29th Apr 2009 07:39
29 April 2009
Liberty International PLC (the "Company")
ANNUAL FINANCIAL REPORT
Liberty International PLC has today published its Annual Report for the year ended 31 December 2009 ("Annual Report"). The Annual Report is available for download at www.liberty-international.co.uk.
In addition, attention is drawn to the Company's interim management statement which was published on 27 April 2009.
Two copies of the Annual Report have been submitted to the Financial Services Authority, and will shortly be available for inspection at the Financial Services Authority's Document Viewing Facility, which is situated at:
The Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Telephone: 020 7066 8333
In accordance with DTR 6.3.5, the following information is extracted from the Annual Report and should be read in conjunction with Liberty International PLC's Preliminary Results for the year ended 31 December 2008 which were released on 26 February 2009. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.
Chairman's statement
The following is the text of my statement, published with the Company's Preliminary Results on 26 February 2009:
"2008 has been a year that the UK property industry would like to forget, but no doubt its unremitting gloom will be long remembered. In the last quarter, an already uncertain market dropped further following the crisis in the banking sector. While Liberty International's high quality assets are resilient, with prime regional shopping centres amounting to 70 per cent of the total and retail property 85 per cent overall, we are not immune to market stresses.
One manifestation of these difficult conditions has been our share price, which dropped in the year, mostly in the last quarter, from 1077p to 478p and further since the year end to 328p on 25 February 2009.
The reduction in net asset value per share for the year from 1264p to 745p is, evidently, disappointing, though it reflects market conditions. In fact our assets are holding up relatively well - a tribute to their calibre and focal position in their communities. The results and activities for the year are set out in detail in the attached Operating and Financial Review.
Early steps
Some two years ago at the end of 2006, we raised over £300 million of equity by a share placing at 1350p per share to finance the rare opportunity to acquire a large block of prime Central London assets, the Covent Garden Estate.
During 2007, we disposed of some non-core properties, at very satisfactory prices, and brought an investment partner into 40 per cent of our MetroCentre interest, enabling us to finance the Earls Court and Olympia acquisition which holds great promise for the future.
In 2008, we have disposed of further non-core properties, cut back capital expenditure and, at a non-recurring expense, reduced our ongoing cost base.
Including a further £160 million currently exchanged or under offer, aggregate asset sales since the end of 2006 now exceed the £1 billion mark and have been an important component in managing our financial position.
Current measures
At the end of 2008, after the savage fall in property valuations, our debt to asset ratio, which has been around the 40 per cent mark for the last decade, increased to 58 per cent, higher than we would like but not unmanageable.
The primary focus of the Board has, perforce, shifted from growth to reinforcing the financial strength of the company. In the light of falling values and dislocation in the financing markets, we have concluded that additional measures are necessary including potential further asset sales and new capital raising.
Our predominately non-recourse debt structure, with over 90 per cent of our debt asset specific and non-recourse, provides a great deal of financial flexibility enabling the group to address issues on an asset by asset basis, with very limited cross-default exposure.
In terms of the residual corporate debt, we appreciate the support shown by our lending bankers who have since the year end agreed important changes to the terms of our £360 million corporate bank facilities, including extending overall maturity into 2011.
These changes are contingent on the group raising not less than £350 million of additional equity. Given current market
conditions, the Board's intention would be to raise a greater sum through a combination of asset disposals and new capital.
Valuations
The dramatic fall in property values in 2008 has been of record proportions: the IPD monthly index of capital values has
fallen 36 per cent since 30 June 2007 and the market has anticipated further falls.
In a business with a long time frame, investors and managers need to keep a sense of proportion. The valuations which we are required to obtain from third party professional valuers as at the date when we report our figures are only estimates of a possible sale price at a particular time. In a thin market they necessarily contain a greater than normal element of subjective judgement but also reflect general market sentiment, which in current circumstances may be expected to compound their negative aspects.
Real estate has an enduring character but one of its driving factors is the income yield. The current gap between property income yields and the return available on cash is unprecedentedly wide. This should attract investors back into the market when liquidity returns. We have always focused on quality and once conditions ameliorate we look forward to a strong recovery.
Going forward
Liberty International intends to continue to be the holder of prime assets; with a shopping centre management team that is regarded as a leader in its field (and in the past, much of our growth has come from active management and redevelopment); with a team of senior executives very experienced in dealing in volatile markets; and with special interest situations such as the Covent Garden Estate and the Earls Court and Olympia sites. The opportunities in our London estate bode well for the group. Much of the strength and potential is inherent in existing assets which contain numerous active management and development opportunities.
We aim to be well positioned to withstand the difficulties that may arise in the short term while maintaining Liberty International's prospects in the medium and longer term. Within the business, we shall continue to conserve resources, strengthen our balance sheet, exert a continuing downward control on costs and hold ourselves ready to benefit when the market recovers in due course. We believe retail and consequently prime retail property should be at the forefront of such recovery.
Dividends and dividend policy
Given financial market conditions and the debt contractionary environment, we believe it to be in shareholders' best interests to restrict the dividend for 2008 to the 16.5p interim dividend already paid which exceeds the expected minimum required under UK REIT legislation of 12.8p per share, an amount well below the 29.0p adjusted earnings for the year because of capital allowances from our development programme and capitalised interest. This decision has been a particularly difficult one as we have had a long track record of steady dividend growth from 4.5p per share in 1985 to 34.1p per share in 2007.
In respect of 2009, the Board would also seek to maintain, subject to available resources, the intended dividend for 2009 at the level of 16.5p per share or the minimum PID requirement if greater. This decision, as well as the dividend policy for future years, will be kept under review.
Executive remuneration
In respect of the financial year 2008, the executive directors have declined any bonus other than (in two cases) the amount to which the company was already committed as part of joining arrangements. Also, except for one contractual entitlement, no salary increases have been requested by or granted to executive directors.
To ensure the company benefits from appropriately motivated executives, we intend to grant some options to executive directors and other senior staff in due course. Such options will not be exercisable unless suitable performance conditions are met, and then only after at least three years.
Prospects
Perception and its travelling companion, momentum, are always the drivers of sentiment, but these things turn. We believe we have been taking and will continue to take important steps to position the company to benefit from a recovery in economic and market conditions.
I must end by thanking my fellow directors and our very busy and committed staff for their continuing support and their
enthusiasm as they go about the company's business."
Since the end of February 2009, the Company has made significant progress on a number of fronts. We have improved CSC's overall occupancy rate, despite further retailer failures in the first quarter of 2009, at some cost in terms of rental
levels achieved on re-lettings but many, deliberately, on a short-term basis; we have achieved further disposals of non-core assets in excess of £200 million, of which net £150 million has been realised in cash in the year to date; we have increased cash and committed facilities to £313 million at 31 March 2009 (31 December 2008 - £291 million) while expenditure in the period has reduced capital commitments on property developments from £238 million to £195 million and we have launched a firm placing and placing and open offer to raise equity capital, as set out in the separate announcements issued on 27 and 28 April 2009.
Greater detail on all of these aspects, and on current trading, is set out in a first quarter Interim Management Statement issued on 27 April 2009.
We remain cautious about the economic outlook generally, but confident on the strengths and skills of our core operations, opportunities for which are already apparent.
Patrick Burgess
Chairman
28 April 2009
i) Management Report
The Preliminary Results contained a fair review of the Company's business, however the following extract from the Annual Report sets out part of that review updated to reflect material events since the date of the Preliminary Results and to include certain additional disclosures:
Operating Review
The outcome for 2008 should be considered in the context of the markedly more adverse UK financial and economic background. The results are dominated by the £2,051 million deficit on revaluation of investment properties, an overall reduction of 22.5 per cent, with £969 million, an 11.8 per cent reduction, recorded in the last quarter of the year. This revaluation result has driven the fall in net assets per share (adjusted, diluted) from 1264p to 745p.
Underlying profit before valuation items reduced from £127.7 million (36.0p per share) to £103.3 million (29.0p per share). Two main factors caused the reduction, an £11.8 million fall (4.3 per cent) in like-for-like income from Capital Shopping Centres ("CSC") mostly through tenants going into administration and £11.6 million of one-off internal reorganisation expenses.
Total investment properties have reduced from £8.7 billion to £7.1 billion. An important measure of our financial position, the debt to assets ratio, which has been around and mostly just below the 40 per cent mark for the last decade, increased substantially to 58 per cent.
Full details of the financial results for the year and comments on the group's financial position are contained in the accompanying Financial review. Additional commentary on the group's performance in 2008 is provided in the 2008 Annual Results presentation, available for download from www.liberty-international.co.uk.
External background
External factors which had begun to impact on the group in the second half of 2007 became substantially more negative in 2008, particularly in the last quarter:
• The availability of credit for UK property companies dwindled rapidly following turmoil in the banking sector, with credit spreads rising markedly.
• Market values for UK commercial property fell steeply with the benchmark IPD monthly index indicating a 27 per cent reduction in capital values in 2008 (15 per cent in the last quarter).
• The UK economy moved into technical recession with the third quarter showing a 0.6 per cent fall in GDP and the final quarter a 1.5 per cent fall.
• Consumer confidence indices fell to record low levels driven by fears of rising unemployment.
• Retail tenant failures increased during 2008, most notably in December 2008, and in early 2009.
Our response
We have responded to the changing environment in a number of ways, in particular:
• Prioritising cash management and capital structure for example through the revised dividend policy announced with these results, and around the year end, the early conversion into ordinary shares of £19 million of convertible bonds, with a further conversion of £13 million since the year end.
• Reducing capital expenditure and deferring projects other than where already committed, for example putting the Westgate, Oxford shopping centre redevelopment on hold.
• Reducing administrative expenses, particularly by lowering headcount especially in the development area. In order to achieve these reductions, some additional costs have been incurred in 2008, with the benefits to emerge in 2009 and beyond. We are targeting a reduction in administrative expenses for 2009 to £45 million, including the operational expenses of the Earls Court & Olympia exhibition business, compared with £63 million in 2008.
• Continuing our programme of disposals of non-core assets, a further £200 million of assets were sold in 2008 at a small deficit of £6 million to book value at the end of 2007. This follows £340 million of asset sales in 2007 at £37 million above 2006 year end book values and in early 2007 we achieved a 40 per cent reduction in CSC's interest in MetroCentre, Gateshead, which valued the 40 per cent property interest at £426 million. MetroCentre is still fully consolidated because of the group's residual 60 per cent interest and exercise of control. Additionally, we have a further £203 million of sales, including CMBS investments, concluded, exchanged or under offer.
• Refining our strategic focus in recognition of the reduced availability of long-term finance. We view the UK regional
shopping centre business of Capital Shopping Centres ("CSC") and the Central London activities of Capital & Counties,
particularly Covent Garden and Earls Court, as the key components for the future long-term success of the business.
• Engaging with our corporate lending bankers to stabilise the financial position of the company by amending key lending conditions, thereby reducing the risks of any covenant breach.
Property valuations
The extent to which commercial property valuations have been under pressure from the severe restriction on credit availability and the reduced appetite for risk has been well documented. The end of June 2007 marked the turning point and 2008, especially the last quarter, saw a fall of record proportions.
In this difficult environment where absolute returns have been extremely unattractive, one consolation is that we have at least significantly outperformed the benchmark IPD monthly index with our Central London and USA assets in particular demonstrating notable resilience:
|
Three |
Eighteen |
||
|
months ended |
Year ended |
months ended |
|
|
31 December |
31 December |
31 December |
|
|
2008 |
2008 |
2008 |
|
|
UK regional shopping centres |
-13.8% |
-25.4% |
-30.2% |
|
UK non-shopping centre properties |
-7.2% |
-16.1% |
-19.0% |
|
USA |
-7.1% |
-9.1% |
--6.6% |
|
Total group |
-11.8% |
-22.5% |
-27.2% |
|
IPD monthly index (all property) |
-15.3% |
-27.1% |
-35.6% |
In 2008, the direction of interest rates and property yields diverged markedly. Especially in the last quarter of the year, interest rates moved rapidly downwards, with the 10-year interest rate swap declining in the year from 5 per cent to 3.45 per cent, while property yields moved sharply upwards. The change in valuation yields in respect of our UK assets was as follows:
|
Nominal equivalent yield (per cent) |
||||
|
31 December |
30 September |
31 December |
30 June |
|
|
2008 |
2008 |
2007 |
2007 |
|
|
UK regional shopping centres |
6.67 |
5.86 |
5.08 |
4.77 |
|
UK non-shopping centre properties |
5.84 |
5.42 |
5.09 |
4.95 |
Estimated rental values ("ERV") used by the valuers held up well in 2008, with the ERV of CSC's regional shopping centres contributing a positive 1.2 per cent to the valuation outcome for the year. We expect ERV to come under pressure in 2009 reflecting the more difficult retail trading and letting market conditions.
We commissioned our external valuers to perform property valuations at 31 March 2009 for the purpose of the capital raising. The results of the valuations indicate that the underlying like-for-like reduction in the market value of investment and development properties since 31 December 2008 amounted to 8.0 per cent for CSC's completed UK regional shopping centres and 8.5 per cent overall (deficit £0.6billion). Despite the further reduction in valuation, the group's portfolio continues to outperform the benchmark IPD monthly index which fell by 8.9 per cent in the first quarter of 2009 (retail property - minus 9.6 per cent).
Shopping centre development valuations suffered particularly severely as the full impact of higher yields, anticipated longer letting periods and lower overall rental income was absorbed into the site value or carrying value of the partially completed projects. St David's 2, Cardiff incurred a revaluation deficit of £125 million, reducing the carrying value of the development to £90 million. Westgate, Oxford incurred a £39 million deficit largely as a result of abortive costs as we put the development project on hold, with the centre in its present state valued at £65 million.
It is widely anticipated that there will be further reductions in UK commercial property capital values in 2009, reflected by the discount to reported historical net asset values at which the share prices of UK-listed real estate companies currently trade, and the current pricing of derivative contracts linked to the forward performance of the IPD Index.
Capital Shopping Centres
(Market value of assets £5,010 million, 70 per cent of group total)
CSC is the market leader in prime UK regional shopping centres and has always focused on retail assets of the highest quality, with our ownership including nine of the UK's top 30 regional shopping centres. The benefit of this approach becomes most obvious in more difficult periods, with occupancy at high levels as described below and our assets performing well operationally compared with retail assets of lower quality.
CSC's prime regional centres aim to provide variety, diversity and volume of shops in a single location containing the most attractive flagship and department stores, offering the best services and providing a safe, stress-free and rewarding experience.
Our retailer tenant mix is diverse. The top 20 tenants account for 38 per cent of CSC's rent roll with the top 3 (Arcadia, Boots and Next) accounting for 11 per cent. National or international multiple retailers represent over 90 per cent of the rent roll.
The winning retailer formats in 2008 were value brands and trusted names with a strong complementary online presence. 2008 saw the disappearance of several high street names such as Woolworths, The Pier and Zavvi together with a number of smaller and independent retailers.
Key indicators of performance were as follows:
• Estimated footfall at CSC's centres in 2008 has shown considerable resilience, with our 12 completed centres recording an increase to 229 million customer visits compared with 225 million the previous year. Encouragingly, the last nine weeks of 2008 showed stronger growth than the year as a whole and growth has continued with increased footfall year-on-year to date in 2009.
• Retail sales year-on-year in 2008 excluding food according to national statistics (ONS) were positive for the year as a whole at 0.9 per cent growth, although the second half saw a slowdown. Based on the figures we receive from tenants at CSC's centres, trading at our centres in 2008 is estimated to have generally reflected the national trend, excluding those centres affected by new development.
• Occupancy levels at year end remained high at 98.7 per cent. However the final quarter in particular saw a number of additional retailer failures, 15 of which affected CSC's portfolio involving 59 units out of CSC's 2028 units in aggregate (nine months to 30 September 2008 - 31 tenants, 78 units).
The impact of these tenant failures in terms of bad debt and lease incentive write-offs within CSC's like-for-like rental income has been as follows:
|
Year |
Nine months |
Year |
|
|
ended |
ended |
ended |
|
|
31 December |
30 September |
31 December |
|
|
2008 |
2008 |
2007 |
|
|
£m |
£m |
£m |
|
|
Bad and doubtful debts |
(8.2) |
(7.2) |
(4.7) |
|
Lease incentive write-offs |
(9.3) |
(3.0) |
- |
|
(17.5) |
(10.2) |
(4.7) |
|
The resultant reduced occupancy level, adjusted for units affected by administrations still to be relet, was 93.6 per cent at 31 December 2008 (compared with 97.9 per cent at 30 September 2008).
The continued health of our retail tenant base is of overriding importance to our long-term success. We are dealing proactively with tenant issues which have emerged in 2008 and will undoubtedly continue to be a factor in 2009 given difficult trading conditions for retailers.
• Letting activity has been a focus of 2008 as we managed for occupancy in order to underpin the attractiveness of our shopping centres. We have made 244 tenancy changes in the year to 31 December 2008, involving £19.1 million of new annual passing rent, with over 60 per cent of the income generated related to long-term lettings which produced additional annual rental income of £4.1 million per annum. These tenancy changes in the year included 94 long-term lettings, 76 short-term lettings, 55 lettings by our commercialisation business, CSC Enterprises, and 19 turnoveronly transactions.
Short-term lettings have generally been agreed below previous rental levels, but are an important part of the overall strategy to manage for occupancy maintaining attractiveness of the centres and minimising exposure to void costs.
• Rent review settlements have continued to be agreed in line with our expectations, with 15 per cent of CSC's income
due for rent review during 2008 primarily at Cribbs Causeway.
In 2009, 18 per cent of CSC's rental income is due for review, primarily the second cycle of rent reviews at Braehead, Renfrew, Glasgow, falling in September.
During 2010 and 2011, 56 per cent of income is due for review split equally at 28 per cent each year. In 2010, the first cycle of rent reviews at Norwich falls due together with the fourth cycle at Lakeside. Rent review strategies for regional shopping centres are commenced well in advance of the rent review date.
• CSC's lease expiry profile is robust with only 2 and 3 per cent of rent expiring in 2009 and 2010 respectively. The first major round of lease expiries is at MetroCentre in 2011 which management are already addressing pro-actively.
• Our focus on improvements to customer service and amenities has continued. During 2008 new centre websites were completed and a mystery shopper programme introduced together with benchmarking of our centre management operations.
• Asset and centre management initiatives are ongoing at our completed centres to continually respond to both our retailer and shopper aspirations. We have numerous value adding development opportunities which can be undertaken when market conditions are appropriate.
Notable active management initiatives in 2008 have been as follows:
- Upgrade of the leisure and dining facilities in the Yellow and Blue Quadrants at MetroCentre, Gateshead
- A new 36,000 sq. ft. flagship store for New Look at Braehead, Renfrew, Glasgow and intended relocation of Sainsbury's to the adjoining retail park
- Retail park refurbishment and food court remodelling at Cribbs Causeway
- Completion of two projects at Eldon Square, Newcastle with the third and largest project, Eldon Square South, due to complete in Spring 2010, increasing the overall size of the centre to 1.3 million sq. ft.
- Remodelling of Bromley High Street units to provide 50,600 sq. ft. of new space at The Glades.
• CSC's largest development project, St David's, Cardiff, a joint venture with Land Securities, is on programme to complete in Autumn this year. The project will extend the existing St David's Centre by 967,500 sq. ft. to 1.4 million sq. ft overall. Overall around 125 new shops and restaurants are being developed which, when added to the existing centre, will enlarge St David's into one of the UK's largest city centre retail schemes.
We are confident of the future prospects for the enlarged St David's Centre with the existing centre already attracting 22 million customer visits each year.
Cardiff is expected to rise to eighth place in the UK retail rankings on completion of the St David's development which has already attracted several new retailers to Wales.
The new library was handed over to Cardiff Council on schedule in December and John Lewis is currently fitting out its store. Cardiff will be its largest store outside London.
57 per cent of the area and 47 per cent of anticipated rental income is currently either exchanged or in solicitors' hands.
In 2008 a significant number of new shopping centres opened during the year adding over 10 million sq. ft. of retail space, generally well let. In 2009, only a small number of large retail schemes are due to open including St David's Cardiff. Following this, supply will be curtailed sharply, as the current economic environment has halted many projects in the pipeline.
However, we anticipate the letting market to continue to be challenging in 2009 as retailers approach expansion with caution.
Schedule 4 sets out details of asset management initiatives at CSC's individual completed regional shopping centres, together with data on operating performance, CSC's major developments and CSC's rent review and lease expiry profile.
Capital & Counties
(£2.1 billion of investment properties, 30 per cent of group total, and £129 million of investments)
Capital & Counties is principally engaged in non-shopping centre investments focused on Central London. It also manages the development and international activities of Liberty International and Capital Shopping Centres. Capital & Counties is arranged into large business units comprising Capco London (£1,434 million), Capco International (£580 million) and Capco Opportunities (£218 million).
In a challenging environment, we made firm progress across our business units.
The strong performance on a relative basis validates the strategy of focusing on prime assets and disposal of non-core properties. Conditions will remain difficult in the immediate future but we believe that the steps taken over the last two years to realign Capital & Counties will enable the business to outperform the general market and once conditions stabilise each business unit has a defined objective and a promising future.
Disposals of non-core assets in 2008 of £202 million resulted in a small deficit of £6 million to end 2007 market values.
• Capco London
(£1,434 million investment properties, 20 per cent of group total)
Capco Covent Garden
(£590 million investment properties, 8 per cent of group total)
Our enhancement strategy has gained support from key stakeholders and our vision to position Covent Garden as a world class district has been welcomed by target retail brands.
Tenant engineering has commenced in earnest and we expect to welcome high quality retailers into the established mix. In 2008 we introduced eight new retailers to the estate. Selective enhancement and refurbishment work commenced with planning applications made, most notably for Bedford Chambers which is contracted to a major global retailer.
Marketing and rebranding drove visitor numbers of approximately 43 million with average dwell time of 2.75 hours.
At the year end, portfolio occupancy was strong at 97 per cent by rental value and the capital value of the estate held up relatively well, recording a 15.4 per cent revaluation deficit.
Great Capital Partnership (GCP)
(£275 million investment properties, 4 per cent of group total)
GCP undertook a major property swap with the Crown Estate in 2008 involving 580,000 sq. ft. of space in Central London with an aggregate value as at 31 December 2007 of £358 million. In addition, the partnership made four acquisitions, our share amounting to £9 million. Capital values reduced by 20.2 per cent during the year. Although headline rents in the West End will undoubtedly come under pressure, the GCP portfolio with an average rent of £36 psf is considered reversionary and its strategic focus on prime properties with added value potential should prove beneficial. At 31 December 2008 portfolio occupancy was 86 per cent by rental value with 6 per cent under refurbishment.
Earls Court & Olympia
(£569 million investment properties, 8 per cent of group total)
The underlying exhibition business, EC&O Venues, performed very soundly in 2008 with turnover increased from £61.0 million to £62.2 million and EBITDA before exceptional items increased from £18.2 million to £20.4 million.
We have made good progress with our longer term plans and are in the process of documenting a vision agreement with adjacent landowners for a major integrated mixed use development around Earls Court.
During the second half of 2008, we acquired a 50 per cent interest in the Empress State building for a cash consideration of £33.1 million. The total value of our interest in the new partnership was £113 million, with the balance being funded by an asset-specific, non-recourse loan. As required by IAS 27 "Consolidated and Separate Financial Statements", this acquisition has been fully consolidated with the 50 per cent third party share adjusted through minority interest. This 470,000 sq. ft. 30 storey building is strategic to our plans at Earls Court and benefits from an index-linked lease with 11 years remaining to a government tenant, the Metropolitan Police.
In valuation terms, the Earls Court investment performed creditably with a 10.4 per cent reduction in capital value.
• International - USA
(£486 million investment properties, 7 per cent of group total)
Our portfolio in California remained robust in terms of both income and value. Net property income for the year remained stable with a small reduction in like-for-like income of 1.3 per cent. As at 31 December 2008, the occupancy level was 94 per cent.
Turnover at our retail properties in Q4 was slightly weaker than in previous years with the retail and office leasing markets softening in line with the fall in economic activity. Overall the number of tenant failures was relatively small with four tenants occupying 11,000 sq. ft. (0.5 per cent of the portfolio) going into administration. 3,800 sq. ft. of this retail space was relet in December.
The Serramonte Centre continues to trade well with net rental income ahead of budget at $14.7 million. With the introduction of a visitor counting system at the end of 2007, we are able to report customer numbers for the first time this year of 8.9 million.
An aggressive programme of cost saving initiatives was initiated in the second half of the year, for example the development division was disbanded. This should reduce 2009 operating overheads substantially compared with 2008.
• International - other
(Investments of £95 million)
In China our relationship is developing well with Harvest Capital and China Resources. Our first co-investment in Harvest Capital's fund CR1 is showing a surplus. In India, our joint venture Prozone Liberty, in which we have a 25 per cent interest, is working on four major shopping centre projects with the first in Aurangabad due for completion in 2010.
• Capco Opportunities
(Investment properties of £183 million, 3 per cent of group total, and investments of £35 million)
We continue to sell the remaining legacy assets with a reduction in investment properties in the year from £374 million to £183 million and net rental income reduced from £18.7 million to £11.3 million.
Dividends
Liberty International became a UK Real Estate Investment Trust ("REIT") on 1 January 2007. Under UK REIT regulations, the group is required to distribute a minimum Property Income Distribution ("PID") amounting to not less than 90 per cent of the taxable profits of its UK property rental business.
As a result of capital allowances and capitalised interest relating to the group's development activities, the required minimum PID is substantially less than reported underlying earnings. In respect of 2008, the group will restrict the dividend to the 16.5p per share interim dividend already paid which exceeds the expected minimum PID requirement for 2008 of 12.8p per share.
In the light of prevailing market conditions where cash conservation and debt reduction are a priority, the Board believes it to be in the best interests of shareholders not to pay a final dividend in respect of the 2008 financial year as the required minimum PID requirement has already been met.
The Board would also seek to maintain, subject to available resources, the intended dividend for 2009, at the level of 16.5p per share or the minimum PID requirement if greater. The dividend policy for future years will be kept under review.
Interim management statements
Since becoming a REIT in January 2007, Liberty International has provided full quarterly reports with property valuations. Feedback from market participants has however indicated a preference for interim management statements rather than full quarterly reports for the first and third quarters and we have concluded that the additional detail in the full quarterly reports relative to the information available from an interim management statement does not justify the extra time, effort and expense in their preparation and analysis.
Therefore, with effect from the first quarter of 2009, we intend to publish interim management statements rather than full quarterly reports for the first and third quarters of the year. Full reports with property valuations will be prepared at the half year and year end.
Extraordinary General Meeting
Due almost entirely as a result of the downward revaluation of the Group's properties, these financial statements indicate that the borrowing limit in the Articles of Association of 1.5 times adjusted capital and reserves has been exceeded. Furthermore, the uncertain environment for market valuations of property is likely to cause the borrowing limit to remain exceeded in the near term. At an Extraordinary General Meeting held on 1 April 2009, shareholders approved a resolution to suspend the borrowing limit until the company's AGM in 2011 and to reinstate the limit thereafter at two times adjusted capital and reserves, subject to review at the time of the 2011 AGM.
Corporate responsibility
Our corporate responsibility policies, covering a wide range of environmental and community engagement initiatives,
are directly tied to the needs of the business.
We aim to manage and minimise our impact on the environment. We are delighted that, for the first time, 2008 saw a greater volume (42 per cent) of waste generated by our shopping centres being recycled as opposed to being sent to landfill (37 per cent).
We also recorded a 7 per cent reduction in our carbon footprint across CSC managed shopping centres. As long-term investors, it is vital that despite tougher economic conditions we continue to engage fully with the communities who sustain and support our business. In general, we focus on supporting youth, education and the prevention of crime in
the neighbourhoods surrounding our assets.
In 2008, centre management teams contributed over 4,500 hours to community related projects. As an example, The Breakthrough Apprenticeships initiative based at The Victoria Centre, Nottingham, working with the charity Catch22, has seen 19 young people from troubled local communities taking their first steps onto the employment ladder. Carefully developed programmes such as this are important as our prime shopping centres and other major assets are focal points of the wider community.
Regional shopping centres have an enormous economic multiplier effect across their community. For example, we estimate some 50,000 people are employed at our shopping centres. The development of the St David's Shopping Centre in Cardiff is currently providing employment for some 1,300 people, many local to the area.
The strength of our commitment is demonstrated by inclusion in a number of social reporting indices including FTSE4Good, Business in the Community Top 100 Companies, and the Johannesburg Stock Exchange SRI Index.
Additional information on our commitment to Corporate Responsibility is contained in the Corporate Responsibility summary of the Annual Report. Our full Corporate Responsibility Report 2008 is at www.liberty-international.co.uk/cr.
Employees
Our employees are central to the success of our business and the delivery of a high quality service for our shoppers and occupiers. We have a comprehensive set of policies that embody our approach to our employees and establish the framework for the high standards of behaviour and values that we expect. Further information on our employees is contained in the annual report and in the Corporate Responsibility Report 2008 which is available at www.liberty-international.co.uk. The website also carries current corporate and staff policies.
Contractual arrangements
Various companies within the Liberty International group have contractual arrangements with a large number of third parties including tenants, joint venture partners, service providers and construction companies. The Directors do not consider that disclosure of the terms of any particular contractual arrangement is necessary to provide an understanding of the development, performance or position of the group's business.
Key risks and uncertainties
As described in the Corporate Governance Report in the Annual Report, the Board has established a system for identifying, evaluating and managing the key risks facing the group. A summary of these key risks and uncertainties is given and additional commentary on the principal financial risks is provided in the Financial Review.
Key performance indicators
The performance of the business is monitored through a number of Key Performance Indicators (KPI's) including both financial and non-financial measures. These are included in the appropriate section of these financial statements with commentary discussing performance. Certain KPI's can be found in the Highlights section in the Annual Report. This Operating review contains details of our property portfolio and operational performance and the Financial review in the Annual Report contains a variety of financial KPI's.
Prospects
2009 will undoubtedly be a further difficult year for the UK economy and the property industry.
However, a combination of important factors which should be positive for a recovery are in place but have yet to take effect. In particular, the fall in sterling, lower prices for fuel and commodities, and Government-induced measures such as lower interest rates, the recapitalisation of the banking sector and the reduction in VAT from 17.5 per cent to 15 per cent should in aggregate be beneficial.
Furthermore, while the retail failures in 2008 and early 2009 will have a negative impact on our net rental income for 2009, the process of eliminating less successful retailers which accelerates when market conditions are more difficult is ultimately a healthy one. The remaining retailers should benefit from reduced competition and in due course along with new entrants to the sector will look to expand to fill the available space, particularly in quality locations such as we possess. We anticipate that retail is likely to be at the forefront of economic recovery in the UK and, given the key advantage of our close working relationship with the UK's major retailers, Liberty International should be an early beneficiary.
Positives for Liberty International are:
• The quality of our underlying assets including:
- 14 prime UK regional shopping centres with nine of the top 30 in the UK, including four of the eight out-of-town regional centres in the UK; Lakeside, Thurrock; MetroCentre, Gateshead; Cribbs Causeway, Bristol; and Braehead, Renfrew, Glasgow.
- The Covent Garden Estate where we have consolidated a substantial block in the heart of London's West End, with good prospects for the tourist component of the customer base as sterling weakness increases London's attraction to overseas visitors.
- Earls Court & Olympia, a sound operational business with major medium to long-term development prospects from the Earls Court site.
• A predominately non-recourse debt structure with over 90 per cent of the group's debt being asset specific and non-recourse with no major debt refinancings until the Lakeside CMBS in 2011.
• A sharp reduction in the retail supply pipeline in the UK, with projects which have not already started unlikely to be open for some years, given the timescales involved in bringing major shopping centre projects to fruition. The prime quality, scarcity value and strong competitive position of our UK regional shopping centre assets is therefore unlikely to be substantially further challenged for a sustained period, which bodes well for the long-term performance of our assets and their recovery potential when conditions improve.
• The modest size in relation to the company as a whole and high quality of our development programme, in particular the St David's Cardiff development at the heart of one of the UK's major cities which has excellent long-term prospects notwithstanding the near-term letting challenges.
• Limited exposure to the more difficult retail sectors in the UK, namely bulky goods, big ticket items and the household goods sector.
• Occupancy levels at our regional shopping centres which, while lower than we may have been accustomed to in recent years, are likely to significantly exceed levels at more secondary assets, thereby increasing the relative attraction of our centres.
• Increased footfall at our centres to date in 2009 compared with 2008 indicating stronger performance from prime centres compared with secondary assets in these more difficult conditions.
• Limited lease expiries in 2009 and 2010 with most of our rental income for these two years contractually committed.
• Asset values now stated at substantially more defensive levels following the falls in the second half of 2007 and in 2008.
• A committed management team who have experienced previous recessionary cycles.
• Ample opportunities within our existing assets for active management and development projects when market and financial conditions permit.
Important objectives for 2009 include:
• To maintain occupancy levels at our existing assets and secure development lettings in a difficult letting market where, until a measure of confidence returns to financial markets and the general UK economy, further retailer failures must be anticipated.
• To conserve cash resources and strengthen the financial position of the company in the face of possible further falls in asset values, while progressing active management and development initiatives for launch when market conditions are more suitable.
• To position the group for market recovery in due course with retail, and thereby prime retail property, likely in our view to be at the forefront of such recovery.
In furtherance of these objectives, the group announced on 28 April 2009 a Capital Raising of £592 million net of estimated expenses of £28 million through a Firm Placing and Placing and Open Offer which will improve the Group's debt to assets and interest cover ratios, augment the Group's cash resources, extend its debt maturity profile and increase the Group's financial flexibility. The proceeds from the Capital Raising will immediately reduce the Group's overall net debt position.
Directors' responsibility statement
We confirm to the best of our knowledge:
(a) the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and
(b) the Chairman's statement, the Operating review, the Financial review, the Key risks and uncertainties and the Directors' report include a fair review of the development and performance of the business and the position of the
company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Signed on behalf of the Board on
28 April 2009
David Fischel
Chief Executive
Ian Durant
Finance Director
ii) Key Risks and Uncertainties
The key risks and uncertainties facing the group are as set out in the table below which is reproduced from the Annual Report:
|
Risk |
Description |
Impact |
Mitigation |
|
Financing |
|||
|
Liquidity |
Reduced availability |
Insufficient funds to |
Efficient treasury |
|
meet requirements |
management and strict |
||
|
credit control |
|||
|
Property values |
Property values |
Impact on covenants |
Regular monitoring of |
|
decrease |
LTV; covenant |
||
|
headroom maintained; |
|||
|
regular market |
|||
|
valuations; focus on |
|||
|
quality assets; regular |
|||
|
portfolio reviews |
|||
|
identifying properties for |
|||
|
disposal. |
|||
|
Economic downturn |
Reduction in rental |
Impact on covenants |
Internal Group limits on |
|
income |
debts to assets and |
||
|
interest rate ratios |
|||
|
Interest cover |
Interest rates fluctuate |
Lack of certainty over |
Hedging to establish |
|
interest costs |
long-term certainty. |
||
|
REIT |
Breach REIT conditions |
Tax penalty or be forced |
Regular monitoring of |
|
to leave the REIT |
compliance and |
||
|
regime |
tolerances. |
||
|
Joint Ventures |
Reliance on JV partners' |
Partners under perform |
Agreements in place |
|
performance and |
or provide incorrect |
and regular contact |
|
|
reporting |
information |
with partners. |
|
|
Asset Management |
|||
|
Tenants |
Tenant failure |
Financial loss |
Regular reporting and |
|
modelling of covenant |
|||
|
cover; credit control. |
|||
|
Voids |
Increased voids, failure |
Financial loss |
Policy of active tenant. |
|
to let developments |
mix management |
||
|
Reputation |
|||
|
Responsibility for visitors |
Failure of Health & |
Impact on reputation or |
Annual audits carried |
|
to shopping centres |
Safety |
potential criminal/civil |
out by external |
|
proceedings |
consultants. Health &. |
||
|
Safety policies in place |
|||
|
Disaster/National |
Effect of natural disaster/ |
Impact on footfall and |
Security team training |
|
Security terrorist strike |
terrorist strike; |
retailer income; adverse |
and procedures in |
|
publicity |
shopping centres. |
||
|
Implementation of |
|||
|
NATSCO |
|||
|
recommendations. |
|||
|
Security and Health & |
|||
|
Safety policies and |
|||
|
procedures in shopping |
|||
|
centres/offices. Terrorist |
|||
|
insurance is in place. |
|||
|
People/HR |
|||
|
Staff |
Key staff |
Loss of key members of |
Succession Planning; |
|
the management team |
performance evaluation; |
||
|
could impact adversely |
training and |
||
|
on the Group's success |
development; incentive |
||
|
reward |
|||
|
Developments |
|||
|
Time |
Planning |
Securing planning |
Policy of sustainable |
|
consent |
development and |
||
|
regeneration of for |
|||
|
developments |
|||
|
brownfield sites. |
|||
|
Constructive dialogue |
|||
|
with planning authorities. |
|||
|
Cost and letting risk |
Construction cost |
Returns reduced by |
Approval process based |
|
overrun, low occupancy |
increased costs or delay |
on detailed project costs; |
|
|
levels |
in securing tenants. |
regular monitoring and |
|
|
forecasting of project |
|||
|
costs and rental income; |
|||
|
and fixed cost contracts. |
|||
|
Investment/Strategic risks |
|||
|
Strategic |
Diversification |
Invest in new areas of |
Retaining and |
|
property use and |
appointing experienced |
||
|
geographical location |
management |
||
|
teams/overseas |
|||
|
representatives. |
|||
|
Securing local partners |
|||
|
to oversee investment |
|||
|
but retaining a measure |
|||
|
of influence. |
|||
iii) Audited Financial Statements
The preliminary results contained a condensed set of financial statements for the year ended 31 December 2008, however additional note disclosures are contained below in unedited full text from the company's annual report
1 Accounting convention and basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union ("IFRS"), IFRIC interpretations and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The Directors have taken advantage of the exemption offered by Section 230 of the Companies Act not to present a separate income statement for the parent company.
The financial statements have been prepared under the historical cost convention as modified by the revaluation of properties, available-for-sale investments, financial assets and liabilities held for trading. A summary of the more important group accounting policies is set out below.
The group's business activities have been affected by the markedly more adverse UK financial and economic background. A description of the impact and the factors likely to affect the group's future development, performance and position are set out in the Chairman's statement and the Operating review. The financial position of the group, its cash flows, debt structure, borrowing facilities and principal financial risks are described in the Financial Review in the Annual Report. In addition note 27 to the financial statements in the Annual Report includes the group's financial risk management objectives; details of its financial instruments and hedging activities; its exposures to liquidity risk and details of its capital structure.
In response to the more negative economic background the group has re-negotiated its main corporate loan facility and announced an underwritten capital raising of £620 million, subject to shareholder approval at an Extraordinary General Meeting on 22 May 2009. As a consequence of these actions, the directors believe that the group is well placed to manage its business risks despite the current uncertain economic outlook.
The directors have therefore concluded, based on cash flow projections taking account of the factors listed above, that there is a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future and have therefore prepared the financial statements on a going concern basis.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Where such judgements are made they are included within the
accounting policies below.
Standards and guidelines relevant to the group that were in issue at the date of approval of the financial statements but not yet effective for the current accounting period were: IFRS 3 (amendment), 'Business Combinations',
effective for annual periods beginning on or after 1 July 2009.
IFRS 8, 'Operating Segments', effective for accounting periods beginning on or after 1 January 2009.
IAS 23 (Revised) 'Borrowing Costs', effective for accounting periods beginning on or after 1 January 2009.
IAS 27 (amendment), 'Consolidated and Separate Financial Statements', effective for accounting periods beginning on or after 1 January 2009.
IAS 39 (amendment), 'Financial Instruments: Recognition and Measurement', effective for accounting periods beginning on or after 1 January 2009.
These pronouncements, when applied, are not expected to have a material impact on the financial statements, but will result in changes to presentation or disclosure.
The assessment of new standards, amendments and interpretations issued but not effective, not included above are not anticipated to have a material impact on the financial statements.
During 2008, the following accounting standards and guidance were adopted by the group:
IAS 1 (amendment), 'Presentation of Financial Statements', effective for annual periods beginning on 1 January 2009, but adopted early.
IAS 16 (amendment) 'Property, Plant and Equipment', and IAS 40 (amendment) 'Investment Property' effective for annual periods beginning on 1 January 2009, but adopted early.
These pronouncements either had no impact on the financial statements or resulted in changes to presentation and disclosure only.
2 Segmental analysis
For management purposes the group is organised into operating divisions, of which the two largest are UK shopping centres and other commercial properties. Unallocated expenses are costs incurred centrally which are neither directly or reasonably attributable to individual segments.
|
(a) Business segments |
2008 |
||||
|
UK |
Other |
||||
|
shopping |
commercial |
Other |
Group |
||
|
centres |
properties |
Exhibition |
activities |
total |
|
|
£m |
£m |
£m |
£m |
£m |
|
|
Revenue |
423.6 |
119.0 |
62.8 |
12.8 |
618.2 |
|
Rent receivable |
338.8 |
98.8 |
62.8 |
- |
500.4 |
|
Service charge income |
57.8 |
13.8 |
- |
- |
71.6 |
|
Other rental income |
21.1 |
1.6 |
- |
12.7 |
35.4 |
|
417.7 |
114.2 |
62.8 |
12.7 |
607.4 |
|
|
Rent payable |
(23.5) |
(0.8) |
- |
- |
(24.3) |
|
Service charge and other non-recoverable |
|||||
|
costs |
(113.4) |
(40.9) |
(34.2) |
(11.1) |
(199.6) |
|
Net rental income |
280.8 |
72.5 |
28.6 |
1.6 |
383.5 |
|
Property trading profits |
0.3 |
- |
- |
- |
0.3 |
|
Other income |
- |
0.1 |
- |
0.1 |
0.2 |
|
Deficit on revaluation and sale of |
|||||
|
investment and development property |
(1,693.5) |
(301.7) |
(61.8) |
- |
(2,057.0) |
|
Profit on sale of subsidiary |
- |
0.8 |
- |
- |
0.8 |
|
Write down of trading property |
- |
(5.8) |
- |
- |
(5.8) |
|
Impairment of goodwill |
- |
- |
(8.4) |
(26.6) |
(35.0) |
|
Segment result |
(1,412.4) |
(234.1) |
(33.2) |
1.7 |
(1,713.0) |
|
Unallocated administration costs |
(63.2) |
||||
|
Operating loss |
(1,776.2) |
||||
|
Total assets* |
5,149.9 |
1,918.8 |
381.0 |
81.2 |
7,530.9 |
|
Total liabilities* |
(3,539.0) |
(1,333.9) |
(278.0) |
(394.2) |
(5,545.1) |
|
Net assets/(liabilities) |
1,610.9 |
584.9 |
103.0 |
(313.0) |
1,985.8 |
|
Other segment items: |
|||||
|
Capital expenditure |
208.0 |
326.4 |
31.6 |
- |
566.0 |
|
Depreciation |
- |
0.3 |
- |
- |
0.3 |
* Total assets and total liabilities exclude loans between group companies.
|
2007 |
|||||
|
UK |
Other |
||||
|
shopping |
commercial |
Other |
Group |
||
|
centres |
properties |
Exhibition |
activities |
total |
|
|
£m |
£m |
£m |
£m |
£m |
|
|
Revenue |
424.8 |
126.3 |
24.7 |
(1.2) |
574.6 |
|
Rent receivable |
334.8 |
98.8 |
24.7 |
- |
458.3 |
|
Service charge income |
57.6 |
9.3 |
- |
- |
66.9 |
|
Other rental income |
19.3 |
2.2 |
- |
- |
21.5 |
|
411.7 |
110.3 |
24.7 |
- |
546.7 |
|
|
Rent payable |
(22.3) |
(3.1) |
- |
- |
(25.4) |
|
Service charge and other non-recoverable costs |
(100.6) |
(31.8) |
(14.6) |
- |
(147.0) |
|
Net rental income |
288.8 |
75.4 |
10.1 |
- |
374.3 |
|
Property trading profits |
1.5 |
1.4 |
- |
- |
2.9 |
|
Other income/(expenses) |
- |
0.3 |
- |
(1.2) |
(0.9) |
|
(Deficit)/gain on revaluation and sale of |
|||||
|
investment and development property |
(284.5) |
0.6 |
4.8 |
- |
(279.1) |
|
Segment result |
5.8 |
77.7 |
14.9 |
(1.2) |
97.2 |
|
Total assets |
6,692.0 |
1,905.5 |
417.9 |
157.1 |
9,172.5 |
|
Total liabilities |
(3,108.6) |
(1,106.5) |
(282.5) |
34.0 |
(4,463.6) |
|
Net assets |
3,583.4 |
799.0 |
135.4 |
191.1 |
4,708.9 |
|
Other segment items: |
|||||
|
Capital expenditure |
226.8 |
458.4 |
376.6 |
- |
1,061.8 |
|
Depreciation |
- |
0.3 |
- |
- |
0.3 |
|
(b) Geographical segments |
Revenue |
Total assets |
Capital expenditure |
|||
|
2008 |
2007 |
2008 |
2007 |
2008 |
2007 |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
United Kingdom |
571.8 |
534.0 |
7,009.4 |
8,756.4 |
559.8 |
1,049.5 |
|
United States |
46.4 |
40.6 |
521.5 |
416.1 |
6.2 |
12.3 |
|
618.2 |
574.6 |
7,530.9 |
9,172.5 |
566.0 |
1,061.8 |
|
3 Business combinations
Empress State Limited Partnership
On 19 August 2008, the group acquired a 50 per cent interest in the Empress State Limited Partnership which owns and manages, through its general partner, the Empress State Building in West London. This 470,000 sq.ft., 30 storey building is strategic to the group's plans at Earls Court and benefits from an index linked lease to the Metropolitan Police with 11 years still remaining.
In accordance with IAS 27, 'Consolidated and Separate Financial Statements', this acquisition has been fully consolidated as the group holds an option to purchase the remaining 50 per cent partnership interest at any point until August 2009. As a consequence the group controls the business as it has the power to govern the financial and operating policies so as to obtain the benefits from its activities. The third party partnership share has therefore been accounted for through minority interest, which represents the portion of profit and loss and net assets which is not held by the group.
This business contributed net revenues of £4.7 million, and a net loss of £36.2 million after charging a deficit on revaluation of investment and development property of 21.2 million. Had the acquisition occurred on 1 January 2008 the group net revenue would have been £7.7 million higher and the group net loss would have been £14.9 million lower, after charging a deficit on revaluation of investment and development property of £5.9 million.
These amounts have been calculated by adjusting the results of the subsidiaries to reflect the group's accounting policies.
|
Purchase consideration: |
£m |
|
Cash paid |
31.9 |
|
Non-recourse, asset specific loan |
79.5 |
|
Rent apportionment |
0.6 |
|
Direct costs relating to acquisition |
1.2 |
|
Total purchase consideration |
113.2 |
|
Fair value of assets acquired |
(113.2) |
|
Goodwill |
- |
The assets and liabilities arising from the acquisition are as follows:
|
Total |
||
|
Acquiree's |
||
|
carrying |
||
|
Fair value |
value |
|
|
£m |
£m |
|
|
Non-current assets |
||
|
Investment and development property |
222.2 |
222.2 |
|
Net assets |
222.2 |
222.2 |
|
Minority interests |
(109.0) |
|
|
Net assets acquired |
113.2 |
|
4 Disposal of subsidiaries
Capital Enterprise Centres (Jersey) Limited
The group disposed of its 70 per cent interest in Capital Enterprise Centres (Jersey) Limited during the period for a consideration of £8.2 million in cash and loan notes. This gave rise to a £0.8 million profit on disposal. The net assets of Capital Enterprise Centres (Jersey) Limited at the date of disposal were as follows:
|
Total |
||
|
Carrying |
Fair |
|
|
value |
value |
|
|
£m |
£m |
|
|
Non-current assets |
||
|
Investment and development property |
64.8 |
64.8 |
|
Plant and equipment |
0.6 |
0.6 |
|
Trade and other receivables |
3.0 |
3.0 |
|
Borrowings |
(39.1) |
(39.1) |
|
Tax liabilities |
(5.6) |
(5.6) |
|
Trade and other payables |
(14.7) |
(14.7) |
|
Net assets |
9.0 |
9.0 |
|
Minority interests |
(2.7) |
|
|
Net assets disposed |
6.3 |
|
|
Other costs |
1.1 |
|
|
Profit on disposal |
0.8 |
|
|
Total consideration |
8.2 |
|
|
Satisfied by: |
||
|
Cash |
5.0 |
|
|
Loan notes * |
3.2 |
|
|
8.2 |
||
* Loan notes are interest bearing and repayable on 28 April 2011
5 Goodwill
|
2008 |
2007 |
|
|
£m |
£m |
|
|
At 1 January |
26.6 |
- |
|
Additions |
8.4 |
26.6 |
|
Impairment |
(35.0) |
- |
|
At 31 December |
- |
26.6 |
Following an impairment test, required under IAS 36, the goodwill arising on the acquisition of the Covent Garden Restaurants group and the Earls Court & Olympia group has been written off in full. As a result, a charge of £35.0 million has been made to the income statement in the year; £26.6 million relates to the impairment of goodwill brought forward on 1 January 2008 and £8.4 million to acquisition costs and deferred consideration payments incurred in the current period being fully impaired. In respect of the Covent Garden Restaurants group, which was acquired for their investment properties, with the intention of a change in use, the impairment is due to an assessment of value in use with a negligible time value of money given the advanced state of the plans to reconfigure the buildings in which they are located. These plans are, however, subject to commercial agreement. The charge arising on the Earls Court & Olympia group has arisen due to the carrying value of the cash generating unit exceeding the recoverable amount (fair value) at 31 December 2008.
6 Finance costs
|
2008 |
2007 |
|
|
£m |
£m |
|
|
Interest payable |
||
|
On bank overdrafts and loans |
239.0 |
211.8 |
|
On convertible debt |
4.4 |
6.9 |
|
On obligations under finance leases |
5.4 |
5.7 |
|
Gross interest payable - recurring |
248.8 |
224.4 |
|
Interest capitalised on developments |
(18.5) |
(15.1) |
|
Total interest payable |
230.3 |
209.3 |
|
Costs of termination of financial instruments |
6.6 |
2.0 |
|
Profit on repurchase of CMBS notes |
(13.1) |
- |
|
MetroCentre amortisation of compound financial instrument |
2.0 |
- |
|
Exceptional finance costs: |
||
|
- Payments on conversion of 3.95% convertible bond |
3.6 |
- |
|
- Issue costs written off on redemption of loans |
- |
1.3 |
|
Other finance (income)/costs |
(0.9) |
3.3 |
Interest is capitalised, before tax relief, on the basis of the average rate of interest paid of 6.25 per cent (2007 - 6.25 per cent) on the relevant debt, applied to the cost of developments during the year.
7 Taxation
Taxation (credit)/charge for the financial year
|
2008 |
2007 |
|
|
£m |
£m |
|
|
Current UK corporation tax at 28.5% (2007 - 30%) on profits |
0.7 |
6.0 |
|
Prior year items - UK corporation tax |
(8.1) |
(3.4) |
|
(7.4) |
2.6 |
|
|
Overseas taxation (including £0.5 million (2007- £0.7 million) of prior year items) |
0.9 |
0.1 |
|
Current tax on profits excluding exceptional items and property disposals |
(6.5) |
2.7 |
|
Deferred tax: |
||
|
On investment and development property |
(25.5) |
8.7 |
|
On derivative financial instruments |
(59.5) |
15.6 |
|
On other temporary differences |
2.8 |
(0.5) |
|
Deferred tax on profits excluding exceptional items and property disposals |
(82.2) |
23.8 |
|
Tax (credit)/charge excluding exceptional items and property disposals |
(88.7) |
26.5 |
|
REIT entry charge |
3.6 |
3.9 |
|
Tax credit on exceptional items and property disposals |
(0.5) |
- |
|
Total tax (credit)/charge |
(85.6) |
30.4 |
Factors affecting the tax (credit)/charge for the year
The tax assessed for the period is lower than the standard rate of corporation tax in the UK. The differences are explained below:
|
2008 |
2007 |
|
|
£m |
£m |
|
|
Loss before tax |
(2,662.1) |
(124.8) |
|
Loss on ordinary activities multiplied by the standard rate in the UK of 28.5% |
||
|
(2007 - 30%) |
(758.7) |
(37.4) |
|
UK capital allowances not reversing on sale |
(5.9) |
(8.2) |
|
Disposals of properties and investments |
16.6 |
1.0 |
|
Prior year corporation tax items |
(7.6) |
(2.7) |
|
Prior year deferred tax items |
(0.4) |
2.5 |
|
Expenses disallowed, net of capitalised interest |
(3.4) |
(3.2) |
|
REIT exemption - corporation tax |
(19.9) |
(31.7) |
|
REIT exemption - deferred tax |
644.5 |
108.1 |
|
REIT exemption - entry charge |
3.6 |
3.9 |
|
Utilisation of losses brought forward |
(0.1) |
(1.0) |
|
Overseas taxation |
(0.2) |
0.8 |
|
Unprovided deferred tax |
46.0 |
- |
|
Reduction in tax rate following cut in corporate tax rate |
(0.1) |
(1.7) |
|
Total tax (credit)/charge |
(85.6) |
30.4 |
Tax items that are taken directly to equity are shown in the Statement of Recognised Income and Expense.
8 Dividends
|
2008 |
2007 |
|
|
£m |
£m |
|
|
Ordinary shares |
||
|
Prior period final dividend paid of 17.6p per share (2007 - 17.25p) |
63.5 |
62.4 |
|
Interim dividend paid of 16.5p per share (2007 - 16.5p) |
59.5 |
59.7 |
|
Dividends paid |
123.0 |
122.1 |
|
Proposed dividend of nil per share (2007 - 17.6p) |
- |
63.6 |
9 Investment and development property
|
Leasehold |
|||
|
over 50 |
|||
|
Freehold |
years |
Total |
|
|
£m |
£m |
£m |
|
|
At 1 January 2007 |
4,699.4 |
3,487.7 |
8,187.1 |
|
Additions |
424.9 |
636.9 |
1,061.8 |
|
Disposals |
(157.4) |
(146.0) |
(303.4) |
|
Foreign exchange fluctuations |
(6.2) |
- |
(6.2) |
|
Deficit on valuation |
(155.4) |
(161.1) |
(316.5) |
|
At 31 December 2007 |
4,805.3 |
3,817.5 |
8,622.8 |
|
Reclassification |
(180.0) |
180.0 |
- |
|
Additions from acquisition and subsequent expenditure |
101.4 |
242.3 |
343.7 |
|
Additions from acquisition of subsidiary companies |
222.2 |
- |
222.2 |
|
Transfers from trading properties |
4.9 |
- |
4.9 |
|
Disposal of subsidiaries |
(45.3) |
(19.5) |
(64.8) |
|
Other disposals |
(98.5) |
(42.5) |
(141.0) |
|
Foreign exchange fluctuations |
137.7 |
- |
137.7 |
|
Deficit on valuation |
(945.9) |
(1,105.2) |
(2,051.1) |
|
At 31 December 2008 |
4,001.8 |
3,072.6 |
7,074.4 |
|
As at |
As at |
||
|
31 December |
31 December |
||
|
2008 |
2007 |
||
|
£m |
£m |
||
|
Balance sheet carrying value of investment and development property |
7,074.4 |
8,622.8 |
|
|
Adjustment in respect of tenant incentives |
88.9 |
69.3 |
|
|
Adjustment in respect of head leases |
(50.5) |
(57.2) |
|
|
Market value of investment and development property |
7,112.8 |
8,634.9 |
|
|
Geographical analysis: |
As at |
As at |
|
|
31 December |
31 December |
||
|
2008 |
2007 |
||
|
£m |
£m |
||
|
United Kingdom |
6,600.7 |
8,245.5 |
|
|
United States |
473.7 |
377.3 |
|
|
Total |
7,074.4 |
8,622.8 |
|
Included within investment and development properties is £18.5 million (31 December 2007 - £13.8 million) of interest capitalised on developments and redevelopments in progress.
The group's interests in investment and development properties were valued as at 31 December 2008 by independent external valuers in accordance with the Royal Institute of Chartered Surveyors (RICS) Valuation Standards 6th Edition, on the basis of market value. Market value represents the figure that would appear in a hypothetical contract of sale between a willing buyer and a willing seller.
The main assumptions underlying the valuations are in relation to market rent, taking into account forecast growth rates and yields based on known transactions for similar properties and likely incentives offered to tenants.
There are certain restrictions on the realisability of investment property when a credit facility is in place. In most circumstances the group can realise up to 50% without restriction providing the group continues to manage the asset. Realising an amount in excess of this would trigger a change of control and mandatory repayment of the facility.
10 Trading property
|
2008 |
2007 |
||
|
£m |
£m |
||
|
Undeveloped sites |
29.4 |
36.7 |
|
|
Completed properties |
3.9 |
7.0 |
|
|
33.3 |
43.7 |
||
The estimated replacement cost of trading properties based on market value amounted to £33.8 million (31 December 2007 - £46.1 million).
11 Trade and other receivables
|
Restated |
||
|
2008 |
2007 |
|
|
£m |
£m |
|
|
Amounts falling due within one year: |
||
|
Rents receivable |
16.0 |
27.3 |
|
Other receivables |
37.2 |
60.4 |
|
Prepayments and accrued income |
44.0 |
47.2 |
|
97.2 |
134.9 |
|
|
Amounts falling due after more than one year: |
||
|
Other receivables |
33.4 |
17.9 |
|
Prepayments and accrued income |
62.2 |
60.6 |
|
95.6 |
78.5 |
|
Included within prepayments and accrued income are tenant lease incentives of £88.9 million (2007 - £69.3 million).
13 Borrowings
|
2008 |
||||||
|
Carrying |
Fixed |
Floating |
Fair |
|||
|
value |
Secured |
Unsecured |
rate |
rate |
value |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
Amounts falling due within one year: |
||||||
|
Bank loans and overdrafts |
23.3 |
21.4 |
1.9 |
5.4 |
17.9 |
23.3 |
|
Commercial mortgage backed securities |
||||||
|
("CMBS") notes |
34.3 |
34.3 |
- |
- |
34.3 |
24.6 |
|
CSC bonds 2009 |
31.5 |
- |
31.5 |
31.5 |
- |
32.2 |
|
Borrowings, excluding finance leases |
89.1 |
55.7 |
33.4 |
36.9 |
52.2 |
80.1 |
|
Finance lease obligations |
6.1 |
6.1 |
- |
6.1 |
- |
6.1 |
|
Amounts falling due within one year |
95.2 |
61.8 |
33.4 |
43.0 |
52.2 |
86.2 |
|
Amounts falling due after more than one |
||||||
|
year: |
||||||
|
CMBS notes 2011 |
483.4 |
483.4 |
- |
- |
483.4 |
387.2 |
|
CMBS notes 2015 |
1,038.4 |
1,038.4 |
- |
- |
1,038.4 |
703.9 |
|
Bank loan 2011 |
100.0 |
100.0 |
- |
- |
100.0 |
100.0 |
|
Bank loan 2012 |
217.2 |
217.2 |
- |
- |
217.2 |
217.2 |
|
Bank loans 2013 |
737.2 |
737.2 |
- |
218.0 |
519.2 |
738.3 |
|
Bank loan 2014 |
24.5 |
24.5 |
- |
- |
24.5 |
24.5 |
|
Bank loans 2016 |
827.6 |
827.6 |
- |
- |
827.6 |
827.6 |
|
Bank loan 2017 |
117.3 |
117.3 |
- |
- |
117.3 |
117.3 |
|
Debentures 2027 |
226.3 |
226.3 |
- |
226.3 |
- |
313.1 |
|
CSC bonds 2013 |
26.6 |
- |
26.6 |
26.6 |
- |
23.5 |
|
Other loans |
140.0 |
- |
140.0 |
- |
140.0 |
140.0 |
|
3.95% convertible bonds due 2010 |
92.3 |
- |
92.3 |
92.3 |
- |
60.2 |
|
Borrowings excluding finance leases and |
||||||
|
MetroCentre compound financial |
||||||
|
instrument |
4,030.8 |
3,771.9 |
258.9 |
563.2 |
3,467.6 |
3,652.8 |
|
MetroCentre compound financial |
||||||
|
instrument |
120.3 |
- |
120.3 |
- |
120.3 |
120.3 |
|
Finance lease obligations |
44.4 |
44.4 |
- |
44.4 |
- |
44.4 |
|
Amounts falling due after more than one |
||||||
|
year |
4,195.5 |
3,816.3 |
379.2 |
607.6 |
3,587.9 |
3,817.5 |
|
Total borrowings |
4,290.7 |
3,878.1 |
412.6 |
650.6 |
3,640.1 |
3,903.7 |
|
Cash and cash equivalents |
(70.9) |
|||||
|
Net debt |
4,219.8 |
|||||
Net external debt (adjusted for MetroCentre compound financial instrument) at 31 December 2008 was £4,099.5 million.
The group substantially eliminates its exposure to floating rate debt.
13 Borrowings (continued)
|
2007 |
||||||
|
Carrying |
Fixed |
Floating |
Fair |
|||
|
value |
Secured |
Unsecured |
rate |
rate |
value |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
Amounts falling due within one year: |
||||||
|
Bank loans and overdrafts |
118.8 |
118.8 |
- |
6.1 |
112.7 |
118.8 |
|
Commercial mortgage backed securities |
||||||
|
("CMBS") notes |
27.4 |
27.4 |
- |
- |
27.4 |
27.4 |
|
Borrowings, excluding finance leases |
146.2 |
146.2 |
- |
6.1 |
140.1 |
146.2 |
|
Finance lease obligations |
6.1 |
6.1 |
- |
6.1 |
- |
6.1 |
|
Amounts falling due within one year |
152.3 |
152.3 |
- |
12.2 |
140.1 |
152.3 |
|
Amounts falling due after more than one |
||||||
|
year: |
||||||
|
CMBS notes 2011 |
533.7 |
533.7 |
- |
- |
533.7 |
533.7 |
|
CMBS notes 2015 |
1,131.4 |
1,131.4 |
- |
- |
1,131.4 |
1,131.4 |
|
Bank loan 2011 |
100.0 |
100.0 |
- |
- |
100.0 |
100.0 |
|
Bank loan 2012 |
207.9 |
207.9 |
- |
- |
207.9 |
207.9 |
|
Bank loans 2013 |
406.1 |
406.1 |
- |
154.9 |
251.2 |
406.1 |
|
Bank loan 2014 |
27.4 |
27.4 |
- |
- |
27.4 |
27.4 |
|
Bank loans 2016 |
652.2 |
652.2 |
- |
- |
652.2 |
652.2 |
|
Bank loan 2017 |
117.2 |
117.2 |
- |
- |
117.2 |
117.2 |
|
Debentures 2027 |
226.1 |
226.1 |
- |
226.1 |
- |
342.0 |
|
CSC bonds 2009 |
31.4 |
- |
31.4 |
31.4 |
- |
31.5 |
|
CSC bonds 2013 |
26.6 |
- |
26.6 |
26.6 |
- |
26.2 |
|
Other loans |
38.6 |
- |
38.6 |
38.6 |
- |
38.2 |
|
3.95% convertible bonds due 2010 |
111.3 |
- |
111.3 |
111.3 |
- |
152.7 |
|
Borrowings excluding finance leases and |
||||||
|
MetroCentre compound financial |
||||||
|
instrument |
3,609.9 |
3,402.0 |
207.9 |
588.9 |
3,021.0 |
3,766.5 |
|
MetroCentre compound financial |
||||||
|
instrument |
43.0 |
- |
43.0 |
- |
43.0 |
43.0 |
|
Finance lease obligations |
51.1 |
51.1 |
- |
51.1 |
- |
51.1 |
|
Amounts falling due after more than one |
||||||
|
year |
3,704.0 |
3,453.1 |
250.9 |
640.0 |
3,064.0 |
3,860.6 |
|
Total borrowings |
3,856.3 |
3,605.4 |
250.9 |
652.2 |
3,204.1 |
4,012.9 |
|
Cash and cash equivalents |
(188.4) |
|||||
|
Net debt |
3,667.9 |
|||||
Net external debt (adjusted for MetroCentre compound financial instrument) at 31 December 2007 was £3,624.9 million.
The group substantially eliminates its exposure to floating rate debt.
The market value of assets pledged as collateral against borrowings is £6,059.0 million.
The fair values of financial assets and liabilities have been established using the market value, where available. For those instruments without a market value, a discounted cash flow approach has been used. If the fair values of the group net borrowings were used the increase, after credit for tax relief, to the net diluted net assets per share (which does not require adjustment for the fair value of convertible bonds) would amount to 68p (2007 - decrease 21p) per share.
|
2008 |
2007 |
|
|
The maturity profile of gross debt (excluding finance leases) is as follows: |
£m |
£m |
|
Wholly repayable within one year |
89.1 |
146.2 |
|
Wholly repayable in more than one year but not more than two years |
191.1 |
78.9 |
|
Wholly repayable in more than two years but not more than five years |
1,622.3 |
1,112.1 |
|
Wholly repayable in more than five years |
2,337.7 |
2,461.9 |
|
4,240.2 |
3,799.1 |
|
Certain borrowing agreements contain financial and other conditions that, if contravened, could alter the repayment profile. Treasury management includes assessing future operational and capital funding requirements and assessing the optimal use of funds generated through operations or external borrowings.
13 Borrowings (continued)
The group has various undrawn committed borrowing facilities. The facilities available at 31 December in respect of which all conditions precedent had been met were as follows:
|
2008 |
2007 |
|
|
£m |
£m |
|
|
Expiring in one to two years |
170.0 |
- |
|
Expiring in more than two years |
50.0 |
540.0 |
These undrawn facilities are available at floating rates based on LIBOR plus applicable margin.
14 Capital commitments
At 31 December 2008, the group was contractually committed to £238.8 million (2007 - £317.0 million), of future expenditure for the purchase, construction, development and enhancement of investment property. Of the £238.8 million committed, £190.1 million is committed 2009 expenditure.
The group's share of joint venture commitments included above at 31 December 2008 was £134.0 million (2007 - £190 million).
15 Contingent liabilities
The group's joint venture with Land Securities, the St. David's Limited Partnership, currently makes annual rental payments of approximately £2.5 million per annum in respect of land to be used for car parking space. If this arrangement were to cease, the partnership would be liable to make a payment of approximately £58 million to compulsorily purchase the land, 50 per cent, which represents the group's interest in the partnership, may have to be funded by the group.
As at 31 December 2008, the Group has a contingent commitment to provide a future investment of £60.5 million into the Harvest Capital Second Fund. The conditions include a decision by the fund manager to make an investment decision. The Group has two representatives on the board of the fund manager.
There were no contingent liabilities of which the Directors were aware at 31 December 2007.
16 (Loss)/earnings per share
|
2008 |
2007 |
|
|
million |
million |
|
|
Weighted average ordinary shares in issue |
362.9 |
362.8 |
|
Weighted average ordinary shares held as treasury shares and by ESOP |
(1.4) |
(1.1) |
|
Weighted average ordinary shares in issue for calculation of basic (loss)/earnings per share |
361.5 |
361.7 |
|
Weighted average ordinary shares to be issued on conversion of bonds and under employee |
||
|
incentive arrangements |
14.5 |
14.7 |
|
Weighted average ordinary shares in issue for calculation of diluted (loss)/earnings per share |
376.0 |
376.4 |
|
2008 |
2007 |
|
|
£m |
£m |
|
|
Loss used for calculation of basic earnings per share |
(2,451.3) |
(105.0) |
|
Reduction in interest charge from conversion of bonds, net of tax |
3.1 |
5.0 |
|
Loss used for calculation of diluted earnings per share |
(2,448.2) |
(100.0) |
|
Basic loss per share (pence) |
(678.1)p |
(29.0)p |
|
Diluted loss per share (pence) |
(651.1)p |
(26.6)p |
|
Loss used for calculation of basic earnings per share |
(2,451.3) |
(105.0) |
|
Add back deficit on revaluation and sale of investment and development property |
2,057.0 |
279.1 |
|
Less profit on sale of subsidiary |
(0.8) |
- |
|
Add back impairment of goodwill |
35.0 |
- |
|
Add back other finance costs |
3.6 |
3.3 |
|
Add back/(less) change in fair value of derivative financial instruments |
665.1 |
(27.0) |
|
(Less)/add back deferred tax in respect of investment and development property |
(22.4) |
4.2 |
|
(Less)/add back deferred tax in respect of derivative financial instruments |
(59.5) |
15.6 |
|
(Less)/add back deferred tax on capital allowances |
(3.6) |
4.5 |
|
Add back REIT entry charge |
3.6 |
3.9 |
|
Less amounts above due from minority interests |
(121.8) |
(48.3) |
|
Earnings used for calculation of adjusted earnings per share |
104.9 |
130.3 |
|
Adjusted earnings per share (pence) |
29.0p |
36.0p |
|
Earnings used for calculation of adjusted earnings per share |
104.9 |
130.3 |
|
Reduction in interest charge from conversion of bonds, net of tax |
3.1 |
5.0 |
|
Earnings used for calculation of adjusted, diluted earnings per share |
108.0 |
135.3 |
|
Adjusted, diluted earnings per share (pence) |
28.7p |
35.9p |
17 Share capital and share premium
|
2008 |
2007 |
|
|
£m |
£m |
|
|
Authorised |
||
|
500,000,000 ordinary shares of 50p each |
250.0 |
250.0 |
|
Share |
Share |
|
|
capital |
premium |
|
|
£m |
£m |
|
|
Issued and fully paid |
||
|
At 31 December 2007 - 362,772,673 ordinary shares of 50p each |
181.4 |
975.6 |
|
Shares issued |
1.2 |
17.8 |
|
At 31 December 2008 - 365,147,798 ordinary shares of 50p each |
182.6 |
993.4 |
During 2008, the company issued 2.4 million shares on the conversion of 3.95 per cent convertible bonds.
Full details of the rights and obligations attaching 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.
At 24 April 2009, the company had an unexpired authority to repurchase shares up to a maximum of 35,857,267 shares with a nominal value of £17.9 million, and the Directors had an unexpired authority to allot up to a maximum of 90,518,168 shares with a nominal value of £45.3 million.
Included within the issued share capital as at 31 December 2008 are 364,327 ordinary shares (2007 - 570,180) held by the Trustee of the Employee Share Ownership Plan ("ESOP") which is operated by the company. The nominal value of these shares is £0.2 million (2007 - £0.3 million).
18 Treasury shares and Employee Share Ownership Plan (ESOP)
During the year the company purchased a total of 350,000 shares (0.1 per cent of issued share capital) with a nominal value of £0.2 million for an aggregate consideration of £3.0 million with a view to increasing net asset value per share. These shares are held as treasury shares.
The cost of shares in Liberty International PLC purchased in the market and held by the Trustee of the Employee Share Ownership Plan (ESOP) operated by the company is also accounted for as treasury shares.
The purpose of the ESOP is to acquire and hold shares which will be transferred to employees in the future under the group's employee incentive arrangements. Dividends of £0.2 million (2007 - £0.3 million) have been waived by agreement.
|
2008 |
2007 |
|||
|
Shares |
2008 |
Shares |
2007 |
|
|
million |
£m |
million |
£m |
|
|
At 1 January |
1.3 |
(9.6) |
1.1 |
(6.4) |
|
Acquired in the year |
0.4 |
(3.8) |
0.8 |
(7.9) |
|
Disposed of on exercise of options |
(0.3) |
2.6 |
(0.6) |
4.7 |
|
At 31 December |
1.4 |
(10.8) |
1.3 |
(9.6) |
19 Related party transactions
Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation for the group.
Significant transactions between the parent company and its subsidiaries are shown below:
|
2008 |
2007 |
|||
|
Subsidiary |
Nature of transaction |
£m |
£m |
|
|
Libtai Holdings (Jersey) Limited |
Dividend |
7.1 |
30.5 |
|
|
Liberty International Holdings Limited |
Dividend |
9.9 |
42.7 |
|
|
Conduit Insurance Holdings Limited |
Dividend |
7.6 |
33.0 |
|
|
C&C Properties UK Ltd |
Dividend |
- |
66.1 |
|
|
Re-charges |
1.5 |
- |
||
|
Capital & Counties Australia |
||||
|
(Holdings) Limited |
Dividend |
- |
0.6 |
|
|
Capital & Counties Debenture PLC * |
Dividend |
82.0 |
- |
|
|
Greenhaven Industrial Properties |
||||
|
Limited |
Dividend |
1.0 |
5.0 |
|
|
Capital Shopping Centres PLC |
Dividend |
73.4 |
387.4 |
|
|
Re-charges |
4.0 |
4.2 |
||
* Dividend declared in 2007 was repaid
|
2008 |
2007 |
|||
|
Key management* compensation |
£m |
£m |
||
|
Salaries and short-term employee benefits |
6.0 |
5.5 |
||
|
Pensions and other post-employment benefits |
0.7 |
0.5 |
||
|
Share-based payment |
0.4 |
2.3 |
||
|
Other long-term payments |
0.2 |
0.9 |
||
|
Termination |
1.7 |
- |
||
|
9.0 |
9.2 |
|||
* Key management comprises the Directors of Liberty International and those employees who have been designed as persons discharging managerial responsibility.
20 Events after the balance sheet date
On 28 April 2009, the company announced a proposed capital raise of £620 million, before expenses, through a fully underwritten Firm Placing and a Placing and Open Offer. The proposed Capital Raise is subject to ratification at an Extraordinary General Meeting to be held on 22 May 2009.
The Firm Placing will be of 104,839,061 new ordinary shares at a price of 310p per new ordinary share. The Placing and Open Offer will be of 95,161,642 new ordinary shares at a price of 310p per new ordinary share.
The company intends to utilise the net proceeds of £592 million to reduce the Group's net indebtedness.
The pro forma balance sheet at 31 December 2008 is shown below, based on the assumption that the Capital Raise proceeds.
We commissioned our external valuers to perform property valuations at 31 March 2009 for the purpose of the Capital Raise.
The unaudited proforma statement of net assets is based on the audited consolidated balance sheet of the Group as at 31 December 2008, as adjusted to illustrate the effect of the revaluation of the Group's investment properties as at 31 March 2009 and the Capital Raise as if those events had been completed on 31 December 2008. No account is taken of any results or other activity since 31 December 2008.
20 Events after the balance sheet date (continued)
|
(Audited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|
|
Consolidated |
Proceeds of |
|||
|
net assets |
the Firm |
Pro forma |
||
|
of the |
Property |
Placing and |
consolidated |
|
|
Group at |
valuation |
Open Offer, |
net assets at |
|
|
31 December |
31 March |
net of |
31 December |
|
|
2008 |
2009 (1) |
expenses |
2008 |
|
|
Assets |
||||
|
Investments and development properties |
7,074.4 |
(600.9) |
6,473.5 |
|
|
Cash and cash equivalents |
70.9 |
592.0 |
662.9 |
|
|
Trade and other payables |
192.8 |
192.8 |
||
|
Investments |
128.6 |
128.6 |
||
|
Other assets |
64.2 |
64.2 |
||
|
Total assets |
7,530.9 |
(600.9) |
592.0 |
7,522.0 |
|
Liabilities |
||||
|
Borrowings |
4,290.7 |
4,290.7 |
||
|
Trade and other payables |
426.7 |
426.7 |
||
|
Derivative financial instruments |
818.5 |
818.5 |
||
|
Other liabilities |
9.2 |
9.2 |
||
|
Total liabilities |
5,545.1 |
- |
- |
5,545.1 |
|
Net assets |
1,985.8 |
(600.9) |
592.0 |
1,976.9 |
|
Minority interests |
(27.8) |
14.6 |
- |
(13.2) |
|
Equity shareholders' funds |
1,958.0 |
(586.3) |
592.0 |
1,963.7 |
|
NAV per share (diluted, adjusted) |
745p |
493p |
||
|
Debt to assets |
58% |
54% |
(1) The market value of the group's investment and development properties has been updated to reflect movements in valuation to 31 March 2009. The Directors estimate that after taking into account capital expenditure, asset sales and currency movements, the underlying like-for-like reduction in the value of investment and development properties since 31 December 2009 amounted to 8.0 per cent for CSC completed UK regional shopping centres and 8.5 per cent overall, indicating continued out performance of IPD which fell by 8.9 per cent for the equivalent period. 21 General information
The company is a public limited company incorporated in England and Wales and domiciled in the UK. The address of its registered office is 40 Broadway, London SW1H 0BT.
The company has its primary listing on the London Stock Exchange. The company has a secondary listing on the JSE, South Africa.
Susan Folger
Company Secretary
020 7887 7073
Related Shares:
INTU.L