Interim Report for the Half Year Ended 30 June 13

30 July 2013

CAPITAL & COUNTIES PROPERTIES PLC ("Capco")

INTERIM REPORT FOR THE SIX MONTHS ENDED 30 June 2013

Ian Hawksworth, Chief Executive of Capco commented: "We have seen strong progress at Capco in the first half of 2013 which has delivered excellent total returns for our shareholders. Value has grown at Covent Garden through the creative asset management strategy, with a number of key lettings in the period including Dior and the opening of Shake Shack. The outline planning process for the Earls Court Masterplan is nearly complete following the Mayor of London's endorsement, and the land assembly is well advanced with the acquisition of Empress State and the recent progress with Transport for London."

Strong valuation performance providing superior shareholder returns

-       14 per cent increase in EPRA adjusted, diluted NAV to 232 pence per share (Dec 2012: 203 pence)

-       13 per cent (like-for-like) increase in total property value to £2.1 billion (Dec 2012: £1.7 billion)

-       Proposed interim 2013 dividend of 0.5 pence per share

-       15 per cent total return in the period

Value growth through continued transformation at Covent Garden

-       Total property value of £1.1 billion up 14.1 per cent (like-for-like) (Dec 2012: £952 million)

-       New lettings at 9.1 per cent above ERV

-       ERV £55.9 million up 6.9 per cent (on a like-for-like basis), on target for ERV of £60-65 million by end of 2015

-       12 new retailers and restaurants have taken space in the first 6 months, including Dior, Y-3 and Shake Shack

-       Kings Court planning applications for a new mixed use development submitted in May

Value creation at Earls Court through planning and land assembly

-       Earls Court interests valued at £417 million, up 18.5 per cent (like-for-like) (Dec 2012: £336 million)

-       Mayor of London consent for the Earls Court Masterplan and the Section 106 agreement

-       Agreement with TfL to pursue proposals to settle heads of terms for a joint venture regarding Earls Court 1 and 2

-       Completion of land deal with Network Rail in regards to its air space over the West London Line

-       Secretary of State consent for land deal with London Borough of Hammersmith & Fulham

-       Contracts exchanged on the 50 per cent of the Empress State Building not already owned for £117 million

Momentum at Lillie Square

-       Lillie Square valued at £125 million (our share), up 16.9 per cent (like-for-like) (Dec 2012: £104 million)

-       Design amendments to enhance the Lillie Square scheme submitted to LBHF for approval

Strong financial position

-       LTV 14% (Dec 2012: 10%)

-       Cash and available facilities of £344 million (Dec 2012: £401 million)

-       Further capital recycled with contracts exchanged for the sale of the final asset in The Great Capital Partnership

Financial Highlights 

	Comprising	June 2013	December 2012
15% Total return for the 6 months to 30 June 2013
EPRA adjusted net asset value		£1,785m	£1,553m
EPRA adjusted net asset value per share	14%	232p	203p
Dividend per share paid during the period	1%	1.0p	1.5p
14% Total property return for the 6 months to 30 June 2013
Total property portfolio	12%	£2,071m	£1,721m
Profits on disposal	-	£5m	£35m
Net rental income	2%	£32.2m	£65.3m
Underlying earnings per share		0.6p	1.8p

 

Outlook

Capco remains well positioned to create and grow value, driving superior shareholder returns through its focus on retail and residential properties in central London.

The volatility within the capital markets over the past few months illustrates the continued uncertainty of the macroeconomic outlook. Nevertheless, demand for prime assets within central London continues to be very strong, with a deep pool of domestic and foreign buyers. Rental growth remains underpinned by requirements for new space on central London's prime pitches from retailers and restaurants.

Covent Garden has again demonstrated its appeal to global brands, and this is expected to continue to drive rental growth towards the 2015 ERV target of £60-65 million. The Kings Court and Carriage Hall scheme is intended to improve circulation and rental values on the western end of the estate, and Capco looks forward to a decision from Westminster City Council which would allow it to progress the scheme in 2014.

The Earls Court Masterplan continues to move forward. Following the recent news of progress with TfL, we look forward to finalising the agreement in the second half of 2013. Alongside this process, the detailed planning applications will allow Capco to consider the first stages of the implementation of the Earls Court Masterplan within the Earls Court Village and North End Village on the eastern and western sides of the site respectively.

Lillie Square will provide the first evidence of the demand for premium residential product in the Earls Court area, and the partners are focused on achieving a successful sales launch.

Enquiries

Capital & Counties Properties PLC
Ian Hawksworth	Chief Executive	+44 (0)20 3214 9188
Soumen Das	Finance Director	+44 (0)20 3214 9183
Public relations
UK: Michael Sandler/Wendy Baker, Hudson Sandler		+44 (0)20 7796 4133
SA: Nicholas Williams/Vanessa Hillary, College Hill Associates		+27 (0)11 447 3030

 

A presentation to analysts and investors will take place today at 9:00am BST at UBS, 100 Liverpool Street, London, EC2M 2RH. The presentation will also be available to international analysts and investors through a live audio call and webcast and after the event on the Group's website www.capitalandcounties.com.

A copy of this announcement is available for download from our website at www.capitalandcounties.com and hard copies can be requested via the website or by contacting the company (email [email protected] or telephone +44 (0)20 3214 9153).

OPERATING REVIEW 

Overview

Capco is a property company with a focus on central London which aims to deliver market-leading total returns through value growth at Covent Garden and value creation at Earls Court. Capco unlocks the potential of its assets through an entrepreneurial and active asset management strategy creating sustainable long-term value for shareholders.

Capco is focused on the retail and residential markets of central London which continue to perform well. The London retail market has remained positive, with anecdotal evidence of strong retail sales growth in the West End over recent months. International retailers are still looking for space in the prime retail streets in London with several flagship stores opening in 2013, therefore demand remains strong for high quality space in high footfall locations. The residential market has also performed well with an increase in volumes.

Valuations

The external valuation of Capco's assets has risen strongly in the first half of the year, with the portfolio valued at £2.1 billion, a like-for-like increase of 13.3 per cent. This compares favourably with the IPD index of UK property which fell 0.4 per cent in the period.

	Market         Value        Jun-13             £m	Market Value  Dec-12 £m	Market Value Change 1,2	ERV Change 1	Initial Yield	Equivalent Yield
Covent Garden	1,101	952	14.1%	6.9%	3.3%	4.8%
EC Properties
Earls Court	417	336	18.5%
Lillie Square 3	125	104	16.9%
Empress State 4	234	110	6.4%
Other	47	25	18.3%
Venues	147	146	(2.5)%
Other 5	-	48	-
Total property	2,071	1,721	13.3%

 

 1 Like-for-Like.

 2 Valuation change takes account of amortisation of lease incentives, capital expenditure and fixed head leases.

 3 Represents Capco's 50 per cent share.

 4 Previously shown as 50 per cent, prior to acquisition of control in May 2013.

 5 GCP (Capco's 50 per cent share).

Covent Garden has been revalued at £1.1 billion, with the strong letting performance in the first half reflected in the ERV growth. The equivalent yield has reduced by 0.3 per cent reflecting the continued demand for prime investment assets in central London.

The land interests within EC Properties have shown positive valuation movement in the first half of 2013, due to the positive milestones achieved in the planning and land assembly process, as well as the strong conditions in the central London residential market. 

COVENT GARDEN

Covent Garden has become a world class destination as a result of the first stage transformation under Capco's management. The next objective is to establish Covent Garden as the best retail and residential district in the capital, allowing shareholders to benefit from the growth in capital values and rents.

In the first six months of the year, value growth in the Covent Garden estate has continued, with the estate valued at £1.1 billion, an increase of 14.1 per cent on a like-for-like basis. ERV has increased to £55.9 million, a like-for-like increase of 6.9 per cent and the estate remains on target to reach £60-65 million of ERV by December 2015. Gross income at 30 June 2013 was £39.4 million.

Year to date, 33 letting transactions (excluding those with non-standard terms such as development breaks) representing £4.2 million of rental income per annum were executed at 9.1 per cent above ERV at the point of the lease activity. Footfall remains consistently strong with 44 million visits annually and the estate maintains 99 per cent occupancy.

 

Retail

In line with the strategy to grow the premium retail offering in the area, and following the success of the Chanel boutique, French fashion house Dior will be opening a new luxury beauty concept store, setting a new Zone A rent of over £500psf for the north range of the Market Building. Continuing the beauty trend in the area, Aveda will be taking space on Russell Street and Australian skincare brand Aesop opened its doors in July on King Street. In addition to the luxury beauty offering in the Market Building, premium stationary brand Il Papiro took Unit 14 in the Market Building in June.

King Street also welcomed Twenty8Twelve and Sandro which opened in February and July respectively and Brazilian footwear brand Galeria Melissa will be opening a flagship store in 43 King Street in early 2014. Cult yogawear brand lululemon athletica opened a showroom and yoga studio on Floral Street in April and will be joined by luxury sportswear concept Y-3 in September.

Dining

In July Covent Garden welcomed Danny Meyer's American burger phenomenon Shake Shack to the Market Building, taking space previously occupied by New York Deli and the Icecreamists. It is the first in the UK and opened to hour-long queues. It has enhanced footfall to the area, furthering the estate's reputation as the neighbourhood for destination dining.

Godiva, the luxury chocolatier, has taken Unit 2 in the Market Building and will be opening in the coming months. Premium coffee house, Andronicas, will be taking a second location on Floral Street following the ongoing success of its location in the Market Building. Following its opening in February, Keith McNally's Balthazar and the Balthazar Boulangerie continue to be a destination for Londoners and visitors alike.

Residential

In line with the strategy of introducing luxury residential to Covent Garden, The Russell was launched in April. The second office-to-residential conversion, The Russell comprises two duplex penthouses and three lateral apartments which overlook the Piazza. The first sale completed in May with a 9 per cent increase on the price per square foot achieved at The Henrietta and interest in the remaining apartments remains high. Work is continuing on site at The Beecham, another landmark building on the south-west corner of the Piazza, and The Southampton, both of which will come to market in 2014.

Future developments and acquisitions

The acquisition of a 125 year lease over 38 King Street was completed in January 2013 from the Trustees of the Africa Centre.

In May a series of planning applications were submitted to Westminster City Council for the creation of a new mixed-use development between Floral Street and King Street. The proposed development, known as Kings Court, covers over 90,000 square feet, of which 20,000 square feet is new space. In addition, a planning application was submitted for the refurbishment of Carriage Hall. Comprehensive public consultation has been undertaken regarding the proposals with stakeholders in the Covent Garden area including the Covent Garden Area Trust, local ward councillors, planning officers, retailers and residents.

The proposals enhance the retail offering on Floral Street including a new retail anchor, and will create a new retail passage connecting Long Acre and King Street which aims to improve pedestrian movement in the district and opens the existing courtyard area to the public. High quality new residential space will be created on the upper levels with views over the courtyard and retail and restaurant space on the ground level. 

EARLS COURT MASTERPLAN

Capco's interests on the eastern side of the Masterplan, covering 23 acres, comprise the leasehold interests of the Earls Court Exhibition Centres and the freehold of the Northern Access Road. Progress in the planning and land assembly process along with the strong conditions in the central London residential market have resulted in a considerable uplift in the valuation of these interests. At 30 June these interests were valued at £417 million, an increase of 18.5 per cent since December 2012 on a like-for-like basis. This implies a value of £18.4 million per acre. In arriving at their valuation of Capco's interests, the external valuers have taken into account the terms of the joint venture structure announced on 18 July following Transport for London's ("TfL") Finance & Policy Committee meeting.

The land relating to the Conditional Land Sale Agreement ("CLSA") has not been revalued, as this remains subject to a detailed process with the first tranche of land drawdown not before December 2015. The £15 million paid originally for the Exclusivity Agreement is now held as a prepayment against a future trigger of the option, whilst the properties acquired earlier this year after signing the CLSA are accounted for as investment properties and accordingly were revalued as at 30 June.

Empress State has been revalued to £234 million, an increase of 6.4 per cent on a like-for-like basis since 31 December 2012.

Planning momentum

The outline planning process for the Earls Court Masterplan, one of the largest regeneration projects in London, is now almost complete.

In July, the Mayor of London formally completed his review of the Earls Court Masterplan outline planning applications and the Section 106 agreement and confirmed his acceptance that the outline planning applications be granted by the London Borough of Hammersmith & Fulham ("LBHF") and the Royal Borough of Kensington & Chelsea ("RBKC"). This follows the resolutions to grant consent from both councils in 2012. The next step in the process is the current review by the Secretary of State for the Department of Communities and Local Government ("DCLG") of the outline planning applications and the Section 106 agreement to determine whether to call them in.  The Section 106 agreement is the package of benefits to the local area that will be delivered as the implementation of the Masterplan is progressed.

A judicial review hearing was held in July in relation to the Supplementary Planning Document ("SPD"). The SPD is an additional planning framework which supported the existing and approved LBHF and RBKC Core Strategies in regard to the regeneration of the Earls Court & West Kensington Opportunity Area ("ECOA"). A decision has not yet been made. The risk of further judicial challenge against planning decisions or land assembly cannot be discounted and will in part depend on the outcome of the existing judicial review.

Work is currently underway on detailed planning applications covering the Earls Court Village and the first phase of the North End Village. It is envisaged these will be submitted later this year.

Progress on land assembly

The land assembly process in relation to the Earls Court Masterplan is well advanced. Most recently, in July TfL and Capco agreed to pursue proposals to settle heads of terms for a joint venture to enable the development of Earls Court 1 & 2 in line with the Earls Court Masterplan. This approach was endorsed by TfL's Finance & Policy Committee which met on 18 July. The agreement remains subject to Capco and TfL Board approvals.

TfL owns the freehold to the exhibition centres known as Earls Court 1 & 2, and Capco is the leaseholder of both sites. The agreement will enable the two organisations to establish a joint entity which will own a new 999 year lease over the 23 acre site described above, incorporating Earls Court 1 & 2, the Northern Access Road and Earls Court 2's air rights over the West London Line. It is envisaged that ownership of the joint venture will be split 63 per cent to Capco and 37 per cent to TfL, which reflects the value created by combining both organisations' respective freehold and leasehold interests. No cash consideration will be payable by either party. Under the joint venture, Capco will be the exclusive development manager, which will enable a comprehensive approach to be taken for the implementation of the Masterplan for the wider ECOA. At this stage, no agreement is in place regarding the Lillie Bridge Depot, however TfL has stated it will form part of the Earls Court Masterplan if and when it is operationally feasible to do so.

In March the agreement with Network Rail was completed regarding the air rights above the West London Line where it runs within the ECOA. As part of the agreement, Capco has secured a new 999 year lease to replace the existing lease in respect of the Earls Court 2 site for an initial consideration of £5.3 million. Within the terms of the agreement, Capco can exercise options for a period of 50 years for further 999 year leases over the remainder of the West London Line to allow for development of the Lost River Park within the Earls Court Masterplan. Network Rail is entitled to further payments of 5.55% of the residual land value which will be payable at the time of development or disposal of each phase of the Masterplan.

In April the Secretary of State for DCLG gave consent to the Conditional Land Sale Agreement ("CLSA"). The CLSA provides Capco with the option to acquire approximately 22 acres of land in the ECOA for £105 million and the replacement of the 760 homes currently on the West Kensington and Gibbs Green housing estates. In July, an exhibition was held for residents of the estates to illustrate the potential phasing of the redevelopment of the land within the CLSA and the potential location of the replacement homes. This consultation, together with the planning work for the North End Village, may put Capco in a position to trigger its option under the CLSA in the next year. However the first land drawdown and first payment of the remaining consideration would not occur until December 2015. 

The application for the judicial review in relation to the CLSA was refused for a second time in April at an oral hearing, after being denied initially in January.

Capco acquired control of 100 per cent of the Empress State Building in May having exchanged contracts with Land Securities Group PLC for the 50 per cent not already owned for a price of £117 million. Completion is expected in early August, and a new 5 year debt facility has been agreed. The Empress State Building is a 451,000 sq ft, 31 storey, office building located adjacent to the ECOA. In the medium-term, opportunities to extend or review the existing lease will be considered or alternatively the property may be suitable for a residential conversion in line with the plans for the Earls Court Masterplan.

LILLIE SQUARE

The valuation of Capco's 50 per cent interest in Lillie Square (formerly Seagrave Road) increased to £125 million as at 30 June 2013, a like-for-like increase of 16.9 per cent since December 2012.

The joint venture with the Kwok Family Interests (KFI) on the Lillie Square project continues to make positive progress. In collaboration with our JV partner, the focus of the Lillie Square joint venture is on finalising the design of the scheme and preparing for the sales and marketing launch alongside the construction contracts. Design amendments were submitted to LBHF earlier this year to enhance the consented scheme and it is hoped that these will be approved shortly. The build costs for this enhanced scheme are estimated to be £360 million, with a peak capital requirement of £100 million due to the phasing of the scheme.

Opportunities to enhance the development through strategic acquisitions to the north of the site continue to be investigated. As part of this ongoing investigation a planning application was submitted in July for the property at 1-9 Lillie Road. Should they proceed, the proposals for 65 residential units and new commercial space will further enhance the overall scheme and public realm around West Brompton Station.

The sales and marketing programme is being finalised for the launch of pre-sales within the next six to twelve months.

As outlined in the annual results in February 2013, Capco notes the ongoing legal situation in Hong Kong regarding charges brought by the ICAC against certain members of the Kwok family, but the operation of the joint venture continues to be unaffected.

VENUES

The valuation of Olympia London was £147 million as at 30 June 2013, down 2.5 per cent on a like-for-like basis. This now incorporates Olympia London's ancillary assets, principally its marshalling area, which were previously included as other assets under the former Earls Court & Olympia segment, and valued at £22 million as at 30 June 2013. The EBITDA of the Venues business was £6.6 million, down 18 per cent compared to the first half of 2012. This decline in performance was expected due to the continued uncertainty within the Venues business at Earls Court as a result of the ongoing progress with the Earls Court Masterplan. Earls Court is currently taking bookings for 2014.

Olympia London continues to attract new shows and retain its existing business following its successful rebrand. In March Olympia London hosted Art 13, a new global art fair and later welcomed The Telegraph Cruise Show which attracted over 17,000 visitors, a 15 per cent increase on the previous year.

In line with the on-going improvement works to enhance Olympia London, a series of planning applications will be submitted in the coming months. The proposals will reinstate and enhance the entrance to the Olympia Grand and provide improvements to Olympia Way such as cycle lanes, improved surfaces and signage.

GREAT CAPITAL PARTNERSHIP AND CHINA

Contracts were exchanged for the sale of the final asset in the Great Capital Partnership, Park Crescent West, during the first half at a price of £52.5 million (Capco share). This represents the culmination of asset sales in the joint venture partnership. In total the Great Capital Partnership has successfully recycled £338 million of capital (Capco share) back into the core business over the last 3 years.

In light of the final sale of the investments in China, the Group continues to evaluate future opportunities which could deliver comparable returns.

DIVIDENDS

The Board has proposed an interim dividend of 0.5 pence per share to be paid on 25 September 2013 to shareholders on the register at 30 August 2013. Subject to SARB approval, a scrip dividend alternative will be offered.

 

FINANCIAL REVIEW

Strong valuation results for the first half of 2013 have contributed to a 14.4 per cent increase in EPRA adjusted, diluted net asset value per share, increasing from 203 pence at 31 December 2012 to 232 pence. This 29 pence increase together with the 1 pence dividend paid in June represents a total return of 15 per cent in the period.

Both yield compression and ERV growth at Covent Garden increased the value of the estate by 13.9 per cent (14.1 per cent like-for-like), the result of a strong Central London retail market for which there is limited supply and increased residential sales values being achieved in prime locations.

The value of the Group's existing land interests at Earls Court has increased by 12.7 per cent (16.0 per cent like-for-like), as a result of the positive milestones achieved in the planning and land assembly process, as well as the strong conditions in the central London residential market. In respect of the Group's Earls Court leasehold interests, Jones Lang LaSalle, the Group's external valuers at Earls Court, has attributed a land value of £18.4 million per acre which compares to £14.8 million at 31 December 2012.

Restatement of 2012 comparatives

The recent adoption of the amendments to IAS 12 'Income Taxes', has required the Group to re-present its deferred tax position as though the amended standard had been in effect at 31 December 2011. The amendment introduces a presumption that investment property assets accounted for under IAS 40 'Investment Property' will normally be recovered through sale rather than use. This change in calculation basis increased the 30 June 2012 IFRS reported net asset position and profit after tax by £1.6 million.

Control acquired of former joint venture

In May 2013 the Group acquired 100 per cent control of The Empress State Limited Partnership which owns and manages the Empress State Building, a building adjacent to the Group's property interests at Earls Court. Having exchanged contracts with Land Securities Group PLC to acquire its 50 per cent limited partnership interest, the transaction is accounted for as a business combination.  From the date of exchange the Partnership is fully consolidated with Land Securities' share reported as a non-controlling interest. Completion is expected in August 2013.

A brief summary of the impact on the Group's 30 June 2013 balance sheet is set out below:

Balance sheet		£m
Investment property	Increased by	117.0
Borrowings	Increased by	(65.7)
Other net liabilities	Increased by	(6.9)
Change in net assets		44.4
Less: Non-controlling interest		(44.4)
Net change		-

Since the acquisition of control, £0.5 million has been recorded in the Group's income statement representing profit which is attributable to the non-controlling interest.

Total cash outflow following completion is expected to be approximately £65 million. This comprises consideration payable for the non-controlling interest's share of net asset value (as above), reorganisation of the partners' loan accounts, transaction costs and paydown of debt upon refinancing.

Discontinued operations

In June, The Great Capital Partnership, the joint venture between the Group and Great Portland Estates, announced the sale of its final asset, Park Crescent West, which marked the culmination of the partnership's activities.

As The Great Capital Partnership has historically represented a separate major line of business, its results and cash flows have been reported as at 30 June 2013 as having arisen from a discontinued operation. The requirement extends to the comparative periods which have been re-presented in line with reporting requirements. For the purposes of this financial review, continuing and discontinued operations have been combined.

 

Segmental analysis

With the cessation of The Great Capital Partnership and the changes more widely in the business over the past six months, the Group has revised its segmental analysis. As a result of these changes the discontinued activity within The Great Capital Partnership is now disclosed within 'Other'. The segment previously called Earls Court & Olympia has been split in two: EC Properties and Venues. EC Properties comprises land interests at Earls Court and Lillie Square (previously Seagrave Road) together with the Empress State Building. Venues comprises the exhibition business including the Olympia property interests. Covent Garden remains unchanged.

Conditional Land Sale Agreement (CLSA)

On 23 January 2013 the Group entered into the CLSA with the London Borough of Hammersmith & Fulham ("LBHF") for the purchase of the West Kensington and Gibbs Green housing estates.

The overall consideration payable is expected to be £105 million cash plus the planning requirement to provide up to 760 replacement homes.

Of the consideration, £15 million was paid during 2012 under an Exclusivity Agreement and is carried on the Group's balance sheet as a prepayment towards future land draw down. A further £15 million was paid in January 2013 upon exchange for the acquisition of two property assets. The residual £75 million due will not crystallise until exercise of the option.

Prior to exercise of the option the Group has certain obligations. These are in part linked to the exercise of the option but subject to an overall cap of £55 million. Should any payments be made in respect of these obligations they will be deducted from the total consideration due to LBHF.

FINANCIAL POSITION

At 30 June 2013 the Group's EPRA adjusted net assets were £1.8 billion representing 232 pence per share adjusted and diluted, an increase of 29 pence per share since 31 December 2012.

This 29 pence increase can be attributed to the gains on revaluation of, and sales from, the Group's property portfolio, with underlying income of 0.6 pence being offset by the payment of the 2012 final dividend.

		30 June 2013 £m		31 December 2012 £m
Investment and trading property		1,992.2		1,670.6
Net debt		(281.1)		(163.5)
Other assets and liabilities		(24.7)		(29.3)
IFRS net assets		1,686.4		1,477.8
Fair value of derivative financial instruments		22.9		30.8
Unrecognised surplus on trading properties		62.8		37.5
Deferred tax liabilities on exceptional items and other		12.5		6.9
EPRA adjusted net assets		1,784.6		1,553.0
EPRA adjusted, diluted net assets per share (pence)		232		203

 

Investment and Trading Property

Total property return for the period was 14.1 per cent which compares favourably to the IPD Total Return index for the corresponding period which recorded a 2.9 per cent increase.

Valuation surpluses on properties held for trading cease to be recorded in the consolidated income statement and their balance sheet valuation no longer reflects market value but rather the lower of cost or net realisable value. Any difference between the carrying value and market value are however captured within the EPRA adjusted, diluted net asset measure.

At 30 June 2013, the unrecognised surplus on trading property was £62.8 million, up from £37.5 million at 31 December 2012. This principally arises on property assets at Lillie Square, which has been consented for the development of residential units for sale.

Property acquisitions in the period totalled £32 million, in the majority small but strategic acquisitions at Earls Court. Property disposals were £56 million, primarily the sale of The Great Capital Partnership's final asset, Park Crescent West, with consideration due on completion which is expected in the third quarter.

Debt & Gearing

Excluding the debt assumed on the acquisition of control of Empress State, net debt increased by £52 million in the period principally the result of property acquisitions and capital expenditure (£61 million) offset by proceeds from the sale of two residential units at Covent Garden (£9 million).

Debt repayments in the period were £7.1 million, £4.8 million of which was paid on maturity of The Great Capital Partnership's debt facility in March 2013.

The gearing measure most widely used in the industry is loan-to-value ("LTV"). LTV as at 30 June 2013 was 14 per cent. The LTV remains comfortably within the Group's current target of no more than 40 per cent.

		30 June 2013		31 December 2012
Property Loan-to-value		14%		10%
Interest cover		157%		172%
Weighted average debt maturity		5 years	*	4.8 years
Weighted average cost of debt		4.3%	*	5.2%
Proportion of gross debt with interest rate protection		100%		100%

* Proforma adjusted for the new finance facility secured over the Empress State Building

A new five year £119 million facility has been agreed to refinance the existing debt facility secured on the Empress State Building. The next debt maturity is the £300 million facility secured over Covent Garden which falls due in 2016. This facility, which is currently drawn to £158 million, can be extended for a further two years at the Group's option subject to meeting certain financial covenants. 

The Group is compliant with all of its debt covenants. A detailed breakdown of debt by maturity together with the latest covenant test results is shown in Appendix 3.

The Group's policy is to substantially eliminate the short and medium-term risk arising from interest rate volatility. The Group's banking facilities are arranged on a floating-rate basis, but swapped to fixed-rate or capped using derivative contracts coterminous with the relevant debt facility. At 30 June 2013 the proportion of gross debt with interest rate protection was 100 per cent.

The Group has capital commitments of £74.5 million at 30 June 2013 which compares to £21.4 million at 31 December 2012. In respect of the acquisition of the residual 50 per cent non-controlling interest in the Empress State Partnership, the above includes consideration of £44 million due on completion.

CASHFLOW

A summary of the Group's cash flow for the period to 30 June 2013 is presented below:

		30 June                             2013                               £m		30 June                             2012                                £m
Recurring cash flows after interest and tax		4.6		6.1
Property investments and developments		(61.0)		(32.7)
Sale proceeds of property and investments		9.6		125.1
VAT paid on internal restructure		-		(22.2)
Cash flow before financing		(46.8)		76.3
Financing		(7.1)		(106.9)
Dividends paid		(3.9)		(5.7)
Net cash flow		(57.8)		(36.3)

Typically the main cash flow items are operating cash flows, dividends paid and capital transactions undertaken.

Recurring cash flow was £4.6 million compared to £6.1 million for the equivalent period of 2012, the result of the reduction in net rental income being significantly offset by lower finance charges.

Capital transactions comprise property acquisitions and disposals, together with investment and divestment in other long-term assets.

During the period, the Group completed property acquisitions of £32 million and incurred development expenditure of £29 million, mainly in respect of Earls Court and Lillie Square.

Of the proceeds from the sale of property and investments, £9 million was received following the sale of two residential units at Covent Garden.

Financing cash flows relate to the repayment on maturity of The Great Capital Partnership facility in March 2013 together with scheduled amortisation payments on the Empress State debt facility.

Dividends paid of £3.9 million reflect the final dividend payment made in respect of the 2012 financial year. This was lower than the previous six month period due to the scrip dividend alternative, the take up of which was significantly higher at 48 per cent.

Cash and undrawn committed facilities at 30 June 2013 were £344 million.

FINANCIAL PERFORMANCE

The Group has presented an underlying calculation of profit after tax and adjusted earnings per share figures in addition to the amounts reported under IFRS. The Directors consider this presentation to provide useful information on the underlying performance of the business as it removes exceptional and other one-off items.

		30 June 2013 £m		Restated 30 June 2012 £m
Net rental income		32.2		34.1
Other income		2.6		2.1
Gain on revaluation and sale of investment property		197.5		79.1
Administration expenses		(15.5)		(12.4)
Net finance costs		(1.5)		(14.3)
Profit on available for sale investments		-		10.4
Other		(0.9)		-
Taxation		(2.6)		(2.2)
IFRS profit for the period attributable to owners of the Parent		211.8		96.8
Adjustments:
Other income		(2.6)		(2.1)
Gain on revaluation and sale of investment property		(197.5)		(79.1)
Change in fair value of derivative financial instruments		(9.2)		(1.2)
Profit on sale of investments		-		(10.4)
Other adjustments		1.1		1.8
Taxation on non-underlying items		1.2		0.3
Underlying profit after tax		4.8		6.1
Underlying earnings per share (pence)		0.6		0.9

Income

Net rental income fell by £1.9 million (4.6 per cent like-for-like) in the period when compared to the comparative six month period of 2012. Of this reduction £5.2 million is attributed to the sale of properties within The Great Capital Partnership and the weaker performance of the Venues business. This has been offset by increased income at Covent Garden and income arising from EC Properties which includes the Empress State Building and a number of small income producing assets. Given the acquisition of control of Empress State in May 2013, this segment is expected to benefit from the increased rental income associated with full control of the Empress State building and its RPI-linked lease.

Other income of £2.6 million includes trading property profits of £2.4 million which arose on the sale of two residential units at Covent Garden.

Gain on revaluation and sale of investment property

The gain on revaluation of the Group's investment property portfolio was £194.7 million. Profits recorded on the sale of investment property were £2.8 million, the result of the sale of the last Great Capital Partnership asset, Park Crescent West.

Administration expenses

Underlying administration expenses increased 25 per cent to £15.5 million. The increase is in line with expectation and indicative of normalised operating costs. £4.2 million of the administration expenses for the period related to charges associated with the Group's equity based compensation schemes, which are linked in part to share price performance.

Net finance costs

Excluding gains of £9.2 million recorded on the change in fair value of derivatives, the Group's underlying net finance costs for the period fell to £10.7 million from £13.7 million in 2012.

This reduction reflects the impact of various debt prepayments and repayments together with the benefit of refinancing in a historically low interest rate environment.

Exceptional items

In addition to revaluation surpluses on investment and development property and fair value movements on derivative financial instruments, exceptional items which have been removed from the calculation of underlying profit include:

-       Other income of £2.6 million, of which profit on sale of trading property arising on the sale of two residential units at Covent Garden represented £2.4 million;

-       Exceptional charges of £0.4 million

Taxation

The total tax charge for the period was £2.6 million which is made up of both underlying tax and exceptional tax.

The underlying tax charge for the period was £1.4 million reflecting an underlying tax rate of 23 per cent. This is broadly in line with the average rate of UK corporation tax for 2013 of 23.25%. The UK corporation tax rate is expected to fall to 20% from April 2015.

The exceptional tax charge of £1.2 million predominantly relates to disposals of trading properties.

Contingent tax, the amount of tax that would become payable on a theoretical disposal of all investment properties held by the Group, is £nil. The contingent tax position is arrived at after allowing for indexation relief and Group loss relief. A disposal of the Group's trading properties at their market values as per note 12 would result in a corporation tax charge to the Group of £14.5 million (23 per cent of £62.8 million).

The Group's Tax Policy, which has been approved by the Board and has been disclosed to HM Revenue & Customs, is aligned with the business strategy. The Group seeks to protect shareholder value by structuring operations in a tax efficient manner which complies with all relevant tax law and regulations and does not adversely impact our reputation as a responsible taxpayer. As a Group, we are committed to acting in an open and transparent manner. Consistent with the Group's policy of complying with relevant tax obligations and its goal in respect of its stakeholders, the Group maintains a constructive and open working relationship with HM Revenue & Customs.

 

Principal Risks and uncertainties

Through risk management and internal control systems the Group is able to identify, assess and prioritise risk within the business and seeks to minimise, control and monitor their impact on profitability whilst maximising the opportunities they present.

The Board has overall responsibility for Group risk management. It reviews principal risks and uncertainties regularly, together with the actions taken to mitigate them. The Board has delegated responsibility for assurance over the risk management process and the review of mitigating controls to the Audit Committee.

Executive Directors together with Senior Management from every division and corporate function of the business complete a Group risk register. Risks are considered in terms of their impact and likelihood from both a financial and reputational perspective. Risks are assessed both gross and net of mitigating controls. Review meetings are held to ensure consistency of response and adequacy of grading. Detailed risk registers are reviewed twice yearly and upon any material change in the business with a full risk review undertaken annually, at which point it is also reviewed in detail by the Audit Committee with new or emerging risks considered by the Committee as appropriate. This allows the Audit Committee to monitor the most important controls and prioritise risk management and internal audit activities accordingly.

The Board has reviewed the principal risks in the context of the first half of the current financial year.  There have been no significant changes to the principal risks and uncertainties as disclosed in the Annual Report and Accounts for the year ended 31 December 2012.  What follows are the principal risks and uncertainties from across the business.  These are not exhaustive. The Group monitors a number of additional risks and adjusts those considered 'principal' as the risk profile of the business changes.

Financing risks

Risk	Impact potential	Mitigation factors
Impact: Reduced or limited availability of debt or equity finance may reduce the Group's profitability or threaten the Group's ability to meet its financial commitments or objectives and potentially to operate as a going concern
Decline in market conditions or a general rise in interest rates could impact the availability and cost of debt financing.	Reduced financial and operational flexibility and delay to works.	Maintain appropriate liquidity to cover commitments. Target longer and staggered debt maturities to avoid refinancing concentration and consideration of early refinancing. Derivative contracts to provide interest rate protection. Development phasing to enable flexibility and reduce financial exposure.
Reduced availability of equity capital.	Constrained growth, lost opportunities, higher finance costs.	Maintain appropriate liquidity to cover commitments. Target conservative overall leverage levels.

Economic Risks

Risk	Impact potential	Mitigation factors
Impact: Economic factors may threaten the Group's ability to meet its strategic objectives or return targets
Increased competition, changes in social behaviour or deteriorating profitability and confidence during a period of economic uncertainty.	Declining profitability. ERV targets not achieved. Reduced rental income and/or capital values.	Focus on prime assets and quality tenants with initial assessment of credit risk and active credit control. Diversity of occupier mix with limited exposure to any single tenant. Strategic focus on creating retail destinations and residential districts with unique attributes.
Decline in UK commercial or residential real estate market heightened by continued global macro-economic conditions or currency fluctuations.	Declining valuations.	Focus on prime assets. Regular assessment of investment market conditions including bi-annual external valuations.
Restricted availability of credit and higher tax rates and macroeconomic factors may lead to reduced consumer spending and higher levels of business failure.	Decline in demand for the Group's properties, declining valuations, and reduced profitability.	Regular monitoring of covenants with headroom maintained.

Principal Risks and uncertainties

Corporate risks

Risk	Impact potential	Mitigation factors
Impact: The Group's ability to maintain its reputation, revenue and value could be damaged by corporate risks
Responding to regulatory and legislative challenges.	Reduced flexibility and increased cost base.	Sound governance and internal policies with appropriately skilled resource and support from external advisers as appropriate.
Responding to reputational, communication and governance challenges.	Reputational damage and increased costs.	Appointment of experienced individuals with clear responsibility and accountability. Clear statements of corporate and social responsibility, skilled Executive and Non-executive Directors, with support from external advisers as appropriate. Continuous stakeholder communication and consultation.
Inability to implement strategy or correctly allocate capital.	Constraints on growth and reduced profitability.	Regular strategic reviews and monitoring of performance indicators. Corporate level oversight of capital allocation. Detailed capital planning and financial modelling. Maintain adequate cash and available facilities together with conservative leverage.
Adequacy of partner evaluation and management of key suppliers.	Reduced profitability, delay or reputational damage.	Appropriate due diligence and consultation.
Ineffective operation of joint ventures.	Inability to execute business plans.	Appropriate governance structure and documentation. Regular dialogue and reporting.
Risk associated with attracting and retaining staff.	Inability to execute business plan.	Succession planning, performance evaluations, training & development, long-term incentive rewards. Sound systems and processes to effectively capture and manage information.
Failure to comply with health and safety or other statutory regulations or notices.	Loss or injury to employees, tenants or contractors and resultant reputational damage.	Comprehensive health and safety procedures in place across the Group and monitored regularly. External consultants undertake annual audits in all locations. Safe working practices well established, including staff communication and training.
Group structure brings heightened tax exposure. Non-REIT status has a potential competitive disadvantage when bidding for new assets.	Competitive disadvantage.   Lower returns.	Group tax policy. Open and transparent engagement with HM Revenue & Customs.

Concentration of investments

Risk	Impact potential	Mitigation factors
Impact: Heightened exposure to events that threaten or disrupt central London
Events which damage or diminish London's status as a global financial, business and tourist centre could affect the Group's ability to let vacant space, reduce the value of the Group's properties and potentially disrupt access or operations at the Group's head office. Changes to or failure of infrastructure. Concentration of higher profile events in central London.	Loss or injury, business disruption or damage to property.	Terrorist insurance in place. Security and health & safety policies and procedures in offices. Close liaison with police and National Counter Terrorism Security Office (NaCTSO). Disaster recovery and business continuity planning. Active involvement in organisations and industry bodies promoting London.

 

Principal Risks and uncertainties

Development risks

Risk	Impact potential	Mitigation factors
Impact: Inability to deliver against development plans, particularly regarding ECOA
Unable to secure planning consent due to political, legislative or other risks inherent in the planning environment.   Risk of change or delay due to Mayor of London or Secretary of State intervention or judicial reviews. Inability to gain the support of influential stakeholders.   Failure to demonstrate or implement viable development due to legal, contractual, environmental, transportation, affordable housing or other technical factors.	Delayed implementation or reduced development opportunity with corresponding impact on valuation.	Pre-application and continued consultation and involvement with key stakeholders and landowners. Engagement with relevant authorities at a local and national level to ensure development proposals are in accordance with current and emerging policy. Project team of internal staff and external consultants with capabilities across all relevant areas. Technical studies with regular review. Responsive consultation with evidence based information and focus on agreed statements of common ground.
Inability to reach agreement on lease extension, renegotiation of use or land deals with adjacent landowners on acceptable terms (including risk of Section 34A of the Housing Act 1985 in relation to land subject to CLSA).	Likely negative impact on valuations and Group's returns or delay to works. Restricted optionality in delivery of development	Informed market valuation and open dialogue with adjacent landowners.   Earls Court Masterplan designed to allow phased implementation.
Construction costs increase e.g. due to market pricing, unforeseen site issues or longer build period. Punitive cost, design or other implications.   Volatility in sales price	Reduced profitability of development.	Extensive consultation, design and technical work undertaken. Properly tendered or negotiated processes to select contractors and manage costs. Market demand assessments. Pre-sales and marketing.

 

 

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the condensed set of financial statements, in accordance with applicable law and regulations.  The Directors confirm that, to the best of their knowledge:

·      the condensed set of financial statements on pages 17 to 41 has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union; and

·      the condensed set of financial statements on pages 17 to 41 includes a true and fair view of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

The operating and financial review on pages 3 to 11 refers to important events which have taken place in the period.

The principal risks and uncertainties facing the business are referred to on pages 12 to 14.

Related party transactions are set out in note 24 of the condensed set of financial statements.

A list of current Directors is maintained on the Capital & Counties Properties PLC website: www.capitalandcounties.com.

 

By order of the Board

 

 

 

I D Hawksworth

Chief Executive

 

 

 

S Das

Finance Director

 

30 July 2013

 

INDEPENDENT REVIEW REPORT TO CAPITAL & COUNTIES PROPERTIES PLC

Introduction

We have been engaged by the company to review the condensed consolidated financial statements in the interim report for the six months ended 30 June 2013, which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

PricewaterhouseCoopers LLP
Chartered Accountants
30 July 2013
London

Notes:                       

(a)   The maintenance and integrity of the Capital & Counties Properties PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

 

(b)   Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Consolidated income statement (unaudited)
for the six months ended 30 June 2013

	Notes	Six months ended 30 June 2013 £m	Re-presented and restated Six months ended 30 June 2012 £m	Re-presented Year ended 31 December 2012 £m
Continuing operations
Revenue	2	54.5	52.0	109.4
Rental income		45.4	45.7	91.6
Rental expenses		(14.3)	(15.6)	(31.7)
Net rental income	2	31.1	30.1	59.9
Other income	3	2.6	2.1	6.1
Gain on revaluation and sale of investment and development property	4	194.7	60.7	190.9
Profit on sale of available for sale investments	5	-	8.7	10.0
Profit on sale of subsidiaries		-	1.7	1.7
Loss of control of former subsidiary		-	-	(1.0)
Write down of trading property		-	-	(0.9)
Write back of impairment of other receivables		-	-	0.6
Other exception charges		(0.4)	-	-
		228.0	103.3	267.3
Administration expenses		(15.4)	(12.7)	(26.2)
Operating profit		212.6	90.6	241.1
Finance costs	6	(11.3)	(11.6)	(20.9)
Finance income		0.6	0.4	0.8
Other finance costs	6	-	(1.8)	(2.0)
Change in fair value of derivative financial instruments		9.2	(0.1)	(0.3)
Net finance costs		(1.5)	(13.1)	(22.4)
Profit before tax		211.1	77.5	218.7
Current tax		(2.5)	(2.8)	(3.9)
Deferred tax		0.1	1.2	(4.1)
Taxation	7	(2.4)	(1.6)	(8.0)
Profit for the period from continuing operations		208.7	75.9	210.7
Discontinued operations
Profit for the period from discontinued operations	9	3.6	20.9	29.3
Profit for the period		212.3	96.8	240.0
Profit attributable to:
Owners of the Parent		211.8	96.8	240.0
Non-controlling interests	8	0.5	-	-
Earnings per share from continuing operations
Basic earnings per share	11	27.7p	11.1p	29.9p
Diluted earnings per share	11	27.4p	11.1p	29.9p
Weighted average number of shares	11	752.8m	684.2m	703.7m

Earnings per share from discontinued operations and adjusted earnings per share from continuing and discontinued operations and are shown in note 14.

Notes on pages 23 to 41 form part of these consolidated financial statements.

The notes provide full details of the June 2012 comparatives restatement.

Consolidated statement of comprehensive income (unaudited)
for the six months ended 30 June 2013

		Six months ended 30 June 2013 £m	Restated Six months   ended 30 June 2012 £m	Year ended 31 December 2012 £m
Profit for the period		212.3	96.8	240.0
Other comprehensive income/(expense)
Items that may be reclassified subsequently to the income statement
Fair value gains on available for sale investments and other movements		0.3	0.1	-
Realise revaluation reserve on disposal of available for sale investments		-	-	(9.1)
Tax relating to items that may be reclassified		(0.1)	0.4	2.0
Items that will not be reclassified subsequently to the income statement
Actuarial losses on defined benefit pension schemes		-	-	(1.7)
Tax relating to items that will not be reclassified		-	-	0.4
Other comprehensive income/(expense) for the period		0.2	0.5	(8.4)
Total comprehensive income for the period		212.5	97.3	231.6
Attributable to:
Owners of the Parent		212.0	97.3	231.6
Non-controlling interests		0.5	-	-
Arising from:
Continuing operations		208.9	76.4	202.3
Discontinued operations		3.6	20.9	29.3

Notes on pages 23 to 41 form part of these consolidated financial statements.

The notes provide full details of the June 2012 comparatives restatement.

CONSOLIDATED Balance sheet (unaudited)
as at 30 June 2013

	Notes	As at 30 June 2013 £m	As at 31 December 2012 £m
Non-current assets
Investment and development property	12	1,886.5	1,586.2
Plant and equipment		1.2	1.0
Available for sale investments		3.9	3.6
Derivative financial instruments	16	1.0	0.5
Trade and other receivables	13	42.3	39.4
		1,934.9	1,630.7
Current assets
Trading property	12	105.7	84.4
Trade and other receivables	13	74.6	25.9
Cash and cash equivalents	14	126.7	184.5
		307.0	294.8
Total assets		2,241.9	1,925.5
Non-current liabilities
Borrowings, including finance leases	15	(270.0)	(269.6)
Derivative financial instruments	16	(23.0)	(29.3)
Pension deficit		(0.4)	(0.4)
		(293.4)	(299.3)
Current liabilities
Borrowings, including finance leases	15	(137.8)	(78.4)
Derivative financial instruments	16	(0.9)	(2.0)
Other provisions	17	(7.3)	(7.3)
Trade and other payables	18	(69.1)	(58.6)
Tax liabilities		(2.6)	(2.1)
		(217.7)	(148.4)
Total liabilities		(511.1)	(447.7)
Net assets		1,730.8	1,477.8
Equity
Share capital	20	188.6	188.3
Other components of equity		1,497.8	1,289.5
Capital and reserves attributable to owners of the Parent		1,686.4	1,477.8
Non-controlling interests	8	44.4	-
Total equity		1,730.8	1,477.8

Notes on pages 23 to 41 form part of these consolidated financial statements.

CONSOLIDATED Statement of changes in equity (unaudited)
for the six months ended 30 June 2013                      

		Equity attributable to owners of the Parent
	Notes	Share capital £m	Share premium £m	Treasury shares £m	Merger reserve £m	Revalua-tion reserve £m	Other reserves £m	Retained earnings £m	Total £m	Non- controlling interests £m		Total equity £m
Balance at 1 January 2013		188.3	117.7	(1.0)	277.8	1.7	5.2	888.1	1,477.8	-		1,477.8
Profit for the period		-	-	-	-	-	-	211.8	211.8	0.5		212.3
Other comprehensive income:
Fair value gains on available for sale investments		-	-	-	-	0.3	-	-	0.3	-		0.3
Tax on items taken directly to equity	19	-	-	-	-	-	-	(0.1)	(0.1)	-		(0.1)
Total comprehensive income for the period ended 30 June 2013		-	-	-	-	0.3	-	211.7	212.0	0.5		212.5
Transactions with owners:
Ordinary shares issued	20	0.3	3.3	-	-	-	-	-	3.6	-		3.6
Fair value of share-based payments		-	-	-	-	-	1.6	(1.1)	0.5	-		0.5
Non-controlling interest		-	-	-	-	-	-	-	-	43.9		43.9
Dividends paid	10	-	-	-	-	-	-	(7.5)	(7.5)	-		(7.5)
Total transactions with owners		0.3	3.3	-	-	-	1.6	(8.6)	(3.4)	43.9		40.5
Balance at 30 June 2013		188.6	121.0	(1.0)	277.8	2.0	6.8	1,091.2	1,686.4	44.4		1,730.8
		Equity attributable to owners of the Parent
		Share capital £m	Share premium £m	Treasury shares £m	Merger reserve £m	Revalua-tion reserve £m	Other reserves £m	Retained earnings £m	Total £m	Non- controlling interests £m		Total equity £m
Balance at 1 January 2012		170.9	95.1	-	196.2	10.8	2.2	632.7	1,107.9	-		1,107.9
Profit for the period (restated)		-	-	-	-	-	-	96.8	96.8	-		96.8
Other comprehensive income:
Fair value gains on available for sale financial assets		-	-	-	-	0.1	-	-	0.1	-		0.1
Tax on items taken directly to equity		-	-	-	-	-	-	0.4	0.4	-		0.4
Total comprehensive income for the period ended 30 June 2012 (restated)		-	-	-	-	0.1	-	97.2	97.3	-		97.3
Transactions with owners:
Ordinary shares issued		0.2	0.9	-	-	-	-	-	1.1	-		1.1
Realise revaluation reserves on disposal of available for sale investments		-	-	-	-	(7.9)	-	-	(7.9)	-		(7.9)
Fair value of share-based payments		-	-	-	-	-	1.3	-	1.3	-		1.3
Dividends paid		-	-	-	-	-	-	(6.8)	(6.8)	-		(6.8)
Total transactions with owners		0.2	0.9	-	-	(7.9)	1.3	(6.8)	(12.3)	-		(12.3)
Balance at 30 June 2012 (restated)		171.1	96.0	-	196.2	3.0	3.5	723.1	1,192.9	-		1,192.9

Notes on pages 23 to 41 form part of these consolidated financial statements.

The notes provide full details of the June 2012 comparatives restatement.

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

for the six months ended 30 June 2013

		Equity attributable to owners of the Parent
	Notes	Share capital £m	Share premium £m	Treasury shares £m	Merger reserve £m	Revaluation reserve £m	Other reserves £m	Retained earnings £m	Total £m
Balance at 1 January 2012		170.9	95.1	-	196.2	10.8	2.2	632.7	1,107.9
Profit for the year		-	-	-	-	-	-	240.0	240.0
Other comprehensive income:
Realise revaluation reserves on available for sale investments		-	-	-	-	(9.1)	-	-	(9.1)
Actuarial losses on defined benefit pension schemes		-	-	-	-	-	-	(1.7)	(1.7)
Tax on items taken directly to equity		-	-	-	-	-	-	2.4	2.4
Total comprehensive income for the year ended 31 December 2012		-	-	-	-	(9.1)	-	240.7	231.6
Transactions with owners:
Ordinary shares issued		17.4	22.6	-	106.0	-	-	-	146.0
Merger reserve realised 1		-	-	-	(24.4)	-	-	24.4	-
Fair value of share-based payments		-	-	-	-	-	3.0	-	3.0
Purchase of treasury shares 2	21	-	-	(1.0)	-	-	-	-	(1.0)
Dividends paid		-	-	-	-	-	-	(10.3)	(10.3)
Adjustment for scrip dividend		-	-	-	-	-	-	0.6	0.6
Total transactions with owners		17.4	22.6	(1.0)	81.6	-	3.0	14.7	138.3
Balance at 31 December 2012		188.3	117.7	(1.0)	277.8	1.7	5.2	888.1	1,477.8

 

1 Represents qualifying consideration received by the Group following capital raising in September 2012 and May 2011. The residual balance taken to the merger reserve does not currently meet the criteria for qualifying consideration as it forms part of a linked transaction.

 

2 Treasury shares purchased as a result of the odd-lot offer launched in November 2012.

 

Notes on pages 23 to 41 form part of these consolidated financial statements.

 

CONSOLIDATED statement OF CASH FLOWS (unaudited)
for the six months ended 30 June 2013

			Re-presented
		Six months ended 30 June 2013 £m	Six months ended 30 June 2012 £m	Year ended 31 December 2012 £m
Cash flows from continuing operations
Cash generated from operations	23	18.6	16.1	28.8
Interest paid		(11.7)	(11.9)	(22.1)
Interest received		0.6	0.4	0.8
Taxation		(2.3)	(0.9)	(2.9)
Cash flows from operating activities		5.2	3.7	4.6
Cash flows from investing activities
Purchase and development of property		(60.3)	(31.8)	(132.7)
Sale of property		8.9	7.6	18.7
Sale of available for sale investments		-	15.5	17.6
Loss of control of former subsidiary		-	-	65.4
Control acquired of former joint venture		0.1	-	-
Sale of subsidiary companies		0.6	0.2	0.2
VAT paid on internal restructure 1		-	(22.2)	(22.2)
Cash flows from investing activities		(50.7)	(30.7)	(53.0)
Cash flows from financing activities
Issue of shares		-	-	145.0
Treasury shares purchased	21	-	-	(1.0)
Borrowings drawn		-	30.0	48.2
Borrowings repaid		(2.3)	(100.5)	(141.9)
Purchase of derivatives		-	(1.6)	(1.6)
Other finance costs		-	-	(1.9)
Equity dividends paid		(3.9)	(5.7)	(8.6)
Cash flows from financing activities		(6.2)	(77.8)	38.2
Net decrease in unrestricted cash and cash equivalents from continuing operations		(51.7)	(104.8)	(10.2)
Cash flows from discontinued operations
Operating activities		(0.6)	2.4	0.2
Investing activities		(0.7)	100.9	215.9
Financing activities		(4.8)	(34.8)	(111.0)
Net (decrease) / increase in cash and cash equivalents from discontinued operations		(6.1)	68.5	105.1
Net (decrease) / increase in cash and cash equivalents		(57.8)	(36.3)	94.9
Unrestricted cash and cash equivalents at 1 January		178.5	83.6	83.6
Unrestricted cash and cash equivalents at end of period		120.7	47.3	178.5

1 VAT received on an internal property transfer was deemed to be a VAT supply. Input VAT was received in December 2011 whilst output VAT was not settled until January 2012.

Notes on pages 23 to 41 form part of these consolidated financial statements.

 

NOTES (unaudited)

1 PRINCIPAL ACCOUNTING POLICIES

The Group's condensed consolidated financial statements are prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union (EU). The condensed consolidated financial statements should be read in conjunction with the Annual Report for the year ended 31 December 2012, which have been prepared in accordance with IFRSs as adopted by the EU.

The condensed consolidated financial statements for the six months ended 30 June 2013 are reviewed, not audited and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 December 2012 were approved by the Board of Directors on 28 February 2013 and delivered to the Registrar of Companies. The auditors' report on these accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement made under Section 498 of the Companies Act 2006.

The condensed consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation of properties, available for sale investments and financial assets held for trading which are held at fair value.

The Directors are satisfied that the Group has the resources to continue in operational existence for the foreseeable future, for this reason the condensed consolidated financial statements are prepared on a going concern basis.

There is no material seasonal impact on the Group's financial performance.

These condensed consolidated financial statements were approved by the Board of Directors on 30 July 2013.

Except as described below, the condensed financial statements have been prepared using the accounting policies, significant judgements, key assumptions and estimates set out on pages 86 to 89 of the Group's Annual Report for 2012.

Taxes on income in interim periods are accrued using tax rates expected to be applicable to total annual earnings.

Standards and guidelines relevant to the Group that were in issue and endorsed by the European Union but not yet effective or adopted early at the date of approval of the condensed consolidated financial statements:

IAS 27 'Separate Financial Statements' (revised)

IAS 28 'Investments in Associates and Joint Ventures' (revised)

IAS 32 'Financial Instruments: Presentation' (amendment)

IFRS 10 'Consolidated Financial Statements'

IFRS 11 'Joint Arrangements'

IFRS 12 'Disclosure of Interests in other Entities'

The assessment of pronouncements issued but not effective are not anticipated to have a material impact on the financial statements with the exception of IFRS 11 'Joint Arrangements'. The standard, which has recently been endorsed by the EU, removes the proportional consolidation option currently available under IAS 31 'Interests in Joint Ventures'. This will impact the Group's existing accounting policy in respect of joint ventures. Rather than proportionally consolidating the Group's share of assets, liabilities, income and expenses on a line-by-line basis, the Group's net interest in the joint venture will be disclosed as a single line item in both the consolidated balance sheet and the consolidated income statement. This change will reduce total assets and total liabilities as currently presented, with no change in net assets. The Group has chosen not to adopt this standard early.

During the six months to 30 June 2013, the following accounting standards and guidance were adopted by the Group:

IAS 1 'Presentation of Financial Statements' (amendment)

IAS 19 'Employee Benefits' (revised)

IFRS 7 'Financial Instruments: Disclosures' (amendment)

IFRS 13 'Fair Value Measurement'

Collectively, together with the International Accounting Standards Board's annual improvements, these pronouncements either had no impact on the condensed consolidated Financial Statements or resulted in changes to presentation and disclosure only.

 

1 PRINCIPAL ACCOUNTING POLICIES

Discontinued operations

A discontinued operation is a component of the Group's business that represents a separate major line of business that has been disposed of or meets the criteria for classification as held for sale. Discontinued operations are presented separately from continuing operations in both the Income Statement and Statement of Cash flows.  In respect of the Great Capital Partnership, the comparative periods have also been re-presented where appropriate, in line with reporting requirements.

Restatement of prior period comparatives

In 2012 the Group chose to early adopt the amendment to IAS 12 'Income Taxes' as it was more representative of the Group's recovery basis.  This amendment introduced a presumption that investment property assets accounted for at fair value under IAS 40 'Investment Property' will normally be recovered through their eventual sale rather than their use.

The impact of this change on the key financial statement line items for the period ending 30 June 2012 was as follows:

Balance Sheet		£m
Deferred tax provision	Reduced by	1.6
Consolidated Income Statement
Deferred tax charge	Reduced by	1.6
Earnings per share		Pence Per Share
Basic	Increased to	14.1
Diluted	Increased to	14.1

 

The amendment had no impact on the opening balance sheet. Consequently no additional balance sheet has been disclosed.

2 SEGMENTAL REPORTING

Management has determined the operating segments based on reports reviewed by the Chief Executive, who is deemed to be the chief operating decision maker. The principal performance measures have been identified as net rental income and net asset value.

With the cessation of The Great Capital Partnership and the changes more widely in the business over the past six months, the chief operating decision maker has revised the segmental analysis. As a result of these changes, the discontinued activity within The Great Capital Partnership is now disclosed within 'Other', along with the Group's residual China investments, the business unit historically known as Opportunities, and other head office companies.

The segment previously called Earls Court & Olympia has been split in two: EC Properties and Venues. EC Properties comprises land interests at Earls Court and Lillie Square (previously Seagrave Road) together with the Empress State Building. Venues comprises the exhibitions business including the Olympia property assets. Covent Garden remains unchanged.

The Group's operating segments derive their revenue primarily from rental income from lessees, with the exception of Venues whose revenue primarily represents exhibition income.

Unallocated expenses consist primarily of costs incurred centrally which are neither directly nor meaningfully attributable to individual segments.

 

2 SEGMENTAL REPORTING

Reportable segments

	Six months ended 30 June 2013
Continuing operations		EC Properties1 £m	Venues £m	Covent Garden £m	Other £m	Group total £m
Revenue		6.1	17.6	30.6	0.2	54.5
Rent receivable and venues income		6.1	17.6	20.3	-	44.0
Service charge income		-	-	1.4	-	1.4
Rental income		6.1	17.6	21.7	-	45.4
Service charge and other non-recoverable costs		(0.2)	(10.1)	(4.0)	-	(14.3)
Net rental income		5.9	7.5	17.7	-	31.1
Other income		-	-	2.4	0.2	2.6
Gain on revaluation and sale of investment and development property		75.1	(3.8)	123.4	-	194.7
Other exceptional charges		(0.4)	-	-	-	(0.4)
Segment result		80.6	3.7	143.5	0.2	228.0
Unallocated costs
Administration expenses						(15.4)
Operating profit						212.6
Net finance costs 2						(1.5)
Profit before tax						211.1
Taxation						(2.4)
Profit for the period from continuing operations						208.7
Discontinued operations
Profit for the period from discontinued operations		-	-	-	3.6	3.6
Profit for the period						212.3
Profit attributable to:
Owners of the Parent						211.8
Non-controlling interests						0.5
Summary balance sheet
Total segment assets 3		807.9	158.8	1,110.4	82.0	2,159.1
Total segment liabilities 3		(172.3)	(33.0)	(319.2)	(3.4)	(527.9)
		635.6	125.8	791.2	78.6	1,631.2
Unallocated net assets 2						99.6
Net assets						1,730.8
Other segment items:
Depreciation		-	-	(0.1)	-	(0.1)
Capital expenditure		(156.1)	(4.0)	(21.7)	(0.8)	(182.6)

1 Included in the net rental income for EC Properties is £3.7 million attributable to The Empress State Building, of which £0.6 million represents non-controlling interests.

2 The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and a majority of the Group's cash balances.

3 Total assets and total liabilities exclude loans between and investments in Group companies.

 

 

2 SEGMENTAL REPORTING

	Six months ended 30 June 2012  (Re-presented and restated)
Continuing operations	EC Properties1 £m	Venues £m	Covent Garden £m	Other £m	Group total £m
Revenue	4.6	21.1	26.3	-	52.0
Rent receivable and venues income	4.6	21.1	18.6	-	44.3
Service charge income	-	-	1.4	-	1.4
Rental income	4.6	21.1	20.0	-	45.7
Service charge and other non-recoverable costs	-	(11.3)	(4.3)	-	(15.6)
Net rental income	4.6	9.8	15.7	-	30.1
Other income	-	-	2.1	-	2.1
Gain on revaluation and sale of investment and development property	18.3	9.2	33.5	(0.3)	60.7
Profit on sale of available for sale investments	-	-	-	8.7	8.7
Profit on sale of subsidiaries	-	1.1	0.6	-	1.7
Segment result	22.9	20.1	51.9	8.4	103.3
Unallocated costs
Administration expenses					(12.7)
Operating profit					90.6
Net finance costs 2					(13.1)
Profit before tax					77.5
Taxation					(1.6)
Profit for the period from continuing operations					75.9
Discontinued operations
Profit for the period from discontinued operations	-	-	-	20.9	20.9
Profit for the period					96.8
Summary balance sheet
Total segment assets (restated) 3	312.9	349.9	876.6	184.0	1,723.4
Total segment liabilities (restated) 3	(90.1)	(39.5)	(336.5)	(92.7)	(558.8)
	222.8	310.4	540.1	91.3	1,164.6
Unallocated net assets 2					28.3
Net assets					1,192.9
Other segment items:
Capital expenditure	(12.0)	(8.5)	(14.5)	(0.8)	(35.8)

1 Empress State represents £3.6 million of the £4.6 million net rental income for EC Properties.

2 The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and a majority of the Group's cash balances.

3 Total assets and total liabilities exclude loans between and investments in Group companies.

 

2 SEGMENTAL REPORTING

	Year ended 31 December 2012 (Re-presented)
Continuing operations	EC Properties1 £m	Venues £m	Covent Garden £m	Other £m	Group total £m
Revenue	9.4	41.7	54.8	3.5	109.4
Rent receivable and venues income	9.4	41.7	38.0	-	89.1
Service charge income	-	-	2.5	-	2.5
Rental income	9.4	41.7	40.5	-	91.6
Service charge and other non-recoverable costs	(0.2)	(23.1)	(8.4)	-	(31.7)
Net rental income	9.2	18.6	32.1	-	59.9
Other income	-	-	2.9	3.2	6.1
Gain on revaluation and sale of investment and development property	139.8	0.3	50.7	0.1	190.9
Profit on sale of available for sale investments	-	-	-	10.0	10.0
Profit on sale of subsidiaries	-	1.1	0.6	-	1.7
Loss of control of former subsidiary	(1.0)	-	-	-	(1.0)
Write down of trading property	(0.9)	-	-	-	(0.9)
Write back of impairment of other receivables	-	-	-	0.6	0.6
Segment result	147.1	20.0	86.3	13.9	267.3
Unallocated costs
Administration expenses					(26.2)
Operating profit					241.1
Net finance costs 2					(22.4)
Profit before tax					218.7
Taxation					(8.0)
Profit for the period from continuing operations					210.7
Discontinued operations
Profit for the period from discontinued operations	-	-	-	29.3	29.3
Profit for the period					240.0
Summary balance sheet
Total segment assets 3	573.4	163.0	977.5	70.8	1,784.7
Total segment liabilities 3	(75.8)	(54.4)	(316.0)	(17.0)	(463.2)
	497.6	108.6	661.5	53.8	1,321.5
Unallocated net assets 2					156.3
Net assets					1,477.8
Other segment items:
Depreciation	-	-	(0.1)	-	(0.1)
Capital expenditure	(32.3)	(10.2)	(100.8)	(2.2)	(145.5)

1 Empress State represents £7.3 million of the £9.2 million net rental income for EC Properties. 

2 The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and a majority of the Group's cash balances.

3 Total assets and total liabilities exclude loans between and investments in Group companies.

 

3 OTHER INCOME

Continuing operations	Six months ended 30 June 2013 £m	Six months ended 30 June 2012 £m	Year ended 31 December 2012 £m
Sale of trading property	8.8	6.3	17.8
Cost of sales	(6.4)	(4.2)	(11.7)
Profit on sale of trading property	2.4	2.1	6.1
Non-recurring income	0.2	-	-
Other income	2.6	2.1	6.1

4 GAIN ON REVALUATION AND SALE OF INVESTMENT AND DEVELOPMENT PROPERTY 

Continuing operations	Six months ended 30 June 2013 £m	Re-presented Six months ended 30 June 2012 £m	Re-presented Year ended 31 December 2012 £m
Gain on revaluation of investment and development property	194.7	59.7	177.7
Gain on loss of control and appropriation to trading property	-	-	12.6
Gain on sale of investment property	-	1.0	0.6
Gain on revaluation and sale of investment and development property	194.7	60.7	190.9

5 PROFIT ON SALE OF AVAILABLE FOR SALE INVESTMENTS

Continuing operations	Six months ended 30 June 2013 £m	Six months ended 30 June 2012 £m	Year ended 31 December 2012 £m
Profit on sale of available for sale investments	-	8.7	10.0

Profit on sale of available for sale investments represents part divestment from Harvest China Real Estate Fund I following property disposals made by the fund as a result of actions taken by the fund manager.

 

6 FINANCE COSTS

Continuing operations	Six months ended 30 June 2013 £m	Re-presented Six months ended 30 June 2012 £m	Re-presented Year ended 31 December 2012 £m
Finance costs:
On bank overdrafts, loans and other	11.0	12.2	21.9
Amortisation of issue costs	0.5	0.6	1.2
On obligations under finance leases	0.1	-	0.4
Gross finance costs	11.6	12.8	23.5
Interest capitalised on developments	(0.3)	(1.2)	(2.6)
Finance costs	11.3	11.6	20.9
Costs of termination of derivative financial instruments	-	0.7	0.7
Other exceptional finance costs	-	1.1	1.3
Other finance costs 1	-	1.8	2.0

1 Treated as exceptional and therefore excluded from the calculation of underlying earnings.

Interest is capitalised, before tax relief, on the basis of the average rate of interest paid of 5.4 per cent (December 2012: 5.2 per cent) on the relevant debt, applied to the cost of developments during the period.

7 TAXATION

Continuing operations	Six months ended 30 June 2013 £m	Re-presented and restated Six months ended 30 June 2012 £m	Re-presented Year ended 31 December 2012 £m
Current income tax:
Current income tax charge	0.7	2.1	2.6
Current income tax on profits excluding exceptional items	0.7	2.1	2.6
Deferred income tax:
On investment and development property	1.1	(0.1)	(1.5)
On accelerated capital allowances	0.5	(0.7)	-
On losses	(0.6)	-	1.1
On derivative financial instruments	4.4	0.8	2.8
On non-exceptional items	0.7	(1.0)	-
On exceptional items	(6.2)	(0.2)	1.7
Deferred income tax on profits	(0.1)	(1.2)	4.1
Current income tax charge on exceptional items	1.8	0.8	1.4
Adjustments in respect of previous years	-	(0.1)	(0.1)
Total tax expense reported in the income statement	2.4	1.6	8.0

Tax on items that are taken directly to equity are shown in the statement of comprehensive income; these include deferred tax on an element of the share options and deferred tax on pensions.

Further amendments to the UK Corporation Tax system were announced in the March 2013 Budget which included changes to the main rates of UK Corporation Tax. The main rate of corporation tax decreased from 24 per cent to 23 per cent from 1 April 2013. The Budget announced the reduction in the main rate of corporation tax to 21 per cent from 1 April 2014, with a further 1 per cent reduction in rate from 1 April 2015 resulting in a final corporation tax rate of 20 per cent.

Future reductions beyond 23 per cent are not yet substantively enacted at 30 June 2013, hence are not used when measuring deferred tax.

 

 

8 BUSINESS COMBINATION

The Empress State Limited Partnership

On 29 May 2013, the Group exchanged contracts to acquire the 50 per cent interest not already owned in The Empress State Limited Partnership, which owns and manages, through its general partner, the Empress State Building in West London. This 451,000 sq.ft. 31 storey office building is adjacent to the Group's Earls Court Masterplan interests and benefits from an index linked lease to the Metropolitan Police Authority until June 2019. Consideration will be paid on completion in August 2013.

In accordance with IAS 27 'Consolidated and Separate Financial Statements', the Partnership has been fully consolidated as the Group is deemed to have the ability to control the financial and operating policies so as to obtain the benefits from the Partnership's activities. The third party Partnership share as at the balance sheet date has been accounted for through non-controlling interests, which represents the portion of profit and loss and net assets which is not held by the Group.

The Partnership contributed revenues of £1.2 million from the date control was deemed to be acquired and a net profit of £0.5 million is attributed to the non-controlling interest. Had the acquisition occurred on 1 January 2013 the Group's revenue would have been £3.1 million higher and the net profit attributed to the non-controlling interest would have been £7.9 million higher.

On the date control was acquired, the assets and liabilities of the business combination were fair valued with movements taken to the Group's income statement. The fair value of assets and liabilities acquired by the business combination were as follows:

Non-controlling interests	As at 30 June 2013 £m
Non-current assets	117.0
Current assets	2.3
Current liabilities	(74.9)
Net assets	44.4

9 DISCONTINUED OPERATIONS

On 29 April 2013, the Group exchanged contracts for the disposal of the final asset, Park Crescent West, in The Great Capital Partnership. This was effected as part of the Group's strategy to dispose of non-core assets in support of the Group's core estates.  The residual assets and liabilities of the partnership are reflected within the 'Other' segment in note 2.

The results of the discontinued operation, which have been included in the consolidated income statement, were as follows:

	Six months ended 30 June 2013 £m	Six months ended 30 June 2012 £m	Year ended 31 December 2012 £m
Revenue	1.1	4.5	5.9
Net rental income	1.1	4.0	5.4
Gain on revaluation and sale of investment and development property	2.8	18.4	23.0
Administration expenses	(0.1)	0.3	0.1
Operating profit	3.8	22.7	28.5
Net finance costs	-	(1.2)	(1.7)
Profit before tax	3.8	21.5	26.8
Taxation	(0.2)	(0.6)	2.5
Net profit attributable to discontinued operations	3.6	20.9	29.3

A profit of £2.8 million (year to 31 December 2012: £15.8 million) arose on the disposal of the assets of GCP, being the proceeds of disposal less the carrying amount of the assets.

 

10 DIVIDENDS

	Six months ended 30 June 2013 £m	Six months ended 30 June 2012 £m	Year ended 31 December 2012 £m
Ordinary shares
Prior period final dividend paid of 1.0 pence per share	7.5	6.8	6.8
Interim dividend paid of 0.5 pence per share	-	-	2.9
Dividends expense	7.5	6.8	9.7
Shares issued in lieu of cash	(3.6)	(1.1)	(1.1)
Cash dividends paid	3.9	5.7	8.6
Proposed dividend of 0.5 pence per share	3.8	3.4	7.5

Details of the shares in issue are given in note 20.

11 EARNINGS PER SHARE AND NET ASSETS PER SHARE

a) Earnings per share
	Six months ended 30 June 2013 Millions 1	Restated Six months ended 30 June 2012 Millions 1,2	Year ended 31 December 2012 Millions 1
Weighted average ordinary shares in issue for calculation of basic earnings per share	752.8	684.2	703.7
Dilutive effect of share option awards	8.3	5.6	5.9
Dilutive effect of contingently issuable shares	1.3	1.6	1.8
Dilutive effect of matching nil cost options	3.6	3.0	3.0
Dilutive effect of deferred shares	0.6	0.3	0.4
Weighted average ordinary shares in issue for calculation of diluted earnings per share	766.6	694.7	714.8

1 Weighted average number of shares in issue during the period has been adjusted for shares held in Treasury.

2 Weighted average number of shares in issue during the period to June 2012 have been adjusted for issue of bonus shares issued in connection with the interim scrip dividend (0.2 million).

 

	Six months ended 30 June 2013 £m	Restated Six months ended 30 June 2012 £m	Year ended 31 December 2012 £m
Continuing and discontinued operations attributable to the Parent
Profit used for calculation of basic earnings per share	211.8	96.8	240.0
Dilutive effect of share option awards	2.2	1.3	3.1
Profit used for calculation of diluted earnings per share	214.0	98.1	243.1
Basic earnings per share (pence)	28.1	14.1	34.1
Diluted earnings per share (pence)	27.9	14.1	34.0
Continuing operations attributable to the Parent
Profit used for calculation of basic earnings per share	208.2	75.9	210.7
Dilutive effect of share option awards	2.2	1.3	3.1
Profit used for calculation of diluted earnings per share	210.4	77.2	213.8
Basic earnings per share (pence)	27.7	11.1	29.9
Diluted earnings per share (pence)	27.4	11.1	29.9
Discontinued operations attributable to the Parent
Profit used for calculation of basic and diluted earnings per share	3.6	20.9	29.3
Basic earnings per share (pence)	0.5	3.0	4.2
Diluted earnings per share (pence)	0.5	3.0	4.1

 

11 EARNINGS PER SHARE AND NET ASSETS PER SHARE 

	Six months ended 30 June 2013 £m	Restated Six months ended 30  June 2012 £m	Year ended 31 December 2012 £m
Profit from continuing operations attributable to the Parent used for calculation of basic earnings per share	208.2	75.9	210.7
Adjustments:
Gain on sale of trading property	(2.4)	(2.1)	(6.1)
Gain on revaluation and sale of investment and development property	(194.7)	(60.7)	(190.9)
Profit on sale of subsidiaries	-	(1.7)	(1.7)
Loss of control of former subsidiary	-	-	1.0
Other exceptional charges	0.4	-	-
Write down of trading property	-	-	0.9
Costs of termination of derivative financial instruments	-	0.7	0.7
Change in fair value of derivative financial instruments	(9.2)	0.1	0.3
Current tax adjustments	1.8	0.8	1.4
Deferred tax adjustments	6.0	(0.1)	1.2
Less amounts above due to non-controlling interests	0.7	-	-
EPRA adjusted earnings on continuing operations	10.8	12.9	17.5
Discontinued operations	0.9	1.3	3.7
Less exceptional other income	(0.2)	-	-
Profit on sale of available for sale investments	-	(8.7)	(10.0)
Write back of impairment of other receivables	-	-	(0.6)
Refinancing fees	-	1.1	1.3
Current tax adjustments	-	(1.1)	(1.1)
Deferred tax adjustments	(6.7)	0.6	1.7
Underlying earnings	4.8	6.1	12.5
Underlying earnings per share (pence)	0.6	0.9	1.8
EPRA adjusted earnings per share (pence)	1.4	1.9	2.5

 

Headline earnings per share is calculated in accordance with Circular 3/2012 issued by the South African Institute of Chartered Accountants (SAICA), a requirement of the Group's JSE listing. This measure is not a requirement of IFRS.

	Six months ended 30 June 2013 £m	Restated Six months ended 30 June 2012 £m	Year ended 31 December 2012 £m
Profit attributable to the Parent used for calculation of basic earnings per share	211.8	96.8	240.0
Adjustments:
Gain on revaluation and sale of investment and development property	(197.5)	(79.1)	(213.9)
Profit on sale of available for sale investments	-	(8.7)	(10.0)
Profit on sale of subsidiaries	-	(1.7)	(1.7)
Loss of control of former subsidiary	-	-	1.0
Write back of impairment of other receivables	-	-	(0.6)
Deferred tax adjustments	1.1	0.8	(3.6)
Headline earnings used for calculation of headline earnings per share attributable to the Parent	15.4	8.1	11.2
Dilutive effect of share options awards	2.2	1.3	3.1
Diluted headline earnings used for calculation of diluted headline
earnings per share	17.6	9.4	14.3
Headline earnings per share (pence)	2.1	1.2	1.6
Diluted headline earnings per share (pence)	2.3	1.4	2.0

11 EARNINGS PER SHARE AND NET ASSETS PER SHARE 

b) Net assets per share

	As at 30 June 2013 £m	As at 31 December 2012 £m
Basic net asset value attributable to the Parent used for calculation of basic net assets per share	1,686.4	1,477.8
Fair value of derivative financial instruments	22.9	30.8
Unrecognised surplus on trading property	62.8	37.5
Deferred tax adjustments	12.9	6.9
Non-controlling interests on the above	(0.4)	-
EPRA adjusted, diluted NAV	1,784.6	1,553.0
Fair value of derivative financial instruments	(22.9)	(30.8)
Deferred tax adjustments	(10.0)	(5.1)
EPRA adjusted, diluted NNNAV	1,751.7	1,517.1
Basic net assets per share (pence)	223.7	193.3
EPRA adjusted, diluted NAV per share (pence)	232.3	203.1
Diluted EPRA NNNAV per share (pence)	228.0	198.4

 

c) Shares in issue

	As at 30 June 2013 Millions 1	As at 31 December 2012 Millions 1
Shares in issue	753.9	752.7
Effect of dilution:
On exercise of options	8.8	6.7
On issue of contingently issuable shares	1.3	1.8
On issue of matching nil cost options	3.6	3.0
On issue of deferred shares	0.6	0.4
Adjusted, diluted number of shares	768.2	764.6

1 Number of shares in issue has been adjusted for shares held in Treasury, 0.4 million (December 2012: 0.4 million).

 

12 PROPERTY PORTFOLIO

a) Investment and development property

			Total £m
At 1 January 2013			1,586.2
Additions from acquisitions			32.3
Additions from subsequent expenditure			26.2
Control acquired of former joint venture			117.0
Transfers to trading property			(20.8)
Disposals			(49.1)
Gain on valuation			194.7
At 30 June 2013			1,886.5
			Total £m
At 1 January 2012			1,616.8
Additions from acquisitions			96.0
Additions from subsequent expenditure			40.4
Disposals			(210.1)
Loss of control of former subsidiary			(60.8)
Transfers to trading property			(81.0)
Gain on valuation			184.9
At 31 December 2012			1,586.2

 

	As at 30 June 2013 £m	As at 31 December 2012 £m
Balance sheet carrying value of investment and development property	1,886.5	1,586.2
Adjustment in respect of tenant incentives	19.7	17.1
Adjustment in respect of head leases	(3.7)	(3.8)
Market value of investment and development property	1,902.5	1,599.5

 

Included within investment and development property is £0.3 million (2012: £2.6 million) of interest capitalised during the period on developments and redevelopments in progress.

The fair value of the Group's investment and development property as at 30 June 2013 was determined by independent, appropriately qualified external valuers Jones Lang LaSalle for Venues and EC Properties (excluding The Empress State Building) and CB Richard Ellis for the remainder of the Group's investment and development property. The valuation conforms with the Royal Institution of Chartered Surveyors (RICS) Valuation Professional Standards. Fees paid to valuers are based on fixed price contracts.

The main assumptions underlying the valuations are in relation to market rent or business profitability, likely incentives offered to tenants, construction costs, forecast growth rates, yields and sales prices based on known market transactions for similar properties (in the case of development valuations, properties similar to those contemplated under the development) while taking account of tenure and structural condition.

Valuations are based on what is determined to be the highest and best use. When considering the highest and best use a valuer will consider, on a property by property basis, the highest valuation which will include its actual and potential uses given current market conditions. Where the highest and best use differs from the existing use, the valuer will consider the cost and the likelihood of achieving and implementing this change in arriving at its valuation.

In respect of development valuations, the valuer ordinarily considers the gross development value of the completed scheme based upon assumptions of capital and rental values and yields of the properties which would be created through the implementation of the development. Deductions are then made for anticipated costs, including an allowance for developer's profit before arriving at a valuation. The valuer has applied this methodology to derive a residual land valuation of the Group's interests at Earls Court covering 23 acres on the eastern side of the Masterplan on the basis of a standalone development of these interests.

 

12 PROPERTY PORTFOLIO

There are often restrictions on both freehold and leasehold investment property which could have a material impact on the realisation of these assets.  The most significant of these occur when a credit facility is in place or when planning permission, lease extension or renegotiation of use are required (as is the case currently regarding Earls Court).  These restrictions are factored in to the property's valuation by the external valuer. Also see disclosures surrounding development risks on page 14.

b) Trading property

	As at 30 June 2013 £m	As at 31 December 2012 £m
At 1 January	84.4	0.2
Transfers from investment and development property	20.8	87.3
Additions from acquisitions	-	2.4
Additions from subsequent expenditure	7.1	6.7
Disposals	(6.6)	(11.3)
Write down of trading property	-	(0.9)
At 30 June 2013	105.7	84.4
Unrecognised revaluation surplus 1	62.8	37.5
Market value of trading property	168.5	121.9

1 The market value of trading property is shown for informational purposes only and is not a requirement of IFRS. Trading property continues to be measured at the lower of cost and net realisable value in the financial statements.

13 TRADE AND OTHER RECEIVABLES

	As at 30 June 2013 £m	As at 31 December 2012 £m
Non-current
Loan notes receivable	4.0	4.0
Other receivables 1	18.6	18.0
Prepayments and accrued income	19.7	17.4
Trade and other receivables	42.3	39.4
Current
Rents receivable 2	4.5	8.8
Other receivables	57.9	7.0
Prepayments and accrued income	12.2	10.1
Trade and other receivables	74.6	25.9

1 Includes £15 million exclusivity payment with LBHF which now forms part of the CLSA contract discussed in the operating and financial review

2 Includes Venues trade receivables.

Amounts owed by subsidiary undertakings are unsecured, repayable on demand and, for amounts falling within formalised loan agreements, interest bearing.

Included within prepayments and accrued income are tenant lease incentives of £19.7 million (2012: £17.1 million).

14 CASH AND CASH EQUIVALENTS

	As at 30 June 2013 £m	As at 31 December 2012 £m
Cash at hand	28.7	28.0
Cash on short-term deposit	92.0	150.5
Unrestricted cash and cash equivalents	120.7	178.5
Restricted cash	6.0	6.0
Cash and cash equivalents	126.7	184.5

Restricted cash relates to amounts placed on deposit in accounts which are subject to withdrawal conditions.

 

15 BORROWINGS, INCLUDING FINANCE LEASES

	As at 30 June 2013
	Carrying value £m	Secured £m	Unsecured £m	Fixed rate £m	Floating rate £m	Fair value £m
Current
Bank loans and overdrafts	131.3	131.3	-	-	131.3	131.3
Loan notes	6.0	6.0	-	-	6.0	6.0
Borrowings, excluding finance leases	137.3	137.3	-	-	137.3	137.3
Finance lease obligations	0.5	0.5	-	0.5	-	0.5
Current	137.8	137.8	-	0.5	137.3	137.8
Non-current
Bank loan 2016	155.1	155.1	-	-	155.1	155.1
Bank loan 2017	111.7	111.7	-	-	111.7	111.7
Borrowings, excluding finance leases	266.8	266.8	-	-	266.8	266.8
Finance lease obligations	3.2	3.2	-	3.2	-	3.2
Non-current	270.0	270.0	-	3.2	266.8	270.0
Total borrowings	407.8	407.8	-	3.7	404.1	407.8
Cash and cash equivalents	(126.7)
Net debt	281.1

 

	As at 31 December 2012
	Carrying value £m	Secured £m	Unsecured £m	Fixed rate £m	Floating rate £m	Fair value £m
Current
Bank loans and overdrafts	71.9	71.9	-	-	71.9	71.9
Loan notes	6.0	6.0	-	-	6.0	6.0
Borrowings, excluding finance leases	77.9	77.9	-	-	77.9	77.9
Finance lease obligations	0.5	0.5	-	0.5	-	0.5
Current	78.4	78.4	-	0.5	77.9	78.4
Non-current
Bank loan 2016	154.6	154.6	-	-	154.6	154.6
Bank loan 2017	111.7	111.7	-	-	111.7	111.7
Borrowings, excluding finance leases	266.3	266.3	-	-	266.3	266.3
Finance lease obligations	3.3	3.3	-	3.3	-	3.3
Non-current	269.6	269.6	-	3.3	266.3	269.6
Total borrowings	348.0	348.0	-	3.8	344.2	348.0
Cash and cash equivalents	(184.5)
Net debt	163.5

 

16 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES

The tables below set out the Group's accounting classification of each class of financial assets and liabilities, and their fair values at 30 June 2013 and 31 December 2012.

The fair values of derivative financial instruments are determined from observable market prices or estimated using appropriate yield curves obtained from an independent source at 30 June and 31 December each year by discounting the future contractual cash flows to the net present values.

30 June 2013	Carrying value £m	Fair value £m	Gain to income statement £m	Gain to other comprehensive income £m
Derivative financial instrument asset	1.0	1.0	0.5	-
Total held for trading assets	1.0	1.0	0.5	-
Cash and cash equivalents	126.7	126.7	-	-
Other financial assets	116.9	116.9	-	-
Total cash and receivables	243.6	243.6	-	-
Available for sale investments	3.9	3.9	-	0.3
Total available for sale investments	3.9	3.9	-	0.3
Derivative financial instrument liabilities	(23.9)	(23.9)	8.7	-
Total held for trading liabilities	(23.9)	(23.9)	8.7	-
Borrowings	(407.8)	(407.8)	-	-
Other financial liabilities	(79.8)	(79.8)	-	-
Total loans and payables	(487.6)	(487.6)	-	-

 

31 December 2012	Carrying value £m	Fair value £m	(Loss)/gain to income statement £m	Gain to other comprehensive income £m
Derivative financial instrument asset	0.5	0.5	(2.1)	-
Total held for trading assets	0.5	0.5	(2.1)	-
Cash and cash equivalents	184.5	184.5	-	-
Other financial assets	65.3	65.3	-	-
Total cash and receivables	249.8	249.8	-	-
Available for sale investments	3.6	3.6	-	-
Total available for sale investments	3.6	3.6	-	-
Derivative financial instrument liabilities	(31.3)	(31.3)	2.8	-
Total held for trading liabilities	(31.3)	(31.3)	2.8	-
Borrowings	(348.0)	(348.0)	-	-
Other financial liabilities	(68.4)	(68.4)	-	-
Total loans and payables	(416.4)	(416.4)	-	-

Fair value estimation

Derivative financial instruments are classified by valuation method.  The different levels are defined as follows:

Level 1: valuation based on quoted market prices traded in active markets.

Level 2: valuation based on inputs other than quoted prices included within Level 1 that maximise the use of observable data either directly or from market prices or indirectly derived from market prices.

Level 3: where one or more inputs to valuation are not based on observable market data. Valuations at this level are more subjective and therefore more closely managed, including sensitivity analysis of inputs to valuation models.  Such testing has not indicated that any material difference would arise due to a change input variables.

At 30 June 2013, all derivative financial instrument asset and liability measurements are classified as Level 2.

When the degree of subjectivity or nature of the measurement inputs changes, consideration is given as to whether a transfer between fair value levels is deemed to have occurred.

 

17 OTHER PROVISIONS

		Deferred consideration £m	Total £m
Current
At 1 January 2012		7.3	7.3
At 31 December 2012		7.3	7.3
At 30 June 2013		7.3	7.3

Deferred consideration is the amount payable on the 2009 acquisition of the non-controlling interests' share in Earls Court & Olympia. The amount of deferred consideration payable is based on a number of factors including a potential redevelopment of the ECOA, with the final details of such a redevelopment dependent on discussions with the owners of the adjacent land and the outcome of the planning process. The maximum potential payment is £20.0 million.

18 TRADE AND OTHER PAYABLES

	As at 30 June 2013 £m	As at 31 December 2012 £m
Current
Rents received in advance	17.3	17.2
Accruals and deferred income	34.6	27.4
Trade payables	1.5	1.1
Other payables 1	15.2	12.6
Other taxes and social security	0.5	0.3
Trade and other payables	69.1	58.6

1 Includes sundry payables and amounts due to joint venture partners.

19 DEFERRED TAX PROVISION

Under the new IAS 12 provisions the recognised deferred tax liability on investment property is £2.9 million at 30 June 2013. The calculation is on a disposal basis, by reference to the original historic tax base cost of each property. Elements factored into the calculation include indexation relief, the Group's holding structure and the application of the REIT provisions to disposals occurring 2 years or more post exit from the regime (7 May 2012). The Group's contingent tax liability, which is calculated on the same basis as the IAS 12 charge above, is nil (2012 restated - nil).

A disposal of the Group's trading property at their market value as per note 12 would result in a corporation tax charge to the Group of £14.5 million (23 per cent of £62.8 million).

	Accelerated capital allowances £m	Fair value of investment & development property £m	Fair value of derivative financial instruments £m	Other temporary differences £m	Group losses £m	Total £m
Provided deferred tax (assets)/liabilities:
At 31 December 2012	11.2	1.8	(6.1)	(4.1)	(2.8)	-
Recognised in income	0.5	1.1	4.4	0.7	(6.8)	(0.1)
Recognised in other comprehensive income	-	-	-	0.1	-	0.1
At 30 June 2013	11.7	2.9	(1.7)	(3.3)	(9.6)	-
Unprovided deferred tax asset:
At 31 December 2012	-	-	(2.2)	-	(10.3)	(12.5)
Movement in the year	-	-	(4.6)	-	6.6	2.0
At 30 June 2013	-	-	(6.8)	-	(3.7)	(10.5)

In accordance with the requirements of IAS 12 'Income Taxes', the deferred tax asset has not been recognised in the Group Financial Statements due to uncertainty on the level of profits that will be available in the future periods.

20 SHARE CAPITAL AND SHARE PREMIUM

			Number of shares	Share capital £m	Share premium £m
Issued and fully paid ordinary shares of 25 pence:
At 1 January 2012			683,928,502	170.9	95.1
Shares issued		- placing	68,400,000	17.1	21.8
		- scrip dividends	799,301	0.3	0.8
At 31 December 2012			753,127,803	188.3	117.7
Shares issued	- scrip dividends		1,130,749	0.3	3.3
At 30 June 2013			754,258,552	188.6	121.0

In September 2012, the Company completed a placing of 68.4 million new ordinary shares at a price of 218 pence per share. The placing generated gross proceeds of £149.1 million, £145.0 million net of expenses.

In June 2012, the Company offered a scrip dividend alternative in respect of the 2011 final dividend. 541,709 shares were issued at a price of 198 pence per share.

In September 2012, the Company offered a scrip dividend alternative in respect of the 2012 interim dividend. 257,592 shares were issued at a price of 217 pence per share.

In June 2013, the Company offered a scrip dividend alternative in respect of the 2012 final dividend. 1,130,749 shares were issued at a price of 318 pence per share.

Full details of the rights and obligations attached to the ordinary shares are contained in the Company's Articles of Association. These rights include an entitlement to receive the Company's Report and Accounts, to attend and speak at General Meetings of the Company, to appoint proxies and to exercise voting rights. Holders of ordinary shares may also receive dividends and may receive a share of the Company's assets on the Company's liquidation. There are no restrictions on the transfer of the ordinary shares.

21 TREASURY SHARES

	Number of shares	Treasury shares £m
Ordinary shares of 25 pence:
At 1 January 2012	-	-
Shares purchased	431,450	1.0
At 31 December 2012	431,450	1.0
At 30 June 2013	431,450	1.0

Treasury shares were purchased as a result of the odd-lot offer launched in November 2012 and completed in December 2012.

22 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

The Group has capital commitments of £74.5 million at 30 June 2013 (31 December 2012: £21.4 million) relating to future expenditure for the purchase, construction, development and enhancement of investment property. In respect of the acquisition of Empress State, this includes consideration of £44 million due on completion.

£1.3 million relates to the Group's share of joint venture commitments (31 December 2012: £0.2 million).

The capital commitments also include £15 million in relation to the CLSA with LBHF. On 23 January 2013 the Group entered into the CLSA with LBHF for the purchase of the West Kensington and Gibbs Green housing estates. The overall consideration payable is expected to be £105 million, of which £75 million remains outstanding.  This residual £75 million due will not crystallise until exercise of the option. Prior to exercise of the option the Group has certain obligations subject to an overall cap of £15 million prior to exercise (rising to £55 million post exercise). Should any payments be made in respect of these obligations they will be deducted from the total consideration due to LBHF.  Further details are available on the Company's website.

As at 30 June 2013, the Group has no contingent liabilities (31 December 2012: £nil).

 

23 CASH GENERATED FROM OPERATIONS

Continuing operations	Notes	Six months ended 30 June 2013 £m	Six months ended 30 June 2012 £m	Year ended 31 December 2012  £m
Profit before tax		211.1	77.5	218.7
Adjustments for:
Profit on sale of trading property	3	(2.4)	(2.1)	(6.1)
Gain on revaluation of investment and development property	4	(194.7)	(59.7)	(177.7)
Gain on sale of investment property	4	-	(1.0)	(0.6)
Gain on loss of control and appropriation to trading property	4	-	-	(12.6)
Other exceptional charges		0.4	-	-
Profit on sale of available for sale investments	5	-	(8.7)	(10.0)
Profit on sale of subsidiaries	6	-	(1.7)	(1.7)
Loss of control of former subsidiary	7	-	-	1.0
Write down of trading property	15	-	-	0.9
Write back of impairment of other receivables	8	-	-	(0.6)
Depreciation		0.1	-	0.1
Amortisation of lease incentives and other direct costs		2.5	(1.0)	1.7
Finance costs	9	11.3	11.6	20.9
Finance income		(0.6)	(0.4)	(0.8)
Other finance costs	9	-	1.8	2.0
Change in fair value of derivative financial instruments		(9.2)	0.1	0.3
Change in working capital:
Change in trade and other receivables		(3.8)	(2.5)	(3.1)
Change in trade and other payables		3.9	2.2	(3.6)
Cash generated from operations		18.6	16.1	28.8

24 RELATED PARTY TRANSACTIONS

Key management compensation 1	Six months  ended 30 June 2013 £m	Six months ended 30 June 2012 £m	Year ended 31 December 2012 £m
Salaries and short term employee benefits	1.1	1.0	2.9
Share based payment	1.8	1.3	2.3
	2.9	2.3	5.2

1 Key management comprises the Directors of Capital & Counties Properties PLC who have been deemed to be the only individuals with authority and responsibility for planning, directing and controlling the activities of the Company.

 

25 EVENTS AFTER THE REPORTING PERIOD

On 18 July 2013, the Group together with Transport for London (TfL) issued a joint statement setting out an intention to pursue proposals to settle heads of terms for a joint venture to enable the development of Earls Court 1 & 2 in line with the Earls Court Masterplan. The agreement will enable the two organisations to establish a joint entity which will own a new 999 year lease over the sites, as well as other land owned by the Group. It is envisaged that ownership of the development will be split 63 per cent to the Group and 37 per cent to TfL. No cash consideration will be payable by either party. The agreement remains subject to Capco and TfL Board approval.

On 24 July 2013, the Group agreed a refinancing of the debt facility secured over the Empress State Building. A £118.5 million facility has been arranged with BNP Paribas and Santander with a maturity of July 2018. The facility is split between a term element (£63.5 million) and a revolving credit facility (£55 million).

On 3 July 2013, the Mayor of London completed his review of the Earls Court Masterplan outline planning applications and the Section 106 agreement and confirmed his acceptance of the outline planning applications granted by LBHF and RBKC.

 

ANALYSIS OF PROPERTY PORTFOLIO (unaudited)

 

1    PROPERTY DATA AS AT 30 JUNE 2013

 

	Market value £m	Ownership	Initial  yield  (EPRA)	Nominal  equivalent  yield	Passing rent £m	ERV £m	Occupancy   rate (EPRA)	Weighted average unexpired lease years	Gross   area   million sq ft 3
Covent Garden	1,100.8	100%	3.26%	4.81%	38.1	55.9	99.0%	7.1	0.9
EC Properties 1	823.5	100%			16.5	17.0			1.2
Venues 2	146.7	100%				-			0.6
Total property	2,071.0				54.6	72.9			2.7
Investment property	1,902.5					70.9
Trading property	168.5					2.0

 

1 Includes the Group's 50% interest in Lillie Square. The Empress State Building is now reflected at 100%.

 

2 Venues does not report a passing rent, ERV, occupancy, or lease maturity due to the nature of the business.

 

3 Area shown is net internal area of the portfolio, not adjusted for proportional ownership.

 

2    ANALYSIS OF CAPITAL RETURN IN THE PERIOD

	Market value 30 June 2013 £m	Market value 31 December 2012 £m	Revaluation   surplus/   (deficit)1         30 June 2013   £m	Increase/ (Decrease)
Like-for-like capital
Covent Garden	1,090.3	945.2	132.7	14.1%
EC Properties	687.0	574.3	94.6	16.0%
Venues	146.7	146.5	(3.8)	(2.5)%
Total like-for-like capital	1,924.0	1,666.0	223.5	13.3%
Investment property	1,755.5	1,551.2	196.9	12.8%
Trading property	168.5	114.8	26.63	18.7%
Non like-for-like capital
Acquisitions	30.0	-	(2.2)
Control acquired of former joint venture	117.0	-	-
Disposals	-	55.4	-
Total property	2,071.0	1,721.4	221.3	12.1%
Investment property	1,902.5	1,599.5	194.7	11.5%
Trading property	168.5	121.9	26.62	18.7%
All property
Covent Garden	1,100.8	952.3	132.0	13.9%
EC Properties	823.5	574.3	93.1	12.7%
Venues	146.7	146.5	(3.8)	(2.5)%
Other	-	48.3	-
Total property	2,071.0	1,721.4	221.3	12.1%

 

1 Revaluation surplus / (deficit) includes amortisation of lease incentives and fixed head leases.

 

2 Represents realised gains, impairment charges and unrecognised surplus on trading property. Presented for information only.

 

3          Property transferred to trading during the period is included as like-for-like capital in current and comparative periods where appropriate.

 

4    ANALYSIS OF NET RENTAL INCOME IN THE PERIOD

	30 June 2013 £m	30 June 2012 £m	Change %
Like-for-like income
Covent Garden	16.1	15.6	3.2%
EC Properties	5.2	4.4	18.2%
Venues	7.5	10.0	(25.0)%
Like-for-like investment property income	28.8	30.0	(4.0)%
Like-for-like trading property income	-	0.21
Total like-for-like property income	28.8	30.2	(4.6)%
Non like-for-like income
Acquisitions	0.6	-
Disposals	1.1	3.8
Like-for-like capital	1.7	0.1
Total property income	32.2	34.1	(5.6)%
Investment property income	32.2	33.9	(5.0)%
Trading property income	-	0.2
All property
Covent Garden	17.7	15.7	12.7%
EC Properties	5.9	4.6	28.3%
Venues	7.5	9.8	(23.5)%
Other	1.1	4.0
Total property income	32.2	34.1	(5.6)%

 

1 Represents the 30 June 2012 net rental income attributable to like-for-like trading property.

 

5    ANALYSIS OF PROPERTY BY USE

 

	30 June 2013
Market Value	Retail £m	Office £m	Exhibition £m	Residential £m	Other1  £m	Total £m
Covent Garden	874.8	146.7	-	42.2	37.1	1,100.8
EC Properties	2.3	239.9	-	6.1	575.2	823.5
Venues	-	-	146.7	-	-	146.7
	877.1	386.6	146.7	48.3	612.3	2,071.0

 

	30 June 2013
ERV	Retail £m	Office £m	Exhibition £m	Residential £m	Other  £m	Total £m
Covent Garden	43.7	8.8	-	1.3	2.1	55.9
EC Properties	0.2	15.2	-	0.2	1.4	17.0
Venues	-	-	-	-	-	-
	43.9	24.0	-	1.5	3.5	72.9

 

1 Consists of property where the highest and best use valuation differs from the current use.

 

 

Consolidated underlying profit statement (unaudited)
for the six months ended 30 June 2013

	Six months ended 30 June 2013 £m	Six months ended 30 June 2012 £m	Year ended 31 December 2012  £m
Net rental income	32.2	34.1	65.3
Administration expenses	(15.5)	(12.4)	(26.1)
Operating profit	16.7	21.7	39.2
Finance costs	(11.3)	(14.1)	(23.6)
Finance income	0.6	0.4	0.8
Net finance costs	(10.7)	(13.7)	(22.8)
Profit before tax	6.0	8.0	16.4
Tax on adjusted profit	(1.4)	(1.9)	(3.9)
Non-controlling interests	0.2	-	-
Underlying earnings (used for calculation of underlying earnings per share)	4.8	6.1	12.5
Underlying earnings per share (pence)	0.6	0.9	1.8

 

Financial covenants    

Financial covenants on non-recourse debt

	Maturity	Loan outstanding at 30 June 2013 1 £m	LTV covenant	Loan to 30 June 2013 Market value 2	Interest cover covenant	Interest cover reported 3
The Empress State Partnership 4	2013	131.3	N/A	N/A	120%	177%
Covent Garden 5,6	2016	158.2	70%	34%	130%	236%
Covent Garden 5,7	2017	112.0	70%	45%	120%	174%
Covent Garden (RCF) 5,8	2017	-	65%	0%	130%	483%
Total		401.5

1 The loan values are the actual principal balances outstanding at 30 June 2013. The balance sheet value of the loans includes any unamortised fees.

2 The loan to 30 June 2013 market value provides an indication of the impact the 30 June 2013 property valuations on the LTV covenants. The actual timing and manner of testing LTV covenants varies and is loan specific.

3 Based on the latest certified figures, calculated in accordance with loan agreements, which have been submitted during June 2013. The calculations are loan specific and include a variety of historic, forecast and in certain instances a combined historic and forecast basis.

4 Loan facility provided by a consortium of three banks with Hypothekenbank Frankfurt AG London Branch acting as agent, LTV covenant removed until maturity.

5 There are three separate loans secured against Covent Garden properties.

6 Loan facility provided by a consortium of six banks with BNP Paribas acting as agent, with a further 2 year extension available at Capco's option subject to meeting certain financial covenants

7 Loan facility provided by NyKredit Realkredit A/s.

8 Loan facility provided by a consortium of two banks with BNP Paribas acting as agent.

 

Dividends

The Directors of Capital & Counties Properties PLC have proposed aN INTERIM dividend per ordinary share (ISIN GB00B62G9D36) of 0.5 pence payable on 25 SEPTEMBER 2013.

Dates

The following are the salient dates for payment of the proposed interim dividend:

Sterling/Rand exchange rate struck:	15 August 2013
Sterling/Rand exchange rate and dividend amount in Rand announced:	16 August 2013
Ordinary shares listed ex-dividend on the JSE, Johannesburg:	26 August 2013
Ordinary shares listed ex-dividend on the London Stock Exchange:	28 August 2013
Record date for final dividend in UK and South Africa:	30 August 2013
Dividend payment date for shareholders:	25 September 2013

South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-dividend will be 23 August 2013 and that no dematerialisation of shares will be possible from 26 August 2013 to 30 August 2013 inclusive. No transfers between the UK and South Africa registers may take place from 15 August 2013 to 30 August 2013 inclusive.

Subject to SARB approval, the Board intends to offer an optional scrip dividend alternative in respect of the 2013 interim dividend.

The above dates are proposed and subject to change and any changes will be published accordingly.

Important Information for South African Shareholders:

Holders of the Company's shares in South Africa should note that National Treasury introduced a new Dividends Tax with effect from 1 April 2012, at a rate of 15 per cent.

The cash dividend received by a South African shareholder will constitute a foreign dividend and will therefore be subject to Dividends Tax. Dividends Tax will be withheld from the amount of the dividend at a rate of 15 per cent, unless a shareholder qualifies for an exemption or a reduced rate of Dividends Tax and the prescribed requirements for effecting the exemption or reduction, as set out in the Scrip Dividend Scheme booklet, are in place.

It is the Company's understanding that a receipt of shares pursuant to the scrip dividend alternative will not constitute a foreign dividend in terms of current legislation. Under the current legislation, the scrip dividend will not be subject to Dividends Tax, nor income tax on receipt.  The new shares which are acquired under the scrip dividend alternative will be treated as having been acquired for nil consideration.

This information is included only as a general guide to taxation for Shareholders resident in South Africa based on Capco's understanding of the law and the practice currently in force. Any Shareholder who is in any doubt as to their tax position should seek independent professional advice.

Further disclosures required in terms of the JSE Listings Requirements will be detailed in the finalisation announcement to be published on 16 August 2013.

 

Glossary

Capco

Capco represents Capital & Counties Properties PLC (also referred to as "the Company") and all its subsidiary companies, together referred to as "the Group".

CLSA

Conditional Land Sale Agreement, an agreement with LBHF relating to its land in the ECOA.

Diluted figures

Reported amounts adjusted to include the effects of potential shares issuable under employee incentive arrangements.

ECOA

The Earls Court and West Kensington Opportunity Area.

EPRA

European Public Real Estate Association, the publisher of Best Practice Recommendations intended to make financial statements of public real estate companies in Europe clearer, more transparent and comparable.

EPRA adjusted, diluted NAV

The net assets as at the end of the period including the excess of the fair value of trading property over its cost and excluding the fair value of financial instruments, deferred taxation on revaluations and diluting for the effect of those shares potentially issuable under employee share schemes divided by the diluted number of shares at the period end.

EPRA adjusted, diluted NNNAV

EPRA diluted NAV adjusted to reflect the fair value of derivatives and to include deferred taxation on revaluations.

EPRA adjusted earnings per share

Profit for the period excluding gains or losses on the revaluation and sale of investment and development property, write down on trading property, changes in fair value of financial instruments and associated close-out costs and the related taxation on these items divided by the weighted average number of shares in issue during the period.

ERV (estimated rental value)

The external valuers' estimate of the Group's share of the current annual market rent of all lettable space net of any non-recoverable charges, before bad debt provision and adjustments required by International Financial Reporting Standards regarding tenant lease incentives.

GCP

The Great Capital Partnership, a 50:50 joint venture with GPE

GPE

Great Portland Estates plc. The Group's joint venture partner in The Great Capital Partnership.

Gross income

The Group's share of passing rent plus sundry non-leased income.

Interest rate swap (IRS)

A derivative financial instrument enabling parties to exchange interest rate obligations for a predetermined period. These are used by the Group to convert floating rate debt to fixed rates.

Initial yield (EPRA)

Annualised net rent (after deduction of revenue costs such as head rent, running void, service charge after shortfalls and empty rates) on investment properties expressed as a percentage of the gross market value before deduction of theoretical acquisition costs, consistent with EPRA's net initial yield.

IPD

Investment Property Databank Ltd, producer of an independent benchmark of property returns.

IRR

Internal Rate of Return

ITZA

In Terms of Zone A. ITZA is a method of calculating the floor area of a retail unit with relation to the frontage and first 20 feet/6.1 metres of depth and the value relating to that floor area.

Kwok Family Interests (KFI)

Joint venture partner in the Lillie Square project.

LBHF

The London Borough of Hammersmith & Fulham.

LIBOR

London Interbank Offer Rate

Like-for-like properties

Investment properties which have been owned throughout both periods without significant capital expenditure in either period, so income can be compared on a like-for-like basis. For the purposes of comparison of capital values, this will also include assets owned at the previous balance sheet date but not necessarily throughout the prior period.

Loan-to-value (LTV)

LTV is the ratio of attributable net debt to the book value of property.

Net Debt

Total borrowings less cash and cash equivalents

Net rental income (NRI)

The Group's share of gross rental income less ground rents, payable service charge expenses and other non-recoverable charges, having taken due account of bad debt provisions and adjustments to comply with International Financial Reporting Standards regarding tenant lease incentives.

Nominal equivalent yield

Effective annual yield to a purchaser on the gross market value, assuming rent is receivable annually in arrears, and that the property becomes fully occupied and that all rents revert to the current market level (ERV) at the next review date or lease expiry.

Occupancy rate (EPRA)

The ERV of let and under offer units expressed as a percentage of the ERV of let and under offer units plus ERV of un-let units, excluding units under development.

Passing rent

The Group's share of contracted annual rents receivable at the balance sheet date. This takes no account of accounting adjustments made in respect of rent-free periods or tenant incentives, the reclassification of certain lease payments as finance charges or any irrecoverable costs and expenses, and does not include excess turnover rent, additional rent in respect of unsettled rent reviews or sundry income such as from car parks etc. Contracted annual rents in respect of tenants in administration are excluded.

RBKC

The Royal Borough of Kensington & Chelsea.

REIT

Real Estate Investment Trust.

SARB

South African Reserve Bank

Section 34A Housing Act 1985

An amendment to the 1985 Act enabling an organised group of tenants to require a local authority to transfer their homes to a housing association or similar body registered with the Tenant Services Authority (the social housing regulator), or, to take over responsibility for managing the housing services provided by their local authority landlord. The legislation only applies to social rented tenants of local authorities. It does not apply to tenants of housing associations even where the ultimate owner may be a local authority. Section 34A requires implementation by regulations yet to come into effect. These regulations will be enacted by the Department of Communities and Local Government. No regulations have yet been introduced.

Tenant (or lease) incentives

Any incentives offered to tenants to enter into a lease. Typically incentives are in the form of an initial rent-free period and/or a cash contribution to fit-out the premises. Under International Financial Reporting Standards the value of incentives granted to tenants is amortised through the income statement on a straight-line basis over the lease term.

TfL

Transport for London

Total property return

Capital growth including gains and losses on disposals plus rent received less associated costs, including ground rent.

Total return

The growth in EPRA adjusted, diluted NAV per share plus dividends per share paid during the period.

Total shareholder return

The increase in the price of an ordinary share plus dividends paid during the period assuming re-investment in ordinary shares.

Underlying earnings

Profit for the period excluding impairment charges, net valuation gains/losses (including profits/losses on disposals), net refinancing charges and swap termination costs.

Weighted average unexpired lease term

The unexpired lease term to lease expiry weighted by ERV for each lease.

Zone A

A means of analysing and comparing the rental value of retail space by dividing it in to zones parallel with the main frontage. The most valuable zone, Zone A, falls within a 6m depth of the shop frontage. Each successive zone is valued at half the rate of the zone in front of it. The blend is referred to as being 'ITZA' ('In Terms of Zone A')

 

NOTES TO EDITORS

Capital & Counties Properties PLC is one of the largest listed property investment and development companies in central London. Our landmark estates held directly or through joint ventures are valued at £2.1 billion.

Covent Garden

The Covent Garden estate represents 53 per cent of Capco's property portfolio and showcases its place-making strategy, which is realised through creative asset management, acquisitions, investment, strategic development and creative marketing.

EC Properties & Venues

EC Properties & Venues represents 47 per cent of Capco's property portfolio. Capco's strategy is to maintain a robust exhibitions business at Olympia London whilst unlocking value from its Earls Court interests now that the Mayor of London has endorsed the proposals and resolutions to grant consent have been obtained from the local authorities for the Earls Court Masterplan, Sir Terry Farrell's vision to create 'Four Urban Villages and a 21st Century High Street.'

The Lillie Square project is a joint venture between Capco and KFI to take forward the development of the 7.5 acre site. It has formal planning consent for a residential-led scheme including 808 new homes and a new garden square.

 

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