6th Nov 2007 07:01
Liberty International PLC06 November 2007 6 November 2007 LIBERTY INTERNATIONAL PLC QUARTERLY REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2007 Attached is the quarterly report for the period ended 30 September 2007: Highlights Summary of Investment and Development Properties Chairman's statement Financial review Unaudited Financial Information Sir Robert Finch, Chairman of Liberty International, commented: "Liberty International is pleased to report further strong results for the thirdquarter of 2007. Adjusted earnings per share of 26.7p for the nine months ended30 September 2007 show a 10 per cent increase on the equivalent period in 2006.Adjusted net assets per share of 1369p (equivalent to 1478p adding back notionalproperty acquisition costs deducted from valuations) match the 1385p reported at30 June 2007 as reduced by the interim dividend of 16.5p paid in the quarter.This outcome vindicates our focus over a long period on highest quality realestate, in particular regional shopping centres. Evidence has remained strongthis year that super-prime or prime regional shopping centres, well managed andproperly marketed, attract considerable investor interest. Liberty International has been built over a period of 27 years and now owns anirreplaceable range of top quality assets with a very strong retail focus. Theteam behind that ownership is one of the strongest in the country with a depthof expertise, knowledge and track record which is unrivalled. This allows us tohave every confidence in the prospects for Liberty International and in ourability to extend the group's successful long-term track record. We look forwardto the investment opportunities and challenges which a changing market willbring." 6 November 2007 This announcement includes statements that are forward-looking in nature.Forward-looking statements involve known and unknown risks, uncertainties andother factors which may cause the actual results, performance or achievements ofLiberty International PLC to be materially different from any future results,performance or achievements expressed or implied by such forward-lookingstatements. Any information contained in this announcement on the price atwhich shares or other securities in Liberty International PLC have been boughtor sold in the past, or on the yield on such shares or other securities, shouldnot be relied upon as a guide to future performance. A conference call with analysts and investors will take place at 9.00am on 6November 2007. Enquiries: Liberty International PLC:Sir Robert Finch Chairman +44 (0)20 7960 1273David Fischel Chief Executive +44 (0)20 7960 1207Aidan Smith Finance Director +44 (0)20 7960 1210 Public relations:UK: Michael Sandler, Hudson Sandler +44 (0)20 7796 4133SA: Matthew Gregorowski, +44 (0)20 7457 2020 College Hill Associates Nicholas Williams, +27 (0)11 447 3030 College Hill Associates Background on Liberty International LIBERTY INTERNATIONAL PLC is one of the UK's largest listed property companiesand a constituent of the FTSE-100 Index of the UK's leading listed companies.Liberty International converted into a UK Real Estate Investment Trust (REIT) on1 January 2007. Liberty International owns 100 per cent of Capital Shopping Centres ("CSC"), thepremier UK regional shopping centre business, and of Capital & Counties, aretail and commercial property investment and development company. At 30 September 2007, Liberty International held £8.6 billion of totalproperties of which UK regional shopping centres comprised 75 per cent andretail property in aggregate 87 per cent. Shareholders' funds (diluted,adjusted) amounted to £5.2 billion. Assets of the group under control or jointcontrol amounted to £11.3 billion at that date. CAPITAL SHOPPING CENTRES has interests in 14 UK regional shopping centresamounting to 12.6 million sq.ft. in aggregate including 8 of the UK's top 21regional shopping centres with a market value of £6.4 billion at 30 September2007. CSC's largest centres are Lakeside, Thurrock; MetroCentre, Gateshead;Braehead, Renfrew, Glasgow; The Harlequin, Watford; and Manchester Arndale. CSChas three major development projects underway or with planning permission inCardiff, Oxford and Newcastle. CAPITAL & COUNTIES owned assets of £2.2 billion at 30 September 2007 amountingto 7.4 million sq.ft. in aggregate. Capital & Counties has around £685 millioninvested in the Covent Garden area including the historic Covent Garden Market,and around £350 million in Central London, primarily through the Great CapitalPartnership, a joint venture with Great Portland Estates plc. Capital & Countieshas acquired 50 per cent of EC&O Venues (Earls Court and Olympia Group) for asum that valued the assets at approximately £375 million. In addition, Capital &Counties has interests in the USA amounting to around £380 million (2.7 millionsq.ft.), predominantly comprising retail assets in California, including the856,000 sq.ft. Serramonte Shopping Centre, Daly City, San Francisco. LIBERTY INTERNATIONAL PLC HIGHLIGHTS -------------------------------------------------------------------------------- Nine months Nine months Year ended ended ended 30 September 30 September 31 December 2007 2006 2006-------------------------------------------------------------------------------- Net rental income £261m £246m £341m Profit before tax (underlying)* £96m £91m £122m Profit before tax £439m (note 2) £903mProfit for the period attributable toequity shareholders (note 1) £407m - £1,564m Gain on revaluation and sale ofinvestment properties £192m - £587m Total properties £8,581m - £8,232mNet debt £3,390m - £3,063mNet assets (diluted, adjusted) £5,156m - £5,002m Adjusted earnings per share 26.7p 24.3p 33.9p Net assets per share (diluted,adjusted)** 1369p - 1327p-------------------------------------------------------------------------------- Note 1 Year ended 31 December 2006 included £883 million (net) tax credit fromconversion to REIT status Note 2 Some comparative figures are not available as no property valuation wasundertaken at 30 September 2006. * Before property trading, valuation and exceptional items ** Net assets per share (diluted, adjusted) would increase by 109p per share to1478p at 30 September 2007(31 December 2006 - by 98p to 1425p) if adjusted fornotional acquisition costs amounting to £409 million (31 December 2006 - £370million). SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES ------------------------------------------------------------------------------------------- Market value Revaluation surplus Net rental income ------------------------------------------------------------------------------------------- 31 30 30 30 December September September September 2006 2007 2006 2007 £m £m £m Increase £m £m Increase ------------------------------------------------------------------------------------------- UK regionalshopping centresLakeside,Thurrock 1,298.6 1,343.5 39.9 3.1%Braehead,Glasgow 746.1 753.7 7.6 1.0%MetroCentre,Gateshead (60%) 615.0 658.7 24.2 3.8%The Harlequin,Watford 523.6 531.1 7.4 1.4%VictoriaCentre,Nottingham 441.1 464.8 24.7 5.7%Chapelfield,Norwich 354.0 351.2 4.6 1.4%CribbsCauseway,Bristol 311.6 312.1 0.8 0.2%The Potteries,Stoke-on-Trent 307.5 294.1 (15.4) (5.0)%The Chimes,Uxbridge 275.0 273.1 (2.1) (0.8)%The Glades,Bromley 269.5 262.9 (8.9) (3.1)% ----------------------------- ------------------Like-for-like capitaland income 5,142.0 5,245.2 82.8 1.6% 159.8 167.1 4.6% Arndale,Manchester 428.3 448.4 18.3 4.2%Eldon Square,Newcastle upon Tyne 240.1 268.2 3.6 1.4%St. David's,Cardiff 104.3 104.8 0.5 0.5%Xscape,Braehead 39.4 41.3 (0.5) (1.4)% ----------------------------- ------------------Like-for-likecapital 5,954.1 6,107.9 104.7 1.7% 179.8 193.2 7.4% Acquisitions - 49.5 (2.3) (4.5)% - 0.4Redevelopmentsand developments 193.2 228.9 (6.9) (2.9)% 4.0 2.8 Disposals(MetroCentre (40%)) 410.0 - - - 13.5 4.6 ----------------------------- ------------------Total UK regionalshopping centres 6,557.3 6,386.3 95.5 1.5% 197.3 201.0 1.9% ----------------------------- ------------------UK non-shopping centre propertiesLike-for-likecapital and income 435.4 452.4 14.9 3.4% 15.4 14.8 (4.1)%Like-for-like other 470.1 487.5 13.6 2.9% 3.3 15.2 ----------------------------- ------------------Like-for-likecapital 905.5 939.9 28.5 3.1% 18.7 30.0 Acquisitions - 703.0 (13.7) (1.9)% - 7.3Redevelopmentsand developments 113.3 152.6 0.1 0.1% 3.1 1.9Disposals 270.7 - - - 11.1 6.2 ----------------------------- ------------------Total UK non-shoppingcentre properties 1,289.5 1,795.5 14.9 0.8% 32.9 45.4 37.9% ----------------------------- ------------------US properties*Like-for-like capital and income 283.2 298.9 18.8 6.8% 14.0 11.6 (9.1)%Like-for-like other 70.3 73.1 3.4 5.0% 1.6 2.9 ----------------------------- ------------------Like-for-like capital 353.5 372.0 22.2 6.5% 15.6 14.5 Acquisitions - 6.6 (0.2) (3.3)% - -Redevelopmentsand developments - - - - 0.3 0.1Disposals 5.7 - - - 0.3 (0.1) ----------------------------- ------------------Total USproperties 359.2 378.6 22.0 6.3% 16.2 14.5 ----------------------------- ------------------ Total investmentproperties 8,206.0 8,560.4 132.4 1.6% 246.4 260.9 5.9% ----------------------------- ------------------ *Like-for-like percentage increases are in local currency SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES (Continued) Property analysis by use and type----------------------------------------------------------------------------------- Revaluation Market value surplus---------------------------------------------------------------------- ----------- 31 December 30 September 2006 2007 % of total £m £m properties Increase----------------------------------------------------------------------------------- Regional shopping centres andother retailUK regional shopping centres 6,557.3 6,386.3 74.6% 1.5%UK other retail 781.6 830.4 9.7% 0.6%US regional shopping centres 123.1 137.0 1.6% 11.3%US other retail 134.2 131.1 1.5% 3.5% ----------------------------------Total regional shopping centresand other retail 7,596.2 7,484.8 87.4% 1.6% ---------------------------------- OfficeUK business space 507.9 595.9 7.0% 3.2%US business space 67.9 76.6 0.9% 4.5% ----------------------------------Total office 575.8 672.5 7.9% 3.3% ---------------------------------- ExhibitionUK Exhibition - 369.2 4.3% (2.2)% ---------------------------------- ResidentialUS residential 34.0 33.9 0.4% 1.9% ---------------------------------- Total investment properties 8,206.0 8,560.4 100.0% 1.6% ---------------------------------- Analysis of UK non-shopping centres and US properties by location and type--------------------------------------------------------------------------------------- Market value Revaluation surplus Net rental income ------------------- ------------------- -------------------- 31 30 30 30 30 December September September September September 2006 2007 2007 2006 2007 £m £m £m Increase £m £m--------------------------------------------------------------------------------------- UK non-shoppingcentre propertiesCapco Covent Garden 491.5 685.0 7.6 1.1% 4.3 18.5Capco Earls Court - 369.2 (8.1) (2.2)% - 2.5Capco London (inc. GreatCapital Partnership) 323.2 357.4 13.4 3.9% 12.1 10.0Capco Opportunities 276.1 246.7 4.3 1.8% 10.7 9.3Capco Urban 198.7 137.2 (2.3) (1.7)% 5.8 5.1 ------------------------------- ----------------Total UK non-shoppingcentre properties 1,289.5 1,795.5 14.9 0.8% 32.9 45.4 ------------------------------- ---------------- US propertiesUS retail 257.3 268.1 18.2 7.4% 12.6 10.8US business space 67.9 76.6 3.2 4.5% 3.6 2.9US residential 34.0 33.9 0.6 1.9% - 0.8 ------------------------------- ---------------Total US properties 359.2 378.6 22.0 6.3% 16.2 14.5 ------------------------------- --------------- 1,648.7 2,174.1 36.9 1.7% 49.1 59.9 ------------------------------- --------------- SUMMARY OF INVESTMENT AND DEVELOPMENT PROPERTIES (Continued) UK investment property valuation data-------------------------------------------------------------------------------------- Market Passing Net rental value Nominal equivalent rent income ERV 30 yield 30 30 30 September 31 30 September September September 2007 December September 2007 2007 2007 £m 2006 2007 £m £m £m-------------------------------------------------------------------------------------- UK regional shoppingcentresLakeside, Thurrock 1,343.5 4.65% 4.55%Braehead, Glasgow 753.7 4.81% 4.82%MetroCentre,Gateshead 658.7 4.75% 4.62%The Harlequin,Watford 531.1 4.75% 4.70%Victoria Centre,Nottingham 464.8 4.95% 4.85%Arndale, Manchester 448.4 4.96% 4.86%Chapelfield, Norwich 351.2 5.00% 4.95%Cribbs Causeway,Bristol 312.1 4.74% 4.76%The Potteries,Stoke-on-Trent 294.1 5.00% 5.25%The Chimes, Uxbridge 273.1 5.00% 5.20%Eldon Square,Newcastle upon Tyne 268.2 5.20% 5.10%The Glades, Bromley 262.9 4.95% 5.25%St. David's, Cardiff 104.8 5.00% 5.05%Xscape, Braehead 41.3 6.04% 5.96% ------- Like-for-like capital 6,107.9 4.84% 4.82% 242.3 193.2 303.2Other 278.4 4.4 7.8 7.8 ------- ------------------------------ Total UK regionalshopping centres 6,386.3 246.7 201.0 311.0 ------- ------------------------------ UK non-shopping centre propertiesCapco Covent Garden 508.7 4.56% 4.54%Capco Opportunities 184.6 5.75% 5.80%Capco Urban 154.4 4.89% 5.16%Capco London 92.2 4.93% 5.11% -------Like-for-like capital 939.9 4.89% 4.94% 42.0 30.0 53.2Exhibition 369.2 - 2.5 -Other 486.4 17.7 12.9 31.0 ------- ------------------------------Total UK non-shoppingcentre properties 1,795.5 59.7 45.4 84.2 ------- ------------------------------ CHAIRMAN'S STATEMENT Introduction Liberty International is pleased to report further strong results for the thirdquarter of 2007. Adjusted earnings per share of 26.7p for the nine months ended30 September 2007 show a 10 per cent increase on the equivalent period in 2006.Adjusted net assets per share of 1369p (equivalent to 1478p adding back notionalproperty acquisition costs deducted from valuations) match the 1385p reported at30 June 2007 as reduced by the interim dividend of 16.5p paid in the quarter.This outcome vindicates our focus over a long period on highest quality realestate, in particular super-prime or prime regional shopping centres. We have continued to move rapidly to take advantage of our conversion at the endof 2006 to tax transparent status as a UK real estate investment trust ('REIT').We have recorded £755 million of disposals this year at an aggregate surplusover book values at 31 December 2006 of £59 million (30 June 2007 - £594 millionof disposals at £21 million above book value). These have closely matchedadditions of £920 million in the nine months, comprising development expenditureand strategic acquisitions in Central London including materially increasing ourownership in Covent Garden, purchases by the Great Capital Partnership and, inthe third quarter, the £375 million Earls Court and Olympia transaction. Investor enthusiasm for the quoted UK property sector has diminished in 2007 asnegative sentiment from the US sub-prime mortgage lending market spread acrossthe Atlantic. The third quarter saw torrid conditions in the UK inter-banksector including the highly-publicised troubles of Northern Rock. While creditmarket conditions have put upward pressure on lending margins and unsettled UKproperty investors, one favourable consequence has been a lowering of interestrate expectations. The 10 year UK interest rate swap fell substantially in thequarter from 5.92 per cent at 30 June 2007 to 5.45 per cent at 30 September 2007and further since then to 5.33 per cent currently. While Liberty Internationalis relatively insensitive to interest rate movements in the short term as ourborrowings are mostly long-term fixed-rate, the impact of lower interest rateson the wider UK economy and property market should be beneficial over time. Property valuations After several years of buoyant market conditions, the third quarter of 2007 hasseen valuers taking a more cautious view of UK property. Our overall gains for the year on the revaluation and sale of investmentproperties reduced from £231 million at 30 June 2007 to £192 million at 30September 2007. The valuation yields for the majority of CSC's UK regional shopping centres wereunchanged in the quarter ended 30 September 2007, but increases for three of thesmaller centres moved the overall average slightly upwards from 4.77 per cent at30 June 2007 to 4.82 per cent at 30 September 2007, effectively the same asapplied by the valuers at 31 December 2006. These results confirm the defensivemerits of our UK regional shopping centres, with resilient income streams andlow volatility in capital values. Evidence has remained strong this year that super-prime or prime regionalshopping centres, well managed and properly marketed, attract considerableinvestor interest; such centres are noticeably outperforming secondary centreswith the gap in valuation yields widening as investors once again begin tofactor in the much greater risks of lower quality assets. Furthermore, theyields applied by valuers to prime regional shopping centres continue to lookundemanding compared with other prime UK property asset classes. As an illustration of this point, indicative UK property market valuationyields, as provided by one of our valuers, CB Richard Ellis, are set out below: Indicative equivalent yield % -------------------------------------------- 31 December 30 June 30 September 2006 2007 2007Retail--------Prime shops 4.00 4.00 4.25Prime shopping centres 4.75 4.75 4.75Secondary shopping centres 5.50 5.75 6.00Prime retail parks 3.85 3.85 4.00Offices---------Prime West End of London 3.75 3.50 3.75Prime City of London 4.25 4.25 4.50 We are confident that Liberty International's concentration on super-prime orprime large-scale and predominantly retail real estate will be advantageous inany overall flight to quality by UK property investors. Successful property investment requires a long-term perspective and, in the UK,while the indications are that upward pressure on valuation yields has continuedsince the end of the third quarter, we have many positive factors, includingconsistent economic growth, investor demand for long-term, stable, incomeproducing and inflation-proofing assets to meet the retirement needs of the UKpopulation, relatively benign long-term interest rates and no materialover-supply issues in the real estate industry. Furthermore, although shareholders buying our shares only pay stamp duty at 0.5per cent on share transactions, the assumption contained within the valuationsis that our assets would be sold individually to purchasers who would pay thefull 4 per cent stamp duty land tax applicable to large property transactionsand other notional acquisition costs. Adjusting for this factor would increaseour net asset value by £409 million, representing 109p per share over and aboveour published net asset value per share figure of 1369p producing a morerealistic number for shareholders of 1478p. Capital Shopping Centres CSC's business has continued to perform robustly. Like-for-like growth in netrental income amounted to 4.6 per cent for the nine month period and theoccupancy rate continued at the high level of 98.5 per cent. In the year todate, we have recorded 90 tenancy changes, 4.5 per cent of our 2,025 totalretail units, increasing the annual rents from these tenancies by £5.2 million. Asset management initiatives are a constant feature of the business. Inparticular, the Boardwalk development at Lakeside, Thurrock, of 11 restaurantsoverlooking the lake and a refurbished cinema, has traded strongly since openingin June 2007, enhancing activity throughout the centre. At MetroCentre,Gateshead, we have, with our partners, GIC, acquired the adjoining 220,000sq.ft. Metro Retail Park for £82.5 million, increasing our overall ownership toover 2 million sq.ft., and obtained planning permission for the intended upgradeof the Yellow and Blue Quadrants, with a view to continuing our improvementprogramme, most notably delivered by the successful 370,000 sq.ft. Red Mallextension which opened in Autumn 2004. CSC's development activities are progressing according to programme with twomajor projects under way, the 967,500 sq.ft. extension of St David's, Cardiff,opening in Autumn 2009, and the 480,000 sq.ft. retail extension of Eldon Square,Newcastle, where the largest phase opens in Spring 2010. In both cases, we haveentered into fixed price construction contracts to ensure control of costs, wehave secured anchor tenants and lettings are in line with expectations. Weanticipate ample retailer requirements for the attractive and well-configuredretail space. The compulsory purchase order inquiry date for the 750,000 sq.ft.Westgate, Oxford, refurbishment and extension has now been fixed for December2007 and, subject to a satisfactory outcome, we will be in a position to committo the project in 2008 for an opening in 2011. We are pleased to have satisfiedthe principal stakeholders that our proposals fit well in this unique andarchitecturally-sensitive city-centre location. CSC is a retail property business, not a retailer, and our net rental incomegrowth is more correlated to rent reviews, typically on a five year cycle in theUK, and active asset management initiatives, than short term fluctuations inretail sales. Nevertheless, it is encouraging that UK non-food retail sales, asmeasured by ONS, have continued to grow steadily with year-on-year growth of 4.1per cent for the twelve months ended 30 September 2007. Successful retailers arecontinuing to look to expand and trade from high quality space such as CSCoffers. Capital & Counties We have continued the dynamic re-alignment of the business of Capital &Counties, with gross assets now increased to £2.2 billion compared with £1.1billion as recently as 30 June 2006, the last quarter date before last year'smajor acquisition of the Covent Garden Estate. Capital & Counties' activities are strongly focussed on Central London with over£1.4 billion invested at 30 September 2007. We continue to regard Central Londonas a long-term beneficiary of globalisation, with its world-class financialservices industry and historical, cultural and residential attractions. Threeimportant investments now form the core of our London holdings. First, theCovent Garden Estate, where we have further consolidated our ownership duringthe quarter. Covent Garden is now the group's fourth largest investment at £685million and we are making good progress working closely with stakeholders on thestrategic plan for the area. Second, our 50/50 partnership with Great PortlandEstates plc, The Great Capital Partnership, which has grown to £660 million, ofwhich some two-thirds is focussed on the Regent Street, London W1, area. Third,Earls Court and Olympia where we moved decisively during the quarter to secure50 per cent ownership. These globally recognised London landmark venues offerover 1 million sq.ft. of exhibition and conference space with considerableopportunities to intensify use. The £375 million assets of Earls Court andOlympia are fully consolidated at 30 September 2007 reflecting the nature of theownership arrangements. Through Capco Urban, our mixed-use development business, the group continues itsactivities in other important regional locations. Our US activities focussed onCalifornia have performed well in 2007 with a 6.5 per cent revaluation gaindriven by our flagship shopping centre, Serramonte, in the San Francisco bayarea. Financial position Liberty International's financial position remains exceptionally strong with adebt to assets ratio of 39 per cent at 30 September 2007 and a long-term debtstructure, predominantly on an asset-specific and fixed rate basis and with nosignificant repayments before 2011. We have around £500 million of unutilisedcommitted borrowing facilities to finance all our development commitments. Prospects Liberty International has been built over a period of 27 years and now owns anirreplaceable range of prime regional shopping centres and other real estateholdings with a very strong retail focus. The team behind that ownership is oneof the strongest in the country with a depth of expertise, knowledge and trackrecord which is unrivalled. This allows us to have every confidence in theprospects for Liberty International and in our ability to extend the group'ssuccessful long-term track record. We look forward to the investmentopportunities and challenges which a changing market will bring. Sir Robert Finch Chairman 6 November 2007 FINANCIAL REVIEW Liberty International recorded the following significant transactions in thethird quarter of 2007: - Completion of the acquisition of a 50 per cent interest in the Earls Court and Olympia Group for a net consideration of £54 million.- Acquisition of the Metro Retail Park through the MetroCentre Partnership for £82.5 million (group's share £49.5 million).- Acquisition of further properties by The Great Capital Partnership for £140 million (group's share £70 million).- Acquisition of further properties in Covent Garden for £32 million.- Property sales realising £161 million at a surplus over 31 December 2006 values of £38 million bringing total sales for the year to date to £755 million at a surplus of £59 million. Further details are shown in the paragraph "Transactions during the quarter"below. Results for the period ended 30 September 2007 The results for the 9 months to 30 September 2007 include those of the EarlsCourt and Olympia Group from the date of completion of the acquisition, 24 July2007, on the basis of full consolidation as a subsidiary. The share of profitsand net assets attributable to the other 50 per cent shareholders are shownunder minority interests. This has affected the results in several ways.Firstly, they are not directly comparable with the equivalent period for lastyear, both because of the inclusion of a new activity and because of thepresentation on a consolidated basis. Secondly, the exhibition business is moreseasonal than the group's longer-term rental businesses, with the summer monthsgenerally producing much less income than in other quarters. The table belowshows the revenue results for the period, adjusted for the effect of the EarlsCourt acquisition. This shows that the results for the rest of the business forthe third quarter were broadly in line with those of the second quarter. Inaddition, and not adjusted in the numbers below, the receipt of a surrenderpremium of £3 million is reflected in the first quarter's results whereas thesubsequent loss of income is borne in the two succeeding quarters. The quarterlytrend should therefore be considered in light of the above. ------------------------------------------------------------------------------- Quarter Quarter Quarter Nine months Nine months ended ended ended ended ended 30 30 31 30 30 September June March September September 2007 2007 2007 2007 2006 £m £m £m £m £m ------------------------------------------------------------------------------- Profit before tax(underlying) attributableto ordinary shareholders 28.8 31.5 35.9 96.2 90.9 Add back effect of EarlsCourt acquisition 2.5 - - 2.5 --------------------------------------------------------------------------------- Pro forma profit for theperiod (underlying) attributable to ordinary shareholders 31.3 31.5 35.9 98.7 90.9-------------------------------------------------------------------------------- Pro forma adjustedearningsper share 8.6p 9.0p 9.8p 27.4p 24.3p-------------------------------------------------------------------------------- The Income Statement for the 9 months to 30 September 2007 shows continuingunderlying growth, after adjusting for the Earls Court acquisition, with a 9 percent increase in underlying profit before tax from £91 million to £99 million,and a 13 per cent increase in adjusted earnings per share. Like-for-like netrental income in the group's UK regional shopping centres increased by 4.6 percent. Like-for-like non-shopping centre net rental income fell by 4.1 per cent(£0.6 million) in the UK, an improvement over the 6.5 per cent at June, and by9.1 per cent in the US. The falls reflect planned refurbishment activity, alease expiry in the UK where the property has been subsequently re-let and asmall number of tenant failures. Good progress has been made in securing newtenants or with sales where appropriate. Valuations Gains on revaluation and sale of investment properties for the nine months ended30 September 2007 amounted to £192 million, including £59 million fromdisposals, (six months ended 30 June 2007, £231 million and £21 millionrespectively). Like-for-like percentage gains on revaluation of investment properties since thepreceding year end are summarised as follows: -------------------------------------------------------------------------------- Nine months Six months Year ended ended ended 30 September 30 June 31 December 2007 2007 2006-------------------------------------------------------------------------------- - UK regional shopping centres +1.7% +2.6% +7.9%- UK non-shopping centre properties +3.1% +3.2% +13.9%- USA +6.5% +3.7% +5.8%-------------------------------------------------------------------------------- The related weighted average nominal equivalent yields were as follows: -------------------------------------------------------------------------------- As at As at As at 30 September 2007 30 June 2007 31 December 2006--------------------------------------------------------------------------------UK regional shoppingcentres 4.82% 4.77% 4.84%UK non-shopping centreproperties 4.94% 4.95% 4.89%-------------------------------------------------------------------------------- The percentage valuation gains on UK regional shopping centres reducedmarginally in the quarter ended 30 September 2007 with a small increase in theaverage equivalent yield since 30 June 2007. This increase in yield was confinedto a few centres with the majority of yields, principally the yields on thelarger centres, unchanged from 30 June 2007. Of the revaluation gain on UKregional shopping centres over the nine month period, two thirds is estimated tohave arisen as a result of underlying rental growth. The small reduction in percentage valuation gains on UK non-shopping centreproperties is also largely unrelated to yield shift. Sales during the thirdquarter generated proceeds of £161 million and a surplus over December 2006values of £38 million bringing total sales for the year to date to £755 millionwith a surplus of £59 million. Some substantial valuation gains recognisedearlier in the year have been validated and realised through sales in the thirdquarter. Valuations have absorbed costs related to purchases made during theperiod. Revaluation surpluses in the USA increased from 3.7 per cent at 30 June 2007 to6.5 per cent at 30 September 2007 primarily driven by the retail properties and,in particular, Serramonte which showed an increase of 11.3 per cent for the ninemonths to 30 September 2007. Quarter by quarter movements in the gains on revaluation and sale of investmentproperties are as follows: ------------------------------------------------------------------------------- Nine Quarter ended months ended-------------------------------------------------------------- ------------- 30 September 30 June 31 March 30 September 2007 2007 2007 2007 £m £m £m £m Gain on revaluation (77.3) 69.5 140.2 132.4 Gain on sale 38.2 5.0 16.1 59.3------------------------------------------------------------------------------- Gains on revaluationand sale of investmentproperties (39.1) 74.5 156.3 191.7------------------------------------------------------------------------------- Net assets per share Adjusted net assets per share at 30 September 2007 were effectively unchangedfrom 30 June 2007 at 1369p (the reported figure of 1385p at 30 June 2007 lessthe interim dividend of 16.5p paid in the period). This represents a totalreturn for the nine month period of 5.7 per cent, from 1327p at 31 December(after taking into account the final dividend for 2006 of 17.25p and the interimdividend for 2007 of 16.5p paid in 2007). Financial position The group raised £161 million from disposals during the quarter and purchased£178 million of investment properties in addition to the £375 million ofproperty acquired through the Earls Court transaction. For the year-to-date,total additions, including development expenditure and the Earls Courtproperties, amounted to £920 million and proceeds from sales amounted to £755million. Net debt increased from £3,063 million at 31 December 2006 to £3,390million at 30 September 2007. Liberty International's financial ratios, including a debt to assets ratio of 39per cent at 30 September 2007 (31 December 2006 - 36 per cent), remain robust. At 30 September 2007 the weighted average maturity of the group's debt was over6.7 years and the weighted average cost of debt was 5.8% (7 years and 5.7 percent excluding Earls Court debt). The group had undrawn committed borrowingfacilities of £285 million with a further £235 million added since 30 September2007. Fair value of debt and financial instruments Long-term interest rates declined in the third quarter having risen strongly inthe first half of the year. The ten year UK interest rate swap, a reasonableproxy for our fixed rate hedging strategy, rose from 5.11 per cent at 31December 2006 to 5.92 per cent at 30 June 2007, falling back to 5.45 per cent at30 September 2007. We recorded a surplus of £154 million in the nine monthsended 30 September 2007 on revaluation of the derivative financial instrumentsused to fix our long-term debt. Compared to the surplus at 30 June 2007 of £251million, this represents a reduction in the quarter of £97 million. The potential adjustment to net assets per share (diluted, adjusted) arisingfrom the fair value of the group's debt and financial instruments in recentyears is shown below: ------------------------------------------------------------------------------- Fair value Fair value adjustment 10 year adjustment (before tax) £swap (before tax) pence per % £m share------------------------------------------------------------------------------- 31 December 2005 4.51% (417.4) (119)p31 December 2006 5.11% (240.2) (64)p31 March 2007 5.35% (121.6) (32)p30 June 2007 5.92% 47.1 13 p30 September 2007 5.45% (41.0) (11)p------------------------------------------------------------------------------- The group's net borrowings at 30 September 2007 amounted to £3,390 million with£549 million of fixed rate debt and the remainder largely fixed by way ofderivative financial instruments. Additional hedging was put in place during thequarter and the structure of the group's hedging instruments means that on thefixed element of our borrowings the group has a declining interest rate profile(see table below): -------------------------------------------------------------------------------Interest Rate Swap Summary------------------------------------------------------------------------------- Notional amount Average rateEffective after £m %------------------------------------------------------------------------------- 1 Year 2,935 5.265 Years 2,893 5.1110 Years 2,425 4.6915 Years 2,100 4.5820 Years 2,100 4.5825 Years 1,700 4.42------------------------------------------------------------------------------- Share buy-backs Liberty International has shareholder approval to buy-back on-market up to 10per cent of its shares. Although the current share price is at a discount topublished net asset value, we would expect only to use the buy-back power veryselectively given the scale of our development programme and the long-term timehorizon required to bring major shopping centre projects to fruition. During thethird quarter, Liberty International bought 700,000 shares at an average priceof 1017 pence per share. Transactions during the quarter ended 30 September 2007 Acquisition of a 50 per cent interest in EC&O Venues (Earls Court and Olympia Group)------------------------------------------------------------------------------------Capital & Counties acquired a 50 per cent interest in EC&O for a sum that valuedthe assets at approximately £375 million. The consideration for the 50 per cent interest was £54 million taking into account all assets, debt and other liabilitiesof the business. The group owns and manages the Earls Court and Olympia ExhibitionCentres in West London and the Brewery, Chiswell Street, London EC2, with the aimof establishing the venues as landmark leisure destinations, centred around the core businesses of exhibitions, conferences and special events whilst exploringopportunities to intensify use. The interest in EC&O has been accounted for as asubsidiary with the results, assets and liabilities fully consolidated in thequarterly results.------------------------------------------------------------------------------------ Development Programme Details of the principal development projects underway or with planningpermission are set out in the table below: -------------------------------------------------------------------------------- Cost toDevelopment Status complete as at 30 September 2007-------------------------------------------------------------------------------- Eldon Square, Newcastle (60% £65minterest) Phase one - restaurants and 22,000 Completed in October 2006.sq. ft. retail. Phase two - bus station and 48,000 Bus station completedsq. ft. retail. February 2007. Retail on site; expected opening Spring 2008. Phase three - 410,000 sq. ft. retail On site July 2007.extension including 175,000 sq. ft.Debenhams department store. Expected opening Spring 2010. ---------------------------------------------------------------------- St David's, Cardiff £175m 967,500 sq. ft. extension. On site. Expected openingJoint venture with Land Securities autumn 2009. Group PLC.---------------------------------------------------------------------- Westgate Centre, Oxford £155m 750,000 sq. ft. refurbishment and Detailed planning permissionextension. granted March 2007. CPOJoint venture with LaSalle inquiry in December 2007.Investment Management. Expected start on site 2008. Expected opening 2011. ----------------------------------------------------------------------Other developments - CSC £70mOther developments - Capital and Counties £50m ----------Total developments underway or with planning consent £515m ---------- UNDERLYING PROFIT STATEMENT (unaudited) ------------------------------------------------------------------------------------- Quarter Quarter Quarter Nine months Nine months Ended Ended ended Ended Ended 30 September 30 June 31 March 30 September 30 September 2007 2007 2007 2007 2006 £m £m £m £m £m------------------------------------------------------------------------------------- UK shopping centres 65.1 64.1 71.8 201.0 197.3Other commercial properties 22.2 18.2 19.5 59.9 49.1 -------------------------------------------------------------------------------------Net rental income 87.3 82.3 91.3 260.9 246.4 Other income/(expense) 0.2 (0.1) 0.4 0.5 2.1------------------------------------------------------------------------------------- 87.5 82.2 91.7 261.4 248.5Administration expenses (12.4) (9.6) (7.4) (29.4) (22.7)-------------------------------------------------------------------------------------Operating profit (underlying)* 75.1 72.6 84.3 232.0 225.8------------------------------------------------------------------------------------- Interest payable (49.5) (43.2) (49.7) (142.4) (138.1)Interest receivable 1.3 2.1 1.3 4.7 3.2-------------------------------------------------------------------------------------Net finance costs (underlying)* (48.2) (41.1) (48.4) (137.7) (134.9)------------------------------------------------------------------------------------- Profit before tax (underlying)* 26.9 31.5 35.9 94.3 90.9 Minority interests 1.9 - - 1.9 - -------------------------------------------------------------------------------------Profit before tax (underlying)*attributable to equityshareholders 28.8 31.5 35.9 96.2 90.9 Tax on profit (underlying) (0.5) 0.6 (0.5) (0.4) (9.7) Minority interests'share of tax 0.2 - - 0.2 --------------------------------------------------------------------------------------Profit for the period (underlying)* attributable to equity shareholders 28.5 32.1 35.4 96.0 81.2------------------------------------------------------------------------------------- Adjusted earnings pershare (note 8) 7.9p 9.0p 9.8p 26.7p 24.3p------------------------------------------------------------------------------------- * before property trading, valuation and exceptional items UNAUDITED FINANCIAL INFORMATION CONSOLIDATED INCOME STATEMENT (unaudited)------------------------------------------------------------------------------ Nine months Year ended ended 30 September 31 December 2007 2006 Notes £m £m------------------------------------------------------------------------------ Net rental income 260.9 340.6 Other income 1.2 34.8Gain on revaluation and sale of investmentand development properties 2 191.7 586.5 ------------------------------------------------------------------------------ 453.8 961.9Administration expenses (29.4) (34.2)------------------------------------------------------------------------------Operating profit 424.4 927.7------------------------------------------------------------------------------ Interest payable 3 (142.4) (190.0)Interest receivable 4.7 3.9Exceptional finance costs (1.9) (2.0)Change in fair value of derivative financial instruments 154.1 163.5------------------------------------------------------------------------------Net finance costs 14.5 (24.6)------------------------------------------------------------------------------ Profit before tax 438.9 903.1 Tax (37.9) 661.0Minority interests 5.7 ------------------------------------------------------------------------------- Profit for the period attributable to equityshareholders 406.7 1,564.1------------------------------------------------------------------------------ Adjusted earnings per share 26.7p 33.9p------------------------------------------------------------------------------ CONSOLIDATED BALANCE SHEET (unaudited) ------------------------------------------------------------------------------ As at As at 30 September 31 December 2007 2006 Notes £m £m------------------------------------------------------------------------------Non-current assetsGoodwill 5.7 -Investment and development property 4 8,535.1 8,187.1Plant and equipment 2.5 0.9Investments 34.9 -Trade and other receivables 6 134.1 81.4------------------------------------------------------------------------------ 8,712.3 8,269.4------------------------------------------------------------------------------Current assetsTrading properties 5 45.8 45.2Trade and other receivables 6 208.0 113.8Cash and cash equivalents 150.7 321.8------------------------------------------------------------------------------ 404.5 480.8------------------------------------------------------------------------------Total assets 9,116.8 8,750.2------------------------------------------------------------------------------Current liabilitiesTrade and other payables (263.6) (319.5)Tax liabilities (3.1) (2.1)Borrowings, including finance leases 7 (133.6) (43.5)Derivative financial instruments (3.8) (4.6)------------------------------------------------------------------------------ (404.1) (369.7)------------------------------------------------------------------------------Non-current liabilitiesBorrowings, including finance leases 7 (3,406.7) (3,341.3)Derivative financial instruments (21.1) (128.9)Deferred tax provision (83.1) (40.8)Other provisions (0.7) (4.9)Other payables (134.1) (132.2)------------------------------------------------------------------------------ (3,645.7) (3,648.1)------------------------------------------------------------------------------ Total liabilities (4,049.8) (4,017.8)------------------------------------------------------------------------------ Net assets 5,067.0 4,732.4Net assets attributable to minority interests (48.7) -------------------------------------------------------------------------------Net assets attributable to equity shareholders 5,018.3 4,732.4------------------------------------------------------------------------------ EquityCalled up share capital and reserves 9 5,018.3 4,732.4------------------------------------------------------------------------------ Diluted, adjusted net assets per share 8 1369p 1327p Basic net assets per share 8 1388p 1308p------------------------------------------------------------------------------ NOTES 1 Basis of preparation The Quarterly Report is unaudited and does not constitute statutory accountswithin the meaning of s240 of the Companies Act 1985. The auditor's opinion onthe statutory accounts for the year ended 2006, which were prepared inaccordance with International Financial Reporting Standards as adopted by theEuropean Union ("IFRS"), IFRIC interpretations and with those parts of theCompanies Act, 1985 applicable to companies reporting under IFRS, wasunqualified and did not contain a statement made under s237(2) or s237(3) of theCompanies Act 1985. The financial information has been prepared using the accounting policies setout on pages 42 and 43 of the Group's Annual report for 2006. 2 Gain on revaluation and sale of investment and development properties------------------------------------------------------------------------------ Nine months Year ended ended 30 September 31 December 2007 2006 £m £m------------------------------------------------------------------------------ Gain on revaluation of investment and developmentproperties 132.4 558.5Gain on sale of investment properties 59.3 28.0------------------------------------------------------------------------------ Gain on revaluation and sale of investment anddevelopment properties 191.7 586.5------------------------------------------------------------------------------ 3 Interest payable------------------------------------------------------------------------------ Nine months Nine months Year ended ended ended 30 September 30 September 31 December 2007 2006 2006 £m £m £m------------------------------------------------------------------------------ Gross interest payable - recurring 152.0 144.5 198.6Interest capitalised on developments (9.6) (6.4) (8.6)------------------------------------------------------------------------------Interest payable 142.4 138.1 190.0------------------------------------------------------------------------------ 4 Investment and development property------------------------------------------------------------------------------ UK Other shopping commercial centres properties Total £m £m £m------------------------------------------------------------------------------ At 31 December 2006 6,542.8 1,644.3 8,187.1Additions 149.1 770.9 920.0Disposals (419.1) (277.6) (696.7)Foreign exchange fluctuations - (7.7) (7.7)Surplus on valuation 95.5 36.9 132.4------------------------------------------------------------------------------At 30 September 2007 6,368.3 2,166.8 8,535.1------------------------------------------------------------------------------ The group's interests in investment and development properties were valued as at31 December 2006 and 30 September 2007 by independent external valuers inaccordance with the Appraisal and Valuation Manual of RICS on the basis ofmarket value. Market value represents the figure that would appear in ahypothetical contract of sale between a willing buyer and a willing seller. ------------------------------------------------------------------------------ As at As at 30 September 31 December 2007 2006 £m £m------------------------------------------------------------------------------Balance sheet carrying value of investment anddevelopment properties 8,535.1 8,187.1Adjustment in respect of head leases andincentives 25.3 18.9------------------------------------------------------------------------------Market Value of investment and developmentproperties 8,560.4 8,206.0------------------------------------------------------------------------------ 5 Trading properties The estimated replacement cost of trading properties based on market valueamounted to £45.8 million (31 December 2006 - £49.9 million). 6 Trade and other receivables------------------------------------------------------------------------------ As at As at 30 September 31 December 2007 2006 £m £m------------------------------------------------------------------------------Amounts falling due within one year:Rents receivable 62.9 26.1Derivative financial instruments 17.1 7.0Other receivables 75.5 42.3Prepayments and accrued income 52.5 38.4------------------------------------------------------------------------------ 208.0 113.8------------------------------------------------------------------------------Amounts falling due after more than one year:Derivative financial instruments 64.9 14.0Other receivables 13.6 12.2Prepayments and accrued income 55.6 55.2------------------------------------------------------------------------------ 134.1 81.4------------------------------------------------------------------------------ 7 Borrowings, including finance leases------------------------------------------------------------------------------ As at As at 30 September 31 December 2007 2006 £m £m------------------------------------------------------------------------------Amounts falling due within one year 133.6 43.5Amounts falling due after more than one year 3,406.7 3,341.3------------------------------------------------------------------------------ Total borrowings, including finance leases 3,540.3 3,384.8Cash and cash equivalents (150.7) (321.8)------------------------------------------------------------------------------Net borrowings 3,389.6 3,063.0------------------------------------------------------------------------------ See below for details of interest rate hedging arrangements Fair value of financial instruments------------------------------------------------------------------------------ As at 30 September 2007 As at 31 December 2006 ----------------------- ---------------------- Balance Balance sheet Fair Sheet Fair value value Value value £m £m £m £m------------------------------------------------------------------------------ Debentures and other fixedrate loans SterlingC&C 5.562% debenture 2027 226.0 326.5 225.8 348.8CSC 6.875% unsecured bonds 2013 26.6 26.1 26.5 25.4CSC 5.75% unsecured bonds 2009 31.3 31.5 41.3 42.0US dollarsFixed rate loans 154.2 152.1 164.0 169.1------------------------------------------------------------------------------ 438.1 536.2 457.6 585.3Floating rate and other loans 2,991.0 2,991.0 2,818.5 2,818.5------------------------------------------------------------------------------ 3,429.1 3,527.2 3,276.1 3,403.8Convertible bonds - fixed rate 111.2 159.7 108.7 195.4------------------------------------------------------------------------------Total borrowings 3,540.3 3,686.9 3,384.8 3,599.2------------------------------------------------------------------------------ The adjustment in respect of the above, after credit for tax relief, to thediluted net assets per share (which does not require adjustment for the fairvalue of convertible bonds) would amount to 18p per share (31 December 2006 -24p). All other financial assets and liabilities included in the balance sheet arestated at fair values. Derivative financial instruments----------------------------------------------------------------------- As at As at 30 September 31 December 2007 2006 £m £m-----------------------------------------------------------------------Non current assets (note 6) 64.9 14.0Current assets (note 6) 17.1 7.0Current liabilities (3.8) (4.6)Non-current liabilities (21.1) (128.9)------------------------------------------------------------------------ 57.1 (112.5)------------------------------------------------------------------------ Interest rate swaps-------------------------------------------------------------------------------- Notional principal Average contracted rate-------------------------------------------------------------------------------- 30 September 31 December 30 September 31 December 2007 2006 2007 2006 £m £m % %Effective after:1 year 2,935 3,055 5.26 5.315 years 2,893 3,153 5.11 5.1610 years 2,425 2,075 4.69 4.7515 years 2,100 1,750 4.58 4.6320 years 2,100 1,750 4.58 4.6325 years 1,700 1,275 4.42 4.43-------------------------------------------------------------------------------- 8 Per share details (a) Earnings per share-------------------------------------------------------------------------------- Nine months Nine months Year ended ended ended 30 September 30 September 31 December 2007 2006 2006 £m £m £m--------------------------------------------------------------------------------Underlying earnings 96.0 81.2 114.9Property trading profits 0.7 0.8 (0.3)--------------------------------------------------------------------------------Earnings used for calculation ofadjusted earnings per share 96.7 82.0 114.6-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Nine months Nine months Year ended ended ended 30 September 30 September 31 December 2007 2006 2006 Number Number Number millions millions millions--------------------------------------------------------------------------------Weighted average shares in issue 362.6 337.8 340.0Weighted averages shares held by ESOP (0.9) (1.5) (1.5)--------------------------------------------------------------------------------Weighted average shares used for calculationof adjusted earnings per share 361.7 336.3 338.5-------------------------------------------------------------------------------- (b) Net assets per share-------------------------------------------------------------------------------- As at As at 30 September 31 December 2007 2006 £m £m--------------------------------------------------------------------------------Basic net asset value 5,018.3 4,732.4Fair value of derivative financial instruments(net of tax) (57.1) 80.4Deferred tax on revaluation surpluses 33.1 32.1Deferred tax on capital allowances 46.8 31.8Unrecognised surplus on trading properties (net of tax) - 4.7Minority interest in the above adjustments (6.7) --------------------------------------------------------------------------------- 5,034.4 4,881.4Effect of dilution:On conversion of bonds 111.2 108.7On exercise of options 10.8 12.3-------------------------------------------------------------------------------- Diluted, adjusted net asset value 5,156.4 5,002.4-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- As at As at 30 September 31 December 2007 2006 Number Number millions millions--------------------------------------------------------------------------------Shares in issue, excluding those held by ESOPtrust and treated as cancelled 361.5 361.7Effect of dilution:On conversion of bonds 13.9 13.9On exercise of options 1.1 1.5-------------------------------------------------------------------------------- Diluted shares in issue 376.5 377.1-------------------------------------------------------------------------------- (c) Convertible debt 3.95 per cent convertible bonds due 2010 At 30 September 2007 and 31 December 2006 3.95 per cent convertible bonds with anominal value of £111.3 million were in issue. The holders of the 3.95 per centbonds have the option to convert their bonds into ordinary shares at any time onor up to 23 September 2010 at 800p per ordinary share. The 3.95 per cent bondsmay be redeemed at par at the company's option after 14 October 2008. 9 Summary of changes in equity-------------------------------------------------------------------------------- Nine months Year ended ended 30 September 31 December 2007 2006 £m £m--------------------------------------------------------------------------------Opening equity shareholders' funds 4,732.4 2,933.1Issue of shares 3.7 342.4Cancellation of shares (7.8) (1.0)-------------------------------------------------------------------------------- 4,728.3 3,274.5-------------------------------------------------------------------------------- Underlying profit for the period 96.0 114.9Trading, valuation and exceptional items andrelated tax 310.7 1,449.2-------------------------------------------------------------------------------- Profit for the period 406.7 1,564.1Actuarial gains on defined benefit pension schemes - 0.7Surplus on fixed asset investments 4.4 -Tax on items taken directly to equity - (4.9) Net exchange translation differences and other movements 1.0 (4.6)-------------------------------------------------------------------------------- Total recognised income and expense for the period 412.1 1,555.3-------------------------------------------------------------------------------- 5,140.4 4,829.8Dividends paid (122.1) (97.4)--------------------------------------------------------------------------------Closing equity shareholders' funds 5,018.3 4,732.4-------------------------------------------------------------------------------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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