Half Yearly Report

RNS Number : 5504Q

Capital Shopping Centres Group PLC

05 August 2010

 

5 August 2010

 

CAPITAL SHOPPING CENTRES GROUP PLC

 

INTERIM REPORT FOR THE HALF YEAR ENDED 30 JUNE 2010

 

				Pro forma
	30 June			31 December
		2010		2009			Change
NAV per share (diluted, adjusted) (pence)		368		339			Up 9%
Market value of investment properties (£m)		4,919		4,631			Up 6%
Net external debt (£m)		2,622		2,522			Up 4%
Debt to assets ratio (per cent)		53		55			Down 2%
		Six months ended 30 June
		2010			2009	(2)	Change
Property revaluation surplus/(deficit) (£m)		348.3	(+7.7%)		(649.7)	(-12.8%)	n/a
IFRS profit/(loss) for the period (£m)		291.2			(495.1)		n/a
Net rental income from continuing operations (£m)		134.5			132.7		Up 1%
Underlying earnings (£m) (1)		43.3			33.8		Up 28%
Underlying EPS (pence) (1)		7.0			8.4		Down 17%
Interim dividend per share (pence)		5.0			5.0		Unchanged
Weighted average shares in issue (million)		622			402		Up 55%

(1) Excluding valuation and exceptional items, refer note 10(c)

(2) 2009 figures have been re-stated to remove the impact of the Capco business following the demerger in May 2010.

 

Property valuation recovery continued

·; Property revaluation surplus 7.7 per cent (IPD retail monthly index 6.3 per cent for H1 2010)

·; Average valuation yield (nominal equivalent) of 6.5 per cent (31 December 2009 - 7.1 per cent), still defensive

 

Positive financial performance

·; NAV (diluted, adjusted) per share increased to 368 pence, total return for the six month period of 12 per cent

·; Underlying earnings up 28 per cent to £43 million (2009 - £34 million), 7.0 pence per share (2009 - 8.4 pence) impacted by shares issued in 2009

 

Operational recovery underway

·; Net rental income from continuing operations up 1 per cent

·; Like-for-like net rental income reduction narrowed to 0.4 per cent improving from reductions of 2009 full year - 3.4 per cent, 2008 full year - 4.3 per cent

·; 131 lettings generating £14 million of annual rent, an increase of £4 million from the previous rent

·; Occupancy remains strong at 98 per cent

·; Footfall up 3 per cent year-on-year, 6 per cent in two years

 

Attractive organic growth prospects

·; Lettings, lease expiries and rent reviews

·; Pipeline of opportunities to reinforce pre-eminence of centres

 

Patrick Burgess, Chairman of Capital Shopping Centres Group PLC, comments as follows:

 

"Our unwavering focus on quality, with 13 prime centres all in the UK's top 50 and a number of those among the UK's very best, has been an important factor in CSC's strong performance in the first half of 2010, as we present the first set of results since the demerger of the non-shopping centre activities which completed in May 2010. The results show a 7.7 per cent uplift in property valuations, increasing net asset value per share to 368 pence, and a 28 per cent increase in underlying CSC earnings before valuation items. We are now looking to drive growth in net rental income from lettings, lease expiries and rent reviews, with a particular opportunity from converting last year's short-term lets into longer-term lets at higher rents. With around £125 million of value enhancing active management projects under consideration and around £500 million of potential investment by way of major extensions, the Group has significant scope to grow organically without depending on acquisitions."

 

 

 

Contents:
Highlights
Operating and Financial Review
Directors' Responsibility Statement
Independent Review Opinion
Unaudited Financial Information
Summary of Investment and Development Properties
Other Information
Glossary

 

 

 

Enquiries:

 

Capital Shopping Centres Group PLC:
David Fischel	Chief Executive	+44 (0)20 7960 1207
Matthew Roberts	Finance Director	+44 (0)20 7960 1353
Kate Bowyer	Investor Relations Manager	+44 (0)20 7960 1250
Public relations:
UK:	Michael Sandler, Hudson Sandler	+44 (0)20 7796 4133
SA:	Nicholas Williams, College Hill	+27 (0)11 447 3030

 

A copy of this press release is available for download from our website at www.capital-shopping-centres.co.uk

 

 

 

NOTES TO EDITORS

 

Capital Shopping Centres is the leading specialist UK regional shopping centre REIT   Capital Shopping Centres Group PLC (CSC) is the leading specialist developer, owner and manager of pre-eminent UK regional shopping centres. CSC owns 13 regional shopping centres amounting to 14.1 million sq. ft. of retail space and valued at £4.9 billion at 30 June 2010. The assets comprise four major out-of-town centres - Lakeside, Thurrock; Metrocentre, Gateshead; Braehead, Glasgow and The Mall at Cribbs Causeway, Bristol - and nine in-town centres including the prime destinations in Cardiff, Manchester, Newcastle, Norwich and Nottingham.   With a dedicated and skilled management team, CSC aims to be the landlord of choice for retailers, to provide compelling destinations for shoppers and to offer clarity and transparency to investors. CSC is a responsible and environmentally conscious participant in the communities where it invests. CSC focuses on the creation of long term and sustainable growth in net rental income with a view to generating superior returns to shareholders through dividend growth and capital appreciation.   CSC's centres attracted 275 million customer visits and generated net rental income of £267 million in 2009.   CSC was formerly known as Liberty International PLC. Its name was changed in May 2010 upon demerger of its central London activities into a newly listed company, Capital & Counties Properties PLC (Capco).

 

 

  

 

 

OPERATING AND FINANCIAL REVIEW

 

OPERATING REVIEW

 

Introduction

CSC is pleased to report a strong performance for the six months ended 30 June 2010, the first set of results since the demerger of the non-shopping centre activities which completed in May 2010.

 

Highlights of the period for CSC are as follows:

 

·; An overall profit of £291 million driven by a 7.7 per cent increase in property valuations, a notable turnaround from recent adverse circumstances.

 

·; A 28 per cent increase in underlying earnings from £34 million to £43 million with net rental income growing from £133 million to £135 million.

 

·; A robust operational performance from CSC's shopping centres with continuing footfall growth, good progress on lettings and occupancy maintained at 98 per cent.

 

·; The successful opening in February 2010, fully let, of St Andrew's Way mall, Eldon Square, Newcastle. The extension to the centre of around 400,000 sq. ft. has brought further prime units to the city and driven strong increases in footfall through the entire centre.

 

·; Continued lettings at the recently opened St David's, Cardiff, extension now 79 per cent committed by area, 78 per cent by income, with a further 4 per cent by income in advanced negotiation, and at Metrocentre where the leisure and catering upgrade is now fully let.

 

·; Important transactions to place the balance sheet in a very sound position for the current stage of the cycle with the loan to value ratio now at 53 per cent and the first significant debt maturity not until 2014:

 

- £525 million, seven year refinancing of debt secured on Lakeside, Thurrock in January 2010, at the time the largest real estate financing in the UK since the start of the crisis in the financial markets.

- The restructuring of the Group's approximately £150 million ($250 million) net investment in predominantly retail assets in California, USA (C&C US). In exchange for its direct interest, CSC will receive 4.1 million shares in Equity One, a US retail REIT, and 10.9 million redeemable units in a new joint venture, completion is expected later this year.

- The disposal of the Westgate Centre, Oxford, and other non-core UK asset disposals generating £66 million in cash.

 

In addition, CSC has attractive organic growth prospects. Lettings, lease expiries and rent reviews have the scope to capture a 23 per cent uplift from current contracted rents to our valuers' assessments of ERV, in particular from:

 

·; Retailer demand for high quality space stimulated by scarcity of supply.

·; Strong demand for larger units in centres with best catchments.

·; Turning temporary lets into longer leases.

 

Further, CSC has a pipeline of opportunities to reinforce the pre-eminence of its centres:

 

·; £125 million of identified revenue-enhancing active management opportunities.

·; Feasibility work underway on a further c. £500 million of expenditure across three major extensions to Lakeside, Thurrock, Braehead, Glasgow and Victoria Centre, Nottingham.

 

We were pleased to obtain shareholder support for the demerger which was executed smoothly and provides an improved platform for CSC and Capco to deliver greater value for shareholders over time than the former Liberty International could as a combined business.

 

Since demerger, the CSC management team has settled quickly and continues to focus on the core objectives of delivering like-for-like growth in net rental income and pursuing the active management and development opportunities within CSC's existing assets which provide the company with substantial scope to drive the overall business forward over the next few years.

 

Market background

The UK economy's modest recovery which began in the last quarter of 2009 continued in the first half of 2010. UK retail sales generally held up well and can be expected to continue at satisfactory levels for the rest of the year as consumers look to purchase ahead of the increase in VAT due to take effect in January 2011. Tax increases and the programme embarked upon by the recently elected coalition Government to control public sector expenditure are however likely to constrain levels of growth for some time to come. Consumer confidence levels have declined in the last few months as the scale of required adjustment has become apparent.

 

The direct commercial property investment market in the UK continued its rebound from the very depressed levels of mid - 2009 with the income component of real estate returns now looking attractive in the prevailing low interest rate regime. Domestic institutions have been active and, in addition, we have specifically noted genuine interest from major international institutional investors in large scale, high quality UK regional shopping centres.

 

CSC has benefited during the period from each of the above factors, namely an improving economic background, a resilient retail environment and a recovering property investment market.

The level of retailer failures has substantially diminished from the exceptional levels experienced in late 2008 and early 2009 and, after two difficult years, the letting market for quality retail space in large centres has become more balanced between landlord and retailer.

 

Property valuations

After a relatively muted start to the recovery in asset valuations in the second half of 2009, CSC's assets have performed strongly in the first half of 2010 with a revaluation surplus of 7.7 per cent, mostly through yield contraction with rental values holding up satisfactorily.

 

	First	Second	First
	half	half	half
	2010	2009	2009
Revaluation surplus/(deficit)	7.7%	2.6%	(12.8)%
IPD monthly index retail capital growth	6.3%	11.3%	(14.0)%
Nominal equivalent yield (weighted average)	6.52%	7.08%	7.37%
Change in nominal equivalent yield ("yield shift")	-56bp	-29bp	+70bp
Initial yield	5.35%	5.70%	6.30%
Valuation effect of change in ERV	(1)%	(1)%	(3)%

 

·; CSC believes that the yields applied by the valuers to its assets at 30 June 2010 remain above the long-term norm and are defensive relative to other retail asset classes such as prime high street shops and prime retail warehouses (nominal equivalent yields of 4.85 per cent and 5.25 per cent respectively, according to CBRE).

·; CSC's weighted average initial yield has contracted 35 basis points to 5.35 per cent, a number impacted in the short-term as CSC works through rent free periods.

·; Valuers' estimates of ERV have fallen only marginally in the period, with evidence from rent reviews and lettings supporting the current levels.

 

Lettings

New entrants to the UK retail market, together with existing successful retailers looking to upsize, are creating some price tension for well configured stores of over 15,000 sq. ft. in the best locations.

 

So far this year, CSC has welcomed 18 new retailers not previously represented in our centres, 5 being new retailers to the UK.

 

Demand for restaurant space is strong as casual dining formats continue to expand in our centres.

 

In the first half of the year CSC has achieved:

·; 131 lettings for £14.2 million aggregate annual passing rent, an increase of £3.9 million over previous rent for those units; and

·; a further 194 lettings under offer or in advanced negotiations at levels which, if concluded, would substantially increase their passing rent from £15 million to £28 million, including £5 million relating to recently completed developments.

 

Of the 131 lettings, the proportion in the form of short-term leases has fallen:

·; 61 of the new lettings are long-term, generating an uplift in annual rent of £5.5 million to £10.4 million. In aggregate, these terms are around 16 per cent below ERV, reflecting market conditions in 2009 when the majority of these transactions went under offer;

·; 54 short-term leases were signed, with terms around 25 per cent below previous passing rent, a less severe reduction than those signed in 2009; and

·; 16 turnover only leases were signed.

 

Included in the above is the progress which has been made in securing improved terms on expiry of short-term lettings of which, since the year end:

·; 34 units have been re-let, providing a £1.1 million uplift in annual rent to £3.0 million; and

·; 43 are in solicitors' hands or under active negotiation at terms which, if concluded, would increase annual rent by £2.8 million to £4.4 million.

 

At 30 June 2010 CSC had 202 short-term leases which represented 2 per cent of passing rent and 8 per cent of ERV.

 

As well as generating revenue, new lettings refresh the centres, keeping the offer vibrant for shoppers. Around 120 units in established centres (6 per cent) were refitted by retailers in the first half, 53 in respect of new lettings and the balance by existing retailers. This substantial investment represents a firm commitment on the part of retailers and belief in the quality of CSC's centres.

 

Operating highlights

·; Occupancy of established centres, treating the 1 per cent of tenants in administration as unoccupied, has remained high at 98.1 per cent (31 December 2009 - 97.8 per cent). Tenants occupying 41 units and accounting for 1.4 per cent of rent entered administration in the first half (2009 - 125 units and 5.5 per cent of rent).

 

·; Net rental income of £135 million represents an increase of 1 per cent from the same period of 2009, with a much improved trend on a like-for-like basis (-0.4 per cent compared to -3.4 per cent in 2009):

 

- Rental income on recently completed developments up £4 million;

- Reduced level of bad debt and lease incentive write offs (£4 million); partly offset by

- Income foregone on disposals (£1 million decrease); and

- Full period effect of 2009's short-term re-lettings.

 

·; The positive letting activity in the period has increased passing rent on the continuing portfolio by 1 per cent to £269 million as well as increased levels of annualised rent contributed by leases in rent free periods, from £7 million to £17 million of annual rent.

 

·; As illustrated by Chart 1, CSC has considerable upside potential between current rent and the valuer's assessment of ERV, in particular from:

 

- Lease expiries where the uplift to ERV is estimated at £37 million, including £11 million currently in solicitors' hands or advanced negotiation and a further £18 million in respect of short-term leases

- Vacancies valued at £22 million in excess of the normal running void, including the remaining vacancy at St. David's, Cardiff

To view Chart 1, please paste the following URL into the address bar of your browser:

 

http://www.rns-pdf.londonstockexchange.com/rns/5504Q_-2010-8-4.pdf

 

·; Estimated footfall is up 3 per cent year-on-year for CSC's established centres, building on 2009's 3 per cent increase.

·; Estimated retailer sales in CSC centres increased by 8 per cent in total and broadly in line with the benchmark on a like-for-like basis (BRC like-for-like non-food +0.9 per cent).

·; Affordability improved with estimated occupancy cost ratio (rent to retailer turnover) of 13.2 per cent (2009 - 13.6 per cent) excluding anchor stores.

 

Lakeside: Market value - £988 million, 20 per cent of CSC's total.

Lakeside is a prime regional shopping centre occupying a strong position on the eastern perimeter of London's M25 orbital motorway at the heart of Europe's largest aggregation of retail space. It is CSC's flagship asset and largest by value, with 13,000 free car parking spaces. Approximately 11.3 million people live within 70 minutes' drive time and an estimated 25 million customer visits are made each year.

 

Lakeside has attracted a number of new retail brands in 2010, including Cult, Guess, and Fossil. Reinforcing Lakeside as a leisure destination, Dove opened their second UK spa in January to much acclaim and additional treatment rooms have since been added to reflect the level of demand. US restaurant operator Taco Bell chose Lakeside as their first UK opening and early trading suggests it has been well received. Other new catering outlets, Sainsy's Pie & Mash and Ed's Diner, have added to the choice now provided at Lakeside.

 

The strong market requirement for flagship stores has been well demonstrated at Lakeside this year. Primark have taken a further 20,000 sq. ft. which will enlarge their store to 100,000 sq. ft. with an improved mall frontage. Demand for well configured, large MSUs has been so strong that in June CSC conducted a "best bids" process for a 36,000 sq. ft. opportunity. We are looking creatively to deliver other larger format stores for existing retailers within the centre to meet demand. Elsewhere in the centre competitive bidding has delivered offers above the valuer's assumption for prime rental levels.

 

We continue to explore further opportunities for enlarging the anchor stores, roof box extensions and unit amalgamations to meet the evolving requirements of retailers.

 

Metrocentre: Market value - £801 million, 16 per cent of CSC's total

Metrocentre, Gateshead, is the largest covered shopping and leisure centre in Europe and the leading shopping centre in the UK in terms of tenant mix, transport links and catering offer. With 2.1 million sq. ft. of retail space and 9,250 free car parking spaces, it is the premier regional shopping centre destination for north east England attracting an estimated 23 million customer visits a year.

 

Following the successful Red Mall extension in 2004, CSC embarked on a £45 million project to remodel the leisure and catering offer of the Yellow and Blue Malls to include a new Odeon IMAX cinema, Namco family entertainment centre and ten restaurants. The first two phases opened between 2008 and 2009, with the Odeon IMAX proving to be one of Odeon's best performing locations in the UK, and the final phase is due to complete this autumn. In the first half of 2010, the final restaurant unit has been let to Zizzi, completing the new line up. TK Maxx and sister brand Homesense are currently fitting out their first shopping centre combined store in the former cinema space which will create a new retail anchor to Blue Mall.

Metrocentre has also attracted a number of new retailers this year such as Apple, Radley and G Star. In addition, the former Woolworths store is now under offer with detailed planning consent to one of the UK's largest value fashion anchors, which will enable them to upsize to 60,000 sq. ft. and will create a new and important anchor to the Central Mall. Next have contracted to open a Home Store on the Metrocentre Retail Park, the first letting in our strategy to improve its tenant mix.

 

Braehead: Market value - £569 million, 12 per cent of CSC's total

Braehead continues to be the most successful out of town shopping centre in Scotland with around half of Scotland's population within its catchment and an estimated 18 million customer visits per year. The Braehead shopping centre and retail park are at the heart of the successful regeneration area led by CSC, which now also includes the Xscape leisure destination, Ikea, business parks, new homes, flagship car dealerships and shortly a major garden centre.

 

Following Sainsbury's relocation to the former B&Q unit on the retail park in late 2009, the surrender in early 2010 of their 80,000 sq. ft. former store brought the largest letting opportunity since Braehead's opening in 1999. With the continued importance of creating flagship destinations, Primark took the opportunity to relocate into the store and opened on 6 July 2010. Trading reports have been exceptional with adjacent retailers reporting noteable improvements in trade. The relocation of Primark has enabled fashion retailer H&M to upsize to a 25,000 sq. ft. store which will carry stock for all ranges including childrenswear. The opening of the new H&M store is anticipated in March 2011.

 

Other centres

Recently completed development activities at other centres include:

 

·; The 1 million sq. ft. extension to St. David's, Cardiff, which opened October 2009, led the regeneration of Wales' capital city into a unique shopping, leisure, cultural and tourist destination. Now 1.4 million sq. ft. with 221 stores and a catchment of 2.5 million residents plus around 12 million tourist visits a year, St. David's is number six in Experian's UK retail centre rankings. A further ten retailers new to Wales have taken space in the first half of 2010, including Carluccio's and Pandora. As trading, footfall growth and retailer comment remain positive, interest in the remaining units is increasing and CSC is confident that the centre will provide strong growth in the next few years.

·; The new St Andrews Way mall, Eldon Square, Newcastle, has traded strongly since opening fully let in February 2010, with footfall for the centre overall up 25 per cent since opening. The enlarged 1.4m sq. ft centre now includes 70 per cent of Newcastle's prime retail space, with 38 remodelled or refurbished stores including seven new retailers to the city.

 

Active management to create value by fulfilling retailer needs is fundamental to CSC's approach. Around £125 million of projects are planned which are targeted to enhance shareholder returns as well as reinforce the pre-eminence of CSC's centres. During the period detailed planning consent has been received for a 60,000 sq. ft. flagship store bringing Next into Eldon Square. Other projects include unit amalgamations at Chapelfield, Norwich and The Glades, Bromley, and reconfiguration to create additional retail space at The Victoria Centre, Nottingham together with provision of a 10,000 sq. ft. roof box at Lakeside and development of restaurant units at Bromley, Chapelfield and Braehead. Opportunities to provide unit drivethrus on the former petrol station sites at Braehead and Metrocentre are being drawn up in response to specific user demand.

 

Good progress is being made on the feasibility of major extensions at Lakeside, Victoria Centre, Nottingham and Braehead where discussions with local authorities have gained momentum and, despite some post-election uncertainty in the planning arena, the foundations of robust planning applications are progressing.

 

International

US

In May 2010, CSC announced the exchange of contracts with Equity One, a US retail REIT, relating to the restructuring of its approximately £150 million ($250 million) net investment in predominantly retail assets in California, USA (C&C US). In exchange for its direct interest, CSC will on completion receive 4.1 million shares in Equity One and 10.9 million redeemable units in a new joint venture. The transaction frees the group from day-to-day management of US assets and gives significantly more flexibility in dealing with its interests while retaining a cash income stream and scope to benefit from market recovery. It is anticipated that the transaction will be completed later this year when the appropriate regulatory, banking and tax clearances are received.

 

India

In the current year CSC has acquired a further 5.4 million shares in the listed Indian retailer, Provogue, the partner in the Prozone shopping centre joint venture, increasing our interest, at an average cost of Rupees 54 per share and total cost of approximately £4.2 million, from 5.2 per cent to 9.9 per cent (11.4 million shares). The joint venture's first shopping centre development, the 800,000 sq. ft. Aurangabad centre, is due to open in October with tenants beginning to shop fit. The centre is around 80 per cent let and the occupancy certificate, at this point excluding the unfinished multiplex, has now been granted. The next two projects, in Coimbatore and Nagpur, are being worked up to be embarked upon post the Aurangabad opening.

 

Dividends

The Directors have resolved to pay an interim dividend of 5.0 pence per share on 3 November 2010 to shareholders on the register on 8 October 2010. This dividend will be a property income distribution ("PID") subject to applicable withholding tax. In line with the statement made at the time of the demerger, the Directors intend, subject to available capital resources, to pay a dividend in respect of 2010 of 15.0 pence per share in aggregate.

 

Business overview

Post-demerger, it is timely to review some important aspects of CSC's business.

 

For a number of reasons, the Board of CSC regards the fundamentals as exceedingly sound with promising prospects from the current base:

 

·; Our unwavering focus on quality, with 13 prime centres all in the UK's top 50 and a number of those among the UK's very best.

 

·; The trend (which has strengthened in the last few years) for large centres with a wide range of catering and leisure attractions to outperform smaller centres - demonstrated for example by CSC's high occupancy level at 98 per cent which compares very favourably with the aggregate vacancy level of UK retail space which is estimated to exceed 10 per cent.

 

·; The resilient nature of our prime regional centres, exemplified by rising footfalls in the last two years, with our centres serving as lifestyle destinations for shoppers who may be cutting back other discretionary expenditure.

 

·; The benefit for owners of existing large centres from a limited new supply of high quality retail space, both as a result of the market downturn of the last few years and generally from the restrictive UK planning environment.

 

·; CSC's strong relationships with the UK's leading retailers as we look for our centres to host their flagship stores.

 

·; The overall scale of the business with 275 million annual customer visits which, for example, provides a ready made platform for international retailers looking to enter the UK market.

 

·; A wide geographic spread throughout the UK and an attractive mix with 52 per cent by value of CSC's assets comprising large scale out of town centres, and 48 per cent by value comprising the prime destinations in major cities such as Cardiff, Manchester, Newcastle, Norwich and Nottingham.

 

·; The strong prospects for organic growth within our existing centres through a continuation of CSC's constant programme of investment in its centres, whether through remodelling, extensions or tenant mix changes, to refresh the centres and keep them in top condition enhancing their attraction for both retailers and shoppers.

 

·; In investment terms, the value of CSC's assets when considered as a portfolio, which has taken over 30 years to assemble and could not be replicated from scratch, exceeding the aggregate value of the individual assets.

 

Prospects

CSC's top priority at present remains to drive growth in net rental income. An important element of this is to convert 2009's short-term leases into longer-term lets at higher rents. Lettings already completed this year have had a positive impact on the rent roll, narrowing the gap to ERV, and, along with those to follow in the second half, will start to impact the financial results from 2011.

 

With our highly specialised and focused management team, CSC's position as the market-leading developer, owner and manager of pre-eminent UK regional shopping centres offers a unique opportunity to work creatively with retailers to satisfy their expansion plans.

 

We are confident of the investment prospects for CSC's pre-eminent assets, with valuation yields still above long term trend.

 

With around £125 million of value enhancing active management projects under consideration and around £500 million by way of major extensions to Lakeside, Braehead and Nottingham at the feasibility stage, the Group has significant scope to grow organically without depending on acquisitions.

 

FINANCIAL REVIEW

 

Financing strategy and financial management

In the first half of 2010 the Group's financial management has focussed on achieving the successful demerger of Capco, addressing the appropriate financial management and medium term funding structure for the demerged Group and supporting the organisation in its efforts to improve the trading performance. Notable achievements include:

 

·; Underlying earnings up by 28 per cent

·; Improving like-for-like net rental income trend

·; NAV per share at 368 pence; total return for the six months 12 per cent

·; Loan prepayments, swap terminations of £114 million and re-financing of Lakeside secured facility concluded in January 2010 reduce re-financing and loan financial covenant risk, resulting in no significant debt repayments until 2014

 

With regard to the capital structure, our preference over the medium to long-term is to bring the debt to assets ratio within the 40-50 per cent range and interest cover to greater than 160 per cent.

 

Comparative figures re-presented

The successful demerger of Capco and the proposed joint venture agreement in respect of the C&C US business with Equity One has resulted in certain comparative figures being re-presented. The Capco results up to the date of demerger have now been classified as discontinued operations in the comparative income statements and cash flow statements. The balance sheet information for Capco at 30 June 2009 and 31 December 2009 is, however, still included in the respective line categories in the balance sheets.

 

The C&C US results have also been included as discontinued operations in the comparative income statements and cash flow statements. The C&C US balance sheet information at 30 June 2009 and 31 December 2009 is however still included in the respective line categories in the balance sheets. C&C US is categorised as an asset held for sale at 30 June 2010 and therefore in accordance with IFRS 5 non-current assets held for sale its total assets and total liabilities are shown separately on the 30 June 2010 balance sheet. A pro forma balance sheet analysis prepared as if the demerger and proposed sale of C&C US had occurred at 31 December 2009 is included in the Other Information section of this report.

 

Income from C&C US has been included in the Group's underlying earnings as it is anticipated that there will be an ongoing income stream from Equity One shares and joint venture units once the transaction has been completed.

 

No re-statement of prior year comparatives has been made due to the structure of the capital raisings in 2009 as noted in the 2009 annual report. However, the impact of the additional shares issued increased the weighted average shares used in the underlying earnings per share calculation from 402 million in the first half of 2009 to 622 million in the current period. Re-basing the comparative underlying earnings per share figure of 8.4 pence to the 2010 weighted average shares reduces this comparable figure to 5.4 pence, which is 23 per cent below the 7.0 pence adjusted earnings per share achieved in the current period.

 

Results for the six months ended 30 June 2010

The results for the period ended 30 June 2010 reflect the improved conditions in the UK commercial property market in 2010. This is most clearly illustrated by the 7.7 per cent revaluation gain on the Group's UK shopping centres in the first six months of 2010. However, the general economic environment remains challenging and it is therefore encouraging that the Group achieved growth over the comparable 2009 underlying earnings, one of the Group's key measures of performance.

 

Income statement

The Group recorded a profit for the period of £291 million, a substantial improvement on the loss of almost £500 million recorded in the first six months of 2009.

 

The £219 million profit from continuing operations in the six month period contrasts favourably with the £320 million loss recorded in 2009. The 2010 results include a £348 million gain on property valuations which is partially offset by a £89 million non-cash charge due to the movement in the fair value of derivative financial instruments. In contrast, the 2009 loss was caused by a significant deficit on property valuations, £650 million, which was partially compensated by a £397 million favourable movement in the fair value of derivative financial instruments.

 

Those businesses classified as discontinued operations, which are detailed above, contributed a profit of £73 million in the period, largely due to property valuation gains.

 

Underlying earnings, as shown in Chart 2, which excludes valuation and exceptional items, increased by almost £10 million to £43 million. However, underlying earnings per share as noted above was adversely affected by the issue of 256 million new shares in the 2009 capital raises, resulting in a reduction of 1.4 pence per share to 7.0 pence. To view Chart 2, please paste the following URL into the address bar of your browser:

 

http://www.rns-pdf.londonstockexchange.com/rns/5504Q_-2010-8-4.pdf 

 

The Group's net rental income increased by 1 per cent to £135 million. CSC's net rental income benefitted in the period from lower bad debt charges and the income generated by the new developments at St David's, Cardiff and the St. Andrew's mall at Eldon Square. More detail on the rental performance is included in the Operating Review.

 

Administration expenses, excluding the £8 million costs associated with the Capco demerger, reduced from £14 million in the six months to 30 June 2009 to £11 million in 2010. The saving largely resulted from lower professional fees and pension costs as a result of the insurance buyout of the defined benefit pension scheme in the second half of 2009. The sharing of certain costs with Capco in 2010 resulted in an approximate £0.5 million benefit which will cease as Capco become fully resourced in the second half of the year.

 

Underlying net finance costs, which exclude exceptional items, reduced by £5 million in 2010, with the benefit of the treasury strategy of loan prepayments and interest swap terminations more than offsetting the reduction in capitalised interest of £8 million following completion of the developments at St. David's, Cardiff and Eldon Square, Newcastle.

 

Exceptional finance costs of £66 million were incurred in the period largely on interest rate swap termination costs, £28 million of which was in connection with the re-financing of the Lakeside facility. The cost of the demerger amounted to £8 million in the period, these costs are classified as exceptional administration costs. Total demerger costs incurred by the Group totalled £13 million, with £2 million having been expensed in 2009 and £3 million charged to Capco. This total cost of £13 million was £2 million higher than previously indicated due to certain internal re-structuring costs arising from the demerger.

 

Balance sheet

The Group's net assets attributable to equity shareholders have reduced from the £2.4 billion disclosed in the 2009 annual report to £1.9 billion largely as a result of the demerger of Capco. A pro forma balance sheet analysis prepared as if the demerger and proposed sale of C&C US had occurred at 31 December 2009 is included in the Other Information section of this report.

 

As detailed in the table below, net assets (diluted, adjusted) have increased by £162 million from the pro forma net assets (diluted, adjusted) at 31 December 2009. This increase was due to the property valuation gain on the UK shopping centre properties of £348 million being only partially offset by the exceptional costs incurred in the period and the final dividend for 2009 paid in 2010 of £71 million.

 

Balance sheet			Pro forma (1)
	30 June		31 December
	2010		2009
	£m		£m
Investment, development and trading properties	4,915.5		4,618.0
Investments	48.0		39.1
Net external debt	(2,622.4)		(2,521.6)
Other assets and liabilities	(623.1)		(582.7)
C&C US net assets	144.0		127.3
Net assets	1,862.0		1,680.1
Minority interest	(1.8)		-
Attributable to equity shareholders	1,860.2		1,680.1
Fair value of derivatives (net of tax)	355.6		282.2
Other adjustments	80.6		83.8
Adjusted net assets	2,296.4		2,046.1
Effect of dilution	12.7		101.3
Net assets (diluted, adjusted)	2,309.1		2,147.4

(1) The pro forma analysis removes the Capco balances that were demerged and re-classifies the C&C US assets as held-for-sale.

The fair value provision for financial derivatives, principally interest rate swaps, included in other assets and liabilities above, increased by £76 million largely as a consequence of the deferral of expectations of UK interest rate increases. The reduction in the dilution effect from 31 December 2009 relates to the now expected repayment of the £75 million convertible bonds in September 2010.

 

Adjusted net assets per share

As illustrated in Chart 3 diluted adjusted net assets per share of 368 pence at 30 June 2010 represents an increase of 9 per cent compared to the 31 December 2009 pro forma value of 339 pence. The increase is attributable to the property valuation gain, partially offset by the 2009 final dividend and the exceptional costs. Included in Other in Chart 3 is the negative 6 pence impact of the now anticipated repayment of the convertible bonds in September 2010. To view Chart 3, please paste the following URL into the address bar of your browser:

 

http://www.rns-pdf.londonstockexchange.com/rns/5504Q_-2010-8-4.pdf 

 

 

Cash flow

The cash flow summary below shows a substantial reduction in the Group's cash balance in the period. This is due to the impact of the demerger and the strategy to reduce surplus cash held on the balance sheet.

 

	2010		2009
	£m		£m
Underlying operating cash generated	121.7		129.2
Net finance charges paid	(85.5)		(95.4)
Exceptional finance and other costs	(73.2)		(15.3)
Net movement in working capital	(4.2)		(15.8)
Taxation/REIT entry charge	(18.2)		(0.3)
Cash flow from operations	(59.4)		2.4
Property development/investments	(30.5)		(109.8)
Sale proceeds of property/investments	65.7		23.3
Other derivative financial instruments	(19.5)		-
Dividends	(66.9)		-
Cash flow before financing and equity raises	(110.6)		(84.1)
Net debt repaid	(79.4)		(182.7)
Equity capital raised	1.8		591.7
Impact of discontinued operations	(256.5)		165.4
Others	(54.1)		7.2
Net (decrease)/increase in cash and cash equivalents	(498.8)		497.5

 

Cash flow from operations has fallen from the comparable period in 2009 due to the exceptional finance and other costs, which includes termination of interest rate swap contracts (£64 million) and Capco demerger costs (£8 million), and higher REIT entry charges (£19 million). Adjusting for these items, which are considered to be of a non-recurring nature, gives recurring cash flow from operations of £34 million.

 

The table below illustrates that recurring operating cash flow covers the 2010 interim dividend of 5 pence per share.

 

Dividends - cash cover	2010
	£m
Underlying operating cash generated	121.7
Dividends received from C&C US (net of tax)	1.6
Net finance charges excluding exceptional items	(85.5)
Net movement in working capital	(4.2)
Recurring cash flow	33.6
2010 interim dividend of 5.0p	31.1

 

2010 investment in property related assets was mainly restricted to existing 2009 commitments, with the most significant expenditure in the period being in respect of St. David's 2, Cardiff (£8 million), Eldon Square (£8 million) and Braehead (£5 million). A further £4 million was spent to increase the Group's existing investment in India.

 

Cash proceeds from the disposal of properties and investments generated cash of £66 million, including £54 million net proceeds received from the disposal of Westgate, Oxford.

 

Net debt repayments of £79 million are discussed in the debt structure section below.

 

Capital commitments

The Group has an aggregate commitment to capital projects of £111 million at 30 June 2010, down from the £124 million, excluding the Capco commitments, at 31 December 2009. The largest project within the outstanding commitments relates to finalisation of the St. David's, Cardiff shopping centre project including the associated residential development, which will be funded through the associated loan facility. Current expectations are that £52 million of the total commitments will be funded in the second half of 2010.

 

Financial position

The Group's debt is largely arranged on an asset-specific basis, with limited or non-recourse from the borrowing entities to other Group companies. This structure permits the Group a high degree of financial flexibility in dealing with debt issues and importantly avoids the concentration of covenant and refinancing risk associated with a single group-wide borrowing. The flexibility of this debt structure was evidenced by the success in obtaining, where required, lender consent to proceed with the demerger.

 

In addition to the asset-specific debt, the Group has a corporate revolving credit facility of £248 million, which is available until June 2013 and can be utilised to fund opportunities before they reach the stage that they can support their own financing arrangements. This facility, which was utilised to fund working capital requirements in the first half of the year, was undrawn at 30 June 2010.

 

Net external debt increased from £2,522 million at 31 December 2009 to £2,622 million at 30 June 2010. The largest factor in the net debt increase was the £64 million early termination of interest rate swap contracts.

 

The Group had cash balances of £128 million at 30 June 2010. This balance includes £76 million held in a restricted bank account to fund redemption (£75 million) and interest payments (£1 million) on the convertible bonds due for repayment in September this year. Available undrawn facilities total £331 million, consisting of the £248 million revolving credit facility and approximately £83 million undrawn on the joint venture asset specific loan on St. David's, Cardiff. The Group is in compliance with all of its corporate and asset-specific loan covenants.

 

			Pro forma (1)
Group debt ratios were as follows:	30 June		31 December
	2010		2009
Debt to assets	53%		55%
Interest cover	152%		141%
Weighted average debt maturity	6.1 years		5.5 years
Weighted average cost of gross debt	5.7%		6.0%
Proportion of gross debt with interest rate protection	94%		104%

(1) The pro forma figures remove the Capco balances that were demerged and the C&C US balances now held for sale

 

The debt to assets ratio was 53 per cent, an improvement on the pro forma level of 55 per cent at 31 December 2009. The lower average rate on the Group's cost of debt was the major factor in the improved interest cover, which increased to 152 per cent from the 141 per cent applicable at 31 December 2009 on a pro forma basis.

 

The re-financing of the Lakeside facility and the interest rate swap terminations during the period resulted in:

 

·; the weighted average debt maturity increasing to 6.1 years from 5.5 years as at 31 December 2009

·; the weighted average cost of gross debt reducing to 5.7 per cent from 6.0 per cent as at 31 December 2009

·; proportion of gross debt with interest rate protection falling to 94 per cent from 104 per cent at 31 December 2009

·; the next significant date for repayment of CMBS related debt now being 2015

 

Debt structure and maturity

 

To view Chart 4, please paste the following URL into the address bar of your browser:

 

http://www.rns-pdf.londonstockexchange.com/rns/5504Q_-2010-8-4.pdf 

 

 

The significant repayments of Group debt during the first half of 2010 were £18 million of scheduled loan amortisation plus a voluntary£48 million prepayment on the loan secured on the Victoria Shopping Centre, Nottingham. Debt maturing in the second half of 2010 totals £93 million, including the £75 million of convertible bonds, with the balance being further scheduled loan amortisation.

 

In 2011 and 2012, the Group has no debt maturities other than scheduled amortisation. £27 million of unsecured bonds mature in 2013 with the next maturity of secured loans being £56 million in 2014. The undrawn Revolving Credit Facility of £248 million and £83 million undrawn on the facility secured on St. David's, Cardiff mature in 2013 and 2014 respectively.

 

Financial covenants

Full details of the loan financial covenants are included in the Other Information section of this report.

 

Financial covenants apply to £2.4 billion of secured asset-specific debt. The two main covenants are Loan to Value (LTV) and Interest Cover (IC). The actual requirements vary and are specific to each loan.

 

During the period the Group made asset-specific loan prepayments of £48 million and £36 million of swap repayments to reduce financial covenant risk. A further £34 million of CMBS notes, that were owned by a Group company since issuance, were cancelled at zero cash cost to the Group. £2 million was injected into Xscape Braehead Partnership, as part of a loan prepayment and covenant moderation agreement, including the Loan to Value covenant being waived until 2012.

 

During the year the £248 million revolving credit bank loan was amended with the 2011 maturity extended to 2013. This renegotiation also resulted in reduced borrowing costs and improved financial covenants. These financial covenants are tested semi-annually on a number of the Group's companies, defined as the Borrower Group, and all tests are currently satisfied.

 

There is a minimum capital cover and interest cover condition applicable to the £231 million mortgage debenture tested semi-annually. Both tests were satisfied at 30 June 2010, the latest test date. Compliance with financial covenants is and will continue to be constantly monitored.

 

Re-financing activity

Lakeside

The £546 million loan and associated CMBS notes secured on the Lakeside, Thurrock Shopping Centre was scheduled to mature in July 2011 but was re-financed in January this year with a new £525 million, 7 year loan maturing in 2017 to take advantage of the improvement in bank liquidity and reduce near term refinancing risk.

 

At the time of prepayment the loan had a funding cost of 5.5 per cent. The hedging arrangements of the new loan require an increasing level of interest rate protection from the current level of 60 per cent towards maturity. In addition, 30 per cent of the loan amount is protected by an interest rate cap with a maximum interest rate payable of 4 per cent. The new loan and the associated hedging arrangements reduced the overall interest cost of the loan and was the most significant factor in lowering the Group's average cost of debt from 6.0 per cent to 5.7 per cent.

Interest rate hedging and fair value of financial instruments

At 30 June 2010 the fair value liability of the Group's derivative financial instruments was £391 million. This liability includes the Group's derivative contracts to hedge both interest rate and currency risk. During the period scheduled derivative payments of £53 million were made plus £64 million of interest rate swap prepayments, however a deferral of expectations of sterling interest rate increases resulted in the liability increasing by £76 million from the comparable balance at the end of 2009.

 

At 30 June 2010 the Group's gross debt was 94 per cent hedged by a combination of fixed rate debt or floating rate debt with rate protection through interest rate swaps and interest rate caps. Whilst interest rate swaps fix the interest rate payable and provide certainty over future cash flows, interest rate caps allow the Group certainty on the upper level of interest rate payable but also benefit from participating in the current low rate environment.

Interest rate and US$ hedging policy has historically been based on having certainty on cash flows. The Group hedges using predominantly interest rate swaps to eliminate the risk of our loans, which have been taken out on a variable basis. Following completion of the Equity One Inc transaction, the Group's intention is to phase out currency hedging and therefore the existing currency swaps will not be renewed as they mature.

 

Taxation

Since the Group became a UK REIT on 1 January 2007, the Group has made REIT entry charge payments of £124 million, including payments made in respect of Capco prior to demerger, with £21 million paid in the first half of 2010. A further £43 million has still to be paid, with £23 million due to be paid in the second half of 2010 and the balance in 2011. The financial benefits to date have amounted to almost £170 million, comprising net rental income and capital gains sheltered from UK tax.

 

The tax charge on continuing operations in the period of £1 million comprises the REIT entry financing charge of £2 million partially offset by deferred tax credits on the revaluation of interest rate swaps.

 

The total tax charge on discontinued operations of £6 million comprises £2 million of irrecoverable withholding tax suffered on dividends paid by C&C US and deferred tax on the revaluation of the C&C US properties.

 

Audit partner

The audit partner, Parwinder Purewal, was due to rotate off the audit following the conclusion of the 31 December 2009 audits of the Group and its subsidiaries as he had completed five years in the role. Given the significant changes in the Group arising from the demerger of Capco and the Board composition in the year, the Audit Committee requested and PricewaterhouseCoopers LLP agreed to an extension to the tenure of the audit partner in order to provide continuity and to support the maintenance of audit quality. He will therefore continue to act as audit partner for one further year, being the year ending 31 December 2010.

 

 

 

 

 

Key risks and uncertainties

The key risks and uncertainties facing the Group are as set out in the table below:

 

Risk	Description	Impact	Mitigation
Financing
Liquidity	Reduced availability	Insufficient funds to	Regular reporting of current and projected position
		meet operational and	to the Board
		financing needs	Efficient treasury management and strict credit control
Economic and	Property values decrease	Impact on covenants	Regular monitoring of LTV and ICR covenants
property market			Covenant headroom monitored and maintained
downturn	Reduction in rental income		Regular market valuations
			Focus on quality assets
Interest cover	Interest rates fluctuate	Lack of certainty over	Hedging to establish high degree of certainty
		interest costs	throughout term of loan
Market price risk of	Interest rates fluctuate	Potential cash outflow	Manage derivative contracts to achieve a balance
fixed rate	resulting in significant	if derivative contract	between hedging interest rate exposure and
derivatives	assets and or liabilities	contains break clause	minimising potential cash calls
	on derivative contracts
REIT	Breach REIT conditions	Tax penalty or be forced	Regular monitoring of compliance and tolerances
		to leave the REIT regime
	PID requirements	Requirement to pay 90	Alternative sources of investment funding constantly
		per cent of income	under review
		restricts ability to retain
		cash for investment
Group's ordinary	The Group's ordinary	Additional complexity	Professional advice sought in both jurisdictions to
shares are dual-	shares are listed on the	when assessing	ensure Group capital needs are met in optimal
listed	London and	options for capital	manner
	Johannesburg stock	raising
	exchanges
Joint Ventures	Reliance on JV partners'	Partners under -	Agreements in place and regular communication
	performance and	perform or provide	with partners
	reporting	incorrect information
Asset Management
Tenants	Tenant failure	Financial loss	Ongoing assessment of tenant covenant strength
			Active credit control process
Voids	Increased voids, failure	Financial loss	Policy of active tenant mix management
	to let developments		Active management to minimise financial impact if
			voids should arise
Reputation
Responsibility for	Failure of Health & Safety	Impact on reputation	Annual audits by external consultants
visitors to shopping		or potential criminal/	Health & Safety policies in place
centres		civil proceedings
Business	Lost access to centres	Impact on footfall and	Documented Business Recovery Plans in place
interruption	or head office	tenant income	Security team training and procedure in
		Adverse publicity	shopping centres
			Terrorist Insurance is in place
People/HR
Staff	Key staff	Loss of key members	Succession planning
		of the management	Performance evaluation
		team could impact	Training and development
		adversely on the	Incentive reward
		Group's success
Developments
Time	Planning	Securing planning	Policy of sustainable development and regeneration
		consent for	of brownfield sites
		developments	Constructive dialogue with planning authorities
Cost and letting	Construction cost	Returns reduced by	Approval process based on detailed project costs
risk	overrun, low	increased costs or	Regular monitoring and forecasting of project costs
	occupancy levels	delay in securing tenants	and rental income
			Utilisation of fixed cost contracts

 

DIRECTORS' RESPONSIBILITY STATEMENT

 

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

 

·; this condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union; and

·; this condensed set of financial statements includes a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

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

 

The principal risks and uncertainties facing the business are referred to in the operating and financial review.

 

Related party transactions are set out in note 18 of the condensed set of financial statements.

 

A list of current Directors is maintained on the Capital Shopping Centres Group PLC website: www.capital-shopping-centres.co.uk.

 

By order of the Board

 

 

 

 

 

D A Fischel

Chief Executive

 

 

 

 

 

M Roberts

Finance Director

5 August 2010

 

 

 

INDEPENDENT REVIEW REPORT TO CAPITAL SHOPPING CENTRES GROUP PLC

 

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated statement of cash flows and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

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

 

Our responsibility

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

 

Scope of review

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

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

 

 

 

 

 

 

PricewaterhouseCoopers LLP Chartered Accountants London

5 August 2010

 

 

Notes:

 

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

 

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

 

CONSOLIDATED INCOME STATEMENT (unaudited)

For the six months ended 30 June 2010

 

			Re-presented		Re-presented
		Six months		six months	year
		ended		ended	ended
		30 June		30 June	31 December
		2010		2009	2009
	Notes	£m		£m	£m
Continuing operations
Revenue	4	205.0		205.6	405.0
Net rental income	4	134.5		132.7	267.3
Net other income		0.3		5.0	4.9
Revaluation and sale of investment and development property	5	344.8		(650.8)	(535.7)
Sale and impairment of other investments		-		(10.1)	(10.1)
Administration expenses - ongoing		(11.2)		(14.3)	(26.2)
Administration expenses - exceptional		(8.1)		-	-
Operating profit/(loss)		460.3		(537.5)	(299.8)
Finance costs	6	(82.3)		(87.2)	(174.8)
Finance income		1.3		1.8	3.7
Other finance costs	7	(70.7)		(24.1)	(48.2)
Change in fair value of derivative financial instruments		(89.1)		396.5	399.6
Net finance (costs)/income		(240.8)		287.0	180.3
Profit/(loss) before tax		219.5		(250.5)	(119.5)
Current tax	8	-		0.2	2.9
Deferred tax	8	0.8		(68.3)	(67.1)
REIT entry charge	8	(1.7)		(1.6)	(3.1)
Taxation	8	(0.9)		(69.7)	(67.3)
Profit/(loss) for the period from continuing operations		218.6		(320.2)	(186.8)
Profit/(loss) for the period from discontinued operations	17	72.6		(174.9)	(183.3)
Profit/(loss) for the period		291.2		(495.1)	(370.1)
Attributable to:
Equity shareholders of CSC Group PLC		292.5		(470.1)	(338.8)
Non-controlling interest		(1.3)		(25.0)	(31.3)
		291.2		(495.1)	(370.1)
Basic earnings/(loss) per share
From continuing operations	10	35.4p		(77.8)p	(35.2)p
From discontinued operations	10	11.6p		(39.2)p	(32.9)p
		47.0p		(117.0)p	(68.1)p
Diluted earnings/(loss) per share
From continuing operations	10	34.8p		(75.4)p	(34.0)p
From discontinued operations	10	11.5p		(38.1)p	(32.1)p
		46.3p		(113.5)p	(66.1)p
Profit/(loss) from discontinued operations arises from:
Demerged operations	17	59.7		(140.7)	(124.4)
C&C US	17	12.9		(34.2)	(58.9)
		72.6		(174.9)	(183.3)

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

For the six months ended 30 June 2010

 

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
Profit/(loss) for the period	291.2	(495.1)	(370.1)
Other comprehensive income:
Revaluation of other investments	13.9	(12.2)	(5.3)
Realised revaluation reserve on disposal of other investments	-	6.0	4.5
Exchange differences	(1.9)	4.5	2.2
Actuarial loss on defined benefit pension schemes	-	-	(14.8)
Tax on items taken directly to equity	(0.8)	(1.7)	(2.8)
Other comprehensive income for the period	11.2	(3.4)	(16.2)
Total comprehensive income for the period	302.4	(498.5)	(386.3)
Attributable to:
Equity shareholders of CSC Group PLC	303.7	(473.5)	(354.7)
Non-controlling interest	(1.3)	(25.0)	(31.6)
	302.4	(498.5)	(386.3)
Total comprehensive income attributable to equity shareholders of
CSC Group PLC arises from:
Continuing operations	212.6	(285.6)	(163.0)
Discontinued operations	91.1	(187.9)	(191.7)
	303.7	(473.5)	(354.7)

 

CONSOLIDATED BALANCE SHEET (unaudited)

As at 30 June 2010

 

			Re-presented	Re-presented
		As at	as at	as at
		30 June	31 December	30 June
		2010	2009	2009
	Notes	£m	£m	£m
Non-current assets
Investment and development property	12	4,886.7	6,182.6	6,062.1
Plant and equipment		2.5	1.9	1.6
Investments in associate companies		29.0	26.8	29.6
Other investments		19.0	58.3	63.7
Derivative financial instruments		23.0	15.0	18.7
Trade and other receivables		42.4	69.8	80.8
		5,002.6	6,354.4	6,256.5
Current assets
Trading property		28.8	24.2	25.2
Current tax assets		5.7	1.1	-
Trade and other receivables		68.6	86.1	83.3
Cash and cash equivalents	13	127.7	582.5	568.4
C&C US - assets	17	429.6	-	-
		660.4	693.9	676.9
Total assets		5,663.0	7,048.3	6,933.4
Current liabilities
Trade and other payables		(213.8)	(285.2)	(287.4)
Current tax liabilities		-	-	(1.4)
Borrowings	14	(115.5)	(148.5)	(61.7)
Derivative financial instruments		(19.0)	(14.3)	(9.9)
C&C US - liabilities	17	(285.6)	-	-
		(633.9)	(448.0)	(360.4)
Non-current liabilities
Borrowings	14	(2,769.0)	(3,740.1)	(4,021.0)
Derivative financial instruments		(394.5)	(371.8)	(367.0)
Deferred tax provision	8	-	(37.1)	(34.9)
Other provisions		(1.4)	(8.6)	(7.3)
Other payables		(2.2)	(21.6)	(42.3)
		(3,167.1)	(4,179.2)	(4,472.5)
Total liabilities		(3,801.0)	(4,627.2)	(4,832.9)
Net assets		1,862.0	2,421.1	2,100.5
Equity
Share capital		311.7	311.3	283.3
Share premium		1.4	1,005.7	1,005.7
Treasury shares		(5.4)	(9.7)	(9.8)
Convertible bond reserve		6.1	6.7	7.6
Other reserves		336.7	286.9	775.7
Retained earnings		1,209.7	820.2	27.8
Amounts attributable to equity shareholders of CSC Group PLC		1,860.2	2,421.1	2,090.3
Non-controlling interest		1.8	-	10.2
Total equity		1,862.0	2,421.1	2,100.5

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

For the six months ended 30 June 2010

 

	Attributable to equity shareholders of CSC Group PLC
				Convertible					Non-
	Share	Share	Treasury		bond	Other	Retained		controlling	Total
	capital	premium	shares		reserve	reserves	earnings	Total	interest	equity
	£m	£m	£m		£m	£m	£m	£m	£m	£m
At 1 January 2010	311.3	1,005.7	(9.7)		6.7	286.9	820.2	2,421.1	-	2,421.1
Profit/(loss) for the period	-	-	-		-	-	292.5	292.5	(1.3)	291.2
Other comprehensive
income:
Revaluation of other
investments	-	-	-		-	13.9	-	13.9	-	13.9
Exchange differences	-	-	-		-	(1.9)	-	(1.9)	-	(1.9)
Tax on items taken directly
to equity	-	-	-		-	(0.8)	-	(0.8)	-	(0.8)
Total comprehensive
income for the period	-	-	-		-	11.2	292.5	303.7	(1.3)	302.4
Ordinary shares issued	0.4	1.4	-		-	-	-	1.8	-	1.8
Dividends paid	-	-	-		-	-	(71.4)	(71.4)	-	(71.4)
Conversion of bonds	-	-	-		(0.6)	-	0.6	-	-	-
Non-controlling interest
additions	-	-	-		-	-	-	-	3.1	3.1
Acquisition of treasury shares	-	-	(1.5)		-	-	-	(1.5)	-	(1.5)
Disposal of treasury shares	-	-	5.8		-	-	-	5.8	-	5.8
Share based payments	-	-	-		-	-	0.5	0.5	-	0.5
Reduction of capital (note 17)	-	(1,005.7)	-		-	-	1,005.7	-	-	-
Demerger effected by way of
repayment of capital (note 17)	-	-	-		-	38.6	(838.4)	(799.8)	-	(799.8)
	0.4	(1,004.3)	4.3		(0.6)	38.6	97.0	(864.6)	3.1	(861.5)
At 30 June 2010	311.7	1.4	(5.4)		6.1	336.7	1,209.7	1,860.2	1.8	1,862.0

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

For the year ended 31 December 2009

 

	Attributable to equity shareholders of CSC Group PLC
				Convertible					Non-
	Share	Share	Treasury		bond	Other	Retained		controlling	Total
	capital	premium	shares		reserve	reserves	earnings	Total	interest	equity
	£m	£m	£m		£m	£m	£m	£m	£m	£m
At 1 January 2009	182.6	993.4	(10.8)		7.6	287.3	497.9	1,958.0	27.8	1,985.8
Loss for the year	-	-	-		-	-	(338.8)	(338.8)	(31.3)	(370.1)
Other comprehensive income:
Revaluation of other
investments	-	-	-		-	(5.3)	-	(5.3)	-	(5.3)
Realised revaluation reserve on
disposal of other investments	-	-	-		-	4.5	-	4.5	-	4.5
Exchange differences	-	-	-		-	2.2	-	2.2	-	2.2
Actuarial loss on defined
benefit pension schemes	-	-	-		-	-	(14.5)	(14.5)	(0.3)	(14.8)
Tax on items taken
directly to equity	-	-	-		-	(2.0)	(0.8)	(2.8)	-	(2.8)
Total comprehensive income
for the year	-	-	-		-	(0.6)	(354.1)	(354.7)	(31.6)	(386.3)
Ordinary shares issued	128.0	-	-		-	737.7	-	865.7	-	865.7
Realisation of merger reserve	-	-	-		-	(737.7)	737.7	-	-	-
Dividends paid	-	-	-		-	-	(28.2)	(28.2)	-	(28.2)
Conversion of bonds	0.7	12.3	-		(0.9)	-	0.9	13.0	-	13.0
Loss of control of
deemed subsidiary	-	-	-		-	-	-	-	(8.0)	(8.0)
Increase in partner capital	-	-	-		-	-	0.3	0.3	-	0.3
Non-controlling interest additions	-	-	-		-	-	-	-	11.8	11.8
Purchase of non-
controlling interest	-	-	-		-	-	(34.3)	(34.3)	-	(34.3)
Share based payments	-	-	-		-	0.2	-	0.2	-	0.2
Acquisition of treasury shares	-	-	(0.2)		-	-	-	(0.2)	-	(0.2)
Disposal of treasury shares	-	-	1.3		-	-	-	1.3	-	1.3
	128.7	12.3	1.1		(0.9)	0.2	676.4	817.8	3.8	821.6
At 31 December 2009	311.3	1,005.7	(9.7)		6.7	286.9	820.2	2,421.1	-	2,421.1

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

For the six months ended 30 June 2009

 

	Attributable to equity shareholders of CSC Group PLC
				Convertible					Non-
	Share	Share	Treasury		bond	Other	Retained		controlling	Total
	capital	premium	shares		reserve	reserves	earnings	Total	interest	equity
	£m	£m	£m		£m	£m	£m	£m	£m	£m
At 1 January 2009	182.6	993.4	(10.8)		7.6	287.3	497.9	1,958.0	27.8	1,985.8
Loss for the period	-	-	-		-	-	(470.1)	(470.1)	(25.0)	(495.1)
Other comprehensive income:
Revaluation of
other investments	-	-	-		-	(12.2)	-	(12.2)	-	(12.2)
Realised revaluation reserve on
disposal of other investments	-	-	-		-	6.0	-	6.0	-	6.0
Exchange differences	-	-	-		-	4.5	-	4.5	-	4.5
Tax on items taken
directly to equity	-	-	-		-	(1.7)	-	(1.7)	-	(1.7)
Total comprehensive
income for the period	-	-	-		-	(3.4)	(470.1)	(473.5)	(25.0)	(498.5)
Ordinary shares issued	100.7	-	-		-	504.0	-	604.7	-	604.7
Conversion of bonds	-	12.2	-		-	(12.2)	-	-	-	-
Non-controlling interest additions	-	-	-		-	-	-	-	7.4	7.4
Acquisition of treasury shares	-	-	(0.2)		-	-	-	(0.2)	-	(0.2)
Disposal of treasury shares	-	0.1	1.2		-	-	-	1.3	-	1.3
	100.7	12.3	1.0		-	491.8	-	605.8	7.4	613.2
At 30 June 2009	283.3	1,005.7	(9.8)		7.6	775.7	27.8	2,090.3	10.2	2,100.5

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

For the six months ended 30 June 2010

 

			Re-presented	Re-presented
		Six months	six months	year
		ended	ended	ended
		30 June	30 June	31 December
		2010	2009	2009
	Notes	£m	£m	£m
Cash flows from continuing operations
Cash generated from operations	15	109.4	113.4	250.3
Interest paid		(151.5)	(113.1)	(221.9)
Interest received		0.9	2.4	16.5
Taxation		1.5	-	1.1
REIT entry charge		(19.7)	(0.3)	(33.1)
Cash flows from operating activities		(59.4)	2.4	12.9
Cash flows from investing activities
Purchase and development of property, plant & equipment		(26.6)	(109.8)	(189.8)
Sale of property		64.4	4.6	4.6
Sale of other investments		1.3	18.7	18.7
Purchase of other investments		(3.9)	-	-
Purchase of pension insurance policy		-	-	(15.5)
Other derivative financial instruments		(19.5)	-	-
Cash flows from investing activities		15.7	(86.5)	(182.0)
Cash flows from financing activities
Partnership equity introduced		3.1	7.4	11.7
Issue of ordinary shares		1.8	591.7	865.7
Acquisition of treasury shares		(0.6)	(0.2)	(0.2)
Cash transferred (to)/from restricted accounts		(56.6)	-	(19.8)
Borrowings drawn		518.5	201.8	237.3
Borrowings repaid		(597.9)	(384.5)	(478.3)
Equity dividends paid		(66.9)	-	(23.0)
Cash flows from financing activities		(198.6)	416.2	593.4
Net (decrease)/increase in cash and cash equivalents
from continuing operations		(242.3)	332.1	424.3
Cash flows from discontinued operations
Operating activities		(12.0)	10.1	9.6
Investing activities		(3.1)	150.5	119.7
Financing activities		(63.2)	6.2	(60.6)
Cash and cash equivalents transferred on demerger		(179.2)	-	-
Effect of exchange rate changes on cash and cash equivalents		1.0	(1.4)	(1.2)
Net (decrease)/increase in cash and cash equivalents
from discontinued operations		(256.5)	165.4	67.5
Net (decrease)/increase in cash and cash equivalents		(498.8)	497.5	491.8
Cash and cash equivalents at beginning of period		562.7	70.9	70.9
Cash and cash equivalents at end of period	13	63.9	568.4	562.7

 

NOTES (unaudited)

 

1 Basis of preparation

The condensed set of financial statements for the six months ended 30 June 2010 is unaudited and does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The condensed set of financial statements has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 as adopted by the European Union.

The comparative information presented for the year ended 31 December 2009 is not the Group's statutory accounts for that year. Those accounts have been reported on by the Group's auditors and delivered to the registrar of companies. The auditors' opinion on these accounts was unqualified and did not contain an emphasis of matter paragraph or a statement made under Section 498 (2) or (3) of the Companies Act 2006.

The comparative information has been re-presented to meet the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations so that operations being reclassified as discontinued during the six months ended 30 June 2010 are also shown as discontinued in certain comparatives. Comparative information is re-presented for the income statement and statement of cash flows but not the balance sheet. Balance sheet comparatives have been re-presented to classify derivative financial instruments according to their maturity date.

The condensed set of financial statements should be read in conjunction with the Group's statutory accounts for the year ended 31 December 2009 which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, income and expense. Actual results may differ from these estimates. Except as described below, in preparing the condensed set of financial statements, the significant judgements made by management in applying the Group accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2009.

The largest area of estimation and uncertainty in the condensed set of financial statements is in respect of the valuation of the property portfolio and investments, where external valuations were obtained.

 

2 Accounting policies

Except as described below, the accounting policies applied are consistent with those of the Group's statutory accounts for the year ended 31 December 2009 as set out in pages 74 to 77 of the Annual Report.

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

During 2010, the following standards, amendments and interpretations endorsed by the EU are effective for the first time for the Group's 31 December 2010 year end:

IFRS 2 Share-based Payment (amendment);

IFRS 3 Business Combinations;

IAS 27 Consolidated and Separate Financial Statements;

IAS 39 Financial Instruments: Recognition and Measurement (amendment);

IFRIC 12 Service Concession Arrangements;

IFRIC 15 Arrangements for Construction of Real Estate;

IFRIC 16 Hedges of a Net Investment in a Foreign Operation;

IFRIC 17 Distributions of Non-cash Assets to Owners; and

Amendments arising from the 2008 and 2009 annual improvements projects.

These either had no material impact on the condensed financial statements or resulted in changes to presentation and disclosure only.

 

3 Seasonality and cyclicality

There is no material seasonality or cyclicality impacting interim financial reporting.

 

 

4 Segmental reporting

Following the demerger of Capco (see note 17) the Group has reassessed its segmental reporting. The Group is now primarily a UK shopping centre focussed business and to reflect this, the segmental reporting has been changed to show one main reportable operating segment being UK Shopping Centres.

Revenue represents total income from tenants and net rental income is the principal profit measure used to measure performance. All continuing items in the income statement arise in the UK Shopping Centres segment. A more detailed analysis of net rental income is given below.

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
Revenue	205.0	205.6	405.0
Rent receivable	170.7	171.1	341.1
Service charge income	29.9	29.4	58.9
	200.6	200.5	400.0
Rent payable	(11.7)	(10.2)	(21.4)
Service charge and other non-recoverable costs	(54.4)	(57.6)	(111.3)
Net rental income	134.5	132.7	267.3

 

Total assets are analysed as follows:

	As at	As at	As at
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
UK Shopping Centres segment assets	5,195.1	4,772.8	4,567.8
India investments	38.3	31.5	29.4
Assets of discontinued operations	429.6	1,721.5	1,817.9
Unallocated assets (1)	-	522.5	518.3
Total assets	5,663.0	7,048.3	6,933.4

(1) Unallocated assets in comparative periods represent balances controlled at a corporate level when the Group had more than one operating segment.

 

 

5 Revaluation and sale of investment and development property

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
Revaluation of investment and development property	348.3	(649.7)	(534.7)
Sale of investment property	(3.5)	(1.1)	(1.0)
Revaluation and sale of investment and development property	344.8	(650.8)	(535.7)

 

 

 

 

 

 

6 Finance costs

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
On bank loans and overdrafts	80.3	93.1	184.9
On convertible debt	1.6	1.4	2.9
On obligations under finance leases	2.0	2.0	4.1
Gross finance costs	83.9	96.5	191.9
Interest capitalised on developments	(1.6)	(9.3)	(17.1)
Finance costs	82.3	87.2	174.8

Interest is capitalised, before tax relief, on the basis of the average rate of interest paid of 6.25 per cent (six months ended 30 June 2009 - 6.25 per cent, year ended 31 December 2009 - 6.25 per cent) on the relevant debt, applied to the cost of developments during the year.

 

 

7 Other finance costs

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
Metrocentre amortisation of compound financial instrument	4.4	4.5	9.6
Loss on sale of CMBS notes(1)	-	4.3	4.3
Revolving credit facility arrangement fee(1)	1.2	5.4	5.4
Costs of termination of derivative financial instruments(1)	65.1	9.9	28.9
Other finance costs	70.7	24.1	48.2

(1) Amounts totalling £66.3 million for the six months ended 30 June 2010 are treated as exceptional and therefore excluded from the calculation of adjusted earnings (six months ended 30 June 2009 - £19.6 million, year ended 31 December 2009 - £38.6 million).

 

 

8 Taxation

Taxation charge/(credit) for the period:

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
Current tax	-	(0.2)	(2.9)
Deferred tax:
On investment and development property	0.4	(0.1)	(0.2)
On derivative financial instruments	(1.2)	68.8	69.5
On other temporary differences	0.2	(0.4)	-
On exceptional items	(0.2)	-	(2.2)
Deferred tax	(0.8)	68.3	67.1
REIT entry charge	1.7	1.6	3.1
Total tax charge	0.9	69.7	67.3

 

 

 

Movements in the provision for deferred tax:

	Investment and	Derivative	Other
	development	financial	temporary
	properties	instruments	differences	Total
	£m	£m	£m	£m
Deferred tax provision:
At 1 January 2010	42.8	(7.4)	1.7	37.1
C&C US balances transferred to assets held for sale	(37.1)	-	-	(37.1)
Recognised in the income statement	0.7	(0.8)	(0.7)	(0.8)
Recognised in other comprehensive income or directly in equity	-	0.8	-	0.8
Transferred on demerger (note 17)	(6.4)	2.6	3.8	-
At 30 June 2010	-	(4.8)	4.8	-
Unrecognised deferred tax asset:
At 1 January 2010	(12.8)	(14.4)	(12.6)	(39.8)
Income statement items	(0.3)	(5.0)	(0.7)	(6.0)
Transferred on demerger	12.8	-	1.5	14.3
At 30 June 2010	(0.3)	(19.4)	(11.8)	(31.5)

In accordance with the requirements of IAS 12 Income Taxes, the deferred tax asset has not been recognised in the Group financial statements due to uncertainty on the level of profits that will be available in the non-REIT businesses in future periods.

 

9 Dividends

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
Ordinary shares
Final dividend paid of 11.5 pence per share (2009 - nil pence per share)	71.4	-	-
Interim dividend paid of nil per share (2009 - 5 pence per share)	-	-	28.2
Dividends paid	71.4	-	28.2
Interim dividend of 5.0 pence per share	31.1	28.2	-

 

 

 

 

10 Earnings per share

(a) Earnings per share

Basic and diluted earnings per share as calculated in accordance with IAS 33 Earnings per Share.

	Six months ended			Six months ended			Year ended
	30 June 2010			30 June 2009			31 December 2009
			Pence			Pence			Pence
	Earnings	Shares	per	Earnings	Shares	per	Earnings	Shares	per
	£m	million	share	£m	million	share	£m	million	share
Continuing operations:
Basic earnings/(loss) per share (1)	219.9	621.7	35.4p	(312.7)	401.8	(77.8)p	(175.1)	497.7	(35.2)p
Dilutive convertible bonds,
share options and share awards	1.1	13.1		0.8	11.8		1.5	12.3
Diluted earnings/(loss) per share	221.0	634.8	34.8p	(311.9)	413.6	(75.4)p	(173.6)	510.0	(34.0)p
Discontinued operations:
Basic earnings/(loss) per share (1)	72.6	621.7	11.6p	(157.4)	401.8	(39.2)p	(163.7)	497.7	(32.9)p
Dilutive convertible bonds,
share options and share awards	-	13.1		-	11.8		-	12.3
Diluted earnings/(loss) per share	72.6	634.8	11.5p	(157.4)	413.6	(38.1)p	(163.7)	510.0	(32.1)p
Continuing and discontinued
operations:
Basic earnings/(loss) per share (1)	292.5	621.7	47.0p	(470.1)	401.8	(117.0)p	(338.8)	497.7	(68.1)p
Dilutive convertible bonds,
share options and share awards	1.1	13.1		0.8	11.8		1.5	12.3
Diluted earnings/(loss) per share	293.6	634.8	46.3p	(469.3)	413.6	(113.5)p	(337.3)	510.0	(66.1)p

(1) The weighted average number of shares used for the calculated of basic earnings/(loss) per share has been adjusted for shares held in the ESOP and treasury shares.

(b) Headline earnings per share

Headline earnings per share has been calculated and presented as required by the Johannesburg Stock Exchange listing requirements.

	Six months ended		Six months ended		Year ended
	30 June 2010		30 June 2009		31 December 2009
	Gross	Net (1)	Gross	Net (1)	Gross	Net (1)
	£m	£m	£m	£m	£m	£m
Basic earnings/(loss)		292.5		(470.1)		(338.8)
Remove:
Revaluation and sale of investment and
development property	(417.9)	(406.2)	890.8	828.3	768.3	704.9
Loss on sale and impairment of other investments	-	-	10.1	10.1	10.4	10.4
Impairment of other receivables	-	-	-	-	12.0	12.0
Exceptional other income	-	-	(0.2)	(0.2)	(5.3)	(5.3)
Headline (loss)/earnings		(113.7)		368.1		383.2
Dilution (2)		1.1		0.8		1.5
Diluted headline (loss)/earnings		(112.6)		368.9		384.7
Weighted average number of shares		621.7		401.8		497.7
Dilution (2)		13.1		11.8		12.3
Diluted weighted average number of shares		634.8		413.6		510.0
Headline (loss)/earnings per share (pence)		(18.3)p		91.6p		77.0p
Diluted headline (loss)/earnings per share (pence)		(17.7)p		89.2p		75.4p

(1) Net of tax and non-controlling interests

(2) The dilution impact is required to be included as for earnings per share as calculated in note 10(a) even where this is not dilutive for headline earnings per share.

 

 

 

 

 

 (c) Underlying earnings per share

EPRA underlying earnings per share is a non-GAAP measure but has been included as it is considered to be a key measure of the Group's operating results and indication of the extent to which dividend payments are supported by current earnings.

	Six months ended			Six months ended			Year ended
	30 June 2010			30 June 2009			31 December 2009
			Pence			Pence			Pence
	Earnings	Shares	per	Earnings	Shares	per	Earnings	Shares	per
	£m	million	share	£m	million	share	£m	million	share
Basic earnings/(loss) per share
from continuing operations (1)	219.9	621.7	35.4p	(312.7)	401.8	(77.8)p	(175.1)	497.7	(35.2)p
Remove:
Revaluation and sale of
investment and
development property	(344.8)		(55.5)p	650.8		162.0p	535.7		107.6p
Sale and impairment of
investments	-		-	10.1		2.5p	10.1		2.0p
Exceptional administration costs	8.1		1.3p	-		-	-		-
Exceptional other income	-		-	(5.0)		(1.3)p	(5.0)		(1.0)p
Exceptional finance charges	66.3		10.7p	19.6		4.9p	38.6		7.8p
Change in fair value of
derivative financial instruments	89.1		14.4p	(396.5)		(98.7)p	(399.6)		(80.3)p
Tax on the above	(1.0)		(0.2)p	68.7		17.1p	66.9		13.5p
REIT entry charge	1.7		0.3p	1.6		0.4p	3.1		0.6p
Non-controlling interest
in respect of the above	(0.4)		(0.1)p	(4.7)		(1.2)p	(5.9)		(1.2)p
Add:
C&C US underlying earnings
included within discontinued
operations	4.4		0.7p	1.9		0.5p	6.3		1.3p
EPRA underlying earnings
per share	43.3	621.7	7.0p	33.8	401.8	8.4p	75.1	497.7	15.1p
Dilutive convertible bonds,
share options and share awards	-	0.9		0.8	11.8		1.5	12.3
Underlying, diluted earnings
per share	43.3	622.6	7.0p	34.6	413.6	8.4p	76.6	510.0	15.0p

(1) The weighted average number of shares used for the calculation of basic earnings/(loss) per share has been adjusted for shares held in the ESOP and treasury shares.

 

 

 

 

11 Net assets per share

	As at 30 June 2010			As at 31 December 2009			As at 30 June 2009
	Net		NAV per	Net		NAV per	Net		NAV per
	assets	Shares	share	assets	Shares	share	assets	Shares	share
	£m	million	(pence)	£m	million	(pence)	£m	million	(pence)
NAV attributable to equity
shareholders of
CSC Group PLC (1)	1,860.2	622.4	299p	2,421.1	621.5	390p	2,090.3	565.4	370p
Dilutive convertible bonds,
share options and share
awards	12.7	4.3		101.3	12.8		85.1	11.9
Diluted NAV	1,872.9	626.7	299p	2,522.4	634.3	398p	2,175.4	577.3	377p
Add:
Unrecognised surplus on
trading properties (net of tax)	1.4		-	0.9		-	0.6		-
Remove:
Fair value of derivative
financial instruments
(net of tax)	355.6		57p	335.5		53p	322.6		56p
Deferred tax on investment
and development property	43.8		7p	42.9		7p	40.7		7p
Non-controlling interest
on the above	(35.9)		(6)p	(27.1)		(5)p	(38.4)		(7)p
Add:
Non-controlling interest
recoverable balance not
recognised	71.3		11p	71.3		11p	83.8		15p
Diluted EPRA NAV	2,309.1	626.7	368p	2,945.9	634.3	464p	2,584.7	577.3	448p
Fair value of derivative
financial instruments
(net of tax)	(355.6)		(56)p	(335.5)		(53)p	(322.6)		(56)p
Excess of fair value of debt
over book value	288.2		46p	394.5		63p	637.3		110p
Diluted EPRA NNNAV	2,241.7	626.7	358p	3,004.9	634.3	474p	2,899.4	577.3	502p

(1) The number of shares used has been adjusted for shares held in the ESOP and treasury shares.

 

 

 

12 Investment and development property

	Total
	£m
At 1 January 2010	6,182.6
C&C US balances transferred to assets held for sale	(338.0)
Additions from subsequent expenditure	17.5
Disposals	(67.1)
Transferred to trading property	(16.1)
Revaluation	409.2
Transferred on demerger (note 17)	(1,301.4)
At 30 June 2010	4,886.7

 

 

	As at	As at	As at
	30 June	31 December	30 June
	2010	2009	2009
	£m	£m	£m
Balance sheet carrying value of investment and development property	4,886.7	6,182.6	6,062.1
Adjustment in respect of tenant incentives	71.6	83.2	80.7
Adjustment in respect of head leases	(39.3)	(47.1)	(48.9)
Market value of investment and development property	4,919.0	6,218.7	6,093.9

The fair value of the Group's investment and development properties as at 30 June 2010 was determined by independent external valuers at that date. The valuation conforms with the Royal Institution of Chartered Surveyors (RICS) Valuation Standards 6th Edition and with IVS 1 of International Valuation Standards, and was arrived at by reference to market transactions for similar properties.

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.

 

13 Cash and cash equivalents

	As at	As at	As at
	30 June	31 December	30 June
	2010	2009	2009
	£m	£m	£m
Unrestricted cash	51.4	562.7	568.4
Restricted cash	76.3	19.8	-
	127.7	582.5	568.4
Cash and cash equivalents per the statement of cash flows:
Unrestricted cash	51.4	562.7	568.4
C&C US - classified as held for sale	12.5	-	-
	63.9	562.7	568.4

Restricted cash at 30 June 2010 relates to amounts deposited in a trust account equal to the outstanding principal on the 3.95 per cent convertible bonds plus interest due on maturity to be used on exercise of put options or on maturity.

 

14 Borrowings

	As at	As at	As at
	30 June	31 December	30 June
	2010	2009	2009
Current borrowings
Bank loans and overdrafts	11.6	30.0	20.9
Commercial mortgage backed securities ("CMBS") notes	24.7	33.5	34.3
3.95% convertible bonds due 2010	74.7	79.2	-
Borrowings excluding finance leases	111.0	142.7	55.2
Finance lease obligations	4.5	5.8	6.5
Current borrowings	115.5	148.5	61.7
Non-current borrowings
CMBS notes 2011	-	417.7	479.7
CMBS notes 2015	1,018.9	1,030.6	1,043.1
Bank loan 2011	-	100.0	100.0
Bank loan 2012	-	147.0	216.1
Bank loans 2013	-	633.4	715.2
Bank loan 2014	58.2	60.0	24.4
Bank loans 2016	756.1	809.3	825.6
Bank loan 2017	513.2	117.5	117.4
Debentures 2027	226.7	226.6	226.4
CSC bonds 2013	26.7	26.8	26.7
3.95% convertible bonds due 2010	-	-	79.2
Borrowings excluding finance leases and Metrocentre compound financial
instrument	2,599.8	3,568.9	3,853.8
Metrocentre compound financial instrument	134.4	129.9	124.8
Finance lease obligations	34.8	41.3	42.4
Non-current borrowings	2,769.0	3,740.1	4,021.0
Total borrowings	2,884.5	3,888.6	4,082.7
Cash and cash equivalents	(127.7)	(582.5)	(568.4)
Net debt	2,756.8	3,306.1	3,514.3

Net external debt (adjusted for Metrocentre compound financial instrument) at 30 June 2010 was £2,622.4 million (31 December 2009 - £3,176.2 million, 30 June 2009 - £3,389.5 million).

 

15 Cash generated from operations

		Six months	Six months	Year
		ended	ended	ended
		30 June	30 June	31 December
		2010	2009	2009
	Notes	£m	£m	£m
Continuing operations
Profit/(loss) before tax		219.5	(250.5)	(119.5)
Remove:
Revaluation and sale of investment and development property	5	(344.8)	650.8	535.7
Sale and impairment of other investments		-	10.1	10.1
Depreciation		0.2	0.2	0.2
Amortisation of lease incentives and other direct costs		(2.1)	5.6	6.5
Finance costs	6	82.3	87.2	174.8
Finance income		(1.3)	(1.8)	(3.7)
Other finance costs	7	70.7	24.1	48.2
Change in fair value of derivative financial instruments		89.1	(396.5)	(399.6)
Changes in working capital:
Change in trading properties		1.2	(0.4)	(0.7)
Change in trade and other receivables		(10.8)	2.2	(7.1)
Change in trade and other payables		5.4	(17.6)	5.4
Cash generated from operations		109.4	113.4	250.3

 

16 Capital commitments

At 30 June 2010, the Group was contractually committed to £110.7 million (31 December 2009 - £142.4 million, 30 June 2009 - £172.4 million) of future expenditure for the purchase, construction, development and enhancement of investment property.

The Group's share of joint venture commitments included above at 30 June 2010 was £79.3 million (31 December 2009 - £75.6 million, 30 June 2009 - £104.8 million).

 

 

17 Discontinued operations

Demerger

On 9 March 2010 Liberty International PLC (renamed Capital Shopping Centres Group PLC on 7 May 2010) announced its intention to separate into two businesses, CSC and Capco. The separation was effected by way of a demerger of the central London focused property investment and development division to a new company called Capital & Counties Properties PLC (Capco). The demerger became unconditional on 7 May 2010.

The demerger was effected through a reduction of capital. This involved the cancellation of the share premium account followed by the transfer of demerged assets to Capco in consideration for which Capco issued to shareholders of CSC one ordinary share for each CSC ordinary share held.

The share premium account cancelled amounted to £1,005.7 million. The book value of assets and liabilities transferred to Capco, as recorded in the consolidated accounts of CSC, was £799.8 million. The assets and liabilities transferred were:

				£m
Assets
Investment and development property				1,301.4
Plant and equipment				0.8
Other investments				53.3
Trading property				0.3
Current tax assets				0.6
Trade and other receivables				40.4
Cash and cash equivalents				179.2
Total assets				1,576.0
Liabilities
Trade and other payables				(49.7)
Borrowings				(660.7)
Derivative financial instruments				(58.3)
Other provisions				(7.5)
Total liabilities				(776.2)
Net assets				799.8

As a result of the demerger Capco has been classified as a discontinued operation in these financial statements.

 

The following amounts are included for Capco in the income statement within profit/(loss) for the period from discontinued operations:

	Period	Six months	Year
	ended	ended	ended
	7 May	30 June	31 December
	2010	2009	2009
	£m	£m	£m
Revenue	45.4	79.6	133.2
Net rental income	30.1	45.1	79.2
Net other income	-	1.6	1.4
Revaluation and sale of investment and development property	60.9	(177.7)	(140.7)
Sale and impairment of other investments	-	-	(0.3)
Impairment of other receivables	-	-	(12.0)
Administration expenses	(7.6)	(6.2)	(14.5)
Operating profit/(loss)	83.4	(137.2)	(86.9)
Net finance costs	(23.6)	(3.7)	(36.1)
Profit/(loss) before tax	59.8	(140.9)	(123.0)
Taxation	(0.1)	0.2	(1.4)
Profit/(loss) for the period	59.7	(140.7)	(124.4)

 

C&C US

The Group has entered into an agreement with Equity One, pursuant to which Equity One will acquire the Group's interests in its U.S. subsidiaries (C&C US), through a joint venture with CSC. Consideration will be in the form of 10.9 million shares in the joint venture and 4.1 million shares in Equity One common stock. The CSC investment in these shares will be accounted for as an available-for-sale investment as CSC will not have control nor significant influence over the venture. The transaction had not completed as at 30 June 2010 but is expected to complete later in 2010. Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, C&C US is required to be classified as a discontinued operation and as a disposal group held for sale.

The total assets and total liabilities of C&C US are classified as held for sale and separately disclosed on the face of the balance sheet at 30 June 2010. These comprise:

			£m
Assets
Investment and development property			386.4
Plant and equipment			0.1
Trading property			10.8
Trade and other receivables			19.8
Cash and cash equivalents			12.5
C&C US - assets			429.6
Liabilities
Trade and other payables			(7.7)
Current tax liabilities			(2.5)
Borrowings			(231.6)
Deferred tax provision			(43.8)
C&C US - liabilities			(285.6)
C&C US - net assets			144.0

 

 

 

The following amounts are included for C&C US in the income statement within profit/(loss) for the period from discontinued operations:

	Six months	Six months	Year
	ended	ended	ended
	30 June	30 June	31 December
	2010	2009	2009
	£m	£m	£m
Revenue	21.9	21.0	40.7
Net rental income	13.7	12.4	24.4
Net other income	0.1	(2.8)	(4.1)
Revaluation and sale of investment and development property	12.2	(62.3)	(91.8)
Administration expenses	(1.2)	(1.3)	(2.7)
Operating profit/(loss)	24.8	(54.0)	(74.2)
Net finance costs	(6.5)	(6.5)	(12.4)
Profit/(loss) before tax	18.3	(60.5)	(86.6)
Taxation	(5.4)	26.3	27.7
Profit/(loss) for the period	12.9	(34.2)	(58.9)
Underlying earnings	4.4	1.9	6.3

 

 

18 Related party transactions

There have been no related party transactions during the period that require disclosure under Section DTR 4.2.8 R of the Disclosure and Transparency Rules or under IAS34 Interim Financial Reporting except those disclosed elsewhere in this condensed set of financial statements.

 

INVESTMENT AND DEVELOPMENT PROPERTIES (unaudited)

 

Property data

									Weighted
									average	Gross
	Market			Initial*	Nominal*	Passing*			unexpired	area
	value			yield	equivalent	rent	ERV*		lease	million
	£m	Ownership	Note	(EPRA)	yield	£m	£m	Occupancy*	years	sq ft F
As at 30 June 2010
Lakeside, Thurrock	988.0	100%		5.30%	6.10%			98.5%		1.4
Metrocentre, Gateshead	800.5	90%	A	5.99%	6.62%			98.4%		2.1
Braehead, Glasgow	568.5	100%		5.20%	6.32%			99.2%		1.1
The Harlequin, Watford	351.0	93%		5.22%	6.65%			98.6%		0.7
Victoria Centre, Nottingham	332.0	100%		5.44%	6.60%			97.8%		1.0
Arndale, Manchester	322.5	48%	B	5.56%	6.22%			99.3%		1.6
Eldon Square, Newcastle upon Tyne	235.3	60%		4.19%	7.16%			96.0%		1.4
Chapelfield, Norwich	231.3	100%		5.28%	6.90%			99.6%		0.5
St David's, Cardiff	229.3	50%		2.93%	6.48%			93.9%E		1.4
Cribbs Causeway, Bristol	220.3	33%	C	5.17%	6.14%			95.8%		1.0
The Chimes, Uxbridge	210.2	100%		6.15%	6.70%			100.0%		0.4
The Potteries, Stoke-on-Trent	201.8	100%		6.59%	7.25%			99.4%		0.6
The Glades, Bromley	179.0	64%		5.63%	7.25%			95.5%		0.5
Other	49.3		D							0.4
Total investment and
development property	4,919.0			5.35%	6.52%	269.2	355.4	98.1%	6.4	14.1
As at 31 December 2009
Total investment and
development property	4,631.1			5.70%	7.08%	271.1	363.4	97.8%	6.8	14.0

* As defined in glossary.

 

Notes

A	Interest shown is that of the Metrocentre Partnership in the Metrocentre (90 per cent) and the Metro Retail Park (100 per cent).
	CSC has a 60 per cent interest in the Metrocentre Partnership which is consolidated as a subsidiary of the Group.
B	The Group's interest is through a joint venture ownership of a 95 per cent interest in The Arndale, Manchester, and 90 per cent
	interest in New Cathedral Street, Manchester.
C	The Group's interest is through a joint venture ownership of a 66 per cent interest in The Mall at Cribbs Causeway and a 100 per
	cent interest in The Retail Park, Cribbs Causeway.
D	Includes the Group's 50 per cent economic interest in Xscape, Braehead.
E	Excludes the recently completed extension to St David's, Cardiff.
F	Area shown is the gross area of the property, this is not adjusted for the proportional ownership.

 

 

Analysis of capital return in the period

 

	Market value
	30 June	31 December	Revaluation surplus *
	2010	2009	30 June 2010
	£m	£m	£m	%
Like-for-like properties	4,919.0	4,384.2	348.3	7.7%
Disposals	-	67.3	-	-
Redevelopments and developments	-	179.6	-	-
Total investment properties	4,919.0	4,631.1	348.3	7.7%

* Revaluation surplus includes amortisation of lease incentives and fixed head leases.

 

 

 

Analysis of net rental income in the period

 

	Six months	Six months
	ended	ended
	30 June	30 June
	2010	2009	Change
	£m	£m	%
Like-for-like properties	126.1	126.6	(0.4)%
Disposals	1.0	1.7	(41.2)%
Developments	7.4	4.4	68.2%
Total investment properties	134.5	132.7	1.4%

 

 

OTHER INFORMATION

 

FINANCIAL COVENANTS

 

Financial covenants on asset-specific debt excluding joint ventures

		Loan			Loan to
		outstanding at			30 June		Interest	Interest
		31 July 2010	(1)	LTV	2010		cover	cover
	Maturity	£m		covenant	Market value	(2)	covenant	actual	(3)
Metrocentre	2015	555.2		90%	73%		120%	136%
Braehead	2015	337.7		N/A	N/A		120%	163%
Watford	2015	255.9		N/A	N/A		120%	129%
Nottingham	2016	252.0		90%	76%		110%	160%
Chapelfield	2016	212.6		N/A	N/A		110%	126%
Uxbridge	2016	160.7		85%	77%		120%	145%
Bromley	2016	138.6		85%	77%		120%	129%
Lakeside	2017	522.4		75%	53%		140%	191%
Total		2,435.1
Financial covenants on joint ventures asset-specific debt
		Loan
		outstanding at			Loan to
		31 July			30 June		Interest	Interest
		2010	(1)	LTV	2010		cover	cover
	Maturity	£m		covenant	Market value	(2)	covenant	actual	(3)
Cardiff	2014	37.2	(4)	75%	15%		150%	170%
Xscape	2014	22.8	(4)	N/A	N/A		120%	170%
Total		60.0

Notes

(1) The loan values are the actual principal balances outstanding at 31 July 2010, which take into account any principal repayments made in July 2010. The balance sheet value of the loans includes any unamortised fees.

(2) The Loan to 30 June 2010 Market Value provides an indication of the impact the 30 June 2010 property valuations undertaken for inclusion in the condensed financial statements could have on the LTV covenants. The actual timing and manner of testing LTV covenants varies and is loan specific.

(3) Based on latest certified figures, calculated in accordance with loan agreements, which have been submitted between 30 June 2010 and 31 July 2010. The calculations are loan specific and include a variety of historic, forecast and in certain instances a combined historic and forecast basis.

(4) 50 per cent of the debt is shown which is consistent with accounting treatment and the Group's economic interest.

 

Financial covenants on corporate facilities at 30 June 2010

Interest

Borrowings/

Borrowings/

Net worth

Net worth

cover

Interest cover

Net worth

Net worth

covenant*

Actual

covenant*

Actual

covenant*

Actual

£248m facility, maturing in 2013

£600m

£1,247m

120%

135%

110%

22%

* Tested on the Borrower Group which excludes, at the Group's election, certain subsidiaries with asset-specific finance. The

facility is secured on the Group's investments in the Arndale, Manchester and Cribbs Causeway, Bristol.

CSC Debenture PLC at 30 June 2010

Capital

Interest

Interest

Loan

cover

Capital cover

cover

cover

Maturity

£m

covenant

Actual

covenant

Actual

2027

231.4

167%

189%

100%

107%

The debenture is currently secured on the Group's interests in The Potteries, Stoke-on-Trent and Eldon Square, Newcastle.

Should the capital cover or interest cover test be breached CSC Debenture PLC (the issuer) has three months from the date of delivery of the valuation or the latest certificate to the Trustees to make good any deficiencies. The issuer may withdraw property secured on the debenture by paying a sum of money or through the substitution of alternative property provided that the loan to value and income tests are satisfied immediately following the substitution.

 

UNDERLYING PROFIT STATEMENT (unaudited)

For the six months ended 30 June 2010

 

		Re-presented	Re-presented	Re-presented
	Six months	six months	six months	year
	ended	ended	ended	ended
	30 June	30 June	31 December	31 December
	2010	2009	2009	2009
	£m	£m	£m	£m
Net rental income	134.5	132.7	134.6	267.3
Net other income	0.3	-	(0.1)	(0.1)
	134.8	132.7	134.5	267.2
Administration expenses	(11.2)	(14.3)	(11.9)	(26.2)
Underlying operating profit	123.6	118.4	122.6	241.0
Finance costs	(82.3)	(87.2)	(87.6)	(174.8)
Finance income	1.3	1.8	1.9	3.7
Other finance costs	(4.4)	(4.5)	(5.1)	(9.6)
Underlying net finance costs	(85.4)	(89.9)	(90.8)	(180.7)
Underlying profit before tax	38.2	28.5	31.8	60.3
Tax on adjusted profit	(0.2)	0.6	2.1	2.7
Remove amounts attributable to non-controlling interest	0.9	2.8	3.0	5.8
C&C US underlying earnings
included within discontinued operations	4.4	1.9	4.4	6.3
Underlying earnings	43.3	33.8	41.3	75.1
Underlying earnings per share (pence)	7.0p	8.4p	8.3p	15.1p

 

 

CONSOLIDATED PRO FORMA BALANCE SHEET (unaudited)

As at 31 December 2009

 

The analysis below is provided to illustrate the impact on the Group's balance sheet as if the demerger of Capco and the proposed disposal of C&C US had occurred at 31 December 2009. The demerger of Capco and demerger and other costs information have been extracted from the Circular on the demerger of Capco that was issued on 12 March 2010.

The re-classification of C&C US as held for sale column classifies C&C US' assets and liabilities on a consistent basis as they are shown in the Group's 30 June 2010 balance sheet.

 

					Pro forma
	As at		Demerger	Reclassify	as at
	31 December	Demerger of	and	C&C US as held	31 December
	2009	Capco (1)	other costs (2)	for sale	2009
	£m	£m	£m	£m	£m
Non-current assets
Investment and development property	6,182.6	(1,240.5)	-	(338.0)	4,604.1
Plant and equipment	1.9	(1.0)	-	(0.2)	0.7
Investments in associate companies	26.8	-	-	-	26.8
Other investments	58.3	(46.0)	-	-	12.3
Derivative financial instruments	15.0	-	-	-	15.0
Trade and other receivables	69.8	(14.5)	-	(12.8)	42.5
	6,354.4	(1,302.0)	-	(351.0)	4,701.4
Current assets
Trading property	24.2	(0.3)	-	(10.0)	13.9
Current tax assets	1.1	(1.3)	-	2.3	2.1
Trade and other receivables	86.1	(20.8)	-	(6.2)	59.1
Cash and cash equivalents	582.5	(263.3)	-	(12.8)	306.4
C&C US - assets	-	-	-	377.7	377.7
	693.9	(285.7)	-	351.0	759.2
Total assets	7,048.3	(1,587.7)	-	-	5,460.6
Current liabilities
Trade and other payables	(285.2)	61.9	(7.3)	8.3	(222.3)
Borrowings	(148.5)	15.0	-	11.6	(121.9)
Derivative financial instruments	(14.3)	-	-	-	(14.3)
C&C US - liabilities	-	-	-	(250.4)	(250.4)
	(448.0)	76.9	(7.3)	(230.5)	(608.9)
Non-current liabilities
Borrowings	(3,740.1)	711.4	-	192.7	(2,836.0)
Derivative financial instruments	(371.8)	56.2	-	-	(315.6)
Deferred tax provision	(37.1)	-	-	37.1	-
Other provisions	(8.6)	7.4	-	-	(1.2)
Other payables	(21.6)	2.1	-	0.7	(18.8)
	(4,179.2)	777.1	-	230.5	(3,171.6)
Total liabilities	(4,627.2)	854.0	(7.3)	-	(3,780.5)
Net assets	2,421.1	(733.7)	(7.3)	-	1,680.1

(1) Represents the demerger of the Capco business and includes an allocation to Capco of £244 million of cash. The financial information used in this adjustment has been extracted from the Combined Financial Information in the listing prospectus of Capco, dated 12 March 2010, as adjusted to reflect the allocation of cash prior to completion of the demerger.

(2) £7.3 million represents estimated demerger and related costs not incurred or accrued as at 31 December 2009.

 

DIVIDENDS

The Directors of Capital Shopping Centres Group PLC have announced an interim dividend per ordinary share (ISIN GB0006834344) of 5 pence (2009 - 5.0 pence) payable on 3 November 2010 (see salient dates below). This dividend will be paid totally as a Property Income Distribution ("PID") and will be wholly subject to a 20 per cent withholding tax unless exemptions apply (please refer to the SPECIAL NOTE below).   Dates The following are the salient dates for the payment of the interim dividend:
Wednesday, 22 September 2010	Sterling/Rand exchange rate struck.
Thursday, 23 September 2010	Sterling/Rand exchange rate and dividend amount in SA currency announced.
Monday, 4 October 2010	Ordinary shares listed ex-dividend on the JSE, Johannesburg
Wednesday, 6 October 2010	Ordinary shares listed ex-dividend on the London Stock Exchange.
Friday, 8 October 2010	Record date for interim dividend in London and Johannesburg.
Friday, 8 October 2010	UK shareholders only: Last date for receipt of Tax Exemption Declaration forms to permit
	dividends to be paid gross.
Wednesday, 3 November 2010	Dividend payment day for shareholders
	(Note: Payment to ADR holders will be made on 15 November 2010).
South African shareholders should note that, in accordance with the requirements of Strate, the last day to trade cum-dividend will be Friday, 1 October 2010 and that no dematerialisation or rematerialisation of shares will be possible from Monday, 4 October to Friday, 8 October 2010 inclusive. No transfers between the UK and South African registers may take place from Wednesday, 22 September to Sunday, 10 October 2010 inclusive.   PID SPECIAL NOTE: UK shareholders: For those who are eligible for exemption from the 20 per cent withholding tax and have not previously registered for exemption, an HM Revenue & Customs ("HMRC") Tax Exemption Declaration is available for download from the "Investors" section of the Capital Shopping Centres Group website (www.capital-shopping-centres.co.uk), or on request to our UK registrars, Capita Registrars, or HMRC. Validly completed forms must be received by Capita Registrars no later than the Record Date, Friday 8 October 2010, otherwise the dividend will be paid after deduction of tax.   South African and other non-UK shareholders: South African shareholders may apply to HMRC after payment of the dividend for a refund of the difference between the 20 per cent withholding tax and the UK/South African double taxation treaty rate of 15 per cent. Other non-UK shareholders may be able to make similar claims. Refund application forms for all non-UK shareholders are available for download from the "Investors" section of the Capital Shopping Centres Group website (www.capital-shopping-centres.co.uk), or on request to our SA registrars, Computershare, or HMRC. Refunds are not claimable from Capital Shopping Centres Group, the South African Revenue Service or other national authorities, only from the UK's HMRC.     For South African shareholders, a helpline for questions relating to the withholding tax is available until 17 December 2010 on 086 110 0915 (+27 11 373 0056 if calling from outside South Africa). Calls from within South Africa are toll-free.   The above does not constitute advice and shareholders should seek their own professional guidance. Capital Shopping Centres Group PLC does not accept liability for any loss suffered arising from reliance on the above.

 

GLOSSARY

 

Adjusted, diluted net asset value per share

NAV per share adjusted to exclude the fair value of derivative instruments and related tax and deferred tax on investment and

development property and to include any unrecognised post tax surplus on trading properties.

Annual property income

The Group's share of passing rent plus the external valuers' estimate of annual excess turnover rent, additional rent in respect of

unsettled rent reviews and sundry income such as that from car parks and mall commercialisation.

Debt to assets ratio

Net external debt divided by the balance sheet value of investment and development property plus trading property.

Diluted figures

Reported amounts adjusted to include the effects of dilutive potential shares issuable under convertible bonds and employee

incentive arrangements.

Earnings per share

Profit for the period attributable to equity shareholders of CSC Group PLC divided by the weighted average number of shares in

issue during the period.

EPRA

European Public Real Estate Association, the publisher of Best Practice Recommendations intended to make financial

statements of public real estate companies in Europe clearer, more transparent and comparable.

ERV (estimated rental value)

The external valuers' estimate of the Group's share of the current annual market rent of all lettable space net of any

non-recoverable charges, before bad debt provision and adjustments required under IFRS regarding tenant lease incentives.

Exceptional items

Exceptional items are those items that in the Directors' view are required to be separately disclosed by virtue of their size or

incidence to enable a full understanding of the Group's financial performance.

Initial yield (EPRA)

Annualised net rent (after deduction of revenue costs such as head rent, running void, service charge after shortfalls, empty rates

and merchant association contribution) on investment properties expressed as a percentage of the gross market value before

deduction of theoretical acquisition costs, consistent with EPRA's net initial yield.

Initial yield to the Group

Annualised net rent (as initial yield (EPRA)) on investment properties expressed as a percentage of the net market value,

representing the yield that would be foregone by the Group were the asset to be sold.

Interest cover ratio (ICR)

Underlying operating profit excluding trading property related items divided by the net finance cost excluding the change in fair value

of derivatives, exceptional finance costs and amortisation of compound financial instruments.

Interest rate swap

A derivative financial instrument enabling parties to exchange interest rate obligations for a predetermined period. These are

used by the Group to convert floating rate debt to fixed rates.

IPD

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

Like-for-like properties

Investment properties which have been owned throughout both periods without significant capital expenditure in either period, so

both income and capital can be compared on a like-for-like basis. For the purposes of comparison of capital values, this will also

include assets owned at the previous reporting period end but not throughout the prior period.

Loan-to-value (LTV)

LTV is the ratio of attributable debt to the market value of an investment property.

Net asset value (NAV) per share

Net assets attributable to equity shareholders of CSC Group PLC divided by the number of ordinary shares in issue at the period end.

 

 

Net rental income

The Group's share of net rents receivable as shown in the income statement, having taken due account of non-recoverable

charges, bad debt provisions and adjustments to comply with IFRS including those regarding tenant lease incentives.

Nominal equivalent yield

Effective annual yield to a purchaser from the assets individually at market value after taking account of notional acquisition costs

assuming rent is receivable annually in arrears, reflecting estimated rental values (ERV) but disregarding potential changes in

market rents.

Occupancy

The passing rent of let and under offer units expressed as a percentage of the passing rent of let and under offer units plus ERV

of un-let units, excluding development and recently completed properties and treating units let to tenants in administration as un-let.

Passing rent

The Group's share of contracted annual rents receivable at the balance sheet date. This takes no account of accounting

adjustments made in respect of rent free periods or tenant incentives, the reclassification of certain lease payments as finance

charges or any irrecoverable costs and expenses, and does not include excess turnover rent, additional rent in respect of unsettled

rent reviews or sundry income such as from car parks etc. Contracted annual rents in respect of tenants in administration are

excluded.

Property Income Distribution (PID)

A dividend, generally subject to UK withholding tax at the basic rate of income tax, that a UK REIT is required to pay to its

shareholders from its qualifying rental profits. Certain classes of shareholder may qualify to receive a PID gross - shareholders

should refer to www.capital-shopping-centres.co.uk for further information. The Group can also pay non-PID dividends which

are not subject to UK withholding tax.

Real Estate Investment Trust (REIT)

A tax regime which exempts from corporation tax the rental profits and capital gains of the REIT's qualifying investment property

activities. In the UK, the regime must be elected into and the REIT must meet certain ongoing qualifications, including the

requirement to distribute at least 90 per cent of qualifying rental profits to shareholders. The Group elected for REIT status with

effect from 1 January 2007.

Tenant (or lease) incentives

Any incentives offered to occupiers to enter into a lease. Typically incentives are in the form of an initial rent free period and/or

a cash contribution to fit-out the premises. Under IFRS the value of incentives granted to tenants is amortised through the income

statement on a straight-line basis over the lease term.

Trading properties

Properties held for trading purposes rather than to earn rentals or for capital appreciation and shown as current assets in the

balance sheet.

Underlying earnings per share (EPS)

Earnings per share adjusted to exclude valuation movements, exceptional items and related tax.

Underlying figures

Amounts described as underlying exclude valuation movements, exceptional items and related tax.

Yield shift

A movement (usually expressed in basis points) in the yield of a property asset.

 

 

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