterplan is located in two London boroughs, The Royal Borough of Kensington and Chelsea ("RBKC") and
The London Borough of Hammersmith & Fulham ("LBHF"), which has recently changed from a Conservative to a Labour
administration. Capco remains committed to working constructively with all of its stakeholders to deliver this important scheme
for London.
Earls Court Properties represents Capco's interests in Earls Court, which principally comprise:
- The leasehold interests of the Earls Court Exhibition Centres and the freehold of the Northern Access Road
("EC1 & EC2")
- 100 per cent of the Empress State Building
- 50 per cent interest in the Lillie Square joint venture
The valuation of Earls Court Properties has performed well over the period, reflecting the successful launch of the first phase of
the Lillie Square scheme together with a strong central London residential sales market. The total valuation increased to
GBP1.1 billion, up 10.1 per cent on a like-for-like basis.
The Earls Court Masterplan is moving forward and several milestones have been achieved in the context of the scheme.
Planning
Two detailed planning consents were granted over the period.
Earls Court Village, which represents the majority of the EC1 & EC2 area, covers 16 acres and provides for 2.4 million square
feet of residential-led, mixed-use space. The consent provides for over 1,200 new homes, over three acres of publicly
accessible park and the first phase of the new High Street.
The Empress State Building achieved a change of use from commercial to residential. The consent provides for the creation of
340 private new homes, as well as improvements to the facade of the existing building. The Section 106 agreement has also
been signed which will provide 102 affordable units as well as other community benefits. The consent adds a further 610,000
square feet of residential floor space to the overall Masterplan area.
Land Assembly
Earls Court Partnership Limited, the venture with Transport for London ("TfL") in respect of EC1 & EC2, was established
(Capco share 63 per cent). It is anticipated that the venture arrangements will complete in full once vacant possession is
available, which will result in new 999 year leases over EC1 & EC2 being granted to the venture. Capco is appointed exclusive
Business and Development Manager and is leading the venture. Pre-enabling works for EC1 & EC2 have commenced to
prepare for demolition which is expected to commence in 2015. Demolition is expected to take 18 months due to the
complexity of the site at a cost of GBP50-GBP60 million.
A number of small acquisitions have been made around the Earls Court Masterplan area totalling GBP18 million with further
acquisitions identified around the site. The business is well placed to maximise opportunities following the May 2014 capital
raise. The acquisitions provide the opportunity to enhance the implementation of the early stages of the scheme.
As stated in the full year results released in February 2014, Capco has exercised its option under the Conditional Land Sale
Agreement ("CLSA") and to date has paid GBP30 million of the GBP105 million cash consideration, the remainder of which is payable
in five annual instalments of GBP15 million, beginning on 31 December 2015. Further details are contained within the Financial
Review.
No applications for judicial review are currently outstanding, however the risk of future judicial review challenges on planning
decisions or land assembly transactions cannot be discounted.
LILLIE SQUARE
Lillie Square is an exciting new residential development delivering modern garden-square living in central London. The
development will create over 600 private and 200 affordable homes across three phases.
The valuation of Capco's 50 per cent interest in Lillie Square, which is held in a joint venture with the Kwok Family Interests
("KFI"), increased to GBP170 million as at 30 June 2014, a like-for-like increase of 8.4 per cent since December 2013.
The first phase, which comprises 237 apartments, was launched in March 2014 to strong demand. Marketing was initially
focused on the 213 standard units which were predominately all sold within a few weeks. The 24 premium units were released
in July, of which 10 are already reserved with pricing on individual units achieving over GBP2,000 per square foot.
Over 90% of phase 1 is now exchanged or reserved, totalling over GBP200 million of sales, demonstrating the depth of demand
for this well located premium residential development. The average sales price for phase 1 is expected to be between
GBP1,400-GBP1,500 per square foot setting a record pricing benchmark for the immediate vicinity.
Construction is expected to cost GBP360 million with a peak capital requirement of GBP130 million due to the phasing of the project.
A GBP130 million revolving credit facility was signed in May 2014 (Capco share: GBP65 million) to finance the development. Enabling
works for phase 1 have started and construction is expected to begin shortly.
Capco notes the on-going legal situation in Hong Kong regarding certain members of the Kwok Family however the operation
of the joint venture continues to be unaffected.
VENUES
The Venues business has performed ahead of expectations with EBITDA at GBP7.7 million, up 17 per cent compared to the first
half of 2013.
The transition of activities to Olympia London has progressed very well. Over 80 per cent of Earls Court's 2014 exhibitions (by
licence fee) are to move to Olympia London in 2015, including major shows such as The London Book Fair and the Ideal
Home Show. This is reflected in the valuation performance, which has increased by 2.0 per cent to GBP167 million.
The Earls Court venue is currently taking bookings until December 2014.
DIVIDENDS
The Board has proposed an interim dividend of 0.5 pence per share to be paid on 26 September 2014 to shareholders on the
register at 5 September 2014. Subject to SARB approval, a scrip dividend alternative will be offered.
FINANCIAL REVIEW
The first half of 2014 has seen EPRA adjusted, diluted net assets per share rise by 9.5 per cent during the period, increasing
from 249 pence at 31 December 2013 to 272 pence. This 23 pence increase together with the 1 pence dividend paid in June
represents a total return of 9.9 per cent.
At Covent Garden continued growth in rental values as well as some yield compression have increased the value of the estate
by 5.5 per cent (6.2 per cent like-for-like) following a number of rent reviews, lease re-gears, new lettings and progress made
on developments.
The market value of Earls Court Properties, which comprises the Group's interests at Earls Court, has increased by
9.6 per cent (10.1 per cent like-for-like), primarily the result of the successful launch of the first phase of the Lillie Square scheme
together with the strong central London residential sales market. The valuation of the Group's EC1 & EC2 interests by Jones
Lang LaSalle, the Group's external valuers, implies a land value of GBP36.5 million per acre (31 December 2013: GBP31.7 million) for
the combined freehold and leasehold interest.
Re-presentation of prior year comparatives
Following the adoption of IFRS 11 'Joint Arrangements' the Group is required to represent its joint ventures as though the
standard had been in effect at 1 January 2013. The standard removed the proportional consolidation option that was previously
available under IAS 31 'Interests in Joint Ventures'. Under the equity method, rather than proportionally consolidating the
Group's share of assets, liabilities, income and expenses on a line-by-line basis, the Group's net equity interest in the joint
venture is now disclosed as a single line item in both the consolidated balance sheet and consolidated income statement.
Loans between the Group and its joint ventures, as well as interest thereon, are no longer eliminated on consolidation. There
has been no change in the net asset position or profit after tax as a result of adoption.
Internally the Board focuses on and reviews information and reports prepared on a proportionately consolidated basis, which
includes the Group's share of joint ventures. Therefore to align with the way the Group is managed, this financial review
presents the financial position and performance analysis on a proportionately consolidated basis. Continuing and discontinuing
operations have also been combined.
FINANCIAL POSITION
At 30 June 2014 the Group's EPRA adjusted net assets were GBP2.3 billion representing 272 pence per share adjusted and
diluted, an increase of 23 pence per share since 31 December 2013.
As at 30 June 2014 As at 31 December 2013
Joint Proportionately Joint Proportionately
IFRS Ventures Consolidated IFRS Ventures Consolidated
GBPm GBPm GBPm GBPm GBPm GBPm
Investment, development and trading property 2,346.3 88.7 2,435.0 2,081.4 84.9 2,166.3
Net debt (231.5) 13.1 (218.4) (331.2) 2.0 (329.2)
Other assets and liabilities 81.2 (101.8) (20.6) 61.9 (86.9) (25.0)
Net assets 2,196.0 – 2,196.0 1,812.1 – 1,812.1
Fair value of derivative financial instruments (3.0) – (3.0) 14.1 – 14.1
Unrecognised surplus on trading properties 96.9 – 96.9 69.2 – 69.2
Deferred tax liabilities on exceptional items and other 16.9 – 16.9 16.2 – 16.2
EPRA adjusted net assets 2,306.8 – 2,306.8 1,911.6 – 1,911.6
EPRA adjusted, diluted net assets per share (pence) 272 – 272 249 – 249
Investment, development and trading property
A revaluation surplus on the Group's property portfolio of GBP163.4 million was recorded during the period, up 7.5 per cent on a
like-for-like basis compared to IPD Capital Return for the equivalent period of 5.8 per cent.
Total property return for the period was 8.5 per cent which compares to the IPD Total Return index which recorded a
9.1 per cent return for the corresponding period.
Valuation surpluses on trading property are not recorded in the income statement and its balance sheet valuation does not
reflect market value, but rather the lower of cost and market value. Any unrecognised surplus is however reflected within the
EPRA adjusted net asset measure.
At 30 June 2014, the unrecognised surplus on trading property was GBP96.9 million, up from GBP69.2 million at 31 December 2013.
This primarily arises on property assets at Lillie Square.
Property acquisitions in the period were GBP112.7 million, the majority of which were acquisitions at Covent Garden of
GBP89.7 million. Net of a property swap, cash invested in expanding the footprint at Covent Garden was GBP76.4 million. The last
residential apartment at The Russell was also sold during the period.
In March the Group established Earls Court Partnership Limited ("ECPL"), an investment vehicle between the Group (63 per
cent controlling interest) and TfL (37 per cent interest) to enable the development of EC1 & EC2 in line with the Earls Court
Masterplan. The completion of the transfer of the Group's leasehold interests will occur in conjunction with the grant of a
999 year lease to ECPL by TfL. However, as at 30 June 2014 the Group's leasehold interests in Earls Court 1 & 2 are held outside
of ECPL. ECPL will recognise the leasehold interests when investment property recognition criteria have been met. At 30 June
2014 ECPL was in receipt of GBP12.4 million in advances from the Group and TfL, to fund pre-enabling work and other activities
currently being undertaken.
As detailed in the 2013 Annual Report & Accounts the Conditional Land Sale Agreement ("CLSA") was value neutral as the
underlying asset did not at that time meet the recognition criteria required for investment and development property. This
position remains the same at 30 June 2014 and therefore of the GBP30 million paid to date, GBP15 million remains held as a
prepayment against a future draw of land and the future payments, a total of GBP75 million, are disclosed as a capital
commitment. Where any amounts are paid prior to the transfer of property, they will be carried on the Group's balance sheet as
prepayments against future land draw down. A transfer from prepayment to investment and development property will occur
once the risks and rewards of ownership have passed to the Group. Once this occurs, in line with the Group's accounting
policy, the land will become subject to bi-annual valuation.
Capital raising
In May the Group completed a placing of 75.9 million new ordinary shares at a price of 340 pence per share to fund the
acceleration of value creation at Covent Garden and Earls Court. The placing generated net proceeds of GBP251.6 million. The
number of ordinary shares in issue now stands at 835.7 million.
Debt and gearing
In February the Group signed a GBP665 million five year unsecured revolving credit facility to replace the Group's Covent Garden
facilities. An exceptional charge of GBP4.8 million was incurred relating to the termination of derivatives and a write off of
unamortised transaction costs relating to the previous facilities.
In May the Group entered into a GBP130 million (Capco share GBP65 million) four year construction facility to fund the Lillie Square
development.
Net debt has decreased by GBP110.8 million in the period principally as a result of the share placing proceeds (GBP251.6 million net
of expenses) less property acquisitions and capital expenditure.
The gearing measure most widely used in the industry is loan-to-value ("LTV"). LTV is calculated on the basis of net debt
divided by value of the Group's property portfolio. The Group focuses most on an LTV measure that includes the notional share
of joint venture interests but excludes the share of cash, debt and property which is held by the Group on behalf of TfL in
respect of ECPL. The LTV of 9.2 per cent remains comfortably within the Group's current limit of no more than 40 per cent.
As at As at
30 June 31 December
2014 2013
Loan to value 9.2% 15.2%
Interest cover 225% 148%
Weighted average debt maturity 4.5 years 4.3 years
Weighted average cost of debt 3.3% 4.4%
Proportion of gross debt with interest rate protection 100% 100%
The Group's policy is to substantially eliminate the medium and long-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 2014 the proportion of gross debt with interest rate protection was
100 per cent (31 December 2013: 100 per cent).
The Group remains compliant with all of its debt covenants.
The Group has capital commitments of GBP91.0 million at 30 June 2014 which compares to GBP105.9 million at 31 December 2013.
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 on a proportionately consolidated basis. The Group consider this presentation to provide useful information
as it removes unrealised, exceptional and other one-off items and therefore represents the recurring, underlying performance of
the business.
Re-presented
Six months Six months
ended ended
30 June 30 June
2014 2013
GBPm GBPm
Net rental income 37.4 32.2
Profit on sale of trading property and other income 0.5 2.6
Gain on revaluation and sale of investment and development property 134.5 197.5
Administration expenses (19.4) (15.5)
Net finance costs (8.0) (10.7)
Exceptional finance costs (5.2) –
Change in fair value of derivative financial instruments (0.4) 9.2
Other 0.4 (0.4)
Taxation (2.3) (2.6)
Profit for the period attributable to non-controlling interest – (0.5)
IFRS profit for the period attributable to owners of the Parent 137.5 211.8
Adjustments:
Profit on sale of trading property and other income (0.5) (2.6)
Gain on revaluation and sale of investment and development property (134.5) (197.5)
Exceptional finance costs 5.2 –
Change in fair value of derivative financial instruments 0.4 (9.2)
Other adjustments (0.4) 0.6
Taxation on exceptional items 0.1 1.2
Profit for the period attributable to non-controlling interest – 0.5
Underlying profit after tax 7.8 4.8
Underlying earnings per share (pence) 1.0 0.6
Income
Net rental income increased by GBP5.2 million (8.9 per cent like-for-like) in the period when compared to the comparative six
month period of 2013, with the acquisition of control of Empress State in May 2013 contributing GBP3.2 million of the increase.
Performance has been strong across the Group, most notably at Olympia London which is benefitting from the transition of
exhibitions from Earls Court.
Gain on revaluation and sale of investment and development property
The gain on revaluation and sale of the Group's investment and development property was GBP134.5 million, GBP51.7 million arising
from the Covent Garden estate and GBP79.4 million from Earls Court Properties.
Administration expenses
Administration expenses have increased by 25.4 per cent from the first half of 2013, 6.3 per cent when compared to the second
half of 2013. This change is due to increased headcount in line with expansion of the Group's activities.
Net finance costs
Net finance costs have decreased by 25.3 per cent due to the combined impact of a reduced weighted average cost of debt
and lower average debt as a result of the re-financings over the past 12 months.
Exceptional finance costs
Exceptional finance costs relate primarily to charges incurred on termination of debt facilities in respect of the Covent Garden
refinancing, discussed earlier within debt and gearing.
Taxation
The total tax charge for the period was GBP2.3 million which is made up of both underlying tax and exceptional tax.
Underlying tax, the amount of tax charged on the underlying profits of the Group was GBP2.2 million, which reflects an underlying
tax rate of 22 per cent in line with the current rate of UK corporation tax. The UK corporation tax rate will to fall to 20 per cent
from April 2015.
Contingent tax, the amount of tax that would become payable on a theoretical disposal of all investment properties held by the
Group remains GBPnil. The contingent tax position is arrived at after allowing for indexation relief and Group loss relief. A disposal
of the Group's trading property at market value would result in a corporation tax charge to the Group of GBP20.8 million (21.5 per
cent of GBP96.9 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,
with external advice as appropriate, which complies with all relevant tax law and regulations and does not adversely impact our
reputation as a responsible taxpayer. As a Group, we are committed to acting in an open and transparent manner.
Consistent with the Group's policy of complying with relevant tax obligations and its goal in respect of its stakeholders, the
Group maintains a constructive and open working relationship with HM Revenue & Customs which regularly includes obtaining
advance clearance on key transactions where the tax treatment may be uncertain.
CASH FLOW
A summary of the Group's IFRS cash flow for the period to 30 June 2014 is presented below:
Re-presented
Six months Six months
ended ended
30 June 30 June
2014 2013
GBPm GBPm
Recurring cash flows after interest and tax 0.7 4.8
Purchase and development of property (120.5) (52.3)
Sale proceeds of property and investments 3.2 9.8
Pension funding (0.8) –
Net cash flow to joint ventures (10.3) (14.2)
Net cash flow before financing (127.7) (51.9)
Issue of shares 252.5 –
Other financing (102.9) (0.8)
Dividends paid (7.5) (3.9)
Net cash flow 14.4 (56.6)
Recurring cash flows were GBP0.7 million compared to GBP4.8 million for the equivalent period of 2013, as a result of higher
receivables and other assets.
Investing activities mainly comprise acquisitions (GBP97.9 million), capital expenditure (GBP22.6 million), offset in part by proceeds
received from the disposal of property (GBP2.8 million).
During the period six properties were acquired in Covent Garden (GBP76.4 million). The remaining property acquisition and
development expenditure was mainly in respect of Earls Court Properties. Proceeds from the sale of property and investments
primarily comprise the disposal of the last remaining residential unit at The Russell, Covent Garden.
Issue of shares reflects the Capital raising referred to above and the vesting of equity based compensation awards.
The GBP665 million five year unsecured revolving credit facility replaced the Group's Covent Garden facilities and has in part been
repaid by cash received from the capital raising to reduce cash drag in the short-term until it is invested.
Dividends paid of GBP7.5 million reflect the final dividend payment made in respect of the 2013 financial year. This was higher
than the comparative six month period due to additional ordinary shares in issue at the record date and a lower take up of the
scrip dividend alternative, 11 per cent versus 21 per cent in 2013.
As a result of the May 2014 placing and the two new facilities previously discussed, the Group's cash and undrawn committed
facilities at 30 June 2014 have increased to GBP640.5 million (31 December 2013: GBP287.0 million).
Soumen Das
Finance Director
1 August 2014
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 the assurance for the risk management
process and the review of mitigating controls to the Audit Committee.
Executive Directors together with Senior Management from every division and corporate function of the business complete a
Group risk register. Risks are considered in terms of their impact and likelihood from both a financial and reputational
perspective. Risks are assessed both gross and net of mitigating controls. Review meetings are held to ensure consistency of
response and adequacy of grading. Detailed risk registers are reviewed twice yearly and upon any material change in the
business with a full risk review undertaken annually, at which point it is also reviewed in detail by the Audit Committee with new
or emerging risks considered by the Committee as appropriate. This allows the Audit Committee to monitor the most important
controls and prioritise risk management and internal audit activities accordingly.
On the following pages are the principal risks and uncertainties from across the business and these are reflective of where the
Board has invested time during the period. These principal risks are not exhaustive and remain unchanged from 31 December
2013. The Group monitors a number of additional risks and adjusts those considered 'principal' as the risk profile of the
business changes.
CORPORATE RISKS
Impact: The Group's ability to maintain its reputation, revenue and value could be damaged by corporate risks
Risk Impact potential Mitigation factors
Responding to regulatory and legislative Reduced flexibility and increased cost Sound governance and internal policies
challenges. base. with appropriately skilled resource and
support from external advisers as
appropriate.
Responding to reputational, Reputational damage and increased Appointment of experienced individuals
communication and governance costs. with clear responsibility and
challenges. 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
allocate capital. profitability. of performance indicators.
Corporate level oversight of capital
allocation. Detailed capital planning and
financial modelling. Maintain adequate
cash and available facilities together with
conservative leverage.
Adequacy of partner evaluation and Reduced profitability, delay or Appropriate due diligence, procurement
management of agents and key reputational damage. and consultation.
suppliers.
Ineffective operation of shared Inability to execute business plan. Appropriate governance structure and
investment vehicles. documentation. Regular dialogue and
reporting.
Risk associated with attracting and Inability to execute business plan. Succession planning, performance
retaining staff. evaluations, training
and development, long-term incentive
rewards. Sound systems and processes
to effectively capture and manage
employee information.
Risk Impact potential Mitigation factors
Failure to comply with health and safety Loss or injury to employees, tenants or Comprehensive health and safety
or other statutory regulations or notices. contractors and resultant reputational procedures in place across the Group
damage. and 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 Lower returns. Open and transparent engagement with
potential competitive disadvantage when HM Revenue & Customs.
bidding for new assets.
Failure of IT systems / loss of data. Lack of access to data restricting ability Disaster recovery plan in place including
Cyber crime compromises data security, to operate effectively. frequent replication of data.
websites and applications. Loss of data and accessing of Extensive testing of security.
commercially sensitive data by Staff security training.
unauthorised persons.
ECONOMIC RISKS
Impact: Economic factors may threaten the Group's ability to meet its strategic objectives or return targets
Risk Impact potential Mitigation factors
Increased competition, changes in social Declining profitability. Focus on prime assets and quality
behaviour or deteriorating profitability and ERV targets not achieved. tenants with initial assessment of credit
confidence during a period of economic Reduced rental income and/or capital risk and active credit control.
uncertainty. values. Diversity of tenant mix with limited
exposure to any single tenant.
Strategic focus on creating retail
destinations and residential districts with
unique attributes.
Decline in UK commercial or residential Declining valuations. Focus on prime assets.
real estate market heightened by Regular assessment of investment
continued global macro-economic market conditions including bi-annual
conditions, currency fluctuations or the external valuations.
political landscape.
Restricted availability of credit and higher Decline in demand for the Group's Regular monitoring of covenants with
tax rates and macroeconomic factors properties, declining valuations, and headroom maintained.
may lead to reduced consumer spending reduced profitability. Ability to monitor tenants on turnover
and higher levels of business failure. leases.
FINANCING RISKS
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
Risk Impact potential Mitigation factors
Decline in market conditions or a general Reduced financial and operational Maintain appropriate liquidity to cover
rise in interest rates could impact the flexibility and delay to works. commitments.
availability 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.
DEVELOPMENT RISKS
Impact: Inability to deliver against development plans, particularly regarding Earls Court Properties
Risk Impact potential Mitigation factors
Unable to secure or implement planning Delayed implementation or reduced Pre-application and continued
consent due to political, legislative or development opportunity with consultation and involvement with key
other risks inherent in the planning corresponding impact on valuation. stakeholders and landowners.
environment. 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 development proposals are in
or judicial reviews. Inability to gain the accordance with current and emerging
support of influential stakeholders. policy.
Failure to demonstrate or implement Project team of internal staff and external
viable development due to legal, consultants with capabilities across all
contractual, environmental, relevant areas.
transportation, affordable housing or Technical studies with regular review.
other technical factors. Responsive consultation with evidence
Complexity of legal agreements relating based information.
to planning and land assembly for Earls Close monitoring and control over key
Court Properties. dates and triggering of obligations.
Inability to achieve lease extension, Inability to execute business plan. Informed market valuation and open
renegotiation of use or vacant Likely negative impact on valuations and dialogue with adjacent landowners.
possession. Failure to reach agreement Group's returns or delay to works. Earls Court Masterplan designed to allow
on land deals with adjacent landowners Restricted optionality in delivery of phased implementation.
on acceptable terms (including risk of development.
Section 34A of the Housing Act 1985 in
relation to land subject to CLSA).
Construction costs increase e.g. due to Reduced profitability of development. Extensive consultation, design and
market pricing, unforeseen site issues or technical work undertaken.
longer build period. Punitive cost, design Properly tendered and negotiated
or other implications. processes to select reputable contractors
Volatility in sales price. with relevant experience in projects of
equivalent scale and complexity, with
skilled resources and appropriate
insurance.
Commercially astute project team to
ensure management of costs and
delivery of programme.
Market demand assessments. Pre-sales
and marketing.
CONCENTRATION OF INVESTMENTS
Impact: Heightened exposure to events that threaten or disrupt central London
Risk Impact potential Mitigation factors
Events which damage or diminish Loss or injury, business disruption or Terrorist insurance in place.
London's status as a global financial, damage to property. Security and health and safety policies
business and tourist centre could affect and procedures in offices. Close liaison
the Group's ability to let vacant space, with police and National Counter
reduce the value of the Group's Terrorism Security Office (NaCTSO).
properties and potentially disrupt access Disaster recovery and business continuity
or operations at the Group's head office. planning.
Changes to or failure of infrastructure. Active involvement in organisations and
Concentration of higher profile events in industry bodies promoting London.
central London.
DIRECTORS' RESPONSIBILITIES
Statement of Directors' responsibilities
The Directors are responsible for preparing the condensed consolidated financial statements, in accordance with applicable
law and regulations. The Directors confirm that, to the best of their knowledge:
- the condensed consolidated financial statements on pages 19 to 56 has been prepared in accordance with IAS 34
'Interim Financial Reporting', as adopted by the European Union; and
- the condensed consolidated financial statements on pages 19 to 56 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 4 to 12 refers to important events which have taken place in the period.
The principal risks and uncertainties facing the business are referred to on pages 13 to 15.
Related party transactions are set out in note 27 of the condensed consolidated 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
1 August 2014
INDEPENDENT REVIEW REPORT TO CAPITAL & COUNTIES PROPERTIES PLC
Report on the condensed consolidated financial statements
Our conclusion
We have reviewed the condensed consolidated financial statements, defined below, in the Interim Report of Capital & Counties
Properties PLC for the six months ended 30 June 2014. Based on our review, nothing has come to our attention that causes us
to believe that the condensed consolidated financial statements are 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.
This conclusion is to be read in the context of what we say in the remainder of this report.
What we have reviewed
The condensed consolidated financial statements, which are prepared by Capital & Counties Properties PLC, comprise:
– the Consolidated Balance Sheet as at 30 June 2014;
– the Consolidated Income Statement and Statement of Comprehensive Income for the period then ended;
– the Consolidated Statement of Cash Flows for the period then ended;
– the Consolidated Statement of Changes in Equity for the period then ended; and
– the explanatory notes to the condensed consolidated financial statements.
As disclosed in note 1, the financial reporting framework that has been applied in the preparation of the full annual financial
statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
The condensed consolidated financial statements included in the Interim Report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
What a review of condensed consolidated financial statements involves
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.
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 consolidated financial statements.
INDEPENDENT REVIEW REPORT TO CAPITAL & COUNTIES PROPERTIES PLC CONTINUED
Responsibilities for the condensed consolidated financial statements and the review
Our responsibilities and those of the directors
The Interim Report, including the condensed consolidated financial statements, 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.
Our responsibility is to express to the Company a conclusion on the condensed consolidated 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 complying with the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose.
We do not, in giving this conclusion, 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.
PricewaterhouseCoopers LLP
Chartered Accountants
1 August 2014
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 2014
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Notes GBPm GBPm GBPm
Continuing operations
Revenue 2 54.2 51.2 115.5
Rental income 51.4 42.2 89.4
Rental expenses (14.1) (14.3) (29.1)
Net rental income 2 37.3 27.9 60.3
Profit on sale of trading property 3 1.2 2.4 10.4
Other income – 0.2 0.2
Gain on revaluation and sale of investment and development property 4 134.4 187.9 303.7
Profit on sale of available-for-sale investments 5 – – 0.9
Write back/(write down) of trading property 0.5 – (0.5)
Impairment of other receivables 6 (5.2) (0.9) (4.3)
Other exceptional charges (0.1) (0.4) (0.5)
168.1 217.1 370.2
Administration expenses (18.7) (14.9) (32.6)
Operating profit 149.4 202.2 337.6
Finance costs 7 (8.3) (9.9) (20.7)
Finance income 0.3 0.6 1.1
Other finance costs and income 7 (1.2) 3.5 7.3
Change in fair value of derivative financial instruments (0.4) 8.3 15.6
Net finance (costs)/income (9.6) 2.5 3.3
Share of post-tax profit from joint ventures 14 – 6.4 6.3
Profit before tax 139.8 211.1 347.2
Current tax (2.0) (2.5) (3.3)
Deferred tax – 0.1 (10.2)
Taxation 10 (2.0) (2.4) (13.5)
Profit for the period from continuing operations 137.8 208.7 333.7
Discontinued operation
(Loss)/profit for the period from discontinued operation 9 (0.3) 3.6 4.7
Profit for the period 137.5 212.3 338.4
Profit attributable to:
Owners of the Parent 137.5 211.8 337.4
Non-controlling interest 8 – 0.5 1.0
Earnings per share from continuing operations attributable to owners
of the Parent
Basic earnings per share 12 17.8p 27.6p 44.0p
Diluted earnings per share 12 17.5p 27.4p 43.3p
Weighted average number of shares 12 776.2m 753.7m 755.4m
Earnings per share from discontinued operation and adjusted earnings per share from continuing and discontinued operations are shown in note 12.
Notes on pages 26 to 56 form part of these condensed consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
For the six months ended 30 June 2014
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Notes GBPm GBPm GBPm
Profit for the period 137.5 212.3 338.4
Other comprehensive income/(expense)
Items that may or will be reclassified subsequently to the income
statement
Fair value gains/(losses) on available-for-sale investments – 0.3 (0.7)
Realisation of revaluation reserve on disposal of available-for-sale
investments – – (0.9)
Items that will not be reclassified subsequently to the income
statement
Actuarial gains on defined benefit pension scheme – – 1.2
Tax relating to items that will not be reclassified 20 (0.1) (0.3) (0.5)
Total other comprehensive (expense)/income for the period (0.1) – (0.9)
Total comprehensive income for the period 137.4 212.3 337.5
Attributable to:
Owners of the Parent 137.4 211.8 336.5
Non-controlling interest 8 – 0.5 1.0
Arising from:
Continuing operations 137.7 208.7 332.8
Discontinued operation 9 (0.3) 3.6 4.7
Notes on pages 26 to 56 form part of these condensed consolidated financial statements.
CONSOLIDATED BALANCE SHEET (unaudited)
As at 30 June 2014
Re-presented Re-presented
As at As at As at
30 June 31 December 1 January
2014 2013 2013
Notes GBPm GBPm GBPm
Non-current assets
Investment and development property 13 2,308.8 2,049.8 1,427.2
Plant and equipment 1.2 0.9 1.0
Investment in joint ventures 14 0.1 93.3 179.1
Available-for-sale investments 0.3 0.4 3.6
Derivative financial instruments 19 3.8 3.5 0.5
Pension asset 1.6 0.8 –
Trade and other receivables 15 120.1 113.5 107.4
2,435.9 2,262.2 1,718.8
Current assets
Trading property 13 37.5 31.6 14.9
Trade and other receivables 15 48.4 37.7 25.4
Cash and cash equivalents 16 57.4 43.0 174.8
143.3 112.3 215.1
Total assets 2,579.2 2,374.5 1,933.9
Non-current liabilities
Borrowings, including finance leases 18 (282.4) (357.7) (197.6)
Derivative financial instruments 19 (0.8) (17.6) (27.3)
Pension liability – – (0.4)
Deferred tax 20 (11.0) (9.9) –
(294.2) (385.2) (225.3)
Current liabilities
Borrowings, including finance leases 18 (6.5) (16.5) (78.4)
Derivative financial instruments – – (2.0)
Other provisions 21 (7.2) (7.2) (7.3)
Tax liabilities (1.6) (0.1) (2.2)
Trade and other payables 17 (73.7) (153.4) (140.9)
(89.0) (177.2) (230.8)
Total liabilities (383.2) (562.4) (456.1)
Net assets 2,196.0 1,812.1 1,477.8
Equity
Share capital 22 208.9 189.5 188.3
Other components of equity 1,987.1 1,622.6 1,289.5
Total equity 2,196.0 1,812.1 1,477.8
Notes on pages 26 to 56 form part of these condensed consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
For the six months ended 30 June 2014
Equity attributable to owners of the Parent
Share Share Merger Revaluation Other Retained Total
capital premium reserve reserve reserves earnings equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2014 189.5 121.0 277.8 0.1 7.4 1,216.3 1,812.1
Profit for the period – – – – – 137.5 137.5
Other comprehensive expense:
Items that will not be reclassified
subsequently to the income
statement
Tax relating to items that will not be
reclassified 20 – – – – – (0.1) (0.1)
Total comprehensive income for the
period ended 30 June 2014 – – – – – 137.4 137.4
Transactions with owners
Ordinary shares issued 22 19.4 85.8 148.0 – – – 253.2
Dividend expense 11 – – – – – (8.4) (8.4)
Realisation of share-based payment
reserve on issue of shares – – – – (0.6) 0.6 –
Fair value of share-based payment – – – – 2.4 – 2.4
Tax relating to share-based payment 20 – – – – – (0.7) (0.7)
Total transactions with owners 19.4 85.8 148.0 – 1.8 (8.5) 246.5
Balance at 30 June 2014 208.9 206.8 425.8 0.1 9.2 1,345.2 2,196.0
Notes on pages 26 to 56 form part of these condensed consolidated financial statements.
For the six months ended 30 June 2014
Equity attributable to owners of the Parent
Non-
Share Share Treasury Merger Revaluation Other Retained controlling Total
capital premium shares reserve reserve reserves earnings Total interest 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/(expense):
Items that may or will be
reclassified subsequently to
the income statement
Fair value gains on
available-for-sale
investments – – – – 0.3 – – 0.3 – 0.3
Items that will not be
reclassified subsequently to
the income statement
Tax relating to items that will
not be reclassified – – – – – – (0.3) (0.3) – (0.3)
Total comprehensive income
for the period ended 30 June
2013 – – – – 0.3 – 211.5 211.8 0.5 212.3
Transactions with owners:
Ordinary shares issued 0.3 3.3 – – – – – 3.6 – 3.6
Dividends expense 11 – – – – – – (7.5) (7.5) – (7.5)
Fair value of share-base
payment – – – – – 1.6 (1.1) 0.5 – 0.5
Tax relating to share-based
payment – – – – – – 0.2 0.2 – 0.2
Non-controlling interest – – – – – – – – 43.9 43.9
Total transactions with owners 0.3 3.3 – – – 1.6 (8.4) (3.2) 43.9 40.7
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
Notes on pages 26 to 56 form part of these condensed consolidated financial statements.
For the six months ended 30 June 2014
Equity attributable to owners of the Parent
Non-
Share Share Treasury Merger Revaluation Other Retained controlling Total
capital premium shares reserve reserve reserves earnings Total interest 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 year – – – – – – 337.4 337.4 1.0 338.4
Other comprehensive
income/(expense):
Items that may or will be
reclassified subsequently to
the income statement
Realisation of revaluation
reserve on disposal of
available-for-sale
investments – – – – (0.9) – – (0.9) – (0.9)
Fair value losses on
available-for-sale
investments – – – – (0.7) – – (0.7) – (0.7)
Items that will not be
reclassified subsequently to
the income statement
Actuarial gains on defined
benefit pension scheme – – – – – – 1.2 1.2 – 1.2
Tax relating to items that will
not be reclassified 20 – – – – – – (0.5) (0.5) – (0.5)
Total comprehensive income
for the year ended 31
December 2013 – – – – (1.6) – 338.1 336.5 1.0 337.5
Transactions with owners
Ordinary shares issued 22 1.2 3.3 – – – – – 4.5 – 4.5
Dividend expense 11 – – – – – – (11.3) (11.3) – (11.3)
Adjustment for bonus issue 11 – – – – – – 0.8 0.8 – 0.8
Realisation of share-based
payment reserve on issue of
shares – – – – – (2.5) 0.7 (1.8) – (1.8)
Fair value of share-based
payment – – – – – 4.7 – 4.7 – 4.7
Tax relating to share-based
payment 20 – – – – – – 0.9 0.9 – 0.9
Non-controlling interest 8 – – – – – – – – 43.9 43.9
Acquisition of non-controlling
interest 8 – – – – – – – – (44.9) (44.9)
Disposal of treasury shares(1) 23 – – 1.0 – – – (1.0) – – –
Total transactions with owners 1.2 3.3 1.0 – – 2.2 (9.9) (2.2) (1.0) (3.2)
Balance at 31 December 2013 189.5 121.0 – 277.8 0.1 7.4 1,216.3 1,812.1 – 1,812.1
1 Treasury shares were used to satisfy employee share awards made in August 2013.
Notes on pages 26 to 56 form part of these condensed consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the six months ended 30 June 2014
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Continuing operations Notes GBPm GBPm GBPm
Cash flows from operating activities
Cash generated from operations 26 9.9 16.0 37.5
Interest paid (8.9) (9.5) (18.5)
Interest received 0.3 0.6 1.2
Taxation paid (0.6) (2.3) (4.4)
Cash flows from operating activities 0.7 4.8 15.8
Cash flows from investing activities
Purchase and development of property(1) (120.5) (52.3) (114.4)
Sale of property(1) 2.8 8.9 26.5
Sale of available-for-sale investments – – 2.6
Pension funding (0.8) – –
Control acquired of former joint venture 8 – – (50.3)
Cash acquired on acquisition of former joint venture – 0.3 0.2
Sale of subsidiary companies 0.4 0.6 0.6
Loan advances to joint ventures (10.4) (9.4) (17.7)
Cash flows from investing activities (128.5) (51.9) (152.5)
Cash flows from financing activities
Issue of shares 252.5 – –
Borrowings drawn 430.0 – 138.5
Borrowings repaid (510.2) (0.8) (172.1)
Purchase of derivative financial instruments (1.8) – (1.5)
Other finance costs (25.5) – (0.2)
Cash dividends paid 11 (7.5) (3.9) (6.9)
Contribution from non-controlling interest 4.6 – –
Cash flows from financing activities 142.1 (4.7) (42.2)
Net increase/(decrease) in unrestricted cash and cash equivalents
from continuing operations 14.3 (51.8) (178.9)
Cash flows from discontinued operation
Investing activities 0.1 (4.8) 47.1
Net increase/(decrease) in cash and cash equivalents from
discontinued operation 0.1 (4.8) 47.1
Net increase/(decrease) in cash and cash equivalents 14.4 (56.6) (131.8)
Unrestricted cash and cash equivalents at 1 January 37.0 168.8 168.8
Unrestricted cash and cash equivalents at period end 16 51.4 112.2 37.0
1 Includes purchase and sale of plant and equipment.
Notes on pages 26 to 56 form part of these condensed consolidated financial statements.
NOTES (unaudited)
1 PRINCIPAL ACCOUNTING POLICIES
General information
The Capital & Counties Properties PLC Group's assets principally comprise investment and development property at Covent
Garden, Earls Court and the exhibition halls at Olympia London. The condensed consolidated financial statements are
prepared in British pounds sterling.
Basis of preparation
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 . The
condensed consolidated financial statements should be read in conjunction with the Annual Report & Accounts for the year
ended 31 December 2013, which have been prepared in accordance with IFRSs as adopted by the European Union.
The condensed consolidated financial statements for the six months ended 30 June 2014 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 2013 were approved by the Board of Directors on 25 February 2014 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 property, 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 1 August 2014.
There were no standards and guidelines relevant to the Group that were in issue and endorsed at the date of approval of the
condensed consolidated financial statements but not effective at the balance sheet date.
During the six months to 30 June 2014, the following accounting standards and guidance were adopted by the Group:
IFRS 10 'Consolidated Financial Statements'
IFRS 11 'Joint Arrangements'
IFRS 12 'Disclosure of Interests in other Entities'
IAS 27 'Separate Financial Statements' (revised)
IAS 28 'Investment in Associates and Joint Ventures' (revised)
IAS 32 'Financial Instruments: Presentation' (amendment)
IAS 36 'Impairment of Assets' (amendment)
IAS 39 'Financial Instruments: Recognition and Measurement' (amendment)
These pronouncements had no significant impact on the condensed consolidated financial statements and resulted in changes
to presentation and disclosure only with the exception of IFRS 11 'Joint Arrangements' ("IFRS 11").
Impact of transition to IFRS 11 on prior period comparatives
IFRS 11, which has been endorsed by the European Union, removes the proportional consolidation option which was available
under IAS 31 'Interests in Joint Ventures'. This impacted the Group's published accounting policy in respect of joint ventures.
The Group's net interest in joint ventures is now disclosed as a single line item on both the consolidated balance sheet and the
consolidated income statement using the equity method rather than proportionally consolidating the Group's share of assets,
liabilities, income and expenses on a line-by-line basis.
This change has increased the total assets and total liabilities as previously presented, but there has been no overall change in
net assets. This standard was adopted by the Group from 1 January 2014 with retrospective application. The change in
accounting policy has a material impact on the consolidated balance sheet at 1 January 2013; consequently the opening
consolidated balance sheet has been presented within the primary statements.
The tables below show the impact of the change in accounting policy on the consolidated income statement, consolidated
balance sheet and consolidated statement of cash flows for all periods presented. There is no impact on the statement of
comprehensive income, statement of changes in equity or basic and diluted earnings per share.
Impact of transition to IFRS 11 on prior period comparatives
Impact on the consolidated income statement
Year Six months
ended ended
31 December 30 June
2013 2013
Revenue GBPm GBPm
Increase/(decrease)
Revenue for the period from continuing operations as previously reported under
proportionate consolidation 118.8 54.5
Adjustment to:
Revenue (3.3) (3.3)
Revenue for the period from continuing operations re-presented under IFRS 11 115.5 51.2
Profit for the period
Increase/(decrease)
Profit for the period from continuing operations as previously reported under
proportionate consolidation 333.7 208.7
Adjustment to:
Net rental income (3.3) (3.2)
Gain on revaluation of investment and development property (6.9) (6.8)
Write down of trading property 1.2 –
Impairment of other receivables (6.3) (0.9)
Administration expenses 1.0 0.5
Operating profit (14.3) (10.4)
Net finance costs 8.0 4.0
Share of post-tax profit from joint ventures 6.3 6.4
Profit for the period from continuing operations under IFRS 11 333.7 208.7
Impact on the consolidated balance sheet
As at As at
31 December 1 January
2013 2013
Assets GBPm GBPm
Increase/(decrease)
Total assets as previously reported under proportionate consolidation 2,282.5 1,925.5
Adjustment to:
Investment and development property (1.3) (159.0)
Investment in joint ventures 93.3 179.1
Other non-current assets 68.2 68.0
Trading property (83.6) (69.5)
Other current assets 17.4 (0.5)
Cash and cash equivalents (2.0) (9.7)
Total assets re-presented under IFRS 11 2,374.5 1,933.9
Liabilities
(Increase)/decrease
Total liabilities as previously reported under proportionate consolidation (470.4) (447.7)
Adjustment to:
Borrowings, including finance leases – 72.0
Derivative financial instruments – 2.0
Tax liabilities – (0.1)
Trade and other payables (92.0) (82.3)
Total liabilities re-presented under IFRS 11 (562.4) (456.1)
Equity
Total equity under both proportionate consolidation and IFRS 11 1,812.1 1,477.8
Impact on consolidated statement of cash flows
Year Six months
ended ended
31 December 30 June
2013 2013
Increase/(decrease) GBPm GBPm
Net decrease in cash and cash equivalents from continuing operations as previously
reported under proportionate consolidation (185.5) (51.7)
Adjustment to:
Cash flows from operating activities 7.3 (0.4)
Cash flows from investing activities (2.2) (1.2)
Cash flows from financing activities 1.5 1.5
Net decrease in cash and cash equivalents from continuing operations re-presented under
IFRS 11 (178.9) (51.8)
A summary of the Group's principal accounting policies, which have been applied consistently across the Group is set out
below.
Subsidiaries
Subsidiaries are fully consolidated from the date on which the Group is deemed to govern the financial and operating policies of
an entity, whether through a majority of the voting rights or otherwise. Subsidiaries cease to be consolidated from the date this
control is lost.
Investments in subsidiaries are reviewed at least annually for impairment. Where an indication of impairment exists, an
assessment of the recoverable amount is performed. The recoverable amount is based on the higher of the investment's
continued value in use or its fair value less cost to sell; fair value is derived from the entity's net asset value at the balance
sheet date.
Joint ventures
Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement.
Interests in joint ventures are accounted for using the equity method of accounting as required by IFRS 11 'Joint
Arrangements'. The equity method requires the Group's share of the joint venture's post-tax profit or loss for the period to be
presented separately on the income statement and the Group's share of the joint venture's net assets to be presented
separately on the balance sheet. Joint ventures with net liabilities are carried at nil value in the balance sheet where there is no
commitment to fund the deficit and any distributions are included in the consolidated income statement for the period. When the
Group's share of losses in a joint venture equals or exceeds its interests in the joint ventures, the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Estimation and uncertainty
The preparation of condensed consolidated financial statements in accordance with IFRS requires the use of estimates and
assumptions that affect the reported amounts of assets, liabilities, income and expenses. Although these estimates are based
on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
The most significant area of estimation and uncertainty in the condensed consolidated financial statements is in respect of the
valuation of the property portfolio and investments, where external valuations are obtained. The valuation of the Group's
property portfolio is inherently subjective due to the assumptions as outlined within the property portfolio note. As a result, the
valuations the Group places on its property portfolio are subject to a degree of uncertainty and are made on the basis of
assumptions which may not prove to be accurate and could therefore have a material effect on the Group's financial
performance and position.
Other areas of estimation and uncertainty are included within the accounting policies below, the more significant being:
Revenue recognition
Share-based payment
Provisions
Pensions
Contingent liabilities and capital commitments
Income taxes
Trade and other receivables
Derivative financial instruments
Operating segments
Management has determined the operating segments with reference to reports on divisional financial performance and position
that are regularly reviewed by the Chief Executive, who is deemed to be the chief operating decision maker.
Foreign currencies
Transactions in currencies other than the Company's functional currency are recorded at the exchange rate prevailing at the
transaction date. Foreign exchange gains and losses resulting from settlement of these transactions and from retranslation of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement except for differences
arising on the retranslation of available-for-sale investments which are recognised in other comprehensive income.
Revenue recognition
Property rental income and exhibition income consist of gross income calculated on an accruals basis, together with services
where the Group acts as principal in the ordinary course of business, excluding sales of property. Rental income is spread
evenly over the period from lease commencement to lease expiry.
Lease incentive payments, including surrender premiums paid which can be directly linked to enhanced rental income, are
amortised on a straight-line basis over the lease term. Upon receipt of a surrender premium for the early termination of a lease,
the profit and non-recoverable outgoings relating to the lease concerned are immediately reflected in net rental income.
Contingent rents, being those lease payments that are not fixed at the inception of a lease, for example increases arising on
rent reviews, are recorded as income in the periods in which they are earned.
Rent reviews are recognised as income, based on management estimates, when it is reasonable to assume they will be
received. Estimates are derived from knowledge of market rents for comparable properties determined on an individual
property basis and updated for progress of negotiations.
Where revenue is obtained by the sale of property, it is recognised when the significant risks and rewards have been
transferred to the buyer. This will normally take place on exchange of contracts unless there are conditions that suggest
insufficient probability of future economic benefits flowing to the Group. For conditional exchanges, sales are recognised when
these conditions are satisfied. Revenue arising from the sale of property under construction is recognised when both contracts
have been exchanged and the building work is physically complete.
Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate.
Dividend income is recognised when the relevant Group undertaking's right to receive payment has been established.
Exceptional items
Exceptional items are those items that in the Directors' view are required to be separately disclosed by virtue of their size or
incidence to enable a full understanding of the Group's financial performance. These items are excluded from the calculation of
underlying earnings.
Income taxes
Current tax is the amount payable on the taxable income for the period and any adjustment in respect of prior periods.
Taxes on income in interim periods are accrued using tax rates expected to be applicable to total annual earnings.
In accordance with IAS 12 'Income Taxes', deferred tax is provided for using the balance sheet liability method on temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax bases of those
assets and liabilities. However, temporary differences are not recognised to the extent that they arise from the initial recognition
of goodwill or an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects
neither accounting nor taxable profit or loss; or are associated with investments in subsidiaries, joint ventures and associates
where the timing of the reversal of the temporary difference can be controlled by the parent, venture or investor, respectively,
and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are
expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised only to the extent that management believes it is probable that future taxable profit will be
available against which the deferred tax assets can be recovered. Deferred income tax assets and liabilities are only offset
when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same tax authority on either the same taxable group or different taxable entities
where there is an intention to settle balances on a net basis.
Tax is included in the income statement except when it relates to items recognised in other comprehensive income or directly in
equity, in which case the related tax is also recognised in other comprehensive income or directly in equity.
An investment property accounted for at fair value will normally be recovered through sale rather than use.
Discontinued operation
A discontinued operation is a component of the Group's business that represents a separate major line of the 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.
Share-based payment
The cost of granting share options and other share-based remuneration to employees and Directors is recognised through the
income statement with reference to the fair value of the instrument at the date of grant.
The income statement is charged over the vesting period of the options with a corresponding increase in equity.
An option pricing model is used applying assumptions around expected yields, forfeiture rates, exercise price and volatility.
Upon eventual exercise, a reserves transfer occurs with no further charge reflected in the income statement.
Own shares held in connection with employee share plans and other share-based payment arrangements are treated as
treasury shares and deducted from equity.
Investment and development property
Investment and development property are owned or leased by the Group and held for long-term rental income and capital
appreciation and exclude property occupied by the Group.
The Group has chosen to use the fair value model. Property and any related obligations are initially recognised when the
significant risks and rewards attached to the property have transferred to the Group. Payments made in respect of the future
acquisition of investment and development property, as is the case for the CLSA, are initially recognised as prepayments until
the recognition criteria outlined above have been met. Investment and development property are recorded at cost and
subsequently revalued at the balance sheet date to fair value as determined by professionally qualified external valuers on the
basis of market value after allowing for future transaction costs.
The fair value of property is arrived at by adjusting the market value as above for directly attributable lease incentive assets and
fixed head leases.
Property held under leases is stated gross of the recognised finance lease liability.
The valuation is based upon assumptions as outlined within the property portfolio note. These assumptions conform with the
Royal Institution of Chartered Surveyors ("RICS") Valuation Professional Standards. The cost of development properties
includes capitalised interest and other directly attributable outgoings, with the exception of properties and land where no
development is imminent in which case no interest is included. Interest is capitalised (before tax relief) on the basis of the
weighted average cost of debt outstanding until the date of practical completion.
When the Group redevelops a property for continued future use, that property is classified as an investment and development
property during the redevelopment period and continues to be measured at fair value.
Gains or losses arising from changes in the fair value of investment property are recognised in the income statement in the
period in which they arise. Depreciation is not provided in respect of investment property including plant and equipment integral
to such investment property.
When the use of a property changes from trading property to investment property, the property is transferred at fair value with
any resulting gain recognised as trading property profit.
Investment properties cease to be recognised as investment property when they have been disposed of or when they cease to
be held for the purpose of generating rental income or for capital appreciation.
Where the Group disposes of a property at fair value in an arm's length transaction the carrying value immediately prior to the
sale is adjusted to the transaction price, offset by any directly attributable costs, and the resulting gain or loss is recorded in the
income statement.
A property ceases to be recognised as investment property and is transferred at its fair value to trading property when, in the
Directors' judgement, development commences with the intention of sale. Criteria considered in this assessment include, the
Board's stated intention, contractual commitments and physical, legal and financial viability.
Trading property
Trading property comprises those properties that in the Directors' view are not held for long-term rental income and capital
appreciation and are expected to be disposed of within one year of the balance sheet date or to be developed with the intention
to sell.
Such property is constructed, acquired, or if transferred from investment property, transferred at fair value which is deemed to
represent cost. Subsequently trading property is carried at the lower of cost and net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion and selling costs. In the case
of trading property this approximates market value as determined by professionally qualified external valuers at the balance
sheet date.
The amount of any write-down of trading property to market value is recognised as an expense in the period the write down
occurs. Should a valuation uplift occur in a subsequent period, the amount of any reversal shall be recognised as a reduction in
the previous write-down in the period in which the uplift occurs. This may not exceed the property's initial cost.
The sale of trading property is recognised as income when the significant risks and rewards have been transferred to the buyer.
Total costs incurred in respect of trading property are recognised simultaneously as an expense.
Leases
Leases are classified according to the substance of the transaction.
A lease that transfers substantially all the risks and rewards of ownership to the lessee is classified as a finance lease. All other
leases are normally classified as operating leases.
Group as a lessee:
In accordance with IAS 40 'Investment Property', property held under finance and operating leases may be accounted for as
investment property. Finance leases are recognised as both an asset and an obligation to pay future minimum lease payments.
The investment property asset is included in the balance sheet at the lower of fair value and the present value of minimum
lease payments, gross of the recognised finance lease liability. Lease payments are allocated between the liability and finance
charges so as to achieve a constant financing rate.
Other finance leased assets are capitalised at the lower of the fair value of the leased asset and the present value of the
minimum lease payments and depreciated over the shorter of the lease term and the useful life of the asset.
Rental expenses under operating leases are charged to the income statement on a straight-line basis over the lease term.
Plant and equipment
Plant and equipment consist of fixtures, fittings and other office equipment. Plant and equipment are stated at cost less
accumulated depreciation and any accumulated impairment losses. Cost includes the original purchase price of the asset plus
any attributable cost in bringing the asset to its working condition for its intended use. Depreciation is charged to the income
statement on a straight-line basis over an asset's estimated useful life to a maximum of five years.
Investments
Available-for-sale investments, being investments intended to be held for an indefinite period, are initially recognised and
subsequently measured at fair value.
Gains or losses arising from changes in the fair value of available-for-sale investments are included in other comprehensive
income, except to the extent that losses are determined to be attributable to impairment, in which case they are recognised in
the income statement and may not be reversed in subsequent periods.
Disposals are recorded upon distribution, at which time accumulated fair value adjustments are recycled from reserves to the
income statement.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost. The Directors
exercise judgement as to the collectability of the Group's trade and other receivables and determine when it is appropriate to
impair these assets.
Impairment of financial assets
An annual review is conducted for financial assets to determine whether there is any evidence of a loss event as described by
IAS 39 'Financial Instruments: Recognition and Measurement'. Factors such as days past due, credit status of the
counterparty, historical evidence of collection and probability of deriving future economic benefit are considered to assess
whether there is objective evidence of impairment. The amount of any potential loss is calculated by estimating future
cashflows or by using fair value where this is available through observable market prices. If, in a subsequent period, the
amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the original
impairment was recognised, the impairment reversal is recognised in the income statement on a basis consistent with the
original charge.
Cash and cash equivalents
Cash and cash equivalents are recognised at fair value. Cash and cash equivalents comprise cash on hand, deposits with
banks and other short-term highly liquid investments with original maturities of three months or less.
Deposits
Property deposits and on account receipts are held within trade and other payables.
Derivative financial instruments
The Group uses non-trading derivative financial instruments to manage exposure to interest rate risk. These instruments have
not been designated as qualifying for hedge accounting and are classified as held for trading. They are initially recognised on
the trade date at fair value and subsequently remeasured at fair value based on market price. Changes in fair value are
recognised directly in the income statement.
Trade and other payables
Trade payables are obligations for goods or services acquired in the ordinary course of business. Trade payables are
recognised at fair value and subsequently measured at amortised cost until settled.
Dividend distribution
Dividend distributions to shareholders are recognised as a liability once approved by shareholders.
Provisions
Provisions are recognised when the Group has a current obligation arising from a past event and it is probable that the Group
will be required to settle the obligation. Provisions are measured at the Directors' best estimate of the expenditure required to
settle the obligation at the balance sheet date.
Borrowings
Borrowings are recognised initially at their net proceeds as an approximation of fair value and subsequently carried at
amortised cost. Any transaction costs, premiums or discounts are capitalised and recognised over the contractual life of the
loan using the effective interest rate method; or on a straight line basis where it is impractical to do so. In the event of early
repayment, transaction costs, premiums or discounts paid or unamortised costs are recognised immediately in the income
statement.
Pensions
The costs of the defined contribution scheme and the Group's personal pension plans are charged against profits in the year in
which they fall due.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions of the defined benefit
scheme are recognised immediately as a charge in other comprehensive income for the period in which they arise with a
corresponding increase in the pension surplus or deficit. These re-measurements are not reclassified to the income statement
in subsequent periods. Past service costs, current service costs, curtailment or settlement gains or losses and net interest
income or expense are recognised immediately in the income statement. Net interest is calculated by applying the discount
rate to the opening plan assets and scheme obligation. The defined benefit obligation is calculated annually by independent
actuaries using the projected unit credit method and applying assumptions which are agreed between the Group and its
actuaries.
Contingent liabilities and capital commitments
Contingent liabilities are disclosed where there are present or possible obligations arising from past events, but the economic
impact is uncertain in timing, occurrence or amount. A description of the nature and, where possible, an estimate of the
financial effect of contingent liabilities are disclosed.
Capital commitments are disclosed when the Group has a contractual future obligation which has not been provided for at the
balance sheet date, as is the case for the CLSA. Amounts are only provided for where such obligations are onerous.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised
as a deduction from equity, net of any tax effects.
Where the Group's own shares are re-purchased, the consideration paid is classified as treasury shares and deducted from
equity. Where such shares are subsequently sold or re-issued, any consideration received is included in equity.
2 SEGMENTAL REPORTING
Management has determined the operating segments based on reports reviewed by the Chief Executive, who is deemed to be
the chief operating decision maker. The principal performance measures have been identified as net rental income and net
asset value.
For management and reporting purposes the Group is organised into four operating divisions being:
- Covent Garden
- Earls Court Properties which comprises the Group's interests at Earls Court, predominantly EC1 & EC2, the Empress
State Building and 50 per cent of the Lillie Square joint venture
- Venues comprises the exhibitions business including the Olympia London property assets
- Other comprises the discontinued activity of GCP, the Group's residual China investments, the business unit
historically known as Opportunities and other head office companies.
Management information is prepared on a proportionally consolidated basis. Segmental reporting has been presented in line
with management information with a reconciliation to the IFRS total.
The Group's operating segments derive their revenue primarily from rental income from lessees, with the exception of Venues
which generates revenue principally from its exhibitions business.
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 2014
Joint
Covent Earls Court Group venture IFRS
Garden Properties Venues Other total adjustment total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 25.1 9.9 19.3 – 54.3 (0.1) 54.2
Rent receivable and exhibition income 20.9 9.9 19.3 – 50.1 (0.1) 50.0
Service charge income 1.4 – – – 1.4 – 1.4
Rental income 22.3 9.9 19.3 – 51.5 (0.1) 51.4
Rental expenses(1) (3.4) (0.3) (10.4) – (14.1) – (14.1)
Net rental income 18.9 9.6 8.9 – 37.4 (0.1) 37.3
Profit on sale of trading property 1.2 (0.7) – – 0.5 0.7 1.2
Gain on revaluation and sale of
investment and development property 51.7 79.4 3.4 – 134.5 (0.1) 134.4
Write back of trading property 0.5 – – – 0.5 – 0.5
Impairment of other receivables – – – – – (5.2) (5.2)
Other exceptional charges – (0.1) – – (0.1) – (0.1)
Segment result 72.3 88.2 12.3 – 172.8 (4.7) 168.1
Unallocated costs
Administration expenses (19.4) 0.7 (18.7)
Operating profit 153.4 (4.0) 149.4
Net finance (costs)/income(2) (13.6) 4.0 (9.6)
Profit before tax 139.8 – 139.8
Taxation (2.0) – (2.0)
Profit for the period from continuing
operations 137.8 – 137.8
Discontinued operation
Loss for the period from discontinued
operation – – – (0.3) (0.3) – (0.3)
Profit for the period 137.5 – 137.5
Profit attributable to:
Owners of the Parent 137.5 – 137.5
Summary balance sheet
Total segment assets(3) 1,325.8 1,029.8 182.0 27.3 2,564.9 (10.3) 2,554.6
Total segment liabilities(3) (212.3) (149.2) (36.3) (7.4) (405.2) 10.3 (394.9)
Segmental net assets 1,113.5 880.6 145.7 19.9 2,159.7 – 2,159.7
Unallocated net assets(2) 36.3 – 36.3
Net assets 2,196.0 – 2,196.0
Other segment items:
Depreciation – – (0.1) – (0.1) – (0.1)
Capital expenditure (112.5) (29.1) (2.7) (4.5) (148.8) 3.7 (145.1)
1 Comprises service charge and other non-recoverable costs.
2 The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and the majority of the Group's
cash balances.
3 Total assets and total liabilities exclude loans between and investments in Group undertakings.
Reportable segments
Six months ended 30 June 2013
Joint
Covent Earls Court Group venture IFRS
Garden Properties(1) Venues Other total adjustment total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 30.6 6.1 17.6 0.2 54.5 (3.3) 51.2
Rent receivable and exhibition income 20.3 6.1 17.6 – 44.0 (3.2) 40.8
Service charge income 1.4 – – – 1.4 – 1.4
Rental income 21.7 6.1 17.6 – 45.4 (3.2) 42.2
Rental expenses(2) (4.0) (0.2) (10.1) – (14.3) – (14.3)
Net rental income 17.7 5.9 7.5 – 31.1 (3.2) 27.9
Profit on sale of trading property 2.4 – – – 2.4 – 2.4
Other income – – – 0.2 0.2 – 0.2
Gain on revaluation and sale of
investment and development property 123.4 75.1 (3.8) – 194.7 (6.8) 187.9
Impairment of other receivables – – – – – (0.9) (0.9)
Other exceptional charges – (0.4) – – (0.4) – (0.4)
Segment result 143.5 80.6 3.7 0.2 228.0 (10.9) 217.1
Unallocated costs
Administration expenses (15.4) 0.5 (14.9)
Operating profit 212.6 (10.4) 202.2
Net finance (costs)/income(3) (1.5) 4.0 2.5
Share of joint venture profits – 6.4 6.4
Profit before tax 211.1 – 211.1
Taxation (2.4) – (2.4)
Profit for the period from continuing
operations 208.7 – 208.7
Discontinued operation
Profit for the period from discontinued
operation – – – 3.6 3.6 – 3.6
Profit for the period 212.3 – 212.3
Profit attributable to:
Owners of the Parent 211.8 – 211.8
Non-controlling interest 0.5 – 0.5
Summary balance sheet
Total segment assets(4) 1,110.4 807.9 158.8 82.0 2,159.1 90.0 2,249.1
Total segment liabilities(4) (319.2) (172.3) (33.0) (3.4) (527.9) (90.0) (617.9)
Segmental net assets 791.2 635.6 125.8 78.6 1,631.2 – 1,631.2
Unallocated net assets(3) 99.6 – 99.6
Net assets 1,730.8 – 1,730.8
Other segment items:
Depreciation (0.1) – – – (0.1) – (0.1)
Capital expenditure (21.7) (156.1) (4.0) (0.8) (182.6) (113.8) (296.4)
1 Included in the net rental income from Earls Court Properties is GBP3.7 million attributable to the Empress State Building, of which GBP0.6 million represents non-
controlling interest.
2 Comprises service charge and other non-recoverable costs.
3 The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and the majority of the Group's
cash balances.
4 Total assets and total liabilities exclude loans between and investments in Group undertakings.
Reportable segments
Year ended 31 December 2013
Joint
Covent Earls Court Group venture IFRS
Garden Properties(1) Venues Other total adjustment total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 70.0 15.0 33.6 0.2 118.8 (3.3) 115.5
Rent receivable and exhibition income 41.3 15.0 33.6 – 89.9 (3.3) 86.6
Service charge income 2.8 – – – 2.8 – 2.8
Rental income 44.1 15.0 33.6 – 92.7 (3.3) 89.4
Rental expenses(2) (8.5) (0.5) (20.1) – (29.1) – (29.1)
Net rental income 35.6 14.5 13.5 – 63.6 (3.3) 60.3
Profit on sale of trading property 10.4 – – – 10.4 – 10.4
Other income – – – 0.2 0.2 – 0.2
Gain on revaluation and sale of
investment and development property 179.9 121.2 9.5 – 310.6 (6.9) 303.7
Profit on sale of available-for-sale
investments – – – 0.9 0.9 – 0.9
Write down of trading property (0.5) (1.2) – – (1.7) 1.2 (0.5)
Impairment of other receivables – – – 2.0 2.0 (6.3) (4.3)
Other exceptional charges – (0.5) – – (0.5) – (0.5)
Segment result 225.4 134.0 23.0 3.1 385.5 (15.3) 370.2
Unallocated costs
Administration expenses (33.6) 1.0 (32.6)
Operating profit 351.9 (14.3) 337.6
Net finance (costs)/income(3) (4.7) 8.0 3.3
Share of post-tax profit from joint
venture – 6.3 6.3
Profit before tax 347.2 – 347.2
Taxation (13.5) – (13.5)
Profit for the year from continuing
operations 333.7 – 333.7
Discontinued operation
Profit for the year from discontinued
operation – – – 4.7 4.7 – 4.7
Profit for the year 338.4 – 338.4
Profit attributable to:
Owners of the Parent 337.4 – 337.4
Non-controlling interest 1.0 – 1.0
Summary balance sheet
Total segment assets(4) 1,180.6 897.9 175.1 18.5 2,272.1 92.0 2,364.1
Total segment liabilities(4) (312.8) (120.4) (33.8) (17.0) (484.0) (92.0) (576.0)
Segmental net assets 867.8 777.5 141.3 1.5 1,788.1 – 1,788.1
Unallocated net assets(3) 24.0 – 24.0
Net assets 1,812.1 – 1,812.1
Other segment items
Depreciation (0.1) – (0.2) – (0.3) – (0.3)
Capital expenditure (40.0) (205.6) (5.1) (0.8) (251.5) (100.0) (351.5)
1 Included in the net rental income from Earls Court Properties is GBP11.9 million attributable to the Empress State Building, of which GBP1.2 million represents non-
controlling interest.
2 Comprises service charge and other non-recoverable costs.
3 The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and the majority of the Group's
cash balances.
4 Total assets and total liabilities exclude loans between and investments in Group undertakings.
3 PROFIT ON SALE OF TRADING PROPERTY
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Continuing operations GBPm GBPm GBPm
Sale of trading property 2.8 8.8 25.9
Cost of sale of trading property (1.6) (6.4) (15.5)
Profit on sale of trading property 1.2 2.4 10.4
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
2014 2013 2013
Continuing operations GBPm GBPm GBPm
Gain on revaluation of investment and development property 134.5 187.9 303.7
Loss on sale of investment and development property (0.1) – –
Gain on revaluation and sale of investment and development property 134.4 187.9 303.7
5 PROFIT ON SALE OF AVAILABLE-FOR-SALE INVESTMENTS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Continuing operations GBPm GBPm GBPm
Profit on sale of available-for-sale investments – – 0.9
Profit on sale of available-for-sale investments represents part divestments 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 IMPAIRMENT OF OTHER RECEIVABLES
Following an impairment review of amounts receivable from joint ventures by the Group, an impairment of GBP5.2 million has
been recognised (30 June 2013: GBP0.9 million). The impairment was calculated with reference to the Group's share of the net
liability position of the Lillie Square joint venture (also see note 14).
Following an impairment review of loan notes receivable by the Group, a write back of GBP2.0 million was recognised in 2013.The
write back was calculated with reference to the market value of certain property assets that the Group would have priority over
in the event of default.
7 FINANCE COSTS
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Continuing operations GBPm GBPm GBPm
Finance costs:
On bank overdrafts, loans and other 8.4 10.1 21.1
On obligations under finance leases 0.2 0.1 0.4
Gross finance costs 8.6 10.2 21.5
Interest capitalised on developments (0.3) (0.3) (0.8)
Finance costs 8.3 9.9 20.7
Costs of termination of derivative financial instruments 1.3 – 0.2
Other exceptional finance income (0.1) (3.5) (7.5)
Other finance costs and income(1) 1.2 (3.5) (7.3)
1 Treated as exceptional and therefore excluded from the calculation of underlying earnings.
Interest is capitalised, before tax relief, on the basis of the weighted average cost of debt of 3.3 per cent (31 December 2013:
4.4 per cent) applied to the cost of developments during the period.
8 BUSINESS COMBINATIONS
The Empress State Limited Partnership
On 29 May 2013, the Group acquired control of the 50 per cent interest not already owned in The Empress State Limited
Partnership ("ESLP"), 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 EC1 & EC2 interests and an index-linked lease to the
Metropolitan Police Authority is in place until 2019. ESLP was accounted for as a joint venture under the equity method to the
date that control of the partnership was acquired by the Group.
The partnership contributed revenues of GBP2.4 million during the period between exchange in May and completion in August, of
which GBP1.2 million is disclosed as being attributable to the non-controlling interest. A net profit of GBP1.0 million was attributable to
the non-controlling interest during this time. Had the acquisition occurred on 1 January 2013 the Group's revenue and the net
profit would have been GBP3.1 million and GBP7.9 million higher respectively. The net profit amount includes revaluation gains
recognised on exchange of contracts.
On the date control was acquired, the assets acquired and liabilities assumed of the business combination were fair valued with
resulting gains or losses being taken to the Group's consolidated income statement. No deferred tax was recognised on this
date because the tax base of the underlying asset was equal to its fair value.
The fair value of assets acquired and liabilities assumed by the Group on acquisition of control were as follows:
GBPm
Non-current assets 234.0
Current assets 5.6
Current liabilities (151.8)
Net assets of ESLP on acquisition of control 87.8
Disposal of investment in ESLP as joint venture (43.9)
Net assets acquired 43.9
Completion of the acquisition occurred on 1 August 2013. Consideration for the net assets acquired, including the non-
controlling interest share of profits, was GBP45 million. Total cash paid was GBP50.3 million comprising both consideration and the
repayment of the joint venture partner's loan account. ESLP is now consolidated as a subsidiary of the Group.
9 DISCONTINUED OPERATION
On 29 April 2013, the Group exchanged contracts for the disposal of the final asset, Park Crescent West, in The Great Capital
Partnership ("GCP"). This was effected as part of the Group's strategy to dispose of non-core assets in support of the Group's
core estates and, as a result, the partnership was presented as a discontinued operation. GCP was established as a joint
venture in 2007 with Great Portland Estates plc, to own, manage and develop a number of central London properties. The
partnership has been accounted for as a joint venture of the Group using the equity method in accordance with the Group's
accounting policy.
The Group's share of results of GCP for the period which have been presented separately in the consolidated income
statement were as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Summarised income statement GBPm GBPm GBPm
Revenue – 1.1 1.2
Net rental income – 1.1 1.2
Gain on revaluation and sale of investment and development property – 2.8 2.8
Administration expenses – (0.1) (0.2)
Profit before tax – 3.8 3.8
Taxation (0.3) (0.2) 0.9
Post-tax (loss)/profit for the period from discontinued operation (0.3) 3.6 4.7
In 2013 profit of GBP2.8 million arose on disposal of the assets of GCP, being the proceeds of disposal less the carrying amount of
the assets.
10 TAXATION
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Continuing operations GBPm GBPm GBPm
Current income tax:
Current income tax charge 2.3 0.7 2.2
Current income tax on profits excluding exceptional items 2.3 0.7 2.2
Deferred income tax:
On accelerated capital allowances – 0.5 (0.6)
On investment and development property 0.6 1.1 1.3
On derivative financial instruments (0.2) 4.4 6.3
On Group losses 0.5 (0.6) 0.5
On non-exceptional items (1.0) 0.7 0.5
On exceptional items 0.1 (6.2) –
Deferred income tax on profits – (0.1) 8.0
Current income tax charge on exceptional items (0.2) 1.8 2.5
Adjustments in respect of previous years - current tax (0.1) – (1.4)
Adjustments in respect of previous years - deferred tax – – 2.2
Total tax expense reported in the consolidated income statement 2.0 2.4 13.5
The main rate of corporation tax decreased from 23 per cent to 21 per cent from 1 April 2014. A further reduction in the main
rate of corporation tax from 21 per cent to 20 per cent will occur on 1 April 2015.
11 DIVIDENDS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
Ordinary shares
Prior period final dividend of 1.0p per share 8.4 7.5 7.5
Interim dividend of 0.5p per share – – 3.8
Dividend expense 8.4 7.5 11.3
Shares issued in lieu of cash(1) (0.9) (3.6) (3.6)
Adjustment for bonus issue(2) – – (0.8)
Cash dividends paid 7.5 3.9 6.9
Proposed interim dividend of 0.5p per share 4.2 3.8 –
Proposed final dividend of 1.0p per share – – 7.6
1 Shares issued in lieu of cash relates to those shareholders who elect to receive theirollowing the declaration of dividend which occurs at the
Company's Annual General Meeting.
2 Adjustments for bonus issue arise from those shareholders who elect to receive their dividends in scrip form on an evergreen basis. These shares are treated as a
bonus issue and allotted at nominal value.
12 EARNINGS PER SHARE AND NET ASSETS PER SHARE
a) Earnings per share
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014(1) 2013(1,2) 2013(1,2)
Millions Millions Millions
Weighted average ordinary shares in issue for calculation of basic earnings
per share 776.2 753.7 755.4
Dilutive effect of share option awards 5.4 8.3 6.1
Dilutive effect of contingently issuable shares – 1.3 0.9
Dilutive effect of matching nil cost options 5.0 3.6 4.3
Dilutive effect of deferred shares 1.9 0.6 1.0
Weighted average ordinary shares in issue for calculation of diluted earnings
per share 788.5 767.5 767.7
1 Weighted average number of shares in issue during the period to June 2014 have been adjusted for issue of bonus shares issued in connection with the 2013
interim scrip dividend (0.2 million) and shares issued at a discount as part of capital raise (0.7 million).
2 Weighted average number of shares in issue during the prior periods has been adjusted for shares held in Treasury.
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
Continuing and discontinued operations attributable to the Parent
Profit used for calculation of basic earnings per share 137.5 211.8 337.4
Dilutive effect of share option awards – 2.2 –
Profit used for calculation of diluted earnings per share 137.5 214.0 337.4
Basic earnings per share (pence) 17.7 28.1 44.7
Diluted earnings per share (pence) 17.4 27.9 44.0
Continuing operations attributable to the Parent
Profit used for calculation of basic earnings per share 137.8 208.2 332.7
Dilutive effect of share option awards – 2.2 –
Profit used for calculation of diluted earnings per share 137.8 210.4 332.7
Basic earnings per share (pence) 17.8 27.6 44.0
Diluted earnings per share (pence) 17.5 27.4 43.3
Discontinued operations attributable to the Parent
(Loss)/profit used for calculation of basic and diluted earnings per share (0.3) 3.6 4.7
Basic earnings per share (pence) – 0.5 0.6
Diluted earnings per share (pence) – 0.5 0.6
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
Basic earnings 137.8 208.2 332.7
Adjustments:
Profit on sale of trading property (1.2) (2.4) (10.4)
Gain on revaluation and sale of investment and development property – Group (134.4) (187.9) (303.7)
Gain on revaluation of investment and development property – Joint ventures (0.1) (6.8) (6.9)
(Write back)/write down of trading property – Group (0.5) – 0.5
Write down of trading property – Joint ventures – – 1.2
Other exceptional charges 0.1 0.4 0.5
Costs of termination of derivative financial instruments 1.3 – 0.2
Change in fair value of derivative financial instruments – Group 0.4 (8.3) (15.6)
Change in fair value of derivative financial instruments – Joint ventures – (0.9) (0.8)
Current tax adjustments – 1.8 2.0
Deferred tax adjustments 0.4 6.0 9.2
Less amounts above due to non-controlling interest – 0.7 0.5
EPRA adjusted earnings on continuing operations 3.8 10.8 9.4
Other income – (0.2) (0.2)
Impairment of other receivables 5.2 0.9 4.3
Profit on sale of available-for-sale investments – – (0.9)
Exceptional share of post-tax profit from joint ventures (0.6) (0.9) (6.3)
Exceptional other finance costs and income (0.1) – –
Current tax adjustments (0.3) – 0.5
Deferred tax adjustments 0.1 (6.7) (1.5)
Discontinued operation (0.3) 0.9 2.0
Underlying earnings 7.8 4.8 7.3
Underlying earnings per share (pence) 1.0 0.6 1.0
EPRA adjusted earnings per share (pence) 0.5 1.4 1.2
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
Profit attributable to the Parent used for calculation of basic earnings per share 137.5 211.8 337.4
Adjustments:
Gain on revaluation and sale of investment and development property (134.4) (197.5) (313.4)
Profit on sale of available-for-sale investments – – (0.9)
Post-tax profit from joint ventures – (0.9) (6.3)
Impairment of other receivables 5.2 0.9 4.3
Deferred tax adjustments 0.6 1.1 1.3
Headline earnings used for calculation of headline earnings per share
attributable to the Parent 8.9 15.4 22.4
Dilutive effect of share options awards – 2.2 –
Diluted headline earnings used for calculation of diluted headline
earnings per share 8.9 17.6 22.4
Headline earnings per share (pence) 1.1 2.0 3.0
Diluted headline earnings per share (pence) 1.1 2.3 2.9
Headline earnings per share is calculated in accordance with Circular 2/2013 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.
b) Net assets per share
As at As at
30 June 31 December
2014 2013
Millions Millions
Shares in issue 835.7 757.9
Effect of dilution:
On exercise of options 5.4 6.2
On issue of matching nil cost options 5.0 4.3
On issue of deferred shares 1.9 1.0
Adjusted, diluted number of shares 848.0 769.4
As at As at
30 June 31 December
2014 2013
GBPm GBPm
Basic net asset value attributable to the Parent used for calculation
of basic net assets per share 2,196.0 1,812.1
Fair value of derivative financial instruments (3.0) 14.1
Unrecognised surplus on trading property – Group 15.2 1.0
Unrecognised surplus on trading property – Joint ventures 81.7 68.2
Deferred tax adjustments 16.9 16.2
EPRA adjusted NAV 2,306.8 1,911.6
Fair value of derivative financial instruments 3.0 (14.1)
Deferred tax adjustments (13.2) (13.1)
EPRA adjusted NNNAV 2,296.6 1,884.4
Basic net assets per share (pence) 262.8 239.1
EPRA adjusted, diluted NAV per share (pence) 272.0 248.5
Diluted EPRA NNNAV per share (pence) 270.8 244.9
13 PROPERTY PORTFOLIO
a) Investment and development property
Property portfolio Tenure
Covent Earls Court
Garden Properties Venues Other Total Freehold Leasehold
Re-presented(1) GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2013 920.9 359.8 146.5 – 1,427.2 644.8 782.4
Additions from acquisitions 17.9 37.5 – – 55.4 38.9 16.5
Additions from subsequent expenditure 10.5 30.0 5.1 – 45.6 16.0 29.6
Control acquired of former joint venture – 238.7 – – 238.7 238.7 –
Transfers to trading property (20.8) – – – (20.8) (20.8) –
Gain on valuation(2) 179.9 114.3 9.5 – 303.7 131.7 172.0
At 31 December 2013 1,108.4 780.3 161.1 – 2,049.8 1,049.3 1,000.5
Additions from acquisitions 89.7 18.2 – 4.5 112.4 107.5 4.9
Additions from subsequent expenditure 15.2 7.2 2.7 – 25.1 12.8 12.3
Disposals (13.0) – – – (13.0) (13.0) –
Gain on valuation(2) 51.8 79.3 3.4 – 134.5 47.8 86.7
At 30 June 2014 1,252.1 885.0 167.2 4.5 2,308.8 1,204.4 1,104.4
b) Trading property
Property portfolio Tenure
Covent Earls Court
Garden Properties Venues Other Total Freehold Leasehold
Re-presented(1) GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2013 14.6 0.3 – – 14.9 3.6 11.3
Transfers from investment and development property 20.8 – – – 20.8 20.8 –
Additions from subsequent expenditure 11.6 0.3 – – 11.9 9.7 2.2
Disposals (15.5) – – – (15.5) (3.5) (12.0)
Write down of trading property(3) (0.5) – – – (0.5) (0.5) –
At 31 December 2013 31.0 0.6 – – 31.6 30.1 1.5
Additions from subsequent expenditure 7.6 – – – 7.6 7.5 0.1
Disposals (1.6) – – – (1.6) – (1.6)
Write back/(write down) of trading property and other(3) 0.5 (0.6) – – (0.1) (0.1) –
At 30 June 2014 37.5 – – – 37.5 37.5 –
c) Market value reconciliation of total property
Covent Earls Court
Garden Properties Venues Other Total
GBPm GBPm GBPm GBPm GBPm
Carrying value of investment, development and trading
property at 30 June 2014(4) 1,289.6 885.0 167.2 4.5 2,346.3
Adjustment in respect of head leases (3.7) – – – (3.7)
Adjustment in respect of tenant incentives 23.4 – – – 23.4
Unrecognised surplus on trading property(5) 15.2 – – – 15.2
Market value of investment, development and trading
property at 30 June 2014 1,324.5 885.0 167.2 4.5 2,381.2
Joint ventures:
Carrying value of joint venture investment, development and
trading property at 30 June 2014 – 88.8 – – 88.8
Unrecognised surplus of joint venture trading property(5) – 81.7 – – 81.7
Market value of Group on a proportionate basis at 30 June
2014 1,324.5 1,055.5 167.2 4.5 2,551.7
Covent Earls Court
Garden Properties Venues Other Total
Re-presented(1) GBPm GBPm GBPm GBPm GBPm
Carrying value of investment, development and trading property
at 31 December 2013(4) 1,139.4 780.9 161.1 – 2,081.4
Adjustment in respect of head leases (3.8) – – – (3.8)
Adjustment in respect of tenant incentives 19.7 – – – 19.7
Unrecognised surplus on trading property(5) 1.0 – – – 1.0
Market value of investment, development and trading property
at 31 December 2013 1,156.3 780.9 161.1 – 2,098.3
Joint ventures:
Carrying value of joint venture investment, development and
trading property at 31 December 2013 – 84.9 – – 84.9
Unrecognised surplus of joint venture trading property(5) – 68.2 – – 68.2
Market value of Group on a proportionate basis at 31 December
2013 1,156.3 934.0 161.1 – 2,251.4
1 The 2013 numbers disclosed in Earls Court Properties and Other have been re-presented following the adoption of IFRS 11. Property held by joint ventures are
included in investment in joint ventures in the consolidated balance sheet. Refer to note 14 for further details.
2 Gain on valuation is recognised in the consolidated income statement within gain on revaluation and sale of investment and development property. This gain is
unrealised and relates to assets held at the end of the period.
3 The value of trading property carried at net realisable value was GBPnil at 30 June 2014 (31 December 2013 re-presented: GBP29.6 million).
4 Included within investment, development and trading property is GBP0.3 million (31 December 2013: GBP0.8 million) of interest capitalised during the period on
developments in progress.
5 The unrecognised surplus on 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 condensed consolidated financial statements.
At 30 June 2014, the Group was contractually committed to GBP86.9 million (31 December 2013 re-presented: GBP103.9 million) of
future expenditure for the purchase, construction, development and enhancement of investment, development and trading
property. Refer to note 24 for further information on capital commitments. The fair value of the Group's investment,
development and trading property as at 30 June 2014 was determined by independent, appropriately qualified external valuers
Jones Lang LaSalle for Earls Court Properties (excluding the Empress State Building) and Venues; and CBRE for the
remainder of the Group's investment, development and trading property. The valuations conform to the Royal Institution of
Chartered Surveyors (RICS) Valuation Professional Standards. Fees paid to valuers are based on fixed price contracts.
Each year the Investment Director, on behalf of the Board, appoints the external valuers. The valuers are selected based upon
their knowledge, independence and reputation for valuing assets such as those held by the Group.
Valuations are performed bi-annually and are performed consistently across all properties in the Group's portfolio. At each
reporting date appropriately qualified employees of the Group verify all significant inputs and review computational outputs.
Valuers submit and present summary reports to the Group's Audit Committee, with the Investment Director reporting to the
Board on the outcome of each valuation round.
Valuations take into account tenure, lease terms and structural condition. The inputs underlying the valuations include market
rent or business profitability, likely incentives offered to tenants, forecast growth rates, yields, EBITDA, discount rates,
construction costs including any site specific costs (for example section 106), professional fees, planning fees, developer's
profit including contingencies, planning and construction timelines, lease regear costs, planning risk and sales prices based on
known market transactions for similar properties or properties similar to those contemplated for development are considered.
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, its actual and potential uses which are physically, legally and financially
viable. 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.
A number of the Group's properties have been valued on the basis of their development potential which differs from their
existing use. Most notably, within Earls Court Properties the Group's interests at EC1 & EC2 have been valued on the basis of
a mixed use, residential led scheme. The properties are currently used as exhibition venues, generating an income stream for
the Group, while the process to achieve the change in use is being implemented. Within the Covent Garden segment, where
appropriate, a number of properties have been valued on the basis of their development potential.
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 EC1 & EC2 on the basis of a standalone development of these interests.
There are often restrictions on both freehold and leasehold property which could have a material impact on the realisation of
these assets. The most significant of these occur when planning permission or lease extension and renegotiation of use are
required or when a credit facility is in place. These restrictions are factored into the property's valuation by the external valuer.
Also see disclosures surrounding development risks on page 15.
14 JOINT VENTURES
Investment in joint ventures are measured using the equity method. All joint ventures are held with other joint venture investors
on a 50:50 basis.
At 30 June 2014, joint ventures comprise the Lillie Square Joint Venture ("LSJV") and The Great Capital Partnership ("GCP")
which is disclosed as a discontinued operation. Refer to note 9 'Discontinued Operations' for further information regarding
GCP. Until May 2013, The Empress State Limited Partnership ("ESLP") was also accounted for as a joint venture of the Group.
Following acquisition of control the partnership has been fully consolidated. Refer to note 8 for further information regarding
ESLP.
LSJV was established as a joint venture arrangement with the Kwok Family Interests, in August 2012. The joint venture was
established to own, manage and develop land interests at Lillie Square. LSJV comprises Lillie Square LP, Lillie Square GP
Limited and its subsidiaries. All major decisions regarding LSJV are taken by the Board of the General Partner, through which
the Group shares in its strategic control.
The summarised income statement and balance sheet of LSJV is presented below.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
LSJV GBPm GBPm GBPm
Summarised income statement
Revenue 0.2 0.4 0.4
Net rental income 0.1 0.2 0.4
Gain/(loss) on revaluation of investment and development property 0.2 (0.4) (0.2)
Agents and selling fees (1.4) – –
Write down of trading property – – (2.4)
Administration expenses (1.4) (1.0) (2.0)
Net finance costs (7.9) (7.0) (15.0)
Loss for the period (10.4) (8.2) (19.2)
As at As at
30 June 31 December
2014 2013
LSJV GBPm GBPm
Summarised balance sheet
Investment and development property 2.8 2.6
Other non-current assets 7.1 2.6
Trading property 174.7 167.2
Cash and cash equivalents 26.0 3.4
Other current assets 1.5 1.6
Partners' loans (66.1) (48.0)
Current liabilities (22.0) (3.0)
Non-current liabilities – deep discount bonds (147.0) (139.0)
Net liabilities (23.0) (12.6)
Capital commitments 8.3 1.9
A summarised income statement for ESLP is presented below illustrating performance of the Partnership to the date control
was acquired. No summarised balance sheet is included below as ESLP was fully consolidated at 31 December 2013. Refer to
note 8 for disclosure of the assets and liabilities acquired.
Period
ended
29 May
2013
ESLP GBPm
Summarised income statement
Revenue 6.2
Net rental income 6.2
Gain on revaluation of investment and development property 14.0
Net finance costs (1.0)
Profit for the period 19.2
The summarised income statement and balance sheet of GCP is presented below.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GCP GBPm GBPm GBPm
Summarised income statement
Revenue – 2.2 2.4
Net rental income – 2.2 2.4
Gain on revaluation and sale of investment and development property – 5.6 5.6
Administration expenses – (0.2) (0.4)
Profit for the period – 7.6 7.6
As at As at
30 June 31 December
2014 2013
GCP GBPm GBPm
Summarised balance sheet
Cash and cash equivalents 0.2 0.5
Other current assets – 0.1
Partners loans – 186.0
Net assets 0.2 186.6
Reconciliation of summarised financial information:
The table below reconciles the summarised financial information presented above to the carrying value of investment in joint
ventures presented on the consolidated balance sheet.
GCP LSJV Total
GBPm GBPm GBPm
Net assets/(liabilities) of joint ventures at 31 December 2013 186.6 (12.6) 174.0
Elimination of joint venture partners' interest (93.3) 6.3 (87.0)
Cumulative losses restricted – 6.3 6.3
Carrying value at 31 December 2013 93.3 – 93.3
Net assets/(liabilities) of joint ventures at 30 June 2014 0.2 (23.0) (22.8)
Elimination of joint venture partners' interest (0.1) 11.5 11.4
Cumulative losses restricted – 11.5 11.5
Carrying value at 30 June 2014 0.1 – 0.1
Reconciliation of investment in joint ventures:
The table below reconciles the opening to closing carrying value of investment in joint ventures presented on the consolidated
balance sheet.
GCP LSJV ESLP Total
GBPm GBPm GBPm GBPm
Investment in joint ventures
At 1 January 2013 141.5 3.3 34.3 179.1
Capital distribution (51.9) – – (51.9)
Acquisition of control – – (43.9) (43.9)
Change in working capital (0.1) – – (0.1)
(Loss)/profit for the period(1) – (9.6) 9.6 –
Loss restricted(1) – 6.3 – 6.3
Profit attributable to discontinued operations 3.8 – – 3.8
At 31 December 2013 93.3 – – 93.3
Income distribution (10.8) – – (10.8)
Capital distribution (82.4) – – (82.4)
Loss for the period(1) – (5.2) – (5.2)
Loss restricted(1) – 5.2 – 5.2
At 30 June 2014 0.1 – – 0.1
1 Share of post-tax profit from joint ventures on the consolidated income statement comprises of loss for the period of GBP5.2 million (31 December 2013: GBPnil) and loss
restricted totalling GBP5.2 million (31 December 2013: GBP6.3 million). Losses restricted represent the Group's share of losses in LSJV which exceed its investment in the
joint venture.
15 TRADE AND OTHER RECEIVABLES
Re-presented
As at As at
30 June 31 December
2014 2013
GBPm GBPm
Non-current
Loan notes receivable 6.0 6.0
Other receivables(1) 17.7 18.6
Prepayments and accrued income(2) 22.9 19.4
Amounts receivable from joint ventures 73.5 69.5
Trade and other receivables 120.1 113.5
Current
Rent receivable(3) 6.7 5.8
Other receivables 5.7 1.7
Prepayments and accrued income(2) 12.4 11.8
Amounts receivable from joint ventures(4) 23.6 18.4
Trade and other receivables 48.4 37.7
1 Includes GBP15 million exclusivity payment with LBHF which forms part of the CLSA.
2 Included within prepayments and accrued income are tenant lease incentives of GBP23.4 million (31 December 2013: GBP19.7 million).
3 Includes exhibition trade receivables from Venues.
4 Amounts receivable from joint ventures at 30 June 2014 have been impaired by GBP11.5 million (31 December 2013: GBP6.3 million).
16 CASH AND CASH EQUIVALENTS
Re-presented
As at As at
30 June 31 December
2014 2013
GBPm GBPm
Cash at hand 21.4 20.0
Cash on short-term deposit 30.0 17.0
Unrestricted cash and cash equivalents 51.4 37.0
Restricted cash/(1) 6.0 6.0
Cash and cash equivalents 57.4 43.0
1 Restricted cash relates to amounts placed on deposit in accounts which are subject to withdrawal conditions.
17 TRADE AND OTHER PAYABLES
Re-presented
As at As at
30 June 31 December
2014 2013
GBPm GBPm
Current
Rent received in advance 18.7 18.0
Accruals and deferred income 39.6 27.8
Trade payables 4.0 4.4
Other payables(1) 5.9 7.9
Other taxes and social security 0.9 2.3
Amounts payable to TfL 4.6 –
Amounts payable to joint ventures – 93.0
Trade and other payables 73.7 153.4
1 Includes sundry payables.
18 BORROWINGS, INCLUDING FINANCE LEASES
As at 30 June 2014
Carrying
value Secured Unsecured Fixed rate Floating rate Fair value
GBPm GBPm GBPm GBPm GBPm GBPm
Current
Loan notes 6.0 6.0 – – 6.0 6.0
Borrowings, excluding finance leases 6.0 6.0 – – 6.0 6.0
Finance lease obligations 0.5 0.5 – 0.5 – 0.5
Borrowings, including finance
leases 6.5 6.5 – 0.5 6.0 6.5
Non-current
Bank loan 2018 107.3 107.3 – – 107.3 107.3
Bank loan 2019 171.9 – 171.9 – 171.9 171.9
Borrowings, excluding finance leases 279.2 107.3 171.9 – 279.2 279.2
Finance lease obligations 3.2 3.2 – 3.2 – 3.2
Borrowings, including finance
leases 282.4 110.5 171.9 3.2 279.2 282.4
Total borrowings, including
finance leases 288.9 117.0 171.9 3.7 285.2 288.9
Cash and cash equivalents (57.4)
Net debt 231.5
As at 31 December 2013
Carrying
value Secured Unsecured Fixed rate Floating rate Fair value
GBPm GBPm GBPm GBPm GBPm GBPm
Current
Bank loans and overdrafts 10.0 10.0 – – 10.0 10.0
Loan notes 6.0 6.0 – – 6.0 6.0
Borrowings, excluding finance leases 16.0 16.0 – – 16.0 16.0
Finance lease obligations 0.5 0.5 – 0.5 – 0.5
Borrowings, including finance leases 16.5 16.5 – 0.5 16.0 16.5
Non-current
Bank loan 2016 155.6 155.6 – – 155.6 155.6
Bank loan 2017 111.7 111.7 – – 111.7 111.7
Bank loan 2018 87.1 87.1 – – 87.1 87.1
Borrowings, excluding finance leases 354.4 354.4 – – 354.4 354.4
Finance lease obligations 3.3 3.3 – 3.3 – 3.3
Borrowings, including finance leases 357.7 357.7 – 3.3 354.4 357.7
Total borrowings, including finance
leases 374.2 374.2 – 3.8 370.4 374.2
Cash and cash equivalents
(re-presented) (43.0)
Net debt (re-presented) 331.2
19 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 2014 and 31 December 2013.
The fair values of derivative financial instruments are determined from observable market prices or estimated using appropriate
yield curves at 30 June and 31 December each year by discounting the future contractual cash flows to the net present values.
Gain/(loss)
Gain/(loss) to other
Carrying to income comprehensive
value Fair value statement income
30 June 2014 GBPm GBPm GBPm GBPm
Derivative financial assets 3.8 3.8 0.3 –
Total held for trading assets 3.8 3.8 0.3 –
Cash and cash equivalents 57.4 57.4 – –
Other financial assets 170.1 170.1 (5.2) –
Total cash and other financial assets 227.5 227.5 (5.2) –
Available-for-sale investments 0.3 0.3 – –
Total available-for-sale investments 0.3 0.3 – –
Derivative financial liabilities (0.8) (0.8) (0.7) –
Total held for trading liabilities (0.8) (0.8) (0.7) –
Borrowings, including finance leases (288.9) (288.9) – –
Other financial liabilities (82.5) (82.5) – –
Total loans and other financial liabilities (371.4) (371.4) – –
Gain/(loss) Loss to other
Carrying to income comprehensive
value Fair value statement income
31 December 2013 (Re-presented) GBPm GBPm GBPm GBPm
Derivative financial assets 3.5 3.5 – –
Total held for trading assets 3.5 3.5 – –
Cash and cash equivalents 43.0 43.0 – –
Other financial assets 152.0 152.0 (4.3) –
Total cash and other financial assets 195.0 195.0 (4.3) –
Available-for-sale investments 0.4 0.4 – (0.7)
Total available-for-sale investments 0.4 0.4 – (0.7)
Derivative financial liabilities (17.6) (17.6) 15.6 –
Total held for trading liabilities (17.6) (17.6) 15.6 –
Borrowings, including finance leases (374.2) (374.2) – –
Other financial liabilities (160.7) (160.7) – –
Total loans and other financial liabilities (534.9) (534.9) – –
Fair value estimation
Derivative financial instruments are carried at fair value by the 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 2014, 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. At 30 June 2014, neither the degree of subjectivity nor nature of the
measurement inputs is deemed to have changed.
20 DEFERRED TAX
The decrease in corporation tax rate to 20 per cent (referred to in note 10) has been substantively enacted for the purposes of
IAS 12 'Income Taxes' ("IAS 12") and therefore has been reflected in these condensed consolidated financial statements
based on the expected timing of the realisation of deferred tax. Deferred tax on investment and development property is
calculated under IAS 12 provisions on a disposals basis by reference to the properties original tax base cost. Elements factored
into the calculation include indexation relief and the Group's holding structure. The Group's recognised deferred tax liability on
investment and development property as calculated under IAS 12 is GBP3.7 million as at 30 June 2014 (31 December 2013:
GBP3.1 million). The Group's contingent tax liability is GBPnil (31 December 2013: GBPnil) after allowing for loss relief.
A disposal of the Group's trading property including Lillie Square at its market value would result in a corporation tax charge to
the Group of GBP20.8 million (21.5 per cent of GBP96.9 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 liabilities/(assets):
At 1 January 2013 11.2 1.8 (6.1) (4.1) (2.8) –
Adjustments in respect of previous years 2.2 – – – – 2.2
Recognised in income 0.7 1.8 6.2 0.5 0.5 9.7
Recognised in other comprehensive
income – – – 0.5 – 0.5
Recognised directly in equity – – – (0.9) – (0.9)
Reduction due to rate change (1.2) (0.5) 0.1 – – (1.6)
At 31 December 2013 12.9 3.1 0.2 (4.0) (2.3) 9.9
Recognised in income 0.8 0.7 (0.2) (1.1) 0.4 0.6
Recognised in other comprehensive
income – – – 0.1 – 0.1
Recognised directly in equity – – – 0.7 – 0.7
Reduction due to rate change (0.5) (0.1) – 0.2 0.1 (0.3)
At 30 June 2014 13.2 3.7 – (4.1) (1.8) 11.0
Unprovided deferred tax asset:
At 1 January 2013 – – (4.6) – (11.5) (16.1)
Movement in the period – – 4.6 – (4.4) 0.2
At 30 June 2014 – – – – (15.9) (15.9)
In accordance with the requirements of IAS 12, the deferred tax asset has not been recognised in the condensed consolidated
financial statements due to uncertainty on the level of profits that will be available in future periods.
21 OTHER PROVISIONS
GBPm
Current
At 1 January 2014 7.2
Re-measurement of deferred consideration –
At 30 June 2014 7.2
Other provisions represent deferred consideration relating to the amount payable on the 2009 acquisition of the non-controlling
interest in EC Properties Limited. 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 million.
22 SHARE CAPITAL AND SHARE PREMIUM
Gross Share Share
Transaction Issue price proceeds Number of capital premium
Issue type date (pence) GBPm shares GBPm GBPm
At 1 January 2013 753,127,803 188.3 117.7
Scrip dividend - 2012 final June 318 – 1,130,749 0.2 3.4
Scrip dividend - 2013 interim September 341 – 239,751 0.1 (0.1)
Share-based payment(1) – – – 3,404,855 0.9 –
At 31 December 2013 757,903,158 189.5 121.0
Placing May 340 258.1 75,900,000 18.9 84.7
Scrip dividend - 2013 final June 347 – 254,158 0.1 0.8
Share-based payment(2) – – – 1,667,606 0.4 0.3
At 30 June 2014 835,724,922 208.9 206.8
1 Between July and December 2013 a total of 3,404,855 new shares were issued at the nominal share price of 25 pence to satisfy the settlement of employee share
scheme awards.
2 Between January and June 2014 a total of 1,667,606 new shares were issued to satisfy the settlement of employee share scheme awards.
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 Annual Report & 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 residual assets on liquidation. There are no restrictions on the transfer of
ordinary shares.
23 TREASURY SHARES
Number
of shares GBPm
Ordinary shares of 25 pence:
At 1 January 2013 431,450 1.0
Disposal of shares (431,450) (1.0)
At 31 December 2013 – –
At 30 June 2014 – –
Treasury shares were used to satisfy part of the employee share awards that were exercised during 2013.
24 CAPITAL COMMITMENTS
At 30 June 2014, the Group was contractually committed to GBP86.9 million (31 December 2013: GBP103.9 million) of future
expenditure for the purchase, construction, development and enhancement of investment, development and trading property.
Of the GBP86.9 million committed, GBP15.7 million is committed 2014 expenditure. At 30 June 2014, joint venture capital
commitments arising on the LSJV amount to GBP8.3 million (31 December 2013: GBP1.9 million).
In November 2013 the Group exercised its option under the CLSA which it entered into with LBHF in January 2013 in relation
to LBHF's land interest within the Earls Court Masterplan. Under the terms of the CLSA, the Group can draw down land in
phases but no phase can be transferred unless replacement homes for the residents of the relevant phase have been provided
and vacant possession is given of the phase. The Group has already paid GBP30 million of the GBP105 million cash consideration
payable under the CLSA. Independent of the land draw down process, exercising the option commits the Group to the
payment of the residual GBP75 million which is yet to be paid. This is expected to be settled in five annual instalments of GBP15
million starting on 31 December 2015.
25 CONTINGENT LIABILITIES
Under the terms of the CLSA the Group has certain compensation obligations relating to achieving vacant possession, which
are 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 payable to LBHF (see note 24 'Capital Commitments' above).
In March 2014, an agreement with Network Rail was signed to acquire a 999 year leasehold interest in the air rights above the
West London Line where it runs within the ECOA. Within the terms of the agreement, during the next 50 years the Group can
exercise options for further 999 year leases over the remainder of the West London Line to allow for development within the
Earls Court Masterplan. Network Rail is entitled to further payments of 5.55 per cent of the residual land value which will be
payable at the time of development or disposal of each phase of the Earls Court Masterplan. In addition, the Group has certain
obligations to Network Rail to make contributions to a sinking fund in respect of the maintenance of the existing platform above
the West London Line which would be triggered by any future demolition of the Earls Court exhibition halls.
26 CASH GENERATED FROM OPERATIONS
Re-presented Re-presented
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Continuing operations Notes GBPm GBPm GBPm
Profit before tax attributable to the owners of the Parent 139.8 210.6 346.2
Adjustment to:
Profit on sale of trading property 3 (1.2) (2.4) (10.4)
Other income – (0.2) (0.2)
Gain on revaluation and sale of investment and development property 4 (134.4) (187.9) (303.7)
Profit on sale of available-for-sale investments 5 – – (0.9)
(Write back)/write down of trading property (0.5) – 0.5
Impairment of other receivables 6 5.2 0.9 4.3
Other exceptional charges 0.1 0.4 0.5
Depreciation 0.1 0.1 0.3
Amortisation of lease incentives and other direct costs (0.8) 2.5 2.4
Share-based payment 2.7 – 3.7
Finance costs 7 8.3 9.9 20.7
Finance income (0.3) (0.6) (1.1)
Other finance costs and income 7 1.2 (3.5) (7.3)
Change in fair value of derivative financial instruments 0.4 (8.3) (15.6)
Share of post-tax profit from joint ventures – (6.4) (6.3)
Change in working capital:
Change in trade and other receivables (4.9) (3.8) (1.8)
Change in trade and other payables (5.8) 4.7 6.2
Cash generated from operations 9.9 16.0 37.5
27 RELATED PARTY TRANSACTIONS
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Key management compensation (1) GBPm GBPm GBPm
Salaries and short-term employee benefits 1.2 1.1 3.1
Share-based payment 1.5 1.8 4.0
2.7 2.9 7.1
1 The Directors of Capital & Counties Properties PLC have been determined to be the only individuals with authority and responsibility for planning, directing and
controlling the activities of the Company.
Property purchased by Directors of Capital & Counties Properties PLC
During the period a related party of the Group, Lillie Square GP Limited, entered into the following related party transactions as
defined by IAS 24:
- In April 2014 Ian Durant, Chairman of Capital & Counties Properties PLC, together with his spouse exchanged
contracts to acquire an apartment for a purchase price of GBP725,000. As at 30 June 2014 an initial deposit of GBP72,500
has been received with GBP652,500 not yet due for payment. In April 2015 a further GBP72,500 will become due with the
balance due upon legal completion.
- In April 2014 Andrew Strang, a non-executive Director of Capital & Counties Properties PLC exchanged contracts to
acquire an apartment for a purchase price of GBP855,000. As at 30 June 2014 an initial deposit of GBP85,500 has been
received with GBP769,500 not yet due for payment. In April 2015 a further GBP85,500 will become due with the balance due
upon legal completion.
- In April 2014 Henry Staunton, a non-executive Director of Capital & Counties Properties PLC, together with his
spouse exchanged contracts to acquire an apartment for a purchase price of GBP1,999,000. As at 30 June 2014 an
initial deposit of GBP199,900 has been received with GBP1,799,100 not yet due for payment. In April 2015 a further
GBP199,900 will become due with the balance due upon legal completion.
The above transactions with Directors were conducted at fair and reasonable market price based upon similar comparable
transactions at that time. Where applicable, appropriate approval has been provided.
Lillie Square GP Limited acts in the capacity of general partner to Lillie Square LP, a joint venture between the Group and the
Kwok Family Interests.
ANALYSIS OF PROPERTY PORTFOLIO (unaudited)
1. PROPERTY DATA AS AT 30 JUNE 2014
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(1)
Covent Garden 1,324.5 100% 2.98% 4.09% 65.7 98.6% 7.4 1.0
Earls Court Properties(2,3) 1,055.5 17.9 2.1
Venues(2) 167.2 100% – 0.6
Other(2) 4.5 100% 0.3
Total property 2,551.7 59.7 83.9 3.7
Investment property 2,329.9 59.5 82.4 3.3
Trading property 221.8 0.2 1.5 0.4
1 Area shown is current net internal area of the portfolio, not adjusted for proportional ownership.
2 Due to the nature of properties held in these segments, not all metrics are disclosed.
3 Represents the Group's interests at Earls Court, predominantly comprising EC1 & EC2, the Empress State Building and 50 per cent of LSJV.
2. ANALYSIS OF CAPITAL RETURN FOR THE PERIOD
Revaluation
Market Market surplus/
value value (deficit))(1)
30 June 31 December 30 June
2014 2013 2014 Increase
Like-for-like capital GBPm GBPm GBPm
Covent Garden 1,238.3 1,140.6 71.2 6.2%
Earls Court Properties 1,043.5 934.0 95.7 10.1%
Venues 167.2 161.1 3.4 2.0%
Total like-for-like capital 2,449.0 2,235.7 170.3 7.5%
Investment property 2,227.6 2,053.8 141.4 6.8%
Trading property(2) 221.4 181.9 28.9 15.0%
Non like-for-like capital
Acquisitions 102.7 – (6.9)
Disposals – 15.7 –
Total property 2,551.7 2,251.4 163.4 6.9%
Investment property 2,329.9 2,067.0 134.6 6.2%
Trading property 221.8 184.4 28.83 14.9%
All property
Covent Garden 1,324.5 1,156.3 67.5 5.5%
Earls Court Properties 1,055.5 934.0 92.5 9.6%
Venues 167.2 161.1 3.4 2.0%
Other 4.5 – – –
Total property 2,551.7 2,251.4 163.4 6.9%
1 Revaluation surplus/(deficit) includes amortisation of lease incentives and fixed head leases.
2 Property transferred to trading during the period is included as like-for-like capital in current and the comparative period where appropriate.
3 Represents realised gains, impairment charges and unrecognised surplus on trading property. Presented for information only.
ANALYSIS OF PROPERTY PORTFOLIO (unaudited)
3. ANALYSIS OF NET RENTAL INCOME FOR THE PERIOD
Six months Six months
ended ended
30 June 30 June
2014 2013 Change
Like-for-like income GBPm GBPm
Covent Garden 18.5 17.6 5.4%
Earls Court Properties 6.3 5.9 8.0%
Venues 8.9 7.5 17.9%
Total like-for-like income 33.7 31.0 8.9%
Like-for-like investment property 33.6 30.9 9.0%
Like-for-like trading property 0.1 0.1
Non like-for-like income
Acquisitions 0.3 –
Control acquired of former joint venture 3.2 –
Disposals 0.2 1.2
Total property income 37.4 32.2 15.8%
Investment property income 37.3 32.2 15.8%
Trading property income 0.1 –
All property
Covent Garden 18.9 17.7 6.7%
Earls Court Properties 9.6 5.9 62.6%
Venues 8.9 7.5 17.9%
Other – 1.1
Total property income 37.4 32.2 15.8%
4. ANALYSIS OF PROPERTY BY USE
30 June 2014
Retail Office Exhibition Residential Other(1) Total
Market value GBPm GBPm GBPm GBPm GBPm GBPm
Covent Garden 946.5 146.5 – 36.8 194.7 1,324.5
Earls Court Properties 7.5 16.0 – 17.6 1,014.4 1,055.5
Venues – – 167.2 – – 167.2
Other – – – – 4.5 4.5
954.0 162.5 167.2 54.4 1,213.6 2,551.7
1 Consists of property where the highest and best use valuation differs from the current use.
30 June 2014
Retail Office Exhibition Residential Other Total
ERV GBPm GBPm GBPm GBPm GBPm GBPm
Covent Garden 46.1 8.6 – 1.0 10.0 65.7
Earls Court Properties 0.4 0.7 – 0.6 16.2 17.9
Venues – – – – – –
Other – – – – 0.3 0.3
46.5 9.3 – 1.6 26.5 83.9
CONSOLIDATED UNDERLYING PROFIT STATEMENT (unaudited)
For the period ended 30 June 2014
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
GBPm GBPm GBPm
Net rental income 37.4 32.2 64.8
Administration expenses (19.4) (15.5) (33.8)
Operating profit 18.0 16.7 31.0
Finance costs (8.3) (11.3) (22.0)
Finance income 0.3 0.6 1.1
Net finance costs and income (8.0) (10.7) (20.9)
Profit before tax 10.0 6.0 10.1
Tax on adjusted profit (2.2) (1.4) (2.3)
Non-controlling interest – 0.2 (0.5)
Underlying earnings (used for calculation of underlying earnings per share) 7.8 4.8 7.3
Underlying earnings per share (pence) 1.0 0.6 1.0
DIVIDENDS
THE DIRECTORS OF CAPITAL & COUNTIES PROPERTIES PLC HAVE PROPOSED AN INTERIM DIVIDEND PER ORDINARY
SHARE (ISIN GB00B62G9D36) OF 0.5 PENCE PAYABLE ON 26 SEPTEMBER 2014.
Dates
The following are the salient dates for payment of the proposed interim dividend:
Sterling/Rand exchange rate struck: 21 August 2014
Sterling/Rand exchange rate and dividend amount in Rand announced: 22 August 2014
Ordinary shares listed ex-dividend on the JSE, Johannesburg: 1 September 2014
Ordinary shares listed ex-dividend on the London Stock Exchange: 3 September 2014
Record date for interim dividend in UK and South Africa: 5 September 2014
Dividend payment date for shareholders: 26 September 2014
South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-dividend will be 29 August
2014 and that no dematerialisation of shares will be possible from 1 September 2014 to 5 September 2014 inclusive. No transfers between the
UK and South Africa registers may take place from 22 August 2014 to 5 September 2014 inclusive.
Subject to SARB approval, the Board intends to offer an optional scrip dividend alternative in respect of the 2014 interim dividend.
The above dates are proposed and subject to change and any changes will be published accordingly.
Important Information for South African Shareholders:
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.
GLOSSARY
Capco
Capco represents Capital & Counties Properties PLC (also referred to as "the Company") and all its subsidiaries and group
undertakings, collectively 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 dilutive effects of potential shares issuable under employee incentive arrangements.
Earls Court
The London district made up of a series of residential neighbourhoods crossing the boundaries of LBHF and RBKC.
EC1 & EC2
Capco's leasehold interests in the Earls Court 1 and Earls Court 2 exhibition centres (TfL together with Network Rail hold the
freehold interests) and Capco's freehold interest in the Northern Access Road which runs from the exhibition centre northwards
to Fenelon Place. The venture with TfL (Capco share is 63 per cent) relates to these interests.
ECOA
The Earls Court and West Kensington Opportunity Area.
Earls Court Partnership or ECPL
Earls Court Partnership Limited; an investment vehicle between the Group (63 per cent controlling interest) and Transport for
London (37 per cent interest) to enable the development of EC1 & EC2 in line with the Earls Court Masterplan.
Earls Court Properties
The Group's interests in the Earls Court area, comprising EC1 & EC2, Lillie Square (a 50:50 joint venture partnership with the
Kwok Family Interests), the Empress State Building (Capco ownership 100 per cent) and a number of smaller properties in the
Earls Court area.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
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 derivative financial instruments 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
of trading property, changes in fair value of derivative 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.
Estimated rental value (ERV)
The external valuers' estimate of the Group's share of the open market rent which, on the date of valuation, could reasonably
be expected to be obtained on a new letting or rent review of the property.
GCP
The Great Capital Partnership, a 50:50 joint venture with Great Portland Estates plc. This represents a discontinued operation.
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 and development property 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.
Kwok Family Interests (KFI)
Joint venture partner in the Lillie Square development.
LBHF
The London Borough of Hammersmith & Fulham.
LIBOR
London Interbank Offer Rate.
Like-for-like property
Property which has 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.
NAV
Net Asset Value.
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.
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
private registered provider of social housing, where a transfer proves to be the favoured and viable option. The Housing (Right
to Transfer from a Local Authority Landlord) (England) Regulations 2013 which brought Section 34A into effect came into force
on 5 December 2013.
Section 106
Section 106 of the Town and Country Planning Act 1990, pursuant to which the relevant planning authority can impose
planning obligations on a developer to secure contributions to services, infrastructure and amenities in order to support and
facilitate a proposed development.
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 and any subsidiary of Transport for London including Transport Trading Limited and London
Underground Limited.
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 costs of termination of derivative financial instruments.
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 shared investment vehicles are valued at GBP2.6 billion.
Covent Garden
The Covent Garden estate represents 52 per cent of Capco's property portfolio and showcases its place-making strategy, which is
realised through creative asset management, acquisitions, investment, strategic development and creative marketing.
Earls Court Properties & Venues
Earls Court Properties & Venues represents 48 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 the local authorities have granted outline planning consent 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 site. It has planning
consent for a residential-led scheme including 808 new homes and a new garden square.
This press release includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance or achievements of Capital & Counties Properties PLC to be
materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any
information contained in this press release on the price at which shares or other securities in Capital & Counties Properties PLC have been
bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance.
Sponsor:
Merrill Lynch South Africa (Pty) Ltd
Date: 01/08/2014 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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