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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Capital & Regional Plc | LSE:CAL | London | Ordinary Share | GB00BL6XZ716 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.10 | 0.19% | 51.90 | 51.40 | 52.40 | 260,816 | 16:35:01 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMCAL
RNS Number : 5882N
Capital & Regional plc
10 August 2017
10 August 2017
Capital & Regional plc
Half Year Results to 30 June 2017
Capital & Regional plc (LSE: CAL), the UK focused REIT with a portfolio of dominant in-town community shopping centres, today announces its half year results to 30 June 2017.
Lawrence Hutchings, Chief Executive, said: "This is a strong set of results which reflect that whilst elements of the retail sector may face challenges, the continued strong occupier demand for our centres as well as the local and convenient nature of our assets, which cater for the non-discretionary and value-orientated needs of our shoppers, gives us great comfort over the security of our income. This, allied with our proven track record of driving income and delivering results through selective but significant capital expenditure investment, underpins the future growth potential of the business. We also see opportunity to further enhance profitability by seeking greater efficiency in our operating platform and streamlining our structure through various initiatives. Some of these are already delivering tangible results and we are initially targeting annualised savings of at least GBP1.8 million by 2018, equivalent to a c 20% reduction in 2016 central costs.
"Reflecting the strong feeling of confidence in the future growth prospects of the business, the Board has announced an Interim dividend of 1.73p, representing a 6.8% increase on the prior year. With the second half of the year set to comparatively benefit from several major lettings coming on stream and the timing of recent acquisitions and disposals we expect the Full Year 2017 Dividend will be at the top end of our targeted growth range of at least 5% to 8% per annum."
Highlights:
Income growth underpins strong financial results and supports an increased dividend, with further improvements expected in H2
-- Adjusted Profits(1) up 6.6% to GBP14.5 million (June 2016: GBP13.6 million) setting the business on track for its fourth consecutive year of Adjusted Profit growth
-- IFRS Profit for the period of GBP12.1 million (June 2016: Loss of GBP4.4 million)
-- Like-for-like(2) Net Rental Income up 0.5% despite the loss of H1 2016 BHS income, up 4.4%, once adjusted for this
-- 34 new lettings and renewals achieved at an average 21%(3) premium to previous rents and an 8.4%(3) premium to ERV. Passing rent up 1.7% on a like-for-like basis
-- Full period benefit of Ilford acquisition, and timing of Camberley sale in November 2016, will strengthen comparative second half year-on-year performance
-- Enhanced focus on cost efficiencies targeting annualised savings of at least c GBP1.8 million by 2018
-- Interim dividend increased by 6.8% to 1.73p per share (June 2016: 1.62p). Second half improvements underpin target for total Full Year 2017 dividend at top end of the stated 5% to 8% per annum growth range
Capex investment and specialist asset management continue to drive performance
-- GBP80 million Capex plan gathering further momentum with a number of significant initiatives substantially completed during the period, including:
o Blackburn - Wilko opening in September 2017 from the refurbished former BHS unit
o Walthamstow - new units to Lidl, The Gym and Gökyüzü due to open in Q4 2017
o Wood Green - GBP6.4 million new Travelodge scheduled for Q3 2017 opening
-- These lettings will bring GBP1.4 million of annualised rent on stream in H2 2017 from a total capex spend of GBP11.6 million
-- Planning applications to deliver leisure transformation at Hemel Hempstead and Walthamstow extension submitted
-- Strong occupier demand reflected in continued high occupancy at 95.5% (31 December 2016: 95.4%)
-- 35.4 million shopper visits in first half of the year representing a modest 0.9% like-for-like(2) fall, though once again significantly outperforming the national index which was -2.7%
Robust balance sheet with long term debt security
-- Basic and EPRA NAV per share resilient, at 68p and 67p respectively (December 2016: both 68p)
-- GBP30 million Revolving Credit Facility extended to January 2022, meaning all Group debt has minimum tenure of 4.5 years. Weighted average debt maturity of 7.8 years(4)
-- Cost of debt reduced to 3.25%(5) following GBP372.5 million January 2017 refinancing leading to annual saving of c GBP0.5 million
6 months Year 6 months to to to June 2017 Dec 2016 June 2016 Net Rental Income(6) GBP25.0m GBP50.4m GBP25.4m Adjusted Profit(1) GBP14.5m GBP26.8m GBP13.6m Adjusted Earnings per share(1) 2.06p 3.82p 1.94p IFRS Profit/(Loss) for the period GBP12.1m GBP(4.4)m GBP7.2m Total dividend per share 1.73p 3.39p 1.62p Net Asset Value (NAV) per share 68p 68p 71p EPRA NAV per share 67p 68p 71p Group net debt(6,7) GBP403.1m GBP398.1m GBP403.1m Net debt to property value(6,7) 46% 46% 46%
(1) Adjusted Profit is as defined in the Glossary. It incorporates profits from operating activities and excludes revaluation of properties and financial instruments, gains or losses on disposal, exceptional items and other defined terms. A reconciliation of this, and Adjusted Earnings per share, to the statutory result is provided in the Financial Review. EPRA figures and a reconciliation to EPRA EPS are shown in Note 7 to the Financial Statements. The EPRA measures used throughout this report are industry best practice performance measures established by the European Public Real Estate Association. They are defined in the Glossary to the Financial Statements.
(2) Like-for-like excludes the impact of property purchases and sales on year to year comparatives. Like-for-like footfall also excludes entrances impacted by development work. A reconciliation of Like-for-like Net Rental Income to total Net Rental Income for the period is provided in the Financial Review.
(3) For lettings and renewals (excluding development deals) with a term of five years or longer and which did not include a turnover element.
(4) As at 30 June 2017, adjusted for RCF extension completed on 3 August 2017 and assuming exercise of all extension options.
(5) Assuming RCF fully drawn.
(6) Wholly-owned assets
(7) December 2016 figures are proforma, adjusted for the refinancing of Mall assets completed on 4 January 2017, Ipswich disposal completed on 17 February 2017 and Ilford acquisition completed on 8 March 2017.
For further information:
Capital & Regional: Tel: +44 (0)20 7932 8000 Lawrence Hutchings, Chief Executive Charles Staveley, Group Finance Director FTI Consulting: Tel: +44 (0)20 3727 1000 Richard Sunderland Email: Capreg@fticonsulting.com Claire Turvey
Notes to editors:
About Capital & Regional plc
Capital & Regional is a UK focused retail property REIT specialising in shopping centres that dominate their catchment, serving the non-discretionary and value orientated needs of the local communities. It has a strong track record of delivering value enhancing retail and leisure asset management opportunities across a c. GBP1 billion portfolio of in-town shopping centres. Capital & Regional is listed on the main market of the London Stock Exchange and has a secondary listing on the Johannesburg Stock Exchange.
Capital & Regional owns seven shopping centres in Blackburn, Hemel Hempstead, Ilford, Luton, Maidstone, Walthamstow and Wood Green. It also has a 20% joint venture interest in the Kingfisher Centre in Redditch. Capital & Regional manages these assets through its in-house expert property and asset management platform.
For further information see www.capreg.com.
Forward looking statements
This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of government regulators and other risk factors such as the Group's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this document. The Group does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Group should not be relied upon as a guide to future performance.
Operating review
The core strength and expertise of Capital & Regional lies in its ability to create and deliver specialist asset management improvements across its GBP1.0 billion portfolio of UK shopping centres, which is underpinned by a strong London and South East bias. A key characteristic of our assets is their dominance in their locality coupled with their ability to offer occupiers attractive, affordable and high footfall space which caters for the non-discretionary and value-orientated needs of the local community.
Delivery of specialist asset management initiatives
In the first six months of the year we spent GBP7.8 million of the GBP80 million of capital expenditure investment planned over 2017-2019. We expect the pace of investment to increase in the second half of the year to approximately double this.
A number of significant initiatives have substantially completed during the period:
-- At Blackburn the refurbished former BHS unit has been handed over to Wilko and will open in September 2017. Sports Direct, also continues to trade from the unit, now via a direct lease.
-- At Walthamstow we have successfully handed over units to Lidl and The Gym and both are due to open in Q4. We have also commenced works to create a new Turkish restaurant for local operator Gökyüzü, which has traded very successfully at our Wood Green centre for a number of years, and two further retail units totalling 5,000 sq ft. All of the above have been created from the former BHS store.
-- At Wood Green the new 78 bedroom Travelodge is due to be handed over imminently and will open for trade following a GBP6.4 million investment project.
The above units will deliver a combined annual rent of GBP1.4 million from a total Capex spend of approximately GBP11.6 million. To date, the completed lettings of former BHS units have secured an aggregate annual rent that is equivalent to 104% of the rent being paid by BHS when they ceased trading in August 2016. This is with the two further retail units created from the space at Walthamstow and the whole unit at Maidstone, where we are pursuing a number of alternative options, still to be let.
In April we submitted a planning application for the extension at Walthamstow, having completed a public consultation which was very well received. Our plans include the addition of 90,000 sq ft of new retail and leisure space and 470 new residential apartments. A development agreement is in place with the London Borough of Waltham Forest, which remains supportive of our ambitions for the scheme, and we anticipate a positive decision later in the year.
In Hemel Hempstead work has commenced to renew the atrium roof, the cost of which is being met by the previous owner. In addition, our plans to transform the scheme are gathering pace with a planning application submitted to create a leisure hub anchored by a cinema, for which heads of terms have been agreed with a leading operator, and with up to six new restaurant units.
New lettings, renewals and rent reviews
There were 34 new lettings and renewals in the period at a combined average premium of 21%(1) to previous passing rent and an 8.4%(1) premium to ERV.
6 months to June 2017 New Lettings Number of new lettings 22 Rent from new lettings GBP1.5m (GBPm) Comparison to ERV(1) (%) +13.6% ------------------------ ----------- Renewals settled Renewals settled 12 Revised rent (GBPm) GBP0.5m Comparison to ERV(1) (%) -3.1% ------------------------ ----------- Combined new lettings and renewals Comparison to previous rent(1) +21% Comparison to ERV(1) +8.4% ------------------------ ----------- Rent reviews Reviews settled 13 Revised passing rent GBP1.9m (GBPm) Uplift to previous rent (%) +1.8% ------------------------ -----------
(1) For lettings and renewals (excluding development deals) with a term of five years or longer which do not include a turnover rent element.
At Walthamstow, in addition to the new Lidl letting, Smiggle has taken a 10 year lease on an 850 sq ft store. At Luton, Kiko and Scotts have signed up to take a split of the former USC unit while KFC has taken a 10 year lease in the new food court.
At Wood Green, Five Guys has taken a 3,750 sq ft unit on a 15 year term whilst at Blackburn significant five year renewals include Superdrug, The Perfume Shop and Thorntons. Superdrug has also signed a new 10 year letting in Maidstone.
The outperformance of new lettings versus ERV demonstrates the affordability and attractiveness of our schemes to occupiers and this evidence will be supportive of rental tones in the future. Whilst lease renewals were settled at a little below ERV this reflects what has become a growing trend in renewal discussions of tenants seeking a lower headline rent rather than rent free incentives. The net effective rent achieved, assuming that all renewals in the first half were for a five year term was, at 97.3% of ERV, 1.8% higher than assumed by the Group's valuers.
Since 30 June 2017 the positive letting momentum has continued with Superdrug and Aldo both renewing at Wood Green, Boots renewing at Luton and Maidstone, as well as new lettings to Republic at Luton and Card Factory at Ilford.
Rental income and occupancy
Like for like excluding 30 June 30 December 30 June The Exchange, Ilford 2017 2016 2016 Contracted rent (GBPm) 57.8 57.5 57.2 Passing rent (GBPm) 53.9 53.0 53.1 Occupancy (%) 95.6 95.4 96.4 -------------------------- -------- ------------ --------
The GBP0.6 million year-on-year increase in contracted rent represents an excellent performance given the loss of GBP1.0 million of rent in the second half of 2016 as a consequence of the BHS administration. At 30 June 2017 there was GBP2.5 million of contracted rent where the tenant is in a rent free period; of this GBP1.8 million will convert to passing rent this year. There is a further GBP1.5 million of committed transactions where works are being undertaken prior to the handover of the units to tenants.
Occupancy has increased from December 2016 despite the seasonal impact of Christmas trading. The fall in year-on-year occupancy of 0.8% is driven primarily by the impact of the BHS store at Maidstone.
Administrations
6 months 12 months 6 months to to to June 2017 December June 2016(1) 2016(1) Administrations (units) 11 18 12 Passing rent of administrations (GBPm) 0.5 2.4 1.9 ------------------ ----------- ---------- --------------
(1) Comparatives exclude the impact of The Mall, Camberley which was disposed of in November 2016.
The number of administrations is broadly in line with 2016, but the value is much reduced owing to the impact of BHS last year. The most significant insolvency was Blue Inc involving five units with a total rent of GBP0.3 million. As at 30 June 2017 three of the 11 units affected by administration had been re-let and two, with a combined rent of GBP0.3 million, were continuing to trade as usual.
Operational performance
There were 35.4 million visits to our centres in the first half of the year. While this represented a slight like-for-like decrease of 0.9%(1) , we significantly outperformed the national index which declined by 2.7%. Footfall in July was down 0.4%(1) year on year compared to the national index at -2.7%. Car Park usage has been stable and car park income, at GBP4.7 million, is up 11% on a like-for-like basis.
Our C&R Trade Index showed retailers' sales in our schemes up 0.3% for the six months, with June up 1.7%. Our Collect+ service continues to expand with in excess of 20,000 packages handled in the first half, an increase of 34% year on year.
(1) Like for like excluding The Exchange Centre, Ilford and entrances impacted by development work.
Other assets and operations
The Kingfisher Centre, Redditch (C&R ownership 20%)
The former BHS unit was re-let during the period to The Range which opened in July 2017. Other significant lettings include Delightful Desserts and Shake Dog Red although the scheme was impacted by the insolvencies of 99p Stores and Linens Direct as well as the closure of Argos. The property was valued at GBP147.0 million, reflecting a net initial yield of 6.50%. Capital expenditure in the period was GBP0.4 million.
Snozone
Snozone enjoyed another successful trading period with revenues increasing to GBP5.5 million and profit to just over GBP1.0 million. The development of initiatives including SnoAcademy and the Disability Snowschool have supplemented Snozone's core offering and helped contribute to the strong financial performance. The operational expertise of Snozone is also regularly utilised to assist our property business, particularly with regard to initiatives involving the leisure sector.
FINANCIAL REVIEW
Six months Year Six months to to to June 2017 Dec 2016 June Wholly-owned assets 2016 Profitability Net Rental Income (NRI)(1) GBP25.0m GBP50.4m GBP25.4m Adjusted Profit(2) GBP14.5m GBP26.8m GBP13.6m Adjusted Earnings per share 2.06p 3.82p 1.94p IFRS Profit/(Loss) for the period GBP12.1m GBP(4.4)m GBP7.2m EPRA cost ratio (excluding vacancy costs) 25.3% 27.4% 26.4% Net Administrative Expenses to Gross Rent 12.1% 13.6% 12.7% Investment returns Net Asset Value (NAV) per share 68p 68p 71p EPRA NAV per share 67p 68p 71p Dividend per share 1.73p 3.39p 1.62p Dividend pay-out 84.0% 88.7% 83.5% Return on equity 2.5% (0.9)% 1.4% Financing(3) Group net debt GBP403.1m GBP398.1m GBP403.1m Group net debt to property value 46% 46% 46% Average maturity of Group debt(4) 7.8 years 8.0 years 3.1 years Cost of Group debt(5) 3.25% 3.25% 3.46% ----------------------------------- ------------ ----------- -----------
(1) Wholly-owned assets.
(2) Adjusted Profit is as defined in the Glossary. It incorporates profits from operating activities and excludes revaluation of properties and financial instruments, gains or losses on disposal, exceptional items and other defined terms. A reconciliation to the statutory result is provided below. EPRA figures and a reconciliation to EPRA EPS are shown in Note 7 to the Financial Statements.
(3) December 2016 comparative figures in this section are adjusted for the refinancing of Mall assets completed on 4 January 2017, Ipswich disposal completed on 17 February 2017 and Ilford acquisition completed on 8 March 2017.
(4) 30 June 2017 adjusted to reflect RCF extensions completed on 3 August 2017. December 2016 figure is as at date of results (9 March 2017) reflecting debt drawn on Ilford acquisition. Calculations assume exercise of all extension options.
(5) Assuming RCF fully drawn.
The above results are discussed on the following pages.
Profitability
Components of Adjusted Profit and reconciliation to IFRS Profit
Amounts in GBPm Six months Year to Six months to December to June 2017 2016 June 2016 Year to December 2016 Year Year to to December December 2016 2016 Net Rental Income (NRI) Wholly-owned assets (see analysis on next page) 25.0 50.4 25.4 Kingfisher, Redditch(1) 0.7 1.7 0.9 Buttermarket, Ipswich(2) - 0.5 0.1 ----- ------ ---------- ---------- ----- ------- 25.7 52.6 26.4 Net interest (see analysis on page 11) (9.4) (20.3) (10.5) Snozone profit (indoor ski operation) 1.0 1.4 1.0 Central operating costs net of external fees (2.7) (6.9) (3.2) Tax (0.1) - (0.1) Adjusted Profit 14.5 26.8 13.6 Adjusted Earnings per share (pence)(3) 2.1p 3.8p 1.9p Reconciliation of Adjusted Profit to statutory result Adjusted Profit 14.5 26.8 13.6 Property revaluation (including Deferred Tax) (2.8) (14.5) (8.6) (Loss)/profit on disposals - (2.6) 4.3 Gain/(loss) on financial instruments 0.6 (2.5) (1.8) Refinancing costs - (11.0) - Other items(4) (0.2) (0.6) (0.3) -------------------------------- ------------- ---------- ---------- ----- ------- Profit/(loss) for the period 12.1 (4.4) 7.2 -------------------------------- ------------- ---------- ---------- ----- -------
(1) See note 9d to the Financial Statements.
(2) See note 9e to the Financial Statements.
(3) EPRA figures and a reconciliation to EPRA EPS are shown in Note 7 to the Financial Statements.
(4) Includes GBP0.4 million for the non-cash accounting charge in respect of share-based payments (Year to December 2016: GBP0.5 million, Six months to June 2016: GBP0.3 million)
Adjusted Profit increased by 6.6% on the prior year driven by an increase in like-for-like NRI, lower interest costs following the refinancing of the Mall assets and a GBP0.5 million reduction in net central operating costs.
NRI fell on an absolute basis due to the timing of acquisitions and disposals, with the impact of the Camberley and Ipswich sales not fully offset by the Ilford acquisition, which was purchased part way through the current period, and the full period benefit of Hemel Hempstead which was purchased part way through the first half of 2016. Further details are provided in the wholly-owned NRI section below.
Net interest fell by GBP1.1 million compared to the prior year period due to the timing of acquisitions and disposals and a lower average interest cost arising from the refinancing of the Mall assets and the new debt drawn on Ilford.
Net central operating costs improved by GBP0.5 million compared to H1 2016. As the benefit of completed and further cost initiatives continue to flow through we expect the full year rate of improvement to accelerate.
Wholly-owned assets net rental income (NRI)
Amounts in GBPm Six months Six months to to June 2017 June 2016 -------------------------------- ----------- ----------- ------ Like for like excluding BHS (Blackburn, Luton, Maidstone, Walthamstow, Wood Green) 21.5 20.6 +4.4% -------------------------------- ----------- ----------- ------ Impact of BHS -0.3 +0.5 -------------------------------- ----------- ----------- ------ Like for like (Blackburn, Luton, Maidstone, Walthamstow, Wood Green) 21.2 21.1 +0.5% -------------------------------- ----------- ----------- ------ Hemel Hempstead - acquired February/March 2016 2.0 1.6 -------------------------------- ----------- ----------- Camberley (sold November 2016) and other disposals - 2.7 -------------------------------- ----------- ----------- Ilford - acquired 8 March 1.8 - 2017 -------------------------------- ----------- ----------- Net rental income (NRI) 25.0 25.4 -------------------------------- ----------- -----------
Like-for-like NRI growth was 0.5%, despite the net impact of GBP0.8 million from the loss of the three BHS units which ceased trading in August 2016. Excluding this it was 4.4%. The openings of the new Wilko in Blackburn, and Lidl and The Gym at Walthamstow, created from the former BHS space, will drive NRI growth in the second half of the year, together with the new Travelodge at Wood Green.
Net Asset Value (NAV)
NAV at GBP481.1 million and EPRA NAV at GBP482.9 million increased marginally during the period (December 2016: GBP477.6 million and GBP481.5 million respectively) with profit for the period offsetting the payment of the Final 2016 Dividend. The valuation of the wholly-owned portfolio at 30 June 2017 was GBP879.8 million, reflecting a net initial yield of 5.97%. This is in line with the 30 December 2016 valuation of GBP794.1 million after allowing for capital expenditure in the period of GBP7.7 million and the GBP78.0 million acquisition of The Exchange Centre, Ilford in March 2017, excluding acquisition costs of c GBP1.0 million.
On a per share basis Basic NAV was stable at 68p. EPRA NAV fell by 1p to 67p due to a slightly higher number of dilutive shares and shares in issue.
Property portfolio valuation
Property at independent 30 June 2017 30 December valuation 2016 GBPm NIY % GBPm NIY % ------------------------- ------- ------ ------ ------ Wholly-owned portfolio 879.8 5.97 794.1 6.01 ------------------------- ------- ------ ------ ------
Financing
Net interest on a see-through basis
Amounts in GBPm Six months Year to Six months to 30 June 30 December to 30 2017 2016 2016 June 2016 30 December 2016 2016 ------------ ------------- ------------- Wholly-owned assets Net Interest on loans 6.9 14.0 7.0 Amortisation of refinancing costs 0.4 1.4 0.8 Notional interest charge on head leases(1) 1.7 3.6 1.8 ------------ ------------- ------------- 9.0 19.0 9.6 Kingfisher, Redditch 0.3 0.8 0.4 Buttermarket, Ipswich - 0.1 0.2 Central 0.1 0.4 0.3 ----------------------------------- ------------ ------------- ------------- Net Group interest 9.4 20.3 10.5 ----------------------------------- ------------ ------------- -------------
(1) Notional interest charge with offsetting opposite and materially equal credit within other property operating expenses.
Net interest fell by GBP1.1 million compared to the prior year period due to the timing of acquisitions and disposals and the lower average cost of debt (3.25% at 30 June 2017 v 3.47% at 30 June 2016) arising from the refinancing of the Mall assets that completed in January 2017 and the new GBP39 million of debt on the Ilford acquisition that was fixed at an all-in rate of 2.76%.
Group debt
DebtP(1) Cash(2) Net Loan Net Average Fixed Duration Duration debt to debt interest to with value to rate loan extensions (3) value(3) expiry 30 June 2017 GBPm GBPm GBPm % % % % Years Years ----------------- --------- -------- ------ ------- ---------- ----------- ------ --------- ------------ Four Mall assets 255.0 (9.1) 245.9 48% 46% 3.36 100 7.7 9.1 Luton 107.5 (8.6) 98.9 51% 47% 3.14 100 6.5 6.5 Hemel Hempstead 26.9 (1.2) 25.7 50% 48% 3.32 100 4.5 5.5 Ilford 39.0 (3.6) 35.4 49% 44% 2.76 100 6.7 6.7 Group RCF(4) - (2.8) (2.8) - - 3.33 - 4.6 4.6 ----------------- --------- -------- ------ ------- ---------- ----------- ------ --------- ------------ On balance sheet debt 428.4 (25.3) 403.1 49% 46% 3.25 94 6.9 7.8 ----------------- --------- -------- ------ ------- ---------- ----------- ------ --------- ------------
(1) Excluding unamortised issue costs.
(2) Excluding cash beneficially owned by tenants.
(3) Debt and net debt divided by investment property at valuation. (4) At 30 June 2017, adjusted for RCF extension completed on 3 August 2017.
Our target range for net debt to property value remains 40%-50% with an intention to bring this to the lower end of that range in the medium term.
Group Revolving Credit Facility (RCF)
The GBP30 million facility was extended on 3 August 2017 for a further three years such that it now matures on 22 January 2022. Interest on the facility is charged at a margin of 3.0% per annum above LIBOR. A non-utilisation fee of 1.5% is payable. No amount was drawn at 30 June 2017.
Covenants
The Group and its Redditch joint venture were compliant with their banking and debt covenants at 30 June 2017.
Going concern
As stated in note 2 to the condensed financial statements, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.
Dividend
The Board is proposing an interim dividend of 1.73 pence per share, all of which will be paid as a Property Income Distribution (PID). This represents an increase of 6.8% from the 2016 Interim dividend. A Scrip dividend alternative may be offered.
The key dates in relation to the payment of the dividend are:
-- Confirmation of ZAR equivalent dividend 26 September 2017
-- Last day to trade on Johannesburg Stock Exchange (JSE) 3 October 2017
-- Shares trade ex-dividend on the JSE 4 October 2017
-- Shares trade ex-dividend on the London Stock Exchange (LSE) 5 October 2017
-- Record date for LSE and JSE 6 October 2017
-- Dividend payment date 26 October 2017
If a Scrip dividend alternative is offered the deadline for submission of valid election forms will be 6 October 2017. South African shareholders are advised that the dividend will be regarded as a foreign dividend. Further details relating to Withholding Tax for shareholders on the South African register will be provided within the announcement detailing the currency conversion rate on 26 September 2017. Share certificates on the South African register may not be dematerialised or rematerialised between 4 October 2017 and 6 October 2017, both dates inclusive. Transfers between the UK and South African registers may not take place between 26 September 2017 and 6 October 2017, both dates inclusive.
Outlook
Whilst elements of the retail sector may face challenges, the continued strong occupier demand for our centres as well as the local and convenient nature of our assets, which cater for the non-discretionary and value-orientated needs of our shoppers, gives us great comfort over the security of our income. This, allied with our proven track record of driving income and delivering results through selective but significant capital expenditure investment, underpins the future growth potential of the business.
Reflecting the strong feeling of confidence in the future growth prospects of the business, the Board has announced an Interim dividend of 1.73p, representing a 6.8% increase on the prior year. With the second half of the year set to comparatively benefit the timing of recent acquisitions and several major lettings coming on stream we expect the Full Year 2017 Dividend will be at the top end of our targeted growth range of at least 5% to 8% per annum.
Principal risks and uncertainties
There are a number of risks and uncertainties which could have a significant impact on future performance and could cause actual results to differ materially from expected or historical results. The Group carries out a regular review of the major risks it faces and monitors the controls that have been put in place to mitigate them.
A detailed explanation of the principal risks and uncertainties was included on pages 28 to 31 of the Group's 2016 Annual Report. A further review was carried out for the 30 June 2017 half year. This review concluded that the nature of the Group's risks had not significantly changed in the last six months and therefore the principal risks to the Group remain those disclosed in the 2016 Annual Report. These have been summarised below.
Property risks:
-- Property investment market risks - Weak economic conditions and poor sentiment in commercial real estate markets may lead to low investor demand and a market pricing correction. Small changes in property market yields can have a significant effect on property valuation and the impact of leverage could magnify the effect on the Group's net assets.
-- Impact of the economic environment (tenant risks) - Tenant insolvency or distress and a prolonged downturn in tenant demand could put pressure on rent levels. Tenant failures and reduced tenant demand could adversely affect rental income revenues, lease incentive costs, void costs, available cash and the value of properties owned by the Group.
-- Valuation risk - The risk that a lack of relevant transactional evidence makes property valuations increasingly subjective and open to a wider range of possible outcomes.
-- Threat from the internet - The trend towards online shopping may adversely impact footfall in shopping centres and potentially reduce tenant demand for space and the levels of rents which can be achieved.
-- Concentration and scale risks - By having a less diversified portfolio the business is more exposed to specific tenants or types of tenant. Failures of such tenants could therefore have a significant impact on rental income revenues impacting Adjusted Profit and property valuations.
-- Competition risk - The threat to the Group's property assets of competing in town and out of town retail and leisure schemes.
-- Business disruption from a major incident - The threat of a major incident, such as a terrorist attack, impacting one of the Group's assets.
-- Development risk - There is a risk that where capital expenditure and development projects are undertaken, that delays and other issues may lead to increased cost and reputational damage. There is also the risk that planned realisation of value is not achieved, for example if the property cannot subsequently be sold for the anticipated amount or if tenants are not contracted on sufficiently attractive terms.
Funding and treasury risks:
-- Liquidity and funding - Inability to fund the business or to refinance existing debt on economic terms may result in the inability to meet financial obligations when due and put a limitation on financial and operational flexibility. Cost of financing could be prohibitive in the future.
-- Covenant compliance risks - Breach of any loan covenants could cause default on debt and possible accelerated maturity. Unremedied breaches can trigger demand for immediate repayment of loans.
-- Interest rate exposure risks - Exposure to rising or falling interest rates. If interest rates rise and are unhedged, the cost of debt facilities can rise and ICR covenants could be broken. Hedging transactions used by the Group to minimise interest rate risk may limit gains, result in losses or have other adverse consequences.
Other risks:
-- Execution of business plan - the failure to execute the Group's business plan in line with internal and external expectations could lead to potential loss of income or value and reputational damage, negatively impacting investor market perception.
-- Property acquisition/disposal strategy - The Group is exposed to risks around overpayment for acquisitions and that acquisitions do not deliver the returns forecast. In addition, if the portfolio is not effectively managed through the property cycle, with sales and deleveraging at the appropriate time, the Group is exposed to risks in not being able to take advantage of other investment opportunities as they arise and the potential for LTVs to move adversely, with adverse consequences for covenants and shareholder value.
-- Tax risks - Changes in tax legislation or the interpretation of tax legislation or previous transactions where the tax authorities disagree with the tax treatment adopted could result in tax related liabilities and other losses arising.
-- Regulation risks - Exposure to changes in existing or forthcoming property related or corporate regulation could result in financial penalties or loss of business or credibility.
-- Loss of key management - The Group's business is partially dependent on the skills of a small number of key individuals. Loss of key individuals or an inability to attract new employees with the appropriate expertise could reduce the effectiveness with which the Group conducts its business.
-- Historical Transaction Risk - the risk of issues or liabilities emerging from historical transactions most likely through warranties or indemnities provided in asset or business disposals.
The risks noted above do not comprise all those potentially faced by the Group and are not intended to be presented in any order of priority. Additional risks and uncertainties currently unknown to the Group, or which the Group currently deems immaterial, may also have an adverse effect on the financial condition or business of the Group in the future. These issues are kept under constant review to allow the Group to react in an appropriate and timely manner to help mitigate the impact of such risks.
Responsibility statement
The directors confirm that to the best of their knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting", as adopted by the European Union;
-- the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
-- the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).
By order of the Board
Lawrence Hutchings Charles Staveley Chief Executive Group Finance Director 9 August 2017 9 August 2017
INDEPENT REVIEW REPORT TO CAPITAL & REGIONAL PLC
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 2017 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 17. 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.
This report is made solely to the company 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. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
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 Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this 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.
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 inquiries, 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 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
9 August 2017
Condensed consolidated income statement
For the six months to 30 June 2017
Unaudited Unaudited Six months Six months Audited to 30 to Year to June 30 June 30 December 2017 2016 2016 Note GBPm GBPm GBPm ----------------------------------- ----- ------------ ------------ ------------- Continuing operations Revenue 3b 43.9 43.9 87.2 Cost of sales (16.6) (16.1) (32.5) ----------------------------------- ----- ------------ ------------ ------------- Gross profit 27.3 27.8 54.7 Administrative costs (4.8) (5.2) (10.9) Share of (loss)/profit in associates and joint ventures 9a (1.1) 1.9 0.3 Loss on revaluation of investment properties 8a (1.3) (10.3) (14.2) Other gains and losses 5 0.3 4.4 (1.8)
----------------------------------- ----- ------------ ------------ ------------- Profit on ordinary activities before financing 20.4 18.6 28.1 Finance income 0.8 0.2 0.4 Finance costs (9.1) (11.6) (33.0) ----------------------------------- ----- ------------ ------------ ------------- Profit before tax 12.1 7.2 (4.5) Tax 6 - - 0.1 ----------------------------------- ----- ------------ ------------ ------------- Profit/(loss) for the period 12.1 7.2 (4.4) ----------------------------------- ----- ------------ ------------ ------------- Basic earnings per share 7 1.7p 1.0p (0.6)p Diluted earnings per share 7 1.7p 1.0p (0.6)p EPRA basic earnings per share 7 2.0p 1.9p 3.7p EPRA diluted earnings per share 7 2.0p 1.9p 3.7p ----------------------------------- ----- ------------ ------------ -------------
Condensed consolidated statement of comprehensive income
For the six months to 30 June 2017
Unaudited Unaudited six months six months Audited to to Year to 30 June 30 June 30 December 2017 2016 2016 GBPm GBPm GBPm ---------------------------- ------------ ------------ ------------- Profit for the period 12.1 7.2 (4.4) Other comprehensive income - - - Total comprehensive income for the period 12.1 7.2 (4.4) ---------------------------- ------------ ------------ -------------
The results for the current and preceding periods are fully attributable to equity shareholders.
The EPRA measures used throughout this report are industry best practice performance measures established by the European Public Real Estate Association. They are defined in the Glossary to the Financial Statements. EPRA Earnings and EPRA EPS are shown in Note 7 to the Financial Statements. EPRA net assets and EPRA triple net assets are shown in Note 13 to the Financial Statements.
Condensed consolidated balance sheet
At 30 June 2017
Unaudited Audited 30 June 30 December 2017 2016 Note GBPm GBPm ---------------------------------- ----- ---------- ------------- Non-current assets Investment properties 8 924.2 838.5 Plant and equipment 1.1 0.9 Fixed asset investments 2.0 1.9 Receivables 13.4 14.3 Investment in associates 9b 12.6 13.9 Total non-current assets 953.3 869.5 ----------------------------------- ----- ---------- ------------- Current assets Receivables 19.5 13.4 Cash and cash equivalents 10 31.1 49.1 Assets classified as held for sale - 13.9 Total current assets 50.6 76.4 ----------------------------------- ----- ---------- ------------- Total assets 1,003.9 945.9 ----------------------------------- ----- ---------- ------------- Current liabilities Bank loans 11 - (334.6) Trade and other payables (35.2) (41.3) Liabilities directly associated with assets held for sale - (0.4) Total current liabilities (35.2) (376.3) ----------------------------------- ----- ---------- ------------- Net current assets 15.4 (299.9) ----------------------------------- ----- ---------- ------------- Non-current liabilities Bank loans 11 (422.2) (26.2) Other payables (4.0) (4.4) Obligations under finance leases (61.4) (61.4) Total non-current liabilities (487.6) (92.0) ----------------------------------- ----- ---------- ------------- Total liabilities (522.8) (468.3) ----------------------------------- ----- ---------- ------------- Net assets 481.1 477.6 ----------------------------------- ----- ---------- ------------- Equity Share capital 16 7.1 7.0 Share premium 16 161.5 158.2 Other reserves 60.3 60.3 Capital redemption reserve 4.4 4.4 Own shares held (0.4) (0.4) Retained earnings 248.2 248.1 ----------------------------------- ----- ---------- ------------- Equity shareholders' funds 481.1 477.6 ----------------------------------- ----- ---------- ------------- Basic net assets per share 13 GBP0.68 GBP0.68 EPRA triple net assets per share 13 GBP0.67 GBP0.67 EPRA net assets per share 13 GBP0.67 GBP0.68 ----------------------------------- ----- ---------- -------------
Condensed consolidated statement of changes in equity
For the six months to 30 June 2017
Capital Own Share Share Merger redemption shares Retained Total capital premium reserve reserve held earnings Equity GBPm GBPm GBPm GBPm GBPm GBPm GBPm ---- ------------------------------- ----- -------- -------- ----------- ------- --------- ------- Balance at 30 December 2015 7.0 157.2 60.3 4.4 (0.6) 274.9 503.2 ----- -------- -------- ----------- ------- --------- ------- Profit for the period - - - - - 7.2 7.2 Other comprehensive loss for the period - - - - - - - ----- -------- -------- ----------- ------- --------- ------- Total comprehensive income for the period - - - - - 7.2 7.2 Credit to equity for equity-settled share-based payments - - - - - 0.3 0.3 Dividends paid (note 16) - - - - - (11.3) (11.3) Balance at 30 June 2016 (unaudited) 7.0 157.2 60.3 4.4 (0.6) 271.1 499.4 ----- -------- -------- ----------- ------- --------- ------- Profit for the period - - - - - (11.6) (11.6) Other comprehensive loss for the period - - - - - - - ----- -------- -------- ----------- ------- --------- ------- Total comprehensive income for the period - - - - - (11.6) (11.6) Credit to equity for equity-settled share-based payments - - - - - 0.2 0.2 Dividends paid (note 16), net of Scrip - - - - - (10.4) (10.4) Shares issued, net of costs - 1.0 - - - (1.0) - Other movements - - - - 0.2 (0.2) - Balance at 30 December 2016 7.0 158.2 60.3 4.4 (0.4) 248.1 477.6 ----- -------- -------- ----------- ------- --------- ------- Profit for the period - - - - - 12.1 12.1 Other comprehensive loss for the period - - - - - - - ----- -------- -------- ----------- ------- --------- ------- Total comprehensive income for the period - - - - - 12.1 12.1
Credit to equity for equity-settled share-based payments - - - - - 0.4 0.4 Dividends paid (note 16) , net of Scrip - - - - - (9.0) (9.0) Shares issued, net of costs 0.1 3.3 - - - (3.4) - Balance at 30 June 2017 (unaudited) 7.1 161.5 60.3 4.4 (0.4) 248.2 481.1 ------------------------------- ---- ----- -------- -------- ----------- ------- --------- -------
Condensed consolidated cash flow statement
For the six months to 30 June 2017
Unaudited Unaudited Six Six Audited months months Year to 30 to to 30 June 30 June December 2017 2016 2016 Note GBPm GBPm GBPm Operating activities Net cash from operations 12 19.8 21.5 41.1 Distributions received from associates/investments 0.7 0.5 4.7 Interest paid (6.7) (7.1) (14.6) Interest received 0.1 - 0.1 Cash flows from operating activities 13.9 14.9 31.3 ----------------------------------- ----- ---------- ---------- ---------- Investing activities Acquisition of The Exchange, Ilford (79.0) - - Acquisitions in Hemel Hempstead - (56.6) (56.6) Disposal of Buttermarket, Ipswich 9.7 - - Disposal of The Mall, Camberley - - 85.7 Other disposals - 0.4 0.7 Purchase of plant and equipment (0.3) (0.3) (0.5) Capital expenditure on investment properties (6.8) (11.2) (20.6) Cash flows from investing activities (76.4) (67.7) 8.7 ----------------------------------- ----- ---------- ---------- ---------- Financing activities Dividends paid (net of Scrip) including withholding tax (8.9) (11.4) (21.7) Bank loans drawn down 401.5 43.6 26.9 Bank loans repaid (334.6) (0.2) (45.4) Loan arrangement costs (13.5) (0.6) (0.6) Cash flows from financing activities 44.5 31.4 (40.8) ----------------------------------- ----- ---------- ---------- ---------- Net (decrease)/increase in cash and cash equivalents (18.0) (21.4) (0.8) Cash and cash equivalents at the beginning of the period 49.1 49.9 49.9 ----------------------------------- ----- ---------- ---------- ---------- Cash and cash equivalents at the end of the period 10 31.1 28.5 49.1 ----------------------------------- ----- ---------- ---------- ----------
Notes to the condensed financial statements
For the six months to 30 June 2017
1 General information
The comparative information included for the year ended 30 December 2016 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor has reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The Group's financial performance does not suffer materially from seasonal fluctuations.
2 Accounting policies
Basis of preparation
The annual financial statements of Capital & Regional plc are prepared in accordance with IFRS 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 IAS 34 "Interim Financial Reporting" as adopted by the European Union.
The principal exchange rates used to translate foreign currency denominated amounts are:
Balance sheet: GBP1 = EUR1.137 (30 June 2016: GBP1 = EUR1.210; 31 December 2016: GBP1 = EUR1.168)
Income statement: GBP1 = EUR1.162 (30 June 2016: GBP1 = EUR1.285; 31 December 2016: GBP1 = EUR1.224).
The Half-Year Report was approved by the Board on 9 August 2017.
Going concern
The Group prepares cash flow and covenant compliance forecasts to demonstrate that it has adequate resources available to continue in operation for the foreseeable future, being at least 12 months from the date of this report. In these forecasts the directors specifically consider anticipated future market conditions and the Group's principal risks and uncertainties. Further information on the Group's financing position is contained within the Financial Review with additional details of the Group's cash position and borrowing facilities provided in notes 10 and 11 of the condensed financial statements.
In summary the directors believe that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future and accordingly continue to adopt the going concern basis in preparing the annual report and financial statements.
Change in accounting policies
The condensed consolidated interim financial information has been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates as set out in the notes to the Group's annual financial statements for the year ended 30 December 2016. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
The following accounting standards or interpretations were effective for the period beginning 31 December 2016 and have been applied in preparing these financial statements to the extent they are relevant to the preparation of financial information:
-- IFRS 11 'Accounting for acquisitions of interests in joint operations - amendments to IFRS 11'
-- IAS 1 'Disclosure initiative - amendments to IAS 1'
-- IAS 16 and IAS 38 (amendments) 'Clarification of Acceptable Methods of Depreciation and Amortisation'
-- IAS 27 (amendment) 'Equity Method in Separate Financial Statements'
None of the standards above have impacted the Group's reporting.
A number of new standards and amendments to standards have been issued but are not yet effective for the Group. The most significant of these, and their potential impact on the Group's accounting, are set out below:
-- IFRS 15 Revenue from Contracts with Customers (effective for year ending 30 December 2019) - does not apply to gross rental income, but does apply to service charge income, other fees and trading property disposals. The Group does not expect adoption of IFRS 15 to have a material impact on the measurement of revenue recognition, but additional disclosures will be required with regards to the above sources of income.
-- IFRS 9 Financial Instruments (effective for year ending 30 December 2019) - will impact both the measurement and disclosures of financial instruments. The Group has not yet completed its evaluation of the effect of the adoption but it may impact the measurement and presentation of the Group's financial liabilities.
-- IFRS 16 Leases (effective for year ending 30 December 2020) - will result in the Group recognising on balance sheet assets its leases along with a corresponding liability. The primary lease contracts that this will impact are the lease on the Group's head offices and the leases of the Snozone business for its Castleford and Milton Keynes operations. In addition, IFRS 16 could have an indirect impact on the Group's business if it leads to a change in occupier behaviour. Examples of this would be if its adoption results in tenants or potential tenants typically seeking shorter lease terms and/or more prevalent use of turnover-related, as opposed to fixed rents.
3 Operating segments
3a Operating segment performance
The Group's reportable segments under IFRS 8 are Wholly-owned assets, Other UK Shopping Centres, Snozone and Group/Central. Wholly-owned assets consists of the shopping centres at Blackburn, Hemel Hempstead, Ilford (from acquisition on 8 March 2017), Luton, Maidstone, Walthamstow and Wood Green and, in the prior year periods, Camberley, until its disposal on 11 November 2016. Other UK Shopping Centres consists of the Group's interests in Kingfisher Limited Partnership (Redditch) and, in the prior year, until its reclassification as held for sale on 30 December 2016, Buttermarket Ipswich Limited. Group/Central includes management fee income, Group overheads incurred by Capital & Regional Property Management, Capital & Regional plc and other subsidiaries and the interest expense on the Group's central borrowing facility.
Wholly-owned assets and Other UK Shopping Centres derive their revenue from the rental of investment properties. The Snozone and Group/Central segments derive their revenue from the operation of indoor ski slopes and the management of property funds or schemes respectively. The split of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues from different products and services. Depreciation and charges in respect of share-based payments represent the only significant non-cash expenses.
UK Shopping Centres ------------------------------ Other UK Shopping Centres Wholly-owned (Kingfisher assets Redditch) Snozone Group/Central Total ------------------------------- ----- ----- -------------- -------------- --------- --------------- --------- Six months to 30 June 2017 GBPm GBPm GBPm GBPm GBPm --------------------------------------------- -------------- -------------- --------- --------------- --------- Rental income from external sources 30.9 1.1 - - 32.0 Property and void costs (5.9) (0.4) - - (6.3) -------------- -------------- --------- --------------- --------- Net rental income 25.0 0.7 - - 25.7 Net interest expense (9.0) (0.3) - (0.1) (9.4) Snozone income/Management fees(1) - - 5.5 1.1 6.6 Management expenses - - (4.4) (3.4) (7.8) Investment income - - - 0.2 0.2 Depreciation - - (0.1) - (0.1) Variable overhead (excluding non-cash items) - - - (0.6) (0.6) Tax (charge)/credit - (0.1) - - (0.1) Adjusted Profit 16.0 0.3 1.0 (2.8) 14.5 Revaluation of properties (1.3) (1.5) - - (2.8) Profit on disposal - - - - - (Loss)/gain on financial instruments 0.5 0.1 - - 0.6 Share-based payments (non-cash) - - - (0.4) (0.4) Other items - - - 0.2 0.2 -------------- -------------- --------- --------------- Profit after tax 15.2 (1.1) 1.0 (3.0) 12.1 -------------- -------------- --------- --------------- --------- Total assets 979.2 30.8 3.4 8.7 1,022.1 Total liabilities (516.8) (18.2) (1.7) (4.3) (541.0) -------------- -------------- --------- --------------- --------- Net assets 462.4 12.6 1.7 4.4 481.1 ------------------------------- ----- ----- -------------- -------------- --------- --------------- ---------
(1) Asset management fees of GBP2.0 million charged from the Group's Capital & Regional Property Management entity to Wholly-owned assets have been excluded from the table above.
3a Operating segment performance
UK Shopping Centres ------------------------------ Other Wholly-owned UK Shopping assets Centres(1) Snozone Group/Central Total ------------------------------- ----- ----- -------------- -------------- --------- --------------- --------- Six months to 30 June 2016 GBPm GBPm GBPm GBPm GBPm --------------------------------------------- -------------- -------------- --------- --------------- --------- Rental income from external sources 30.8 1.5 - - 32.3 Property and void costs (5.4) (0.5) - - (5.9) -------------- -------------- --------- --------------- --------- Net rental income 25.4 1.0 - - 26.4 Net interest expense (9.6) (0.6) - (0.3) (10.5) Snozone income/Management fees(2) - - 5.4 1.3 6.7 Management expenses - - (4.3) (3.8) (8.1) Depreciation - - (0.1) (0.1) (0.2) Variable overhead (excluding non-cash items) - - - (0.6) (0.6) Tax (charge)/credit - (0.1) - - (0.1) Adjusted Profit 15.8 0.3 1.0 (3.5) 13.6 Revaluation of properties (10.3) 3.3 - - (7.0) Profit on disposal 0.6 - - 0.1 0.7 (Loss)/gain on financial instruments (1.6) (0.2) - - (1.8) Share-based payments (non-cash) - - - (0.3) (0.3) Other items - (1.5) - 3.5 2.0 -------------- -------------- --------- --------------- Profit after tax 4.5 1.9 1.0 (0.2) 7.2 -------------- -------------- --------- --------------- --------- Total assets 982.6 57.5 2.8 8.1 1,051.0 Total liabilities (501.8) (28.4) (1.1) (20.3) (551.6) -------------- -------------- --------- --------------- --------- Net assets 480.8 29.1 1.7 (12.2) 499.4 ------------------------------- ----- ----- -------------- -------------- --------- --------------- ---------
(1) Buttermarket Ipswich and Kingfisher Redditch.
(2) Asset management fees of GBP1.8 million charged internally from the Group's Capital & Regional Property Management entity to Wholly-owned assets have been excluded from the table above which has also been restated to exclude other internal cost recharges.
3a Operating segment performance UK Shopping Centres ------------------------------ Other Wholly-owned UK Shopping assets Centres(1) Snozone Group/Central Total ------------------------------ -------------- -------------- --------- --------------- --------- Year to 30 December 2016 GBPm GBPm GBPm GBPm GBPm -------------------------------- -------------- -------------- --------- --------------- --------- Rental income from external sources 62.0 3.4 - - 65.4 Property and void costs (11.6) (1.2) - - (12.8) -------------- -------------- --------- --------------- ---------
Net rental income 50.4 2.2 - - 52.6 Net interest expense (19.0) (0.9) - (0.4) (20.3) Snozone income/Management fees(2) - - 10.2 2.4 12.6 Management expenses - - (8.7) (7.8) (16.5) Investment income - - - 0.3 0.3 Depreciation - - (0.1) - (0.1) Variable overhead (excluding non-cash items) - - - (1.8) (1.8) Tax (charge)/credit - (0.1) - 0.1 - Adjusted Profit 31.4 1.2 1.4 (7.2) 26.8 Revaluation of properties (14.2) 1.2 - - (13.0) Deferred tax on revaluation of properties - (1.5) - - (1.5) Loss on disposal(3) (5.9) (0.6) - - (6.5) Income from Euro B Note(4) - - - 3.9 3.9 Loss on financial instruments (2.5) - - - (2.5) Refinancing costs(5) (11.0) - - - (11.0) Share-based payments (non-cash) - - - (0.5) (0.5) Other items - - - (0.1) (0.1) -------------- -------------- --------- --------------- --------- Profit after tax (2.2) 0.3 1.4 (3.9) (4.4) -------------- -------------- --------- --------------- --------- Total assets 885.9 32.1 4.0 42.1 964.1 Total liabilities (460.9) (18.2) (2.1) (5.3) (486.5) -------------- -------------- --------- --------------- --------- Net assets 425.0 13.9(6) 1.9 36.8(6) 477.6 ------------------------------ -------------- -------------- --------- --------------- ---------
(1) Includes Buttermarket Ipswich and Kingfisher Redditch. For further information see Note 9.
(2) Asset management fees of GBP3.6 million charged from the Group's Capital & Regional Property Management entity to Wholly-owned assets have been excluded from the table above.
(3) Includes GBP0.6 million impairment of Ipswich trading property recognised on reclassification as held for sale.
(4) GBP3.9 million of monies were received in 2016 through the holding of a share in the German Euro B-Note junior loan instrument which had previously been fully impaired. The monies were distributed following the sale of properties by the liquidator of the underlying entities.
(5) Refinancing costs consist of those triggered by serving notice on the existing debt facility on five Mall assets on 28 December 2016. They comprised GBP7.6 million of fixed rate loan redemption costs and the write off
of the GBP3.4 million of financing costs that were unamortised at 30 December 2016.
(6) Net assets of the Buttermarket Ipswich joint venture were included within Group following its reclassification as held for sale on 30 December 2016. The results for the year are reflected in the Other UK Shopping Centres column.
3b Reconciliations of reportable revenue, assets and liabilities
Unaudited Unaudited Audited Six months Six months to to Year to 30 June 30 June 30 December 2017 2016 2016 Revenue Note GBPm GBPm GBPm ------------------------------------- ------- ----------- ----------- ------------ Rental income from external sources 3a 32.0 32.3 65.4 Service charge income 7.1 7.2 14.0 Management fees 3a 1.1 1.3 2.4 Snozone income 3a 5.5 5.4 10.2 -------------------------------------- ------ ------------ Revenue for reportable segments 45.7 46.2 92.0 Elimination of inter-segment revenue (0.7) (0.8) (1.4) Rental income earned by associates and joint ventures (1.1) (1.5) (3.4) Revenue per consolidated income statement 43.9 43.9 87.2 -------------------------------------- ------ ----------- ----------- ------------
Revenues during the year and in the preceding periods were solely derived from the UK.
Unaudited Unaudited Audited Six months Six months to to Year to 30 June 30 June 30 December 2017 2016 2016 Balance sheet Note GBPm GBPm GBPm ---------------------------------- ----- ----------- ----------- ------------ Total assets of reportable segments 3a 1,022.1 1,051.0 964.1 Adjustment for associates and joint ventures (18.2) (28.4) (18.2) Group assets 1,003.9 1,022.6 945.9 ---------------------------------- ----- ----------- ----------- ------------ Total liabilities of reportable segments 3a (541.0) (551.6) (486.5) Adjustment for associates and joint ventures 18.2 28.4 18.2 Group liabilities (522.8) (523.2) (468.3) ---------------------------------- ----- ----------- ----------- ------------ Net assets by country UK 480.9 499.2 477.5 Germany 0.2 0.2 0.1 ---------------------------------- ----- ----------- ----------- ------------ Net assets by country 481.1 499.4 477.6 ---------------------------------- ----- ----------- ----------- ------------
4 Revenue
Unaudited Unaudited Audited Six months Six months to to Year to 30 June 30 June 30 December 2017 2016 2016 Statutory Note GBPm GBPm GBPm --------------------------------- ----- ----------- ----------- ------------ Gross rental income 25.1 25.8 51.0 Ancillary income 5.8 5.0 11.0 ----------- ----------- ------------ 30.8 30.8 62.0 Service charge income 7.1 7.2 14.0 External management fees 0.4 0.5 1.0 Snozone income 3a 5.5 5.4 10.2 Revenue per consolidated income statement - continuing operations 3b 43.9 43.9 87.2 --------------------------------- ----- ----------- ----------- ------------
Management fees represent revenue earned by Capital & Regional Plc and the Group's wholly-owned CRPM subsidiary. Fees charged to Wholly-owned assets have been eliminated on consolidation.
5 Other gains and losses
Other gains and losses in the prior year related primarily to losses on the sale of The Mall, Camberley of GBP6.3 million, partially offset by GBP3.9 million recovered through the German Euro B-Note junior loan instrument, a GBP0.4 million profit on the sale of a unit in Maidstone and a GBP0.2 million receipt related to a property disposed of in a prior year. The German Euro B-Note junior loan instrument had previously been fully impaired. The GBP3.9 million was received following the sale of properties by the liquidator of the underlying German portfolio. A further GBP0.3 million was received in the current period.
6 Tax
Unaudited Unaudited Audited Six months Six months to to Year to 30 June 30 June 30 December 2017 2016 2016 Tax charge GBPm GBPm GBPm -------------------------- ------------ ------------ ------------ UK corporation tax - - - Adjustments in respect of prior years - - (0.1) Total current tax charge - - (0.1) --------------------------- ------------ ----------- ------------ Deferred tax - - - -------------------------- ------------ ------------ ------------ Total tax charge - - (0.1) --------------------------- ------------ ----------- ------------ Unaudited Unaudited Audited Six months Six months to to Year to 30 June 30 June 30 December 2017 2016 2016 Tax charge reconciliation GBPm GBPm GBPm --------------------------------- ------------ ----------- ------------ Profit before tax on continuing operations 12.1 7.2 97.6 ---------------------------------- ----------- ----------- ------------ Profit multiplied by the UK corporation tax rate of 19.25% (30 June 2016 and 30 December 2016: 20%) 2.3 1.4 19.8 REIT exempt income and gains (2.5) (0.4) (18.5) Non-allowable expenses and non-taxable items 0.2 (0.4) - Utilisation of tax losses 0.1 0.1 0.3 Unrealised gains on investment properties not taxable at the Group - (0.7) (1.5) Temporary timing differences - - (0.1) Adjustments in respect of prior years (0.1) - - ---------------------------------- ----------- ------------ Total tax charge - continuing operations - - - ---------------------------------- ----------- ----------- ------------
The UK corporation tax main rate was reduced to 19% with effect from 1 April 2017. A further reduction in the rate of corporation tax to 17% from 1 April 2020 was substantively enacted in Finance Act 2016. Consequently the UK corporation tax rate at which deferred tax is booked in the financial statements is 17% (2016: 17%).
The Group has recognised a deferred tax asset of GBP0.1 million (30 December 2016: GBP0.1 million). No deferred tax asset has been recognised in respect of temporary differences arising from investments or investments in associates or in joint ventures in the current or prior years as it is not certain that a deduction will be available when the asset crystallises.
The Group has GBP14.1 million (30 December 2016: GBP13.9 million) of unused revenue tax losses, all of which are in the UK. No deferred tax asset has been recognised in respect of these losses due to the unpredictability of future profit streams and other reasons which may restrict the utilisation of the losses (30 December 2016: GBPnil). The Group has unused capital losses of GBP30.5 million (30 December 2016: GBP30.5 million) that are available for offset against future gains but similarly no deferred tax has been recognised in respect of these losses owing to the unpredictability of future capital gains and other reasons which may restrict the utilisation of the losses. The losses do not have an expiry date.
7 Earnings per share
The European Public Real Estate Association ("EPRA") has issued recommendations for the calculation of earnings per share information as shown in the following table:
Six months Six months Year to 30 to 30 June to 30 June December 2016 2017 (unaudited) 2016 (unaudited) (audited) Adjusted Adjusted Adjusted Note Profit EPRA Profit Profit EPRA Profit Profit EPRA Profit ------------------------- ----- ------- ------ --------- ------- ------ --------- ------- ------ --------- Profit (GBPm) Profit/(loss) for the year 12.1 12.1 12.1 7.2 7.2 7.2 (4.4) (4.4) (4.4) Revaluation loss/(gain) on investment properties (net of tax) 3a - 2.8 2.8 - 8.6 8.6 - 14.5 14.5 (Profit)/loss on disposal of properties (net of tax) 3a - - - - (0.7) (0.7) - 6.5 6.5 Income from German B Note - (0.3) (0.3) - (3.6) (3.6) - (3.9) (3.9) Changes in fair value of financial instruments 3a - (0.6) (0.6) - 1.8 1.8 - 2.5 2.5 Refinancing costs - - - - - - - 11.0 11.0 Share-based payments 3a - - 0.4 - - 0.3 - - 0.5 Other items - - 0.1 - - - - - 0.1 ------- ------ --------- ------- ------ --------- ------- ------ --------- Profit 12.1 14.0 14.5 7.2 13.4 13.6 (4.4) 26.2 26.8 ------- ------ --------- ------- ------ --------- ------- ------ --------- Earnings per share (pence) 1.7p 2.0p 2.1p 1.0p 1.9p 1.9p (0.6)p 3.7p 3.8p Diluted earnings per share (pence) 1.7p 2.0p 2.0p 1.0p 1.9p 1.9p (0.6)p 3.7p 3.8p None of the current or prior year earnings related to discontinued operations. Weighted average Six months Six months Year to 30 number of shares to 30 June to 30 June December (m) 2017 2016 2016 ----------------------- ------------ ------------ ----------- Ordinary shares in issue 703.9 700.8 701.0 Own shares held (0.6) (1.0) (0.6) ------------ ------------ ----------- Basic 703.3 699.8 700.4 Dilutive contingently issuable shares and share options 10.5 5.5 10.0 ------------ ------------ ----------- Diluted 713.8 705.3 710.4 ------------------------ ------------ ------------ -----------
At the end of the period, the Group had 13.6 million (30 December 2016: 11.9 million) additional share options and contingently issuable shares granted under share-based payment schemes that could potentially dilute basic earnings per share in the future but which have not been included in the calculation because they are not dilutive or the performance conditions for vesting were not met based on the position at 30 June 2017.
Headline earnings per share
Six months Six months Year to to to 30 December 30 June 2017 30 June 2016 2016 Basic Diluted Basic Diluted Basic Diluted ---------------------------- ---- ------ -------- ------ -------- ------ -------- Profit (GBPm) Profit for the period 12.1 12.1 7.2 7.2 (4.4) (4.4) Revaluation of investment properties (net of tax) 2.8 2.8 8.6 8.6 14.5 14.5 Profit on disposal of investment properties (net of tax) - - (0.7) (0.7) 6.5 6.5 Profit on German B Note (Note 5) (0.3) (0.3) (3.6) (3.6) (3.9) (3.9) ------ -------- Headline earnings 14.6 14.6 11.5 11.5 12.7 12.7 Weighted average number of shares (m) Ordinary shares in issue 703.9 703.9 700.8 700.8 701.0 701.0 Own shares held (0.6) (0.6) (1.0) (1.0) (0.6) (0.6) Dilutive contingently issuable shares and share options - 10.5 - 5.5 - 10.0 ------ -------- ------ -------- ------ -------- 703.3 713.8 699.8 705.3 700.4 710.4 ------ -------- ------ -------- ------ -------- Headline Earnings
per share (pence) 2.1p 2.0p 1.6p 1.6p 1.8p 1.8p ------ -------- ------ -------- ------ --------
8 Investment properties
8a Wholly-owned properties
Freehold Leasehold Total investment investment property properties properties assets GBPm GBPm GBPm ------------------------ ----------- ----------- --------- Cost or valuation At 30 December 2016 357.9 480.6 838.5 Acquired (The Exchange Centre, Ilford) 79.0 - 79.0 Capital expenditure 4.3 3.5 7.8 Valuation deficit(1) (2.9) 1.8 (1.1) At 30 June 2017 438.3 485.9 924.2 ------------------------- ----------- ----------- ---------
(1) GBP1.3 million per Note 3a includes letting fee amortisation adjustment of GBP0.2 million.
Acquisition of the Exchange Centre, Ilford
On 8 March 2017 the Group completed the acquisition of The Exchange Centre, Ilford from a Meyer Bergman fund for GBP78 million, reflecting a Net Initial Yield of 6.70%. Acquisitions costs were approximately GBP1 million. The acquisition, which comprised the purchase of a holding company that owns the property was funded from the Group's existing cash resources as well as through a new seven year debt facility of GBP39 million, secured on the asset, with DekaBank Deutsche Girozentrale.
8b Property assets summary
30 June 2017 30 December 2016 Group Group 100% share 100% share GBPm GBPm GBPm GBPm ---------------------------------- ---- ------------- ------- ------- ------- Wholly-owned Investment properties at fair value 879.8 879.8 794.1 794.1 Head leases treated as finance leases on investment properties 61.4 61.4 61.3 61.3 Unamortised tenant incentives on investment properties (17.0) (17.0) (16.9) (16.9) ------------- ------- ------- ------- IFRS Property Value 924.2 924.2 838.5 838.5 ------------- ------- ------- ------- Associates Investment properties at fair value 147.0 29.4 154.1 30.8 Unamortised tenant incentives on investment properties (4.3) (0.9) (4.1) (0.8) ------------- ------- ------- ------- IFRS Property Value 142.7 28.5 150.0 30.0 ------------- ------- ------- ------- Total at property valuation 1,026.8 909.2 948.2 824.9 -------- ------ ------ ------ Total IFRS Property Value 1,066.9 952.7 988.5 868.5 -------- ------ ------ ------
8c Valuations
External valuations were carried out on all of the property assets detailed in the table above. The valuations at 30 June 2017 were carried out by independent qualified professional valuers from CBRE Limited and Knight Frank LLP in accordance with RICS standards. These valuers are not connected with the Group and their fees are charged on a fixed basis that is not dependent on the outcome of the valuations.
Real estate valuations are complex and derived from data that is not widely publicly available and involves a degree of judgement. For these reasons, the valuations are classified as Level 3 in the fair value hierarchy as defined by IFRS 13. The valuations are sensitive to changes in rent profile and yields.
9 Investment in associates and joint ventures
9a Share of results Unaudited Unaudited Audited Six months Six months to to Year to 30 June 30 June 30 December 2017 2016 2016 Note GBPm GBPm GBPm -------------------------------- ----- ------ ----------- ------------ Share of results of associates 9b (1.1) - (1.5) Share of results of joint ventures 9c - 1.9 1.8 (1.1) 1.9 0.3 -------------------------------- ----- ------ ----------- ------------ 9b Investment in associates Unaudited Audited Six months to Year to 30 June 30 December 2017 2016 Note GBPm GBPm --------------------------------------- ----- ----------- ------------ At the start of the period 13.9 15.9 Share of results of associates 9d (1.1) (1.5) Dividends and capital distributions received (0.2) (0.5) At the end of the period 9d 12.6 13.9 --------------------------------------- ----- ----------- ------------
The Group's only significant associate at 30 June 2017 and 30 December 2016 was its 20% interest in the Kingfisher Limited Partnership which owns the Kingfisher Shopping Centre in Redditch. The Group exercises significant influence through its representation on the General Partner board and through acting as the property and asset manager.
As detailed in Note 17 the Kingfisher Limited Partnership refinanced its debt on 7 July 2017. The Group's net investment in the Partnership is expected to reduce to approximately GBP7.8 million after allowing for its share of distributions and costs arising from this refinancing.
9c Investment in joint ventures Audited Unaudited Year Six months to to 30 June 30 December 2017 2016 Note GBPm GBPm ------------------------------------------- --------- ------------ ------------- At the start of the period - 11.7 Share of results of joint ventures 9e - 1.8 Reclassification of Buttermarket Centre, Ipswich as held for sale - (13.5) At the end of the period 9e - - ------------------------------------------- --------- ------------ -------------
9d Analysis of investment in associates
Unaudited Unaudited Audited Six Six months months Year Other to 30 to 30 to UK June June 30 December Shopping 2017 2016 2016 Centres Total Total Total Note GBPm GBPm GBPm GBPm --------------------------- ----- --------- ---------- ---------- ------------- Income statement (100%) Revenue - gross rent 5.6 5.6 5.8 11.5 Property and management expenses (1.2) (1.2) (0.9) (2.0) Void costs (0.5) (0.5) (0.4) (1.0) ---------------------------- ----- --------- ---------- ---------- ------------- Net rent 3.9 3.9 4.5 8.5 Net interest payable (1.7) (1.7) (2.0) (3.8) ---------------------------- ----- --------- ---------- ---------- ------------- Contribution 2.2 2.2 2.5 4.7 Revaluation of investment properties (7.4) (7.4) (1.2) (11.8) Fair value of interest rate swaps 0.4 0.4 (0.9) (0.2) Profit before tax (4.8) (4.8) 0.4 (7.3) Tax (0.4) (0.4) (0.5) (0.7) ---------------------------- ----- --------- ---------- ---------- ------------- Profit after tax (100%) (5.2) (5.2) (0.1) (8.0) ---------------------------- ----- --------- ---------- ---------- -------------
Balance sheet (100%) Investment properties 142.7 142.7 159.4 150.0 Other assets 11.1 11.1 10.8 10.4 Current liabilities (83.9) (83.9) (7.1) (6.5) Non-current liabilities (6.1) (6.1) (85.1) (84.0) ---------------------------- ----- --------- ---------- ---------- ------------- Net assets (100%) 63.8 63.8 78.0 69.9 ---------------------------- ----- --------- ---------- ---------- ------------- Income statement (Group share) Revenue - gross rent 1.1 1.1 1.2 2.3 Property and management expenses (0.3) (0.3) (0.2) (0.4) Void costs (0.1) (0.1) (0.1) (0.2) ---------------------------- ----- --------- ---------- ---------- ------------- Net rent 0.7 0.7 0.9 1.7 Net interest payable (0.3) (0.3) (0.4) (0.8) ---------------------------- ----- --------- ---------- ---------- ------------- Contribution 0.4 0.4 0.5 0.9 Revaluation of investment properties (1.5) (1.5) (0.2) (2.3) Fair value of interest rate swaps 0.1 0.1 (0.2) - Profit before tax (1.0) (1.0) 0.1 (1.4) Tax (0.1) (0.1) (0.1) (0.1) ---------------------------- ----- --------- ---------- ---------- ------------- Profit after tax (Group share) 9b (1.1) (1.1) - (1.5) ---------------------------- ----- --------- ---------- ---------- ------------- Balance sheet (Group share) Investment properties 28.5 28.5 31.9 30.0 Other assets 2.2 2.2 2.1 2.1 Current liabilities (16.8) (16.8) (1.4) (1.4) Non-current liabilities (1.3) (1.3) (17.0) (16.8) ---------------------------- ----- --------- ---------- ---------- ------------- Net assets (Group share) 9b 12.6 12.6 15.6 13.9 ---------------------------- ----- --------- ---------- ---------- -------------
9e Analysis of investment in joint ventures
Unaudited Unaudited Audited Six Six months months Year Other to to to UK 30 June 30 June 30 December Shopping 2017 2016(1) 2016 Centres Total Total Total Note GBPm GBPm GBPm GBPm --------------------------- ----- --------- ---------- ---------- ------------- Income statement (100%) Revenue - gross rent - - 0.8 2.2 Property and management expenses - - (0.4) (0.7) Void costs - - (0.3) (0.6) ---------------------------- ----- --------- ---------- ---------- ------------- Net rent - - 0.1 0.9 Net interest payable - - (0.3) (0.3) ---------------------------- ----- --------- ---------- ---------- ------------- Contribution - - (0.2) 0.6 Revaluation of investment properties - - 7.1 7.2 Profit on sale of investment properties - - - (2.9) Fair value of interest rate swaps - - - (1.2) Profit before tax - - 6.9 3.7 Tax - - (3.2) - --------------------------- ----- --------- ---------- ---------- ------------- Profit after tax (100%) - - 3.7 3.7 ---------------------------- ----- --------- ---------- ---------- ------------- Balance sheet (100%) Investment properties - - 43.1 - Other assets - - 3.9 - Current liabilities - - (5.4) - Non-current liabilities - - (14.6) - --------------------------- ----- --------- ---------- ---------- ------------- Net assets (100%) - - 27.0 - --------------------------- ----- --------- ---------- ---------- ------------- Income statement (Group share) Revenue - gross rent - - 0.4 1.1 Property and management expenses - - (0.2) (0.3) Void costs - - (0.1) (0.3) ---------------------------- ----- --------- ---------- ---------- ------------- Net rent - - 0.1 0.5 Net interest payable - - (0.2) (0.1) ---------------------------- ----- --------- ---------- ---------- ------------- Contribution - - (0.1) 0.4 Revaluation of investment properties - - 3.6 3.5 Profit on sale of investment properties - - - (1.5) Fair value of interest rate swaps - - - (0.6) Profit before tax - - 3.5 1.8 Tax - - (1.6) - --------------------------- ----- --------- ---------- ---------- ------------- Profit after tax (Group share) 9c - - 1.9 1.8 ---------------------------- ----- --------- ---------- ---------- ------------- Balance sheet (Group share) Investment properties - - 21.6 - Other assets - - 2.0 - Current liabilities - - (2.7) - Non-current liabilities - - (7.3) - --------------------------- ----- --------- ---------- ---------- ------------- Net assets (Group share) 9c - - 13.6 - ---------------------------- ----- --------- ---------- ---------- -------------
(1) The Group's investment in Buttermarket Ipswich Limited was reclassified as held for sale at 30 December 2016. On reclassification Management assessed the fair value of its share of the investment to be GBP13.9 million with the associated costs to sell the entity expected to be GBP0.4 million and these amounts were shown on the balance sheet at year end.
10 Cash and cash equivalents
Unaudited Audited 30 June 30 December 2017 2016 GBPm GBPm --------------------------------- ---------- ------------ Cash at bank 25.3 45.8 Security disposals held in rent accounts 0.8 0.7 Other restricted balances 5.0 2.6 ---------------------------------- ---------- Total cash and cash equivalents 31.1 49.1 ---------------------------------- ---------- ------------
11 Borrowings
Summary of borrowings
The Group's borrowings are arranged to ensure an appropriate maturity profile and to maintain short term liquidity. There were no defaults or other breaches of financial covenants that were not waived under any of the Group borrowings during the current year or the preceding year.
30 June 30 December 2017 2016 Borrowings at amortised cost GBPm GBPm --------------------------------- -------- ------------ Secured Fixed and swapped bank loans 428.4 260.2 Variable rate bank loans - 101.3 -------- ------------ Total secured borrowings before costs 428.4 361.5 Unamortised issue costs (6.2) (0.7) Total borrowings after costs 422.2 360.8 -------- ------------ Analysis of total borrowings after costs
Current - 334.6 Non-current 422.2 26.2 Total borrowings after costs 422.2 360.8 ---------------------------------- -------- ------------
During the period GBP39.0 million of new debt was drawn in respect of the acquisition of The Exchange, Ilford, and GBP362.5 million in respect of the refinancing of the Mall assets completed on 4 January 2017. See note 17a of the financial statements for the year ended 30 December 2016 for further details.
The fair value of total borrowings before costs as at 30 June 2017 was GBP429.0 million (30 December 2016: GBP363.9 million).
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value. All of the assets listed were classified as Level 2, as defined in note 1 to the financial statements for the year ended 30 December 2016. There were no transfers between Levels in the year.
30 June 30 December 2017 2016 GBPm GBPm ------------------------------------ -------- ------------ Interest rate caps - 0.1 Interest rate swaps (1.5) (2.1) Foreign exchange forward contracts - - -------- ------------ (1.5) (2.0) -------- ------------
12 Notes to the cash flow statement
Unaudited Unaudited Audited Six months Six months to to Year to 30 June 30 June 30 December 2017 2016 2016 GBPm GBPm GBPm --------------------------------------------- ----------- ------------ Profit/(loss) for the period 12.1 7.2 (4.4) Adjusted for: Finance income (0.8) (0.2) (0.4) Finance expense 9.1 11.6 33.0 Income tax credit - - (0.1) Loss on revaluation of wholly-owned properties 1.3 10.3 14.2 Share of loss/(profit) in associates and joint ventures 1.1 (1.9) (0.3) Other gains and losses (0.3) (4.4) 1.8 Depreciation of other fixed assets 0.1 0.2 0.1 (Increase)/Decrease in receivables (5.2) 0.1 (0.1) Increase/(Decrease) in payables 2.0 (1.7) (3.2) Non-cash movement relating to share-based payments 0.4 0.3 0.5 Net cash from operations 19.8 21.5 41.1 -------------------------------------- ------ ----------- ------------
13 Net assets per share
EPRA has issued recommended bases for the calculation of certain net assets per share information as shown in the following table:
Unaudited Audited Unaudited 30 June 30 December 30 June 2017 2016 2016 ----------------------------------------------------------- Net Number assets Net of per Net assets Net assets assets shares share per share per share GBPm million GBP GBP GBP ----- -------------------------------------- -------- -------- ----------- ------------ Basic net assets 481.1 708.5 0.68 0.71 0.68 Own shares held (0.6) Dilutive contingently issuable shares and share options 10.5 Fair value of fixed rate loans (net of tax) (0.6) ------------------------------------- ------ -------- -------- ----------- ------------ EPRA triple net assets 480.5 718.4 0.67 0.69 0.67 Exclude fair value of fixed rate loans (net of tax) 0.6 Exclude fair value of see-through interest rate derivatives 1.9 Exclude deferred tax on unrealised gains/capital allowances (0.1) ------------------------------------- -------- -------- ----------- ------------ EPRA net assets 482.9 718.4 0.67 0.71 0.68 ------------------------------------- ------ -------- -------- ----------- ------------
The number of Ordinary shares issued and fully paid at 30 June 2017 was 708,477,735 (30 December 2016: 702,342,500, 30 June 2016: 700,752,626). There have been no changes to the number of shares from 30 June 2017 to the date of this announcement.
14 Return on equity
Unaudited Unaudited Audited Six months Six months to to Year to 30 June 30 June 30 December 2017 2016 2016 GBPm GBPm GBPm ------------------------------ ----------- ----------- ------------ Total comprehensive income attributable to equity shareholders 12.1 7.2 (4.4) Opening equity shareholders' funds 477.6 503.2 503.4 Return on equity 2.5% 1.4% (0.9)% ------------------------------- ----------- ----------- ------------
15 Related party transactions
There have been no material changes to, or material transactions with, related parties as described in note 31 of the annual audited financial statements for the year ended 30 December 2016, except for:
Distributions received from related parties
During the period, the Group received cash distributions of GBP0.2 million from related parties as disclosed in notes 9b.
Management fee income from related parties
During the period, the Group received management fee income in the normal course of business of GBP0.3 million from related parties.
16 Dividends
Unaudited Unaudited Audited Six months Six months Year to to to 30 June 30 June 30 December 2017 2016 2016 GBPm GBPm GBPm ------------------------------------- ----------- ----------- ------------ Final dividend per share for year ended 30 December 2015 of 1.62p - 11.3 11.3 Interim dividend per share for year ended 30 December 2016 of 1.62p - - 11.4 Final dividend per share for year ended 30 December 2016 of 1.77p 12.4 - - ------------------------------------- ----------- ----------- ------------ Amounts recognised as distributions to equity holders in the period 12.4 11.3 22.7 ------------------------------------- ----------- ----------- ------------ Interim dividend per share for year ended 30 December 2017 of 1.73p(1) 12.3 - - ------------------------------------- ----------- ----------- ------------
(1) In line with the requirements of IAS 10 - 'Events after the Reporting Period', this dividend has not been included as a liability in these financial statements.
The Company issued 6,135,235 new ordinary shares on 16 May 2017 to shareholders who elected to receive their 2016 final dividend in shares under the Company's Scrip dividend scheme. The value of the Scrip shares was calculated in accordance with the scheme rules at 56.48 pence. As a result the Company's share capital increased by GBP61,352 and share premium by GBP3,403,828.
17 Events after the balance sheet date
On 7 July 2017 the Kingfisher Limited Partnership refinanced its existing debt with a new GBP113 million package. The Group has a 20% interest in the Partnership which owns the Kingfisher Redditch shopping centre. Part of the new financing is being used to fund a distribution to the joint venture partners. The Group's share is expected to be around GBP4.6 million. The Group's net investment in the Kingfisher Limited Partnership is expected to be approximately GBP7.8 million after allowing for the distribution and its share of refinancing costs.
Glossary of terms Adjusted Profit is the total Net initial yield (NIY) is of Contribution from wholly-owned the annualised current rent, assets and the Group's joint net of revenue costs, topped-up ventures and associates, the for contractual uplifts, profit from Snozone and property expressed as a percentage management fees less central of the capital valuation, costs (including interest excluding after adding notional purchaser's non-cash charges in respect costs. of share-based payments) after tax. Adjusted Profit excludes Net debt to property value revaluation of properties, profit is debt less cash and cash or loss on disposal of properties equivalents divided by the or investments, gains or losses property value. on financial instruments and exceptional one-off items. Results Net interest is the Group's from Discontinued Operations share, on a see-through basis, are included up until the point of the interest payable less of disposal or reclassification interest receivable of the as held for sale. Group and its associates and joint ventures. C&R is Capital & Regional plc, also referred to as the Group Net rent is the Group's share, or the Company. on a see-through basis, of the rental income, less property C&R Trade index is an internal and management costs (excluding retail tracker using data from performance fees) of the approximately 300 retail units Group and its associates across C&R's shopping centre and joint ventures. portfolio. Nominal equivalent yield CRPM is Capital & Regional Property is a weighted average of Management Limited, a subsidiary the net initial yield and of Capital & Regional plc, which reversionary yield and represents earns management and performance the return a property will fees from the Mall assets and produce based upon the timing certain associates and joint of the income received, assuming ventures of the Group. rent is received annually in arrears on gross values Contracted rent is passing rent including the prospective and the first rent reserved purchaser's costs. under a lease or unconditional agreement for lease but which Passing rent is gross rent is not yet payable by a tenant. currently payable by tenants including car park profit Contribution is net rent less but excluding income from net interest, including unhedged non-trading administrations foreign exchange movements. and any assumed uplift from outstanding rent reviews. Capital return is the change in market value during the year Occupancy cost ratio The for properties held at the balance proportion of a retailer's sheet date, after taking account sales compared with the total of capital expenditure calculated cost of occupation being: on a time weighted basis. rent, business rates, service charge and insurance. Retailer Debt is borrowings, excluding sales are based on estimates unamortised issue costs. by third party consultants which are periodically updated Dividend pay-out is the ratio and indexed using relevant of dividend per share to Adjusted data from the C&R Trade Index. Earnings per share. Occupancy rate is the ERV EPRA earnings per share (EPS) of occupied properties expressed is the profit / (loss) after as a percentage of the total tax excluding gains on asset ERV of the portfolio, excluding disposals and revaluations, development voids. movements in the fair value of financial instruments, intangible Rent to sales ratio is Contracted asset movements and the capital rent excluding car park income, allowance effects of IAS 12 ancillary income and anchor "Income Taxes" where applicable, stores expressed as a percentage less tax arising on these items, of net sales. divided by the weighted average number of shares in issue during REIT - Real Estate Investment the year excluding own shares Trust. held. Return on equity is the total EPRA net assets per share include return, including revaluation the dilutive effect of share-based gains and losses, divided payments but ignore the fair by opening equity plus time value of derivatives, any deferred weighted additions to and tax provisions on unrealised reductions in share capital, gains and capital allowances, excluding share options exercised. any adjustment to the fair value of borrowings net of tax and Reversionary percentage is any surplus on the fair value the percentage by which the of trading properties. ERV exceeds the passing rent. EPRA triple net assets per share Reversionary yield is the include the dilutive effect anticipated yield to which of share-based payments and the net initial yield will adjust all items to market value, rise once the rent reaches including trading properties the ERV. and fixed rate debt. See-through balance sheet Estimated rental value (ERV) is the pro forma proportionately is the Group's external valuers' consolidated balance sheet opinion as to the open market of the Group and its associates rent which, on the date of valuation, and joint ventures. could reasonably be expected
to be obtained on a new letting See-through income statement or rent review of a unit or is the pro forma proportionately property. consolidated income statement of the Group and its associates ERV growth is the total growth and joint ventures. in ERV on properties owned throughout the year including growth due Temporary lettings are those to development. lettings for one year or less. Gearing is the Group's debt as a percentage of net assets. Total Property return incorporates net rental income and Capital Interest rate cover (ICR) is return expressed as a percentage the ratio of either (i) Adjusted of the capital value employed Profit (before interest, tax, (opening market value plus depreciation and amortisation); capital expenditure) calculated or (ii) net rental income to on a time weighted basis. the interest charge. Total return is the Group's IPD is Investment Property Databank total recognised income or Limited, a company that produces expense for the year as set an independent benchmark of out in the consolidated statement property returns. of comprehensive income expressed as a percentage of opening Like-for-like figures, unless equity shareholders' funds. otherwise stated, exclude the impact of property purchases Total shareholder return and sales on year to year comparatives. (TSR) is a performance measure of the Group's share price Loan to value (LTV) is the ratio over time. It is calculated of debt excluding fair value as the share price movement adjustments for debt and derivatives, from the beginning of the to the Market value of properties. year to the end of the year plus dividends paid, divided Market value is an opinion of by share price at the beginning the best price at which the of the year. sale of an interest in a property would complete unconditionally Variable overhead includes for cash consideration on the discretionary bonuses and date of valuation as determined the costs of awards to directors by the Group's external or internal and employees made under valuers. In accordance with the 2008 LTIP and SAYE schemes usual practice, the valuers which are spread over the report valuations net, after performance period. the deduction of the prospective purchaser's costs, including stamp duty, agent and legal fees. Net assets per share (NAV) are shareholders' funds divided by the number of shares held by shareholders at the year end, excluding own shares held. EPRA performance measures 30 June 30 June 30 December 2017 2016 2016 -------- -------- ------------ EPRA earnings (GBPm) 14.0 13.4 26.2 EPRA earnings per share (diluted) 2.0p 1.9p 3.7p EPRA net assets (GBPm) 482.9 502.6 481.5 EPRA net assets per share 67p 71p 68p EPRA triple net assets (GBPm) 480.5 489.3 475.2 EPRA triple net assets per share 67p 69p 67p EPRA Cost ratios 30 June 30 June 30 December 2017 2016 2016 GBPm GBPm GBPm -------------------------------------- -------- -------- ------------ Cost of sales (adjusted for IFRS head lease differential) 16.8 16.4 33.0 Administrative costs 4.8 5.2 10.9 Service charge income (7.1) (7.2) (14.0) Management fees (0.4) (0.5) (1.0) Snozone (indoor ski operation) costs (4.5) (4.4) (8.8) Share of joint venture & associate expenses 0.4 0.5 1.2 Less inclusive lease costs recovered through rent (0.9) (1.0) (1.9) -------- -------- ------------ EPRA costs (including direct vacancy costs) 9.1 9.0 19.4 Direct vacancy costs (1.6) (1.2) (2.9) -------- -------- ------------ EPRA costs (excluding direct vacancy costs) 7.5 7.8 16.5 -------- -------- ------------ Gross rental income 30.9 30.8 62.0 Less ground rent costs (1.5) (1.6) (3.1) Share of joint venture & associate gross rental income less ground rent costs 1.1 1.5 3.4 Less inclusive lease costs recovered through rent (0.9) (1.0) (1.9) -------- -------- ------------ Gross rental income 29.6 29.7 60.4 -------- -------- ------------ EPRA cost ratio (including direct vacancy costs) 30.7% 30.3% 32.2% EPRA cost ratio (excluding vacancy costs) 25.3% 26.4% 27.4% -------------------------------------- -------- -------- ------------ Wholly-owned assets portfolio information At 30 June 2017 -------------------------------------------------- Physical data Number of properties 7 Number of lettable units 769 Lettable space (sq feet - million) 4.2 --------------------------------------- ------- Valuation data Properties at independent valuation (GBPm) 879.8 Adjustments for head leases and tenant incentives (GBPm) 44.4 ------- Properties as shown in the financial statements (GBPm) 924.2 ------- Initial yield (%) 6.0 Equivalent yield (%) 6.3 Reversion (%) 13.0 Loan to value ratio (%) 49 Net debt to value ratio (%) 46 --------------------------------------- ------- Lease length (years) Weighted average lease length to break (years) 6.4 Weighted average lease length to expiry (years) 7.7 --------------------------------------- ------- Passing rent (GBPm) of leases expiring in: Six months to 30 December 2017 8.4 Year to 30 December 2018 3.2 Three years to 30 December 2021 14.3 ERV (GBPm) of leases expiring in: Six months to 30 December 2017 8.3 Year to 30 December 2018 3.7 Three years to 30 December 2021 15.6 Passing rent (GBPm) subject to review in: Six months to 30 December 2017 5.4 Year to 30 December 2018 3.0 Three years to 30 December 2021 9.6 ERV (GBPm) of passing rent subject to review in: Six months to 30 December 2017 5.2
Year to 30 December 2018 3.0 Three years to 30 December 2021 10.6 --------------------------------------- ------- Rental Data Contracted rent at period end (GBPm) 63.8 Passing rent at period end (GBPm) 59.9 ERV at period end (GBPm per annum) 67.6 Occupancy rate (%) 95.5 --------------------------------------- -------
This information is provided by RNS
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