Wrap Text
Audited Preliminary Results for the year ended 31 December 2017
Capital & Counties Properties PLC
(Incorporated and registered in the United Kingdom and
Wales with registration Number 07145041 and registered in
South Africa as an external company with Registration
Number 2010/003387/10)
JSE code: CCO
ISIN: GB00B62G9D36
PRESS RELEASE
21 FEBRUARY 2018
CAPITAL & COUNTIES PROPERTIES PLC ("CAPCO")
AUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2017
Ian Durant, Chairman of Capco, commented:
"Both of our central London estates had a very active year in which Capco made good operational progress. The Covent
Garden estate, which now represents over 70 per cent of property value, delivered strong performance and value growth.
Economic and political uncertainty has impacted the London residential market, resulting in a decline in the valuation of our
Earls Court interests.
Capco's strategy remains clear and focused on delivering long-term value for shareholders from our two prime central London
estates, backed by a strong balance sheet."
Ian Hawksworth, Chief Executive of Capco, commented:
"Covent Garden, now valued at over GBP2.5 billion, delivered another strong year of rental and value growth. Positive leasing
demand for our world-class retail and dining destination continues, with 90 leasing transactions securing a record GBP15 million of
rental income at a premium of 10 per cent to December 2016 ERV. Our creative asset management strategy and investment
into the estate have produced a high quality and vibrant environment for the consumer, driving growth of 18 per cent in rental
income. ERV increased to GBP105 million, demonstrating progress towards the target of GBP125 million by December 2020.
The Earls Court Masterplan is one of the most important mixed-use development opportunities in London, with the potential to
create a new district, delivering homes, jobs and investment at scale. This strategic scheme has a planning consent in place,
existing transport infrastructure and the ability to grow with the needs of London. Whilst political and macroeconomic conditions
have impacted the residential market resulting in a further valuation decline, a number of operational milestones have been
achieved and as a long-term investor, Capco will continue to engage with partners and stakeholders to evolve and bring
forward the Masterplan.
The successful sale of Venues and financing activities undertaken during the year have further enhanced Capco's strong
financial position. With low leverage and high liquidity, Capco is well-positioned to deliver long-term value creation from its two
prime central London estates and to take advantage of opportunities as they arise."
Key financials
- Equity attributable to owners of the Parent GBP2.8 billion (2016: GBP2.8 billion)
- EPRA NAV 334 pence per share, a decrease of 1.7 per cent (2016: 340 pence per share)
- Total property value GBP3.5 billion, a decrease of 0.9 per cent (like-for-like) (2016: GBP3.7 billion)
- Underlying EPS 1.3 pence per share (2016: 1.4 pence per share)
- Proposed final 2017 dividend of 1.0 pence per share resulting in a full-year dividend of 1.5 pence per share
Another strong year at Covent Garden
- Total property value of GBP2.5 billion, an increase of 4.3 per cent (like-for-like) (2016: GBP2.3 billion)
- Net rental income up 11.3 per cent like-for-like or 17.8 per cent in total to GBP48.9 million (2016: GBP41.5
million)
- 90 new leases and renewals transacted representing GBP14.6 million of income at 10.4 per cent above 31
December 2016 ERV
- ERV increased by 4.6 per cent (like-for-like) to GBP105 million (2016: GBP96 million); progress towards ERV
target of GBP125 million by December 2020
- GBP99 million invested in strategic acquisitions expanding ownership of the estate
Operational progress at Earls Court
- Earls Court interests valued at GBP1.0 billion in total, a decrease of 11.8 per cent (like-for-like)
(2016: GBP1.1 billion)
- Completion of complex demolition works on ECPL land in preparation for future development
- Lillie Square Phase 1 substantially handed over and 50 per cent of Phase 2 reserved or exchanged
Sale of Venues
- Sale of Venues at a slight premium to net asset value, realising GBP230 million net proceeds for
deployment in prime central London estates
Strong financial position with significant financial flexibility
- Group loan to value ratio 21 per cent (2016: 23 per cent) with substantial headroom across all covenants
- GBP225 million Private Placement completed and GBP705 million Covent Garden bank facility extended to 2022
- Cash and available facilities of GBP691 million (2016: GBP556 million)
- Modest capital commitments of GBP61 million (2016: GBP157 million)
- Weighted average maturity extended to 6.9 years (2016: 5.9 years)
- Weighted average cost of debt of 2.8 per cent (2016: 2.7 per cent)
KEY FINANCIALS
2017 2016
Equity attributable to owners of the Parent GBP2,800m GBP2,805m
Equity attributable to owners of the Parent per share 329.7p 331.5p
-1.3% Total return in 2017 (2016: -5.5%)
EPRA net asset value GBP2,839m GBP2,878m
EPRA net asset value per share 333.8p 339.6p
Dividend per share 1.5p 1.5p
1.0% Total property return in 2017 (2016: -2.3%)
Property market value(1) GBP3,525m GBP3,710m
Net rental income from continuing operations(2) GBP66.2m GBP57.9m
Loss for the year attributable to owners of the Parent from continuing operations (GBP6.5)m (GBP127.0)m
Underlying earnings per share 1.3p 1.4p
(1) On a Group share basis. Refer to Property Data on page 53 for the Group's percentage ownership of property.
(2) On a Group share basis. Refer to the Financial Review.
ENQUIRIES
Capital & Counties Properties PLC:
Ian Hawksworth Chief Executive +44 (0)20 3214 9188
Situl Jobanputra Chief Financial Officer +44 (0)20 3214 9183
Sarah Corbett Head of Investor Relations +44 (0)20 3214 9165
Media enquiries:
UK: Tulchan 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 09:30am at UBS, 5 Broadgate, London, EC2M 2QS. 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 9184).
CHAIRMAN'S STATEMENT
Overview
Both of our prime central London estates had a very active year in which management made good operational progress. The
Covent Garden estate, which now represents more than 70 per cent of the Group's portfolio by value, delivered positive
performance and value growth. The value of our investments at Earls Court has however been impacted by challenges in the
London residential market.
Performance
Capco's total shareholder return for the year, which comprises share price performance plus the dividends paid during the year,
was 8.1 per cent, and total return for the year, which represents the change in net assets plus the dividends paid during the
year, was -1.3 per cent. The total value of Capco's property portfolio fell by 0.9 per cent on a like-for-like basis to GBP3.5 billion,
with gains at Covent Garden being offset by a reduction in the Earls Court valuation.
Covent Garden is established as a renowned retail and dining destination and continues to attract target brands. The Covent
Garden estate is benefiting from a period of significant investment made over recent years, creating an inviting environment
with a wide variety of British heritage, independent and global brands offering a broad selection of retail and dining experiences
across the estate. Net rental income has increased significantly in 2017. Capco's distinct approach to creative asset
management continues to drive leasing activity and in turn ERV progression.
Initiatives to enhance the estate have been very successful. Examples include the establishment of Henrietta Street as a
menswear and dining destination and the successful repositioning of the Royal Opera House Arcade. In addition, a number of
acquisitions have extended our presence on Floral Street. The Floral Court development is nearing completion with the
courtyard and restaurant openings expected over the coming months.
Economic and political uncertainty has impacted the residential market in London, resulting in a further decline in the
valuation of our investments at Earls Court. The consented Masterplan remains one of the largest Opportunity Areas in
central London with the ability to evolve with the needs of the Capital. The political and economic environment has made
discussions on enhancing the Masterplan more difficult, however Capco will continue to seek to positively engage with all
stakeholders to evolve the Masterplan over time.
At Earls Court Partnership Limited ("ECPL"), our investment vehicle with Transport for London ("TfL"), the final phase of the
complex demolition of the former Earls Court Exhibition Centres has been successfully completed in preparation for future
development. Handover of the first phase of the Lillie Square residential development nears completion and half of Phase 2
has been pre-sold at a modest premium to comparable units in Phase 1.
In April 2017, Capco completed the sale of the Venues business at a slight premium to net asset value, in keeping with our
established strategy of recycling capital through the disposal of non-core assets.
Financial position and dividends
Capco continues to maintain a strong balance sheet, with low leverage, high liquidity and modest capital commitments. During
the year, Capco extended its debt maturities, further diversified its sources of funding with a Private Placement and successfully
executed the sale of Venues. The business is well-positioned to support its future activities, and take advantage of opportunities
as they arise.
The Directors are proposing a final dividend of 1.0 pence per share, which brings the total dividend for 2017 to 1.5 pence per share.
People
The Company has evolved during the year and the Board and I would like to thank our employees for their work and commitment.
There were a number of changes to the Board in 2017. At the beginning of the year Situl Jobanputra was promoted to
Chief Financial Officer, following Soumen Das' departure at the end of 2016. Charlotte Boyle was appointed as a Non-
executive Director and member of the Nomination and Remuneration Committees in October 2017, following Demetra
Pinsent's decision to step down from the Board in July 2017.
I am pleased to report that Situl and Charlotte have both settled into their new roles well, and I was delighted to see the
recognition of internal talent. Demetra's departure unfortunately sets back our gender diversity aspirations at Board level.
The Board will consider this along with wider diversity for any future appointments and is committed to encouraging
diversity, inclusiveness and the development of our people across the business.
Shareholders
Capco is listed on the London Stock Exchange and the JSE, and over 50 per cent of the Company's shares are held by South
African investors. There are sometimes different market expectations in the UK and South Africa, and one example of this is
the level of authority to issue new shares that shareholders expect to grant to Boards. The Board feels that, to preserve
flexibility, it is appropriate to seek the conventional level of authorities expected by shareholders in UK listed companies where
possible. This has resulted in significant votes against two of our AGM resolutions and Capco's inclusion in The Investment
Association's public register of shareholder dissent. The Board will maintain dialogue with our South African shareholders on
this topic.
Board Oversight
Non-executive Directors are encouraged to visit our assets in Covent Garden and Earls Court and meet operational
management regularly. This is achieved through individual visits and Board update meetings sometimes held on site,
and helps the Board keep abreast of the business' challenges and opportunities and to contribute to strategic debate.
This has been a year of considerable change in the macroeconomic and political context in which Capco operates and I
am grateful for the Directors' diligence and engagement throughout the year.
In reaching its conclusions regarding key business decisions, the Board takes account of the different stakeholders
relevant to Capco and its activities, including local communities where we operate, partners, lenders, government and
our own people as well as shareholders.
The Board also regularly reviews the changing risks affecting Capco and takes account of changes to risks when
discussing strategy and reviewing operations. Health and Safety receives particular attention at Board meetings and
across the business.
Looking ahead
London is an outstanding global city and remains a very attractive investment arena. Our strategy remains clear and
focused on delivering long-term value for shareholders from our two prime central London estates. The Board remains
alert to broader economic and political uncertainty and its potential impact on market conditions, however Capco's strong
financial position enables the Group to support its future activities and provides the financial flexibility to take advantage
of opportunities as they arise.
Ian Durant
Chairman
20 February 2018
CHIEF EXECUTIVE'S REVIEW
A year of good operational progress
Capco has made good operational progress across its two prime central London estates. Covent Garden, which now accounts
for 72 per cent of the Group's portfolio by value, has had another strong year creating value and positive rental performance.
We continue to implement our strategy by focusing on asset management, investment and managing the estate creatively.
Covent Garden is a world-class destination in the heart of central London offering a vibrant mix of British heritage,
independent and global brands and continues to evolve to meet consumer demand. Investments made in recent years
including on Henrietta Street, Floral Street, King Street and the Royal Opera House Arcade have positioned the estate well.
This has resulted in strong demand from occupiers and as new concepts open, we are capturing the reversionary income
potential of the portfolio.
At Earls Court, good operational progress has been made. ECPL, the investment vehicle with TfL, which represents our
principal investment in Earls Court, successfully completed the final phase of the complex demolition of the former Exhibition
Centres, which prepares the land for development. At Lillie Square, Phase 1 handover has substantially completed. By the end
of 2017 the residents of 182 new homes had been welcomed to the scheme. A pop-up high street for Earls Court was
successfully launched on Lillie Road.
Whilst the West End and Covent Garden have continued to thrive, economic and political uncertainty has continued to impact
the residential market in London, resulting in a further valuation decline in our investments at Earls Court. The growth in Covent
Garden was offset by a decline in the value at Earls Court. As a result, EPRA net asset value fell by 1.7 per cent over the year
to 334 pence.
While the environment for large-scale residential development has become more difficult, the Earls Court Masterplan has an
existing planning consent in place and remains one of the largest Opportunity Areas in central London, capable of delivering
new homes, jobs and investment. Earls Court has the ability to evolve with the needs of London and its potential will be realised
over time. As a long-term investor in London, Capco will continue to seek to engage positively with our partners and all
stakeholders in order to evolve the Masterplan, which has the flexibility to be brought forward through the introduction of third-
party capital and selective development.
Over the year, the Group successfully realised value from the sale of its Venues business, crystallising GBP230 million of net
proceeds which will be recycled into Capco's central London estates.
Capco's prudent approach to its balance sheet continues. We maintain a strong financial position with low leverage, high
liquidity and modest capital commitments. The business is well-positioned to support its future activities, navigate market
uncertainties, while taking advantage of opportunities as they arise. Capco remains disciplined in its investment approach, with
a weighting towards Covent Garden as we continue to expand our ownership on the estate.
Valuations
Market Value Market Value Valuation
2017 2016 Change
GBPm GBPm Like-for-Like(1)
Covent Garden 2,545 2,275 4.3%
Earls Court Properties
Earls Court Partnership Limited ("ECPL")(2) 561 644 (16.0)%
Lillie Square(3) 156 223 (5.7)%
Empress State 220 230 (4.8)%
Other 42 45 (8.1)%
Group share of Earls Court Properties 979 1,142 (11.8)%
Venues - 293 -
Group share of total property(4) 3,524 3,710 (0.9)%
(1) Valuation change takes account of amortisation of tenant lease incentives, capital expenditure, fixed head leases and unrecognised trading surplus.
(2) Represents the Group's 63 per cent interest in ECPL.
(3) Represents the Group's 50 per cent share of the Lillie Square joint venture.
(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 total property value of the Group declined 0.9 per cent (like-for-like) in the year to 31 December 2017 to GBP3.5 billion. The
valuation of Covent Garden has risen by 4.3 per cent (like-for-like) to GBP2.5 billion, driven by ERV growth of 4.6 per cent
achieved over the year. The equivalent yield remains broadly unchanged, reflecting the valuer's current view of the strength of
demand for prime central London real estate.
Capco's investment in Earls Court Properties declined by 11.8 per cent (like-for-like) to GBP1.0 billion at 31 December 2017. A
number of adjustments have been made to the component parts of the valuation of our interest in ECPL. The valuer's more
conservative view on gross development value and the cost of delivery, together with recent transactional evidence in the land
market, have resulted in a net decline of 14.4 per cent (like-for-like) for ECPL in the second half of the year. Similarly the
valuation of our other interests at Earls Court has declined reflecting changes in valuation assumptions.
The Group has a 63 per cent controlling interest in ECPL, the investment vehicle with TfL, which owns the land formerly
occupied by the Earls Court Exhibition Centres ("EC1 & EC2"). As a result, it is fully consolidated in the financial statements
and TfL's interest is represented as a non-controlling interest. See the Financial Review on page 12 for further information.
Covent Garden - a world-class retail and dining destination
Covent Garden is continuing to build on its success as a world-class retail and dining destination. Our creative asset
management strategy has driven positive leasing momentum with good demand for all uses across the estate. We continue to
strengthen the core categories of luxury gifting and accessories, cosmetics and differentiated dining concepts.
The estate is valued at GBP2.5 billion as at 31 December 2017, a like-for-like increase of 4.3 per cent. During the year, 21 new
retail and restaurant brands were signed to the estate, the most in any year to date. As a result of positive demand across all
uses, 90 new lettings and renewals were agreed, securing GBP14.6 million of rental income at 10.4 per cent above December
2016 ERV. Net rental income has increased significantly, by 17.8 per cent in absolute terms or 11.3 per cent like-for-like for the
year. The ERV of the estate is GBP105 million, up 4.6 per cent on a like-for-like basis, with positive progress being made towards
the ERV target of GBP125 million by December 2020.
The range of dining concepts on the estate continues to expand, with the introduction of a number of high quality and
differentiated concepts including The Oystermen, Avobar and The Henrietta. The latest additions further enhance Covent
Garden's attractiveness as one of London's most desirable dining destinations.
Covent Garden's retail offering has gone from strength to strength. The Market Building has introduced Daniel Wellington, Tom
Ford and Deciem. The repositioning of the Royal Opera House Arcade continues with the addition of leading travel brand Tumi
which is set to join British heritage brands N. Peal and Tom Davies which opened stores during the year. Lettings to Kent &
Curwen and The Shop at Bluebird represent an excellent start to the repositioning of Floral Street.
Development of Floral Court nears completion. Anchored by Petersham Nurseries, the courtyard is expected to open in the
coming months and will improve the circulation of pedestrian flows on the northern part of the estate. The residential
component, comprising 45 new apartments, is expected to complete by summer 2018.
We have continued to invest in the estate through acquisitions which offer value creation opportunities. GBP99 million was
invested in acquisitions during the year, most notably consolidating our presence on Floral Street.
Earls Court Properties - large-scale strategic opportunity in central London
During the year, ECPL successfully completed the final phase of the complex demolition of the former Earls Court Exhibition
Centres in preparation for future development.
Handover of Phase 1 of Lillie Square nears completion with GBP98 million (Capco share) of proceeds received by the end of the
year. Cumulative proceeds of GBP125 million (Capco share) are expected to have been received on Phase 1 over the coming
months. Negotiations are at an advanced stage for the main construction contract for Phase 2. 50 per cent of the 186
apartments in the phase have now been reserved or exchanged. 34 of these transacted during 2017, seven of which occurred
during the second half of the year. Sales prices achieved in Phase 2 are at a modest premium to comparable units in Phase 1.
The consented Earls Court Masterplan is a strategic development for London and is identified as a Greater London Authority
("GLA") Opportunity Area. It is referenced in the draft London Plan issued in December 2017 as 'ready to grow'. The political
environment has made discussions on enhancing the Masterplan more difficult, however Capco will continue to seek to engage
positively with the GLA, our partners at Transport for London and other stakeholders to evolve the Masterplan over time. This
includes discussions with London Borough of Hammersmith & Fulham ("LBHF") regarding the possibility of the Council taking
the lead on future plans for the West Kensington and Gibbs Green Estates ("The Estates").
Capco is in discussions with MOPAC (the Mayor's Office for Policing and Crime) regarding its ongoing occupational
requirements at the Empress State Building which may include a lease extension or sale of the building. There is no certainty
that any transaction will be agreed.
Innova Investment
In 2015, Capco acquired a 50 per cent interest in Innova Investment (formerly Solum Developments), a joint venture with
Network Rail, which is exploring potential opportunities for future redevelopments at significant railway station sites
across London.
Sale of Venues
On 7 April 2017, Capco completed the sale of Venues to a consortium of German institutional investors for GBP296 million. Profit
on disposal of Venues was GBP2 million. Having extracted significant value from the venue since acquisition, Capco took the
decision to exit this non-core asset realising value for shareholders through sale. Cash proceeds were used initially to repay
bank debt and will be deployed in Capco's prime central London estates over time.
Outlook
Covent Garden is a world class retail and dining destination in the heart of London, offering a differentiated mix of global, British
heritage and independent brands addressing the needs of the consumer. Through creative asset management and by
attracting excellent retail brands and dining concepts, the reversionary income potential of the portfolio will be captured. Capco
will continue to invest in strategic acquisitions, interventions and in enhancing the customer environment. Following a year of
positive leasing activity, 2018 will be another active year for openings across the estate, which are expected to further
strengthen Covent Garden's reputation as a leading global destination. The estate remains well-placed for continued success
and ERV progression towards the target of GBP125 million by December 2020.
The consented Earls Court Masterplan represents one of the most important mixed-use developments in London. The GLA's
draft London Plan issued in December 2017 references Earls Court as 'ready to grow' demonstrating the site's potential to
deliver more housing and optimise this important London scheme. Whilst the economic and political environment presents
challenges to the London residential market and large scale developments, Capco will continue to seek to positively engage
with all of its partners and stakeholders to evolve the Masterplan. The consented Masterplan has the flexibility to be brought
forward through the introduction of third-party capital and selective development.
Capco has a clear strategy to deliver long-term value creation for our shareholders from our two prime central London estates.
Backed by a strong balance sheet with low leverage, high liquidity and modest capital commitments, Capco is well-positioned
to support its future activities, navigate market uncertainties and take advantage of opportunities as they arise.
Ian Hawksworth
Chief Executive
20 February 2018
STRATEGIC REPORT
COVENT GARDEN
A world-class destination in London's West End
Covent Garden is a leading retail and dining destination and is one of the most vibrant estates in the heart of central London.
Capco's distinct approach to management of the estate with emphasis on enhancing customer experiences continues to attract
target brands.
Following another active year of leasing and investment, a total of 21 new brands were contracted during 2017, the most in any
year, taking the total number of new brands introduced since Capco's ownership of the estate in 2006 to 140, with over 100
new retailers introduced.
Overview
Covent Garden, which represents 72 per cent of Capco's portfolio by value, is a world-class retail and dining destination
providing over 1.1 million square feet of lettable space across all uses in the heart of London's West End. Underpinned by a
vision to establish the estate as a leading destination for Londoners and visitors to the Capital, Capco drives value creation at
Covent Garden through asset management, strategic investment and creativity. The estate is home to a wide variety of British,
global and independent brands including Kent & Curwen, Petersham Nurseries and Tom Ford.
Demand for space in this iconic setting continues to be positive, highlighted by the 21 new brands introduced this year. 90
leasing transactions including new leases and renewals were completed representing GBP14.6 million of rental income per annum
transacted at 10.4 per cent above 31 December 2016 ERV (H1 2017: 43 transactions representing GBP6.6 million of rental
income, H2 2017: 47 transactions representing GBP8.0 million of rental income). A new Zone A rent of GBP750 per square foot for the
Market Building was achieved this year.
Net rental income is GBP48.9 million, up 11.3 per cent (like-for-like) or 17.8 per cent in absolute terms compared to 2016.
Occupancy on the estate remains high at 98 per cent.
2017 was another active year for Covent Garden as the business continued to implement its leasing and investment strategy.
The value of the estate increased by 4.3 per cent on a like-for-like basis to over GBP2.5 billion. ERV is GBP104.8 million, a like-for-like
increase over the year of 4.6 per cent. Good progress has been made towards the ERV target of GBP125 million by December
2020, reflecting the growth prospects of the estate.
Capco continues to work closely with the community stakeholders including Westminster City Council ("WCC") and Covent
Garden Area Trust ("CGAT") to maintain and celebrate the attributes which make the area unique.
Retail
Strong demand for space at Covent Garden from retailers continues with new rental tones being set. The repositioning of Floral
Street as a fashion and lifestyle destination is underway. British heritage sportswear brand, Kent & Curwen, opened its first
concept store under the partnership of creative director Daniel Kearns and business partner David Beckham at 12 Floral Street.
In addition, multi-brand concept store, The Shop at Bluebird, has been signed to Carriage Hall. The store is scheduled to open
in spring 2018, with the 15,000 square foot space housing two dedicated retail floors and a restaurant.
In July, Petersham Nurseries opened its retail space, offering handpicked collections of homeware, furniture and gifts. The
store is set in the Grade II listed building within the Floral Court development beneath three Victorian atria and surrounded by
greenery. Petersham Nurseries has commenced fit-out of its restaurants in the courtyard of Floral Court which are scheduled to
open in the coming months.
The successful transformation of Henrietta Street has established a new menswear and dining destination in London. British
men's shoe brand Cheaney and outerwear clothing concept K-Way opened stores at the beginning of 2017. Australian
eyewear brand, Bailey Nelson, opened its only UK store on Henrietta Street in September offering high quality opticals and
sunglasses. The store complements the existing community of independent, British and global brands, representing the finest
aspects of men's retail, alongside high quality dining concepts on the street.
Over 25 standalone beauty and fragrance boutiques form 'The Beauty Quarter' at Covent Garden which continues to expand.
Tom Ford and Deciem opened in the Market Building joining premium standalone beauty boutiques from Chanel and Dior.
Floral Street Fragrance is the latest signing to Floral Court where customers can create their own four-piece fragrance in store.
In addition, Bose has also taken space on King Street, offering innovative sound systems.
Capco has further strengthened the offering of gifting and premium accessories at the Royal Opera House Arcade signing
leading travel accessory brand Tumi. This exciting addition joins the line-up of premium retailers which opened this year
including luxury sunglasses brand Linda Farrow, British cashmere brand N.Peal and eyewear brand, Tom Davies. The British
watch and accessories brand Olivia Burton is the latest signing to Covent Garden, joining watch brand Daniel Wellington which
opened its first UK store in the Market Building earlier this year.
Dining
Focusing on high quality and unique food concepts has been core to the dining strategy for Covent Garden. The restaurant
leasing activity in 2017 further strengthened Covent Garden's reputation as one of London's best dining destinations.
The latest signing on James Street is a UK first, Wahlburgers, the casual dining burger restaurant and bar, offering a menu of
high-quality homemade burgers and sandwiches, fresh salads and shakes at competitive prices. The signing sets a new rental
tone for food and beverage on James Street and is expected to open towards the end of the year.
The Experimental Group have partnered with Michelin-starred chef Ollie Dabbous to open their latest concept in London on
Henrietta Street at The Henrietta Hotel. The concept includes a bar and restaurant offering a French seasonal menu as well as
an 18-bedroom boutique hotel.
Another successful addition to Henrietta Street is the highly rated seafood restaurant The Oystermen which provides a relaxed,
affordable and fun dining experience offering oysters and seafood from the British Isles. British artisanal coffee shop Host has
opened in the space alongside The Oystermen.
Cora Pearl, a new 60 cover restaurant from the team behind renowned Mayfair establishment Kitty Fishers, is expected to
open in spring 2018 within the ground and lower-ground floors of 30 Henrietta Street.
Pancs have joined the Market Building, offering handcrafted pancakes, and the estate is set to welcome another UK first,
Avobar, London's first permanent avocado bar that will serve avocado based dishes. Egg'cellent serving a breakfast only menu
using fresh and organic eggs will open shortly. These signings are in line with the strategy at Covent Garden to introduce high
quality and interesting concepts to the estate.
Adding to the leisure offering is Z Hotels which has taken space on Bedford Street and will provide compact yet luxurious
accommodation for visitors and is set to open in summer 2018. In addition, Capco has completed assembly of the Wellington
block, which is a scarce island site in central London, through the acquisition of the last remaining unit, 23 Wellington Street in
January 2018. Development of the Wellington block presents a unique opportunity to continue Covent Garden's transformation
on the southern side of the estate.
Other uses
Covent Garden has become an attractive office location for professional services, creative industries and SMEs. Office space
represents 11 per cent of the portfolio by value. A number of office lettings have been achieved successfully during the year
and we continue to see strong interest from occupiers.
Capco continues to restore the estate's residential heritage. The most recent conversion at 26-27 Southampton Street, a
premium residential development with 10 apartments completed earlier this year and units were successfully let in line with
expectations. The final two units at The Beecham, a luxury development overlooking the Piazza, were sold in the first half of the
year. The average sales price achieved across the scheme was GBP2,800 per square foot. Leasing demand for residential
accommodation across the estate remains positive with a high rate of renewals recorded.
Acquisitions
Capco has continued to expand its presence on the estate through strategic acquisitions. During 2017, three new properties
were acquired on Floral Street for a total consideration of GBP99.2 million (including purchaser's costs) and represent GBP4.7 million
of ERV.
The acquisition of the long leasehold interest in 15-17 Long Acre & 27b Floral Street for GBP85.8 million (including purchaser's
costs) further consolidates Capco's presence on Floral Street. This prominent property, located at the western end of Floral
Street, opposite the Floral Court development, benefits from dual frontage on both Floral Street and Long Acre and presents
long-term asset management opportunities.
37 and 39 Floral Street were acquired for GBP5.9 million and GBP7.5 million respectively. Both properties are well-located at key
access points to Floral Street and are well-placed to benefit from the repositioning of this strategic street. In addition, the
acquisition of 23 Wellington Street exchanged and completed in January 2018.
Developments
Floral Court will provide over 85,000 square foot (NIA) of space with eight retail and two restaurant units as well as 45
apartments. The development of the commercial space nears completion. A new connecting courtyard between Floral Street
and King Street is set to open in the coming months which will transform the pedestrian flow on the estate. 65 per cent of the
commercial space has been let representing GBP2.4 million of income. Development of the 45 apartments is progressing well and
is set to complete by mid-2018.
At Carriage Hall, the refurbishment of 15,000 square feet (NIA) successfully completed and has been let to The Shop at
Bluebird which is expected to open in spring 2018.
The redevelopment of 11-12 Floral Street, the building formerly occupied by The Sanctuary, nears completion providing 27,000
square feet (NIA) and includes the creation of two new retail units with flagship potential, one of which has been let to British
heritage sportswear brand, Kent & Curwen.
The development of Opera Terrace completed during the year. SushiSamba is currently fitting out the space and is scheduled
to open later this year.
Future Priorities
Capco continues to implement its strategy for Covent Garden by focusing on creative asset management and investment, and
attracting excellent retail brands and dining concepts to the estate. By introducing an interesting mix of British, global and
independent brands to address the needs of the consumer, Capco aims to continue to capture the reversionary income
potential of the portfolio and achieve ERV growth towards its target of GBP125 million by December 2020.
Further to this, Capco is focused on making strategic investments to expand its ownership of the estate and enhancing the
customer environment through creative asset management. As current capital initiatives including the Floral Court development
near completion, the positioning of Floral Street as a fashion and lifestyle destination is an important priority. Pedestrianisation
of King Street and the completion of Floral Court will continue to change the pedestrian flow on the estate, allowing for further
repositioning opportunities. In addition, the southern side of the estate offers opportunities for repositioning including the
Wellington block.
Building on the successful openings in 2017 including The Henrietta Hotel, The Oystermen, Tom Ford and Petersham
Nurseries, 2018 will see even more retail and dining openings across the estate with brands such as SushiSamba, Mariage
Frères, Wahlburgers and Cora Pearl which are expected to further strengthen the estate's attractiveness as a leading retail and
dining destination.
EARLS COURT PROPERTIES
Large-scale strategic opportunity in central London
Overview
The Earls Court and West Kensington Opportunity Area represents one of the most important mixed-use development sites in
London with the potential to create a new district, delivering thousands of homes and jobs. The Earls Court Masterplan is a
strategic opportunity for London with planning consent for 10.7 million square feet, including the Empress State Building.
The consented Masterplan provides for 7,500 new homes, is anticipated to create 10,000 jobs and deliver over GBP450 million of
community benefits. The site is located within two London Boroughs, the Royal Borough of Kensington and Chelsea ("RBKC")
and the London Borough of Hammersmith & Fulham ("LBHF"), is supported by excellent transport infrastructure and has the
potential to deliver substantially more housing.
Investments at Earls Court
Earls Court Properties represents Capco's investments within the Earls Court and West Kensington Opportunity Area and
principally comprises:
- 63 per cent interest in ECPL: the investment vehicle with TfL in respect of EC1 & EC2, and including certain assets on and
around Lillie Road. Capco's interests in ECPL were valued at GBP560.7 million at 31 December 2017. ECPL land has detailed
planning consent for 3.4 million square feet (GEA) and, following successful completion of the final phase of complex
demolition works, is available for development.
- 100 per cent of the Empress State Building ("ESB") valued at GBP220.0 million at 31 December 2017. ESB has detailed planning
consent to be converted from an office building into residential. ESB is let to MOPAC until June 2019 with a current passing
rent of GBP17.0 million.
- 50 per cent interest in the Lillie Square joint venture, with Capco's 50 per cent interest valued at GBP156.5 million at 31
December 2017. Handover of Lillie Square Phase 1 is substantially complete and Phase 2 continues to progress.
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 ("The Estates"). To date, Capco has paid GBP75 million of the GBP105
million cash consideration payable to LBHF including three of the five annual instalments of GBP15 million.
Demolition works
ECPL, the investment vehicle with TfL, owns 999 year leases over the EC1 & EC2 land together with certain adjacent
properties primarily located on or around Lillie Road. Capco owns a 63 per cent share and is leading the venture in its role as
business and development manager.
The final phase of demolition of the former Earls Court Exhibition Centres successfully completed on schedule in January 2018.
The heavy lifting crane was the most visible part of the important site preparation. The crane successfully completed the lift of
61 concrete portal beams out from over the London Underground lines. Removal of the large portal beams, which supported
the weight of the former Earls Court Exhibition Centres, concludes the complex demolition works, in preparation for future
development, which has the flexibility to be brought forward through the introduction of third-party capital over time.
Planning
In January 2017, detailed planning consent was granted by RBKC for Exhibition Square which is located at the entrance of the
Earls Court estate adjacent to Earls Court Underground station. The consented scheme will create an important gateway to
Earls Court and its new high street, including a public square and gardens, a signature hotel, offices and an entrance to Earls
Court Underground station.
The Earls Court Masterplan remains one of the largest Opportunity Areas in central London, capable of delivering new homes,
jobs and investment. Additional density could deliver much-needed homes for all Londoners, including additional affordable
housing and a broad range of residential tenures. The GLA's draft London Plan issued in December 2017 ("The Plan"),
references the Earls Court Masterplan as 'ready to grow' demonstrating the site's potential to deliver more housing and
optimise this important London opportunity. In addition, The Plan estimates that the population of London will increase by
70,000 per annum, reaching 10.5 million in 2041. According to The Plan, London will need at least 66,000 new homes
annually. Opportunity Areas such as Earls Court are seen as vital in order to meet London's demands.
Capco notes with disappointment the statement released by LBHF regarding the deliverability of "the proposed level of density
and affordable housing", however remains in discussions with LBHF including regarding the possibility of the Council taking the
lead on future plans for the Estates, as part of the wider Masterplan. In the event that agreement is not reached with LBHF, the
CLSA, a binding agreement in relation to the Estates, will remain in place. Capco will continue to seek to engage positively with
all stakeholders in order to evolve the Masterplan to address the changing political landscape and prevailing market conditions.
Due to the scale of the Earls Court Masterplan, there will remain a risk of protests and legal challenges (ranging from
complaints about noise through to judicial reviews or applications for listing) against specific aspects of the development 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.
West Brompton Crossing: temporary retail and leisure use
In November 2017, ECPL successfully launched a pop-up local high street for Earls Court, named West Brompton Crossing
with anchor tenant The Prince. The Prince is located on the junction of Lillie Road and Empress Place within a number of
buildings brought back into temporary use, and features eateries including Patty & Bun, The Begging Bowl, MAM and Rabbit.
The project marks a first for temporary retail and leisure use in the area, offering a parade of restaurants, bars, and shops that
have proved a very popular addition to the area.
Lillie Square
Lillie Square is a one million square foot (GEA) residential development located adjacent to the Earls Court Masterplan. The
development can deliver over 600 private and 200 affordable homes across three phases.
Handover of Phase 1 of Lillie Square nears completion with GBP98 million (Capco share) of proceeds received by the end of the
year. Cumulative proceeds of GBP125 million (Capco share) are expected to have been received on Phase 1 over the coming
months. Phase 2 basement and frame works are underway, and the joint venture is in advanced negotiations with a contractor
for the main construction contract. 50 per cent of the 186 apartments in the phase have been reserved or exchanged. 34 of
these transacted during 2017, seven of which occurred during the second half of the year. Sales prices achieved in Phase 2
are at a modest premium to comparable units in Phase 1.
The Residents' Clubhouse opened over the summer and has been very well-received by residents.
Future Priorities
Capco's strategy is to drive long-term value creation through planning, land assembly, land enablement and selective
development activities on its investments at Earls Court.
Following a period of complex demolition works, the ECPL land is now available for development. Earls Court has the ability to
evolve with the needs of London and its potential will be realised over time. Capco will continue to seek to engage positively
with all stakeholders in order to evolve the Masterplan to address the changing political landscape and prevailing market
conditions. The Masterplan has the flexibility to be brought forward through the introduction of third-party capital and selective
development.
At the Empress State Building, discussions continue with the tenant regarding its occupational requirements and at Lillie
Square, the focus is on delivery of the remaining homes of Phase 1, ensuring a successful handover to all residents. On Phase
2, the focus remains on continued sales and completion of negotiations on the main construction contract which is expected
over the coming months.
VENUES
Sale of Venues
On 7 April 2017, Capco completed the sale of Venues to a consortium of German institutional investors for GBP296 million. Profit
on disposal of Venues was GBP2 million. After repayment of debt, working capital adjustments and transaction-related costs, net
proceeds were approximately GBP230 million. Cash proceeds were used initially to repay bank debt and will be deployed in
Capco's prime central London estates over time.
FINANCIAL REVIEW
Our capital structure positions the Group to withstand prevailing market conditions, take advantage of opportunities as they
arise, and deliver long-term returns to shareholders by driving value creation across our assets.
Capco further strengthened its financial position during 2017 reducing loan to value to 21 per cent and increasing available
liquidity to GBP691 million. This has been achieved by the realisation of value through the disposal of the Venues business and
further enhancing the unsecured debt platform at Covent Garden by raising a further GBP225 million in the private placement
market and extending the GBP705 million revolving credit facility to 2022.
There was additional investment in Covent Garden of GBP177 million through developments, predominantly Floral Court, and GBP99
million of acquisitions which have served to increase the Group's weighting in Covent Garden to 72 per cent. The value of the
Covent Garden estate increased by 4.3 per cent (like-for-like) due to the rental growth achieved during the year, with ERV up
by 4.6 per cent on a like-for-like basis.
Uncertainties in the broader political and economic environment continue to impact London residential property. As a result the
market value of Earls Court Properties, which represents the Group's interests at Earls Court, has decreased by 11.8 per cent
(like-for-like).
Overall, the Group share of the total property value has decreased by 0.9 per cent (like-for-like). EPRA net asset value per
share decreased by 1.7 per cent during the year, from 339.6 pence at 31 December 2016 to 333.8 pence. This 5.8 pence
decline together with the 1.5 pence dividend paid to shareholders resulted in a total return of -1.3 per cent.
Underlying earnings from continuing activities increased to GBP7.3 million due to higher net rental income and reduced
administration expenses.
Basis of preparation
In line with the requirements of IFRS 11 'Joint Arrangements', 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.
Alternative Performance Measures ("APMs"), being financial measures which are not specified under IFRS, are used by the
Group to monitor the performance of the business. These include a number of the Financial Highlights shown on page 2. Many
of the APMs included are based on the EPRA Best Practice Recommendations reporting framework which aims to improve the
transparency, comparability and relevance of published results of public real estate companies in Europe.
Internally, the Board focuses on and reviews information and reports prepared on a Group share basis, which includes the
Group's share of joint ventures but excludes the non-controlling interest share of our subsidiaries. Therefore, to align with the
way the Group is managed, this financial review presents the financial position, performance and cash flow analysis on a
Group share basis.
Discontinued operation
On 7 April 2017 the Venues business was sold. As Venues has previously represented a separate major line of business, its
results and cash flows have been reported for the period 1 January 2017 to 7 April 2017 as having arisen from a discontinued
operation. This extends to the prior period comparative which has been re-presented to reflect the disposal. Further information
on the disposal of the Venues business is set out in note 10 'Discontinued Operation'.
FINANCIAL POSITION
At 31 December 2017 the Group's EPRA net asset value was GBP2.8 billion (31 December 2016: GBP2.9 billion) representing 334
pence per share (31 December 2016: 340 pence).
SUMMARY ADJUSTED BALANCE SHEET
2017
Non-
Joint controlling Group
IFRS ventures(1) interest(2) share
GBPm GBPm GBPm GBPm
Investment, development and trading property 3,645.7 124.7 (329.4) 3,441.0
Net debt (748.3) (6.1) 20.7 (733.7)
Other assets and liabilities(3) 208.2 (118.6) 2.9 92.5
Non-controlling interest (305.8) - 305.8 -
Net assets attributable to owners of the Parent 2,799.8 - - 2,799.8
Adjustments:
Fair value of derivative financial instruments 5.5
Unrecognised surplus on trading property 31.8
Deferred tax adjustments 1.9
EPRA net asset value 2,839.0
EPRA net asset value per share (pence)(4) 334
(1) Primarily Lillie Square.
(2) Non-controlling interest represents TfL's 37 per cent share of ECPL.
(3) IFRS includes amounts receivable from joint ventures which eliminate on a Group share basis.
(4) Adjusted, diluted number of shares in issue at 31 December 2017 was 850.6 million.
2016
Non-
Joint controlling Group
IFRS ventures(1) interest(2) share
GBPm GBPm GBPm GBPm
Investment, development and trading property 3,822.8 176.0 (378.5) 3,620.3
Net debt (815.4) (40.1) 8.2 (847.3)
Other assets and liabilities(3) 165.8 (135.9) 2.1 32.0
Non-controlling interest (368.2) - 368.2 -
Net assets attributable to owners of the Parent 2,805.0 - - 2,805.0
Adjustments:
Fair value of derivative financial instruments 13.7
Unrecognised surplus on trading property 48.1
Deferred tax adjustments 11.5
EPRA net asset value 2,878.3
EPRA net asset value per share (pence)(4) 340
(1) Primarily Lillie Square.
(2) Non-controlling interest represents TfL's 37 per cent share of ECPL.
(3) IFRS includes amounts receivable from joint ventures which eliminate on a Group share basis.
(4) Adjusted, diluted number of shares in issue at 31 December 2016 was 847.6 million.
Investment, development and trading property
The revaluation loss on the Group's property portfolio was GBP37.6 million for the year, representing a 0.9 per cent decrease in
value on a like-for-like basis compared with the IPD Capital Return for the equivalent period of 5.4 per cent. The Group
revaluation loss consists of a GBP93.4 million gain at Covent Garden and a GBP131.0 million loss at Earls Court.
Total property return for the year was 1.0 per cent. The IPD Total Return index recorded a 11.2 per cent return for the
corresponding period.
The total revaluation loss of GBP37.6 million consists of a GBP27.9 million loss on investment property and a GBP9.7 million loss on
trading property. On an IFRS basis, which includes ECPL at 100 per cent and does not include Lillie Square on a line by line
basis, loss on revaluation and sale of investment and development property was GBP90.9 million.
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 net asset value
measure. During the year GBP6.6 million of the unrealised trading property surplus has been realised. At 31 December 2017, the
unrecognised surplus on trading property was GBP31.8 million (31 December 2016: GBP48.1 million) which now arises solely on the
Group's share of trading property at Lillie Square.
Debt and gearing
During the year the Group's share of total facilities increased by GBP24.5 million. During the first half of the year the Group
terminated the GBP100 million Olympia Exhibitions Holdings Limited facility (of which GBP50 million was drawn prior to termination),
the GBP85.5 million loan on the Empress State Building and GBP30 million (GBP15 million Group share) of the Lillie Square LP facility.
In June, the Group signed an agreement with eight institutional investors for a private placement of GBP225 million with a range of
maturities from 7 to 20 year senior unsecured notes, further enhancing the unsecured debt platform at Covent Garden. Closing
occurred in August 2017 and proceeds were used to repay bank debt. In November 2017, the Group exercised the option
under the GBP705 million Covent Garden debt facility to extend the full loan amount to 2022.
The Group's cash and undrawn committed facilities at 31 December 2017 were GBP690.8 million (31 December 2016: GBP556.3
million). A reconciliation between IFRS and Group share is shown below:
2017 2016
Non- Non-
Joint controlling Group Joint controlling Group
IFRS ventures(1) interest(2) share IFRS ventures(1) interest(2) share
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cash and cash equivalents 28.6 25.7 (2.0) 52.3 30.9 37.4 (3.5) 64.8
Undrawn committed facilities 637.9 33.1 (32.5) 638.5 532.7 2.4 (43.6) 491.5
Cash and undrawn committed facilities 666.5 58.8 (34.5) 690.8 563.6 39.8 (47.1) 556.3
(1) Primarily Lillie Square.
(2) Non-controlling interest represents TfL's 37 per cent share of ECPL.
Net debt decreased by GBP114 million to GBP734 million, principally as a result of the disposal of the Venues business partly offset
by further investment into our assets and the acquisitions at Covent Garden. As set out in the summary adjusted balance
sheet, net debt on an IFRS basis was GBP748 million.
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 21.3 per cent remains
comfortably within the Group's limit of no more than 40 per cent.
2017 2016
Loan to value 21.3% 23.4%
Interest cover 170% 173%
Weighted average debt maturity 6.9 years 5.9 years
Weighted average cost of debt 2.8% 2.7%
Gross debt with interest rate protection 91% 86%
The Group's policy is to eliminate substantially the medium and long-term risk arising from interest rate volatility. The Group's
banking facilities are arranged on a floating rate basis but are generally swapped to fixed rate or capped using derivative
contracts. At 31 December 2017 the proportion of gross debt with interest rate protection was 91 per cent (31 December 2016:
86 per cent).
The Group remains compliant with all of its debt covenants, details of which are set out on page 55, and has substantial levels
of headroom against its covenants across all of its debt facilities.
At 31 December 2017 the Group had capital commitments of GBP61.3 million (GBP156.6 million at 31 December 2016) of which
Covent Garden represents GBP19.5 million and Earls Court Properties GBP41.8 million (including the GBP30.0 million of CLSA
instalments and GBP7.0 million in relation to Lillie Square).
2017 2016
Non- Non-
Joint controlling Group Joint controlling Group
IFRS ventures(1) interest(2) share IFRS ventures(1) interest(2) share
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Capital commitments 57.3 7.0 (3.0) 61.3 149.2 18.2 (10.8) 156.6
(1) Primarily Lillie Square.
(2) Non-controlling interest represents TfL's 37 per cent share of ECPL.
Conditional Land Sale Agreement ("CLSA")
In November 2013 the Group exercised its option under the CLSA, which it entered into with 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 and will run through to December 2019. Where
amounts are paid prior to the transfer of property, they will be carried on the Group's balance sheet as prepayments against
future land draw down. Of the GBP75 million paid to date, GBP15 million relates to the acquisition of two properties, held as
investment and development property, and GBP60 million relates to options over the Estates which is held as a prepayment within
other receivables. The remaining future payments totalling GBP30 million are disclosed as a capital commitment as
referred to above.
The prepayment balance will be transferred to investment and development property once the recognition criteria of investment
and development property have been met. Once this occurs, in line with the Group's accounting policy, the land will become
subject to bi-annual valuation with any changes reflected in the Group's reported net asset measure.
CASH FLOW
A summary of the Group's cash flow for the year ended 31 December 2017 is presented below:
SUMMARY CASH FLOW
2017
Non-
Joint controlling Group
IFRS ventures(1) interest(2) share
GBPm GBPm GBPm GBPm
Operating cash flows after interest and tax from continuing activities (13.2) (10.2) (0.6) (24.0)
Purchase and development of property, plant and equipment (211.2) (27.0) 12.6 (225.6)
Transactions with joint venture partners and non-controlling interests 13.3 (5.6) 0.1 7.8
Net sales proceeds from discontinued operation 226.0 - - 226.0
Net sales proceeds from property and investments 12.6 92.0 - 104.6
Net cash flow before financing from continuing activities 27.5 49.2 12.1 88.8
Issue of shares 0.3 - - 0.3
Financing (18.8) (46.3) (10.6) (75.7)
Dividends paid (6.7) - - (6.7)
Transactions with discontinued operation 5.4 - - 5.4
Other (3.8) - - (3.8)
Net cash flow from continuing activities(3) 3.9 2.9 1.5 8.3
Net cash flow from discontinued operation (0.2) - - (0.2)
Net cash flow 3.7 2.9 1.5 8.1
(1) Primarily Lillie Square.
(2) Non-controlling interest represents TfL's 37 per cent share of ECPL.
(3) Net cash flow is based on unrestricted cash and cash equivalents and therefore does not include the movement in Lillie Square deposits on a
Group share basis of GBP14.6 million.
Re-presented 2016(1)
Non-
Joint controlling Group
IFR ventures(2) interest(3) share
GBPm GBPm GBPm GBPm
Operating cash flows after interest and tax from continuing activities (41.3) 1.4 (2.5) (42.4)
Purchase and development of property, plant and equipment (214.2) (41.4) 16.8 (238.8)
Transactions with joint venture partners and non-controlling interests (12.3) 6.4 3.9 (2.0)
Net sales proceeds from property and investments 19.4 1.3 - 20.7
Net cash flow before financing from continuing activities (248.4) (32.3) 18.2 (262.5)
Issue of shares 0.1 - - 0.1
Financing 160.1 31.6 (11.4) 180.3
Dividends paid (7.5) - - (7.5)
Transfers with discontinued operation 57.1 - - 57.1
Net cash flow from continuing activities(4) (38.6) (0.7) 6.8 (32.5)
Net cash flow from discontinued operation 2.6 - - 2.6
Net cash flow (36.0) (0.7) 6.8 (29.9)
(1) The 2016 summary cash flow has been re-presented to reflect the cash flows from continuing operations and therefore it excludes the discontinued
operation of the Venues business. Net cash flows are presented on unrestricted cash on a Group share basis.
(2) Primarily Lillie Square.
(3) Non-controlling interest represents TfL's 37 per cent share of ECPL.
(4) Net cash flow is based on unrestricted cash and cash equivalents and therefore does not include the movement in Lillie Square deposits on a
Group share basis of GBP3.7 million.
Operating cash outflows of GBP24.0 million, of which GBP15.0 million relates to the CLSA annual payment, have decreased from
GBP42.4 million for the year to 31 December 2016 as a result of changes in net working capital requirements.
During the year, GBP170.2 million was invested at Covent Garden for the purchase of three properties and subsequent
expenditure for the development of property predominantly at Floral Court. At Earls Court, total expenditure of GBP55.4 million
comprises enablement works on ECPL land, construction of Lillie Square Phase 1, the acquisition of two properties and other
subsequent expenditure.
The disposal of the Venues business resulted in a net inflow of GBP226 million after repayment of the GBP50 million drawn debt on
the GBP100 million Olympia Exhibitions Holdings Limited loan facility, working capital adjustments and transaction related costs.
The proceeds were used to reduce the Group's net debt position and will be deployed in Capco's core central London estates.
Net sales proceeds from trading property comprise of GBP95.9 million, Group share, for the disposal of 177 units at Lillie Square
(GBP92.0 million) and for the sale of the final two residential units at The Beecham, Covent Garden (GBP3.9 million). Disposal of
investment property net of payments in relation to investments resulted in proceeds of GBP8.7 million being received during the year.
Net borrowings repaid during the period were GBP75.7 million.
Dividends paid of GBP6.7 million reflect the final dividend payment made in respect of the 2016 financial year and the interim
dividend paid in September 2017. This was lower than the previous year due to a higher take up of the scrip dividend
alternative, 47 per cent versus 41 per cent in 2016.
FINANCIAL PERFORMANCE
The Group presents underlying earnings and underlying earnings per share in addition to the amounts reported on a Group
share basis. The Group considers this presentation to provide useful information as it removes unrealised and certain other
items and therefore represents the recurring, underlying performance of the business.
SUMMARY INCOME STATEMENT
2017
Non-
Joint controlling Group
IFRS ventures(1) interest(2) share
GBPm GBPm GBPm GBPm
Net rental income 66.9 - (0.7) 66.2
(Loss)/gain on revaluation and sale of investment and development property (90.9) 0.3 62.6 (28.0)
Administration expenses (38.8) (0.3) 0.4 (38.7)
Net finance costs (19.1) (0.7) - (19.8)
Taxation (6.7) - - (6.7)
Other 19.4 0.7 0.4 20.5
Non-controlling interest 62.7 - (62.7) -
Loss for the year attributable to owners of the Parent from continuing
operations (6.5) - - (6.5)
Adjustments:
Loss on revaluation and sale of investment and development property 28.0
Other (18.2)
Taxation on non-underlying items 4.0
Underlying earnings from continuing operations 7.3
Underlying earnings from discontinued operation 4.1
Underlying earnings 11.4
Underlying earnings per share (pence):
From continuing operations 0.9
From discontinued operations 0.4
Underlying earnings per share (pence) 1.3
Weighted average number of shares 848.7m
(1) Lillie Square and Innova Investment.
(2) Non-controlling interest represents TfL's 37 per cent share of ECPL.
Re-presented 2016(1)
Non-
Joint controlling Group
IFRS ventures(2) interest(3) share
GBPm GBPm GBPm GBPm
Net rental income 58.4 (0.1) (0.4) 57.9
Loss on revaluation and sale of investment and development property (231.2) (0.1) 110.3 (121.0)
Administration expenses (42.0) (0.8) 0.9 (41.9)
Net finance costs (19.3) (0.2) - (19.5)
Taxation 19.5 - (5.9) 13.6
Other (17.3) 1.2 - (16.1)
Non-controlling interest 104.9 - (104.9) -
Loss for the year attributable to owners of the Parent from continuing operations (127.0) - - (127.0)
Adjustments:
Loss on revaluation and sale of investment and development property 121.0
Other 18.8
Taxation on non-underlying items (16.7)
Underlying earnings from continuing operations (3.9)
Underlying earnings from discontinued operation 15.7
Underlying earnings 11.8
Underlying earnings per share (pence):
From continuing operations (0.5)
From discontinued operation 1.9
Underlying earnings per share (pence) 1.4
Weighted average number of shares 846.5m
(1) The 31 December 2016 summary income statement has been re-presented to reflect the Venues business as a discontinued operation.
(2) Lillie Square and Innova Investments.
(3) Non-controlling interest represents TfL's 37 per cent share of ECPL.
Income
Net rental income has increased by GBP8.3 million (14.4 per cent) during the year mainly as a result of the positive performance at
Covent Garden (up 11.3 per cent like-for-like). Of the increase, GBP5.4 million has been achieved on the like-for-like portfolio as
the Group continues to convert the reversionary potential into contracted rents. A further GBP2.9 million has been added through
prior and current year acquisitions with the remaining increase resulting from the net effect of disposals and properties
classified as development. At Covent Garden gross income has increased by 15.4 per cent from GBP52.1 million in 2016 to GBP60.1
million whilst ERV has increased by 9.2 per cent from GBP96.0 million in 2016 to GBP104.8 million.
Loss on revaluation and sale of investment and development property
The loss on revaluation and sale of the Group's investment and development property was GBP28.0 million. Covent Garden
recorded a gain on revaluation of GBP93.4 million as a result of rental growth. The loss on revaluation at Earls Court of GBP121.4
million was driven by changes in valuers' assumptions and is reflective of recent evidence.
Administration expenses
Administration expenses have decreased by GBP3.2 million on a headline basis. The prior year included a GBP2.0 million credit for
performance related employment costs and an assumed allocation of GBP4.0 million of head office costs to the Venues business.
Allowing for these items, like-for-like administration expenses of GBP38.7 million compared with GBP47.9 million in 2016, a decrease
of 19.2 per cent.
Net finance costs
Net finance costs have increased marginally to GBP19.8 million due to the higher level of average borrowings during the year.
Taxation
The total tax charge for the year, made up of both underlying tax and non-underlying tax, is GBP6.7 million.
Tax on underlying profits of the Group was GBP2.7 million, which reflects a rate in line with the current rate of UK corporation tax.
The main rate of corporation tax reduced from 20 per cent to 19 per cent from 1 April 2017. The corporation tax rate will further
reduce to 17 per cent from 1 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 nil (31 December 2016: nil). A disposal of the Group's trading properties at their market value net of available
losses would result in a corporation tax charge to the Group of GBP1.6 million (19.25 per cent of GBP8.3 million).
The provisions of IAS 12 provide for the recognition of a deferred tax asset where it is probable there will be future taxable profit
against which a deductible temporary difference can be utilised. As a result of the application of this provision, the Group has
not recognised the deferred tax asset on decreases to the carrying value of investment property and certain losses
carried forward.
The Group's tax policy, which has been approved by the Board and is available on the Group website, 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 legislation 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 23 May 2018 to shareholders on the register at
20 April 2018. Subject to SARB approval, the Board intends to offer a scrip dividend alternative.
Going concern
At 31 December 2017 the Group's cash and undrawn committed facilities were GBP690.8 million and its capital commitments
were GBP61.3 million. With a weighted average debt maturity of 6.9 years, loan to value of 21.3 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 ongoing and future commitments for at least 12 months from the date of signing these
financial statements. Accordingly, the Directors consider it appropriate to adopt the going concern basis of accounting in
preparing the 2017 Annual Report & Accounts.
Situl Jobanputra
Chief Financial Officer
20 February 2018
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.
Following a comprehensive review of risk management undertaken in 2015, risk is a standing agenda item at all management
meetings. This gives rise to a more risk aware culture and consistency in decision making across the organisation in line with
the corporate strategy and risk appetite. All corporate decision making takes risk into account, in a measured way, while
continuing to drive an 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, comprising of the Executive
Directors, the General Counsel & Director of Corporate Services 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 are established. A full risk review is undertaken annually in which the risk registers
are aggregated and reviewed by the Executive Risk Committee. The Directors confirm that they have completed a robust
assessment of the principal risks faced by the business, assisted by the work performed by the Executive Risk Committee.
The Group's principal risks and uncertainties, which are set out on the following pages, 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, 'Critical
accounting judgements and key sources of estimation and uncertainty'.
Since the EU Referendum, there has been economic and political uncertainty and this is expected to continue into the
foreseeable future. To date, there has been no adverse impact on occupier demand for the Covent Garden estate, which has
seen strong rental growth, although the valuation of residential-led development land has been impacted by the overall
economic and political backdrop.
The political framework for large scale residential development has become more difficult. In the Autumn Statement
government announced it will introduce planning reform that will aim for more land to become available for housing. A review is
being undertaken by government, with an interim report targeted to be delivered for the Spring Statement, to evaluate the gap
between planning permissions and housing starts which may result in beneficial or adverse policy change for landowners.
London, as a highly desirable global city, continues to attract businesses and people and we would expect this leading position
to be maintained over time. Uncertainty remains, however, around the exit mechanism and longer-term implications of Brexit,
and this will continue to have a direct or indirect impact on a number of the principal risks set out on the following pages.
CORPORATE
Risk Impact on strategy Mitigation Change in 2017
Economic conditions
Decline in real estate valuations due Reduced return on Focus on prime assets Static
to macro-economic conditions investment and
development property Regular assessment of investment
Relative attractiveness of other market conditions including bi-annual
asset classes or locations Higher finance costs external valuations
Inability of the Company to adopt Reduced profitability Regular strategic reviews
the appropriate strategy or to react
to changing market conditions or Strategic focus on creating retail
destinations and residential districts with
changing consumer behaviour unique attributes
Funding
Lack of availability or increased cost Reduced financial and Maintain appropriate liquidity to cover Static
of debt or equity funding operational flexibility commitments
Increased cost of borrowing Target longer and staggered debt
maturities
Delay to development works
Consideration of early refinancing
Constrained growth, lost
opportunities Derivative contracts to provide interest
rate protection
Development phasing to enable
flexibility and reduce financial exposure
Covenant headroom monitored and
stress tested
Political climate
Uncertain political climate or Inability to deliver business Monitoring proposals and emerging Increased
changes to legislation and policies plan policy and legislation
Increased uncertainty
Engagement with key stakeholders over the future political
and politicians climate including the
impact of the EU
Referendum, general
election and prospective
local elections
Catastrophic external event
Such as a terrorist attack, health Diminishing London's status Terrorist insurance Increased
pandemic or cyber crime
Heightened by On-site security The threat level of a
concentration of major incident occurring
investments Health and safety policies and in London has increased
procedures during the year. We
Reduced rental income continuously review and
and/or capital values Close liaison with police, National implement
Business disruption or Counter Terrorism Security Office improvements to our
damage to property (NaCTSO) and local authorities procedures to counter
the threat of a major
Reputational damage Regular training incident
People
Inability to retain the right people Inability to execute strategy Succession planning, performance Static
and develop leadership skills within and business plan evaluations, training and development
the business
Constrained growth, lost Long-term and competitive incentive
opportunities rewards
Health, safety and the environment
Accidents causing loss of life or very Prosecution for non- Health and safety procedures across Static
serious injury to employees, compliance with legislation the Group
contractors, occupiers and visitors
to the Group's properties Litigation or fines Appointment of reputable contractors
Activities at the Group's properties Reputational damage External consultants undertake annual
causing detrimental impact on the audits in all locations
environment Distraction of management
Adequate insurance held to cover the
risks inherent in construction projects
Risk Impact on strategy Mitigation Change in 2017
Compliance with law, regulations and contracts
Breach of legislation, regulation or Prosecution for non- Appointment of external advisers to Static
contract compliance with legislation monitor changes in law or regulation
Inability to monitor or anticipate Litigation or fines Members of staff attend external
legal or regulatory changes briefings to remain cognisant of
Reputational damage legislative and regulatory changes
Distraction of management
PROPERTY
Risk Impact on strategy Mitigation Change in 2017
Leasing
Inability to achieve target rents or to Decline in tenant demand Quality tenant mix Static
attract target tenants due to market for the Group's properties
conditions Strategic focus on creating retail
Reduced income destinations with unique attributes
Competition from other locations /
formats Expansion of yield
Planning
Unfavourable planning policy or Impact on future land Outline planning permission already Static
legislation impacting on the ability to valuations granted for the Earls Court Masterplan
secure future planning approvals or
consents Engagement with local and national
authorities
Secretary of State or Mayoral
intervention or judicial review Pre-application and consultation with
key stakeholders and landowners
Engagement with local community
bodies
Developments
Decline in returns from development Lower development Focus on prime assets Increased
and impact on land valuations due to: returns due to lower sales Greater uncertainty over
proceeds, higher costs or Regular assessment of market central London
- Market conditions delay conditions and development strategy residential market due to
macro-economic
- Site constraints leading to an Business strategy based on long-term conditions and
increase in overall development returns increased uncertainty
costs over the future political
Professional teams in place to climate and policy
- Increased construction costs or manage costs and deliver programme
delays (including as a result of
complexity of developing Earls Court Masterplan designed to
adjacent to and above public allow phased implementation
transport infrastructure)
- Failure to implement strategic
agreements (including with
adjacent landowners) on
acceptable terms
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 2017. 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 loss 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 20 February 2018
Ian Hawksworth
Chief Executive
20 February 2018
Situl Jobanputra
Chief Financial Officer
20 February 2018
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2017
Re-presented
2017 2016
Note GBPm GBPm
Continuing operations
Revenue 2 87.7 94.1
Rental income 80.0 70.7
Rental expenses (13.1) (12.3)
Net rental income 2 66.9 58.4
Profit on sale of trading property 3 0.9 5.6
Other income 3.8 4.6
Loss on revaluation and sale of investment and development property 4 (90.9) (231.2)
Profit on sale of available-for-sale investments - 0.4
Impairment of other receivables 5 (1.3) (14.8)
Other costs 6 - (5.0)
(20.6) (182.0)
Administration expenses (38.8) (42.0)
Operating loss (59.4) (224.0)
Finance income 7 0.8 0.3
Finance costs 8 (19.9) (19.6)
Other finance income 7 11.7 10.5
Other finance costs 8 - (5.3)
Change in fair value of derivative financial instruments 4.3 (13.0)
Net finance costs (3.1) (27.1)
(62.5) (251.1)
Share of post-tax loss from joint ventures 14 - (0.3)
Loss before tax (62.5) (251.4)
Current tax (1.7) (1.0)
Deferred tax (5.0) 20.5
Taxation 9 (6.7) 19.5
Loss for the year from continuing operations (69.2) (231.9)
Discontinued operation
Profit for the year from discontinued operation 10 6.1 8.4
Loss for the year (63.1) (223.5)
Loss attributable to:
Owners of the Parent (0.4) (118.6)
Non-controlling interest 15 (62.7) (104.9)
Earnings per share attributable to owners of the Parent(1)
Basic and diluted loss per share 12 (0.1)p (14.0)p
Earnings per share from continuing operations attributable to owners of the Parent(1)
Basic and diluted loss per share 12 (0.8)p (15.0)p
Weighted average number of shares 12 848.7m 846.5m
(1) Earnings per share from discontinued operation are shown in note 12 'Earnings Per Share and Net Assets Per Share'.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2017
2017 2016
Note GBPm GBPm
Loss for the year (63.1) (223.5)
Other comprehensive expense
Items that may be reclassified subsequently to the income statement
Realised revaluation reserves on available-for-sale investments - (0.2)
Loss on cash flow hedge - (1.2)
Tax relating to items that may be reclassified subsequently - 0.3
Items that will not be reclassified subsequently to the income statement
Actuarial loss on defined benefit pension scheme - (1.6)
Tax relating to items that will not be reclassified - 0.3
Total other comprehensive expense for the year - (2.4)
Total comprehensive expense for the year (63.1) (225.9)
Attributable to:
Owners of the Parent (0.4) (121.0)
Non-controlling interest 15 (62.7) (104.9)
Arising from:
Continuing operations (69.2) (233.0)
Discontinued operation 10 6.1 7.1
CONSOLIDATED BALANCE SHEET
As at 31 December 2017
2017 2016
Note GBPm GBPm
Non-current assets
Investment and development property 13 3,645.7 3,819.9
Plant and equipment 4.6 7.1
Investment in joint ventures 14 16.9 15.0
Derivative financial instruments 20 - 0.2
Deferred tax 21 7.8 -
Trade and other receivables 16 224.5 194.8
3,899.5 4,037.0
Current assets
Trading property 13 - 2.9
Trade and other receivables 16 33.1 47.8
Cash and cash equivalents 17 28.6 30.9
61.7 81.6
Total assets 3,961.2 4,118.6
Non-current liabilities
Borrowings, including finance leases 19 (776.2) (827.8)
Derivative financial instruments 20 (5.5) (13.9)
Pension liability - (0.9)
Deferred tax 21 - (2.7)
Trade and other payables (0.3) -
(782.0) (845.3)
Current liabilities
Borrowings, including finance leases 19 (0.7) (18.5)
Other provisions (2.0) (2.0)
Tax liabilities (1.8) (1.3)
Trade and other payables 18 (69.1) (78.3)
(73.6) (100.1)
Total liabilities (855.6) (945.4)
Net assets 3,105.6 3,173.2
Equity
Share capital 22 212.2 211.5
Other components of equity 2,587.6 2,593.5
Equity attributable to owners of the Parent 2,799.8 2,805.0
Non-controlling interest 15 305.8 368.2
Total equity 3,105.6 3,173.2
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2017
Equity attributable to owners of the Parent
Share-
based Non-
Share Share Merger payment Other Retained controlling Total
capital premium reserve(1) reserve reserves earnings Total interest equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2016 210.5 211.1 425.8 10.3 0.4 2,075.9 2,934.0 468.8 3,402.8
Loss for the year - - - - - (118.6) (118.6) (104.9) (223.5)
Other comprehensive (expense)/income
Realised revaluation reserves on
Available-for-sale investments - - - - (0.2) - (0.2) - (0.2)
Loss on cash flow hedge - - - - (1.2) - (1.2) - (1.2)
Tax relating to items that may be
reclassified subsequently 21 - - - - 0.3 - 0.3 - 0.3
Actuarial loss on defined
benefit pension scheme - - - - - (1.6) (1.6) - (1.6)
Tax relating to items that will
not be reclassified 21 - - - - - 0.3 0.3 - 0.3
Total comprehensive expense for
the year ended 31 December 2016 - - - - (1.1) (119.9) (121.0) (104.9) 225.9)
Transactions with owners
Ordinary shares issued(2) 22 1.0 4.0 - - - 0.9 5.9 - 5.9
Dividends 11 - - - - - (12.7) (12.7) - (12.7)
Realisation of share-based payment
reserve on issue of shares - - - (5.3) - 4.6 (0.7) - (0.7)
Fair value of share-based payment - - - 1.1 - - 1.1 - 1.1
Tax relating to share-based payment 21 - - - - - (1.6) (1.6) - (1.6)
Contribution from non-controlling interest 15 - - - - - - - 4.3 4.3
Total transactions with owners 1.0 4.0 - (4.2) - (8.8) (8.0) 4.3 (3.7)
Balance at 31 December 2016 211.5 215.1 425.8 6.1 (0.7) 1,947.2 2,805.0 368.2 3,173.2
Loss for the year - - - - - (0.4) (0.4) (62.7) (63.1)
Total comprehensive expense for - - - - - (0.4) (0.4) (62.7) (63.1)
the year ended 31 December 2017
Transactions with owners
Ordinary shares issued(2) 22 0.7 6.0 - - - (0.5) 6.2 - 6.2
Dividends 11 - - - - - (12.7) (12.7) - (12.7)
Realisation of share-based payment
reserve on issue of shares - - - (1.8) - 1.6 (0.2) - (0.2)
Fair value of share-based payment - - - 2.0 - - 2.0 - 2.0
Realisation of cash flow hedge - - - - 0.1 - 0.1 - 0.1
Tax relating to share-based payment 21 - - - - - (0.2) (0.2) - (0.2)
Contribution from non-controlling interest 15 - - - - - - - 0.3 0.3
Total transactions with owners 0.7 6.0 - 0.2 0.1 (11.8) (4.8) 0.3 (4.5)
Balance at 31 December 2017 212.2 221.1 425.8 6.3 (0.6) 1,935.0 2,799.8 305.8 3,105.6
(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 and therefore will not form part of distributable
reserves as they form part of linked transactions.
(2) Share premium includes GBP6.0 million (2016: GBP0.9 million included within retained earnings) of ordinary shares issued relating to the bonus
issued in lieu of cash dividends. Refer to note 13 'Dividends' for further information.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2017
Re-presented
2017 2016
Note GBPm GBPm
Cash flows from continuing operating activities
Cash generated from/(used in) operations 25 5.8 (19.5)
Interest paid (18.4) (19.6)
Interest received 0.6 0.2
Tax paid (1.2) (2.4)
Net cash outflow from continuing operating activities (13.2) (41.3)
Net cash inflow from discontinued operating activities 10 7.6 11.8
Net cash outflow from operating activities (5.6) (29.5)
Cash flows from investing activities
Purchase and development of property (211.2) (214.2)
Sale of property 17.1 18.5
Investment in joint venture (1.9) (0.5)
Proceeds from available-for-sale investments - 0.4
Sale of discontinued operation 10 226.0 -
Sale of subsidiaries(1) (4.5) 0.5
Loan advances from/(to) joint ventures 15.2 (11.8)
Net cash inflow/(outflow) from continuing investing activities 40.7 (207.1)
Net cash outflow from discontinued investing activities 10 (2.4) (1.9)
Net cash inflow/(outflow) from investing activities 38.3 (209.0)
Cash flows from financing activities
Issue of shares 0.3 0.1
Borrowings drawn 558.7 782.0
Borrowings repaid (575.5) (612.0)
Purchase and repayment of derivative financial instruments (4.1) (1.7)
Other finance costs (2.0) (8.2)
Cash dividends paid 11 (6.7) (7.5)
Contribution from non-controlling interest 0.3 -
Transactions with discontinued operation(2) 5.4 57.1
Net cash (outflow)/inflow from continuing financing activities (23.6) 209.8
Net cash outflow from discontinued financing activities 10 (5.4) (7.3)
Net cash (outflow)/inflow from financing activities (29.0) 202.5
Net increase/(decrease) in cash and cash equivalents 3.7 (36.0)
Unrestricted cash and cash equivalents at 1 January 24.9 60.9
Unrestricted cash and cash equivalents at 31 December 17 28.6 24.9
(1) Sale of subsidiaries relate to cash inflows of GBP0.5 million (2016: GBP0.5 million) related to deferred consideration on the disposal of
The Brewery by EC&O Limited on 9 February 2012 and cash outflows of GBP5.0 million (2016: GBPnil) related to additional costs on the loss of
control of former subsidiary Lillie Square GP Limited in 2012. Further information on the loss of control of Lillie Square GP Limited can be
found in note 6 'Other Costs'.
(2) Relates to transactions between the Group's treasury function and discontinued operations. The Group operates a central treasury function which
manages and monitors the Group's cash balances.
NOTES TO THE ACCOUNTS
1 PRINCIPAL ACCOUNTING POLICIES
The financial information set out in this announcement does not constitute the Group's consolidated financial statements for the
years ended 31 December 2017 or 2016, but is derived from those financial statements. Statutory financial statements for 2016
have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual
General Meeting. The external auditor has reported on those financial statements; their report was unqualified, did not draw
attention to any matters by way of emphasis and did not contain statements under s498 of Companies Act 2006.
The Group's consolidated financial statements are prepared in accordance with International Financial Reporting Standards
("IFRS"), as adopted by the European Union, IFRS Interpretations Committee ("IFRS IC") interpretations and with those parts
of the Companies Act 2006 applicable to companies reporting under IFRS.
While the financial information included in this preliminary announcement has been prepared in accordance with the
recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with
IFRS. The Group expects to publish full financial statements that comply with IFRS in March 2018.
The consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation
of property and derivative financial instruments.
The accounting policies used by the Group in these condensed financial statements are consistent with those applied in the
Group's financial statements for the year to 31 December 2016, as amended to reflect the adoption of new standards,
amendments and interpretations which became effective in the year.
During 2017, the following accounting standards and interpretations have been adopted by the Group:
IAS 7 'Statement of Cash Flows' (amendment)
IAS 12 'Income Taxes' (amendment)
These pronouncements had no significant impact on the consolidated financial statements and resulted in changes to
disclosures only.
At the date of approval of the consolidated financial statements the following standards and interpretations which have not been
applied in these financial statements were in issue but not effective, and in some cases have not been adopted for use in the
European Union:
IFRS 2 'Share-based Payment' (amendment)
IFRS 9 'Financial Instruments'
IFRS 15 'Revenue from Contracts with Customers'
IFRS 16 'Leases'
IAS 28 'Investments in Associates' (amendment)
IAS 40 'Investment Property' (amendment)
Amendments to IFRS (Annual improvements cycle 2014-2016)
Amendments to IFRS (Annual improvements cycle 2015-2017)
The Group has assessed the impact of these new standards and interpretations and does not anticipate any material impact on
the financial statements.
IFRS 9 'Financial Instruments' modifies the classification and measurement of financial assets and financial liabilities,
impairment provisioning and hedge accounting. There is no change to the Group in respect of classification of financial assets
and liabilities and hedge accounting. All Group financial assets have been assessed for impairments under the 12 month and
lifetime expected credit loss models considered by IFRS 9. The adoption of the new standard does not have a material impact
on the consolidated financial statements of the Group.
In relation to IFRS 15 'Revenue from Contracts with Customers', the Group's material revenue stream relates to property rental
income. On the adoption of the standard this revenue stream will not be materially impacted due to property rental income not
being within the scope of IFRS 15. The assessment of this standard also indicated that the impact on all other revenue streams
is not material.
As the Group is predominantly a lessor, IFRS 16 'Leases' will not have a material impact on adoption. Where the Group is
currently a lessee, this relates only to immaterial contracts.
Critical accounting judgements and key sources of estimation and uncertainty
The preparation of consolidated financial statements in accordance with IFRS requires the Directors to make judgements,
estimates and assumptions that affect the reported amounts of assets, liabilities, equity, income and expenses from sources
not readily apparent. Although these estimates and assumptions are based on management's best knowledge of the amount,
historical experiences and other factors, actual results ultimately may differ from those estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period.
The significant areas of estimation and uncertainty are:
Property valuation: The most significant area of estimation and uncertainty in the consolidated financial statements is in respect
of the valuation of the property portfolio, where external valuations are obtained. The valuation of the Group's property portfolio
is inherently subjective due to the assumptions as outlined within note 13 'Property Portfolio' and this subjectivity may result in a
material adjustment to the carrying amounts of the assets and liabilities year on year. 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.
The key areas of accounting judgement are:
Property classification: Judgement is required in the classification of property between investment and development, trading
and owner occupied. Management considers each property separately and reviews factors including the long-term intention for
the property, in determining if trading, and the level of ancillary income, in determining if owner occupied, to ensure the
appropriate classification.
Other less significant judgements and sources of estimation and uncertainty relate to revenue recognition, significant disposals,
provisions, share-based payment and contingent liabilities.
Discontinued operation
On 7 April 2017 the Venues business was sold. As Venues has previously been presented as a separate major line of
business, its results and cash flows have been reported for the year ended 31 December 2017 as having arisen from a
discontinued operation. The requirement extends to the prior period comparatives which have been re-presented where
appropriate, in line with reporting requirements.
Going Concern
The Directors are satisfied that the Group has adequate resources to continue in operational existence for a period of at least
12 months from the date of approval of the financial statements and for this reason the consolidated financial statements have
been prepared on a going concern basis.
2 SEGMENTAL REPORTING
Management has determined the operating segments based on reports reviewed by the Executive Directors, who are deemed
to be the chief operating decision makers. 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 three 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; and
- Other comprises Innova, the discontinued activity of Venues and The Great Capital Partnership, other head office
companies and investments, including the payment of internal rent.
Management information is reported to the chief operating decision makers on a Group share basis. Outlined below is the
Group share by segment:
Segment Group share
Covent Garden 100%
Earls Court Properties
ECPL 63%
Lillie Square 50%
Empress State 100%
Other 100%
Other
Innova 50%
GCP 50%
Venues(1) 0%
Other 100%
(1) Venues was 100 per cent owned until 7 April 2017. Subsequent to this the Group share ownership is nil.
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.
Unallocated expenses consist primarily of costs incurred centrally which are neither directly nor meaningfully attributable to
individual segments.
Reportable segments
2017
Covent Earls Court Group Consolidation IFRS
Garden Properties Other total adjustments total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm
Revenue(1) 65.7 113.6 1.8 181.1 (93.4) 87.7
Rent receivable 57.7 18.2 (0.5) 75.4 0.5 75.9
Service charge income 4.1 0.3 - 4.4 (0.3) 4.1
Rental income 61.8 18.5 (0.5) 79.8 0.2 80.0
Rental expenses(2) (12.9) (0.7) - (13.6) 0.5 (13.1)
Net rental income/(expense) 48.9 17.8 (0.5) 66.2 0.7 66.9
Profit on sale of trading property 0.9 13.6 - 14.5 (13.6) 0.9
Other income - - 2.3 2.3 1.5 3.8
Gain/(loss) on revaluation and sale of
investment and development property 93.4 (121.4) - (28.0) (62.9) (90.9)
Write down of trading property - (0.6) - (0.6) 0.6 -
Impairment of other receivables - - - - (1.3) (1.3)
Segment profit/(loss) 143.2 (90.6) 1.8 54.4 (75.0) (20.6)
Unallocated costs:
Administration expenses (38.7) (0.1) (38.8)
Operating profit/(loss) 15.7 (75.1) (59.4)
Net finance costs(3) (15.5) 12.4 (3.1)
Profit/(loss) before tax 0.2 (62.7) (62.5)
Taxation (6.7) - (6.7)
Loss for the year from continuing
operations (6.5) (62.7) (69.2)
Discontinued operation
Profit for the year from discontinued operation 6.1 - 6.1
Loss for the year (0.4) (62.7) (63.1)
Loss attributable to:
Owners of the Parent (0.4) - (0.4)
Non-controlling interest - (62.7) (62.7)
Summary balance sheet
Total segment assets(4) 2,565.4 1,056.0 40.8 3,662.2 275.7 3,937.9
Total segment liabilities(4) (773.5) (103.1) (9.1) (885.7) 30.1 (855.6)
Segmental net assets 1,791.9 952.9 31.7 2,776.5 305.8 3,082.3
Unallocated assets(3) 23.3 - 23.3
Net assets 2,799.8 305.8 3,105.6
Other segment items:
Depreciation (0.3) (1.5) (0.3) (2.1) 0.2 (1.9)
Capital expenditure (177.3) (56.2) (0.1) (233.6) 15.2 (218.4)
(1) IFRS total continuing revenue of GBP87.7 million comprises rental income of GBP80.0 million, proceeds from sale of trading property of
GBP3.9 million and other income of GBP3.8 million.
(2) Comprises service charge and other non-recoverable costs.
(3) The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and the majority
of the Group's cash balances.
(4) Total segmental assets and total segmental liabilities exclude loans between and investments in Group undertakings.
Reportable segments
Re-presented 2016
Covent Earls Court Group Consolidation IFRS
Garden Properties Other total adjustments total
Continuing operations GBPm GBPm GBPm GBPm GBPm GBPm
Revenue(1) 71.4 20.4 2.3 94.1 - 94.1
Rent receivable 49.4 17.7 (0.4) 66.7 0.8 67.5
Service charge income 3.2 - - 3.2 - 3.2
Rental income 52.6 17.7 (0.4) 69.9 0.8 70.7
Rental expenses(2) (11.1) (0.9) - (12.0) (0.3) (12.3)
Net rental income/(expense) 41.5 16.8 (0.4) 57.9 0.5 58.4
Profit/(loss) on sale of trading property 5.6 (1.2) - 4.4 1.2 5.6
Other income - - 2.7 2.7 1.9 4.6
Gain/(loss) on revaluation and sale of
investment and development property 126.1 (247.2) 0.1 (121.0) (110.2) (231.2)
Write down of trading property - (0.4) - (0.4) 0.4 -
Profit on sale of available-for-sale
investments - - 0.4 0.4 - 0.4
Impairment of other receivables - - - - (14.8) (14.8)
Other costs - (5.0) - (5.0) - (5.0)
Segment profit/(loss) 173.2 (237.0) 2.8 (61.0) (121.0) (182.0)
Unallocated costs:
Administration expenses (41.9) (0.1) (42.0)
Operating loss (102.9) (121.1) (224.0)
Net finance costs(3) (37.7) 10.6 (27.1)
Share of post-tax loss from joint ventures - (0.3) (0.3)
Loss before tax (140.6) (110.8) (251.4)
Taxation 13.6 5.9 19.5
Loss for the year from continuing operations (127.0) (104.9) (231.9)
Discontinued operation
Profit for the year from discontinued operation - - 8.4 8.4 - 8.4
Loss for the year (118.6) (104.9) (223.5)
Loss attributable to:
Owners of the Parent (118.6) - (118.6)
Non-controlling interest - (104.9) (104.9)
Summary balance sheet
Total segment assets(4) 2,294.0 1,213.2 348.3 3,855.5 252.6 4,108.1
Total segment liabilities(4) (724.8) (240.3) (95.9) (1,061.0) 115.6 (945.4)
Segmental net assets 1,569.2 972.9 252.4 2,794.5 368.2 3,162.7
Unallocated assets(3) 10.5 - 10.5
Net assets 2,805.0 368.2 3,173.2
Other segment items:
Depreciation (0.2) (1.3) (0.7) (2.2) 0.4 (1.8)
Capital expenditure (153.9) (80.2) (1.5) (235.6) 31.1 (204.5)
(1) IFRS total continuing revenue of GBP94.1 million comprises rental income of GBP70.7 million, proceeds from sale of trading property of
GBP18.8 million and other income of GBP4.6 million.
(2) Comprises service charge and other non-recoverable costs.
(3) The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and the majority
of the Group's cash balances.
(4) Total segmental assets and total segmental liabilities exclude loans between and investments in Group undertakings.
3 PROFIT ON SALE OF TRADING PROPERTY
2017 2016
Continuing operations GBPm GBPm
Proceeds from the sale of trading property 3.9 18.8
Cost of sale of trading property (2.9) (12.9)
Agent, selling and marketing fees (0.1) (0.3)
Profit on sale of trading property 0.9 5.6
4 LOSS ON REVALUATION AND SALE OF INVESTMENT AND DEVELOPMENT PROPERTY
Re-presented
2017 2016
Continuing operations GBPm GBPm
Loss on revaluation of investment and development property (90.8) (231.4)
(Loss)/gain on sale of investment and development property (0.1) 0.2
Loss on revaluation and sale of investment and development property (90.9) (231.2)
5 IMPAIRMENT OF OTHER RECEIVABLES
2017 2016
Continuing operations GBPm GBPm
Impairment of other receivables 1.3 14.8
Following an impairment review of amounts receivable from joint ventures by the Group, a net impairment of GBP1.3 million has
been recognised (2016: GBP14.8 million). The Lillie square joint venture incurs amortisation charges on deep discount bonds that
were issued to the Group and Kwok Family Interests ("KFI") which has contributed to the cumulative losses. The Group has
recognised GBP11.7 million (2016: GBP10.5 million) finance income on these deep discount bonds.
During the year the amounts receivable from joint ventures were part repaid resulting in a write back of GBP8.2 million against
amounts previously impaired. The impairment of amounts receivable from joint venture is 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 (2016: GBPnil)
in accordance with IAS 28 'Investment in Associates and Joint Ventures' ("IAS 28"). Refer to note 14 'Investment in Joint
Ventures'.
Due to objective evidence existing an impairment assessment was performed in accordance with IAS 39 'Financial instruments'
comparing the carrying amount of the deep discount bonds to the present value of the estimated future cash flows. This has
resulted in a write down of GBP9.5 million which has been recorded against the deep discount bonds.
6 OTHER COSTS
On 30 August 2012, the Group completed a joint venture arrangement with KFI. The venture, to develop land interests at Lillie
Square, resulted in the loss of control of the former subsidiary, Lillie Square GP Limited, and the disposal of a 50 per cent
limited partnership interest in Lillie Square LP. As at 31 December 2016 additional costs associated with the transaction were
incurred resulting in a loss of GBP5.0 million. No additional costs were incurred in 2017.
7 FINANCE INCOME
2017 2016
Continuing operations GBPm GBPm
Finance income:
On deposits and other 0.8 0.3
Finance income 0.8 0.3
Other finance income:
On deep discount bonds(1) 11.7 10.5
Other finance income 11.7 10.5
(1) Excluded from the calculation of underlying earnings as deep discount bonds eliminate on a Group share basis.
8 FINANCE COSTS
2017 2016
Continuing operations GBPm GBPm
Finance costs:
On bank overdrafts, loans and other 22.7 20.5
On obligations under finance leases 0.5 0.5
Gross finance costs 23.2 21.0
Interest capitalised on property under development (3.3) (1.4)
Finance costs 19.9 19.6
Other finance costs:
Costs of termination of bank loans and other - 5.3
Other finance costs(1) - 5.3
(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 2.8 per cent (2016: 2.7 per cent)
applied to the cost of property under development during the year.
9 TAXATION
Re-presented(1)
2017 2016
Continuing operations GBPm GBPm
Current income tax:
Current income tax charge excluding non-underlying items 0.9 1.4
Current income tax 0.9 1.4
Deferred income tax:
On accelerated capital allowances 1.0 0.5
On fair value of investment and development property - (15.6)
On fair value of derivative financial instruments 1.9 (2.4)
On Group losses 1.6 (4.7)
On other temporary differences 0.7 1.5
Deferred income tax 5.2 (20.7)
Current income tax charge on non-underlying items 0.8 -
Adjustments in respect of previous years - current income tax - (0.4)
Adjustments in respect of previous years - deferred income tax (0.2) 0.2
Total income tax charge/(credit) reported in the consolidated income statement 6.7 (19.5)
(1) Re-presented to reflect taxation of continuing operations. GBP2.7 million tax charge relating to Venues, now presented within discontinued
operation (refer to note 10 'Discontinued Operation').
Following the enactment of Finance (No. 2) Act 2015 and Finance Act 2016, the main rate of corporation tax reduced to 19 per
cent from April 2017 and will reduce further to 17 per cent from April 2020.
10 DISCONTINUED OPERATION
On 7 April 2017, the Group completed the sale of Venues, its exhibition business, comprising Olympia London together with
certain related property assets for a total gross cash consideration of GBP296.0 million. The disposal was in line with the Group
strategy following the successful transition of shows from the former Earls Court Exhibition Centres to Olympia. After the
repayment of debt, working capital adjustments and transaction related costs, net proceeds received were GBP230.2 million.
Based on the net assets at the date of disposal a profit has been recognised on the sale of GBP2.1 million. As part of the sale, the
defined benefit scheme the Group previous held was sold to the purchaser and therefore the Group has no outstanding liability
in relation to the scheme.
The net assets at the date of disposal were as follows:
7 April
2017
GBPm
Investment and development property 292.8
Other non-current assets 0.8
Pension asset 1.4
Cash and cash equivalents(1) 10.8
Other current assets 8.9
Other current liabilities (15.9)
Deferred tax (15.7)
Borrowings (55.0)
Net assets 228.1
Net consideration(2) 230.2
Profit on disposal 2.1
(1) Cash and cash equivalents include GBP6.0 million of restricted cash and cash equivalents.
(2) Sale of discontinued operation as per the consolidated statement of cash flows as at 31 December 2017 is GBP226.0 million. This differs to the
net consideration above of GBP230.2 million by GBP4.2 million. This is due to accrued transaction costs of GBP0.6 million, less unrestricted
cash and cash equivalents disposed of with the transaction of GBP4.8 million.
The Venues results, which have been included in the income statement as a discontinued operation, were:
Period Year
ended ended
7 April 31 December
2017 2016
Summarised income statement GBPm GBPm
Revenue 10.2 33.3
Net rental income 7.2 23.6
Loss on revaluation of investment and development property - (3.8)
Administration expenses (2.7) (8.6)
Operating profit 4.5 11.2
Net finance costs (0.5) (0.1)
Profit before tax 4.0 11.1
Taxation - (2.7)
Profit after tax 4.0 8.4
Profit on disposal 2.1 -
Profit for the period/year from discontinued operation 6.1 8.4
Underlying earnings adjustments
Loss on revaluation and sale of investment and development property - 3.8
Deferred tax adjustments - 3.4
Change in fair value of derivative financial instruments 0.1 0.1
Profit on disposal (2.1) -
Underlying earnings from discontinued operation 4.1 15.7
The Venues cash flows, which have been included in the statement of cash flow as a discontinued operation, were:
Period Year
ended ended
7 April 31 December
2017 2016
Summarised cash flows Note GBPm GBPm
Cash flows from operating activities 25 8.0 11.8
Interest paid (0.4) -
Net cash inflow from operating activities 7.6 11.8
Purchase and development of property, plant and equipment (0.1) (1.9)
Pension funding (2.3) -
Net cash outflow from investing activities (2.4) (1.9)
Borrowings drawn - 50.0
Purchase of derivative financial instruments - (0.2)
Transactions with Group by discontinued operation (5.4) (57.1)
Net cash outflow from financing activities (5.4) (7.3)
Net (decrease)/increase in unrestricted cash and cash equivalents from discontinued operation (0.2) 2.6
Unrestricted cash and cash equivalents at 1 January 5.0 2.4
Unrestricted cash and cash equivalents at period/year end 4.8 5.0
11 DIVIDENDS
2017 2016
Group and Company GBPm GBPm
Ordinary shares
Prior year final dividend of 1.0p per share (2016: 1.0p) 8.5 8.4
Interim dividend of 0.5p per share (2016: 0.5p) 4.2 4.3
Dividend expense 12.7 12.7
Shares issued in lieu of cash(1) - (4.3)
Bonus issue in lieu of cash dividends(2) (6.0) (0.9)
Cash dividends paid 6.7 7.5
Proposed final dividend of 1.0p per share (2016: 1.0p) 8.5 8.5
(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 prior to the declaration of
dividend which occurs at the Company's Annual General Meeting and shareholders who elect to receive their shares 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
2017 Re-presented 2016
(Loss)/ (Loss)/
(Loss)/ earnings (Loss)/ 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 loss (0.4) 848.7 (0.1) (118.6) 846.5 (14.0)
Dilutive effect of contingently issuable share option awards - 0.6 - - 0.7 -
Dilutive effect of contingently issuable deferred share awards - 0.2 - - - -
Dilutive effect of contingently issuable matching nil cost options
awards - 0.1 - - 0.1 -
Dilutive effect of deferred bonus share option awards - 0.6 - - 0.7 -
Diluted loss (0.4) 850.2 (0.1) (118.6) 848.0 (14.0)
Continuing operations attributable to owners of the Parent
Basic loss (6.5) 848.7 (0.8) (127.0) 846.5 (15.0)
Diluted loss (6.5) 850.2 (0.8) (127.0) 848.0 (15.0)
Discontinued operation attributable to owners of the Parent
Basic profit 6.1 848.7 0.7 8.4 846.5 1.0
Diluted profit 6.1 850.2 0.7 8.4 848.0 1.0
Continuing operations attributable to owners of the Parent
Basic loss (6.5) (127.0)
Group adjustments:
Profit on sale of trading property (0.9) (5.6)
Loss on revaluation and sale of investment and
development property 90.9 231.2
Other finance costs - 5.3
Change in fair value of derivative financial instruments (4.3) 13.0
Deferred tax adjustments 2.9 (17.5)
Non-controlling interest in respect of the Group adjustments (62.6) (104.6)
Joint venture adjustments:
(Profit)/loss on sale of trading property(2) (13.6) 1.2
(Gain)/loss on revaluation and sale of investment and
development property (0.3) 0.1
Write down of trading property 0.6 0.4
EPRA adjusted earnings/(loss) on continuing operations(3) 6.2 848.7 0.7 (3.5) 846.5 (0.4)
Profit on sale of available-for-sale investments - (0.4)
Other costs - 5.0
Deferred tax adjustments 1.1 (5.0)
Underlying earnings/(loss) from continued operations 7.3 848.7 0.9 (3.9) 846.5 (0.5)
Underlying earnings from discontinued operation 4.1 0.4 15.7 1.9
Underlying earnings(3) 11.4 848.7 1.3 11.8 846.5 1.4
(1) Weighted average number of shares in issue has been adjusted by 2.1 million (2016: 0.3 million) for the issue of bonus shares in connection with
the scrip dividend scheme.
(2) Profit/(loss) on sale of trading property relates to Lillie Square sales and includes GBP3.0 million (2016: GBP1.4 million) of marketing and
selling fees on a Group share basis. Marketing fees include costs for units that have not yet completed.
(3) EPRA earnings and underlying earnings have been reported on a Group share 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
2017 2016
(Loss)/
(Loss)/ earnings Loss
earnings Shares(1) per share Loss Shares(1) per share
GBPm million (pence) GBPm million (pence)
Continuing and discontinued operations attributable
to owners of the Parent
Basic loss (0.4) 848.7 (0.1) (118.6) 846.5 (14.0)
Group adjustments:
Loss on revaluation and sale of investment
and development property 90.9 235.0
Profit on sale of available-for-sale investments - (0.4)
Deferred tax adjustments 0.8 (15.6)
Non-controlling interest in respect of the Group
adjustments (62.6) (104.6)
Joint venture adjustment:
(Gain)/loss on revaluation of investment and development
property (0.3) 0.1
Headline earnings/(loss) 28.4 848.7 3.3 (4.1) 846.5 (0.5)
Dilutive effect of contingently issuable share option
awards - 0.6 - 0.7
Dilutive effect of contingently issuable deferred share
awards - 0.2 - -
Dilutive effect of contingently issuable matching nil cost
options awards - 0.1 - 0.1
Dilutive effect of deferred bonus share option awards - 0.6 - 0.7
Diluted headline earnings/(loss) 28.4 850.2 3.3 (4.1) 848.0 (0.5)
(1) Weighted average number of shares in issue has been adjusted by 2.1 million (2016: 0.3 million) for the issue of bonus shares in connection
with the scrip dividend scheme.
(b) Net assets per share
2017 2016
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 2,799.8 849.1 329.7 2,805.0 846.1 331.5
Effect of dilution on exercise of contingently issuable share
option awards - 0.6 - 0.7
Effect of dilution on vesting of contingently issuable
deferred share awards - 0.2 - -
Effect of dilution on exercise of contingently issuable
matching nil cost option awards - 0.1 - 0.1
Effect of dilution on exercise of deferred bonus share
option awards - 0.6 - 0.7
Diluted NAV 2,799.8 850.6 329.2 2,805.0 847.6 330.9
Group adjustments:
Fair value of derivative financial instruments 5.5 13.7
Unrecognised surplus on trading property - Group - 1.5
Unrecognised surplus on trading property - Joint venture 31.8 46.6
Deferred tax adjustments 1.9 11.5
EPRA NAV 2,839.0 850.6 333.8 2,878.3 847.6 339.6
Fair value of derivative financial instruments (5.5) (13.7)
Excess fair value of debt over carrying value (9.2) (12.4)
Deferred tax adjustments (1.9) (11.5)
EPRA NNNAV 2,822.4 850.6 331.8 2,840.7 847.6 335.1
13 PROPERTY PORTFOLIO
a) Investment and development property
Property portfolio Tenure
Covent Earls Court
Garden Properties Venues Other Total Freehold Leasehold
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2016 1,949.5 1,606.4 295.0 4.4 3,855.3 1,796.9 2,058.4
Additions from acquisitions 85.2 4.6 - - 89.8 75.6 14.2
Additions from subsequent expenditure 68.4 44.5 1.5 - 114.4 53.0 61.4
Disposals - - - (4.4) (4.4) (4.4) -
Gain/(loss) on revaluation(1) 126.1 (357.5) (3.8) - (235.2) (45.7) (189.5)
At 31 December 2016 2,229.2 1,298.0 292.7 - 3,819.9 1,875.4 1,944.5
Additions from acquisitions 99.2 2.1 - - 101.3 14.5 86.8
Additions from subsequent expenditure 78.1 38.9 0.1 - 117.1 72.9 44.2
Sale of discontinued operation - - (292.8) - (292.8) (292.8) -
Disposals (6.2) (2.7) - - (8.9) (8.9) -
Gain/(loss) on revaluation(1) 93.4 (184.3) - - (90.9) 59.4 (150.3)
At 31 December 2017 2,493.7 1,152.0 - - 3,645.7 1,720.5 1,925.2
b) Trading property
Property portfolio Tenure
Covent Earls Court
Garden Properties Venues Other Total Freehold Leasehold
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2016 15.5 - - - 15.5 15.5 -
Additions from subsequent
expenditure 0.3 - - - 0.3 0.3 -
Disposals (12.9) - - - (12.9) (12.9) -
At 31 December 2016(2) 2.9 - - - 2.9 2.9 -
Disposals (2.9) - - - (2.9) (2.9) -
At 31 December 2017(2) - - - - - - -
(1) Loss on revaluation of GBP90.9 million (2016: loss GBP235.2 million) is recognised in the consolidated income statement within loss on
revaluation and sale of investment and development property. This loss is unrealised and relates to assets held at the end of the year.
(2) The value of trading property carried at net realisable value was GBPnil (2016: GBPnil).
c) Market value reconciliation of total property
Covent Earls Court
Garden Properties Venues Total
GBPm GBPm GBPm GBPm
Carrying value of investment and development property at 31
December 2017(1) 2,493.7 1,152.0 - 3,645.7
Adjustment in respect of fixed head leases (6.1) - - (6.1)
Adjustment in respect of tenant lease incentives 57.8 - - 57.8
Market value of investment and development property at 31
December 2017 2,545.4 1,152.0 - 3,697.4
Joint venture:
Carrying value of joint venture investment, development and trading
property at 31 December 2017 - 124.7 - 124.7
Unrecognised surplus on joint venture trading property(2) - 31.8 - 31.8
2.545.4 1,308.5 - 3,853.9
Non-controlling interest adjustment:
Market value of non-controlling interest in investment, development
and trading property at 31 December 2017 - (329.4) - (329.4)
Market value of investment, development and trading property on
a Group share basis at 31 December 2017 2,545.4 979.1 - 3,524.5
Covent Earls Court
Garden Properties Venues Total
GBPm GBPm GBPm GBPm
Carrying value of investment and development property
at 31 December 2016 2,229.2 1,298.0 292.7 3,819.9
Carrying value of trading property at 31 December 2016 2.9 - - 2.9
Carrying value of investment, development and trading property
at 31 December 2016(1) 2,232.1 1,298.0 292.7 3,822.8
Adjustment in respect of fixed head leases (4.1) - - (4.1)
Adjustment in respect of tenant lease incentives 45.3 - - 45.3
Unrecognised surplus on trading property(2) 1.5 - - 1.5
Market value of investment, development and trading property
at 31 December 2016 2,274.8 1,298.0 292.7 3,865.5
Joint ventures:
Carrying value of joint venture investment, development and trading
property at 31 December 2016 - 176.0 - 176.0
Unrecognised surplus on joint venture trading property(2) - 46.6 - 46.6
2,274.8 1,520.6 292.7 4,088.1
Non-controlling interest adjustment:
Market value of non-controlling interest in investment, development
and trading property at 31 December 2016 - (378.5) - (378.5)
Market value of investment, development and trading property on a
Group share basis at 31 December 2016 2,274.8 1,142.1 292.7 3,709.6
(1) Included within investment and development property is GBP3.3 million (2016: GBP1.4 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.
At 31 December 2017, the Group was contractually committed to GBP57.3 million (2016: GBP149.2 million) of future expenditure for
the purchase, construction, development and enhancement of investment, development and trading property. Refer to note 23
'Capital Commitments' for further information on capital commitments.
The fair value of the Group's investment, development and trading property at 31 December 2017 was determined by
independent, appropriately qualified external valuers, JLL for Earls Court Properties (excluding the Empress State Building) and
15-17 Long Acre, and CBRE Ltd 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 Executive Directors, on behalf of the Board, appoint 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 Executive 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. As at 31
December 2017 all Covent Garden properties are valued under the income capitalisation technique. The majority of Earls Court
properties are valued under the residual development approach.
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.
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 22.
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 2017, joint ventures comprise the Lillie Square joint venture ("LSJV"), Innova Investment ("Innova") and The
Great Capital Partnership ("GCP"). On 29 April 2013, the Group exchanged contracts for the disposal of the final asset, Park
Crescent West, in GCP which has since been 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.
2017 2016
LSJV GBPm GBPm
Summarised income statement
Revenue 190.3 5.5
Net rental expense - (0.2)
Gain/(loss) on revaluation of investment and development property 0.6 (0.1)
Proceeds from the sale of trading property 190.1 5.4
Cost of sale of trading property (156.8) (5.1)
Agent, selling and marketing fees (6.1) (2.7)
Write down of trading property (1.2) (0.8)
Administration expenses (4.4) (4.8)
Finance costs(1) (24.9) (21.2)
Other costs - (0.1)
Loss for the year (2.7) (29.6)
(1) Finance costs of GBP23.5 million (2016: GBP21.0 million) 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 an effective interest rate. Finance income receivable to the Group of GBP11.7 million (2016: GBP10.5 million) is
recognised in the consolidated income statement within other finance income.
2017 2016
LSJV GBPm GBPm
Summarised balance sheet
Investment and development property 3.7 3.1
Other non-current assets 4.1 2.1
Trading property 245.7 349.0
Cash and cash equivalents(1) 49.8 74.2
Other current assets 0.7 5.8
Borrowings (63.6) (155.1)
Other non-current liabilities(2) (218.9) (195.4)
Amounts payable to joint venture partners(3) (71.9) (102.1)
Other current liabilities(1) (44.8) (74.2)
Net liabilities (95.2) (92.6)
Capital commitments 14.0 36.4
Carrying value of investment, development and trading property 249.4 352.1
Unrecognised surplus on trading property(4) 63.6 93.2
Market value of investment, development and trading property(4) 313.0 445.3
(1) Includes restricted cash and cash equivalents of GBP30.6 million (2016: GBP59.7 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 GBP30.6 million
(2016: GBP59.7 million) within other current liabilities.
(2) Other non-current liabilities relate to deep discount bonds. Recoverable amounts receivable by the Group, net of impairments, of
GBP100.0 million (2016: GBP97.7 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.
(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.
Innova
On 29 June 2015, the Group acquired a 50 per cent interest in Innova, a joint venture arrangement with Network Rail
Infrastructure Limited ("NRIL"). Total acquisition costs were GBP14.5 million, GBP2.0 million of which is contingent on achieving
consent to develop specific railway sites with NRIL. The joint venture will explore opportunities for future redevelopments on
and around significant railway station sites in London.
Innova comprises Innova Investment Limited Partnership (formerly Solum Developments Limited Partnership) and Innova
Investment GP Limited (formerly Solum Developments (GP) Limited), acting as general partner to the partnership. All major
decisions regarding Innova are taken by the Board of Innova Investment GP Limited, through which the Group shares strategic
control.
The summarised income statement and balance sheet of Innova are presented below.
2017 2016
Innova GBPm GBPm
Summarised income statement
Administration expenses - (0.6)
Loss for the year - (0.6)
2017 2016
Innova GBPm GBPm
Summarised balance sheet
Other receivables 3.1 0.8
Cash and cash equivalents 1.6 0.5
Other current liabilities - (0.5)
Net assets 4.7 0.8
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 Innova Total
GBPm GBPm GBPm GBPm
Net assets/(liabilities) of joint ventures at 31 December 2016 0.1 (92.6) 0.8 (91.7)
Elimination of joint venture partners' interest - 46.3 (0.4) 45.9
Cumulative losses restricted(1) - 46.3 - 46.3
Goodwill on acquisition of joint venture(2) - - 14.5 14.5
Carrying value at 31 December 2016 0.1 - 14.9 15.0
Net assets/(liabilities) of joint ventures at 31 December 2017 0.1 (95.2) 4.7 (90.4)
Elimination of joint venture partners' interest - 47.6 (2.4) 45.2
Cumulative losses restricted(1) - 47.6 - 47.6
Goodwill on acquisition of joint venture(2) - - 14.5 14.5
Carrying value at 31 December 2017 0.1 - 16.8 16.9
(1) Cumulative losses restricted represent the Group's share of losses in LSJV which exceed the Group's investment in the joint venture. As a
result the carrying value of the investment in LSJV is GBPnil (2016: 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 Innova Total
Investment in joint ventures GBPm GBPm GBPm GBPm
At 1 January 2016 0.1 - 14.7 14.8
Loss for the year(1) - (14.8) (0.3) (15.1)
Loss restricted(1) - 14.8 - 14.8
Issue of equity loan notes - - 0.5 0.5
At 31 December 2016 0.1 - 14.9 15.0
Loss for the year(1) - (1.3) - (1.3)
Loss restricted(1) - 1.3 - 1.3
Issue of equity loan notes - - 1.9 1.9
At 31 December 2017 0.1 - 16.8 16.9
(1) Share of post-tax loss from joint ventures in the consolidated income statement of GBPnil (2016: loss of GBP0.3 million) comprises loss for
the year of GBP1.3 million (2016: GBP15.1 million) and loss restricted totalling GBP1.3 million (2016: GBP14.8 million).
15 NON-CONTROLLING INTEREST
TTL Earls Court Properties Limited, a subsidiary of TfL, holds a 37 per cent non-controlling interest in ECPL, a subsidiary of the
Group. The principal place of business of ECPL is within the UK.
The accumulated non-controlling interest is presented below.
2017 2016
GBPm GBPm
At 1 January 368.2 468.8
Loss and total comprehensive expense for the year attributable to non-controlling interest (62.7) (104.9)
Unsecured loan notes issued to non-controlling interest 0.3 4.3
At 31 December 305.8 368.2
Unsecured, non-interest bearing loan notes have been issued by ECPL to TTL Earls Court Properties Limited. 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 (2016: less
than GBP0.1 million) and therefore GBP402.9 million (2016: GBP402.6 million) has been classified as equity.
Set out below is summarised financial information, before intercompany eliminations, for ECPL.
2017 2016
ECPL GBPm GBPm
Summarised income statement
Net rental income 1.8 1.2
Administrative expenses (2.1) (2.5)
Loss on revaluation of investment and development property (169.2) (298.2)
Taxation - 15.9
Loss for the year after taxation (169.5) (283.6)
2017 2016
ECPL GBPm GBPm
Summarised balance statement
Investment and development property 890.0 1,022.8
Cash at bank and at hand 5.4 9.4
Other current assets 0.4 1.3
Other non-current assets 0.5 0.8
Other current liabilities (8.5) (7.6)
Borrowings (61.4) (31.5)
Net assets 826.4 995.2
2017 2016
ECPL GBPm GBPm
Summarised cash flows
Operating cash inflow/(outflow) after interest and tax 0.5 (4.8)
Purchase and development of property, plant and equipment (34.0) (45.6)
Net cash outflow before financing (33.5) (50.4)
Financing(1) 29.5 32.0
Net cash outflow (4.0) (18.4)
(1) Financing comprises GBP0.8 million (2016: GBPnil) of unsecured, non-interest bearing loan notes and GBP28.7 million (2016: GBP32.0 million) of
external borrowings.
16 TRADE AND OTHER RECEIVABLES
2017 2016
GBPm GBPm
Non-current
Other receivables(1) 71.1 55.3
Prepayments and accrued income(2) 53.4 41.8
Amounts receivable from joint ventures(3) 100.0 97.7
Trade and other receivables 224.5 194.8
Current
Rent receivable 3.3 7.9
Other receivables 16.4 14.6
Prepayments and accrued income(2) 13.4 18.3
Amounts receivable from joint ventures(4) - 7.0
Trade and other receivables 33.1 47.8
(1) Includes GBP60.0 million (2016: GBP45.0 million) payment to LBHF which forms part of the CLSA.
(2) Includes tenant lease incentives of GBP57.8 million (2016: GBP45.3 million).
(3) 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. This balance has been impaired by GBP9.5 million (2016: GBPnil).
(4) Current amounts receivable from joint ventures comprise working capital funding advanced by the Group to LSJV and Innova. This balance has been
impaired by GBP38.1 million (2016: GBP46.3 million).
17 CASH AND CASH EQUIVALENTS
2017 2016
GBPm GBPm
Cash at hand 8.0 8.1
Cash on short-term deposit 20.6 16.8
Unrestricted cash and cash equivalents 28.6 24.9
Restricted cash and cash equivalents(1) - 6.0
Cash and cash equivalents 28.6 30.9
(1) Restricted cash and cash equivalents relate to amounts placed on deposit in accounts which are subject to withdrawal conditions.
18 TRADE AND OTHER PAYABLES
2017 2016
GBPm GBPm
Rent received in advance 18.4 23.9
Accruals and deferred income 32.2 35.3
Trade payables - 1.0
Other payables 15.4 15.6
Other taxes and social security 3.1 2.5
Trade and other payables 69.1 78.3
19 BORROWINGS, INCLUDING FINANCE LEASES
2017
Carrying Fixed Floating Fair Nominal
value Secured Unsecured rate rate value value
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Current
Finance lease obligations 0.7 0.7 - 0.7 - 0.7 0.7
Borrowings, including finance leases 0.7 0.7 - 0.7 - 0.7 0.7
Non-current
Bank loans 223.4 61.4 162.0 - 223.4 227.1 227.1
Loan notes 547.4 - 547.4 547.4 - 552.9 550.0
Borrowings 770.8 61.4 709.4 547.4 223.4 780.0 777.1
Finance lease obligations 5.4 5.4 - 5.4 - 5.4 5.4
Borrowings, including finance leases 776.2 66.8 709.4 552.8 223.4 785.4 782.5
Total borrowings, including finance leases 776.9
Cash and cash equivalents (28.6)
Net debt 748.3
2016
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 loans 500.8 153.6 347.2 - 500.8 505.9 505.9
Loan notes 323.4 - 323.4 323.4 - 330.7 325.0
Borrowings 824.2 153.6 670.6 323.4 500.8 836.6 830.9
Finance lease obligations 3.6 3.6 - 3.6 - 3.6 3.6
Borrowings, including finance leases 827.8 157.2 670.6 327.0 500.8 840.2 834.5
Total borrowings, including finance leases 846.3 175.7 670.6 327.5 518.8 858.7 853.0
Cash and cash equivalents (30.9)
Net debt 815.4
20 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES
2017 Restated 2016
(Loss)/gain Gain to other Loss Loss to other
Carrying to income comprehensive Carrying to income comprehensive
value statement income value statement income
Note GBPm GBPm GBPm GBPm GBPm GBPm
Derivative financial assets - (0.1) - 0.2 (2.4) -
Total held for trading assets - (0.1) - 0.2 (2.4) -
Cash and cash equivalents 17 28.6 - - 30.9 - -
Other financial assets(1) 16 188.1 - - 189.5 - -
Total cash and other financial assets 216.7 - - 220.4 - -
Available-for-sale investments - - - - - (0.2)
Total available-for-sale investments - - - - - (0.2)
Derivative financial liabilities (5.5) 4.4 - (13.9) (10.7) -
Total held for trading liabilities (5.5) 4.4 - (13.9) (10.7) -
Borrowings, including finance leases 19 (776.9) - - (846.3) - -
Other financial liabilities(2) (71.2) - - (79.6) - -
Total borrowings and other financial
liabilities (848.1) - - (925.9) - -
(1) The comparative has been restated to remove a non-financial asset.
(2) Includes trade and other payables and tax liabilities.
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 valuation 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.
The tables below present the Group's financial assets and liabilities recognised at fair value at 31 December 2017 and 31
December 2016. There were no transfers between levels during the year.
2017 2016
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Derivative financial assets
Total assets - - - - - 0.2 - 0.2
Derivative financial liabilities
Total liabilities - (5.5) - (5.5) - (13.9) - (13.9)
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.
The fair values of the Group's cash and cash equivalents, other financial assets and other financial liabilities are not materially
different from those at which they are carried in the financial statements.
21 DEFERRED TAX
The decrease in corporation tax rate referred to in note 9 'Taxation' has been 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 position on investment and development property as calculated under IAS 12 is GBPnil at 31
December 2017 (2016: GBPnil). 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 GBPnil (2016: GBPnil).
A disposal of the Group's trading properties at their market value as per note 13 'Property Portfolio', net of available losses
would result in a corporation tax charge to the Group of GBP1.6 million (19.25 per cent of GBP8.3 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 2016 13.7 15.6 (0.4) (5.7) (3.7) 19.5
Adjustments in respect of previous years 0.1 - - - 0.1 0.2
Recognised in income 0.8 (14.7) (2.4) 4.8 (5.6) (17.1)
Recognised in other comprehensive income - - (0.3) (0.3) - (0.6)
Recognised directly in equity - - - 1.6 - 1.6
Adjustment in respect of rate change - (0.9) - - - (0.9)
At 31 December 2016 14.6 - (3.1) 0.4 (9.2) 2.7
Adjustments in respect of previous years - - - - (0.2) (0.2)
Recognised in income 1.0 - 1.9 0.7 1.6 5.2
Recognised directly in equity - - - 0.2 - 0.2
Released on discontinued operation (12.6) - - (3.1) - (15.7)
At 31 December 2017 3.0 - (1.2) (1.8) (7.8) (7.8)
Unprovided deferred tax assets:
At 1 January 2017 - (35.9) - - (13.9)
Movement during the year - (28.8) - - 5.2
At 31 December 2017 - (64.7) - - (8.7)
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.
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 2016 841,988,945 210.5 211.1
Scrip dividend - 2015 final June 338 1,275,480 0.3 4.0
Scrip dividend - 2016 interim September 293 303,831 0.1 -
Share-based payment(1) 2,553,451 0.6 -
At 31 December 2016 846,121,707 211.5 215.1
Scrip dividend - 2016 final May 290 1,653,429 0.4 4.8
Scrip dividend - 2017 interim September 268 443,695 0.1 1.2
Share-based payment(2) 841,315 0.2 -
At 31 December 2017 849,060,146 212.2 221.1
(1) In 2016 a total of 2,553,451 new shares were issued to satisfy employee share scheme awards.
(2) In 2017 a total of 841,315 new shares were issued to satisfy employee share scheme awards.
At 20 February 2018, the Company had an unexpired authority to repurchase shares up to a maximum of 84,612,170 shares
with a nominal value of GBP21.2 million, and the Directors had an unexpired authority to allot up to a maximum of 561,419,932
shares with a nominal value of GBP140.4 million of which 281,758,528 with a nominal value of GBP70.4 million can only be allotted
pursuant to a fully pre-emptive rights issue.
23 CAPITAL COMMITMENTS
At 31 December 2017, the Group was contractually committed to GBP57.3 million (2016: GBP149.2 million) of future expenditure for
the purchase, construction, development and enhancement of investment, development and trading property. Of the GBP57.3
million committed, GBP42.2 million is committed 2018 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 GBP75.0 million of the GBP105.0 million cash consideration payable
under the CLSA. The residual GBP30.0 million will be settled in two annual instalments of GBP15.0 million with the next payment due
on 31 December 2018.
The Group's share of joint venture capital commitments arising on LSJV amounts to GBP7.0 million (2016: GBP18.2 million).
24 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 GBP55.0 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 23 '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. 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. Any further payments to Network Rail will be treated as contingent rent within finance lease obligations.
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.
25 CASH FLOW INFORMATION
The table below presents the cash generated from/used in continuing operations:
Re-presented
2017 2016
Continuing operations Note GBPm GBPm
Loss before tax (62.5) (251.4)
Adjustments:
Profit on sale of trading property 3 (0.9) (5.6)
Loss on revaluation and sale of investment and development property 4 90.9 231.2
Profit on sale of available-for-sale investments - (0.4)
Impairment of other receivables 5 1.3 14.8
Other costs 6 - 5.0
Depreciation 1.9 1.4
Amortisation of tenant lease incentives and other direct costs (2.3) 2.0
Share-based payment(1) 2.0 1.1
Finance income 7 (0.8) (0.3)
Finance costs 8 19.9 19.6
Other finance income 7 (11.7) (10.5)
Other finance costs 8 - 5.3
Change in fair value of derivative financial instruments (4.3) 13.0
Change in working capital:
Change in trade and other receivables (32.5) (39.6)
Change in trade and other payables 4.8 (5.1)
Cash generated from/used in continuing operations 5.8 (19.5)
(1) Includes GBP2.0 million (2016: GBP1.1 million) relating to the IFRS 2 'Share-based payment' charge.
The table below presents the cash generated from discontinued operation:
Period Year
ended ended
7 April 31 December
2017 2016
Discontinued operation Note GBPm GBPm
Profit before tax 10 6.1 11.1
Adjustments:
Loss on revaluation of investment and development property 10 - 3.8
Profit on disposal of discontinued operation (2.1) -
Depreciation 0.1 0.4
Finance costs 0.4 -
Change in fair value of derivative financial instruments 0.1 0.1
Change in working capital: -
Change in trade and other receivables 1.7 (1.3)
Change in trade and other payables 1.7 (2.3)
Cash generated from discontinued operation 8.0 11.8
The table below sets out the reconciliation of movements of liabilities to cash flows arising from financing activities:
Derivative Total liabilities
Long-term Short-term financial from financing
borrowings borrowings instruments activities
Note GBPm GBPm GBPm GBPm
Balance at 1 January 827.8 18.5 13.9 860.2
Cash flows from financing activities
Proceeds from loans and borrowings 558.7 - - 558.7
Repayment of borrowings (563.5) (12.0) - (575.5)
Sale of discontinued operation (50.0) (6.0) - (56.0)
Facility fees capitalised (2.0) - - (2.0)
Termination of derivatives - - (4.1) (4.1)
Total cash flows used in financing activities (56.8) (18.0) (4.1) (78.9)
Non-cash movements from financing activities
Sale of discontinued operation 1.1 - - 1.1
Facility fees written off 1.4 - - 1.4
Finance lease additions 1.8 0.2 - 2.0
Changes in fair value 20 - - (4.3) (4.3)
Borrowing costs capitalised 0.9 - - 0.9
Total non-cash flows from financing activities 5.2 0.2 (4.3) 1.1
Balance at 31 December 776.2 0.7 5.5 782.4
26 RELATED PARTY TRANSACTIONS
Transactions with Directors
2017 2016
Key management compensation(1) GBPm GBPm
Salaries and short-term employee benefits 3.3 2.8
Share-based payment 1.3 0.5
4.6 3.3
(1) Key management comprises the Directors of the Company who have been determined to be the only individuals with authority and responsibility
for planning, directing and controlling the activities of the Company.
Transactions between the Group and its joint ventures
Transactions during the year between the Group and its joint ventures, which are related parties, are disclosed in notes 14
'Investment in Joint Ventures', 16 'Trade and other receivables' and 23 'Capital commitments'. During the year the Group
recognised management fee income of GBP3.8 million (2016: GBP4.6 million) that was earned on an arm's length basis.
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, and at 31 December 2016 had paid deposits
totalling GBP145,000. Legal completion occurred during 2017 with a net amount of GBP579,000 received, reflecting
application of a standard legal fee incentive and a specification enhancement.
- 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, and at 31 December 2016 had paid deposits totalling
GBP171,000. Legal completion occurred during 2017 with a net amount of GBP683,000 received, reflecting application of a
standard legal fee incentive and a specification enhancement.
- 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, and at 31 December 2016
had paid deposits totalling GBP399,800. Legal completion occurred during 2017 with a net amount of GBP1,596,850
received, reflecting application of a standard legal fee incentive.
- In April 2014 Situl Jobanputra, Chief Financial Officer of Capital & Counties Properties PLC, together with a family
member exchanged contracts to acquire an apartment for a purchase price of GBP710,000, and at 31 December 2016
had paid deposits totalling GBP142,000. Legal completion occurred during 2017 with a net amount of GBP566,250 received,
reflecting application of a standard legal fee incentive.
- 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. During construction plans were altered and the
two apartments were combined into one apartment. Discussions are being undertaken to vary the terms of the
contracts.
- 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. During construction plans were altered and the two apartments were
combined into one apartment. Discussions are being undertaken to vary the terms of the contracts.
- Upon legal completion of the above transactions, the Directors are required to pay annual ground rent and insurance
premium fees and bi-annual service charge fees. During 2017 GBP13,178 has been received in relation to these
charges. Certain payments in relation to these charges are made in advance and GBP3,427 has therefore been received
for 2018 as at 31 December 2017.
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.
ANALYSIS OF PROPERTY PORTFOLIO (UNAUDITED)
1. PROPERTY DATA AS AT 31 DECEMBER 2017
Market
value
GBPm Ownership
Covent Garden 2,545.4 100%
Earls Court Properties
ECPL 560.7 63%
Lillie Square 156.5 50%
Empress State 220.0 100%
Other 41.9 100%
Earls Court Properties (Group share) 979.1
Group share of total property 3,524.5
Investment and development property 3,369.8
Trading property 154.7
2. ANALYSIS OF CAPITAL RETURN FOR THE YEAR
Market Market Revaluation
value value gain/(loss)(1)
31 December 31 December 31 December
2017 2016 2017 Increase/
Like-for-like capital GBPm GBPm GBPm (decrease)
Covent Garden 2,453.7 2,265.5 99.0 4.3%
Earls Court Properties 977.4 978.0 (130.7) (11.8)%
Total like-for-like capital 3,431.1 3,243.5 (31.7) (0.9)%
Investment and development property 3,276.4 3,183.8 (22.0) (0.7)%
Trading property 154.7 59.7 (9.7) (5.9)%
Non like-for-like capital
Acquisitions 93.4 - (5.9)
Disposals - 466.1 -
Group share of total property 3,524.5 3,709.6 (37.6) (1.1)%
Investment and development property 3,369.8 3,484.1 (27.9) (0.8)%
Trading property 154.7 225.5 (9.7)(2) (5.9)%
All property
Covent Garden 2,545.4 2,274.8 93.4 3.9%
Earls Court Properties 979.1 1,142.1 (131.0) (11.8)%
Venues - 292.7 - -
Group share of total property 3,524.5 3,709.6 (37.6) (1.1)%
(1) Revaluation gain/(loss) 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. ANALYSIS OF NET RENTAL INCOME FOR THE YEAR
2017 2016 Increase/
Like-for-like net rental income from continuing operations GBPm GBPm (decrease)
Covent Garden 43.2 38.8 11.3%
Earls Court Properties 18.0 17.0 5.4%
Other (0.5) (0.5) (15.3)%
Total like-for-like net rental income 60.7 55.3 9.8%
Like-for-like investment and development property 60.7 55.3 9.8%
Like-for-like trading property - - -
Non like-for-like net rental income
Acquisitions 0.2 -
Developments 2.0 1.8
Prior year acquisitions (like-for-like capital) 3.3 0.8
Group share of total net rental income 66.2 57.9 14.4%
Investment and development property 66.3 58.0 14.2%
Trading property (0.1) (0.1)
All property
Covent Garden 48.9 41.5 17.8%
Earls Court Properties(1) 17.8 16.8 5.5%
Other (0.5) (0.4) (1.1)%
Group share of total net rental income 66.2 57.9 14.4%
(1) ERV of the Empress State Building is GBP17.0 million.
4. ANALYSIS OF COVENT GARDEN BY USE
31 December 2017
Weighted Net
Initial Nominal Passing average Market area
yield equivalent rent(2) Occupancy unexpired value ERV million
(EPRA) yield GBPm rate lease years GBPm GBPm Sq ft
Retail 1,893.3 76.1 0.6
Office 293.5 15.8 0.2
Residential 127.9 3.5 0.2
Other(1) 230.7 9.4 0.1
Total 2.10% 3.56% 58.9 97.5% 7.6 2,545.4 104.8 1.1
(1) Consists of property where the highest and best use valuation differs from the current use.
(2) Non-leased income of GBP1.3 million is added to passing rent to arrive at gross income.
CONSOLIDATED UNDERLYING PROFIT STATEMENT
For the year ended 31 December 2017
Re-presented(1)
2017 2016
Group share GBPm GBPm
Continuing operations:
Net rental income 66.2 57.9
Other income 2.3 2.7
Administration expenses (38.7) (41.9)
Operating profit 29.8 18.7
Finance costs (20.6) (19.8)
Finance income 0.8 0.3
Net finance costs (19.8) (19.5)
Profit/(loss) before tax 10.0 (0.8)
Taxation (2.7) (3.1)
Underlying earnings/(loss) from continuing operations 7.3 (3.9)
Underlying earnings from discontinued operation 4.1 15.7
Underlying earnings 11.4 11.8
Underlying earnings/(loss) per share (pence):
From continuing operations 0.9 (0.5)
From discontinued operation 0.4 1.9
Underlying earnings per share (pence) 1.3 1.4
Weighted average number of shares 848.7m 846.5m
(1) The prior year comparatives have been re-presented to separate out continuing and discontinued operations.
FINANCIAL COVENANTS
For the year ended 31 December 2017
Financial covenants on non-recourse debt
31 December 2017
Loan(s) outstanding
at 31 December Interest
2017(1) LTV cover
Group share Maturity GBPm covenant covenant
Covent Garden(2) 2022 - 2037 715.0 60% 120%
ECPL 2026 39.1 40% n/a
Lillie Square 2019 31.9 75% n/a
Total 786.0
(1) The loan values are the nominal values at 31 December 2017 shown on a Group share basis. The balance sheet value of the loans includes any
unamortised fees.
(2) Covent Garden comprises GBP705 million Revolving Credit Facility ("RCF") maturing in 2022 with GBP165 million drawn and GBP550 million Private
Placement unsecured notes maturing between 2024 and 2037.
DIVIDENDS
The Directors of Capital & Counties Properties PLC have proposed a final dividend per ordinary share (ISIN GB00B62G9D36)
of 1.0 pence payable on 23 May 2018.
Dates
The following are the salient dates for payment of the proposed final dividend:
Sterling/Rand exchange rate struck 9 April 2018
Sterling/Rand exchange rate and dividend amount in Rand announced 10 April 2018
Ordinary shares listed ex-dividend on the JSE, Johannesburg 18 April 2018
Ordinary shares listed ex-dividend on the London Stock Exchange 19 April 2018
Record date for final dividend in UK and South Africa 20 April 2018
Election date for scrip dividend alternative (SA) by noon: 20 April 2018
Election date for scrip dividend alternative (UK) by 5:30pm: 27 April 2018
Annual General Meeting 4 May 2018
Dividend payment date for shareholders 23 May 2018
South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-
dividend will be 17 April 2018 and that no dematerialisation of shares will be possible from 18 April 2018 to 20 April 2018
inclusive. No transfers between the UK and South Africa registers may take place from 9 April 2018 to
20 April 2018 inclusive.
Subject to SARB approval, the Board intends to offer an optional scrip dividend alternative in respect of the 2017
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 20 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.
GLOSSARY
Alternative Performance Measure (APM)
A financial measure of historical or future financial performance, position or cash flows of the Group which is not a measure
defined or specified in IFRS.
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".
CLSA
Conditional Land Sale Agreement, an agreement with LBHF relating to its land in the Earls Court and West Kensington
Opportunity Area.
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 London Borough of
Hammersmith & Fulham and Royal Borough of Kensington & Chelsea.
Earls Court Masterplan
The Earls Court Masterplan, created by Sir Terry Farrell and Partners, is the consented scheme for the transformation of Earls
Court and West Kensington Opportunity Area. The London Borough of Hammersmith & Fulham and The Royal Borough of
Kensington & Chelsea formally 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.
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.
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.
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 earnings
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.
EPRA earnings per share
EPRA earnings divided by the weighted average number of shares in issue during the year.
EPRA net asset value (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 net asset value per share
EPRA net asset value divided by the diluted number of ordinary shares.
EPRA net initial yield
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.
EPRA triple net asset value (NNNAV)
EPRA 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.
ESB
Empress State Building.
Estimated rental value (ERV)
The external valuers' estimate of the open market rent which, on the date of valuation, could reasonably be expected to be
obtained on a new letting or rent review of the property.
GCP
The Great Capital Partnership is a 50 per cent joint venture between Capital & Counties Limited and Great
Portland Estates PLC.
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.
IFRS
International Financial Reporting Standards.
Innova
Innova Investment Limited Partnership is a 50 per cent joint venture between the Group and Network Rail
Infrastructure Limited.
IPD
Investment Property Databank Limited, 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.
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 Group's net debt divided by the carrying value of the Group's property portfolio.
LSJV
The Lillie Square joint venture is a 50 per cent joint venture between the Group and Kwok Family Interests.
NAV
Net Asset Value.
NAV per share
Net Asset Value attributable to owners of the Parent per share. The Group considers this presentation to provide useful
information as it presents the value attributable to each share.
Net debt
Total borrowings less cash and cash equivalents.
NIA
Net Internal Area.
Net rental income (NRI)
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
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. This is equivalent to 100 per cent less the EPRA vacancy rate.
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
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. Contracted annual rents in respect of tenants in administration are excluded.
RBKC
Royal Borough of Kensington and Chelsea.
SAICA
South African Institute of Chartered Accountants.
SARB
South African Reserve Bank.
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 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 Group share 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: 21/02/2018 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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