19th Sep 2007 07:02
Capital & Regional plc19 September 2007 19 September 2007 INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2007 Capital & Regional plc, the co-investing property asset manager, today announcesits unaudited interim results for the six months ended 30 June 2007. Highlights • Return on equity was 4.8% for the six month period (June 2006: 19.2%); • Triple Net Asset Value per share £13.18 (December 2006: £12.72); • Recurring pre-tax profit up 17% to £17.6m; • Interim dividend increased to 10p (June 2006: 9p); • Profit after tax, including revaluation gains, of £42.7m (June 2006: £135m); • Property under management £6.6bn (June 2006: £5.9bn). Commenting on the results, Martin Barber, Chief Executive said: "Whilst we are seeing significant volatility in the capital markets which hashad a significant impact on property company share prices, this should notdistract us from the underlying strength of the property markets in which we areinvolved. Tenant demand is strong, occupancy is high and we are continuing tosee good rental growth. Our active approach to property management, coupled withour co-investing model will enable us to continue to outperform". For further information: Martin Barber, Chief Executive, Tel: 020 7932 8000Capital & Regional William Sunnucks, Group Finance Director, Tel: 020 7932 8000Capital & Regional Emma Burdett, Martin Leeburn, Maitland Tel: 020 7379 5151 Chief Executive's statement Results I am pleased to report a 17% increase in recurring pre-tax profit compared tothe same period last year. This comes from growth in our rental income streams,as our asset management initiatives take effect and as rents are rising. It alsocomes from the growth in our German portfolio which yields a high return onequity. 6 months to 6 months toIncome statement 30 June 2007 30 June 2006(See note 2) £m £m Net Rents 47.2 38.2Interest (33.5) (28.2)Contribution 13.7 10.0 Management fees 12.5 13.5Snozone operating profit 1.7 1.2Salaries and overheads (10.3) (9.7)Recurring pre tax profit 17.6 15.0 Our dividend has grown by an average of 42% per annum over the last three years.This has been made possible by the strong cash flows coming from our earningsbusinesses. We have been distributing 80% - 90% of our recurring profits, afterallowing for a full tax charge. We do not distribute performance fees ornon-recurring gains on revaluation or interest rate swaps, which are reinvestedin the growth of the business. The continued strength of our recurring profitstream gives us confidence to increase the interim dividend by 11% to 10p pershare. 2003 2004 2005 2006 2007 pps pps pps pps pps Interim 4 5 7 9 10Final 5 9 11 17Total 9 14 18 26Increase 29% 56% 29% 44% Our statutory profit after tax is £43m (2006 £135m) and is prepared under IFRSaccounting rules which require revaluations of our property portfolios andinterest rate swaps to be included. IFRS exposes our statutory results tovolatility arising from these items which is why we focus on recurring pre taxprofit as a more stable indicator of our performance. Under IFRS our June 2006 profit after tax recorded £98m of revaluation gains onour various property interests and £24m of performance fees arising from theexceptionally strong markets seen last year. 2007 has seen a more moderate gainof £11m and £8m of performance fees. Our NAV per share has risen by 4% to £13.18 on a triple net basis, despite avaluation deficit in the Junction fund. The rise stems from continuing rentalgrowth in our shopping centre and leisure businesses, and the impact ofcontinuing asset management initiatives. Positioning for future growth: Our strong management teams put us in a good position for the future. We alreadyhave three long established and specialised teams, each focussed on managing afund with outside investors. The Group is now building up two further specialised teams focussed aroundportfolios where active management can add value - the FIX trade centreportfolio, and the German big box retail portfolio. In time, these could becomefunds in their own right. SNO!zone is now a well established and highly profitable business with goodgrowth prospects and very little need for equity. It is of particular value tothe Group when seeking locations for new Xscape developments. Solid occupier markets In general our retail customer base is in good shape. The high occupancy levelswe have seen over recent years have continued and we have seen fewerbankruptcies. The feedback from our shopping centres remains positive and webelieve our ability to maximise space utilisation provides us with continuedgrowth prospects. A number of retailers are developing new store formats, whichwe are keen to accommodate - we pride ourselves on flexibility in this respect. Occupancy (as % of lettable area) 30 June 2007 30 June 2006 Mall Fund 95.5% 95.0%Junction Fund 94.2% 94.9%X-Leisure Fund 96.7% 97.1% Access to different sources of capital Our co-investing model allows the group access to more than one source ofcapital. At present we use £922m of stock market equity and £2.3 billion of fundlevel equity, largely from UK institutions. The "three balance sheets" tablebelow shows the scale of the enterprise we manage (£6.6billion) alongside oursee through balance sheet showing our share of each portfolio. Our statutorybalance sheet shows smaller figures because we follow the accounting rules forassociates and joint ventures. Three balance sheets Enterprise £m See through £m Statutory £m Shopping centres 3,293 798 413Retail parks 1,555 429 243Leisure property 1,202 364 227German big box retail 431 393 431Trade centres 183 183 183Total property 6,664 2,167 1,497Working capital (8) 37 32Debt (3,427) (1,282) (607)Net assets 3,229 922 922 C&R ordinary shares 922 922 922Fund investors 2,307 - -Total equity 3,229 922 922 Loan to value 52% 59% 41%Gearing (debt/equity) 106% 139% 66% Property portfolio Over the last two years we have significantly rebalanced our portfolio. Ourexposure to retail parks and shopping centres has fallen, while the trade centreand German portfolios have grown. Property portfolio - see through basis June 07 June 06 June 05 Shopping centres 37% 43% 47%Retail parks 20% 27% 34%Leisure 17% 17% 17%Germany 18% 8% 2%Trade centres 8% 5% 0% Fund performance The Mall and X-Leisure Funds have continued to outperform in 2007. Followingseveral strong years, The Junction has shown a property level return of -0.5%against the IPD retail parks index of 2.9%. The underperformance aroseprincipally from the fund's exposure to large DIY units where ERV has beenreassessed following two third party rent review appeals which were decidedagainst other owners. Fund performance Full year Full year Full year Full year To 30/6The Mall 2003 2004 2005 2006 2007(ii)Property levelreturns 21.7% 19.6% 16.5% 17.6% 2.9%Geared returns 33.5% 26.0% 22.8% 26.3% 2.3%IPD shopping centreindex 15.2% 17.1% 16.3% 12.7% 2.6%(iii) The JunctionProperty levelreturns 17.7% 24.0% 23.3% 15.0% -0.5%Geared returns 28.2% 35.6% 34.1% 18.3% -3.7%IPD retail parksindex 16.6% 23.5% 22.1% 14.7% 2.9%(iii) X-LeisureProperty levelreturns 11.4%(i) 15.3% 19.7% 6.3%Geared returns 18.0%(i) 28.3% 30.4% 5.9% (i) 9 months only(ii) returns in 6 months, not annualised.(iii) Proxy benchmark: IPD - All Quarterly and Monthly Funds for the relevant sector. Shopping centres - The Mall Fund: From an initial investment of £170m in 2002, we now have £413m invested in TheMall Fund, with no additional investment and a sale of £30m of our units lastyear. This is our biggest single investment and with fund level gearing thisgives an "exposure" to shopping centres of £798m. The Mall actively manages a portfolio of 23 shopping centres (8.4m sq ft) spreadthroughout England and Scotland, making it one of the largest owners andoperators of covered retail space in the UK. The Mall's operations are focussed on delivering relevant space for retailers inan entertaining environment for shoppers: all designed to have more peoplespending more time, more money, more often in our local Community Malls. Bysucceeding in this, we can deliver sustainable growth in revenues, and againthis has been proven in the period under review. • Footfall is over 1% higher year on year, an additional 2m shopping visits, with the Footfall National Index showing a 0.4% reversal. • Occupancy is at 95.5% (95%), with a true void level ie units available to let and not subject to development, of 2.8% (2.8%) of ERV. • Net rental income is 1% higher, with ancillary revenues arising from the shopper popularity of our Malls, 22.6% higher, representing 10.8% of our revenues (June 2006: 9%). • Rental value growth, as measured by IPD, is 3.3% since the start of the year compared with IPD Quarterly index of 1.2%. • Retailer failures are remarkably similar to the corresponding period in 2006, with a net negative effect of 1.4% of The Mall's valued net income: £2.17m. At the ungeared property level our market out performance continues with a totalreturn of 2.9% (IPD; 2.6%). Geared returns after performance fees were 2.3%. Our equivalent yields remained broadly stable to June 2007 (5.21%); howeverthese have started to soften in response to general market conditions. Thistrend is widely predicted to continue at least for the remainder of the year. The extent of these yield movements is not universal. The dominant, localcommunity positioning of our Malls, trading in economically robust catchments,mitigates some of the adverse market effects, as does the amount and quality ofthe revenue-positive business initiatives within the portfolio. In July andAugust we saw adverse yield shift reflected in our published unit prices.However, the underlying business remains strong. The investment risk profile of the portfolio is supported by the AAA rating ofThe Mall Bonds financing issued in 2005 at a slim spread of 0.18% over LIBOR. Retail parks: 20% of our property exposure is to retail parks, a sector which has shown totalproperty level returns averaging 20% per annum over the last 3 years. From aninitial committed investment of £85m in 2002 we now have £241m invested in theJunction Fund and approximately £11m equity committed to our joint venturedevelopment Capital Retail Park in Cardiff. Glasgow Fort also continues togenerate returns through our financial interest in further development phases. Over the last six months we have seen a softening in investor sentiment towardsthe retail warehouse sector. The market has shown signs of segregation with anincreasing distinction between prime and secondary stock. Market transactionsare indicating that yields required by investors are increasing due to poorexpectations of short term rental growth and the recent rises in interest rates.The market is therefore anticipating a fall in values for all retailwarehousing, particularly secondary stock during 2007. In the Junction Fund, however, the active management approach remains in place,with emphasis on lettings, facilitation of new entrants and tenant formats,major refurbishments and new space extensions. We have partially de-geared the Junction Fund by the sale of 6 secondary orbulky goods retail parks for £199m over the last 18 months. The fund's debt nowstands at 45% of the portfolio value. The first half of 2007 saw the commencement of construction at Bristol,Aylesbury Phase V and the Swansea Pod with a total of 71,000 sq ft of new space,and the continued refurbishment work at Portsmouth, Maidstone and Oxford. The funds are also progressing two major developments which are expected to addsignificant value over the medium to long term. • Oldbury, Birmingham Junction development has a revised planning permission for 460,000sq ft of new space, and progress is being made with the pre-letting to Open A1 occupiers. We expect construction to start in 2008. • Lakeside, Thurrock: the Junction owns 65% of a joint venture that owns the existing 555,000 sq ft Open A1 retail and leisure park with additional development land. There is a major opportunity to reconfigure and redevelop this property creating dominant retail and leisure offers. In Cardiff, construction has started on the 470,000 sq ft Capital Retail Parkbeing developed in a 50/50 joint venture with PMG Estates Limited, a Welshdeveloper based in Cardiff. The building contract is due to complete in July2008, when the park will open with strong anchors at each end (Costco and Asdafoodstore) and big name occupiers in the retail terrace, including Marks &Spencer and JJB Sports. The development is now 70% pre-let by area and goodprogress has been made on the last remaining lettings. Leisure: Our leisure portfolio includes our investments in (i) the X-Leisure fund whichnow owns two of the three Xscapes (ii) two wholly owned properties at HemelHempstead and Great Northern (iii) two joint ventures - a 30% interest inManchester Arena and a 50% interest in the Xscape Braehead development. We alsoown SNO!zone Holdings, now a separately managed earnings business generatingsubstantial profits. The Leisure market: Spending on leisure activities in general, even if morecautious, has remained strong, and overall the leisure operators have enjoyedgood half year results. It looks like the cinema market in particular shouldhave an excellent year thanks mainly to a very good product line. As for thefood and beverage market, the operators are enjoying a good year. The X-Leisure Fund: Our investment criteria, our dominant leisure locations andmultiple asset management initiatives have allowed us to outperform. Totalreturns for the first half, before performance fees, were a pleasing 7.4%. Ourinitial investment of £23m in the X-Leisure Fund in 2004 has grown to £48m. In addition we acquired a further £51m in units upon merger of our interests inthe Xscapes at Milton Keynes and Castleford. Xscape: Our investments in Milton Keynes and Castleford/Leeds were sold to theX-Leisure Fund in February 2007. We are pleased that Rockspring, on behalf ofthe Hanover Property Unit Trust, our joint venture partner at both locations, isrolling its investment into theX-Leisure fund. Our third Xscape at Braehead is establishing itself in the Scottish market,despite the delay in opening the cinema. Most of our partners there are enjoyingtrade figures ahead of predictions. SNO!zone operates the ski slopes at all three Xscape locations. It achievedexcellent half year results, with operating profit rising to £1.7m, up from£1.2m for the first 6 months of 2006. Revenue lines at Milton Keynes andCastleford are still growing, but to a lesser extent than in the past 3 years,suggesting that the businesses are maturing but still have room for growth. TheBraehead business is slowly establishing itself in the Scottish market and thereare a number of opportunities for expansion outside the existing locations whichare being actively pursued. Trade centres - FIX UK We are building up a portfolio of trade counter centres, geared to the needs oftrade counter specialists. During the first half we expanded the portfolio from£110m to £183m, primarily due to the acquisition of 25 properties at a value ofapproximately £72m. We have an acquisition pipeline of a further £21m in H2 2007and H1 2008. Trade centres normally benefit from an industrial planning use with the tradecounter sales, and have been bought off yields of 5.00 - 5.75%. The key driverof a trade centre is its location, generally with frontage or visibility to amain arterial route and at the very least good traffic flows past the unit.Occupiers are starting to group together to form clusters and parks withincreasing evidence that the tenants benefit from being within close proximity. These prominent schemes are proving to be highly profitable for the occupiersand tenant demand remains strong helping to fuel rental growth. FIX UK have agood relationship with the top 30 national occupiers who are all looking to gainsignificant market share within their various areas of trade. It is estimatedthat there is in the region of 400 national, regional and local occupiersspecifically seeking or trading at trade centre locations. There have also beena number of new entrants into the market, most significantly: • Screwfix, owned by Kingfisher which provides a catalogue and internet business for its customers, now has 68 stores (growth in 18 months) and is targeting 300 by 2011. • Benchmark, owned by Travis Perkins, is a new kitchen format. • Trade Depot, also owned by Kingfisher, is more akin to a builder's merchant providing the heavier products to the building trade. They have opened six stores in the last 12 months. The growth in the existing market and new entrants are leading to increasingdemand for the right product. FIX UK achieved rental growth of 2.27% in H1 2007compared to the standard industrial benchmark of 0.5%. At our site in Canterburywe have driven rents forward from £6.00 per ft(2) to £9.00 per ft(2) followingrefurbishment, Milton Keynes continues to perform well recently achieving anagreement for lease at £12.50 per ft(2) for a new unit, at Sunderland we haveincreased rents from £6.00 per ft(2) to £6.50 per ft(2) and at Hartlepool from£5.50 per ft(2) to £6.00 per ft(2). We have continued to have success in securing planning permissions specificallyfor trade centre uses; achieving this across 14 schemes. The property level return on the like for like portfolio was approximately 4%during the first half. German portfolio We have steadily built up our German portfolio from €567m in December 2006 to€640m in June 2007 in spite of increasing competition from local andinternational institutional investors. The German economy is growing faster than we expected, and fears that the 3%increase in VAT in January this year would dampen the recovery of consumerspending appear to have been misplaced. We have concentrated on acquiring well let out of town big box retail units intrading locations which are unlikely to suffer from new competition. The portfolio is generating a cash return of 11% per annum on the €137m ofequity invested in Germany. It has strong defensive qualities with low rentalvalues and with partial indexation. In addition, we have some interesting assetmanagement opportunities. We have a dedicated management team in London which is working closely with ourstrategic partners, the Hahn Group based near Cologne, and other specialistproperty consultants. The overall results for the six months are pleasing, with a property levelreturn of 5.4% and a geared return (before tax) of 14.2%. Property Management: We continue to generate substantial profit from our three fund managementcontracts as follows: Profit from property fund management business 6 months to 6 months to June 2007 June 2006 £m £m Regular fee income 12.5 13.5Fixed management expense (7.7) (7.7) 4.8 5.8 Performance fees 7.9 24.4Variable management expense (2.9) (5.1) Profit before tax 9.8 25.1 75% of our group overhead relates to the fund management business, the balancebeing attributed to our trade centre, German and corporate activities. Variablemanagement expense includes staff bonuses and the cost of the LTIP and CAPschemes which provide an incentive for key individuals to stay with the company. Performance fee details Mall Junction X-Leisure Performance fee hurdles(applied to geared fund Greater of 12% Greater of 12% 12%level returns) and IPD + 1% and IPD + 1% Percentage of < 2% - 15% < 2% - 15% < 3% - 16%out performance 2-4% - 20% 2-4% - 20% 3-6% - 20% > 4% - 25% > 4% - 25% > 6% - 24% Performance fees fell during the half year due to lower returns throughout theproperty market. The performance fee earned in any one year relates to theaverage performance over a three year period. At the end of 2006 there was asubstantial carry forward of performance which will benefit the 2007 and 2008performance fee calculation. As a result we are still expecting significantperformance fees for Mall and X-Leisure during 2007, but we will have eaten intomuch of the carry forward. No performance fees have been accrued for TheJunction because the outlook for retail park yields is more uncertain. Resilience We have taken care to make our financing resilient in a wide range of marketconditions. At 30 June 2007 we had undrawn group facilities of £86m. Ourrecurring profits covered our interest bill by 152%, and 77% of our debt ishedged for an average of 47 months. Our loan facilities have an average durationof 51 months to expiry. The flow of income from our asset management business is underwritten by longterm contracts which continue for the life of the funds: Fund Fund Termination date Manager Mall Morley 31 December 2016 with an option for a further 5 year extensionJunction Morley 31 December 2011 with an option for a further 5 year extensionX-Leisure Hermes 31 December 2018 with an option for a further 5 year extension Market outlook So far we have seen little hard evidence in the tenant market or propertyinvestment market to justify recent falls in property share prices, which havemirrored the widespread volatility in financial markets. The coming months willshow how far turmoil in the financial markets affects the real economy. Whatever the outcome I expect our co-investing model to serve us well. Ouractive approach to property management will put our properties at an advantagein attracting the right tenants and thus generating cash flow. Martin BarberChief Executive Independent review report to Capital & Regional plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated statement ofrecognised income and expense, the reconciliation of movements in equityshareholders' funds, the consolidated summary cash flow statement and relatednotes 1 to 17. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which requires that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applies unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Deloitte & Touche LLPChartered Accountants and Registered AuditorsLondon18 September 2007 Consolidated income statement Restated (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 Notes £m £m £m Revenue 2c 49.8 57.4 132.1Cost of sales (8.7) (7.3) (15.5) ---------- --------- ---------Gross profit 41.1 50.1 116.6 Administrative costs (14.4) (14.8) (39.0)Share of profit in jointventures and 9a 31.1 105.4 164.6associatesGain on revaluation ofinvestment properties 8a 6.6 15.4 26.0Profit on sale ofproperties and 2.0 0.8 6.3investments ---------- --------- ---------Profit on ordinaryactivities 66.4 156.9 274.5before financing Finance income 3 0.9 1.0 2.0Finance costs 4 (13.8) (11.6) (25.6) ---------- --------- ---------Profit before taxation 53.5 146.3 250.9 ---------- --------- ---------Current tax 5 (1.4) (4.6) (16.5)Deferred tax 5 (9.4) (6.7) (12.1) ---------- --------- ---------Tax charge (10.8) (11.3) (28.6) ---------- --------- ---------Profit for the period 42.7 135.0 222.3 ---------- --------- ---------Earnings per share Basic earnings per share 7 59p 190p 311pDiluted earnings per share 7 59p 183p 305p ---------- --------- --------- Consolidated balance sheet Restated (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 Notes £m £m £m Non-current assetsInvestment property 8a,8b 633.6 371.2 511.4Interest in long leaseholdproperty 8a,8b 17.3 14.5 16.0Goodwill 12.2 12.2 12.2Plant and equipment 0.9 1.2 1.2Receivables 8.5 28.4 -Investment in associates 9c 752.8 669.6 685.4Investment in joint ventures 9e 19.4 59.0 67.6 ---------- --------- ---------Total non-current assets 1,444.7 1,156.1 1,293.8 ---------- --------- --------- Current assetsTrading property assets 8a,8b 95.0 94.3 94.4Receivables 97.6 72.4 89.0Cash and cash equivalents 37.7 38.3 35.5 ---------- --------- ---------Total current assets 230.3 205.0 218.9 ---------- --------- ---------Total assets 1,675.0 1,361.1 1,512.7 ---------- --------- --------- Current liabilitiesTrade and other payables (84.4) (41.8) (69.4)Current tax liabilities (26.2) (17.4) (25.5)Short-term bank loans (0.2) (0.2) - ---------- --------- --------- (110.8) (59.4) (94.9) ---------- --------- ---------Non-current liabilitiesBank loans (603.7) (432.4) (456.8)Convertible subordinatedunsecured loan stock 10 (0.1) (2.9) (1.3)Minority interest 11 (12.5) (5.3) (9.3)Other payables (2.6) (17.4) (23.5)Deferred tax liabilities 5b (23.2) (8.5) (13.8) ---------- --------- ---------Total non-current liabilities (642.1) (466.5) (504.7) ---------- --------- --------- Total liabilities (752.9) (525.9) (599.6) ---------- --------- ---------Net assets 922.1 835.2 913.1 ---------- --------- --------- EquityCalled-up share capital 12 7.1 7.1 7.2Share premium account 13 219.6 216.9 219.5Revaluation reserve 13 4.0 1.2 2.7Other reserves 13 9.2 11.4 9.6Capital redemption reserve 13 4.4 4.3 4.3Own shares held 13 (6.1) (3.5) (6.9)Retained earnings 13 683.9 597.8 676.7 ---------- --------- ---------Equity shareholders' funds 922.1 835.2 913.1 ---------- --------- --------- Triple net, fully diluted netassets per share 14 £13.18 £11.63 £12.72EPRA diluted net assets per share 14 £13.21 £11.84 £12.75 ---------- --------- --------- Consolidated statement of recognised income and expense Restated (Unaudited) (Unaudited) Six months to Six months to Year to 30 30 June 30 June December 2007 2006 2006 £m £m £m Foreign exchange translationdifferences 0.1 0.2 (0.7)Revaluation gains on owneroccupied property 1.3 0.8 2.3Profit for the period/year 42.7 135.0 222.3Net investment hedge - - - --------- ---------- ---------Total recognised income andexpense 44.1 136.0 223.9 --------- ---------- --------- Attributable to:Equity shareholders 44.1 136.0 223.9 --------- ---------- --------- Reconciliation of movements in equity shareholders' funds Restated (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 £m £m £m Opening equity shareholders' funds 913.1 707.7 707.7Issue of shares 0.1 - 2.7Acquisition of own shares - (3.4) (8.3)Credit in respect of LTIP charge 0.9 1.0 2.1Share buyback and cancellation (15.2) - -Arising on repurchase of CULS (8.8) - (0.8)Other movements - 1.5 (0.1) --------- -------- --------- 890.1 706.8 703.3Total recognised income and expense 44.1 136.0 223.9 --------- -------- --------- 934.2 842.8 927.2Dividends paid (12.1) (7.6) (14.1) --------- -------- ---------Closing equity shareholders' funds 922.1 835.2 913.1 --------- -------- --------- Consolidated summary cash flow statement (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 Notes £m £m £m Net cash generated fromoperations 16 4.0 6.1 89.5 ---------- --------- --------- Distributions received from jointventures and associates 15.9 12.7 21.9Interest paid (13.5) (10.0) (22.1)Interest received 1.0 1.0 1.9Income tax received/(paid) 0.3 (0.2) (3.8) ---------- --------- ---------Cash flows from operatingactivities 7.7 9.6 87.4 ---------- --------- --------- Investing activitiesAcquisition of investmentproperties (102.0) (37.2) (251.4)Capital expenditure on investmentand trading properties (6.0) - (2.0)Proceeds from sale of investment andtrading properties - 1.1 111.0Investment in joint ventures (2.7) - (8.1)Loans to joint ventures (2.8) (0.7) (0.7)Return of investments 0.2 - -Loan repaid by joint ventures 0.7 - -Disposal of units inassociated entity - - 30.0Acquisitions and disposals (0.1) (0.2) (14.4) ---------- --------- ---------Cash flows from investingactivities (112.7) (37.0) (135.6) ---------- --------- --------- Financing activitiesProceeds from the issue ofordinary share capital 0.1 0.1 0.4Repurchase and cancellationof own shares (15.3) - -Purchase of LTIP shares (1.3) (3.4) (8.3)Repurchase of CULS (10.5) - -Bank loans drawn down 146.9 36.8 64.4Dividends paid to minorityinterests (0.6) (0.3) (0.6)Equity dividends paid (12.1) (7.6) (14.1) ---------- --------- ---------Cash flows from financingactivities 107.2 25.6 41.8 ---------- --------- ---------Net increase/(decrease) incash and deposits 2.2 (1.8) (6.4) ---------- --------- ---------Cash and cash equivalents atbeginning of period/year 35.5 40.1 40.1 Effect of foreign exchangerate changes - - 1.8 ---------- --------- ---------Cash and cash equivalents atend of period/year 37.7 38.3 35.5 ---------- --------- --------- Notes to the interim results 1. Accounting policiesThe interim financial information has been prepared using the accountingpolicies set out in the Annual Report for the year ended 30 December 2006. The comparative figures represent the Group's results and cash flows for theperiod from 31 December 2005 to 30 June 2006 and for the year from 31 December2005 to 30 December 2006. The June 2006 results have been restated to reflectthe treatment of German minority interests as a financial liability. The Group's financial performance does not suffer materially from seasonalfluctuations. Performance fees at the half year are based on estimates.. Therehave been no changes in amounts reported in the prior periods which have amaterial impact on the current interim period. There have been no materialchanges in reportable contingent liabilities since 30 December 2006. The comparative figures for the year ended 30 December 2006 do not constitutethe Company's statutory accounts for that period as defined in section 240 ofthe Companies Act 1985. A copy of the statutory accounts for that year has beendelivered to the Registrar of Companies. The auditors' report on those accountswas not qualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. 2. Segmental analysis 2a. Business and geographic segments on a see through basisThe Group operates in two main business segments, an assets business and anearnings business. The assets business consists of property investmentactivities and the earnings business consists of property management activitiesand the ski slope business of SNO!zone. The businesses are the basis on whichthe Group reports its primary business segments. 2a. Business and geographic segments on a see through basis 2007 Assets Earnings Six months to Property Property Property 30 June investment investment management 2007 UK Germany UK SNO!zone Total2007 Note £m £m £m £m £m Net rents 2b 34.6 12.6 - - 47.2Net interest 2b (26.1) (7.4) - - (33.5) -------- -------- --------- -------- ----------Contribution 2b 8.5 5.2 - - 13.7Management fees 2c - - 12.5 12.5SNO!zone income 2c - - - 7.5 7.5SNO!zone expenses - - - (5.8) (5.8)Management expenses (2.3) (0.3) (7.7) - (10.3) -------- -------- --------- -------- ----------Recurring pre-tax profit 6.2 4.9 4.8 1.7 17.6 Performance fees 2c,9f - - 7.9 - 7.9Cost of performance fees 9c (2.2) - - - (2.2)Variable overhead - - (2.9) (2.9)(Loss)/gain on investmentproperties (0.3) 11.0 - - 10.7Profit on disposals 3.7 - - - 3.7Gain on interest rate swaps 18.1 3.9 - - 22.0Other non-recurring items - (2.9) - (0.4) (3.3) -------- -------- --------- -------- ----------Profit before tax 25.5 16.9 9.8 1.3 53.5Tax (10.8) ----------Profit after tax 42.7 ---------- Assets 1,091.5 454.6 122.8 6.1 1,675.0Liabilities (356.8) (342.9) (49.2) (4.0) (752.9) -------- -------- --------- -------- ----------Net assets at 30 June 2007 734.7 111.7 73.6 2.1 922.1 -------- -------- --------- -------- ----------Capital expenditure (seethrough basis) 150.7 36.6 1.2 - 188.5 -------- -------- --------- -------- ---------- 2b. Contribution and Net Assets on a see through basis 2007 Contribution Six months to Net Assets 30 June 30 June Gross Property Net Net 2007 2007 rent costs rent interest Total Total2007 Notes £m £m £m £m £m £m Mall (C&R share 24.24%) 9c 21.3 (5.8) 15.5 (9.2) 6.3 412.6Junction (C&R share 27.32%) 9c 8.5 (1.3) 7.2 (4.6) 2.6 241.4X-Leisure (C&R share 20.5%) 9c 4.3 (1.0) 3.3 (2.2) 1.1 98.8 ------ -------- ------ ------- --------- -------Total associates 9c 34.1 (8.1) 26.0 (16.0) 10.0 752.8 ------ -------- ------ ------- --------- ------- Xscape Braehead 9e 1.1 (0.4) 0.7 (0.9) (0.2) 8.5Manchester Evening NewsArena 9e 0.8 (0.1) 0.7 (0.5) 0.2 7.2Others1 9e 0.7 (0.4) 0.3 (0.4) (0.1) 3.7 ------ -------- ------ ------- --------- -------Total joint ventures 9e 2.6 (0.9) 1.7 (1.8) (0.1) 19.4 ------ -------- ------ ------- --------- ------- Germany 2d 13.9 (1.3) 12.6 (7.4) 5.2 111.7Fix UK 4.2 (0.4) 3.8 (2.7) 1.1 67.9Other UK 0.6 (0.3) 0.3 (3.7) (3.4) (54.9)Great Northern 3.2 (0.4) 2.8 (1.9) 0.9 25.2 ------ -------- ------ ------- --------- ------- 2c 21.9 (2.4) 19.5 (15.7) 3.8 149.9 ------ -------- ------ ------- --------- -------Total 58.6 (11.4) 47.2 (33.5) 13.7 922.1 ------ -------- ------ ------- --------- ------- 1 Includes the share of results for Xscape Milton Keynes and Xscape Castlefordup to the date of sale (23 February 2007). Net assets include the joint venturesat Glasgow Fort and Cardiff. 2a: Business and geographic segments on a see through basis 2006 Assets Earnings Restated Six months to Property Property Property 30 June Investment investment management 2006 UK Germany UK SNO!zone Total2006 Note £m £m £m £m £m Net rents 2b 33.4 4.8 - - 38.2Net interest 2b (24.8) (3.4) - - (28.2) -------- -------- --------- -------- ---------Contribution 2b 8.6 1.4 - - 10.0Management fees 2c - - 13.5 - 13.5SNO!zone income 2c - - - 6.1 6.1SNO!zone expenses - - - (4.9) (4.9)Management expenses (2.0) - (7.7) - (9.7) -------- -------- --------- -------- ---------Recurring pre-tax profit 6.6 1.4 5.8 1.2 15.0 Performance fees 2c,9f - - 24.4 - 24.4Cost of performance fees 9c (8.1) - - - (8.1)Variable overhead - - (5.1) - (5.1)Gain on investmentproperties 93.7 4.3 - - 98.0Profit on disposals 4.7 - - - 4.7Gain on interest rate swaps 18.7 - - - 18.7Other non-recurring items - (0.9) - (0.4) (1.3) -------- -------- --------- -------- ---------Profit before tax 115.6 4.8 25.1 0.8 146.3Tax (11.3) ---------Profit after tax 135.0 --------- Assets 1,085.6 173.2 100.1 2.2 1,361.1Liabilities (357.7) (124.4) (40.3) (3.5) (525.9) -------- -------- --------- -------- ---------Net assets at 30 June 2006 727.9 48.8 59.8 (1.3) 835.2 -------- -------- --------- -------- --------- Capital expenditure (seethrough basis) 131.5 22.9 1.3 - 155.7 -------- -------- --------- -------- --------- 2b. Contribution and Net Assets on a see through basis 2006 Contribution Six months to Net assets 30 June 30 June Gross Property Net Net 2006 2006 rent costs rent interest Total Total2006 Notes £m £m £m £m £m £m Mall (C&R share 26.12%) 23.4 (6.8) 16.6 (9.1) 7.5 409.6Junction (C&R share 27.32%) 7.5 (1.7) 5.8 (4.7) 1.1 222.6X-Leisure (C&R share 10.59%) 2.4 (0.6) 1.8 (1.2) 0.6 37.4 ------ -------- ----- ------- --------- --------Total Associates 9c 33.3 (9.1) 24.2 (15.0) 9.2 669.6 ------ -------- ----- ------- --------- -------- Xscapes (C&R share) 2.9 (0.7) 2.2 (2.1) 0.1 52.4Others (C&R share) - - - - - 6.6 ------ -------- ----- ------- --------- --------Total joint ventures 9e 2.9 (0.7) 2.2 (2.1) 0.1 59.0 ------ -------- ----- ------- --------- -------- Other UK1 3.2 - 3.2 (4.5) (1.3) 17.8Fix UK 2.1 (0.2) 1.9 (1.4) 0.5 38.9Great Northern 2.5 (0.6) 1.9 (1.8) 0.1 1.1Germany 5.6 (0.8) 4.8 (3.4) 1.4 48.8 ------ -------- ----- ------- --------- --------Total 2c 13.4 (1.6) 11.8 (11.1) 0.7 106.6 ------ -------- ----- ------- --------- --------Total 49.6 (11.4) 38.2 (28.2) 10.0 835.2 ------ -------- ----- ------- --------- -------- 1 Net assets includes the Group's share of the joint venture at Glasgow Fort of £6.2m. 2c. Revenue (Unaudited) (Unaudited) Six months to Six months to Year to 30 30 June 30 June December 2007 2006 2006 Note £m £m £m Assets business Property investment - wholly owned gross rents 2b 21.9 13.4 28.9Earnings businessProperty management - management fees 2a 12.5 13.5 27.4Property management - performance fees 2a,9f 7.9 24.4 62.6SNO!zone 2a 7.5 6.1 13.1Other revenue - - 0.1 --------- --------- --------Revenue per consolidated income statement 49.8 57.4 132.1Finance income 3 0.9 1.0 2.0 --------- --------- --------Total revenue 50.7 58.4 134.1 --------- --------- -------- CRPM earns performance fees on the out performance of the Funds. The performancefees accrued in the period to 30 June 2007 are £7.9m (30 June 2006: £24.4m) -see note 9f. 2d. Geographical segments (Unaudited) (Unaudited) Six months Six months to Year to to 30 June 30 June 30 December 2007 2006 2006 Total Total TotalRevenue by geographical market Note £m £m £m United Kingdom 36.8 52.8 119.8Germany 2b 13.9 5.6 14.3 ----------- --------- ---------Total revenue 2c 50.7 58.4 134.1 ----------- --------- --------- Segment net assets United Kingdom 810.4 786.4 809.6Germany 2b 111.7 48.8 103.5 ----------- --------- ---------Total assets 2b 922.1 835.2 913.1 ----------- --------- --------- Capital expenditure (C&R share) United Kingdom 151.9 132.8 187.9Germany 2a 36.6 22.9 234.1 ----------- --------- ---------Total capital expenditure 2a 188.5 155.7 422.0 ----------- --------- --------- 3. Finance income (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 £m £m £m Interest receivable 0.9 0.9 1.9Other income - 0.1 0.1 ----------- --------- ----------Finance income 0.9 1.0 2.0 ----------- --------- ---------- 4. Finance costs Restated (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 Note £m £m £m Interest on bank loans andoverdrafts 14.0 11.8 23.0Interest receivable on swaps - (0.4) (0.6)Interest on other loans 0.4 0.1 0.3 ---------- --------- ---------Interest payable 14.4 11.5 22.7Unwinding of the discount onCAP awards 1.0 0.7 2.2Share of income attributableto minority interests 11 1.5 0.9 2.6classified as a liabilityGain in fair value of interest (4.5) (1.5) (3.1)rate swapsFair value gains on interest rate swaps transferred from (0.1) - (0.1)equityOther interest payable 1.5 - 1.3 ---------- --------- ---------Finance costs 13.8 11.6 25.6 ---------- --------- --------- 5. Taxation The taxation charge for the period is based on an estimate of the likelyeffective tax rate for the current year. 5a. Tax charge/(credit) (Unaudited) (Unaudited) Six months to Six months to Year to 30 30 June 30 June December 2007 2006 2006 £m £m £m Current tax charge/(credit) UK corporation tax - 4.6 6.6 Adjustments in (0.1) - 9.7 respect of prior years Foreign tax 1.5 - 0.2 --------- --------- --------Total current tax 1.4 4.6 16.5 --------- --------- -------- Deferred tax On net income before 5.5 5.1 9.7 revaluations and disposals On revaluations and dispolsals 3.9 1.6 0.3 Adjustments in - - 2.1 respect of prior years --------- --------- -------- Total deferred tax 9.4 6.7 12.1 --------- --------- -------- Total taxation 10.8 11.3 28.6 --------- --------- -------- 5b. Deferred tax movements Capital gains Other net of capital Capital timing losses allowances differences Total £m £m £m £m As at 30 December 2006 5.7 10.4 (2.3) 13.8Recognised in income 3.9 1.0 4.5 9.4 --------- -------- -------- -------As at 30 June 2007 9.6 11.4 2.2 23.2 --------- -------- -------- ------- The calculation of the Group's tax charge necessarily involves a degree ofestimation and judgement in respect of certain items whose tax treatment cannotbe finally determined until a formal resolution has been reached with therelevant tax authorities. In such cases, the Group has reserved on the basisthat these provisions are required. If all such issues are resolved in theGroup's favour, provisions of up to £18.4 million could be released in futureperiods. A significant part of the Group's property interests are held offshore. TheGroup has also undertaken a restructuring of its activities to separate legallyits assets and earnings businesses, in line with its business model. The Grouphas been advised that no capital gains tax liability arises on thesetransactions although the relevant computations have yet to be agreed. The UK deferred tax liability is calculated at 28% being the rate applicablefrom 1 April 2008 and was substantially enacted before 30 June 2007. 6. Interim dividend The proposed interim dividend of 10p per share (30 June 2006: 9p per share) wasapproved by the Board on 17 September 2007 and is payable on 12 October 2007 toshareholders on the register at close of business on 28 September 2007. 7. Earnings per share The European Public Real Estate Association ("EPRA") has issued recommendedbases for the calculation of certain earnings per share information and theseare shown in the following tables. (Unaudited) Six months to 30 June 2007 Basic Diluted EPRA diluted £m £m £mEarningsProfit for the period 42.7 42.7 42.7Revaluation movements on investmentproperties - - (10.7)Profit on disposal of investmentproperties - - (3.7)Movement in fair value of interestrate swaps - - (22.0)Deferred tax charge - - 9.4 -------- -------- --------- 42.7 42.7 15.7 -------- -------- --------- Number of shares 72.3 72.3 72.3Dilutive share options - 0.4 0.4Conversion of Convertible UnsecuredLoan Stock - 0.1 0.1 -------- -------- --------- 72.3 72.8 72.8 -------- -------- ---------Earnings per share (pence) - sixmonths ended 30 June 2007 59 59 22 -------- -------- --------- Earnings per share (pence) - sixmonths to 30 June 2006 190 183 28Earnings per share (pence) - year to30 December 2006 311 305 46 The calculation includes the full conversion of the Convertible Unsecured LoanStock where the effect on earnings per share is dilutive. Own shares held areexcluded from the weighted average number of shares. 8. Property assets 8a. Wholly-owned property assets Freehold Leasehold Sub-total Investment investment investment Owner- Trading Total property property property occupied property property assets assets assets building assets assets £m £m £m £m £m £mCost or valuationAs at 31 December 2006 494.0 17.4 511.4 16.0 94.4 621.8Exchange adjustments (0.1) - (0.1) - - (0.1)Additions 6.3 - 6.3 - 0.6 6.9Acquisitions 109.5 - 109.5 - - 109.5Disposals (0.1) - (0.1) - - (0.1)Revaluation movementrecognised in income 6.6 - 6.6 - - 6.6Revaluation movementrecognised in equity - - - 1.3 - 1.3 -------- -------- -------- ------- ------- -------As at 30 June 2007 616.2 17.4 633.6 17.3 95.0 745.9 -------- -------- -------- ------- ------- ------- 8b. Investment property assets (Unaudited) (naudited) Six months to Six months to Basis of 30 June 2007 30 June2006 Valuer valuation Note £m £mGroup properties DTZ Debenham Tie Leung Market value 434.1 164.1 CB Richard Ellis Limited Market value 183.3 87.2 Directors' valuations Market value 0.2 0.2 King Sturge Market value 17.4 122.7 --------- --------- 635.0 374.2Less: unamortised tenant incentives (1.4) (3.0) --------- ---------Total investment properties 8a 633.6 371.2 Other fixed assets DTZ Debenham Tie Leung Existing use 8a 17.3 14.5Trading property assets Historic cost 8a 95.0 94.3 --------- ---------Total property assets 8a 745.9 480.0 --------- ---------Properties held by joint ventures Xscape Milton Keynes Partnership Jones Lang LaSalle/DTZ Market value - 105.4Xscape Castleford Partnership Jones Lang LaSalle/DTZ Market value - 73.5 Xscape Braehead Partnership Jones Lang Market value 81.8 76.5 LaSalle/DTZManchester Evening News Arena CB Richard Ellis Limited Market value 68.0 -Capital Retail Parks Partnership Historic cost 18.5 - --------- --------- 168.3 255.4Plus: Head leases treated as finance 3.4 -leasesLess: unamortised tenant incentives (6.8) (11.1) --------- ---------Total investment properties 9e 164.9 244.3 --------- ---------Properties held by associates The Mall Limited Partnership DTZ Debenham Tie Leung Market value 3,194.3 2,987.8The Junction Limited Partnership King Sturge Market value 1,564.0 1,439.5X-Leisure Limited Partnership Jones Lang LaSalle Market value 940.6 761.1 --------- --------- 5,698.9 5,188.4Plus: Head leases treated asfinance leases Less: unamortised tenant incentives 124.8 83.8 (50.3) (25.4) --------- ---------Total investment properties 9c 5,773.4 5,246.8 --------- --------- The independent property valuations as at 30 June 2007, were performed byqualified professional valuers working for DTZ Debenham Tie Leung, CharteredSurveyors, CB Richard Ellis Limited, Chartered Surveyors, Jones Lang LaSalle,Chartered Surveyors and King Sturge, Chartered Surveyors. The properties were valued on the basis of market value, with the exception of10 Lower Grosvenor Place, London SW1, which was appraised on the basis ofexisting use value. All valuations were carried out in accordance with the RoyalInstitute of Chartered Surveyors Appraisals and Valuation Standards. 9. Associates and joint ventures 9a. Share of profit (Unaudited) (Unaudited) Six months to Six months to 30 June 30 June 2007 2006 Note £m £mAssociates 9c 24.4 96.3Joint ventures 9e 6.7 9.1 ---------- --------- 31.1 105.4 ---------- --------- 9b. Investment in associates (Unaudited) (Unaudited) Six months to Six months to 30 June 30 June 2007 2006 £m £m At 31 December 685.4 583.7Investment in X-Leisure Fund 53.9 -Dividends and capital distributions received (10.9) (10.4)Share of results (see below) 24.4 96.3 --------- ---------At 30 June 752.8 669.6 --------- --------- 9c. Analysis of investment in associates (Unaudited) (Unaudited) Six months to Six months to The Mall The Junction X-Leisure* 30 June 2007 30 June 2006 LP LP LP Total Total Note £m £m £m £m £m Income statement (100%)Revenue 87.8 31.1 24.7 143.6 140.1Property expenses (16.2) (0.8) (2.7) (19.7) (18.9)Management expenses (7.6) (4.2) (3.0) (14.8) (19.0) ------- -------- -------- --------- ---------Net rents 64.0 26.1 19.0 109.1 102.2Net interest payable (38.1) (18.4) (12.3) (68.8) (63.7) ------- -------- -------- --------- ---------Contribution 25.9 7.7 6.7 40.3 38.5Performance fees 9f (4.4) - (6.6) (11.0) (33.1)Gain/(loss) oninvestment properties 18.9 (37.6) 26.0 7.3 324.2(Loss) on sale of investment properties (0.1) (2.7) - (2.8) 5.8Fair value of interest rate swaps 42.6 18.0 9.2 69.8 67.1 ------- -------- -------- --------- ---------Profit/(loss) before and after tax 82.9 (14.6) 35.3 103.6 402.5 ------- -------- -------- --------- --------- Balance sheet (100%)Investment property 8b 3,293.4 1,536.6 943.4 5,773.4 5,246.8Non-current assets 2.2 - - 2.2 -Current assets 184.2 109.2 64.0 357.4 230.0Current liabilities (165.0) (62.6) (89.9) (317.5) (321.5)Non-current liabilities (1,611.2) (702.9) (436.0) (2,750.1) (2,420.0) ------- -------- -------- --------- ---------Net assets (100%) 1,703.6 880.3 481.5 3,065.4 2,735.3 ------- -------- -------- --------- --------- C&R interest at period end 24.24% 27.32% 20.50% - -C&R interest at start of period 24.24% 27.32% 10.59% - -C&R average interest during the period 24.24% 27.32% 17.60% - - Group share ofRevenue 2b 21.3 8.5 4.3 34.1 33.3 ------- -------- -------- --------- ---------Net rents 2b 15.5 7.2 3.3 26.0 24.2Net interest payable 2b (9.2) (4.6) (2.2) (16.0) (15.0) ------- -------- -------- --------- ---------Contribution 2b 6.3 2.6 1.1 10.0 9.2Performance fees 2a (1.1) - (1.1) (2.2) (8.1)Gain/(loss) on investment properties 5.2 (10.4) 3.8 (1.4) 77.6Profit on sale of investment properties - 1.1 - 1.1 1.4Fair value of interest rate swaps 10.4 4.9 1.6 16.9 16.2 ------- -------- -------- --------- ---------Profit/(loss) before and after tax 9b 20.8 (1.8) 5.4 24.4 96.3 ------- -------- -------- --------- --------- Investment property 798.3 419.8 193.4 1,411.5 1,268.2Non-current assets 0.5 - - 0.5 -Current assets 44.7 29.8 13.1 87.6 56.5Current liabilities (40.0) (17.1) (18.3) (75.4) (76.8)Non-current liabilities (390.6) (192.0) (89.4) (672.0) (578.0) ------- -------- -------- --------- ---------Associate net assets 412.9 240.5 98.8 752.2 669.9Unrealised profit on sale of property to associate (0.3) 0.9 - 0.6 (0.3) ------- -------- -------- --------- ---------Group share of associate net assets 412.6 241.4 98.8 752.8 669.6 ------- -------- -------- --------- --------- * X-Leisure LP is accounted for as an associate as Capital & Regional hassignificant influence arising from its membership of the General Partner Board. 9d. Investment in joint ventures (Unaudited) (Unaudited) Six months to Six months to 30 June 30 June 2007 2006 £m £m At 31 December 67.6 49.8Net assets disposed of on sale of XscapeMilton Keynes and Xscape Castleford toX-Leisure Fund (51.3) -Investment in joint venture 2.4 0.9Dividends and capital distributions received (6.0) (0.8)Share of results (see below) 6.7 9.1 --------- --------- 19.4 59.0 --------- --------- 9e. Analysis of investment in joint ventures (Unaudited) (Unaudited) Six months to Six months to Xscape 30 June 30 June Braehead Manchester 2007 2006 Partnership Arena Others1 Total Total Note £m £m £m £m £m Income statement (100%)Revenue 2.1 2.5 1.5 6.1 5.3Property expenses (0.7) (0.2) (0.7) (1.6) (1.0)Management expenses (0.1) (0.1) - (0.2) (0.2) -------- -------- ------- -------- --------Net rents 1.3 2.2 0.8 4.3 4.1Net interest payable (1.7) (1.5) (0.9) (4.1) (3.7) -------- -------- ------- -------- --------Contribution (0.4) 0.7 (0.1) 0.2 0.4(Loss)/gain on investmentproperties (0.2) 1.5 9.6 10.9 10.4Profit on sale ofinvestment - - 1.2 1.2 5.5propertiesFair value of interest rateswaps 0.6 1.1 - 1.7 1.9 -------- -------- ------- -------- --------Profit before and after tax - 3.3 10.7 14.0 18.2 -------- -------- ------- -------- -------- Balance sheet (100%)Investment property 8b 75.0 71.4 18.5 164.9 244.3Current assets 10.7 5.2 6.9 22.8 39.5Current liabilities (8.2) (4.9) (6.9) (20.0) (20.7)Non-current liabilities (60.5) (47.5) (12.0) (120.0) (152.3) -------- -------- ------- -------- --------Net assets (100%) 17.0 24.2 6.5 47.7 110.8 -------- -------- ------- -------- -------- C&R interest at period end 50.00% 30.00% 50% - 66.67% Group share ofRevenue 2b 1.1 0.8 0.7 2.6 2.9 -------- -------- ------- -------- --------Net rents 2b 0.7 0.7 0.3 1.7 2.2Net interest payable 2b (0.9) (0.5) (0.4) (1.8) (2.1) -------- -------- ------- -------- --------Contribution 2b (0.2) 0.2 (0.1) (0.1) 0.1(Loss)/gain on investmentproperties (0.1) 0.5 5.2 5.6 5.2Profit on sale of investment - - 0.6 0.6 2.8propertiesFair value of interest rateswaps 0.3 0.3 - 0.6 1.0 -------- -------- ------- -------- --------Profit before and after tax 9d - 1.0 5.7 6.7 9.1 -------- -------- ------- -------- -------- Investment property 37.5 21.4 9.3 68.2 133.9Current assets 5.4 1.6 3.8 10.8 20.7Current liabilities (4.1) (1.5) (3.4) (9.0) (11.0)Non-current liabilities (30.3) (14.3) (6.0) (50.6) (84.6) -------- -------- ------- -------- --------Group share of joint venturenet assets 8.5 7.2 3.7 19.4 59.0 -------- -------- ------- -------- -------- 1 Principally the joint ventures at Glasgow Fort with British Land plc (formerlyPillar Properties plc) and at Cardiff, but also includes the results of XscapeMilton Keynes and Castleford up to the date of sale (23 February 2007). 9f. Performance fees (Unaudited) (Unaudited) The The The Six months to Six months to Mall Junction X-Leisure 30 June 30 June LP LP LP 2007 2006 Note £m £m £m £m £m Property manager - payable to C&R 2a 2.7 - 5.2 7.9 24.4Property manager - payable by C&R to others 0.6 - 0.6 -Fund manager - payable to others 1.1 - 1.4 2.5 8.7 ------ ------- ------- -------- --------Total performance fees 9c 4.4 - 6.6 11.0 33.1 ------ ------- ------- -------- -------- 10. Convertible Subordinated Unsecured Loan Stock In 1996 the Company issued £26 million of Convertible Unsecured Loan Stock("CULS"). Under IFRS these are accounted for as part debt and part equity.Interest is charged on the debt at an effective rate of 11.25% of which 6.75% ispaid as a coupon and the balance rolled up in to the value of the debt. The debtelement is marked to market on the assumption that the debt remains outstandinguntil 2016 when it is repayable. Since 1996 the majority of the CULS have either been converted or bought back inthe market by the Group. During the period the Group bought back in the market£1.6m of CULS at a total cost of £10.5m. At 30 June 2007 CULS with a nominalvalue of £0.1m remained. On 12 September 2007 a further £0.1m of CULS wereconverted into shares and at the date of this report there are no CULSremaining. The CULS may be converted by the holders of the stock into 51.42 (2006: 51.42)ordinary shares per £100 nominal value CULS in any of the years 1997 to 2015inclusive, representing a conversion price of 194p (2006: 194p) per ordinaryshare. The CULS are unsecured and are subordinated to all other forms ofunsecured debt but rank in priority to the holders of the ordinary shares in theCompany. 11. Minority interest As a result of the Group's change to reporting under IFRS the minority interest,arising from the Group's German operations, has been reclassified as aliability. It had previously been treated as equity. Under the terms of thecontract the minority has a put option to sell their share back to the Group atany time after 31 December 2009. (Unaudited) (Unaudited) 30 June 30 June 30 December 2007 2006 2006 Note £m £m £m As at 31 December 9.3 4.1 4.1Share of income and expense 4 1.5 0.9 2.6Dividend paid (0.6) - (0.7)Arising on acquisition 2.3 0.3 3.3 -------- -------- --------- 12.5 5.3 9.3 -------- -------- --------- 12. Called up share capital Number of shares Nominal value of shares issued and fully paid issued and fully paid 30 June 30 June 30 June 30 June 2007 2006 2007 2006 Number Number £000 £000 Ordinary shares of 10p eachAt 31 December 72,388,723 64,039,578 7,239 6,404New share issues - 6,560,000 - 656Shares repurchased and cancelled (1,285,099) - (129) -Issued on exercise of shareoptions 50,000 35,000 5 4 ----------- ----------- -------- --------At 30 June 71,153,624 70,634,578 7,115 7,064 ----------- ----------- -------- -------- Authorised 2007 2006 Ordinary shares of 10p each 150,000,000 150,000,000 During the period the Group repurchased and cancelled £1.3m shares for a totalconsideration of £15.3m. Since the period end the Group has repurchased and cancelled a further £0.2mshares for a total consideration of £1.9m. 13. Reserves Share Capital Own premium Revaluation Other redemption shares Retained account reserve reserves1 reserve held earnings Total £m £m £m £m £m £m £m As at 31 December 2006 219.5 2.7 9.6 4.3 (6.9) 676.7 905.9Shares issued at a premium 0.1 - - - - - 0.1Share buy back and cancellation - - - 0.1 - (15.2) (15.1)Foreign exchange differences - - 0.1 - - - 0.1Revaluation of owner-occupied property - 1.3 - - - - 1.3Conversion of CULS - - (0.5) - - (8.3) (8.8)Credit in respect of LTIP charge - - - - - 0.9 0.9Amortisation of cost of own shares - - - - 0.8 (0.8) -Dividend paid - - - - - (12.1) (12.1)Profit for the period - - - - - 42.7 42.7 ------- -------- -------- -------- ------ ------- ------As at 30 June 2007 219.6 4.0 9.2 4.4 (6.1) 683.9 915.0 ------- -------- -------- -------- ------ ------- ------ 1 Other reserves include those arising on acquisition, the adoption of IFRS 1 inrespect of the market value of swaps and the translation of foreign currency. 14. Net assets per share The European Public Real Estate Association ("EPRA") has issued recommendedbases for the calculation of certain net asset per share information and this isshown in the following notes. 30 June 30 June 30 June 30 December 30 June 2007 2007 2006 2006 2007 Number of Net assets Net assets Net assets Net assets shares per share per share per share £m m £ £ £Basic 922.1 71.1 12.97 11.74 12.61Own shares held (0.9)Fair value of borrowings (net of tax) 3.8Fair value of trading properties 5.0Conversion of CULS 0.1 0.1Dilutive share options 1.1 0.4 -------- -------- -------- -------- ---------Triple net, fully diluted net assetsper share 932.1 70.7 13.18 11.63 12.72Exclude fair value of interest rateswaps (net of tax) (15.3) -Exclude fair value of borrowings (net of tax) (3.8) -Exclude deferred tax on unrealised gains and capital allowances 21.0 - -------- -------- -------- -------- ---------EPRA diluted net assets per share 934.0 70.7 13.21 11.84 12.75 -------- -------- -------- -------- --------- 15. Return on equity (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 £m £m £mTotal recognised income andexpense attributable to equity 44.1 136.0 223.9shareholdersOpening equity shareholders' funds 913.1 707.7 707.7Return on equity 4.8% 19.2% 31.6% --------- --------- --------- 16. Reconciliation of net cash generated from operations (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 £m £m £m Profit on ordinary activitiesbefore financing 66.4 156.9 274.5Less:Share of profit in joint venturesand associates (31.1) (105.4) (164.6)Gain on revaluation of investmentproperties (6.6) (15.4) (26.0)(Profit)/loss on sale of tradingand development properties (0.3) (0.4) 1.5Depreciation of other fixed assets 0.1 0.2 0.3Amortisation of short leaseholdproperties - - 0.1Amortisation of tenant incentives 0.2 0.1 (0.9)Profit on sale of investmentproperties (1.7) (0.4) (6.0)(Increase) in receivables (20.2) (24.1) (3.3)Increase/(decrease) in payables (3.7) (6.7) 6.9Unrealised loss on exchange - - 4.9Non-cash movement relating to the LTIP 0.9 1.3 2.1 ---------- --------- ---------Cash generated from operations 4.0 6.1 89.5 ---------- --------- --------- 17. Debt valuation The table below reflects the adjustment to the interim and full year net assetvalue, required to adjust the carrying value of fixed-rate debt to market value,after the impact of corporation tax. (Unaudited) (Unaudited) Six months to Six months to Year to 30 June 30 June 30 December 2007 2006 2006 £m £m £m Fixed rate loans - fair valueadjustment 5.4 3.1 3.1 --------- --------- ---------Increase in net assets net of tax at 3.8 2.2 2.230% (2006: 30%) --------- --------- --------- Properties under management at 30 June 2007 (neither audited nor reviewed) Portfolio under management * # 30 June 30 June 30 December 2007 2006 2006 £m £m £m Investment properties 652 372 512Trading property 100 94 94The Mall Fund 3,194 2,988 3,125The Junction Fund 1,564 1,439 1,590X-Leisure Fund 941 761 807Other joint ventures 168 255 329 -------- -------- ----------Total 6,619 5,909 6,457 -------- -------- ---------- Properties under management above are shown at valuation and do not include theadjustments in respect of: * Accounting for head leases that are deemed to be finance leases. # The treatment required by IFRS of rent free periods, capital contributions andleasing costs. Fund portfolio information at 30 June 2007 (neither audited or reviewed) The The German Mall Junction X-Leisure Portfolio FIX UKPhysical data Number of core 23 15 18 48 49propertiesNumber of lettable 2,479 237 373 168 243unitsLettable space (sq 8,428 3,552 3,450 4,843 1,591feet-'000s)Rental Increase (ERV) % 3.41% (1.01%) 1.13% n/a 2.27% Valuation data Properties at market £3,194m £1,564m £941m £431m £183mvalue (£m)*Revaluation in the year £22.6m (£36.4m) £24.9m £11.0m (£4.1m)(£m)Initial Yield (%) 4.41% 3.43% 4.77% 5.96% 4.82%Equivalent yield (%) 5.21% 4.50% 5.51% n/a 5.62%Geared returns (%) 2.30% (3.68%) 5.90% 14.20% (5.13%)Property level return (%) 2.90% (0.50%) 6.30% 5.37% (0.39%)Reversionary % 16.86% 15.63% 5.63% n/a 5.75%Loan to value ratio (%) 48.54% 45.15% 46.71% 71.46% 64.82% Rental DataPassing rent (£m) £166.2m £57.3m £47.4m £28.9m £9.34mEstimated rental value £193.8m £71.3m £55.2m n/a £10.87m(£m per annum)Vacancy rate (%) 4.50% 5.84% 3.30% 0.64% 5.46% £m £m £m £m £mLike for Like Net Rental Income 30 June 2007 - 6 months NetRental IncomeProperties owned 60.4 24.0 18.7 5.7 1.8throughout 1H 2007Acquisitions 9.6 0.2 2.8 0.7 1.8Disposals - 0.5 0.2 - - ------- ------- -------- -------- --------Total net rental 70.0 24.7 21.7 6.4 3.6income 30 June 2006 - 6 months NetRental IncomeProperties owned 58.8 23.5 17.6 5.2 1.7throughout 1H 2006Acquisitions 9.6 - 0.2 - 0.1Disposals 0.9 (0.7) 2.0 - 0.1 ------- ------- -------- -------- --------Total net rental 69.3 22.8 19.8 5.2 1.9income The The German Mall Junction X-Leisure Portfolio FIX UK Years Years Years Years YearsLease DataAverage lease length toBreak 9.99 14.05 17.0 9.10 7.48Average lease length toExpiry 10.36 14.50 18.1 9.10 9.02 Passing rent of leases £m £m £m £m £mexpiring in: 2007 11.16 0.77 1.32 0.02 0.17 2008 10.49 0.27 0.46 0.47 1.442009-2011 25.41 0.85 1.76 4.66 1.52 ERV of leases expiring in: 2007 12.19 0.93 1.33 n/a 0.20 2008 12.10 0.32 0.52 n/a 1.552009-2011 25.92 1.86 1.85 n/a 1.82 Passing rent subject toreview in: 2007 24.80 4.71 9.15 n/a 1.66 2008 19.01 14.17 8.74 n/a 0.992009-2011 49.21 36.10 20.33 n/a 4.34 ERV of passing rentsubject to review in: 2007 26.64 6.79 10.40 n/a 2.01 2008 21.60 16.22 9.70 n/a 1.062009-2011 54.21 40.62 21.51 n/a 4.61 Other DataUnit Price (£1.00 atinception) £2.4875 £2.6956 £1.8314 n/a n/aC & R Share 24.24% 27.32% 19.39% 91.24% 100.00% * Properties at market value exclude adjustments for tenant incentives and headleases. Glossary of terms Capital allowances deferred tax provision. In accordance with IAS 12, fullprovision has been made for the deferred tax arising on the benefit of capitalallowances claimed to date. However, in the Group's experience the liabilitiesin respect of capital allowances provided are unlikely to crystallise inpractice and are therefore excluded when arriving at EPRA NAV. CRPM Capital & Regional Property Management Limited is a subsidiary of Capital &Regional plc and earns the management and performance fees arising from Capital& Regional's interests in the associated Funds and joint ventures. Contribution comprises Capital & Regional's share of the net rents less netinterest arising from Capital & Regional's interests in its joint ventures,associates and wholly owned entities. CULS is the Convertible Subordinated Unsecured Loan Stock. EPRA adjusted fully diluted NAV per share includes the effect of those sharespotentially issuable under the CULS or employee share options and excluding ownshares held. The unrealised gains and capital allowances deferred tax provision,the fair value of borrowings net of tax and the fair value of trading propertiesare added back. EPRA earnings per share (EPS) is the profit after taxation excluding gains orlosses on asset disposals and revaluations and their related taxation, movementsin the fair value of financial instruments, intangible asset movements and thecapital allowance effects of IAS 12 where applicable, less taxation arising onthese items, divided by the weighted average number of shares in issue duringthe year excluding own shares held. EPRA triple net, fully diluted NAV per share includes the effect of those sharespotentially issuable under the CULS or employee share options and excluding ownshares held. NAV is adjusted for the fair value of debt and the fair value oftrading properties. Estimated rental value (ERV) is the Group's external valuers' opinion as to theopen market rent which, on the date of valuation, could reasonably be expectedto be obtained on a new letting or rent review of a property. Equivalent yield is a weighted average of the initial yield and reversionaryyield and represents the return a property will produce based upon the timing ofthe income received. In accordance with usual practice, the equivalent yields(as determined by the Group's external valuers) assume rent received annually inarrears and on gross values including prospective purchasers' cost. ERV growth is the total growth in ERV on properties owned throughout the yearincluding growth due to development. Gearing is the Group's net debt as a percentage of net assets. See throughgearing includes our share of non-recourse net debt in the associates and jointventures. Initial yield is the annualised net rents generated by the portfolio expressedas a percentage of the portfolio valuation, excluding development properties. IPD is Investment Property Databank Ltd, a company that produces an independentbenchmark of property returns. Loan to value (LTV) is the ratio of net debt excluding fair value adjustmentsfor debt and derivatives, to the aggregate value of properties (including thesurplus of the open market value over the book value of trading properties),investments in joint ventures and funds and other investments. Market value is an opinion of the best price at which the sale of an interest inthe property would complete unconditionally for cash consideration on the dateof valuation (as determined by the Group's external valuers). In accordance withusual practice, the Group's external valuers report valuations net, after thededuction of the prospective purchaser's costs, including stamp duty, agent andlegal fees. Net assets per share (NAV) are shareholders' funds divided by the number ofshares held by shareholders at the period end, excluding own shares held. Net rent is Capital & Regional's share, on a see through basis, of the rentalincome, less property and management costs excluding performance fees, of theGroup, its associates and joint ventures. Net interest is Capital & Regional's share, on a see through basis, of theinterest payable less interest receivable of the Group, its associates and jointventures. Passing rent is the gross rent, less any ground rent payable under head leases. Recurring pre-tax profit is the sum of Contribution plus management fees,Snozone income less Snozone expenses, less fixed management expenses. Return on equity is the Group's total recognised income for the year as set outin the Consolidated Statement of Recognised Income and Expense ("SORIE")expressed as a percentage of opening equity shareholders' funds.. Reversion is the estimated increase in rent at review where the gross rent isbelow the estimated rental value. Reversionary percentage is the percentage by which the ERV exceeds the passingrent. Reversionary yield is the anticipated yield, which the initial yield will riseto once the rent reaches the estimated rental value. See through balance sheet is the pro forma proportionately consolidated balancesheet of the Group, its associates and joint ventures. See through income statement is the pro forma proportionately consolidatedincome statement of the Group, its associates and joint ventures. Total shareholder return is the growth in price per share plus dividends pershare. Triple net, fully diluted NAV per share includes the effect of those sharespotentially issuable under the CULS or employee share options. SIC 15 "Operating lease - incentives" debtors under accounting rules the balancesheet value of lease incentives given to tenants is deducted from propertyvaluation and shown as a debtor. The incentive is amortised through the incomestatement. Vacancy rate is the estimated rental value of vacant properties expressed as apercentage of the total estimated rental value of the portfolio, excludingdevelopment properties. Variable overhead includes discretionary bonuses and the cost of awards toemployees made under the LTIP and CAP and is spread over the performance period. Shareholder information Financial calendar Interim record date 28 September 2007 Last day to receive mandates 28 September 2007 Dividend warrant/tax vouchers posted 11 October 2007 Dividend payment date/shares purchased 12 October 2007 Certificates/purchase statement despatched 25 October 2007 CREST accounts credited 26 October 2007 RegistrarsLloyds TSB RegistrarsThe CauswayWorthingWest Sussex BN99 6DA T: 0870 691 5366 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Capital & Regional