Wrap Text
Audited Preliminary Results for the Year Ended 31 December 2015
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
24 FEBRUARY 2016
CAPITAL & COUNTIES PROPERTIES PLC ("CAPCO")
AUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015
Ian Durant, Chairman of Capco, commented:
"Capco has delivered strong results in 2015. Covent Garden and Earls Court have experienced a very
active year and milestones have been reached at both of these unique estates.
We remain confident in the strength of our assets and are well-positioned to continue to deliver long-term
value creation for our shareholders."
Ian Hawksworth, Chief Executive of Capco, commented:
"These results demonstrate another strong year of performance at Capco, particularly at Covent
Garden. Retailer demand for prime locations in London is positive and brands are attracted to the retail
and customer experience we have created at Covent Garden. It has been our most active year of leasing,
signing our 100th brand, a milestone which reflects the transformation of the estate and Covent Garden's
increasing importance in global 'street retail'. We achieved new rental levels in 2015 and remain on course
to achieve our ERV target of GBP100 million by December 2017.
Our plans at Earls Court continue to advance as we de-risk our land holdings and progress with the
implementation and opportunities of this strategic London scheme. The demolition of EC1 & EC2 is
progressing well while construction of Phase 1 of Lillie Square is on track.
Whilst we expect increasing uncertainty reflecting global and political challenges, our strategy at Capco
remains clear and focused. London's economic prospects remain strong and its population continues to
grow. Backed by a robust capital structure, with a conservative LTV of 16 per cent, our prime assets are
well positioned for long-term performance. We enter a new year with clear objectives to drive value
creation for our shareholders from our two exceptional estates."
Highlights
Positive valuation performance
- 16 per cent increase in EPRA adjusted, diluted NAV to 361 pence per share (2014: 311 pence)
- 14 per cent (like-for-like) increase in total property value to GBP3.7 billion (2014: GBP3.0 billion)
- 17 per cent total return in the year
- Proposed final 2015 dividend of 1.0 pence per share providing a full-year dividend of 1.5 pence
per share
Strong leasing activity and rental growth at Covent Garden
- Total property value of GBP2.0 billion up 16 per cent (like-for-like) (2014: GBP1.6 billion)
- Strong growth in ERV, up 12 per cent (like-for-like) to GBP86 million
- On track to achieve ERV guidance of GBP100 million by December 2017
- New leases and renewals 11 per cent above December 2014 ERV
- Positive leasing momentum on James Street establishing new Zone A rental levels
- Development of Kings Court progressing well
- GBP50 million invested in acquisitions enhancing ownership of the estate
Positive progress at Earls Court Properties
- Earls Court interests valued at GBP1.4 billion, up 9 per cent (like-for-like) (2014: GBP1.2 billion)
- Earls Court Partnership Limited, the investment vehicle with TfL in relation to EC1 & EC2,
completed and Capco is leading the venture (Capco share 63 per cent)
- Demolition of EC1 & EC2 underway and progressing well
- Construction of Phase 1 of Lillie Square on track with first completions expected in 2016
- Commenced sales of Phase 2 of Lillie Square
- Acquisitions totalling GBP30 million consolidating ownership around Masterplan area
Operational excellence at Venues
- EBITDA of GBP15 million, up 33 per cent (2014: GBP11 million)
- Property valuation of GBP295 million, up 25 per cent (like-for-like) (2014: GBP233 million)
Robust capital structure
- Group loan-to-value 16 per cent (2014: 12 per cent)
- New Covent Garden unsecured revolving credit facility of GBP705 million signed
- Cash and available facilities of GBP452 million
FINANCIAL HIGHLIGHTS
2015 2014
17% Total return in 2015 (2014: 25%)
EPRA adjusted net asset value GBP3,059m GBP2,630m
EPRA adjusted, diluted net asset value per share 361p 311p
Dividend per share 1.5p 1.5p
16% Total property return in 2015 (2014: 22%)
Property market value (Group share)(1) GBP3,662m GBP3,025m
Net rental income(2) GBP75.4m GBP70.1m
Underlying earnings per share 0.9p 1.6p
(1) Refer to Property Data on page 53 for the Group's percentage ownership of property.
(2) On a proportionate consolidation basis. Refer to the Financial Review.
ENQUIRIES
Capital & Counties Properties PLC:
Ian Hawksworth Chief Executive +44 (0)20 3214 9188
Soumen Das Managing Director & Chief Financial Officer +44 (0)20 3214 9183
Michelle McGrath Director of Investor Relations +44 (0)20 7297 6093
Media enquiries:
Sarah Hagan Director of Communications & Marketing +44 (0)20 3214 9185
UK: Tulchan Andrew Grant, Susanna Voyle +44 (0)20 7353 4200
SA: Instinctif Frederic Cornet +27 (0) 11 447 3030
A presentation to analysts and investors will take place today at 9:00am at UBS, 100 Liverpool Street, London, EC2M
2RH. The presentation will also be available to international analysts and investors through a live audio call and
webcast and after the event on the Group's website www.capitalandcounties.com.
A copy of this announcement is available for download from our website at www.capitalandcounties.com and hard
copies can be requested via the website or by contacting the Company (feedback@capitalandcounties.com or
telephone +44 (0)20 3214 9153).
CHAIRMAN'S STATEMENT
Overview
I am pleased to report that Capco had another successful year in 2015, executing its strategy for its assets and
generating strong returns for shareholders. Covent Garden and Earls Court have experienced a very active year and
milestones have been reached at both of these unique London estates.
Performance
In 2015, Capco delivered positive performance with a total return of 17 per cent which represents the growth in net
assets plus the dividends paid during the year. The valuation of the Group's property assets increased by 14 per cent
on a like-for-like basis and total shareholder return, which reflects the share price change and dividends paid, was 20
per cent.
The strategy at Covent Garden to create an internationally renowned destination for retailers and visitors continues to
drive performance. Following a positive year for leasing on the estate, new Zone A rental levels were achieved and we
have continued to invest in the estate through strategic acquisitions and developments. Management remains
confident that the ERV target of GBP100 million by December 2017 is on track.
At Earls Court, our plans continue to advance. The team is demonstrating the capability to undertake complex and
ambitious projects and to manage them successfully. The demolition of the former Earls Court Exhibition Centres is
well-advanced and construction of Lillie Square is underway, with first completions expected later this year.
The strategy to transfer the Venues business from Earls Court to Olympia London has been undertaken successfully
and performance of the Venues business has exceeded expectations in this year of transition.
I would like to thank all of Capco's employees for their hard work during the year. It is their commitment and expertise
that allows Capco to continue to deliver our strategy and generate market-leading returns for our shareholders.
Financial position and dividends
Prudent financing remains an important part of Capco's strategy. The Board ensures that the Company maintains a
strong balance sheet which will enable it to operate throughout the property cycle. The balance sheet is strong and
flexible with a conservative LTV of 16 per cent. Following a Covent Garden refinancing of GBP705 million, which has
further strengthened the balance sheet, the Company is well-positioned to support its future activities with confidence.
The Company continues to seek shareholder returns delivered through capital growth and a modest annual dividend.
This is appropriate during a phase of capital investment and land value enhancement. Accordingly, the Directors are
proposing a final dividend of 1.0 pence per share, which brings the total dividend for 2015 to 1.5 pence per share.
The Board and its priorities
There were a number of changes to the Board during the year, with Gerry Murphy joining as an independent Non-
executive Director and Andrew Huntley's retirement.
Ian Henderson is to retire from the Capco Board and as Deputy Chairman and Senior Independent Director at the
Company's forthcoming AGM on 6 May 2016, and will step down as Chairman of the Remuneration Committee with
effect from 25 April 2016. The Board is pleased that Ian will remain available to the Company on a consultancy basis
following his retirement from the Board, allowing the Company to continue to benefit from his extensive experience.
Gerry Murphy will be appointed as Chairman of the Remuneration Committee with effect from 25 April 2016, and
Demetra Pinsent will join the Remuneration Committee on the same date. The role of Senior Independent Director will
be taken up by Henry Staunton on Ian Henderson's retirement.
Anthony Steains has been appointed as a Non-executive Director of the Company with effect from 1 March 2016. On
appointment, Anthony will become a member of the Nomination Committee. The Board is keen to ensure that a
balance of skills and experience aligned to Capco's strategic goals is maintained and in 2016 will continue to consider
whether any additional Non-executive Directors should be appointed.
Following the promotions of Gary Yardley and Soumen Das to the roles of Managing Director with responsibility for the
oversight of and investment performance at Earls Court and Covent Garden respectively, the business has continued
to evolve its operational structure. Operational functions have been further re-organised to embed and strengthen our
focus on long-term returns from our assets. Both Managing Directors continue to report to Ian Hawksworth, Chief
Executive. The Board continues its commitment to encouraging diversity and the development of our people to ensure
that Capco is resourced appropriately for the future.
A responsible culture
Capco seeks to generate market leading returns with entrepreneurial flair, whilst operating responsibly, professionally
and with accountability. The Board encourages this culture throughout the business.
Targeting ambitious returns requires us to ensure that risk is carefully managed. During the year, the Board undertook
a comprehensive review of its principal risks and its risk management reporting across the business in order to ensure
that the level of risk and return aspirations are appropriately balanced.
2015 saw our first major demolition and construction projects begin at Earls Court and Lillie Square and in preparation
for this, we reviewed our health and safety reporting across the Group and established a Group Safety Leadership
Team.
Corporate Responsibility and how we conduct our business in the communities and environments in which we operate
remains inherent in Capco's strategy and culture. Our employees remain committed to our Corporate Responsibility
programme and throughout the year we have supported a number of charitable fundraising initiatives including
Maggie's Culture Crawl, a quiz night in aid of the Sir Simon Milton Foundation and the Royal British Legion Poppy
fundraising day for the fourth consecutive year. In addition, sustainability continues to play an important role in our
business and activities on both of our estates are underpinned by an ambitious environmental and sustainability
strategy.
Looking ahead
London's economic prospects are positive and it is estimated that the population will grow significantly over the next ten
years. Capco's two unique estates are well-placed to benefit from this growth, providing vibrant and well-managed
places for people to live, work and enjoy. Whilst we expect increasing market uncertainty due to global and political
challenges, Capco's strategy remains clear and focused. With a strong balance sheet we are well-positioned to
continue to deliver long-term value creation for our shareholders.
Ian Durant
Chairman
24 February 2016
CHIEF EXECUTIVE'S REVIEW
A year of performance and progress
2015 was another year of performance and progress across Capco. Underpinned by a clear and focused strategy to
drive value from our estates, the business has delivered a total return of 17 per cent.
With its focus on London, Capco's two prime assets are well-placed for long-term success. London is a global and
growing city with positive economic prospects and continues to attract businesses and people who wish to live, work
and enjoy this great city. The population continues to increase and the Greater London Authority ("GLA") estimates that
the Capital's population will grow by two million by 2031.
At Covent Garden, our distinct approach to placemaking and creative asset management will continue to ensure its
success as a vibrant destination for retailers, visitors and residents. Our consented strategic land holding at Earls Court
forms the only central London development opportunity of scale within existing strong transport infrastructure. As a
designated GLA Opportunity Area, the Earls Court Masterplan is a strategic scheme for the Capital and a unique
opportunity to create the next great estate of London, providing thousands of much-needed new homes and
opportunities.
Capco continues to investigate new areas for investment opportunities where our core skills of placemaking and
masterplanning can be utilised effectively. In 2015, we acquired a 50 per cent interest in the Solum Developments joint
venture with Network Rail, which will allow us to explore potential opportunities for future redevelopments at significant
railway station sites across London.
The balance sheet is robust and disciplined with a conservative loan-to-value of 16 per cent and strong liquidity with
GBP452 million of cash and available facilities, strengthened by the recent refinancing at Covent Garden.
Valuations
The Group has benefited from solid valuation performance following positive momentum across the business. The
property portfolio is valued at GBP3.7 billion as at 31 December 2015, having grown by 14 per cent on a like-for-like basis
over the year.
Market Value Market Value Valuation
2015 2014 Change
GBPm GBPm Like-for-Like(1)
Covent Garden 2,005 1,636 15.9%
Earls Court Properties
Earls Court Partnership Limited ("ECPL") 8032 657(2) 14.3%
Lillie Square 2223 182(3) 4.0%
Empress State 286 278 1.5%
Other 46 35 2.8%
Group share of Earls Court Properties 1,357 1,152 9.2%
Venues 295 233 24.7%
Other 5 4
Group share of total property 3,662 3,025 13.9%
Non-controlling interest in Earls Court Properties 471 –
Total property(4) 4,133 3,025 13.9%
(1) Valuation change takes account of amortisation of tenant lease incentives, capital expenditure, fixed head leases and unrecognised trading
surplus.
(2) Market value at 31 December 2015 represents the Group's 63 per cent interest in ECPL. Market value at 31 December 2014 represents the
Group's interest in the properties that were transferred into ECPL on 2 April 2015.
(3) Represents the Group's 50 per cent share on a proportionate basis.
(4) A reconciliation of carrying value of investment, development and trading property to the market value is shown in note 13 'Property Portfolio'
within the consolidated financial statements.
The Group has a 63 per cent controlling interest in Earls Court Partnership Limited ("ECPL"), the investment vehicle
with Transport for London ("TfL") which owns the land formerly occupied by the Earls Court Exhibition Centres. As a
result, it is fully consolidated in the consolidated financial statements and TfL's interest is represented as a non-
controlling interest. See page 12 of the Financial Review for further information.
Covent Garden – a leading global destination for brands and visitors
Covent Garden is continuing its success as a leading global destination. Underpinned by our vision to position the
estate at the forefront of global destinations for brands and visitors, 2015 was a strong year of performance and we are
delighted to have signed our 100th brand to the estate.
Our asset management strategy, where every street has a plan, continues to attract global and premium brands while
our creative approach to placemaking has continued to drive high quality footfall.
The estate is valued at GBP2.0 billion as at 31 December 2015, a like-for-like increase of 16 per cent. 2015 has been our
most active year of leasing with 74 new lettings and renewals agreed at 11 per cent above December 2014 ERV. The
ERV of the estate is GBP86 million, up 12 per cent on a like-for-like basis. Against this positive performance, we remain on
course to deliver our ERV target of GBP100 million by December 2017.
James Street established a new benchmark rental level reflecting the competition and the depth of demand for space
on the street. A new Zone A rental level of GBP1,400 per square foot was achieved following lettings to Charlotte Tilbury
and kikki.K who have both opened their first London stores. Since the year-end, a new letting to Spanish cosmetics
store, 3INA Cosmetics has set a new Zone A rental level of GBP1,475 per square foot.
The dining offer at Covent Garden has further strengthened and we are delighted to welcome SushiSamba, the iconic
global restaurant, who will be moving into the Opera Terrace of the Market Building, one of the most prominent dining
locations in London.
The redevelopment of Kings Court is on track for completion in 2017 and will transform pedestrian flows on the north
side of the estate. There has been positive interest from brands for this new development in line with the strategy to
create an innovative retail and dining experience at Kings Court.
We have continued to expand our presence on the estate through strategic acquisitions, investing GBP50 million on
properties located at key access points to the estate. This takes the total invested in the estate since demerger in 2010
to over GBP500 million establishing one of the largest managed retail estates in London.
Earls Court – over 70 acres of consented strategic land in Chelsea and Fulham
It has been a year of progress and momentum for our land interests at Earls Court.
The valuation of Capco's interests at Earls Court, represented by Earls Court Properties, has grown in the year to GBP1.4
billion. This represents an increase of 9 per cent over the year on a like-for-like basis benefiting from Capco's strategy
of driving value through planning, land assembly and land enablement as well as selective development.
Our investment vehicle with TfL, ECPL, which is led by Capco, completed in April 2015 resulting in new 999 year
leases over the former Exhibition Centres' land. The significant and complex demolition of the former Exhibition
Centres ("EC1 & EC2"), is successfully underway, as we continue to de-risk our land holdings in this part of the
scheme. Demolition to ground level of the EC2 building is now complete and demolition to ground level for the entire
site is on track for completion this year.
Detailed planning consent for West Brompton Village, a 1.2 acre site adjacent to the former Exhibition Centres, was
granted by the Royal Borough of Kensington and Chelsea, bringing the total area for which detailed consent has been
achieved to over 17 acres.
Following the successful launch of Phase 1 of Lillie Square in 2014, construction is underway with first completions on
track for the second half of 2016. The first phase is predominantly sold, crystallising over GBP250 million of sales and the
average price per square foot for Phase 1 is approximately GBP1,500.
The first release of Phase 2 of Lillie Square which comprises 70 units, was launched in September 2015; 40 per cent of
this first release has been reserved or exchanged. The residential sales market in London experienced challenging
conditions towards the end of 2015 as a result of increasing supply, particularly in emerging locations, and regulatory
intervention which has impacted demand. Whilst we remain confident in Lillie Square, the rate of sales has reduced
compared to 2014, which reflects these challenges in the residential market. Nevertheless, sales prices achieved for
Phase 2 are 5 per cent higher than comparable units in Phase 1, which reflects the strong location and transport
connectivity of the scheme.
The Earls Court Masterplan is a unique opportunity to create the next great estate of London. The Masterplan is in one
of the GLA's designated Opportunity Areas, making it a strategic scheme for London. Against a backdrop of London's
rapidly growing population and its housing needs, options are being considered to intensify the Masterplan to optimise
the development potential of this strategic project.
Venues – operational excellence
The Venues business performed very well in 2015 with EBITDA for the year of GBP15 million, up 33 per cent. Its valuation
was up 25 per cent to GBP295 million on a like-for-like basis, reflecting its bright future prospects.
Following the success of the transition of shows from the Earls Court Exhibition Centres, 2015 was Olympia London's
busiest year with over 200 events held and over 1.5 million visitors. It is now the venue of choice for premium shows in
central London and continues to attract new events.
As announced in November 2015, Capco is conducting a strategic review of its Venues business. A number of
proposals are being explored as part of this review, including a sale or continued ownership.
Outlook
Since our demerger in 2010, we have positioned Capco with two significant prime estates in central London. Covent
Garden now comprises over one million square feet of retail-led space in the West End. In line with our ambitious vision
to establish the estate as the leading world-class destination for retailers and visitors, we will continue to reposition the
estate whilst maintaining our creative approach. We remain on track to achieve our ERV target of GBP100 million by
December 2017. We will invest selectively in acquisitions and developments which enhance the estate and meet our
return expectations.
Earls Court comprises over 70 acres of consented strategic land in Chelsea and Fulham. As a GLA Opportunity Area,
the Earls Court Masterplan is a key strategic site and the only consented scheme capable of scale in central London.
Our focus will be on continued de-risking of our land holdings, through the complex demolition of the former Exhibition
Centres, as well as exploring options to evolve and intensify the Masterplan in order to optimise the potential of this
strategic scheme.
London's status as a world class city continues. Its economic prospects are positive and the population is growing
significantly. With its focus on London, Capco's two prime assets are well-placed for long-term success.
We expect increasing global and political uncertainty, while the challenging conditions seen in the residential market at
the end of the year are expected to continue in 2016. Our strategy at Capco remains clear and focused and we are
confident in the outlook for our prime estates which are backed by a robust capital structure. We enter a new year with
confidence to drive long-term value creation for our shareholders from our two exceptional London estates.
Ian Hawksworth
Chief Executive
24 February 2016
STRATEGIC REPORT
COVENT GARDEN
A global destination in London's West End
The Covent Garden estate continues to reinforce its position as a major global destination and address for retailers,
visitors and residents, in the heart of London's West End. Capco's distinct approach to creating places attracts
premium brands to Covent Garden and footfall remains consistently positive as visitors are drawn to the estate's
energy and unique retail, dining and cultural experience.
Following another active year of leasing and investment activity, the Covent Garden estate remains on track to achieve
its ERV target of GBP100 million by 2017.
Overview
Providing over one million square feet of lettable space in London's West End, the Covent Garden estate represents 55
per cent of Capco's portfolio. At Covent Garden, Capco drives value creation through asset management, strategic
investment and creativity, underpinned by a vision to consistently compete as one of the world's best retail and dining
destinations for brands and visitors.
Covent Garden performed positively in 2015 with the value of the estate up 15.9 per cent on a like-for-like basis to GBP2.0
billion. ERV was GBP86.2 million, a like-for-like increase of 12.1 per cent following an active year of leasing which reflects
the success of the estate's focused strategy to drive rental growth. Reflecting the depth of demand from retailers, 74
new lettings and renewals were negotiated (including transactions under offer at year-end and signed in 2016) securing
GBP11.9 million of passing rent, 11 per cent above the 31 December 2014 ERV level. EPRA occupancy remains high at
98 per cent and footfall is consistently strong at over 42 million customer visits per year.
As the owner of the Covent Garden estate, Capco regularly hosts events on and around the piazza which supports the
estate's cultural offering. In September, a major installation by French artist Charles Pétillon saw the South Hall of the
Market Building filled with over 100,000 balloons. The installation "Heartbeat" featured a pulsing light display and
symbolised the Market Building as the beating heart of central London. This innovative exhibit enjoyed positive reviews
and received global media attention.
Capco continues to work closely with community stakeholders including Westminster City Council ("WCC") and the
Covent Garden Area Trust ("CGAT") to maintain and celebrate the attributes which make the area unique.
Retail
Retailer demand for space at Covent Garden continues to be positive. Continued curation of a contemporary luxury
tenant mix where every street has a plan, fresh concepts and "global first" stores has positioned Covent Garden at the
forefront of demand for street retail in London.
James Street is now an established destination for global retailers coming to London. The depth of demand for a
presence on James Street has led to a strong progression of rental growth on the street. Spanish cosmetics store,
3INA Cosmetics, is the latest tenant to choose James Street for their first London store, setting a new Zone A high of
GBP1,475 per square foot which compares to a Zone A rental level of GBP1,000 per square foot for the street as at 31
December 2014. This follows lettings during the year to premium cosmetics brand Charlotte Tilbury, which opened its
first stand-alone store and premium Australian stationery brand kikki.K, which also opened its first London store, both at
a Zone A rental level of GBP1,400 per square foot.
The "Street to Suit" strategy to reposition Henrietta Street with a contemporary menswear focus and complementary
dining offer has proven successful with nine retail and dining brands introduced to date. International retailer, Club
Monaco, is the latest brand to take space and brings its classic yet modern clothing and accessories to Henrietta
Street. The street now offers an array of premium menswear brands including Nigel Cabourn, The Real McCoy's,
Oliver Sweeney and Edwin.
Following the trading success of its first stand-alone cosmetics store, Chanel has signed a new lease to move to a
larger unit in the north-east of the Market Building. The new unit will offer Chanel almost 50 per cent additional space to
enhance its presence on the estate.
King Street's contemporary luxury offering has continued to expand with a new letting to French cosmetics brand
NARS, which will open its first London standalone store on the street. This follows the introduction of Parisian
womenswear concept, Claudie Pierlot, and Italian knitwear brand, Stefanel, both of which opened earlier in the year.
Dining
Covent Garden has experienced an active year for new restaurant lettings, further enhancing the estate's reputation for
destination dining.
Renowned fusion dining restaurant, SushiSamba, has agreed terms to let the Opera Terrace, located above the
Market Building with exceptional views across the Piazza. Plans for the unique dining space will see the existing glass
structure replaced with a new Eric Parry design, creating an iconic structural addition to this historic London landmark.
Adding to the depth of variety on the estate, Aubaine will open their latest delicatessen, bringing their successful French
cuisine to the Market Building.
Henrietta Street's dining offer has been further strengthened with the introduction of two new restaurants. Gregory
Marchand, through his successful Parisian restaurant Frenchie, has taken space for its first London restaurant which
has recently opened. Flat Iron steakhouse has opened its latest London restaurant occupying over 4,000 square feet,
its largest space to date.
On King Street, Mariage Frères, the iconic French tea house, will open its first standalone store outside of Paris offering
a tea emporium, café and store comprising over 8,000 square feet.
Acquisitions
Capco has continued to expand its presence on the estate through strategic acquisitions. During the year, new
properties were acquired for a total consideration of GBP50 million, representing GBP2.2 million of ERV.
The acquisition of 30-33 Henrietta Street for GBP16 million has further consolidated Capco's holdings on this strategic
street. The building offers the opportunity of repositioning of the retail units and conversion of the upper floors.
31-33 Bedford Street was acquired for GBP32 million in the first half of the year offering prime retail frontage. This follows
the acquisition of 10-14 Bedford Street in 2014 and further enhances Capco's presence on the street, a key access
point to the estate.
Residential and offices
Demand for residential at Covent Garden continues. The letting market has been particularly strong with 35 new
lettings completed during the year. The Southampton, a premium residential development of seven apartments for rent,
established a rental tone of GBP65-70 per square foot and have all been leased. Recent residential conversions of units
on the upper floors of King Street and Henrietta Street have proved extremely successful with rents on certain units
achieving over GBP80 per square foot.
At The Beecham, a luxury development of nine apartments for sale or rental overlooking the Piazza, six apartments
have now been sold or are under offer at an average price per square foot of GBP2,800.
Establishing a new benchmark for prime office space, 35 King Street, the first new office development on the estate,
has been leased to a digital agency for GBP77 per square foot.
Developments
The Kings Court and Carriage Hall developments continue to progress positively. The schemes will transform
pedestrian flow in the area, creating a new connecting passage from Long Acre to King Street, unlocking the potential
to extend Capco's placemaking approach through to Floral Street.
Kings Court will provide over 85,000 square feet (NIA) of space through eight retail and two restaurant units centred
around a new public courtyard as well as 45 premium apartments above the development. Carriage Hall includes the
refurbishment of 15,000 square feet (NIA) and plans include the provision of a double height covered atrium.
The Kings Court and Carriage Hall schemes are on track to complete in 2017. The total development cost is expected
to be approximately GBP100 million, an increase of circa 8 per cent. Material changes are not expected to the total
development cost going forward.
Future Priorities
Through its creative vision at Covent Garden, Capco remains committed to enhancing the estate's reputation as a
leading global retail and dining destination for premium brands and visitors.
The strategy at Covent Garden remains focused on driving value through creative asset management and strategic
investment. The estate's repositioning strategy, where every street has a plan is underway with initiatives across the
estate. In particular, building on the success of Henrietta Street's 'Street to Suit' strategy and repositioning the Royal
Opera House Arcade with luxury gifting and accessories, following successful pop-up lettings in the year, will be key
areas of activity.
The Kings Court and Carriage Hall schemes are progressing well and are on track for completion in 2017. The
developments are a unique opportunity to transform pedestrian flow in the area and extend Capco's placemaking
approach through Floral Street and King Street, unlocking further value potential in these key parts of the estate.
EARLS COURT PROPERTIES
Over 70 acres of consented strategic land in central London
The Earls Court Masterplan covers over 70 acres of prime, consented, strategic land in central London. The scheme,
which is located in Chelsea and Fulham is the largest regeneration opportunity in central London and is currently
consented to provide over 7,500 new homes (including Lillie Square), creating 10,000 new jobs, and will deliver over
GBP450 million of community benefits.
The scheme is located in an established premium neighbourhood with history and heritage and is well-connected,
offering existing strong public transport connectivity. Underpinned by Capco's distinct approach to creating places, the
Earls Court Masterplan represents an opportunity to create the next great estate for London.
Earls Court is one of the Greater London Authority's ("GLA") 45 designated 'opportunity areas' making it a strategic
scheme for the Capital. According to the London Plan, London's population is expected to grow by 2 million to 10
million by 2031 and the provision of housing is a key priority, with the Capital needing over 40,000 new homes per
annum. Against this backdrop of London's housing need, the GLA increased the housing designation for Earls Court to
at least 7,500 new homes in its latest revision of the London Plan in January 2014.
Earls Court Properties represents Capco's interests in Earls Court, which principally comprise:
– 63 per cent interest in ECPL: the investment vehicle with TfL in respect of EC1 & EC2, and including certain
other assets on and around Lillie Road
– 100 per cent of the Empress State Building
– 50 per cent interest in the Lillie Square joint venture
In addition, in 2013 Capco exercised its option under the Conditional Land Sale Agreement ("CLSA"), a binding
agreement in relation to the West Kensington and Gibbs Green Estates.
Plans at Earls Court are progressing well with demolition of the Exhibition Centres underway and construction of Phase
1 of Lillie Square on track with first completions expected in the second half of this year. This positive momentum is
reflected in the valuation which has increased to GBP1.4 billion (Group share), a like-for-like increase of 9.2 per cent.
The Masterplan is located in two London Boroughs, the Royal Borough of Kensington and Chelsea and the London
Borough of Hammersmith & Fulham. Capco continues to work positively and constructively with all its stakeholders.
The Earls Court Masterplan saw continued progress and achieved a number of milestones throughout 2015.
Continued planning momentum
Capco continues to create value through the planning process at Earls Court. In March 2015, detailed planning consent
was granted by the Royal Borough of Kensington and Chelsea for West Brompton Village. The consent will deliver a
public square, a residential apartment building, townhouses, and three retail units across 1.2 acres. Following detailed
planning achieved for Earls Court Village in 2014, this brings the total area for which detailed consent has been
achieved to over 17 acres.
Significant progress in land assembly and land enablement
ECPL, the venture with TfL in respect of EC1 & EC2, completed in April 2015. ECPL is a UK limited company and
owns 999 year leases over the EC1 & EC2 land together with certain other adjacent properties acquired from Capco on
completion, primarily located on or around Lillie Road. Capco owns a 63 per cent share and is leading the venture
following its appointment as exclusive business and development manager.
Demolition of the former Exhibition Centres to ground level is progressing well and is on track for completion in the
second half of 2016. As previously stated, the total cost of this phase of demolition is GBP50-GBP60 million.
Capco continues to consolidate its ownership in the Masterplan area, acquiring a number of smaller assets which will
enhance the implementation of the scheme. GBP30 million of acquisitions were made during the year, of which GBP17 million
were acquired by ECPL.
In November 2013, Capco exercised its option under the CLSA relating to West Kensington and Gibbs Green Estates.
Capco to date has paid GBP45 million of the GBP105 million cash consideration including the first of five annual instalments of
GBP15 million which was paid in December 2015. Plans are progressing towards the construction of Block D of Lillie
Square which will facilitate the first phase of replacement homes for the residents of the estates.
The Earls Court Masterplan achieved outline planning consent for 10.1 million square feet in 2012. Due to its
scale, there will remain a risk of protests or legal challenges (ranging from complaints about noise through to judicial
reviews or applications for listing) against specific aspects of the scheme as it is progressed. It should be noted that all
such challenges to date have been successfully defended however future challenges of this nature cannot be
discounted.
Phase 1 construction on track at Lillie Square
The Lillie Square development is a one million square feet (Gross External Area ("GEA")) residential scheme located
adjacent to the Earls Court Masterplan. Providing 608 private and 200 affordable homes, across three phases, Lillie
Square delivers modern garden-square living in one of the most centrally-located and well-connected schemes in
London.
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 GBP222 million, a like-for-like increase of 4.0 per cent over the year.
Phase 1 launched successfully in 2014 and is predominantly sold, crystallising value through GBP250 million of sales in
this part of the scheme. The average price per square foot for Phase 1 is approximately GBP1,500 with individual premium
units achieving over GBP2,200 per square foot.
The first release of Phase 2 of Lillie Square, which comprises 70 units, was launched in September 2015; 40 per cent
of this first release has been reserved or exchanged. The rate of sales has reduced compared to 2014, reflecting
challenging conditions in the residential sales market. However, sales prices achieved for Phase 2 are 5 per cent
higher than comparable units in Phase 1, which reflects the strong location and transport connectivity of the scheme.
Construction of Phase 1 is underway and progressing positively with first completions on track for delivery in 2016.
Construction of the private element of the scheme is expected to cost GBP400 million.
Future priorities
Capco remains committed to its strategy to create value through planning, land assembly, land enablement and
selective development through its land holdings at Earls Court.
At Earls Court, the focus of activities this year will be the completion of the complex and significant demolition of the
former Exhibition Centres to ground level. In addition, Capco will continue to selectively acquire small but important
assets around the Masterplan area, which will enhance the overall implementation of the scheme.
At Lillie Square, the focus is on construction of Phase 1 and delivery of the first completions in 2016, together with sales
of Phase 2.
The Earls Court Masterplan is currently consented for 10.1 million square feet of residential-led space and is a
designated GLA opportunity area, making it a strategic scheme for the Capital. With a rising population and London's
forecast housing needs, maximising opportunity areas is vital in order to meet London's housing demands and options
are being considered which enhance and maximise the potential of this important London scheme.
VENUES
Operational excellence
The reinvigorated Venues business performed ahead of expectations in 2015 reflecting the positive transition of shows
from the Earls Court Exhibition Centres. EBITDA for the year was GBP15 million, up 33 per cent. This is reflected in the
positive valuation performance, which has increased 24.7 per cent to GBP295 million on a like-for-like basis.
2015 was Olympia London's busiest year with over 200 events held and over 1.5 million visitors. Transitioned shows,
including the Ideal Home Show and International Book Fair, have been successfully held at this re-invigorated venue.
Olympia London is now the venue of choice for premium shows in central London and continues to attract new shows.
Following this successful transition, Capco announced in November 2015 that it is conducting a strategic review of its
Venues business. A number of proposals are being explored as part of this review, including a sale or continued
ownership.
FINANCIAL REVIEW
Capco continues to maintain a robust and disciplined financial position with low leverage of 16 per cent and available
liquidity of GBP452(1) million . Our capital structure provides the platform to continue to deliver market-leading returns for our
shareholders and continue to drive value creation across our assets.
EPRA adjusted, diluted net assets per share rose 16.1 per cent during the year, increasing from 311 pence at 31
December 2014 to 361 pence. This 50 pence increase together with the 1.5 pence dividend paid during the year
represents a total return of 16.6 per cent.
At Covent Garden continued growth in estimated rental values ("ERV") was the main driver of the increase in the value
of the estate by 15.3 per cent (15.9 per cent like-for-like).
The market value of Earls Court Properties, which comprises the Group's interests at Earls Court, has increased by 8.4
per cent (9.2 per cent like-for-like), primarily as a result of further de-risking of the development scheme through the
completion of property transfers to ECPL (the investment vehicle with TfL) and progress with demolition of the Earls
Court Exhibition Centres.
(1) Group share. Includes GBP40 million increase in the Covent Garden facilities completed in January 2016.
Basis of preparation
In line with the requirements of IFRS 11 'Joint Arrangements' ("IFRS 11") the Group is required to present its joint
ventures under the equity method in the consolidated financial statements. Under the equity method, the Group's
interest in joint ventures is disclosed as a single line item in both the consolidated balance sheet and consolidated
income statement rather than proportionally consolidating the Group's share of assets, liabilities, income and expenses
on a line-by-line basis.
Internally the Board focuses on and reviews information and reports prepared on a proportionate consolidation 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, performance and cash flow analysis on a proportionate consolidation basis.
Continuing and discontinuing operations have also been combined.
Completion of property transfers to Earls Court Partnership Limited
On 2 April 2015, the Group's leasehold interests in EC1 & EC2 were transferred into ECPL which occurred
simultaneously with a grant of 999 year headleases by the freeholder, TfL, to ECPL. Other adjacent property interests,
primarily located on and around Lillie Road, were also transferred into ECPL.
ECPL is held 63 per cent by the Group and 37 per cent by TfL. ECPL is fully consolidated within the Group's financial
statements as the Group holds the controlling interest. At completion, the grant of 999 year headleases over EC1 &
EC2 was treated as an acquisition of property and fully consolidated. The transaction resulted in an increase in the
carrying value of investment and development property (GBP419.1 million) which was offset by loan notes payable to TfL
(GBP374.7 million) and TfL's non-controlling interest share in capital (GBP44.4 million), both of which are recognised in equity.
Due to the significance of this transaction and to aid comparability to the previously reported position, a reconciliation to
the Group's share of property, net debt and other assets and liabilities is included in the summary adjusted balance
sheet.
Conditional Land Sale Agreement ("CLSA")
In November 2013 the Group exercised its option under the CLSA, which it entered into with the London Borough of
Hammersmith & Fulham ("LBHF"), for the purchase of the West Kensington and Gibbs Green housing estates (the
"Estates"). The overall consideration payable is expected to be GBP105 million cash plus the planning requirement to
provide up to 760 replacement homes.
The CLSA remains unrecognised in the consolidated financial statements of the Group as its main underlying asset
(the land relating to the Estates) does not currently meet the recognition criteria under IFRS required for investment
and development property. Annual payments of GBP15 million commenced in December 2015. Where amounts are paid
prior to the transfer of property, they will be carried on the Group's consolidated balance sheet as prepayments against
future land draw down. Of the GBP45 million paid to date, GBP15 million relates to the acquisition of two properties and GBP30
million is held as a prepayment. The remaining future payments totalling GBP60 million are disclosed as a capital
commitment. 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 with any uplift reflected in the Group's reported net asset measure.
FINANCIAL POSITION
At 31 December 2015 the Group's EPRA adjusted net assets were GBP3.1 billion (2014: GBP2.6 billion) representing 361
pence per share, an increase of 50 pence per share since 31 December 2014.
SUMMARY ADJUSTED BALANCE SHEET
2015
Non-
Joint Proportionate controlling
IFRS ventures(1) consolidation interest share
GBPm GBPm GBPm GBPm GBPm
Investment, development and trading property 3,870.7 130.9 4,001.6 (471.6) 3,530.0
Net debt (559.2) (9.4) (568.6) (10.3) (578.9)
Other assets and liabilities(2) 91.3 (121.5) (30.2) 13.1 (17.1)
Non-controlling interest (468.8) – (468.8) 468.8 –
Net assets attributable to the Parent 2,934.0 – 2,934.0 – 2,934.0
Adjustments:
Fair value of derivative financial instruments 2.4
Unrecognised surplus on trading property 99.9
Deferred tax adjustments 28.9
Non-controlling interest in respect of the adjustments (5.8)
EPRA adjusted net assets 3,059.4
EPRA adjusted, diluted net assets per share (pence)(3) 361
(1) Primarily Lillie Square.
(2) IFRS includes amounts receivable from joint ventures which eliminate on proportionate consolidation.
(3) Adjusted, diluted number of shares in issue at 31 December 2015 was 847.7 million.
2014
Non-
Joint Proportionate controlling Group
IFRS ventures(1) consolidation interest share
GBPm GBPm GBPm GBPm GBPm
Investment, development and trading property 2,806.5 98.3 2,904.8 – 2,904.8
Net debt (354.9) 10.2 (344.7) (7.1) (351.8)
Other assets and liabilities(2) 54.7 (108.5) (53.8) 7.1 (46.7)
Net assets 2,506.3 – 2,506.3 – 2,506.3
Adjustments:
Fair value of derivative financial instruments 1.8
Unrecognised surplus on trading property 96.3
Deferred tax adjustments 25.1
EPRA adjusted net assets 2,629.5
EPRA adjusted, diluted net assets per share (pence)(3) 311
(1) Primarily Lillie Square.
(2) IFRS includes amounts receivable from joint ventures which eliminate on proportionate consolidation.
(3) Adjusted, diluted number of shares in issue at 31 December 2014 was 846.3 million.
Investment, development and trading property
The revaluation surplus on the Group's property portfolio was GBP461.6 million during the year, a 13.9 per cent gain on a
like-for-like basis compared with the IPD Capital Return for the equivalent period of 7.8 per cent.
Total property return for the year was 15.7 per cent, outperforming the IPD Total Return index which recorded a 13.8
per cent return for the corresponding period.
Trading property is carried on the consolidated balance sheet at the lower of cost and market value therefore valuation
surpluses on trading property are not recorded. Any unrecognised surplus is however reflected within the EPRA
adjusted net asset measure. At 31 December 2015, the unrecognised surplus on trading property was GBP99.9 million, up
from GBP96.3 million at 31 December 2014. This primarily arises on trading property at Lillie Square.
The completion of ECPL on 2 April 2015 resulted in additions to property of GBP419.1 million which was offset by a non-
controlling interest in equity. Excluding this, acquisitions during the year were GBP80.1 million, GBP50.0 million at Covent
Garden and GBP30.1 million around the Earls Court Masterplan area.
Debt and gearing
The Group share of net debt increased by GBP227.1 million to GBP578.9 million, principally as a result of further investment in
the business through property acquisitions and subsequent 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 the carrying 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 the non-controlling interest. The LTV of
16.4 per cent remains comfortably within the Group's limit of no more than 40 per cent.
In January 2016 the GBP665 million Covent Garden facility was replaced by a new GBP705 million Covent Garden debt
facility which has increased available facilities by GBP40 million. The table below includes the pro forma impact of the
facility.
Pro forma 2015 2014
Loan to value 16.4% 12.1%
Interest cover 123% 188%
Weighted average debt maturity 5.3 years 4.1 years 5.1 years
Weighted average cost of debt 2.8% 3.3% 3.4%
Proportion of Group share gross debt with interest rate protection 91% 94%
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. At 31 December 2015 the proportion of Group's share of gross debt with interest rate protection was 91 per
cent (2014: 94 per cent). In January 2016 additional derivative contracts have been entered into taking advantage of
the historically low market rates.
The Group remains compliant with all of its debt covenants.
At 31 December 2015 the Group had capital commitments of GBP211.1 million (GBP206.5 million Group share) compared to
GBP171.4 million at 31 December 2014. The increase is mainly attributable to the Kings Court construction contract.
CASH FLOW
A summary of the Group's cash flow for the year ended 31 December 2015 is presented below:
2015 2014
GBPm GBPm
Operating cash flows after interest and tax 6.5 19.4
Purchase and development of property, plant and equipment (282.9) (259.8)
Investment in joint venture (12.5) –
Sales proceeds from property and investments 17.8 8.1
Deferred consideration on purchase of subsidiary (7.1) –
Pension funding – (0.8)
Net cash flow before financing (278.2) (233.1)
Issue of shares 0.1 252.1
Financing 275.2 58.9
Dividends paid (7.7) (11.0)
Net cash flow (10.6) 66.9
Operating cash inflows were GBP6.5 million compared with cash inflows of GBP19.4 million for 2014, as a result of an
increase in net working capital requirements.
During the year GBP102.8 million was invested at Covent Garden for the purchase of three properties, completion of a
property that had exchanged in the prior year and subsequent expenditure. At Earls Court GBP36.4 million was invested in
land assembly and GBP132.4 million was spent on subsequent expenditure for the construction of Lillie Square Phase 1,
the demolition of the Earls Court Exhibition Centres and transaction costs associated with the completion of ECPL.
On 29 June 2015, the Group acquired a 50 per cent interest in Solum Developments, a joint venture arrangement with
Network Rail Infrastructure Limited for GBP12.5 million. The joint venture will explore opportunities for future
redevelopments on and around significant railway stations in London.
Net borrowings drawn during the year were GBP210.9 million. Financing from TfL (i.e. the non-controlling interest) of GBP64.7
million was received to settle the non-controlling interest share of ECPL completion costs and subsequent expenditure
on the demolition of Earls Court Exhibition Centres.
Dividends paid of GBP7.7 million reflect the final dividend payment made in respect of the 2014 financial year and the
2015 interim dividend paid in September. This was lower than the previous year due to a higher take up of the scrip
dividend alternative, 51 per cent versus 11 per cent in 2014.
The Group's cash and undrawn committed facilities at 31 December 2015 were GBP422.4 million (GBP412.1 million Group
share). On a pro forma basis, adjusting for the increase in available facilities as a result of the new Covent Garden
facility, the Group's cash and undrawn committed facilities are GBP462.4 million (GBP452.1 million Group share).
FINANCIAL PERFORMANCE
The Group presents underlying earnings and underlying earnings per share in addition to the amounts reported on a
proportionate consolidation basis. The Group considers this presentation to provide useful information as it removes
unrealised and other one-off items and therefore represents the recurring, underlying performance of the business.
2015 2014
GBPm GBPm
Net rental income 75.4 70.1
Profit/(loss) on sale of trading property and other income 4.0 (0.4)
Gain on revaluation and sale of investment and development property 454.0 454.4
Administration expenses (52.8) (43.2)
Net finance costs (20.1) (15.1)
Non-recurring finance costs – (5.2)
Change in fair value of derivative financial instruments (0.6) (12.1)
Other – 1.7
Taxation (2.7) (1.6)
Less: Profit for the year attributable to non-controlling interest (26.1) –
Profit for the year attributable to owners of the Parent 431.1 448.6
Adjustments:
Loss/(profit) on sale of trading property and non-underlying other income (2.0) 1.9
Gain on revaluation and sale of investment and development property (454.0) (454.4)
Non-recurring finance costs – 5.2
Change in fair value of derivative financial instruments 0.6 12.1
Other – (1.7)
Taxation on non-underlying items 5.7 1.4
Non-controlling interest in respect of the adjustments 26.4 –
Underlying earnings 7.8 13.1
Underlying earnings per share (pence) 0.9 1.6
Weighted average number of shares 840.8m 806.5m
Income
Net rental income has increased by GBP5.3 million (7.6 per cent like-for-like) during the year. Olympia London performed
strongly, benefiting from the transition of exhibitions from Earls Court.
Gain on revaluation of investment and development property
The gain on revaluation of the Group's investment and development property was GBP454.0 million, GBP262.9 million arising
from the Covent Garden estate, GBP133.1 million from Earls Court Properties and GBP58.4 million from Olympia London.
Administration expenses
Administration expenses have increased by 22.1 per cent to GBP52.8 million. Certain activities previously capitalised to
the EC1 & EC2 properties are now treated as overheads following the completion of ECPL and this will also increase
reported administration expenses going forward. This change together with an increased headcount in line with
expansion of the Group's activities has resulted in the increase in administration expenses.
Net finance costs
Net finance costs have increased by 33.6 per cent to GBP20.1 million as a result of the increased net debt.
Taxation
The total tax charge for the year was GBP2.7 million which is made up of both underlying tax and non-underlying tax.
Tax on underlying profits for 2015 reflects a rate of 20 per cent, in line with the current rate of UK corporation tax. This
is offset by an adjustment in respect of previous years leading to an underlying tax credit of GBP3.0 million. Following the
Chancellor's announcement in the July 2015 Budget, the main rate of corporation tax will fall to 19 per cent from April
2017 and 18 per cent from April 2020.
Contingent tax, the amount of tax that would become payable on a theoretical disposal of all investment property held
by the Group, was GBP17.6 million. This relates to the properties held by ECPL which is a UK limited company. A disposal
of the Group's trading property at market value would result in a corporation tax charge to the Group of GBP20.2 million
(20.25 per cent of GBP99.9 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.
Dividends
The Board has proposed a final dividend of 1.0 pence per share to be paid on 21 June 2016 to shareholders on the
register at 27 May 2016. Subject to SARB approval a scrip dividend alternative will be offered.
Going concern
At 31 December 2015 the Group's cash and undrawn committed facilities were GBP422.4 million and its capital
commitments were GBP211.1 million. With weighted average debt maturity exceeding four years, LTV of 16.4 per cent
and sufficient headroom against all financial covenants, there continues to be a reasonable expectation that the
Company and Group will have adequate resources to meet both on-going and future commitments for the foreseeable
future. Accordingly, the Directors have prepared the 2015 Annual Report & Accounts on a going concern basis.
Soumen Das
Chief Financial Officer
24 February 2016
PRINCIPAL RISKS AND UNCERTAINTIES
RISK MANAGEMENT:
The Board has overall responsibility for Group risk management. It determines its risk appetite and reviews principal
risks and uncertainties regularly, together with the actions taken to mitigate them. The Board has delegated
responsibility for the review of the adequacy and effectiveness of the Group's internal control framework to the Audit
Committee.
During 2015, a comprehensive review of risk management across the Group was undertaken. The purpose of the
review was to set the right tone regarding risk at Board level and to develop a more risk aware culture and consistency
in decision making across the organisation in line with the corporate strategy and risk appetite. Following the review,
risk is now a standing agenda item at all management meetings. All corporate decision making takes risk into account
while continuing to drive entrepreneurial culture.
The Executive Directors are responsible for the day to day operational and commercial activity across the Group and
are therefore responsible for the management of business risk. The Executive Risk Committee, consisting of the
Executive Directors, the General Counsel and the Financial Controller, is the executive level management forum for the
review and discussion of risks, controls and mitigation measures. The corporate and business division risks are
reviewed on a quarterly basis by the Executive Risk Committee so that trends and emerging risks can be identified and
reported to the Board.
Senior management from every division and corporate function of the business identify and manage the risks for their
division or function and complete and maintain a risk register. The severity of each risk is assessed through a
combination of each risk's likelihood of an adverse outcome and its impact. In assessing impact, consideration is given
to financial, reputational and regulatory factors and risk mitigation plans established. A full risk review is undertaken
annually where the risk registers are aggregated and reviewed by the Executive Risk Committee. The Executive Risk
Committee carries out a robust assessment of the principal risks faced by the business and escalates these for the
Board's consideration.
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 year. These principal risks are not exhaustive. The Group monitors a
number of additional risks and adjusts those considered 'principal' as the risk profile of the business changes. See also
the risks inherent in the compilation of financial information, as disclosed within note 1 'Principal Accounting Policies' to
the consolidated financial statements, 'Estimation and uncertainty'.
CORPORATE
Risk Impact on strategy Mitigation
Health, safety & the environment
Accidents causing loss of life or very serious Prosecution for non- Health and safety procedures across the Group
injury to employees, contractors, occupiers compliance with Appointment of Group Head of Health & Safety
and visitors to the Group's properties legislation
Appointment of reputable contractors
Activities at the Group's properties causing Reputational damage
detrimental impact on the environment External consultants undertake annual audits in all
Litigation or fines locations
Distraction of Adequate insurance held to cover the risks inherent
management in construction projects
Funding
Lack of availability or increased cost of Reduced financial and Maintain appropriate liquidity to cover commitments
debt or equity funding operational flexibility Target longer and staggered debt maturities
Increased cost of Consideration of early refinancing
borrowing
Derivative contracts to provide interest rate
Delay to development protection
works
Development phasing to enable flexibility and
Constrained growth, lost reduce financial exposure
opportunities
Covenant headroom monitored and stress tested
Risk Impact on strategy Mitigation
Economic conditions
Decline in real estate valuations due to: Reduced return on Focus on prime assets
- global macro-economic conditions investment and Regular assessment of investment market
development property
- adverse movement in interest rates or conditions including bi-annual external valuations
currency Higher finance costs Regular strategic reviews
Relative attractiveness of other asset classes Reduced profitability Strategic focus on creating retail destinations and
or locations residential districts with unique attributes
Inability of the Company to adopt the
appropriate strategy or to react to changing
market conditions
Political climate and public opinion
Unfavourable policy or changes in legislation Reputational damage Monitoring proposals and emerging policy and
(in particular, as a result of political change) legislation
Litigation
e.g. London mayoral elections Engagement with key stakeholders and politicians
Distraction of
The Group's business (or aspects of it) is management Monitoring intelligence on activist groups
opposed or challenged by public interest or
activist groups Prosecution for non-
compliance
People
Inability to retain the right people and develop Inability to execute Succession planning, performance evaluations,
leadership skills within the business strategy and business training and development
plan
Long-term and competitive incentive rewards
Constrained growth, lost
opportunities
Catastrophic External Event
Such as a terrorist attack, health pandemic or Diminishing London's Terrorist insurance
cyber crime status On-site security
Heightened by Health and safety policies and procedures
concentration of
investments Close liaison with police, National Counter
Terrorism Security Office (NaCTSO) and local
Reduced rental income authorities
and/or capital values
Business disruption or
damage to property
Reputational damage
Compliance with law, regulations and
contracts
Breach of legislation, regulation or contract Prosecution for non- Appointment of external advisers to monitor
Inability to monitor or anticipate legal or compliance with changes in law or regulation
regulatory changes legislation Members of staff attend external briefings to remain
Reputational damage cognisant of legislative and regulatory changes
Litigation or fines
Distraction of
management
PROPERTY
Risk Impact on strategy Mitigation
Leasing
Inability to achieve target rents or to attract Decline in tenant demand Quality tenant mix
target tenants due to market conditions for the Group's properties Strategic focus on creating retail destinations with
Competition from other locations Reduced income unique attributes
Expansion of yield
Residential Sales
Inability to achieve sales targets or prices due Reduced cash flow and Strategic focus on creating residential districts with
to market conditions or competition from other development return unique attributes
residential districts Decline in valuations Market demand assessments and review of product
Viability of projects mix
Pre-sales marketing
Planning
Unfavourable changes to planning policy or Inability to secure future Outline planning permission already granted for the
legislation (in particular, as a result of political planning approvals or Earls Court Masterplan
change) consents Engagement with local and national authorities
Secretary of State intervention or judicial Delay in development Pre-application and consultation with key
review programme stakeholders and landowners
Existing buildings within proposed Engagement with local community bodies
development scheme becoming listed
Development
Inability to deliver anticipated returns due to: Reduced development Focus on prime assets
- Market conditions returns Regular assessment of market conditions
Decline in valuations
- Increased construction costs or delays Business strategy based on long-term returns
Construction
Increased construction costs or delay due to: Reduced cash flow and Extensive consultation, design and technical work
- site or planning conditions development return undertaken
- contractor / sub-contractor default Reduced underlying Properly tendered and negotiated processes to
income select reputable contractors with relevant
- complexity of developing adjacent to and experience in projects of equivalent scale and
above public transport infrastructure Decline in valuations
complexity, with skilled resources and appropriate
Reputational damage insurance
Under building contracts the risk of sub-contractor
failure resides primarily with the principal contractor
Commercially astute development and project
management teams to ensure management of costs
and delivery of programme
Land assembly
Failure to reach agreement on strategic land Inability to fully execute Pro-active investment team
deals or implement strategic land deals with strategy and business Dialogue with adjacent landowners
adjacent landowners on acceptable terms plan
Earls Court Masterplan designed to allow phased
Increased costs and implementation
delays resulting in
reduced development
return
DIRECTORS' RESPONSIBILITIES
Statement of Directors' responsibilities
The statement of Directors' responsibilities has been prepared in relation to the Group's full Annual Report & Accounts
for the year ended 31 December 2015. Certain parts of the Annual Report & Accounts are not included within this
announcement.
We confirm to the best of our knowledge:
- the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give
a true and fair view of the assets, liabilities, financial position and profit of the Group; and
- the Strategic Report includes a fair review of the development and performance of the business and the position of
the Group, together with a description of the principal risks and uncertainties that it faces.
Signed on behalf of the Board on 24 February 2016.
Ian Hawksworth
Chief Executive
Soumen Das
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2015
2015 2014
Notes GBPm GBPm
Continuing operations
Revenue 2 114.9 110.6
Rental income 99.7 100.3
Rental expenses (24.4) (30.3)
Net rental income 2 75.3 70.0
Profit on sale of trading property 3 3.5 2.6
Other income 4.0 3.0
Gain on revaluation and sale of investment and development property 4 453.9 454.2
Write back of trading property – 0.5
Loss on sale of available-for-sale investments 5 (0.2) –
Loss on sale of loan notes (0.2) –
Impairment of other receivables 6 (12.2) (12.7)
Other costs – (0.2)
524.1 517.4
Administration expenses (52.1) (43.2)
Operating profit 472.0 474.2
Finance income 7 0.7 0.8
Finance costs 8 (20.8) (15.9)
Other finance income 7 9.3 8.4
Other finance costs 8 – (5.2)
Change in fair value of derivative financial instruments 19 (0.6) (12.1)
Net finance costs (11.4) (24.0)
460.6 450.2
Share of post-tax loss from joint ventures 14 (0.7) –
Profit before tax 459.9 450.2
Current tax 2.2 2.1
Deferred tax (4.9) (3.4)
Taxation 10 (2.7) (1.3)
Profit for the year from continuing operations 457.2 448.9
Discontinued operation
Post-tax loss for the year from discontinued operation 9 – (0.3)
Profit for the year 457.2 448.6
Profit attributable to:
Owners of the Parent 431.1 448.6
Non-controlling interest 24 26.1 –
Earnings per share from continuing operations attributable to owners
of the Parent(1)
Basic earnings per share 12 51.3p 55.6p
Diluted earnings per share 12 50.9p 55.0p
Weighted average number of shares 12 840.8m 806.5m
(1) Earnings per share from discontinued operations and adjusted earnings per share from continuing and discontinued operations are shown in note 12
'Earnings Per Share and Net Assets Per Share'.
Notes on pages 26 to 52 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
2015 2014
Notes GBPm GBPm
Profit for the year 457.2 448.6
Other comprehensive income/(expense)
Items that may or will be reclassified subsequently to the income statement
Gain on cash flow hedge – 0.3
Items that will not be reclassified subsequently to the income statement
Actuarial gain/(loss) on defined benefit pension scheme 0.8 (1.8)
Tax relating to items that will not be reclassified 20 (0.2) 0.4
Total other comprehensive income/(expense) for the year 0.6 (1.1)
Total comprehensive income for the year 457.8 447.5
Attributable to:
Owners of the Parent 431.7 447.5
Non-controlling interest 24 26.1 –
Arising from:
Continuing operations 457.8 447.8
Discontinued operation 9 – (0.3)
Notes on pages 26 to 52 form part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEET
As at 31 December 2015
2015 2014
Notes GBPm GBPm
Non-current assets
Investment and development property 13 3,855.3 2,784.4
Plant and equipment 6.9 1.0
Investment in joint ventures 14 14.8 0.1
Available-for-sale investments 0.2 0.4
Derivative financial instruments 19 0.8 2.1
Pension asset 0.7 –
Trade and other receivables 15 158.9 129.5
4,037.6 2,917.5
Current assets
Trading property 13 15.5 22.1
Trade and other receivables 15 32.3 42.8
Cash and cash equivalents 16 66.9 94.8
114.7 159.7
Total assets 4,152.3 3,077.2
Non-current liabilities
Borrowings, including finance leases 18 (607.6) (432.2)
Derivative financial instruments 19 (3.2) (3.9)
Pension liability – (0.2)
Deferred tax 20 (19.5) (12.9)
Trade and other payables 17 – (0.2)
(630.3) (449.4)
Current liabilities
Borrowings, including finance leases 18 (18.5) (17.5)
Other provisions 21 (2.0) –
Tax liabilities (2.8) (1.6)
Trade and other payables 17 (95.9) (102.4)
(119.2) (121.5)
Total liabilities (749.5) (570.9)
Net assets 3,402.8 2,506.3
Equity
Share capital 22 210.5 209.1
Other components of equity 2,723.5 2,297.2
Equity attributable to owners of the Parent 2,934.0 2,506.3
Non-controlling interest 24 468.8 –
Total equity 3,402.8 2,506.3
Notes on pages 26 to 52 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2015
Equity attributable to owners of the Parent
Share-
based Non-
Share Share Merger payment Other Retained controlling Total
capital premium reserve(1) reserve reserves(2) earnings Total interest equity
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2014 189.5 121.0 277.8 7.4 0.1 1,216.3 1,812.1 – 1,812.1
Profit for the year – – – – – 448.6 448.6 – 448.6
Other comprehensive
income/(expense)
Gain on cash flow hedge – – – – 0.3 – 0.3 – 0.3
Actuarial loss on defined
benefit pension scheme – – – – – (1.8) (1.8) – (1.8)
Tax relating to items that will
not be reclassified 20 – – – – – 0.4 0.4 – 0.4
Total comprehensive income for
the year ended 31 December 2014 – – – – 0.3 447.2 447.5 – 447.5
Transactions with owners
Ordinary shares issued 19.6 85.9 148.0 – – – 253.5 – 253.5
Dividend expense 11 – – – – – (12.5) (12.5) – (12.5)
Adjustment for bonus issue 11 – – – – – 0.6 0.6 – 0.6
Realisation of share-based
payment reserve on issue of
shares – – – (0.8) – 0.8 – – –
Fair value of share-based
payment – – – 4.8 – – 4.8 – 4.8
Tax relating to share-based
payment 20 – – – – – 0.3 0.3 – 0.3
Total transactions with owners 19.6 85.9 148.0 4.0 – (10.8) 246.7 – 246.7
Balance at 31 December 2014 209.1 206.9 425.8 11.4 0.4 1,652.7 2,506.3 – 2,506.3
Profit for the year – – – – – 431.1 431.1 26.1 457.2
Other comprehensive
income/(expense)
Actuarial gain on defined
benefit pension scheme – – – – – 0.8 0.8 – 0.8
Tax relating to items that will
not be reclassified 20 – – – – – (0.2) (0.2) – (0.2)
Total comprehensive
income for the year ended
31 December 2015 – – – – – 431.7 431.7 26.1 457.8
Transactions with owners
Ordinary shares issued 22 1.4 4.2 – – – – 5.6 – 5.6
Dividend expense 11 – – – – – (12.6) (12.6) – (12.6)
Adjustment for bonus issue 11 – – – – – 0.6 0.6 – 0.6
Realisation of share-based
payment reserve on issue of
shares – – – (5.7) – 5.0 (0.7) – (0.7)
Fair value of share-based
payment – – – 4.6 – – 4.6 – 4.6
Tax relating to share-based
payment 20 – – – – – (1.5) (1.5) – (1.5)
Contribution from non-controlling – – – –
interest – – – 442.7 442.7
Total transactions with owners 1.4 4.2 – (1.1) – (8.5) (4.0) 442.7 438.7
Balance at 31 December 2015 210.5 211.1 425.8 10.3 0.4 2,075.9 2,934.0 468.8 3,402.8
(1) Represents non-qualifying consideration received by the Group following the share placing in May 2014 and previous share placements. The amounts
taken to the merger reserve do not currently meet the criteria for qualifying consideration as they form part of linked transactions.
(2) Refer to note 23 'Other Reserves'.
Notes on pages 26 to 52 form part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2015
2015 2014
Notes GBPm GBPm
Continuing operations
Cash flows from operating activities
Cash generated from operations 27 13.1 26.2
Interest paid (19.6) (15.5)
Interest received 0.7 0.8
Tax refund received 3.5 3.5
Net cash (outflow)/inflow from operating activities (2.3) 15.0
Cash flows from investing activities
Purchase and development of property (250.2) (251.2)
Sale of property 11.2 7.3
Acquisition of interest in joint venture (13.5) –
Pension funding – (0.8)
Sale of loan notes 6.0 –
Sale of subsidiaries(1) 0.5 0.8
Loan advances to joint ventures (3.2) (13.5)
Deferred consideration on purchase of subsidiary (7.1) –
Net cash outflow from investing activities (256.3) (257.4)
Cash flows from financing activities
Issue of shares 0.1 252.1
Borrowings drawn 225.0 730.0
Borrowings repaid (51.0) (650.2)
Purchase of derivative financial instruments – (8.7)
Other finance costs (0.4) (25.2)
Cash dividends paid 11 (7.7) (11.0)
Contribution from non-controlling interest 64.7 7.1
Net cash inflow from financing activities 230.7 294.1
Net (decrease)/increase in unrestricted cash
and cash equivalents from continuing operations (27.9) 51.7
Net increase in unrestricted cash and cash equivalents from discontinued
operation – 0.1
Net (decrease)/increase in unrestricted cash
and cash equivalents (27.9) 51.8
Unrestricted cash and cash equivalents at 1 January 88.8 37.0
Unrestricted cash and cash equivalents
at 31 December 16 60.9 88.8
(1) Cash inflows from sale of subsidiaries relate to deferred consideration on the disposal of The Brewery by EC&O Limited on 9 February 2012 and the
disposal of Covent Garden Restaurants Limited on 29 February 2012.
Notes on pages 26 to 52 form part of these consolidated financial statements.
NOTES TO THE ACCOUNTS
1 PRINCIPAL ACCOUNTING POLICIES
General information
Capital & Counties Properties PLC (the "Company") was incorporated and registered in England and Wales on 3
February 2010 under the Companies Act as a public company limited by shares, registration number 7145051. The
registered office of the Company is 15 Grosvenor Street, London, W1K 4QZ, United Kingdom. The principal activity of
the Company is to act as the ultimate parent company of Capital & Counties Properties PLC Group (the "Group"),
whose principal activity is the development and management of property.
The Group's assets principally comprise investment and development property at Covent Garden, Earls Court and the
exhibition halls at Olympia.
Basis of preparation
The Group's consolidated financial statements are prepared in accordance with International Financial Reporting
Standards ("IFRS"), as adopted by the European Union, International Financial Reporting Interpretations Committee
("IFRIC") interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under
IFRS.
The consolidated financial statements have been prepared under the historical cost convention as modified for the
revaluation of property, available-for-sale investments and derivative financial instruments.
During 2015, the following accounting standards were adopted by the Group:
IFRS 2 'Share Based Payment' (amendment)
IFRS 3 'Business Combinations' (amendment)
IFRS 8 'Operating Segments' (amendment)
IFRS 13 'Fair Value Measurement' (amendment)
IAS 19 'Employee Benefits' (amendment)
IAS 24 'Related Party Disclosures' (amendment)
IAS 40 'Investment Property' (amendment)
These pronouncements had no significant impact on the consolidated financial statements and resulted in no changes
to presentation and disclosure.
Standards and guidelines relevant to the Group that were in issue and endorsed at the date of approval of the
consolidated financial statements but not effective at the balance sheet date and have not been adopted early are:
IFRS 5 'Non-current assets held for sale and discontinued operations' (amendment)
IFRS 7 'Financial instruments: Disclosures' (amendment)
IAS 1 'Presentation of financial statements' (amendment)
IAS 16 'Property, plant and equipment' (amendment)
IAS 19 'Employee benefits' (amendment)
IAS 27 'Separate Financial Statements' (amendment)
IAS 34 'Interim financial reporting' (amendment)
The assessments of these amendments issued but not effective are not anticipated to have a material impact on the
financial statements.
A summary of the Group's principal accounting policies, which have been applied consistently across the Group is set
out below.
Going Concern
The Directors are satisfied that the Group has adequate resources to continue in operational existence for the
foreseeable future and for this reason the consolidated financial statements have been prepared on a going concern
basis.
Basis of consolidation
These consolidated financial statements include the consolidation of the following limited partnerships: Capital &
Counties CGP, Capital & Counties CGP 9, Capco CGP 2012 LP, EC Properties LP, Solum Group Holdings LP and
The Empress State Limited Partnership. The members of these qualifying partnerships have taken advantage of
exemptions available in Statutory Instrument 2008/569 and therefore will not produce consolidated accounts at the
partnership level.
The consolidated financial statements are prepared in British pounds sterling, which is also determined to be the
functional currency of the Parent.
Subsidiaries
Subsidiaries are fully consolidated from the date on which the Group has control; it is exposed, or has rights, to variable
returns from its involvement with an entity and has the ability to affect those returns through its power over an entity.
Subsidiaries cease to be consolidated from the date this control is lost.
Subsidiaries continued
Non-controlling interests are recognised on the basis of their proportionate share in the recognised amounts of a
subsidiary's identifiable net assets. On the balance sheet non-controlling interests are presented separately from the
equity of the owners of the Parent. Profit or loss and total comprehensive income for the period attributable to non-
controlling interests are presented separately in the income statement and the statement of comprehensive income.
Estimation and uncertainty
The preparation of consolidated financial statements in accordance with IFRS requires the use of estimates and
assumptions that affect the reported amounts of assets, liabilities, equity, 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 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
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.
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.
Tenant 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.
Other income includes management fees charged to joint ventures for services associated with the management of
properties and other general expenses as defined by management agreements.
Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate.
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.
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.
Income taxes
Current tax is the amount payable on the taxable income for the year and any adjustment in respect of prior years. It is
calculated using rates that have been enacted or substantially enacted by the balance sheet date.
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 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 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
respectively.
For tax purposes, 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.
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 tenant lease
incentives 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 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 and development 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. Investment and development properties cease to
be recognised as investment and development 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.
Disposals are recognised on completion. Gains or losses arising are recognised in the income statement. The gain on
disposal is determined as the difference between the net sales proceeds and the carrying amount of the asset at the
commencement of the accounting period plus capital expenditure in the period.
A property ceases to be recognised as investment and development 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.
When the use of a property changes from trading property to investment and development property, the property is
transferred at fair value with any resulting gain recognised in the income statement.
Trading property
Trading property comprises those properties that in the Directors' view are not held for long-term rental income or
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 and development 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. 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 tradi
ng 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.
Investment in joint ventures
Joint ventures are those entities over whose activities the Group has joint control, established by contractual
agreement. Investments in joint ventures are accounted for using the equity method. On initial recognition the
investment is recognised at cost, and the carrying amount is subsequently increased or decreased to recognise the
Group's share of the profit or loss of the joint venture after the date of acquisition. Goodwill, if any, on acquisition is
included in the carrying amount of the investment.
The Group's investment in joint ventures is presented separately on the balance sheet and the Group's share of the
joint venture's post-tax profit or loss for the period is also presented separately in the income statement.
Where there is an indication that the Group's investment in joint ventures may be impaired the Group evaluates the
recoverable amount of its investment, being the higher of the joint venture's fair value less costs to sell and value in
use. If the recoverable amount is lower than the carrying value an impairment loss is recognised in the income
statement.
If the Group's share of losses in a joint venture equals or exceeds its investment in the joint venture, the Group does
not recognise further losses, unless it has legal or constructive obligations to make payments on behalf of the joint
venture.
Available-for-sale 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.
Derivative financial instruments
The Group uses non-trading derivative financial instruments to manage exposure to interest rate risk. They are initially
recognised on the trade date at fair value and subsequently remeasured at fair value based on market price.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
Instruments that have not been designated as qualifying for hedge accounting are classified as held for trading.
Changes in fair value of these instruments are recognised directly in the income statement.
The Group designates certain derivatives as hedges of a highly probable forecast transaction (cash flow hedge). For
hedging instruments, the Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for undertaking hedging
transactions. The Group also documents its assessment, both at hedge inception and on an on-going basis, of whether
the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged
items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised
immediately in the income statement. Amounts accumulated in equity are reclassified to profit or loss in the periods
when the hedged item affects profit or loss.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction
is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately transferred 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 cash flows 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.
Trade and other payables
Trade payables are obligations for goods or services acquired in the ordinary course of business. Trade and other
payables are recognised at fair value and subsequently measured at amortised cost until settled.
Deposits
Property deposits and on account receipts are held within trade and other payables.
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 ordinarily recognised initially at their net proceeds as an approximation of fair value.
If the transaction price is not an approximation of fair value at initial recognition, the Group determines the fair value as
evidenced by a quoted price in an active market for an identical instrument or based on a valuation technique that uses
data from observable markets. Where equity holders of the Group are party to the transaction the difference between
the net proceeds and fair value is recognised within equity.
Borrowings are 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.
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 divisions:
– Covent Garden;
– Earls Court Properties represents the Group's interests in the Earls Court area, comprising properties held in
ECPL, Lillie Square, the Empress State Building and a number of smaller properties in the Earls Court area;
– Venues comprises the exhibitions business including the Olympia London property assets and Maclise
Road(1); and
– Other comprises the discontinued activity of The Great Capital Partnership, the Group's residual China
investments, other head office companies and investments.
Management information is reported on a proportionally consolidated basis. Segmental reporting has been presented
in line with management information and therefore consolidation adjustments are presented to reconcile segmental
performance and position 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 the exhibition business.
Unallocated expenses consist primarily of costs incurred centrally which are neither directly nor meaningfully
attributable to individual segments.
(1) The comparative period has been re-presented to reflect the transfer of Maclise Road from the Earls Court Properties segment to the Venues segment.
Reportable segments
2015
Covent Earls Court Group Consolidation IFRS
Garden Properties Venues Other total adjustments total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 61.3 18.8 31.3 2.1 113.5 1.4 114.9
Rent receivable and exhibition income 46.4 18.8 31.3 – 96.5 (0.5) 96.0
Service charge income 3.7 – – – 3.7 – 3.7
Rental income 50.1 18.8 31.3 – 100.2 (0.5) 99.7
Rental expenses(1) (11.3) (1.0) (12.0) (0.5) (24.8) 0.4 (24.4)
Net rental income 38.8 17.8 19.3 (0.5) 75.4 (0.1) 75.3
Profit/(loss) on sale of trading property 3.5 (1.5) – – 2.0 1.5 3.5
Other income – – – 2.1 2.1 1.9 4.0
Gain on revaluation and sale of investment
and development property 262.9 133.1 58.4 (0.4) 454.0 (0.1) 453.9
Write back of trading property – 0.2 – – 0.2 (0.2) –
Loss on sale of loan notes – – – (0.2) (0.2) – (0.2)
Loss on sale of available-for-sale
investments – – – (0.2) (0.2) – (0.2)
Impairment of other receivables – – – – – (12.2) (12.2)
Segment result 305.2 149.6 77.7 0.8 533.3 (9.2) 524.1
Unallocated costs
Administration expenses (52.8) 0.7 (52.1)
Operating profit 480.5 (8.5) 472.0
Net finance costs(2) (20.6) 9.2 (11.4)
Share of post-tax loss from joint ventures – (0.7) (0.7)
Profit before tax 459.9 – 459.9
Taxation (2.7) – (2.7)
Profit for the year from continuing
operations 457.2 – 457.2
Profit attributable to:
Owners of the Parent 431.1
Non-controlling interest 26.1
Summary balance sheet
Total segment assets(3) 2,010.4 1,838.4 314.7 39.2 4,202.7 (82.0) 4,120.7
Total segment liabilities(3) (569.6) (201.1) (36.6) (24.2) (831.5) 82.0 (749.5)
Segmental net assets 1,440.8 1,637.3 278.1 15.0 3,371.2 – 3,371.2
Unallocated assets2 31.6 – 31.6
Net assets 3,402.8 – 3,402.8
Other segment items:
Depreciation (0.2) – (0.2) (0.1) (0.5) – (0.5)
Capital expenditure (110.8) (535.2) (4.0) (0.3) (650.3) 32.4 (617.9)
(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
Re-presented 2014(1)
Covent Earls Court Group Consolidation IFRS
Garden Properties(2) Venues(2) Other total adjustments total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 53.0 19.0 36.5 1.6 110.1 0.5 110.6
Rent receivable and exhibition income 42.7 19.0 36.5 0.1 98.3 (1.0) 97.3
Service charge income 3.0 – – – 3.0 – 3.0
Rental income 45.7 19.0 36.5 0.1 101.3 (1.0) 100.3
Rental expenses(3) (8.9) (1.0) (21.2) (0.1) (31.2) 0.9 (30.3)
Net rental income 36.8 18.0 15.3 – 70.1 (0.1) 70.0
Profit/(loss) on sale of trading property 2.6 (4.5) – – (1.9) 4.5 2.6
Other income – – – 1.5 1.5 1.5 3.0
Gain on revaluation and sale of investment
and development property 270.2 134.2 50.4 (0.4) 454.4 (0.2) 454.2
Write back of trading property 0.5 1.2 – – 1.7 (1.2) 0.5
Write back of impairment/(impairment)
of other receivables – – – 0.2 0.2 (12.9) (12.7)
Other costs – – (0.2) – (0.2) – (0.2)
Segment result 310.1 148.9 65.5 1.3 525.8 (8.4) 517.4
Unallocated costs
Administration expenses (43.2) – (43.2)
Operating profit 482.6 (8.4) 474.2
Net finance costs(4) (32.4) 8.4 (24.0)
Profit before tax 450.2 – 450.2
Taxation (1.3) – (1.3)
Profit for the year from continuing
operations 448.9 – 448.9
Discontinued operation
Loss for the year from
discontinued operation – – – (0.3) (0.3) – (0.3)
Profit for the year 448.6 – 448.6
Profit attributable to:
Owners of the Parent 448.6 – 448.6
Summary balance sheet
Total segment assets5 1,640.4 1,139.2 244.9 29.5 3,054.0 (42.8) 3,011.2
Total segment liabilities(5) (380.0) (173.8) (43.0) (16.9) (613.7) 42.8 (570.9)
Segmental net assets 1,260.4 965.4 201.9 12.6 2,440.3 – 2,440.3
Unallocated assets(4) 66.0 – 66.0
Net assets 2,506.3 – 2,506.3
Other segment items:
Depreciation (0.1) – (0.2) – (0.3) – (0.3)
Capital expenditure (206.2) (85.4) (3.9) (4.9) (300.4) 11.9 (288.5)
(1) The comparative period has been re-presented to reflect the transfer of Maclise Road from the Earls Court Properties segment to the Venues
segment.
(2) Rental income and rental expenses include amounts charged by Earls Court Properties to Venues for use of EC1 & EC2 of GBP0.8 million during 2014.
(3) Comprises service charge and other non-recoverable costs.
(4) 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.
(5) Total assets and total liabilities exclude loans between and investments in Group undertakings.
3 PROFIT ON SALE OF TRADING PROPERTY
2015 2014
Continuing operations GBPm GBPm
Proceeds from the sale of trading property 11.2 7.3
Cost of sale of trading property (7.5) (4.6)
Agent, selling and marketing fees (0.2) (0.1)
Profit on sale of trading property 3.5 2.6
4 GAIN ON REVALUATION AND SALE OF INVESTMENT AND DEVELOPMENT
PROPERTY
2015 2014
Continuing operations GBPm GBPm
Gain on revaluation of investment and development property 453.9 446.6
Revaluation gain on transfer from trading property – 7.7
Loss on sale of investment and development property – (0.1)
Gain on revaluation and sale of investment and development property 453.9 454.2
5 LOSS ON SALE OF AVAILABLE-FOR-SALE INVESTMENTS
2015 2014
Continuing operations GBPm GBPm
Loss on sale of available-for-sale investments 0.2 –
Loss on sale of available-for-sale investments represents part divestment from China Harvest Fund I.
6 IMPAIRMENT OF OTHER RECEIVABLES
2015 2014
Continuing operations GBPm GBPm
Impairment of amounts receivable from joint ventures 12.2 12.9
Write back of impairment of loan notes receivable – (0.2)
Impairment of other receivables 12.2 12.7
Following an impairment review of amounts receivable from joint ventures by the Group, an impairment of GBP12.2 million
has been recognised (2014: GBP12.9 million). The impairment was calculated with reference to the Group's share of the
cumulative losses in the Lillie Square joint venture.
The carrying value of the investment is GBPnil (2014: GBPnil) in accordance with IAS 28 'Investment in Associates and Joint
Ventures' ("IAS 28"). Refer to note 14 'Investment in Joint Ventures'.
Following an impairment review of loan notes receivable by the Group, a write back of GBP0.2 million was recognised in
December 2014. The write back was calculated with reference to the market value of certain property assets that the
Group had priority over in the event of default.
7 FINANCE INCOME
2015 2014
Continuing operations GBPm GBPm
Finance income:
On loan notes 0.2 0.6
On deposits and other 0.5 0.2
Finance income 0.7 0.8
Other finance income:
On deep discount bonds 9.3 8.4
Other finance income(1) 9.3 8.4
(1) Excluded from the calculation of underlying earnings as deep discount bonds eliminate under proportionate consolidation.
8 FINANCE COSTS
2015 2014
Continuing operations GBPm GBPm
Finance costs:
On bank overdrafts, loans and other 21.0 16.5
On obligations under finance leases 0.5 0.5
Gross finance costs 21.5 17.0
Interest capitalised on property under development (0.7) (1.1)
Finance costs 20.8 15.9
Other finance costs:
Loss on termination of derivative financial instruments – 1.3
Costs of termination of bank loans and other – 3.9
Other finance costs(1) – 5.2
(1) Non-recurring finance costs 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 (2014:
3.4 per cent) applied to the cost of property under development during the year.
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 has been presented as a discontinued operation. GCP
was established as a joint venture in 2007 with Great Portland Estates plc ("GPE"), to own, manage and develop a
number of central London properties.
A summary of the results of GCP for the year which have been presented separately in the consolidated income
statement is set out below:
2015 2014
Summarised income statement GBPm GBPm
Revenue – –
Administration expenses – –
Profit before tax – –
Taxation(1) – (0.3)
Post-tax loss for the year from discontinued operation – (0.3)
(1) GCP, as a partnership, is not subject to tax. Tax arises at Group level as a result of the Group's investment in the joint venture.
10 TAXATION
2015 2014
Continuing operations GBPm GBPm
Current income tax:
Current income tax charge excluding non-underlying items 1.6 3.5
Current income tax on profits 1.6 3.5
Deferred income tax:
On accelerated capital allowances 0.1 0.3
On fair value of investment and development property 3.8 9.0
On fair value of derivative financial instruments (0.1) (0.7)
On Group losses 0.5 (3.3)
On other temporary differences (0.8) (1.9)
Deferred income tax on profits 3.5 3.4
Current income tax credit on non-underlying items – (1.8)
Adjustments in respect of previous years – current income tax (3.8) (3.8)
Adjustments in respect of previous years – deferred income tax 1.4 –
Total income tax charge reported in the consolidated income statement 2.7 1.3
Factors affecting the tax charge for the year
The tax assessed for the year is GBP2.7 million which reflects a rate lower than the standard rate of corporation tax in the
United Kingdom ("UK"). The differences are explained below:
2015 2014
Continuing operations GBPm GBPm
Profit before tax 459.9 450.2
Profit on ordinary activities multiplied by the standard rate in the UK of 20.25% (2014: 21.50%) 93.1 96.8
Unrecognised deferred income tax on revaluation gains (74.3) (85.5)
Adjustments in respect of previous years (2.4) (3.8)
Expenses disallowed 1.7 0.4
Other temporary differences (12.9) (5.3)
Reduction in deferred income tax following change in corporation tax rate (2.5) (1.3)
Total income tax charge reported in the consolidated income statement 2.7 1.3
Tax arising on items recognised in other comprehensive income is also reflected within other comprehensive income.
This includes deferred tax on an element of the pension movement. Tax arising on items recognised directly in equity is
reflected in equity. This includes deferred tax on an element of the share-based payment.
The main rate of corporation tax decreased from 21 per cent to 20 per cent on 1 April 2015. Following the Chancellor's
announcement in the July 2015 Budget, the main rate of corporation tax will fall to 19 per cent from April 2017 and 18
per cent from April 2020.
11 DIVIDENDS
2015 2014
GBPm GBPm
Ordinary shares
Prior year final dividend of 1.0p per share (2014: 1.0p) 8.4 8.4
Interim dividend of 0.5p per share (2014: 0.5p) 4.2 4.1
Dividend expense 12.6 12.5
Shares issued in lieu of cash(1) (4.3) (0.9)
Adjustment for bonus issue(2) (0.6) (0.6)
Cash dividends paid 7.7 11.0
Proposed final dividend of 1.0p per share (2014: 1.0p) 8.4 8.4
(1) Shares issued in lieu of cash relates to those shareholders who elect to receive their dividends in scrip form following 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
2015 2014
Earnings Earnings
Earnings Shares(1) per share Earnings Shares(1) per share
GBPm million (pence) GBPm million (pence)
Continuing and discontinued operations attributable
to owners of the Parent
Basic earnings 431.1 840.8 51.3 448.6 806.5 55.6
Dilutive effect of contingently issuable share option
awards – 2.1 – 4.2
Dilutive effect of contingently issuable deferred share
awards – 0.8 – 1.0
Dilutive effect of contingently issuable matching nil cost
options awards – 1.3 – 2.7
Dilutive effect of deferred bonus share option awards – 1.3 – 1.2
Diluted earnings 431.1 846.3 50.9 448.6 815.6 55.0
Continuing operations attributable to owners
of the Parent
Basic earnings 431.1 840.8 51.3 448.9 806.5 55.6
Diluted earnings 431.1 846.3 50.9 448.9 815.6 55.0
Discontinued operation attributable to owners
of the Parent
Basic earnings – 840.8 – (0.3) 806.5 –
Diluted earnings – 846.3 – (0.3) 815.6 –
Continuing operations attributable to owners
of the Parent
Basic earnings 431.1 448.9
Group adjustments:
Profit on sale of trading property (3.5) (2.6)
Gain on revaluation and sale of investment and
development property (453.9) (454.2)
Loss on sale of loan notes 0.2 –
Write back of trading property – (0.5)
Loss on termination of derivative financial instruments – 1.3
Change in fair value of derivative financial instruments 0.6 12.1
Deferred tax adjustments 3.8 8.6
Non-controlling interest in respect of the adjustments 26.4 –
Joint venture adjustments:
Loss on sale of trading property 1.6 4.5
Gain on revaluation of investment and development
property (0.1) (0.2)
Write back of trading property (0.2) (1.2)
EPRA adjusted earnings on continuing operations(2) 6.0 840.8 0.7 16.7 806.5 2.1
Other finance costs and income – 3.9
Write back of impairment of other receivables – (0.2)
Other costs – 0.2
Loss on sale of available-for-sale investments 0.2 –
Current tax adjustments – (3.1)
Deferred tax adjustments 1.7 (4.1)
Discontinued operation – (0.3)
Joint venture adjustment:
Other income (0.1) –
Underlying earnings(2) 7.8 840.8 0.9 13.1 806.5 1.6
(1) Weighted average number of shares in issue has been adjusted by 0.1 million (2014: 0.1 million) for the issue of bonus shares in connection with the
scrip dividend scheme.
(2) EPRA adjusted earnings and underlying earnings have been reported on a proportionally consolidated basis.
Headline earnings per share is calculated in accordance with Circular 2/2015 issued by the South African Institute of
Chartered Accountants ("SAICA"), a requirement of the Group's Johannesburg Stock Exchange ("JSE") listing. This
measure is not a requirement of IFRS.
(a) Earnings per share continued
2015 2014
Earnings Earnings
Earnings Shares(1) per share Earnings Shares(1) per share
GBPm million (pence) GBPm million (pence)
Continuing and discontinued operations
attributable to owners of the Parent
Basic earnings 431.1 840.8 51.3 448.6 806.5 55.6
Group adjustments:
Gain on revaluation and sale of investment
and development property (453.9) (446.5)
Loss on sale of available-for-sale investments 0.2 –
Loss on sale of loan notes 0.2 –
Write back of impairment of other receivables – (0.2)
Deferred tax adjustments 3.8 8.7
Non-controlling interest in respect of the adjustments 26.4 –
Joint venture adjustment:
Gain on revaluation of investment and
development property (0.1) (0.2)
Headline earnings 7.7 840.8 0.9 10.4 806.5 1.3
Dilutive effect of contingently issuable share option
awards – 2.1 – 4.2
Dilutive effect of contingently issuable deferred share
awards – 0.8 – 1.0
Dilutive effect of contingently issuable matching nil cost
options awards – 1.3 – 2.7
Dilutive effect of deferred bonus share option awards – 1.3 – 1.2
Diluted headline earnings 7.7 84.3 0.9 10.4 815.6 1.3
(1) Weighted average number of shares in issue has been adjusted by 0.1 million (2014: 0.1 million) for the issue of bonus shares in connection with the
scrip dividend scheme.
(b) Net assets per share
2015 2014
Net NAV Net NAV
assets Shares per share assets Shares per share
GBPm million (pence) GBPm million (pence)
Net assets attributable to owners of the Parent 2,934.0 842.0 348.5 2,506.3 836.2 299.7
Effect of dilution on exercise of contingently issuable
share option awards – 2.3 – 5.1
Effect of dilution on vesting of contingently issuable
deferred share awards – 0.8 – 1.0
Effect of dilution on exercise of contingently issuable
matching nil cost option awards – 1.3 – 2.8
Effect of dilution on exercise of deferred bonus share
option awards – 1.3 – 1.2
Diluted NAV 2,934.0 847.7 346.1 2,506.3 846.3 296.1
Group adjustments:
Fair value of derivative financial instruments 2.4 1.8
Unrecognised surplus on trading property – Group 8.3 12.9
Unrecognised surplus on trading property – Joint
venture 91.6 83.4
Deferred tax adjustments 28.9 25.1
Non-controlling interests in respect of the adjustments (5.8) –
EPRA adjusted, diluted NAV 3,059.4 847.7 360.9 2,629.5 846.3 310.7
Fair value of derivative financial instruments (2.4) (1.8)
Excess fair value of debt over carrying value (12.1) (15.8)
Deferred tax adjustments (28.9) (13.3)
EPRA adjusted, diluted NNNAV 3,016.0 847.7 355.8 2,598.6 846.3 307.1
13 PROPERTY PORTFOLIO
(a) Investment and development property
Property portfolio Tenure
Earls
Covent Court
Garden Properties Venues Other Total Freehold Leasehold
Re-presented(1) GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2014 1,108.4 763.1 178.3 – 2,049.8 1,049.3 1,000.5
Reclassification – – – – – 5.9 (5.9)
Additions from acquisitions 166.7 50.0 – 4.5 221.2 214.7 6.5
Additions from subsequent expenditure 28.7 23.5 3.9 0.4 56.5 26.6 29.9
Disposals (13.0) – – – (13.0) (13.0) –
Transfers from trading property(2) 23.3 – – – 23.3 23.3 –
Gain/(loss) on valuation(2) 262.6 134.0 50.4 (0.4) 446.6 162.6 284.0
At 31 December 2014 1,576.7 970.6 232.6 4.5 2,784.4 1,469.4 1,315.0
Reclassification – – – – – (32.0) 32.0
Additions from acquisitions 50.0 449.2 – – 499.2 85.6 413.6
Additions from subsequent expenditure 59.9 53.6 4.0 0.3 117.8 48.5 69.3
Gain/(loss) on valuation(3) 262.9 133.0 58.4 (0.4) 453.9 225.4 228.5
At 31 December 2015 1,949.5 1,606.4 295.0 4.4 3,855.3 1,796.9 2,058.4
(b) Trading property
Property portfolio Tenure
Earls
Covent Court
Garden Properties Venues Other Total Freehold Leasehold
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2014 31.0 0.6 – – 31.6 30.1 1.5
Additions from subsequent expenditure 10.8 – – – 10.8 10.6 0.2
Disposals (4.6) – – – (4.6) (3.0) (1.6)
Transfers to investment and development property(2) (15.6) – – – (15.6) (15.6) –
Write back/(write down) of trading property and
other 0.5 (0.6) – – (0.1) – (0.1)
At 31 December 2014(4) 22.1 – – – 22.1 22.1 –
Additions from subsequent expenditure 0.9 – – – 0.9 0.9 –
Disposals (7.5) – – – (7.5) (7.5) –
At 31 December 2015(4) 15.5 – – – 15.5 15.5 –
(1) The comparative period has been re-presented to reflect the transfer of Maclise Road from the Earls Court Properties segment to the Venues
segment.
(2) Within the transfer from trading property of GBP23.3 million is a revaluation gain of GBP7.7 million that 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 2014.
(3) Gain on valuation of GBP453.9 million (2014: GBP446.6 million) 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 year.
(4) The value of trading property carried at net realisable value was GBPnil (2014: GBPnil).
(c) Market value reconciliation of total property
Covent Earls Court
Garden Properties Venues Other Total
GBPm GBPm GBPm GBPm GBPm
Carrying value of investment and development
property at 31 December 2015 1,949.5 1,606.4 295.0 4.4 3,855.3
Carrying value of trading property at 31 December
2015 15.5 – – – 15.5
Carrying value of investment, development
and trading property at 31 December 20151 1,965.0 1,606.4 295.0 4.4 3,870.8
Adjustment in respect of fixed head leases (4.1) – – – (4.1)
Adjustment in respect of tenant lease incentives 36.0 – – – 36.0
Unrecognised surplus on trading property(2) 8.3 – – – 8.3
Market value of investment, development
and trading property at 31 December 2015 2,005.2 1,606.4 295.0 4.4 3,911.0
Joint ventures
Carrying value of joint venture investment,
development and trading property
at 31 December 2015 – 130.8 – – 130.8
Unrecognised surplus on joint venture trading
property(2) – 91.6 – – 91.6
Market value of investment, development and
trading property on a proportionate basis at 31
December 2015 2,005.2 1,828.8 295.0 4.4 4,133.4
Covent Earls Court
Garden Properties Venues Other Total
Re-presented(3) GBPm GBPm GBPm GBPm GBPm
Carrying value of investment and development
property at 31 December 2014 1,576.7 970.6 232.6 4.5 2,784.4
Carrying value of trading property at 31 December
2014 22.1 – – – 22.1
Carrying value of investment, development and
trading property at 31 December 2014(1) 1,598.8 970.6 232.6 4.5 2,806.5
Adjustment in respect of fixed head leases (3.7) – – – (3.7)
Adjustment in respect of tenant lease incentives 27.6 – – – 27.6
Unrecognised surplus on trading property(2) 12.9 – – – 12.9
Market value of investment, development and
trading property at 31 December 2014 1,635.6 970.6 232.6 4.5 2,843.3
Joint ventures
Carrying value of joint venture investment,
development and trading property at
31 December 2014 – 98.3 – – 98.3
Unrecognised surplus of joint venture trading
property(2) – 83.4 – – 83.4
Market value of investment, development and
trading property on a proportionate basis at 31
December 2014 1,635.6 1,152.3 232.6 4.5 3,025.0
(1) Included within investment and development property is GBP0.7 million (2014: GBP1.1 million) of interest capitalised during the year on developments in
progress.
(2) 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 consolidated financial statements.
(3) The comparative period has been re-presented to reflect the transfer of Maclise Road from the Earls Court Properties segment to the Venues
segment.
At 31 December 2015, the Group was contractually committed to GBP162.5 million (2014: GBP100.9 million) of future
expenditure for the purchase, construction, development and enhancement of investment, development and trading
property. Refer to note 25 'Capital Commitments' for further information on capital commitments.
The fair value of the Group's investment, development and trading property at 31 December 2015 was determined by
independent, appropriately qualified external valuers Jones Lang LaSalle for Earls Court Properties (excluding the
Empress State Building) and Venues; and CB Richard Ellis for the remainder of the Group's property portfolio. 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 Managing Directors, 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
Managing Directors 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 re-gear costs, planning risk and
sales prices based on known market transactions for similar properties or properties similar to those contemplated for
development.
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. In respect of development valuations, the valuer ordinarily considers the gross development value of
the completed scheme based upon assumptions of capital values, 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.
Most notably, within Earls Court Properties, the Empress State Building has been valued on the basis of its
development potential as a residential led scheme. The property is currently used as an office space, 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 also been valued on the basis of their development
potential, principally for the conversion to residential use or for improving the configuration of retail units.
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 is required or when a credit
facility is in place. These restrictions are factored into the property's valuation by the external valuer. Refer to
disclosures surrounding property risks on page 19.
14 INVESTMENT IN JOINT VENTURES
Investment in joint ventures is measured using the equity method. All joint ventures are held with other joint venture
investors on a 50:50 basis.
At 31 December 2015, joint ventures comprise the Lillie Square joint venture ("LSJV"), the Solum Developments joint
venture ("Solum") and The Great Capital Partnership ("GCP") which is accounted for as a discontinued operation.
LSJV
LSJV was established as a joint venture arrangement with the Kwok Family Interests ("KFI"), 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, acting as general partner to the partnership, and its subsidiaries. All major decisions regarding
LSJV are taken by the Board of Lillie Square GP Limited, through which the Group shares strategic control.
The summarised income statement and balance sheet of LSJV are presented below.
2015 2014
LSJV GBPm GBPm
Summarised income statement
Revenue 0.6 0.4
Net rental income 0.5 0.1
Gain on revaluation of investment and development property 0.2 0.4
Agent, selling and marketing fees (3.1) (9.0)
Write back of trading property 0.5 2.4
Administration expenses (3.8) (3.1)
Finance costs(1) (18.7) (16.7)
Taxation – 0.1
Loss for the year (24.4) (25.8)
(1) Finance costs relates to the amortisation of deep discount bonds that were issued by LSJV to the Group and KFI. The bonds are redeemable at their
nominal value of GBP263.4 million on 24 August 2019. The discount applied is unwound over the period to maturity using the effective interest rate.
Finance income receivable to the Group of GBP9.3 million (2014: GBP8.4 million) is recognised in the consolidated income statement within other finance
income.
2015 2014
LSJV GBPm GBPm
Summarised balance sheet
Investment and development property 3.2 3.0
Other non-current assets 3.0 1.4
Trading property 258.5 193.5
Cash and cash equivalents(1) 67.2 33.9
Other current assets 0.2 0.2
Borrowings (87.7) (13.8)
Other non-current liabilities(2) (174.5) (155.8)
Amounts payable to joint venture partners(3) (75.2) (72.0)
Other current liabilities1 (57.7) (28.8)
Net liabilities (63.0) (38.4)
Capital commitments 97.2 141.0
Carrying value of investment, development and trading property 261.7 196.5
Unrecognised surplus on trading property(4) 183.2 166.9
Market value of investment, development and trading property(4) 444.9 363.4
(1) Includes restricted cash and cash equivalents of GBP52.3 million (2014: GBP22.6 million) relating to amounts received as property deposits that will not be
available for use by LSJV until completion of building work. There is a corresponding liability of GBP52.3 million (2014: GBP22.6 million) within other current
liabilities.
(2) Other non-current liabilities relate to deep discount bonds. Amounts receivable by the Group of GBP87.2 million (2014: GBP77.9 million) are recognised on
the consolidated balance sheet within non-current trade and other receivables.
(3) Amounts payable to joint venture partners relate to working capital funding advanced by the Group and KFI. Recoverable amounts receivable of GBP10.0
million (2014: GBP19.1 million) by the Group are recognised on the consolidated balance sheet within current trade and other receivables.
(4) The unrecognised surplus on trading property and the market value of LSJV's property portfolio are shown for informational purposes only and are not
a requirement of IFRS. Trading property continues to be measured at the lower of cost and net realisable value.
Solum
On 29 June 2015, the Group acquired a 50 per cent interest in Solum, a joint venture arrangement with Network Rail
Infrastructure Limited ("NRIL"). Total acquisition costs were GBP14.5 million, GBP2.0 million of which is contingent. Refer to
note 21 'Other Provisions' for further information regarding the contingent consideration. The joint venture will explore
opportunities for future redevelopments on and around significant railway station sites in London.
Solum comprises Solum Developments Limited Partnership and Solum Developments (GP) Limited, acting as general
partner to the partnership. All major decisions regarding Solum are taken by the Board of Solum Developments (GP)
Limited, through which the Group shares strategic control.
The summarised income statement and balance sheet of Solum are presented below.
2015
Solum GBPm
Summarised income statement
Administration expenses (1.4)
Loss for the year (1.4)
2015
Solum GBPm
Summarised balance sheet
Cash and cash equivalents 1.6
Other current liabilities (1.1)
Net assets 0.5
GCP
GCP was established as a joint venture in 2007 with Great Portland Estates plc ("GPE"), to own, manage and develop
a number of central London properties. The summarised balance sheet of GCP is presented below. A summarised
income statement is not presented as there were no income, expenses, gains or losses attributable to the joint venture
2015 2014
GCP GBPm GBPm
Summarised balance sheet
Cash and cash equivalents 0.1 0.2
Net assets 0.1 0.2
Reconciliation of summarised financial information:
The table below reconciles the summarised joint venture financial information previously presented to the carrying
value of investment in joint ventures as presented on the consolidated balance sheet.
GCP LSJV Solum Total
GBPm GBPm GBPm GBPm
Net assets/(liabilities) of joint ventures at 31 December 2014 0.2 (38.4) – (38.2)
Elimination of joint venture partners' interest (0.1) 19.2 – 19.1
Cumulative losses restricted(1) – 19.2 – 19.2
Carrying value at 31 December 2014 0.1 – – 0.1
Net assets/(liabilities) of joint ventures at 31 December 2015 0.1 (63.0) 0.5 (62.4)
Elimination of joint venture partners' interest – 31.5 (0.3) 31.2
Cumulative losses restricted1 – 31.5 – 31.5
Goodwill on acquisition of joint venture(2) – – 14.5 14.5
Carrying value at 31 December 2015 0.1 – 14.7 14.8
(1) Cumulative losses restricted represent the Group's share of losses in LSJV which exceed its investment in the joint venture. As a result the carrying
value of the investment in LSJV is GBPnil (2014: GBPnil) in accordance with the requirements of IAS 28.
(2) In accordance with the initial recognition exemption provisions under IAS 12 'Income Taxes', no deferred tax is recognised on goodwill.
Reconciliation of investment in joint ventures:
The table below reconciles the opening to closing carrying value of investment in joint ventures as presented on the
consolidated balance sheet.
GCP LSJV Solum Total
Investment in joint ventures GBPm GBPm GBPm GBPm
At 1 January 2014 93.3 – – 93.3
Distributions (93.2) – – (93.2)
Loss for the year(1) – (12.9) – (12.9)
Loss restricted1 – 12.9 – 12.9
At 31 December 2014 0.1 – – 0.1
Loss for the year(1) – (12.2) (0.7) (12.9)
Loss restricted(1) – 12.2 – 12.2
Issue of equity loan notes – – 0.9 0.9
Goodwill on acquisition of joint venture – – 14.5 14.5
At 31 December 2015 0.1 – 14.7 14.8
(1) Share of post-tax loss from joint ventures in the consolidated income statement of GBP0.7 million (2014: profit GBPnil) comprise loss for the year of GBP12.9
million (2014: GBP12.9 million) and loss restricted totalling GBP12.2 million (2014: GBP12.9 million).
15 TRADE AND OTHER RECEIVABLES
2015 2014
GBPm GBPm
Non-current
Loan notes receivable(1) – 6.2
Other receivables2 38.5 18.7
Prepayments and accrued income(3) 33.2 26.7
Amounts receivable from joint ventures(4) 87.2 77.9
Trade and other receivables 158.9 129.5
Current
Rent receivable5 6.6 8.1
Other receivables 3.4 6.5
Prepayments and accrued income(3) 12.3 9.1
Amounts receivable from joint ventures(6) 10.0 19.1
Trade and other receivables 32.3 42.8
(1) Loan notes receivable were settled on 19 June 2015. A loss of GBP0.2 million was incurred as a result of the transaction.
(2) Includes GBP30.0 million (2014: GBP15.0 million) payment to LBHF which forms part of the CLSA.
(3) Includes tenant lease incentives of GBP36.0 million (2014: GBP27.6 million).
(4) Non-current amounts receivable from joint ventures relate to deep discount bonds that were issued by LSJV to the Group. The bonds are redeemable
at their nominal value of GBP131.7 million on 24 August 2019.
(5) Includes exhibition trade receivables.
(6) Current amounts receivable from joint ventures comprise working capital funding advanced by the Group to LSJV. The balance has been impaired by
GBP31.5 million (2014: GBP19.2 million).
16 CASH AND CASH EQUIVALENTS
2015 2014
GBPm GBPm
Cash at hand 11.6 29.8
Cash on short-term deposit 49.3 59.0
Unrestricted cash and cash equivalents 60.9 88.8
Restricted cash and cash equivalents(1) 6.0 6.0
Cash and cash equivalents 66.9 94.8
(1) Restricted cash and cash equivalents relate to amounts placed on deposit in accounts which are subject to withdrawal conditions.
17 TRADE AND OTHER PAYABLES
2015 2014
GBPm GBPm
Non-current
Other payables – 0.2
Trade and other payables – 0.2
Current
Rent received in advance 21.3 20.6
Accruals and deferred income 58.5 61.3
Trade payables 2.7 4.4
Other payables 6.9 8.3
Other taxes and social security 2.1 0.7
Amounts payable to non-controlling interest 4.4 7.1
Trade and other payables 95.9 102.4
18 BORROWINGS, INCLUDING FINANCE LEASES
2015
Carrying Fixed Floating Fair Nominal
value Secured Unsecured rate rate value value
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Current
Bank loans and overdrafts 12.0 12.0 – – 12.0 12.0 12.0
Loan notes 6.0 6.0 – – 6.0 6.0 6.0
Borrowings 18.0 18.0 – – 18.0 18.0 18.0
Finance lease obligations 0.5 0.5 – 0.5 – 0.5 0.5
Borrowings, including finance
leases 18.5 18.5 – 0.5 18.0 18.5 18.5
Non-current
Bank loan 2018 84.8 84.8 – – 84.8 85.5 85.5
Bank loan 2019 369.8 – 369.8 – 369.8 375.0 375.0
Loan notes 2024 74.7 – 74.7 74.7 – 77.7 75.0
Loan notes 2026 74.7 – 74.7 74.7 – 77.9 75.0
Borrowings 604.0 84.8 519.2 149.4 454.6 616.1 610.5
Finance lease obligations 3.6 3.6 – 3.6 – 3.6 3.6
Borrowings, including finance
leases 607.6 88.4 519.2 153.0 454.6 619.7 614.1
Total borrowings, including
finance leases 626.1 106.9 519.2 153.5 472.6 638.2 632.6
Cash and cash equivalents (66.9)
Net debt 559.2
2014
Carrying Fixed Floating Fair Nominal
value Secured Unsecured rate rate value value
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Current
Bank loans and overdrafts 11.0 11.0 – – 11.0 11.0 11.0
Loan notes 6.0 6.0 – – 6.0 6.0 6.0
Borrowings 17.0 17.0 – – 17.0 17.0 17.0
Finance lease obligations 0.5 0.5 – 0.5 – 0.5 0.5
Borrowings, including finance
leases 17.5 17.5 – 0.5 17.0 17.5 17.5
Non-current
Bank loan 2018 96.5 96.5 – – 96.5 97.5 97.5
Bank loan 2019 183.1 – 183.1 – 183.1 190.0 190.0
Loan notes 2024 74.7 – 74.7 74.7 – 79.1 75.0
Loan notes 2026 74.7 – 74.7 74.7 – 78.2 75.0
Borrowings 429.0 96.5 332.5 149.4 279.6 444.8 437.5
Finance lease obligations 3.2 3.2 – 3.2 – 3.2 3.2
Borrowings, including finance
leases 432.2 99.7 332.5 152.6 279.6 448.0 440.7
Total borrowings, including finance
leases 449.7 117.2 332.5 153.1 296.6 465.5 458.2
Cash and cash equivalents (94.8)
Net debt 354.9
Refer to note 29 'Events after the Reporting Period' for further information on the new Covent Garden GBP705 million
revolving credit facility which was completed in January 2016.
19 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
2015
(Loss)/gain Gain to other
Carrying Fair to income comprehensive
value value statement income
Notes GBPm GBPm GBPm GBPm
Derivative financial assets 0.8 0.8 (1.3) –
Total held for trading assets 0.8 0.8 (1.3) –
Cash and cash equivalents 16 66.9 66.9 – –
Other financial assets 191.2 191.2 (0.2) –
Total cash and other financial assets 258.1 258.1 (0.2) –
Available-for-sale investments 0.2 0.2 (0.2) –
Total available-for-sale investments 0.2 0.2 (0.2) –
Derivative financial liabilities (3.2) (3.2) 0.7 –
Total held for trading liabilities (3.2) (3.2) 0.7 –
Borrowings, including finance leases 18 (626.1) (638.2) – –
Other financial liabilities (98.7) (98.7) – –
Total borrowings and other financial liabilities (724.8) (736.9) – –
2014
(Loss)/gain Gain to other
Carrying Fair to income comprehensive
value value statement income
Notes GBPm GBPm GBPm GBPm
Derivative financial assets 2.1 2.1 (8.4) –
Total held for trading assets 2.1 2.1 (8.4) –
Cash and cash equivalents 16 94.8 94.8 – –
Other financial assets 172.3 172.3 0.2 –
Total cash and other financial assets 267.1 267.1 0.2 –
Available-for-sale investments 0.4 0.4 – –
Total available-for-sale investments 0.4 0.4 – –
Derivative financial liabilities (3.9) (3.9) (3.7) –
Total held for trading liabilities (3.9) (3.9) (3.7) –
Borrowings, including finance leases 18 (449.7) (465.5) – –
Other financial liabilities (104.2) (104.2) – –
Total borrowings and other financial liabilities (553.9) (569.7) – –
Fair value estimation
Financial instruments carried at fair value are required to be analysed by level depending on the valuation method
adopted under IFRS 13 'Fair Value Measurement'.
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 in input variables.
The tables on the next page present the Group's financial assets and liabilities recognised at fair value at 31 December
2015 and 31 December 2014.
The fair values of derivative financial instruments are determined from observable market prices or estimated using
appropriate yield curves at 31 December each year by discounting the future contractual cash flows to the net present
values.
Level 1 Level 2 Level 3 Total
2015 GBPm GBPm GBPm GBPm
Derivative financial assets
Held for trading – 0.8 – 0.8
Investments
Available-for-sale investments – – 0.2 0.2
Total assets – 0.8 0.2 1.0
Derivative financial liabilities
Held for trading – (3.2) – (3.2)
Total liabilities – (3.2) – (3.2)
Level 1 Level 2 Level 3 Total
2014 GBPm GBPm GBPm GBPm
Derivative financial assets
Held for trading – 2.1 – 2.1
Investments
Available-for-sale investments – – 0.4 0.4
Total assets – 2.1 0.4 2.5
Derivative financial liabilities
Held for trading – (3.9) – (3.9)
Total liabilities – (3.9) – (3.9)
The table below presents a reconciliation of Level 3 fair value measurements for the year.
2015 2014
GBPm GBPm
Available-for-sale investments
At 1 January 0.4 0.4
Loss on sale (0.2) –
At 31 December 0.2 0.4
All of the Group's Level 3 financial instruments are unlisted equity investments. The valuation of the available-for-
sale investment is based on expected cash distributions to be received from China Harvest Fund 1 with reference
to the market value of the underlying assets held.
20 DEFERRED TAX
The decrease in corporation tax rate referred to in note 10 'Taxation' has been substantively enacted for the purposes
of IAS 12 'Income Taxes' ("IAS 12") and therefore has been reflected in these 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 GBP15.6 million at 31 December 2015 (2014: GBP11.8 million). The Group's contingent tax liability
on investment properties, calculated on the same tax base cost as above but based on a deemed market value
disposal at year-end, is GBP17.6 million (2014: GBPnil). The variance between the two methods of calculation arise from the
differing tax rates applicable at the time of each deemed disposal.
A disposal of the Group's trading properties including Lillie Square at their market value as per note 13 'Property
Portfolio' would result in a corporation tax charge to the Group of GBP20.2 million (20.25 per cent of GBP99.9 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 2014 12.9 3.1 0.2 (4.0) (2.3) 9.9
Adjustment in respect of previous years 0.1 (0.3) 0.2 – – –
Recognised in income 1.3 9.6 (0.8) (1.8) (3.3) 5.0
Recognised in other comprehensive
income – – – (0.4) – (0.4)
Recognised directly in equity – – – (0.3) – (0.3)
Reduction due to rate change (0.7) (0.6) 0.1 (0.1) – (1.3)
At 31 December 2014 13.6 11.8 (0.3) (6.6) (5.6) 12.9
Adjustments in respect of previous years – – – – 1.4 1.4
Recognised in income 0.8 5.6 (0.1) (0.9) 0.5 5.9
Recognised in other comprehensive
income – – – 0.2 – 0.2
Recognised directly in equity – – – 1.5 – 1.5
Reduction due to rate change (0.7) (1.8) – 0.1 – (2.4)
At 31 December 2015 13.7 15.6 (0.4) (5.7) (3.7) 19.5
Unprovided deferred tax (assets):
At 1 January 2015 – – – – (18.3) (18.3)
Movement during the year – – – – 10.5 10.5
At 31 December 2015 – – – – (7.8) (7.8)
In accordance with the requirements of IAS 12, deferred tax assets are only recognised to the extent that the
Group believes it is probable that future taxable profit will be available against which the deferred tax assets can
be recovered.
21 OTHER PROVISIONS
2015
GBPm
Current
At 1 January –
Contingent consideration on acquisition of joint venture 2.0
At 31 December 2.0
As detailed in note 14 'Investment in Joint Ventures', the Group acquired a joint venture interest in Solum on 29
June 2015. Consideration comprised of an immediate cash payment of GBP12.0 million in addition to contingent
consideration that is dependent on the Group achieving consent to develop specific railway sites with NRIL. On
initial recognition, GBP2.0 million was considered the best estimate of the amount that the Group would have to pay
to settle this obligation.
22 SHARE CAPITAL AND SHARE PREMIUM
Issue Share Share
Transaction price Number capital premium
Issue type date (pence) of shares GBPm GBPm
At 1 January 2014 757,903,158 189.5 121.0
Share placing May 340 75,900,000 18.9 84.7
Scrip dividend – 2013 final June 347 254,158 0.1 0.8
Scrip dividend – 2014 interim September 338 174,600 – –
Share-based payment(1) 2,004,491 0.6 0.4
At 31 December 2014 836,236,407 209.1 206.9
Scrip dividend – 2014 final June 416 1,028,609 0.3 4.0
Scrip dividend – 2015 interim September 467 122,277 – –
Share-based payment(2) 4,601,652 1.1 0.2
At 31 December 2015 841,988,945 210.5 211.1
(1) In 2014 a total of 2,004,491 new shares were issued to satisfy employee share scheme awards.
(2) In 2015 a total of 4,601,652 new shares were issued to satisfy employee share scheme awards.
In May 2014 the Company completed a placing of 75,900,000 new ordinary shares of 25 pence each (aggregate
nominal value GBP18.9 million) at a price of 340 pence per share to UK and South African institutions. The placing
generated gross proceeds of GBP258.1 million, GBP251.7 million net of expenses. The terms of the placing were fixed
on 14 May 2014. The market price of the Company's shares on 14 May 2014 was 344.2 pence per share.
Aggregate market price of placing shares on 14 May 2014 was GBP261.2 million.
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.
At 24 February 2016, the Company had an unexpired authority to repurchase shares up to a maximum of
84,081,014 shares with a nominal value of GBP21.0 million, and the Directors had an unexpired authority to allot up
to a maximum of 558,828,671 shares with a nominal value of GBP140.0 million of which 279,989,778 with a nominal
value of GBP70.0 million can only be allotted pursuant to a fully pre-emptive rights issue.
23 OTHER RESERVES
2015 2014
GBPm GBPm
Revaluation reserve 0.1 0.1
Cash flow hedge reserve 0.3 0.3
Total other reserves 0.4 0.4
24 NON-CONTROLLING INTEREST
2015 2014
GBPm GBPm
At 1 January – –
Profit and total comprehensive income for the year attributable to non-controlling interest 26.1 –
Capital contribution from non-controlling interest 44.4 –
Unsecured loan notes issued to non-controlling interest 398.3 –
At 31 December 468.8 –
During the year, unsecured, non-interest bearing loan notes, redeemable in 2064 were issued by ECPL, a subsidiary of
the Group, to TTL Earls Court Properties Limited, a subsidiary of TfL, which is the non-controlling interest of the Group.
As the transaction price of the loan notes was not an approximation of their fair value, the Group determined the fair
value by using data from observable inputs. As a result, the initial fair value of the loan notes was valued at less than
GBP0.1 million and therefore GBP398.3 million has been classified as equity.
25 CAPITAL COMMITMENTS
At 31 December 2015, the Group was contractually committed to GBP162.5 million (2014: GBP100.9 million) of future
expenditure for the purchase, construction, development and enhancement of investment, development and trading
property. Of the GBP162.5 million committed, GBP91.1 million is committed 2016 expenditure.
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 land can be transferred unless replacement homes for the residents of the relevant phase
have been provided and vacant possession is given. The Group has already paid GBP45 million of the GBP105 million cash
consideration payable under the CLSA. The residual GBP60 million will be settled in four annual instalments of GBP15 million
with the next payment due on 31 December 2016.
The Group's share of joint venture capital commitments arising on LSJV amounts to GBP48.6 million (2014: GBP70.5 million).
26 CONTINGENT LIABILITIES
The Group has contingent liabilities in respect of legal claims, guarantees and warranties arising from the ordinary
course of business. Contingent liabilities that may result in material liabilities are described below.
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 (refer to note 25 'Capital Commitments').
In March 2013, 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 Earls Court and West Kensington Opportunity Area ("ECOA").
Within the terms of the agreement, the Group can exercise options during the next 50 years 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.
Within the terms of the agreement of the acquisition of the Northern Access Road land, the vendor's successor in title is
entitled to further payments until 2027 if certain conditions are met. Further payments become due following the grant
of a planning permission for change of use or on disposal. In the event such planning permission is implemented, the
payment is calculated at 50 per cent of the uplift in land value following the grant of the permission. In the event of a
disposal, the payment is calculated as 50 per cent of the difference between the sale value against the land value
without the relevant permission.
27 CASH GENERATED FROM OPERATIONS
2015 2014
Continuing operations Notes GBPm GBPm
Profit before tax 459.9 450.2
Adjustments:
Profit on sale of trading property 3 (3.5) (2.6)
Gain on revaluation and sale of investment and
development property 4 (453.9) (454.2)
Other costs – 0.2
Write back of trading property – (0.5)
Loss on sale of loan notes 0.2 –
Impairment of other receivables 6 12.2 12.7
Depreciation 0.5 0.3
Amortisation of tenant lease incentives and other direct costs – 5.3
Share-based payment(1) 5.1 5.2
Finance income 7 (0.7) (0.8)
Finance costs 8 20.8 15.9
Other finance income 7 (9.3) (8.4)
Other finance costs 8 – 5.2
Change in fair value of derivative financial instruments 0.6 12.1
Change in working capital:
Change in trade and other receivables (40.5) (17.5)
Change in trade and other payables 21.7 3.1
Cash generated from operations 13.1 26.2
(1) Includes GBP4.6 million (2014: GBP4.8 million) relating to the IFRS 2 'Share-based payment' charge.
28 RELATED PARTY TRANSACTIONS
Transactions with Directors
2015 2014
Key management compensation(1) GBPm GBPm
Salaries and short-term employee benefits 3.5 3.3
Share-based payment 3.2 3.6
6.7 6.9
(1) The Directors of the Company 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 the Company
A related party of the Group, Lillie Square GP Limited, entered into the following related party transactions as defined
by IAS 24 'Related Party Disclosures':
– 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. At 31 December 2014 an initial deposit of
GBP72,500 had been received. In April 2015 a further GBP72,500 was received with the balance of GBP580,000 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. At 31 December 2014 an initial deposit of
GBP85,500 had been received. In April 2015 a further GBP85,500 was received with the balance of GBP684,000 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. At 31 December
2014 an initial deposit of GBP199,900 had been received. In April 2015 a further GBP199,900 was received with the
balance of GBP1,599,200 due upon legal completion.
– In December 2014 Graeme Gordon, a Non-executive Director of Capital & Counties Properties PLC,
exchanged contracts to acquire two apartments for GBP1,925,000 and GBP2,725,000. At 31 December 2014, initial
deposits of GBP192,500 and GBP272,500 had been received. In December 2015 a further GBP192,500 and GBP272,500
had been received, with the balance due upon legal completion.
– In December 2014 Blue Lillie Limited, an entity connected to Graeme Gordon, exchanged contracts to acquire
two apartments for GBP1,975,000 and GBP2,825,000. At 31 December 2014, initial deposits of GBP197,500 and
GBP282,500 had been received. In December 2015 a further GBP197,500 and GBP282,500 had been received with the
balance due on 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 KFI.
Transactions with equity holders
In May 2014, the Company completed a placing of 75.9 million new ordinary shares at a price of 340 pence per
share. Blackrock Investment Management (UK) Limited, a related party controlling more than 10 per cent of the
voting rights in the Company, subscribed for 11.6 million shares.
29 EVENTS AFTER THE REPORTING PERIOD
On 8 January 2016, the GBP665 million Covent Garden revolving credit facility was replaced by a new GBP705 million
revolving credit facility. This new facility is repayable in December 2020 which on a pro-forma basis has extended
the weighted average debt maturity to 5.3 years, has reduced the weighted average cost of debt to 2.8 per cent
and has increased available facilities by GBP40 million. The Group has incurred a charge of approximately GBP2.7
million relating to fees on the new facility and has written off GBP5.2 million relating to unamortised fees on the
existing facility.
ANALYSIS OF PROPERTY PORTFOLIO (UNAUDITED)
1. PROPERTY DATA AS AT 31 DECEMBER 2015
Market
Value
GBPm Ownership
Covent Garden 2,005.2 100%
Earls Court Properties
ECPL 803.0 63%
Lillie Square 222.5 50%
Empress State 286.0 100%
Other 45.7 100%
Earls Court Properties (Group share) 1,357.2
Venues 295.0 100%
Other 4.4 100%
Total property (Group share) 3,661.8
Non-controlling interest in Earls Court Properties 471.6
Total property 4,133.4
Investment and development property 3,888.7
Trading property 244.7
2. ANALYSIS OF CAPITAL RETURN FOR THE YEAR
Revaluation
Market Market surplus/
Value Value (deficit)(1)
31 December 31 December 31 December
2015 2014 2015
Like-for-like capital GBPm GBPm GBPm Increase
Covent Garden 1,958.1 1,624.5 263.8 15.9%
Earls Court Properties 1,343.6 1,152.3 113.5 9.2%
Venues 295.0 232.6 58.4 24.7%
Other 4.4 4.5 (0.4)
Total like-for-like capital 3,601.1 3,013.9 435.3 13.9%
Investment and development property 3,356.4 2,809.8 427.7 14.8%
Trading property 244.7 204.1 7.6 3.2%
Non like-for-like capital
Additions due to transactions with non-controlling interest 468.2 – 32.4
Acquisitions 64.1 – (6.1)
Disposals – 11.1 –
Total property 4,133.4 3,025.0 461.6 12.7%
Investment and development property 3,888.7 2,809.8 454.0 13.3%
Trading property 244.7 215.2 7.62 3.2%
All property
Covent Garden 2,005.2 1,635.6 262.1 15.3%
Earls Court Properties(3) 1,828.8 1,152.3 141.5 8.4%
Venues(3) 295.0 232.6 58.4 24.7%
Other 4.4 4.5 (0.4)
Total property 4,133.4 3,025.0 461.6 12.7%
(1) Revaluation surplus/(deficit) includes amortisation of lease incentives and fixed head leases.
(2) Represents unrecognised surplus and write down or write back to market value of trading property. Presented for information purposes only.
(3) The comparative period has been re-presented to reflect the transfer of Maclise Road from the Earls Court Properties segment to the Venues
segment.
(4) The increase in the market value of Earls Court Properties includes GBP468.2 million additions due to transactions with non-controlling interests.
3. ANALYSIS OF NET RENTAL INCOME FOR THE YEAR
2015 2014 Increase/
Like-for-like net rental income GBPm GBPm (decrease)
Covent Garden 34.8 33.3 4.4%
Earls Court Properties 17.6 17.3 2.1%
Venues 19.3 15.3 26.0%
Other (0.5) –
Total like-for-like net rental income 71.2 65.9 8.0%
Like-for-like investment and development property 71.2 65.9 8.0%
Like-for-like trading property – –
Non like-for-like net rental income
Acquisitions 0.3 –
Developments 0.3 2.6
Disposals – 0.3
Prior year acquisitions (like-for-like capital) 3.6 1.3
Total net rental income 75.4 70.1 7.6%
Investment and development property 75.3 70.1 7.6%
Trading property 0.1 –
All property
Covent Garden 38.8 36.8 5.6%
Earls Court Properties(1) 17.8 18.0 (0.9)%
Venues 19.3 15.3 26.0%
Other (0.5) –
Total net rental income 75.4 70.1 7.6%
(1) ERV of the Empress State Building is GBP15.9 million.
4. ANALYSIS OF COVENT GARDEN BY USE
31 December 2015
Weighted Gross
Initial Nominal Passing Occupancy average Market area
yield equivalent rent rate unexpired value ERV million
(EPRA) yield GBPm (EPRA) lease years GBPm GBPm Sq ft
Retail 1,444.5 57.5 0.5
Office 234.7 13.0 0.2
Residential 121.4 3.5 0.2
Other(1) 204.6 12.2 0.1
Total 2.12% 3.48% 46.2 97.8% 6.9 2,005.2 86.2 1.0
(1) Consists of property where the highest and best use valuation differs from the current use.
CONSOLIDATED UNDERLYING PROFIT STATEMENT (UNAUDITED)
For the year ended 31 December 2015
2015 2014
GBPm GBPm
Net rental income 75.4 70.1
Other income 2.0 1.5
Administration expenses (52.8) (43.2)
Operating profit 24.6 28.4
Finance costs (20.8) (15.9)
Finance income 0.7 0.8
Net finance costs (20.1) (15.1)
Profit before tax 4.5 13.3
Taxation 3.0 (0.2)
Non-controlling interest 0.3 –
Underlying earnings(1) 7.8 13.1
Underlying earnings per share (pence) 0.9 1.6
Weighted average number of shares 840.8m 806.5m
(1) Underlying earnings includes continuing and discontinued operations and is calculated on a proportionate consolidation basis.
DIVIDENDS
The Directors of Capital & Counties Properties PLC have proposed a final dividend per ordinary share (ISIN
GB00B62G9D36) of 1.0 pence payable on 21 June 2016.
Dates
The following are the salient dates for payment of the proposed final dividend:
Annual General Meeting 6 May 2016
Sterling/Rand exchange rate struck 12 May 2016
Sterling/Rand exchange rate and dividend amount in Rand announced 13 May 2016
Ordinary shares listed ex-dividend on the JSE, Johannesburg 23 May 2016
Ordinary shares listed ex-dividend on the London Stock Exchange 26 May 2016
Record date for final dividend in UK and South Africa 27 May 2016
Dividend payment date for shareholders 21 June 2016
South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-
dividend will be 20 May 2016 and that no dematerialisation of shares will be possible from 23 May 2016 to 27 May
2016 inclusive. No transfers between the UK and South Africa registers may take place from 12 May 2016 to 27 May
2016.
Subject to SARB approval, the Board intends to offer an optional scrip dividend alternative in respect of the 2015 final
dividend. The above dates are proposed and subject to change.
Important Information for South African Shareholders
The final cash dividend declared by the Company will constitute a dividend for Dividends Tax purposes. Dividends Tax
will therefore be withheld from the amount of the final cash dividend which is paid at a rate of 15 per cent, unless a
shareholder qualifies for an exemption and the prescribed requirements for effecting the exemption, as set out in the
rules of the Scrip Dividend Scheme, are in place.
It is the Company's understanding that the issue and receipt of shares pursuant to the scrip dividend alternative will not
have any Dividends Tax nor income tax implications. 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.
CONFIRMATION OF HOME STATE
For the purposes of DTR 6.4.2R, it is confirmed that the Home State of the Company is the United Kingdom.
GLOSSARY
Capco
Capco represents Capital & Counties Properties PLC (also referred to as "the Company" or "the Parent") and all its
subsidiaries and group undertakings, collectively referred to as "the Group".
CGAT
Covent Garden Area Trust.
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.
Earls Court Masterplan
The Earls Court Masterplan, created by Sir Terry Farrell and Partners is the consented scheme for the transformation
of ECOA. The London Borough of Hammersmith & Fulham and The Royal Borough of Kensington and Chelsea
formerly granted outline planning permission for the Earls Court Masterplan on 14 November 2013.
Earls Court Properties
The Group's interests in the Earls Court area, comprising properties held in ECPL, Lillie Square (a 50:50 joint venture
partnership with the Kwok Family Interests), the Empress State Building and a number of smaller properties in the
Earls Court area.
ECPL
Earls Court Partnership Limited is the investment vehicle with TfL. The Group holds 63 per cent controlling interest and
TfL holds 37 per cent. ECPL holds interests in EC1 & EC2 and other adjacent property primarily located on and around
Lillie Road.
EBITDA
Earnings before interest, tax, depreciation and amortisation.
EC1 & EC2
The site formerly the location of the Earls Court 1 and Earls Court 2 Exhibition Centres.
ECOA
The Earls Court and West Kensington Opportunity Area.
EPRA
European Public Real Estate Association, the publisher of Best Practice Recommendations intended to make financial
statements of public real estate companies in Europe clearer, more transparent and comparable.
EPRA adjusted, diluted NAV
The net assets as at the end of the year including the excess of the fair value of trading property over its cost and
excluding the fair value of financial instruments, deferred tax 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 year-end.
EPRA adjusted, diluted NNNAV
EPRA diluted NAV adjusted to reflect the fair value of derivative financial instruments, excess fair value of debt over
carrying value and deferred tax on derivative financial instruments, revaluations and capital allowances.
EPRA adjusted earnings per share
Profit for the year excluding gains or losses on the revaluation and sale of investment and development property, write
down of trading property, changes in fair value of derivative financial instruments and associated close-out costs and
the related tax on these items divided by the weighted average number of shares in issue during the year.
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.
GEA
Gross External Area.
GLA
Greater London Authority.
Gross income
The Group's share of passing rent plus sundry non-leased income.
Headline earnings
Headline earnings per share is calculated in accordance with Circular 2/2015 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.
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.
JSE
Johannesburg Stock Exchange.
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 years without significant capital expenditure in either year, 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 year.
Loan-to-value (LTV)
LTV is calculated on the basis of net debt divided by the 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 non-controlling interest.
NaCTSO
National Counter Terrorism Security Office.
NAV
Net Asset Value.
Net Debt
Total borrowings less cash and cash equivalents.
NIA
Net Internal Area.
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.
NRIL
Network Rail Infrastructure Limited.
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.
Opportunity Area
In September 2011 the GLA published the 'Opportunity Area Planning Frameworks Report'. Opportunity Areas are
London's major reservoirs of brownfield land with significant capacity to accommodate new housing, commercial and
other developments linked to existing or potential improvements to public transport accessibility. Typically, they can
accommodate at least 5,000 jobs or 2,500 new homes or a combination of the two, along with other supporting facilities
and infrastructure.
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 lease 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.
RICS
Royal Institution of Chartered Surveyors.
SARB
South African Reserve Bank.
SAICA
South African Institute of Chartered Accountants.
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 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 (TPR)
Capital growth including gains and losses on disposals plus rent received less associated costs, including ground rent.
Total return (TR)
The growth in EPRA adjusted, diluted NAV per share plus dividends per share paid during the year.
Total shareholder return (TSR)
The increase in the price of an ordinary share plus dividends paid during the year assuming re-investment in ordinary
shares.
Underlying earnings
Profit for the year excluding impairment charges, net valuation gains/losses (including profits/losses on disposals), net
refinancing charges, costs of termination of derivative financial instruments and non-recurring costs and income.
Underlying earnings is reported on a proportionally consolidated basis.
Underlying earnings per share (EPS)
Underlying earnings divided by the weighted average number of shares in issue during the year.
Weighted average unexpired lease term
The unexpired lease term to lease expiry weighted by ERV for each lease.
Zone A
A means of analysing and comparing the rental value of retail space by dividing it in to zones parallel with the main
frontage. The most valuable zone, Zone A, falls within a 6m depth of the shop frontage. Each successive zone is
valued at half the rate of the zone in front of it. The blend is referred to as being 'ITZA' ("In Terms of Zone A").
This press release includes statements that are forward-looking in nature. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Capital &
Counties Properties PLC to be materially different from any future results, performance or achievements expressed or implied
by such forward-looking statements. Any information contained in this press release on the price at which shares or other
securities in Capital & Counties Properties PLC have been bought or sold in the past, or on the yield on such shares or other
securities, should not be relied upon as a guide to future performance.
Sponsor
Merrill Lynch South Africa (Pty) Limited
Date: 24/02/2016 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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