Final Results

RNS Number : 4591G

Capital & Regional plc

04 March 2015

 



4 March 2015

Capital & Regional plc

Full Year Results to 30 December 2014

A BUSINESS TRANSFORMED AND POSITIONED FOR GROWTH

Capital & Regional plc ("Capital & Regional", the "Group" or the "Company") today announces its full year results to 30 December 2014.

Highlights

Strategic

·      Acquired controlling stake in The Mall ahead of increase in property valuations in H2 2014

·      Buy-out of remaining Mall minorities completed in December 2014 and fund restructured to deliver at least £1.5 million of annualised cost savings

·      Successful disposal of €350 million German portfolio completed in February 2015 at a small premium to 30 December 2014 NAV.  Group realised £42.1 million for 50% share

·      REIT conversion completed and effective from 31 December 2014

Financial 

·      11% increase in NAV per share to 60p (2013: 54p) despite doubling of shareholder base

·      Refinancing of £380 million of The Mall debt, cost of debt at year end of 3.45%

·      Proforma see-through net debt^{1, 2} of 45% (2013: 54%)

·      Profit before Tax of £67.2 million (2013: £7.3 million)

Operational 

·      Passing rent of £64.5 million increased on December 2013 (+0.6%) and June 2014 (+2.7%)

·      Strong retail occupancy of 96.1% at 30 December 2014 (2013: 95.0%)

·      Footfall up by 0.9% outperforming the national benchmark by 1.8%

·      Strong progress in delivery of enlarged £65 million multi-year capex plan

o  £4 million Walthamstow refurbishment due to complete April 2015

o  £4.5 million project to deliver new Walthamstow units for TK Maxx and Sports Direct on track for completion in Q4 2015

o  Agreed leases for Wood Green hotel and gym extension utilising substantially vacant office space

·      Successful reconfiguration of Waterside Lincoln facilitating sale in November 2014 with profit on disposal of £4.7 million and 20% IRR

Future priorities

·      Delivery of asset management and development programme across existing portfolio

·      Acquisitions will focus on opportunities which boost income and support a progressive approach to dividend growth such as newly acquired 50:50 JV of Buttermarket Centre, Ipswich

Dividend

·      46% increase in total dividend to 0.95p per share for 2014 (2013: 0.65p)

·      Commencement of REIT level dividend from 2015 Interim of at least 90% of Mall Operating Profit

o  To be paid approximately 50% as interim and 50% as final

o  Based on 2014 Proforma Mall Operating Profit⁵ we anticipate paying a 2015 total dividend of at least 2.9p per share

	2014	2013
Total shareholder return3	24.7%	53.9%
Operating ProfitP4	£19.3m	£13.0m
Profit before tax	£67.2m	£7.3m
NAV per share	60p	54p
EPRA NAV per share	59p	56p
Proforma Group net debt/(net cash)P1	£336.6m	£(11.1)m
Proforma see-through net debt 1, 2	45%	54%

¹ 2014 adjusted for £42.1 million of German joint venture net proceeds received in February 2015 and £8.9 million of payments due in respect of Mall performance fee and income due to former unit holders.  2013 adjusted for £8.4 million Hemel Hempstead net proceeds received in February 2014.   

² See-through net debt divided by property valuation.

³ Change in share price plus dividends paid, weighted average to reflect 351.1 million new shares issued on 14 July 2014.

⁴ As defined in Note 1 to the financial statements.

⁵ As set out in the Financial Review.

Commenting on the results, John Clare, Chairman said:

"Capital & Regional has made significant progress in the delivery of its strategic objectives this year.  The acquisition of a controlling stake in The Mall and the subsequent successful tender for units held by minorities has been transformational for the Group.  Conversion to a REIT at the end of 2014 which was followed by the sale of its German portfolio, completed shortly after the year end, enables the Group to focus all its resources on its stated aim to become the UK's leading community shopping centre REIT.

"The Group is now well positioned to achieve this objective based on its exposure to a high quality portfolio of strong assets, dominant in their immediate catchment, which offer the potential to generate significant income and NAV growth based on a programme of exciting asset management initiatives across the portfolio."

Hugh Scott-Barrett, Chief Executive added:

"The Group's operational focus is now on the delivery of the multi-year Mall asset management programme announced in conjunction with the Capital Raise in June 2014 which we now expect to total £65 million and deliver income returns of at least 10%."

For further information:

Capital & Regional:
Hugh Scott-Barrett, Chief Executive	Tel:  [phone]
Charles Staveley, Group Finance Director
FTI Consulting:	Tel: [phone]
Richard Sunderland Claire Turvey [e-mail]	Email: [e-mail]

Notes to editors:

 

About Capital & Regional plc

Capital & Regional is a UK focused specialist property REIT with a strong track record of delivering value enhancing retail and leisure asset management opportunities across a c. £1 billion portfolio of in-town dominant community shopping centres. 

Capital & Regional owns six Mall shopping centres in Blackburn, Camberley, Luton, Maidstone, Walthamstow and Wood Green. It also has a 20% joint venture interest in the Kingfisher Centre in Redditch and a 50% joint venture in the Buttermarket Centre, Ipswich.  Capital & Regional manages these assets, which comprise over 900 retail units and attract c. 1.7 million shopping visits each week, through its in-house expert property and asset management platform.

For further information, please see www.capreg.com.

Chairman's Statement

Performance Overview

The timing of the Mall acquisition means that both existing shareholders as well as those who participated in the £165 million Firm Placing and Placing and Open Offer have been able to benefit from the upswing in investment markets which has gathered momentum as the year has progressed.  The 62.56% stake was acquired for a consideration of £212 million at a discount of 5% to property values as at 30 June 2014.

UK shopping centre valuations have increased by 9.3%, reflecting a mix of yield compression and growth in valued income.  Much of this improvement has taken place in the second half of the year as significant transactional activity has highlighted the attractions of dominant community shopping centre assets, in particular the strong income characteristics.  It is the resilience of these assets and their ability to respond to changing consumer behaviour and a market increasingly dominated by the internet, retailers' requirements and Click & Collect that underpins this.

It is particularly pleasing therefore to report an increase in Net Asset Value per share of 11% to 60p, an increase which fully takes into account a doubling of the number of shares in issue.  Pre-tax profit was £67.2 million compared to the £7.3 million reported in 2013.

Dividend

For 2014, the Board is proposing a final dividend of 0.60p per share taking the full-year dividend to 0.95p per share representing an increase of 46% compared to last year.

At the time of the capital raise in June 2014, the Board committed to deliver on the basis of the issue price of 47p, a dividend yield of at least 5% for the year ending 2015, and at least 6% following acquisition of the minorities and the restructuring of the Mall Fund.  I am pleased to report that all minorities were taken out by the start of December and the fund has been successfully restructured.  Following conversion to a REIT, the Board's policy is to distribute at least 90% of Mall Operating Profit, allocated approximately equally between interim and final dividend payments.  Based on 2014 Proforma Mall Operating Profit we anticipate this will result in a full year dividend payment for 2015 of at least 2.9p per share. 

Our People

This year has been exceptionally challenging for our management teams. Not only have they had to handle transactions of particular complexity at a corporate level but have had to retain their focus on delivering operational excellence to our retail and leisure operators whilst rolling out an ambitious asset management programme across the portfolio. Completion of the Mall transaction now enables the team to focus all its energies on successful delivery of this plan.  As I have mentioned in the past, the management platform is key to delivery of our growth ambitions and I would like to thank all our staff for their role in contributing to this year's progress.

Responsible Business

The value we attach to our people is reflected in our continuing recognition as an "Investor in People".  A further successful assessment review was completed during the year.  The assessment highlighted high levels of engagement which have again been critical in improving the way in which we support our stakeholders whether they are retailers, communities or employees.

An eighth consecutive ROSPA Gold Award demonstrates our commitment to raising health and occupational safety standards across the board.

A 10.2% reduction in electricity and gas consumption not only reduces the Group's environmental impact but contributes towards improving efficiency which directly benefits our retailers and leisure operators. 

The Board

The Group has further strengthened its corporate governance during the year with the appointment of an additional independent non-executive director, in line with the commitment made at the time of the Capital Raise.  I am delighted to welcome Ian Krieger who joined the Board on 1 December 2014.  Ian brings a wealth of experience gained during a 40 year career first with Arthur Andersen and then Deloitte.  Ian has significant boardroom experience in the real estate and retail sectors and has worked with a wide variety of companies throughout his career.  Ian has joined both the Audit and Remuneration Committees.

Philip Newton has indicated his intention to step down from the Board at the AGM in 2016 by which time he will have served nine years as a non-executive director.  Philip will, until then, continue to be the Senior Independent Director and Chairman of the Remuneration Committee. 

John Clare CBE

Chairman

Chief Executive's Statement

Positive Operational Performance

It is particularly pleasing that in a year which has been dominated by corporate activity and against a backdrop of often challenging conditions for our retailers, the Group has been able to report an improvement in its key operational metrics during 2014.

After a number of years in which shopper numbers have fallen, footfall was up across the seven shopping centres in absolute terms (by 0.9%) and continued to outperform the benchmark (by 1.8%).  This is supported by information from our indicative C&R trade index which showed retailers sales across our portfolio were up 2.2% in 2014 compared to a 0.5% decrease in 2013. 

Administrations were sharply lower in 2014 compared to 2013.  This has helped retail occupancy grow from 95.0% as at 30 December 2013 to 96.1% at the end of 2014 on a like-for-like basis.  This increased occupancy has led to an increase in passing rent, particularly in the second half of the year from £62.8 million as at 30 June 2014 to £64.5 million, an increase of 2.7% as at 30 December 2014.

Increased Asset Management Activity

Completion of the Mall acquisition has enabled the Group to accelerate delivery of a number of value enhancing initiatives across the portfolio which were previously compromised by uncertainty surrounding the future of the Mall Fund.  The much needed certainty provided by the transaction has resulted in heightened levels of engagement between our asset managers, local councils, retailers and leisure operators.  The Group is, as a consequence, in a much stronger position to commit increased investment to its shopping centre portfolio.  Three clear trends as we accelerate delivery of our plans are visible:

·   Fashion retailers are still taking new space in shopping centres where refurbishment and reconfiguration have made it attractive and affordable.  The very successful opening of the Next and H&M stores at Waterside, Lincoln, highlight the potential that can be unlocked as these lettings enabled the Group to dispose of the asset at a yield of 5.88%.

·   There is still strong demand from leisure operators to take space.  Unused office space in Wood Green is now being reconfigured to support the opening of both a hotel and the extension of a gym by the end of 2015. The creation of The Hub at Redditch, which has attracted a gym operator as well as three restaurants alongside the Vue Cinema, has led to a significant increase in footfall across the scheme. At the same time, the refurbishment of Worcester Square led to Costa taking a second unit and attracted new retailers such as Swarovski, which has opened with an exceptionally strong trading performance.

·   Changing demographics are having a significant impact on demand for space in and around London.  Fashion retailers are excited by the plans to extend the Walthamstow scheme whilst residential opportunities in Walthamstow and Wood Green seem to have much greater potential than originally anticipated.

Innovative Technology

The Group has, for many years, been at the forefront of developing digital technology to support footfall and spend across its shopping centres.  During the course of the year, the Group entered into a "Click & Collect" agreement with Collect+, the leading UK store-based parcel service.  This is the first such agreement to include dominant community shopping centres.  Initial trials in Camberley and Redditch have proved to be successful, particularly as the service attracts customers of retailers which are not represented in our Malls into the centres.

Aggressive Recycling of Capital

The sale of the Group's German portfolio (which completed shortly after the year-end), together with the earlier sale of its interests in Hemel and Lincoln, reflect a year of aggressive recycling of capital.  In contrast to previous years, the proceeds were re-invested in growth through the acquisition of a controlling stake in the Mall Fund from Aviva Investors. Importantly, recycling has been well timed to take advantage of an investment cycle which began to accelerate as the year has progressed.  The key highlights were:

·   The sale of Lincoln for £46 million.  The net proceeds to the Group of £15.7 million represented an uplift of £4.8 million or 44% on the 30 June 2014 carrying value. 

·   The German portfolio was sold at a small premium to year end NAV resulting in net cash proceeds of £42.1 million.

·   The acquisition of a 62.56% stake in The Mall in July 2014 at a 5% discount to the June 2014 valuation.

Strengthening of Balance Sheet

Following completion of the acquisition of The Mall and the sale of Lincoln and Germany, the pro forma see-through net loan to value of the Group has fallen from 54% to 45% as at 30 December 2014.  With the exception of £15.5 million in respect of the Redditch investment, all of the Group's proforma see-through net debt of £352.1 million, adjusted for the sale of Germany and payment of The Mall performance fee and income due to former unit holders, is now on balance sheet.

In May 2014 the Mall CMBS was refinanced by entering into a new £350 million five year secured bank loan and an additional £25 million capex facility at a day one cost of 3.37%.  The structure of the facility was subsequently amended, following completion of our 62.56% acquisition to enable the tender for the minorities to be funded from within the Mall.

The Group's Revolving Credit Facility, which was increased to £50 million to accommodate the offer for The Mall, has now been reduced to £20 million following completion of the sale of Germany in February 2015.   

The Group raised £165 million of new equity during the year to fund the acquisition of The Mall.

Outlook

Income growth will be the key driver of property valuations. There is still scope for further yield compression given the continuing strength in investment markets, but we expect growth in valued income to be a more significant factor in the future. This will be driven by the fact that increased consumer spending provides retailers and leisure operators with confidence to take units in schemes where we have shown, and continue to demonstrate, a commitment to invest in the creation of attractive and affordable space right across the portfolio. 

The Group's operational focus is now on the delivery of the Mall asset management programme announced in conjunction with the Capital Raise in June 2014 which we now expect to total £65 million.    A significant part of the investment takes place in the next two years.  We are expecting total income returns of at least 10%.

Key decisions on the two developments at Camberley and Maidstone can be expected this year.  We are now entering a period of intense discussion and negotiation with both local councils and anchor retailers on the scope of the developments and expect to be able to clearly define both projects together with the Group's commitment by the end of the year.

Acquisitions will focus on opportunities which enable the Group to boost income and support a progressive approach to dividend growth.  At this stage in the property cycle we see attractive opportunities to acquire assets comparable in size to Lincoln (as evidenced by the announcement of the acquisition of the Buttermarket Shopping Centre in Ipswich) which offer the opportunity for repositioning through asset management which will facilitate the introduction of new retailers and/or leisure operators.

Hugh Scott-Barrett

Chief Executive

Managing Risk

There are a number of risks and uncertainties which could have a material impact on the Group's future performance and could cause results to differ materially from expectations.

Twice a year the Group undertakes a comprehensive risk and controls review involving interviews with relevant management teams.  The output of this process is an updated risk map and internal control matrix for each component of the business which is then aggregated into a Group risk map and matrix which is reviewed by executive management, the Audit Committee and the Board and forms the basis for the disclosures made below.  This process clearly outlines the principal risks, considers their potential impact on the business, the likelihood of it occurring and the actions being taken to manage, and the individual(s) responsible for managing, those risks to the desired level.

The Group's transactional activity in the year, most significantly the acquisition of 100% of The Mall and its disposal of its German joint venture (completed in February 2015), has resulted in the removal of three principal risks from the table below on the basis that they are no longer relevant or significantly reduced in relevance.  These are:

·     Property management income- as the Group now owns 100% of The Mall the large majority of its property management income is within the Group.

·     Nature of investments and relationships with key business partners - given the Group now owns 100% of The Mall and has disposed of its German joint venture the risk of the Group's relationships with key business partners, while still relevant, is significantly reduced compared to prior periods.

·     Foreign exchange exposure risks- At 30 December 2014 the Group had hedged 94% of the expected disposal proceeds in relation to its German joint venture.  Following completion of the disposal the Group no longer has any material foreign currency exposure.

A new risk of execution of business plan has been added reflecting the risk of failing to deliver on the Group's stated business plan, primarily the multi-year £65 million capital expenditure investment within The Mall.

The two principal categories of risks remain Property Risks and Funding and Treasury Risks.  In addition to the specific mitigating actions listed below we look to reduce Property Risks by the nature of the assets we invest in being those that are typically dominant in their local catchment, with strong footfall and attractive value added opportunities. 

The Group's key focus in managing Funding and Treasury risks is to seek to ensure that there is appropriate headroom on credit facilities and that they are renewed well in advance of expiry.  The key actions undertaken in this regard during the year are detailed in the 'Debt' section of the Financial Review.

Risk	Impact	Mitigation
Property risks
Property investment market risks
·  Weakening economic conditions and poor sentiment in commercial real estate markets could lead to low investor demand and market pricing adjustment	· Small changes in property market yields have a significant effect on the value of the properties owned by the Group · Impact of leverage could magnify the effect on the Group's net assets	·  Monitoring of indicators of market direction and forward planning of investment decisions ·  Review of debt levels and consideration of strategies to reduce if relevant
Impact of the economic environment
·  Tenant insolvency or distress ·  Prolonged downturn in tenant demand and 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	·  Large, diversified tenant base ·  Review of tenant covenants before new leases signed ·  Long term leases and active credit control process ·  Good relationships with, and active management of, tenants ·  Void management though temporary lettings and other mitigation strategies
Threat from the internet
·  The trend towards online shopping may adversely impact consumer footfall in shopping centres	· A change in consumer shopping habits towards online purchasing and delivery may reduce footfall and therefore potentially reduce tenant demand for space and the levels of rents which can be achieved	·  Strong location and dominance of shopping centres (predominantly London and South East England) ·  Strength of the community shopping experience ·  Increasing provision of 'Click & Collect' services by retailers within our shopping centres ·  Monitoring of footfall for evidence of falling visitors to shopping centres ·  Monitoring of retail trends and shopping behaviour ·  Mobile smart phone marketing initiatives
Valuation risks
·  In the absence of relevant transactional evidence, valuations can be inherently subjective leading to a degree of uncertainty	· Stated property valuations may not reflect the price received on sale	·  Use of experienced external valuers ·  Use of two valuers on The Mall portfolio ·  Valuations reviewed by internal valuation experts
·  Concentration and scale risk
·  By having a less diversified portfolio the business is more exposed to specific tenants  or types of tenant ·  Smaller size of the business may reduce purchasing power	· Tenant failures could have a greater impact on rental income revenues · Reduced purchasing power could impact the ability to drive economies of scale and the feasibility of certain investment decisions regarding the operating platform	·  Regular monitoring of retail environment and performance of key tenants ·  Maintaining flexibility in operating platform ·  Further diversification considered through acquisitions or joint ventures
Funding and treasury risks Liquidity and funding
·  Inability to fund the business or to refinance existing debt on economic terms when needed	· Inability to meet financial obligations (interest, loan repayments, expenses, dividends) when due · Limitation on financial and operational flexibility · Cost of financing could be prohibitive	·  Debt refinancing at the Group, The Mall and in Redditch in 2014 improved liquidity and long term security ·  Ensuring that there are significant undrawn facilities ·  Efficient treasury management and regular proactive reporting of current and projected position to the board to ensure debt maturities are dealt with in good time ·  Option of further asset sales if necessary
Covenant compliance risks
·  Breach of any loan covenants causing default on debt and possible accelerated maturity	· Unremedied breaches can trigger demand for immediate repayment of loan	·  Regular monitoring and projections of liquidity, gearing and covenant compliance ·  Review of future cash flows and predicted valuations to ensure sufficient headroom

Risk		Impact		Mitigation
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		·  Regular monitoring of the performance of derivative contracts and corrective action taken where necessary ·  Use of alternative hedges such as caps
Other risks
Execution of business plan
·  Failure to execute business plan in line with internal and external expectations		· Potential loss of income or value resulting in lower cash flow and property valuation ·      Reputational damage negatively impacting investor market perception		·  Management of projects and the individual shopping centres by experienced and skilled professionals ·  Strong relationships with retailers and relevant contractors/suppliers ·  Ongoing monitoring of performance against plan and key milestones by Directors and senior management
Tax risks
·  Exposure to non-compliance with the REIT regime and changes in tax legislation or the interpretation of tax legislation ·  Potential exposure to tax liabilities in respect of transactions undertaken where the tax authorities disagree with the tax treatment adopted		· Tax related liabilities and other losses could arise		·  Monitoring of REIT compliance ·  Expert advice taken on tax positions and other regulations ·  Maintenance of a regular dialogue with the tax authorities
Regulation risks ·  Exposure to changes in existing or forthcoming property related or corporate regulation		· Failure to comply could result in financial penalties, loss of business or credibility		·  Management undertake training to keep aware of regulatory changes ·  Expert advice taken on complex regulatory matters
Loss of key management
·  Dependence of the Group's business 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		·  Key management are paid market salaries and offered competitive incentive packages to ensure their retention ·  New LTIP awards made in 2014 ·  Succession planning for key positions is undertaken ·  Performance evaluation, training and development programmes are in place to maintain and enhance the quality of staff

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.

Operating review

There were two fundamental strategic objectives for the group in 2014, both of which have been successfully achieved. In the UK the Group consolidated its ownership of the Mall Fund through the acquisition of all of the units in the fund which it did not own. In Germany the Group exchanged contracts for the sale of all of its property interests in December 2014, with completion following on 10 February 2015.

As a result the Group is now fully focused on its investments in UK shopping centres through the Mall and in its joint ventures in Redditch and Ipswich, following the investment in March 2015. There was one disposal from the UK shopping centre business which was at Lincoln where, subsequent to the reconfiguration of the scheme, the Group and its joint venture partner took advantage of the strong investment market to sell the asset realising a profit on disposal of £4.7 million to the Group.  The Group's key operating metrics are set out as follows:

UK Shopping Centres

Rental income

UK Shopping Centres	December 2014	June 2014	December 2013
(Like-for-like)	£m	£m	£m
Contracted rent	67.8	67.3	67.6
Passing rent	64.5	62.8	64.1

Passing rent increased by 0.6% on a like-for-like basis during the year, which was driven by a strong letting performance and increased occupancy across the portfolio.

New lettings, renewals and rent reviews

There has been good letting and lease renewal activity across the portfolio.

UK Shopping Centres
Number of new lettings	66
Rent from new lettings (£m)	3.7
Comparison to ERV (%)P1,2	2.0
Renewals settled	34
Revised rent (£m)	1.5
Comparison to ERV P1 (%)	0.1
Rent reviews settled	28
Revised passing rent (£m)	3.4
Uplift to previous rent (%)	0.1
Comparison to ERV (%)	9.1

¹ For lettings and renewals with a term of five years or longer which did not include a turnover rent element.

² Excluding development deals.

There has been an excellent level of leasing activity across the UK Shopping Centre business with in excess of £5 million of annualised rental income achieved through completed new lettings and lease renewals during the year.

In Camberley, following the opening of the new TK Maxx store in 2013, further lettings have been achieved with other fashion operators. Jones the Bootmaker has taken a 10 year lease on a 1,400 sq ft unit. Deichmann and Select have also taken 10 year leases over units of 4,400 and 5,000 sq ft respectively. Costa has upsized to a 1,900 sq ft unit also on a 10 year term.

At Luton significant lettings have been made with Poundland which has taken a 10,500 sq ft store for 10 years, while HMV has taken a lease to 2018 on a 4,500 sq ft shop.

The refurbishment of the scheme in Walthamstow is well progressed and notable deals have been concluded with TK Maxx taking 27,500 sq ft of retail space, which is being created partly from the car park, and Vodafone taking a 1,900 sq ft unit on a 10 year term. Burton/Dorothy Perkins has also relocated within the scheme on a new five year term to a unit of 5,100 sq ft.

There has been a strong level of activity at Blackburn where B&M has opened in a 19,000 sq ft unit on a five year term. Warren James has upsized to a 1,300 sq ft unit and tReds has taken a 2,700 sq ft unit, both for terms of ten years. Ed's Diner also signed a 15 year lease on a 5,400 sq ft unit, while further deals were concluded with Vodafone, The Fragrance Store and M Bitz.

At Wood Green, Vodafone has completed a 10 year lease on a 2,000 sq ft store and Costa has opened a new 1,800 sq ft outlet also on a 10 year term. In Maidstone, Yours Clothing took a five year lease on a 2,100 sq ft unit and renewals were completed with H Samuel and Card Factory.

In Redditch, three of the four newly created restaurant units have opened and this has generated significant letting interest from other operators. Costa has opened a second outlet in Worcester Square following its refurbishment. The remaining refurbishment works to the main fashion pitch in Evesham Walk are scheduled to complete early in the second quarter of 2015, adding momentum to the 600 sq ft and 2,300 sq ft lettings made to a Swarovski franchise and tReds respectively.

Retail occupancy levels

	30 December 2014	30 June 2014	30 December 2013
Retail occupancy (like-for-like) 1	%	%	%
UK Shopping Centres	96.1	94.3	95.0

P¹ Occupancy at December 2014 and December 2013 includes a seasonal increase in temporary lettings.

Administrations

There were 20 units affected by administration during the year (2013: 31) with passing rent of £1.2 million (2013: £2.0 million).

UK Shopping Centres	Year ended 30 December 2014	6 months ended 30 December 2014	6 months ended 30 June 2014
Administrations (units)	20	8	12
Passing rent (£m)	1.2	0.7	0.5

At 30 December 2014, there was one unit where the tenant is continuing to trade whilst in administration with a passing rent of £0.2 million.

In the first two months of 2015 there have been nine units affected by administration with a passing rent of £0.6 million.  Of this over 95% of the rent by value relates to units that are still open and trading.

Footfall

Footfall at Capital & Regional's UK shopping centres outperformed the national footfall index by 1.8% during 2014. There was an increase in shopper numbers over the year of 0.9% compared to a decline of 0.9% in the UK benchmark index (ShopperTrak), demonstrating the relative strength of the portfolio. This trend has continued in the year to date in 2015.

Temporary lettings

At 30 December 2014, on a like-for-like basis there were 116 temporary lettings (2013: 100) for a net rent of £0.4 million (2013: £0.8 million) as compared to an ERV of £5.3 million (2013: £4.6 million).

Income security

Credit risk is managed through the assessment of the covenant strength of all incoming tenants and by monitoring credit ratings of key existing tenants. Where possible we look to pre-empt the consequences of administrations through contingency planning and by actively seeking to reduce exposure to known risks.

The 10 largest retail occupiers by rental income at 30 December 2014 were:

UK Shopping Centres
	%
Alliance Boots Limited	5.1
Debenhams Properties Limited	3.9
Primark Stores Limited	2.9
Superdrug	2.4
BHS	2.4
H&M	2.3
New Look Retailers Limited	2.2
Wilkinsons	2.1
Sports Direct	1.9
Arcadia	1.8

Rent collection rates in the UK Shopping Centres (adjusted for tenants in administration) have continued to be strong throughout the year, with 98.3% of rent being paid within 14 days of the due date for December 2014.

Investment portfolio performance

The property level total returns are set out below:

	Property valuation	Capital return	Total return	Initial yield	Equivalent yield
30 December 2014	£m	%	%	%	%
UK Shopping CentresP1	895.7	8.2	14.9	6.27	6.62

1 Weighted average by year end property valuation

Acquisition of Buttermarket Centre, Ipswich

On 3 March 2015 the Group completed the acquisition of the Buttermarket Centre, Ipswich in a 50:50 joint venture with Drum Property Group.  The centre has been acquired on a freehold basis for £9.2 million equivalent to a Net Initial Yield of 8.46%.

The Buttermarket Centre has 235,000 sq ft of retail space over two core trading levels and an integrated 420 space car park.

We believe there is significant potential for repositioning the centre with an enhanced mix of retail and leisure and have plans for a £26 million development to be largely funded from new debt within the joint venture structure.

Other Operations

Snozone

Snozone, the ski slope operator, delivered a 33% increase in its contribution to the Group of £1.2m (2013: £0.9m).  This has been primarily due to year-on-year revenue growth of 10% driven by a more effective marketing strategy and improvements in customer service, which have helped generate better retention and usage.

     Financial review

Key performance indicators

		2014	2013
Investment returns
Total shareholder return		24.7%	53.9%
Net assets per share		60p	54p
EPRA net assets per share		59p	56p
Return on equity		28.1%	5.1%
Profitability
Operating Profit3		£19.3m	£13.0m
Pre-tax profit for the year		£67.2m	£7.3m
Basic earnings per share - continuing and discontinued operations		15p	3p
Financing
Group net debt/(cash)		£369.8m	£(11.1)m
Proforma Group net debt/(cash)P1		£336.6m	£(19.5)m
Proforma see-through net debt to property valueP1,2		45%	54%
Property under management		£0.9 billion	£1.2 billion

P¹ 2014 adjusted for £42.1 million of German joint venture net proceeds received in February 2015 and £8.9 million of payments due in respect of Mall performance fees and Mall income due to former unit holders.  2013 adjusted for £8.4 million Hemel Hempstead net proceeds received in February 2014.   

² See-through net debt divided by property valuation.

³ As defined in Note 1 to the financial statements.

Investment returns

The transactions and results for the year have significantly increased the size and scale of the Group with Net Asset Value growing from £188.7 million at 30 December 2013 to £419.0 million at 30 December 2014:

	£m				NAV per share
Net Asset Value at 30 December 2013			188.7		54p
New shares issued (net of costs)			160.7
Operating Profit for the year		19.3
Revaluation		42.7
Acquisition of Mall Units (see Note 13)		8.1
Profit on disposal of Waterside Lincoln		4.7
Other income statement movements		0.4
Profit for the year			75.2
Dividends paid		(3.8)
Other Reserve movements		(1.8)
			(5.6)
Net Asset Value at 30 December 2014			419.0		60p

The Operating Profit and revaluation gains during the year significantly outweighed the dilutive impact of the new share issue, driving an increase in NAV per share of 6p or 11%.  The return on equity for the year was 28.1%.  The proforma NAV per share at 30 December 2013, reflecting the impact of the capital raise and acquisition of 62.54% of Mall Units from Aviva and Karoo as if it had taken place at that date, was 49p per share.

The transformation and simplification of the Group is reflected in the table below which presents the Group's balance sheet in two separate ways, with the "statutory" balance sheet following the accounting and statutory rules, and the "see-through" balance sheet showing the Group's proportionate economic exposure to the different components. 

Following the sale of Germany in February 2015 the Group's business is almost entirely based on UK shopping centres.

	See-through			Statutory	See-through			Statutory
	Property	Debt	Other	30 December	Property	Debt	Other	30 December
				2014				2013
	£m	£m	£m	£m	£m	£m	£m	£m
The Mall	790.8	(380.0)	(33.6)	377.2	214.3	(111.1)	(2.8)	100.4
Kingfisher Redditch	29.8	(16.9)	0.7	13.6	26.9	(17.1)	1.3	11.1
Germany1	-	-	41.4	41.4	167.9	(119.6)	(3.5)	44.8
Other net assets	-	(23.4)	10.2	(13.2)	-	-	13.9	13.9
Waterside Lincoln	-	-	-	-	15.7	(6.8)	1.2	10.1
Hemel Hempstead	-	-	-	-	8.4	-	-	8.4
Net assets	820.6	(420.3)	18.7	419.0	433.2	(254.6)	10.1	188.7

¹ Held for sale at 30 December 2014

Profitability

The breakdown of Operating Profit, as defined in Note 1 to the financial statements, is as follows (and as set out further in Note 2a):

	Year to	Year to
	30 December	30 December
	2014	2013
	£m	£m
The Mall	14.6	4.1
Other UK Shopping Centres	0.3	2.1
Snozone	1.2	1.0
Group/Central	(2.5)	(0.8)
Discontinued Operations	5.7	6.6
Operating Profit	19.3	13.0

The increase in Operating Profit reflects the impact of the acquisition of 70.74% of Mall units during the second half of 2014.  Profits within Other UK Shopping Centres reflect an operating loss in Lincoln in the period until its disposal in November 2014 for a profit on disposal of £4.7 million.  The movement in Group/Central profits primarily reflects 2013 benefiting from the write back of a £1.4 million provision.

Proforma Operating Profit

The following table provides illustrative annualised figures to show how the Mall contribution for the year would have looked (on a 100% basis) if the refinancing arrangements that were in place at the end of the year (as detailed in the Debt section) and the cost savings from the change in Operator and Fund Manager of The Mall were both in place and effective for the duration of 2014.

The Mall - Proforma Operating Profit

Year to 30 December 2014	Actual		Adjustments			Proforma
	£m	£m	£m	Note		£m	£m
Rental income		48.5	-				48.5
Car park income		6.6	-				6.6
Ancillary income		2.4	-				2.4
Gross Rental Income		57.5	-				57.5
Service charge and void costs		(3.1)	-				(3.1)
Bad debt		(0.7)	-				(0.7)
Operator/Fund and Asset Manager		(5.6)	1.5	1			(4.1)
Car park costs	(3.2)		-			(3.2)
Head leases	(2.7)		(0.3)	2		(3.0)
Head lease adjustment	3.6		-			3.6
Letting and rent review fees	(1.6)		-			(1.6)
Admin expenses	(1.8)		-			(1.8)
Repairs and maintenance	(0.4)		-			(0.4)
Other costs	(1.7)		-			(1.7)
Property operating expenses		(7.8)					(8.1)
Net Rental Income		40.3	1.2				41.5
Interest	(12.3)		(0.8)	3		(13.1)
Fee amortisation	(1.9)		-			(1.9)
Head lease adjustment	(3.6)		-			(3.6)
Interest expense		(17.8)	(0.8)				(18.6)
Mall contribution		22.5	0.4				22.9

Notes

1.     Adjustment to reflect cost saving of change in Fund Manager and Operator arrangements.

2.     Adjustment to remove one-off impact of £0.3 million credit in respect of Luton.

3.     Interest adjusted to reflect a full year charge on the basis of the year end debt and interest position for The Mall as reflected in the Debt section. 

The table above shows the benefit of the saving of the fund manager and operator costs of £1.5 million per annum as part of the restructuring of the fund.  Management believe further cost savings are likely to be achieved.

Using the proforma contribution calculated above for The Mall, the table below shows, based on 2014 actual results, the proforma Group Operating Profit taking into account the sales of Germany and Lincoln and the saving on the central debt facility following the receipt of the proceeds of these sales.    

Group Proforma Operating Profit

Year to 30 December 2014	Actual £m	Adjustments £m	Note	Proforma £m
The Mall	14.6	8.3	1	22.9
Other UK Shopping Centres	0.3	0.5	2	0.8
Snozone	1.2	-		1.2
Group/Central	(2.5)	(1.1)	3	(3.6)
Discontinued Operations	5.7	(5.7)	4	-
Operating Profit	19.3	2.0		21.3

Notes

1.     Proforma Operating Profit of £22.9 million as detailed in the table above.  The adjustment from the actual 2014 results reflects £7.9 million regarding the share of ownership being adjusted to 100% for the full year and £0.4 million of adjustments as detailed in the table of The Mall - Proforma Operating Profit.

2.     £0.5 million adjusted to add back the Group's share of operating losses in respect of The Waterside Shopping Centre, Lincoln which was sold in November 2014.

3.     £1.4 million adjusted to reflect the impact of management fees in respect of Garigal and Lincoln (including £0.9 million of Lincoln performance fees) following the disposals of the Group's interests in 2014.  Interest on the Group's RCF facility has been reduced by £0.3 million.  This reflects an interest charge equivalent to the non-utilisation fee for 12 months on an undrawn £20 million facility given this is the expected position following the receipt of the German disposal proceeds.

4.     £5.7 million of profits in respect of the Group's German joint venture removed following its disposal which completed in February 2015.

Financing

Debt

The vast majority of the Group's debt is now on-balance sheet with the Group owning 100% of The Mall as of 30 December 2014.  The following summary is provided on a proforma basis adjusted for the £42.1 million of net proceeds received from the sale of Germany in February 2015 and £8.9 million of payments due in respect of the Mall performance fee and income due to former unit holders:

Proforma see-through debt

									Weighted
					Loan to	Net debt	Average		average duration
Group share	DebtP1		CashP2, 4	Net debt	ValueP3	to valueP3	interest rate	Fixed	to loan expiry
30 December 2014	£m		£m	£m	%	%	%	%	Years
The Mall		380.0	(22.0)	358.0	51	48	3.45	61.1%	4.4
Group RCF		-	(21.4)	(21.4)	n/a	n/a	n/a	n/a	1.5
On balance sheet debt		380.0	(43.4)	336.6
Kingfisher Redditch		16.9	(1.4)	15.5	56	51	4.59	100%	4.3
Off balance sheet debt		16.9	(1.4)	15.5
See-through debt		396.9	(44.8)	352.1	51	45

¹ Excluding unamortised issue costs.

² Excluding cash beneficially owned by tenants.

³P  Debt and net debt divided by investment property at valuation.

⁴ Cash adjusted for £42.1 million of German joint venture net proceeds received in February 2015 and £8.9 million of payments due in respect of Mall performance fees and Mall income due to former unit holders.

The Mall

The Mall Fund's debt was re-financed on 30 May 2014 and further amended on 3 November 2014, at which date the new £380 million facility was fully drawn down. This facility comprises a fixed rate tranche of £233.3 million with interest fixed at 1.86% plus applicable margin and a floating rate tranche based on three month LIBOR of £146.7 million. The floating rate tranche has been hedged using interest rate caps with a strike rate no higher than 2.75%. Based on the prevailing market rate at the end of 2014 the overall cost of this facility was 3.45% at that date.  The debt matures in May 2019.

Group Revolving Credit Facility (RCF)

At 30 December 2014 the Group had £23.4 million drawn from a total facility available of £35.2 million.  Following completion of the sale of the Group's German joint venture in February 2015 the outstanding drawings were paid off in full.  Under the terms of the facility, as amended in June 2014, the available limit reduced to £20 million on 11 February 2015.  Interest on the facility is charged at a margin of 3.2% per annum above LIBOR. A non-utilisation fee of 45% of the applicable margin is payable.  The facility is available until 31 July 2016 (but will be reduced to £15 million from 1 January 2016).

Kingfisher Redditch

On 5 February 2014, the Kingfisher Limited Partnership completed a refinancing of its loan facilities and increased its senior facility. The additional funds raised were used to repay the partnership's mezzanine debt. The term of the facility was extended to April 2019. As a result the partnership's cost of debt fell from 6.2% to 4.6%.

Covenants

The Group and its associates and joint ventures were compliant with their banking and debt covenants at 30 December 2014.  Further details are disclosed in the 'covenant information' section at the end of this report.

Foreign currency exposure management

At 30 December 2014 the Group used a forward foreign exchange contract to hedge the expected proceeds due from the sale of its German Joint Venture.  The contract was for €50 million at a fixed exchange rate of 1.2721.  This was closed out on 11 February 2015 following receipt of the proceeds.

Acquisition of Mall Units

The Group acquired the 70.74% of Mall Units that it did not already own, through three transactions in 2014:

·     Acquisition of 62.54% of Mall Units from Aviva and Karoo for £212 million which completed in July 2014

·     £28.2 million redemption by the Mall Unit Trust of the units held by eight of the nine remaining minority unit holders completed in October 2014 resulting in the Group's effective shareholding in The Mall increasing from 91.82% to 99.45%

·     £2.1 million acquisition of the units held by the final minority unit holder in December 2014.

The acquisition of the Aviva and Karoo units resulted in an immediate uplift of £11.5 million to the Group's income statement representing the fair value of the units acquired in excess of the amounts paid (see Note 13 of the financial statements for further details).

Transaction costs of £3.1 million were charged to the income statement (excluding £4.1 million of costs directly relating to the capital raise that were deducted from Share Premium) and a further £0.3 million of restructuring costs were incurred in achieving the approximate £1.5 million of annual cost savings expected to be delivered in 2015.

Disposals

Waterside Shopping Centre, Lincoln

On 12 November 2014, the Group and its JV Partner, Karoo, sold the Waterside Shopping Centre Lincoln to Tesco Pension Fund Trustees for a net consideration of £46.0 million representing a net initial yield of 5.88%.  The net proceeds attributable to the Group were £15.7 million (including performance fees of £0.9 million) and the resulting profit on disposal was £4.7 million.

German joint venture

On 24 December 2014, the Group announced the conditional exchange of contracts for the sale of its 50:50 German joint venture to clients and funds under management of Rockspring Property Investment Managers.  Under the terms of the transaction the Group will retain for approximately five years a small minority stake.  The Group's net assets in respect of Germany at 30 December 2014 were £41.4 million including £2.7 million for the retained minority stake. 

The sale completed on 10 February 2015.  The net proceeds received were €54.6 million, this equated to £42.1 million (after all costs and including the benefit of the Group's Forward Contract) and is expected to result in a profit on disposal after costs of approximately £0.6 million to be recognised in the year ending 30 December 2015, subject to any final adjustments arising out of the completion accounts and before the impact of hedging and foreign exchange reserve reclassifications. 

On completion, and included within the proceeds, the Group entered into a long-term loan payable of €3.5 million (£2.7 million at year end exchange rate of 1.2721) repayable after five years.  After completion a distribution of €1.5 million was made in respect of the retained minority stake (reducing the carrying value of this to approximately €2.2 million), this was used to reduce the outstanding amount of the loan to €2.0 million.

REIT conversion

Immediately after the year end, on 31 December 2014, the Group converted to a Real Estate Investment Trust (REIT). The REIT regime enables the Group to benefit from a zero corporation tax rate on qualifying property income and capital gains.

Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal. In order to achieve and retain group REIT status, several entrance tests had to be met and certain ongoing criteria must be maintained. The main criteria are as follows:

·     at the start of each accounting period, the assets of the property rental business plus cash must be at least 75% of the total value of the Group's assets;

·     at least 75% of the Group's total profits must arise from the property rental business; and

·     at least 90% of the Group's UK property rental profits as calculated under tax rules must be distributed.

Property under management

Following the disposal of the German joint venture the Group's property interest is entirely focused on UK Shopping Centres, the vast majority of which are now wholly owned:

			Valuation	Valuation
			30 December 2014	30 December 2013
100%			£m	£m
UK Shopping Centres - wholly owned			745	-
UK Shopping Centres - Associates and Joint Ventures			151	851
German joint venture			-	337
Property under management			896	1,188

Excludes The Broadwalk Centre, Edgware in which the Group has no investment interest and Germany which was held for sale at 30 December 2014 and disposal completed on 10 February 2015.

Going concern

As stated in note 1 to the consolidated financial statements, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, 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.

Discontinuation of Interim Management Statements

Following recent changes to EU regulation on financial disclosure, the Financial Conduct Authority has removed its requirement for UK companies to publish Interim Management Statements (IMSs). As a result, and reflecting the long term nature of our business, the Board has taken the decision to cease publication of formal IMSs in May and November. The Group remains committed to full and transparent disclosure and will continue with full-year and half-year announcements as well as other market updates when appropriate.

Dividend

For 2014, the Board is proposing a final dividend of 0.60p per share taking the full-year dividend to 0.95p per share representing an increase of 46% compared to last year.  As explained in the prospectus issued at the time of the capital raise in June 2014, the earnings for 2014 which are not distributed will be used to part fund the Group's ongoing £65 million capital expenditure programme in The Mall.

The key dates in relation to the payment of the dividend are:

16 April 2015	Ex-dividend date
17 April 2015	Record date for the payment of final dividend
12 May 2015	Dividend payment date

Following conversion to a REIT, the Board's dividend policy going forward, commencing with the interim dividend in 2015 which is expected to be paid in October 2015, will be to distribute at least 90% of Mall Operating Profit.  This will be paid approximately 50% as an interim dividend and 50% as a final dividend.  Based on the 2014 Mall Proforma Operating Profit set out on page 15 we anticipate paying a full year 2015 dividend payment of at least  2.9p per share.

Charles Staveley

Group Finance Director

Unaudited preliminary consolidated income statement

For the year to 30 December 2014

			2014		20131
	Note		£m		£m
Continuing operations
Revenue	3		46.6		17.6
Cost of sales			(18.2)		(8.0)
Gross profit			28.4		9.6
Administrative costs			(11.0)		(11.5)
Share of profit in associates and joint ventures	7a		10.2		8.3
Acquisition of Mall Units	13		8.1		-
Gain on revaluation of investment properties	6a		36.9		-
Other gains and losses			4.4		1.0
Profit on ordinary activities before financing			77.0		7.4
Finance income			0.4		0.3
Finance costs			(10.2)		(0.4)
Profit before tax			67.2		7.3
Tax credit	4a		2.5		0.2
Profit for the year from continuing operations			69.7		7.5
Discontinued operations
Profit for the year from discontinued operations	14		5.5		1.6
Profit for the year			75.2		9.1
Attributable to:
Equity holders of  the parent			73.7		9.1
Non-controlling interest			1.5		-
			75.2		9.1
Continuing operations
Basic earnings per share	5a		14p		2p
Diluted earnings per share	5a		13p		2p
Continuing and discontinued operations
Basic earnings per share	5a		15p		3p
Diluted earnings per share	5a		15p		3p

Unaudited preliminary consolidated statement of comprehensive income

For the year to 30 December 2014

			2014		2013
			£m		£m
Profit for the year			75.2		9.1
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations			(2.8)		0.8
Gain/(loss) on a hedge of a net investment taken to equity			1.7		(0.7)
Total items that that may be reclassified subsequently to profit or loss:			(1.1)		0.1
Total comprehensive income for the year			74.1		9.2
Attributable to:
Equity holders of the parent			72.6		9.2
Non-controlling interest			1.5		-
			74.1		9.2

There are no items in other comprehensive income that may not be reclassified to profit or loss.

¹ 2013 results have been restated to separate discontinued operations as explained in Note 14.

Unaudited preliminary consolidated balance sheet

At 30 December 2014

			2014		2013
	Note		£m		£m
Non-current assets
Investment properties	6		790.8		-
Plant and equipment			0.7		0.7
Fixed asset investments	14		2.7		-
Receivables			17.9		22.8
Investment in associates	7b		13.6		112.1
Investment in joint ventures	7c		-		32.3
Total non-current assets			825.7		167.9
Current assets
Receivables			16.1		6.8
Cash and cash equivalents	8		42.6		11.1
Assets classified as held for sale	14		39.5		8.5
Total current assets			98.2		26.4
Total assets	2b		923.9		194.3
Current liabilities
Trade and other payables			(41.8)		(4.3)
Current tax liabilities			-		(0.2)
Liabilities directly associated with assets held for sale	14		(0.8)		(0.1)
			(42.6)		(4.6)
Net current assets			55.6		21.8
Non-current liabilities
Bank loans	9		(396.8)		-
Other payables			(0.1)		(0.1)
Obligations under finance leases			(65.4)		-
Deferred tax liabilities			-		(0.9)
Total non-current liabilities			(462.3)		(1.0)
Total liabilities	2b		(504.9)		(5.6)
Net assets			419.0		188.7
Equity
Share capital			7.0		9.9
Share premium			157.2		-
Other reserves			61.5		62.6
Capital redemption reserve			4.4		4.4
Own shares held			(0.6)		(0.7)
Retained earnings			189.5		112.5
Equity shareholders' funds			419.0		188.7
Basic net assets per share	11		£0.60		£0.54
EPRA triple net assets per share	11		£0.59		£0.54
EPRA net assets per share	11		£0.59		£0.56

Unaudited preliminary consolidated statement of changes in equity

For the year to 30 December 2014

						Other reserves
									Net
								Foreign	investment	Capital	Own							Non-
	Share		Share	Merger			Acquisition	currency	hedging	redemption	shares	Retained			controlling						Total
	capital		premium	reserve			reserve	reserve	reserve	reserve	held	earnings			Total		interest				Equity
	£m		£m	£m			£m	£m	£m	£m	£m	£m			£m		£m				£m
															-
Balance at 30 December 2012		9.9	-	60.3			9.5	3.6	(1.4)	4.4	(0.7)	94.0			179.6		-				179.6
Profit for the year		-	-	-			-	-	-	-	-	9.1			9.1		-				9.1
Other comprehensive income for the year		-	-	-			-	0.8	(0.7)	-	-	-			0.1		-				0.1
Total comprehensive loss for the year		-	-	-			-	0.8	(0.7)	-	-	9.1			9.2		-				9.2
Credit to equity for equity-settled share-based payments		-	-	-			-	-	-	-	-	0.8			0.8		-				0.8
Deferred tax on share based payments (note 4b)		-	-	-			-	-	-	-	-	0.2			0.2		-				0.2
Transfer between reserves		-	-	-			(9.5)	-	-	-	-	9.5			-		-				-
Dividends paid		-	-	-			-	-	-	-	-	(0.9)			(0.9)		-				(0.9)
Other movements		-	-	-			-	-	-	-	-	(0.2)			(0.2)		-				(0.2)
Balance at 30 December 2013		9.9	-	60.3			-	4.4	(2.1)	4.4	(0.7)	112.5			188.7		-				188.7
Profit for the year		-	-	-			-	-	-	-	-	73.7			73.7		1.5				75.2
Other comprehensive loss for the year		-	-	-			-	(2.8)	1.7	-	-	-			(1.1)		-				(1.1)
Total comprehensive income for the year		-	-	-			-	(2.8)	1.7	-	-	73.7			72.6		1.5				74.1
Credit to equity for equity-settled share-based payments		-	-	-			-	-	-	-	-	0.5			0.5		-				0.5
Deferred tax on share based payments (note 4b)		-	-	-			-	-	-	-	-	(0.2)			(0.2)		-				(0.2)
New shares issued		3.5	157.2	-			-	-	-	-	-	-			160.7		-				160.7
Dividends paid (note 15)		-	-	-			-	-	-	-	-	(3.8)			(3.8)		-				(3.8)
Repurchase and cancellation of deferred shares		(6.4)	-	-			-	-	-	-	-	6.4			-		-				-
Adjustment arising from change in non-controlling interest		-	-	-			-	-	-	-	-	0.5			0.5		(1.5)				(1.0)
Other movements		-	-	-			-	-	-	-	0.1	(0.1)			-		-				-
							-
Balance at 30 December 2014		7.0	157.2	60.3			-	1.6	(0.4)	4.4	(0.6)	189.5			419.0		-				419.0

The merger reserve of £60.3 million arose on the Group's capital raising in 2009 which was structured so as to allow the Company to claim merger relief under section 612 of the Companies Act 2006 on the issue of Ordinary shares. The merger reserve is available for distribution to shareholders.

The acquisition reserve of £9.5 million related to the purchase of the entire ordinary share capital of Morrison Merlin Limited in 2005, prior to which it had been a joint venture in which the Group had a 50% interest. The reserve was transferred to retained earnings on disposal of Morrison Merlin Limited in October 2013.

The foreign currency reserve of £1.6 million and the net investment hedging reserve deficit of £(0.4) million respectively show foreign exchange translation differences from the Group's investment in its German joint venture and the net investment hedge of that investment. 

Unaudited preliminary consolidated cash flow statement

For the year to 30 December 2014

			2014		2013
	Note		£m		£m
Operating activities
Net cash from operations	10		22.5		(1.4)
Distributions received from associates	7b		1.5		1.7
Distributions received from joint ventures	7c		5.3		0.2
Interest paid			(8.7)		(4.2)
Interest received			0.4		0.2
Income taxes received/(paid)			0.4		(1.2)
Cash flows from operating activities			21.4		(4.7)
Investing activities
Acquisition of  Mall Units (net of cash acquired within The Mall)			(220.1)		-
Disposal of Waterside Lincoln Limited Partnership	7c		14.8		-
Disposal of Leisure World, Hemel Hempstead	14		8.4		-
Disposal of Morrison Merlin Limited	14		-		12.0
Disposal of interest in X-Leisure	14		-		30.6
Other disposals			0.2		1.0
Purchase of plant and equipment			(0.4)		(0.2)
Capital expenditure on investment properties			(2.4)		-
Investment in joint ventures			(0.4)		-
Investment in associates	7b		-		(29.3)
Loans to joint ventures			(0.5)		(1.0)
Loans repaid by joint ventures			0.8		0.2
Cash flows from investing activities			(199.6)		13.3
Financing activities
Dividends paid	15		(3.8)		(0.9)
Bank loans drawn down			68.1		-
Bank loans repaid			(14.7)		(1.0)
Loan arrangement costs			(1.5)		-
Proceeds on issue of new shares			160.7		-
Repurchase of own shares			-		(0.3)
Settlement of forward foreign exchange contract			0.9		(0.6)
Cash flows from financing activities			209.7		(2.8)
Net increase in cash and cash equivalents			31.5		5.8
Cash and cash equivalents at the beginning of the year			11.1		5.3
Cash and cash equivalents at the end of the year	8		42.6		11.1

Notes to the unaudited preliminary financial statements

For the year to 30 December 2014

1 Significant Accounting Policies

General information

Capital & Regional plc is a company domiciled and incorporated in the United Kingdom under the Companies Act 2006. These unaudited preliminary consolidated financial statements, which were approved by the Board of Directors on 3 March 2015, do not constitute the Company's statutory financial statements for the years ended 30 December 2014 or 2013.

Statutory accounts for 2013 have 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. 

Basis of preparation

These unaudited preliminary consolidated annual financial statements of Capital & Regional plc are prepared in accordance with IFRSs as adopted by the European Union.  The accounting policies and methods of computation followed in these financial statements are consistent with those as published in the Group's Annual Report and Financial Statements for the year ended 30 December 2013 which are available on the Company's website at www.capreg.com.

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.  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. 

Further detail is contained within the Financial Review. 

Operating segments

The Group's results for the year from its Germany segment have been classified as Discontinued Operations with the prior year comparatives restated following its reclassification as held for sale at 24 December 2014 and its subsequent disposal.  The results of Discontinued Operations in the prior year also include the Group's share of results from its Leisure segment consisting of its interests in Great Northern Warehouse and Hemel Hempstead.  See Note 14 for further details.

Following the acquisition of a controlling stake in The Mall and the disposal of the Group's interest in Garigal Asset Management GmbH the significant majority of Property Management income is now generated intra Group and as such it has been concluded that maintaining it as a distinct operating segment is no longer appropriate.  The results are therefore now presented together with what was previously 'Group items' as 'Group/Central'.  This reflects the manner in which management account information is presented to the Board.  The results for the year ended 30 December 2013 in Note 2a have been restated on this basis.

As a result of the above changes the Group's remaining reportable segments under IFRS 8 are The Mall, Other UK Shopping Centres consisting of The Waterside Lincoln Limited Partnership until its disposal and Kingfisher Limited Partnership (Redditch), Snozone and Group/Central.  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. 

The Mall and Other UK Shopping Centres derive their revenue from the rental of investment and trading 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.

The Group's interests in the assets, liabilities and profit or loss of its associates and joint ventures are proportionately consolidated and are also shown on a see-through basis as this is how they are reported to the Board of directors. There are no differences between the measurements of the segments' assets, liabilities and profit or loss as they are reported to the Board of directors and their presentation under the Group's accounting policies.

Inter-segment revenue and expenses represent items eliminated on consolidation and are accounted for on an arm's length basis.  Management fees and other revenue items in the property management segment are earned from the asset business segments, where they are included under property and void costs. Where these relate to assets that are proportionately consolidated, the costs do not eliminate against the income and have therefore not been split out separately as inter-segment expenses.

Operating Profit

Operating Profit is the total of Contribution from The Mall and the Group's joint ventures and associates, the profit from Snozone and property management fees less central costs (including interest excluding non-cash charges in respect of share based payments) before tax.  Operating Profit excludes revaluation of properties, profit or loss on disposal of properties or investments, gains or losses on financial instruments and exceptional one-off items.  Results from Discontinued Operations are included up until the point of disposal or reclassification as held for sale.

2a Operating segments

		UK Shopping Centres
			Other UK	Total
			Shopping		Group/	Continuing	Discontinued
		The Mall	Centres	Snozone	Central	Operations	Operations	Total
Year to 30 December 2014	Note	£m	£m	£m	£m	£m	£m	£m
Rental income from external sources	2b	35.6	3.1	-	-	38.7	11.6	50.3
Property and void costs		(10.4)	(1.1)	-	-	(11.5)	(2.1)	(13.6)
Net rental income		25.2	2.0	-	-	27.2	9.5	36.7
Interest income		-	-	-	-	-	-	-
Interest expense		(10.6)	(1.3)	-	-	(11.9)	(3.8)	(15.7)
Contribution		14.6	0.7	-	-	15.3	5.7	21.0
Management fees/Snozone income	2b	-	-	9.9	7.3	17.2	-	17.2
Management expenses		-	-	(8.6)	(8.4)	(17.0)	-	(17.0)
Depreciation		-	-	(0.1)	(0.1)	(0.2)	-	(0.2)
Interest expense on central facility		-	-	-	(1.1)	(1.1)	-	(1.1)
Variable overhead (excluding non-cash items)		-	-	-	(1.1)	(1.1)	-	(1.1)
Lincoln performance fees		-	(0.4)	-	0.9	0.5	-	0.5
Operating Profit/(Loss)		14.6	0.3	1.2	(2.5)	13.6	5.7	19.3
Inter-segment eliminations	2b	2.6	-	-	(2.6)	-	-	-
Acquisition of Mall Units (including Mall performance fees)	13	5.3	-	-	2.8	8.1	-	8.1
Share based payments		-	-	-	(0.7)	(0.7)	-	(0.7)
Revaluation of properties		42.0	1.2	-	-	43.2	(0.5)	42.7
Profit on disposal		0.1	4.7	-	-	4.8	-	4.8
(Loss)/gain on financial instruments		(0.3)	(0.3)	-	-	(0.6)	0.9	0.3
Other items		-	(0.2)	-	(1.0)	(1.2)	(0.6)	(1.8)
Profit/(loss) before tax		64.3	5.7	1.2	(4.0)	67.2	5.5	72.7
Tax credit	4a				2.5	2.5	-	2.5
(Loss)/profit after tax					(1.5)	69.7	5.5	75.2
Total assets	2b	857.6	32.1	2.7	7.8	900.2	42.2	942.4
Total liabilities	2b	(480.4)	(18.5)	(1.7)	(22.0)	(522.6)	(0.8)	(523.4)
Net assets/(liabilities)		377.2	13.6	1.0	(14.2)	377.6	41.4	419.0

		UK Shopping Centres
			Other UK	Total
			Shopping		Group/		Continuing	Discontinued
		The Mall	Centres	Snozone	Central		Operations	Operations	Total
Year to 30 December 20131	Note	£m	£m	£m	£m		£m	£m	£m
Rental income from external sources	2b	13.6	4.5	-	-		18.1	18.5	36.6
Property and void costs		(4.4)	(0.9)	-	-		(5.3)	(3.2)	(8.5)
Net rental income		9.2	3.6	-	-		12.8	15.3	28.1
Interest income		-	-	-	-		-	0.6	0.6
Interest expense		(5.1)	(1.5)	-	-		(6.6)	(9.2)	(15.8)
Contribution		4.1	2.1	-	-		6.2	6.7	12.9
Management fees/Snozone income	2b	-	-	9.0	9.9		18.9	-	18.9
Management expenses		-	-	(7.9)	(9.5)		(17.4)	-	(17.4)
Depreciation		-	-	(0.1)	(0.1)		(0.2)	-	(0.2)
Interest expense on central facility		-	-	-	(0.2)		(0.2)	-	(0.2)
Variable overhead (excluding non-cash items)		-	-	-	(1.0)		(1.0)	-	(1.0)
Operating Profit/(Loss)		4.1	2.1	1.0	(0.9)		6.3	6.7	13.0
Inter-segment eliminations	2b	-	-	-	0.1		0.1	(0.1)	-
Share based payments		-	-	-	(0.8)		(0.8)	-	(0.8)
Revaluation of properties		(0.5)	1.2	-	-		0.7	(2.5)	(1.8)
(Loss)/profit on disposal		(4.2)	-	-	1.01		(3.2)	(2.4)	(5.6)
Impairment of Euro B-Note		-	-	-	-		-	(2.4)	(2.4)
Gain on financial instruments		2.9	0.6	-	-		3.5	3.0	6.5
Other items		2.0	-	(0.1)	(1.2)		0.7	(0.8)	(0.1)
Profit/(loss) before tax		4.3	3.9	0.9	(1.8)		7.3	1.5	8.8
Tax credit	4a				0.2		0.2	0.1	0.3
(Loss)/profit after tax					(1.6)		7.5	1.6	9.1
Total assets	2b	243.7	54.6	2.5	16.8		317.6	198.0	515.6
Total liabilities	2b	(143.3)	(33.3)	(1.1)	(4.6)		(182.3)	(144.6)	(326.9)
Net assets/(liabilities)		100.4	21.3	1.4	12.2		135.3	53.4	188.7

¹ 2013 results have been restated to separate discontinued operations as explained in note 14. 

2b Reconciliations of reportable revenue, assets and liabilities

		Year to	Year to
		30 December	30 December
		2014	20131
Revenue	Note	£m	£m
Rental income from external sources	2a	38.7	18.1
Service charge income		5.4	0.1
Management fees	2a	7.3	9.9
Performance fees		6.8	-
Snozone income	2a	9.9	9.0
Revenue for reportable segments - continuing operations		68.1	37.1
Elimination of inter-segment revenue	2a	(2.6)	-
Elimination of inter-segment performance fees		(5.9)	-
Rental income earned by associates and joint ventures		(12.2)	(18.1)
Management fees earned by associates and joint ventures		(0.8)	(1.4)
Revenue per consolidated income statement - continuing operations	3	46.6	17.6
Revenue for reportable segments by country - continuing operations
UK		67.3	35.7
Germany		0.8	1.4
Revenue for reportable segments - continuing operations		68.1	37.1

Revenue is attributed to countries on the basis of the location of the underlying properties. Revenue from the Group's major customer was management fee income from The Mall LP however following the Group taking control of The Mall from 14 July 2014 this has been eliminated on consolidation. The total included in the property management segment up to that date was £2.8 million (2013: £7.3 million) of the Group's total revenue of £46.6 million (2013: £17.6 million).

		2014	2013
Assets	Note	£m	£m
Total assets of reportable segments	2a	942.4	515.6
Adjustment for associates and joint ventures		(18.5)	(321.3)
Group assets		923.9	194.3
Liabilities
Total liabilities of reportable segments	2a	(523.4)	(326.9)
Adjustment for associates and joint ventures		18.5	321.3
Group liabilities		(504.9)	(5.6)
Net assets by country
UK		377.6	143.3
Germany (held for sale at 30 December 2014)		41.4	45.4
Group net assets		419.0	188.7

3 Revenue

		Year to	Year to
		30 December	30 December
		2014	2013
Statutory	Note	£m	£m
Gross rental income		22.2	-
Ancillary income		4.3	-
		26.5	-
Service charge income		5.4	-
Management fees		4.8	8.6
Snozone income	2a	9.9	9.0
Revenue per consolidated income statement - continuing operations	2b	46.6	17.6

Management fees represent revenue earned by the Group's wholly-owned CRPM subsidiary.  Fees charged to The Mall after 14 July 2014, being the date the Group took control of The Mall Fund, have been eliminated on consolidation.

¹ 2013 results have been restated to separate discontinued operations as explained in Note 14.

4 Tax

4a Tax credit

		Year to	Year to
		30 December	30 December
		2014	2013
	Note	£m	£m
Current tax
UK corporation tax - continuing operations		-	-
UK corporation tax - discontinued operations		-	-
Adjustments in respect of prior years - continuing operations		(1.0)	(0.9)
Foreign tax - continuing operations		-	0.4
Total current tax credit		(1.0)	(0.5)
Deferred tax
Origination and reversal of temporary timing differences		(1.3)	0.3
Deferred tax credit - discontinued  operations		-	(0.1)
Adjustments in respect of prior years - continuing operations		(0.2)	-
Total deferred tax (credit)/charge		(1.5)	0.2
Total tax credit		(2.5)	(0.3)
Total tax credit - continuing operations	4c	(2.5)	(0.2)
Total tax credit - discontinued operations		-	(0.1)

£nil (2013: £nil) of the tax charge relates to items included in other comprehensive income.

4b Tax charge to equity

		Year to	Year to
		30 December	30 December
		2014	2013
		£m	£m
Current tax
Excess tax deductions related to share-based payments
on exercised options		-	-
Deferred tax
Arising on transactions with equity participants:
Change in estimated excess tax deductions related
to share-based payments		0.2	(0.2)
Total income tax recognised directly in equity		0.2	(0.2)

4c Tax charge reconciliation

		Year to	Year to
		30 December	30 December
		2014	2013
	Note	£m	£m
Profit before tax on continuing operations		67.2	7.3
Profit multiplied by the UK corporation tax rate of 21.5% (2013: 23.25%)		14.4	1.7
Non-allowable expenses and non-taxable items		(4.4)	(0.7)
Utilisation of tax losses		(0.7)	-
Tax on realised gains		0.1	0.5
Unrealised losses on investment properties not taxable		(9.1)	(0.1)
Temporary timing and controlled foreign companies income		(1.6)	(0.7)
Adjustments in respect of prior years		(1.2)	(0.9)
Total tax credit	4a	(2.5)	(0.2)

5 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 tables: 

5a Earnings per share calculation

Year to 30 December 2014		Year to 30 December 2014			Year to 30 December 20131
	Note	Basic	Diluted	EPRA diluted	Basic	Diluted	EPRA diluted
Profit (£m)
Profit for the year from continuing operations		69.7	69.7	69.7	7.5	7.5	7.5
Revaluation of investment properties	5b	-	-	(43.2)	-	-	(0.7)
Profit on disposal of investment properties (net of tax)	5b	-	-	(4.8)	-	-	2.5
Negative goodwill	13	-	-	(11.5)	-	-	-
Acquisition costs	13	-		3.1	-	-	-
Movement in fair value of financial instruments (net of tax)	5b	-	-	1.0	-	-	(3.0)
Deferred tax credit on capital allowances		-	-	(1.5)	-	-	(0.4)
Profit from continuing operations		69.7	69.7	12.8	7.5	7.5	5.9
Discontinued operations		5.5	5.5	5.1	1.6	1.6	2.6
Profit		75.2	75.2	17.9	9.1	9.1	8.5
Weighted average number of shares (m)
Ordinary shares in issue		514.2	514.2	514.2	349.8	349.8	349.8
Own shares held		(1.1)	(1.1)	(1.1)	(1.3)	(1.3)	(1.3)
Dilutive contingently issuable shares and share options		-	4.6	4.6	-	2.8	2.8
		513.1	517.7	517.7	348.5	351.3	351.3
Earnings per share (pence)		15p	15p	3p	3p	3p	2p
Earnings per share (pence) - continuing operations		14p	13p	2p	2p	2p	2p

At the end of the year, the Group had 8,823,758 (2013: 5,358,855) share options and contingently issuable shares granted under share-based payment schemes that could potentially have diluted basic earnings per share in the future but which have not been included in the calculation because they are not dilutive or the conditions for vesting have not been met.

5b Reconciliation of earnings figures included in earnings per share calculations

		Year to 30 December 2014			Year to 30 December 20131
			Profit/(loss)	Movement		Profit/(loss)	Movement
			on disposal of	in fair value		on disposal of	in fair value
		Revaluation	investment	of financial	Revaluation	investment	of financial
		movements	properties	instruments	movements	properties	instruments
	Note	£m	£m	£m	£m	£m	£m
Associates	7d	7.4	0.1	0.3	(0.2)	(4.2)	3.4
Joint ventures		(1.1)	4.7	0.1	0.9	-	0.1
Wholly-owned		36.9	-	(1.0)	-	1.0	-
Tax effect		-	-	(0.4)	-	0.7	(0.5)
Total	5a	43.2	4.8	(1.0)	0.7	(2.5)	3.0

¹ 2013 results have been restated to separate discontinued operations as explained in Note 14. 

6 Investment properties

6a Wholly-owned properties

		Freehold	Leasehold	Sub-total	Freehold	Total
		investment	investment	investment	trading	property
		properties	properties	properties	properties	assets
		£m	£m	£m	£m	£m
Cost or valuation
At 30 December 2012		-	8.4	8.4	70.0	78.4
Capital expenditure		-	-	-	0.5	0.5
Disposal of freehold trading properties		-	-	-	(70.2)	(70.2)
Impairment of trading properties		-	-	-	(0.3)	(0.3)
Transfer to held for sale (note 14)		-	(8.4)	(8.4)	-	(8.4)
At 30 December 2013		-	-	-	-	-
Acquired in business combination (The Mall)		240.3	511.8	752.1	-	752.1
Capital expenditure		0.3	1.5	1.8	-	1.8
Valuation surplus		16.1	20.8	36.9	-	36.9
At 30 December 2014		256.7	534.1	790.8	-	790.8

6b Property assets summary

		30 December	30 December
		2014	2013
		Valuation	Valuation
	Note	£m	£m
Wholly-owned
Investment properties at fair value		744.7	-
Head leases treated as finance leases on investment properties		65.4	-
Unamortised tenant incentives on investment properties		(19.3)	-
		790.8	-
Joint ventures (100%)
Investment properties at fair value		-	368.5
Unamortised tenant incentives on investment properties		-	(1.3)
	7e	-	367.2
Associates (100%)
Investment properties at fair value		151.0	819.7
Head leases treated as finance leases on investment properties		-	65.5
Unamortised tenant incentives on investment properties		(2.1)	(18.4)
	7d	148.9	866.8

The Group's wholly-owned properties at 30 December 2014 are the six shopping centres within The Mall (classified as Associates at 30 December 2013).  Included in the assets shown in Joint Ventures at 30 December 2013 were those within the Group's German Joint Venture which was reclassified to held for sale on 24 December 2014 and hence excluded from this note.

6c Valuations

External valuations at 30 December 2014 were carried out on all of the gross property assets detailed in the table above.  The Group's share of the total investment properties at fair value was £774.9 million of £895.7 million (2013: £411.6 million of £1,188.2 million). 

The valuations were carried out by independent qualified professional valuers from CB Richard Ellis Limited and Cushman & Wakefield 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.

The valuations performed by the independent valuers are reviewed internally by senior management, this includes discussions of the assumptions used by the external valuers, as well as a review of the resulting valuations.  The valuers' opinion of fair value was primarily derived using comparable recent market transactions on arm's length terms and using appropriate valuation techniques.

7 Investment in associates and joint ventures

7a Share of results

		Year to	Year to
		30 December	30 December
		2014	20131
	Note	£m	£m
Share of results of associates	7d	11.7	6.0
Share of results of joint ventures - continuing operations	7e	(1.5)	2.3
		10.2	8.3

¹ 2013 results have been restated to separate discontinued operations as explained in Note 14.

7b Investment in associates

		30 December	30 December
		2014	2013
	Note	£m	£m
At the start of the year		112.1	80.7
Investment in associates		-	29.3
Share of results of associates	7d	11.7	6.0
Share of results of associates within discontinued operations		-	(2.4)
Dividends and capital distributions received		(1.5)	(1.7)
Reclassification of The Mall Fund as a subsidiary		(108.4)	-
Disposal of interest in Garigal Asset Management GmbH		(0.3)	-
Foreign exchange differences		-	0.2
At the end of the year	7d	13.6	112.1

The Group's associates at 30 December 2014 were:

	Group interest
	At the start of the year	Average during the year/until disposal	At the end of the year
	%	%	%
Kingfisher Limited Partnership	20.00	20.00	20.00
Garigal Asset Management GmbH ("Garigal")	30.06	30.06	-
Euro B-Note Holding Limited	49.90	49.90	49.90

The Mall Limited Partnership was accounted for as an Associate until 14 July 2014 being the date the Group took control and began consolidating its results, see note 13.  The Group's investment in Garigal was disposed of in October 2014 for nil consideration as part of the renegotiation of the property and asset management arrangements for the Group's German joint venture in advance of its sale.

Kingfisher Limited Partnership

On 1 May 2012, the Group completed its acquisition of a 20% interest in The Kingfisher Shopping Centre in Redditch for a total consideration of £10.6 million in partnership with funds managed by Oaktree Capital Management LP. The Kingfisher Centre was purchased for £130.0 million at an 8% net initial yield.  The Group exercises significant influence through its representation on the General Partner board and through acting as the property and asset manager.

Euro B-Note Holding Limited

The Group fully impaired its investment in Euro B-Note Holding during 2013.

7c Investment in joint ventures

		30 December	30 December
		2014	2013
	Note	£m	£m
At the start of the year		32.3	25.7
Share of results of joint ventures within continued operations	7e	(1.5)	2.3
Share of results of joint ventures within discontinued operations	7e	4.6	4.1
Dividends and capital distributions received		(5.3)	(0.2)
Reclassified as held for sale (Germany)		(26.8)	-
Disposal of Waterside Lincoln Limited Partnership		(1.3)	-
Foreign exchange differences		(2.0)	0.4
At the end of the year	7e	-	32.3

The Group had no significant joint ventures at 30 December 2014.

German joint venture

The Group's investment in its German joint venture was reclassified as held for sale on 24 December 2014 on signing of a conditional exchange for its disposal, the Group's share of results for the year have been classified as Discontinued Operations.  See note 14 for further details. 

Waterside Lincoln Limited partnership

On 12 November 2014, the Group and its JV Partner, Karoo, sold the Waterside Shopping Centre Lincoln to Tesco Pension Fund Trustees for a net consideration of £46.0 million representing a net initial yield of 5.88%.  The net proceeds attributable to the Group were £14.8 million resulting in a profit on disposal of £4.7 million. In addition the Group earned performance fees of £0.9m.

7d Analysis of investment in associates

					Year to 30 December	Year to 30 December
			Other UK		2014	2013
		The Mall1	Shopping Centres	Other	Total	Total
		£m	£m	£m	£m	£m
Income statement (100%)
Revenue - gross rent		31.0	12.0	-	43.0	77.9
Property and management expenses		(8.0)	(2.2)	-	(10.2)	(19.2)
Void costs		(1.6)	(0.9)	-	(2.5)	(4.4)
Net rent		21.4	8.9	-	30.3	54.3
Net interest payable		(10.1)	(5.1)	-	(15.2)	(30.4)
Contribution		11.3	3.8	-	15.1	23.9
Revenue - management fees		-	-	2.6	2.6	4.6
Management expenses		-	-	(1.3)	(1.3)	(2.6)
Revaluation of investment properties		17.6	11.3	-	28.9	(0.8)
Loss on sale of investment properties		0.3	-	-	0.3	(19.9)
Fair value of interest rate swaps		2.6	(2.0)	-	0.6	16.4
Impairment of Euro B-Note		-	-	-	-	(4.7)
Profit before tax		31.8	13.1	1.3	46.2	16.9
Tax		-	(0.7)	(0.4)	(1.1)	(0.6)
Profit after tax		31.8	12.4	0.9	45.1	16.3
Balance sheet (100%)
Investment properties		-	148.9	-	148.9	866.8
Other assets		-	11.6	-	11.6	116.6
Current liabilities		-	(6.4)	-	(6.4)	(39.7)
Non-current liabilities		-	(86.0)	-	(86.0)	(542.8)
Net assets (100%)		-	68.1	-	68.1	400.9
Income statement (Group share)
Revenue - gross rent		9.1	2.4	-	11.5	16.2
Property and management expenses		(2.3)	(0.4)	-	(2.7)	(4.1)
Void costs		(0.5)	(0.2)	-	(0.7)	(0.9)
Net rent		6.3	1.8	-	8.1	11.2
Net interest payable		(3.0)	(1.0)	-	(4.0)	(6.3)
Contribution		3.3	0.8	-	4.1	4.9
Revenue - management fees		-	-	0.8	0.8	1.4
Management expenses		-	-	(0.8)	(0.8)	(1.1)
Revaluation of investment properties		5.1	2.3	-	7.4	(0.2)
Loss on sale of investment properties		0.1	-	-	0.1	(4.2)
Fair value of interest rate swaps		0.7	(0.4)	-	0.3	3.4
Impairment of Euro B-Note		-	-	-	-	(2.4)
Gain recognised on investment in Mall		-	-	-	-	2.0
Profit before tax		9.2	2.7	-	11.9	3.8
Tax		-	(0.1)	(0.1)	(0.2)	(0.2)
Profit/(loss) after tax		9.2	2.6	(0.1)	11.7	3.62
Balance sheet (Group share)
Investment properties		-	29.8	-	29.8	241.2
Other assets		-	2.3	-	2.3	32.9
Current liabilities		-	(1.3)	-	(1.3)	(11.0)
Non-current liabilities		-	(17.2)	-	(17.2)	(151.0)
Net assets (Group share)		-	13.6	-	13.6	112.1

¹ The results of The Mall represent those from 1 January to 14 July 2014 being the period in which the Group accounted for it as an Associate.

² Profit after tax of £3.6 million includes £6.0 million in respect of continuing operations and a loss of £2.4 million within discontinued operations.

 7e Analysis of investment in joint ventures

				Discontinued Operations	Year to	Year to
			Other UK		30 December	30 December
			Shopping	German	2014	2013
			Centres1	portfolio	Total	Total
			£m	£m	£m	£m
Income statement (100%)
Revenue - gross rent			1.4	23.2	24.6	30.5
Property and management expenses			(1.5)	(3.9)	(5.4)	(4.2)
Void costs			(0.3)	-	(0.3)	(0.8)
Net rent			(0.4)	19.3	18.9	25.5
Net interest payable			(0.6)	(8.6)	(9.2)	(10.9)
Contribution			(1.0)	10.7	9.7	14.6
Revaluation of investment properties			(2.1)	(1.0)	(3.1)	(2.9)
Profit/(loss) on sale of investment properties			-	0.1	0.1	(0.5)
Fair value of interest rate swaps			0.1	0.7	0.8	3.1
(Loss)/profit before tax			(3.0)	10.5	7.5	14.3
Tax			-	(1.3)	(1.3)	(1.6)
(Loss)/profit after tax			(3.0)	9.2	6.2	12.7
Balance sheet (100%)
Investment properties			-	-	-	327.3
Investment properties held for sale			-	-	-	39.9
Other assets			-	-	-	16.3
Current liabilities			-	-	-	(34.1)
Non-current liabilities			-	-	-	(284.8)
Net assets (100%)			-	-	-	64.6
Income statement (Group share)
Revenue - gross rent			0.7	11.6	12.3	15.2
Property and management expenses			(0.7)	(2.0)	(2.7)	(2.0)
Void costs			(0.2)	-	(0.2)	(0.4)
Net rent			(0.2)	9.6	9.4	12.8
Net interest payable			(0.3)	(4.3)	(4.6)	(5.4)
Contribution			(0.5)	5.3	4.8	7.4
Revaluation of investment properties			(1.1)	(0.5)	(1.6)	(1.4)
Profit(loss) on sale of investment properties			-	0.1	0.1	(0.3)
Fair value of interest rate swaps			0.1	0.4	0.5	1.5
(Loss)/profit before tax			(1.5)	5.3	3.8	7.2
Tax			-	(0.7)	(0.7)	(0.8)
(Loss)/profit after tax			(1.5)	4.6	3.1	6.4
Balance sheet (Group share)
Investment properties			-	-	-	163.7
Investment properties held for sale			-	-	-	19.9
Other assets			-	-	-	8.2
Current liabilities			-	-	-	(17.1)
Non-current liabilities			-	-	-	(142.4)
Net assets (Group share)			-	-	-	32.3

¹ The results of the Waterside Shopping Centre Lincoln (Other UK Shopping Centres) are included up to 12 November 2014, the date of its disposal.  The results of the German portfolio are included up to 24 December 2014, the date of its reclassification as held for sale.

8 Cash and cash equivalents

		30 December	30 December
		2014	2013
		£m	£m
Cash at bank and in hand		33.6	10.8
Security deposits held in rent accounts		0.6	-
Other restricted balances		8.4	0.3
		42.6	11.1

Other restricted balances include amounts subject to a charge against various borrowings and may therefore not be available for general use by the Group.

The analysis of cash and cash equivalents by currency is as follows:

		30 December	30 December
		2014	2013
		£m	£m
Sterling		42.6	10.4
Euro		-	0.7
		42.6	11.1

9 Bank loans

Summary of borrowings

The Group borrows on a secured basis and 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 December	30 December
		2014	2013
Borrowings at amortised cost		£m	£m
Secured
Fixed and swapped bank loans		233.3	-
Variable rate bank loans		170.1	-
Total borrowings before costs		403.4	-
Unamortised issue costs		(6.6)	-
Total borrowings after costs		396.8	-
Analysis of total borrowings after costs
Current		-	-
Non-current		396.8	-
Total borrowings after costs		396.8	-

Mall Fund debt facility

On 30 May 2014, the Mall Fund completed the refinancing of its CMBS by entering into a new five-year secured facility comprising a £350 million term loan and additional £25 million capital expenditure facility. The CMBS, along with an associated £10.7 million interest rate swap liability triggered on repayment, was settled from a combination of the new £350 million term loan and existing cash resources.

A further amendment was agreed on 3 November 2014 to increase the facility by £5 million and to convert the undrawn £25 million capex facility to a term loan.

The £380 million loan, which was fully drawn down at 30 December 2014, comprises a fixed rate tranche of £233.3 million with interest fixed at 1.86% plus applicable margin and a floating rate tranche based on 3 month LIBOR of £146.7 million. The latter tranche has been hedged using interest rate caps with a weighted average strike rate of 2.65%.

Costs of £6.9 million were incurred in respect of the refinancings which will be amortised over the term of the facility. In addition, costs of £0.3 million were incurred which were charged to the income statement of the Mall Fund.

Group revolving credit facility

In June 2014, the Group agreed an amendment and restatement of its existing revolving credit facility including the following amendments:

·       The revolving credit facility was increased to £50 million (separated into two tranches, the first £25 million being ''Tranche A'' and the second £25 million being ''Tranche B'').

·       Tranche B's initial availability was dependent on it being used for an acquisition that resulted in the Group owning at least 80% of the entire issued Units of the Mall Fund.

·       An arrangement fee of £625,000 was payable on the drawdown of Tranche B.

·       Interest on Tranche A is at a margin of 3.2% per annum above LIBOR and Tranche B at a margin of 4.2%. A non-utilisation fee of 45% of the applicable margin is payable.

·       Any proceeds of the sale of any of the properties held by the Group's German Joint Venture or any sale of the Waterside Shopping Centre, Lincoln shall be used to reduce the facility limit to a minimum of £20 million until 31 December 2015.

·       Tranche A is available until 31 July 2016 (but will be reduced to £15 million from 1 January 2016) and Tranche B until 31 December 2015.

The revised facility became effective on 14 July 2014 when the Group drew down a total of £34.6 million (including payment of the £625,000 arrangement fee) in relation to its acquisition of 62.56% of Units in The Mall Fund.  Following the disposal of the Waterside Shopping Centre, Lincoln the Group paid down proceeds of £14.8 million which reduced the total facility limit to £35.2 million.  This remained the facility limit at 30 December 2014 of which £23.4 million was drawn at that date.

This facility is secured by charges over the units the Group holds in The Mall carried at £377.2 million at 30 December 2014 (2013: £100.4 million), charges over certain holdings in and loans to the German joint venture carried at £38.7 million (2013: £39.6 million) and guarantees by the Company. 

On 11 February 2015, following completion of the sale of the Group's German joint venture, the Group fully repaid the amount drawn down.  In line with the revised terms detailed above the limit of the facility reduced to £20 million as of that date. The charges in relation to the German joint venture were released on completion.

 10 Reconciliation of net cash from operations

		Year to	Year to
		30 December	30 December
		2014	2013
	Note	£m	£m
Profit for the year		75.2	9.1
Adjusted for:
Finance income - continuing and discontinued operations		(1.4)	(2.6)
Finance expense - continuing and discontinued operations		10.2	4.7
Income tax expense - continuing operations	4a	(2.5)	(0.2)
Income tax expense - discontinued operations	4a	-	(0.1)
Acquisition of Mall units		(8.1)	-
Profit on disposal of JV & Associates		(4.8)	-
Loss on disposal of wholly owned properties - discontinued operations	14	-	2.1
(Profit)/loss on revaluation of wholly owned properties		(36.9)	0.2
Share of (profit)/loss in associates and joint ventures	7a	(10.2)	(8.3)
Share of (profit)/loss in associates and joint ventures - discontinued operations	14	(4.6)	(1.7)
Profit on disposal of other assets		-	(1.0)
Depreciation of other fixed assets		0.3	0.3
Decrease in receivables		5.8	0.2
Decrease in payables		(1.2)	(4.9)
Non-cash movement relating to share-based payments		0.7	0.8
Net cash from operations		22.5	(1.4)

11 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:

		30 December			30 December
		2014			2013
		Net assets	Number of	Net assets	Net assets
		£m	shares (m)	per share (£)	per share (£)
Basic net assets		419.0	700.8	0.60	0.54
Own shares held			(1.1)
Dilutive contingently issuable shares and share options			4.6
Fair value of fixed rate loans (net of tax)		(4.5)
EPRA triple net assets		414.5	704.3	0.59	0.54
Exclude fair value of fixed rate loans (net of tax)		4.5
Exclude fair value of see-through interest rate derivatives		(0.8)
Exclude deferred tax on unrealised gains and capital allowances		(0.1)
EPRA net assets		418.1	704.3	0.59	0.56

12 Return on equity

		30 December	30 December
		2014	2013
		£m	£m
Total comprehensive income attributable to equity shareholders		74.1	9.2
Opening equity shareholders' funds plus time weighted additions		264.0	179.6
Return on equity		28.1%	5.1%

13 Acquisition of Units in the Mall Unit Trust and Capital Raise

On 20 June 2014 the Group announced it had entered into conditional agreements to acquire 62.56% of Units in the Mall Fund for an initial gross cash consideration of £213.1 million ("the Acquisition") to be funded by available cash and debt funding and an associated Firm Placing and Placing and Open Offer (the "Capital Raise") to raise gross proceeds of £165 million by the issue of 351,063,830 shares at 47 pence per New Ordinary Share.  The Group expects to recover £0.7 million of £7.4 million that was paid into escrow and therefore the expected final consideration is £212.4 million.   Shareholder approval was obtained at the General Meeting held on 9 July 2014 and the shares were admitted to listing and the Acquisition completed on 14 July 2014.

On completion of the Acquisition the Group owned 91.82% of The Mall Fund.  At 30 December 2014 following subsequent transactions, summarised in theSubsequent acquisitions of minority units section below, the Group owned 100%.

Details of the acquisition

Under the terms of the Acquisition, which constituted a reverse takeover under the Listing Rules, the Group acquired:

·      490,300,237 Units from Aviva Life & Pensions UK and other related holdings ("Aviva"), representing 52.04% of the Mall Fund, for a consideration of £177.2 million.

·      99,069,410 Units from Karoo Investment Fund ("Karoo"), representing 10.52% of the Mall Fund, for an expected consideration of £35.1 million, subject to final escrow adjustment.

·      The remaining 50% of The Mall (General Partner) Limited that it did not already own from Norwich Union (Mall GP) for £77,712.

The Units were acquired via Capital & Regional (Europe Holding 5) Limited and the interest in The Mall (General Partner) Limited via Capital & Regional (Mall GP) Limited, both 100% owned subsidiaries of Capital & Regional plc.  The consideration paid was based on the Mall Fund NAV per Unit at 31 March 2014 adjusted for interest rate swap liabilities and estimated performance fees and represented a 6.7% Net Initial Yield on the underlying properties.  

The liability to pay the performance fee was triggered on the redemption offer being made to all remaining unit holders in September 2014 (see Subsequent acquisitions of minority units section below).  The total amount payable was £11.8 million (excl. VAT), to be split equally between Aviva Investor Global Services, the Fund Manager, and Capital & Regional Property Management Limited ("CRPM"), the Property and Asset Manager.  The performance fee was accrued in the Mall Fund financial statements at 30 December 2014.  The entries relating to CRPM have been eliminated on consolidation in the Group financial statements for year ended 30 December 2014.   

In addition to the cash consideration payable Aviva and Karoo will receive their pro-rata share of the Mall Fund's income for the period from 1 April 2014 to 13 July 2014, being the date immediately prior to completion.  This will be paid to them upon distributions being made by the Mall Unit Trust at such time as the Mall Unit Trust resolves to pay such distributions.  At 30 December 2014 an accrual of £3.0 million has been recognised in respect of this amount.

Strategic rationale

The Directors believe that the Acquisition marked a significant step towards completing the Group's strategic objective of focusing on its core UK shopping centre business and positioning itself as the leading dominant community shopping centre owner in the UK. The Board believes the Acquisition provides the Group with:

·      Control of the underlying assets in its core investment, the Mall Fund;

·      The ability to generate compelling returns from the strong cash generating ability of its shopping centres and offer Shareholders a highly attractive dividend yield relative to the sector;

·      The opportunity to further leverage its core strengths of managing or owning interests in dominant UK community shopping centres;

·      The ability to facilitate the delivery of attractive value and asset management opportunities;

·      A more efficient capital structure; and

·      A strong platform that has enabled the Group to convert to a REIT effective 31 December 2014.

Capital Raise and funding of the Acquisition

The gross proceeds from the Capital Raise were £165 million.   Total transaction costs were £7.4 million of which £4.3 million specifically related to the Capital Raise and have been deducted from Share Premium.  The remaining £3.1 million has been charged to the income statement. 

In addition to the net proceeds of the Capital Raise the Group made a drawdown on its amended and restated revolving credit facility of £34.6 million (see note 9 for further details) and utilised existing cash resources for the balance of funding required.

Accounting for the Acquisition

Following the completion of the Acquisition, the Group owned 91.82% of the Mall Fund and held three of the six director seats of The Mall (General Partner) Limited.  In addition through the Group's 100% ownership of The Mall (General Partner) Limited it was (and is) able to appoint and remove the independent directors, giving it the ability to appoint a majority of The Mall (General Partner) Limited's Board and hence exercise control over The Mall Fund.  The Group therefore consolidated the operations of The Mall from 14 July 2014. 

Prior to this date the Group equity accounted for its interest in The Mall Fund as an Associate.

To determine the assets and liabilities acquired at the date of completion the Group have used the 30 June 2014 balance sheet with an adjustment made to deferred income to reflect the pro rata profits for the period to 14 July 2014, the date of the Acquisition.  This is on the basis that the valuation and other balance sheet captions would not be expected to significantly change during such a short period of time.  The following provides a breakdown of the asset and liabilities acquired:

		£m
Investment properties		752.1
Cash		25.1
Trade debtors (net of provisions of £0.8 million)		4.3
Prepayments and Accrued Income		3.0
Other Debtors		24.0
Other assets		56.4

Trade creditors		(1.2)
Other creditors		(10.7)
Accruals and deferred income		(17.0)
Current liabilities		(28.9)

Bank loans		(343.6)
Other liabilities (Head Leases)		(65.4)
Non-current liabilities		(409.0)
Net Assets (100%)		370.6

The only fair value adjustments made on acquisition relate to the performance fee (reflecting the expectation of this being triggered subsequently in the year) and the accrual for estimated profits due to the vendor from 1 April 2014 to the date of completion.

		£m
Net Assets acquired (62.54% of £370.6 million)		231.8
Accrual for 1 April  to 14 July 2014 profits due to vendor		(3.0)
Performance Fee net liability arising on completion		(4.9)
Total identifiable assets (provisional)		223.9
Consideration
Cash paid to Aviva and Karoo		(205.7)
Cash paid to Escrow		(7.4)
Cash consideration out		(213.1)
Expected recovery from Escrow		0.7
Total expected Consideration		(212.4)
Negative Goodwill to be taken to income statement (provisional)		11.5

The negative Goodwill arises due to the valuation driven increase in net asset value of The Mall Fund at 30 June 2014 compared to 31 March 2014, as the acquisition price was calculated with reference to the latter.

Subsequent acquisitions of minority interests

In October 2014 the Mall Fund completed a redemption of the units of eight of the nine remaining unit holders.  Under the terms of this redemption the Fund acquired and then cancelled the outstanding units at a total cash cost of £28.2 million.  This had the effect of increasing the Group's effective shareholding in The Mall from 91.82% to 99.45%.

On 1 December 2014 Capital & Regional (Europe Holding 5) Limited, a 100% subsidiary of Capital & Regional plc, acquired the units held by the sole remaining minority unit holder for cash consideration of £2.1 million.

The impact of these transactions has been reflected as a movement in the statement of changes in equity.

Following these transactions the Group owned 100% of The Mall Fund from 1 December 2014.  Subsequent to this date the two independent directors of The Mall (General Partner) Limited resigned leaving the three Capital & Regional directors and the Chairman as the four serving directors at 30 December 2014.

Amounts credited/charged to the income statement

The following table summarises the amounts credited or charged to the income statement in respect of the acquisitions of Mall Units, the capital raise and the subsequent restructuring of The Mall Fund.

		£m
Negative Goodwill credited on acquisition of 62.54% of Mall Units		11.5
Transaction costs charged to income statement		(3.1)
Restructuring of The Mall Fund		(0.3)
Total		8.1

£31.9 million of revenue and £47.0 million of profit before tax in respect of The Mall has been credited to the income statement in the year post acquisition. If the Group had consolidated the results of The Mall from 31 December 2013, being the first day of its accounting period, the Group's revenues for the year would have been £80.8 million and profit before tax would have been £89.7 million.

14 Discontinued Operations

German joint venture

On 24 December 2014, the Group announced the conditional exchange of contracts for the sale of its 50:50 German joint venture with a real estate fund managed by Ares Management, LP to clients and funds under management of Rockspring Property Investment Managers.  Under the terms of the transaction the Group will retain for approximately five years a 5.1% minority stake in each of the five German portfolios. 

Considering the sale to be highly probable at 24 December 2014 Management reclassified the balances related to the German joint venture from receivables from joint ventures (£14.2 million) and interests in joint ventures (£27.3 million) to assets held for sale (£39.5 million), liabilities in respect of assets held for sale (£(0.8) million) and fixed asset investments (£2.7 million - in respect of the minority stakes retained).  The reclassifications were made at carrying value being the lower of carrying amount and expected fair value less costs to sell.

The transaction completed on 10 February 2015.   The net proceeds received were €54.6 million, this equated after costs to £42.1 million (after all costs and including the benefit of the Group's Forward Contract which hedged €50 million at 1.2721) and is expected to result in a profit on disposal of approximately £0.6 million to be recognised in the year ending 30 December 2015 subject to any final adjustments arising out of the completion accounts and before the impact of hedging and foreign exchange reserves reclassifications.  On completion, and included within the proceeds, the Group entered into a long-term loan payable of €3.5 million (£2.7 million at year end exchange rate of 1.2721) repayable after five years.  After completion a distribution of €1.5 million was made in respect of the retained minority stakes (reducing this to approximately €2.2 million), this was used to reduce the outstanding amount of the loan to €2.0 million

Given Germany was previously treated as a separate operating segment its results have been reclassified as discontinued operations in 2014 and the 2013 results similarly restated.

Leisure World, Hemel Hempstead

On 14 February 2014, the Group completed the sale of the Leisure World property, Hemel Hempstead for net consideration of £8.4 million (£8.5 million of consideration less £0.1 million of associated costs). On the basis that at 30 June 2013 and 30 December 2013 the sale was considered highly probable, the property had been classified as an asset held for sale at both those dates. 

Morrison Merlin (Great Northern Warehouse)

On 31 October 2013, the Group completed the sale of Morrison Merlin Limited, the Group company that owned the Great Northern Warehouse for a headline price of £71.1 million.  At the date of disposal the net assets of Morrison Merlin Limited were £14.1 million.  The net cash consideration received after transaction costs of £0.1 million was £12.0 million resulting in a loss on disposal after tax of £2.1 million. 

Given the disposal of Morrison Merlin and Leisure World, Hemel Hempstead formed part of the Group's strategic plan to exit the Leisure market, the results for 2013 were presented as discontinued operations in the financial statements for the year ended 30 December 2013.

X-Leisure

On 16 January 2013 the Group completed the sale of its 11.9% stake in the X-Leisure Fund and its 50% interest in X-Leisure Limited to a subsidiary of Land Securities Group plc for net proceeds of £30.6 million. 

The results of these discontinued operations, which have been included in the consolidated income statement, were as follows:

		Year ended	Year ended
		30 December	30 December
		2014	2013
	Note	£m	£m
Revenue		-	5.1
Cost of sales		0.2	(1.2)
Administrative costs		(0.3)	-
Finance income		1.0	2.3
Finance costs		-	(4.3)
Share of Joint Ventures and Associates		4.6	1.7
Attributable current tax credit		-	0.1
Share of profit after attributable tax		5.5	3.7
Loss on disposal of discontinued operations		-	(2.1)
Profit from discontinued operations	2a	5.5	1.6

The loss on disposal of discontinued operations of £nil million (2013: loss of £2.1 million) is stated after Deferred Tax credits of £nil million (2013: credits of £0.1 million) relating to Deferred Tax liabilities extinguished on disposal.

During the year, discontinued operations contributed £5.2 million (2013: £4.3 million) in respect of the Group's net operating cash flows, contributed £8.8 million (2013: £42.8 million) in respect of investing activities (disposal proceeds) and received £0.9 million (2013: paid £0.6 million) in respect of financing activities.

Assets held for sale comprise:

		30 December	30 December
		2014	2013
		£m	£m
Interests in German Joint Venture		39.5	-
Leisure World, Hemel Hempstead		-	8.5
		39.5	8.5

£0.8 million (2013: £0.1 million) of balance sheet liabilities associated with these assets have been recognised at 30 December 2014 representing expected transaction costs. 

15 Dividends

		Year to	Year to
		30 December	30 December
		2014	2013
		£m	£m
Interim dividend per share paid for year ended 30 December 2013 of 0.25p		-	0.9
Second interim dividend per share paid for year ended 30 December 2013 of 0.40p		1.4	-
Interim dividend per share paid for year ended 30 December 2014 of 0.35p		2.4	-
Amounts recognised as distributions to equity holders in the year		3.8	0.9
Proposed final dividend per share for year ended 30 December 2014 of 0.60p1		4.2	-

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.

16 Events after the balance sheet date

German joint venture disposal

On 10 February 2015 the Group's disposals of interests in its German joint venture completed, see note 14 for further details.

The Group used the proceeds to repay the outstanding balance on its revolving credit facility on 11 February 2015.  In line with the terms detailed in note 9 the limit of the facility reduced to £20 million as of that date.

Ipswich

On 3 March 2015 the Group completed the acquisition of the Buttermarket Centre, Ipswich in a 50:50 joint venture with Drum Property Group.  The centre has been acquired on a freehold basis for £9.2 million equivalent to a Net Initial Yield of 8.46%.

Five year review
for the year 31 December 2013 to 30 December 2014

	2014	20131	20121	2011	2010
	£m	£m	£m	£m	£m
Balance sheet
Property assets	790.8	-	78.4	80.0	80.8
Other non-current assets	21.3	23.5	24.4	34.3	27.1
Intangible assets	-	-	-	1.8	1.9
Investment in joint ventures	-	32.3	25.7	27.2	25.7
Investment in associates	13.6	112.1	80.7	120.2	110.8
Cash at bank	42.6	11.1	5.3	20.0	25.7
Assets classified as held for sale	39.5	8.5	32.2	-	-
Other net current liabilities	(26.5)	2.2	(7.2)	(13.0)	(10.2)
Bank loans greater than one year	(396.8)	-	(58.3)	(61.6)	(68.8)
Other non-current liabilities	(65.5)	(1.0)	(1.6)	(12.9)	(18.5)
Net assets	419.0	188.7	179.6	196.0	174.5
Financed by
Called up share capital	7.0	9.9	9.9	9.9	9.9
Share premium account	157.2	-	-	-	-
Other reserves	65.3	66.3	75.2	70.4	147.9
Retained earnings / (loss)	189.5	112.5	94.5	115.7	16.7
Capital employed	419.0	188.7	179.6	196.0	174.5
Return on equity
Return on equity (%)	28.1%	5.1%	(8.5)%	11.9%	33.9%
Increase / (decrease) in net assets per share + dividend (%)	11.9%	5.8%	(8.4)%	11.8%	35.1%
Total shareholder return	24.7%	53.9%	(9.5)%	(3.8)%	(2.2)%
Year end share price (pence)	53p	44p	29p	32p	33p
Total return
Total comprehensive income / (expense)	74.1	9.2	(16.6)	20.7	44.0
Net assets per share (pence)
Basic net assets per share	60p	54p	51p	56p	50p
EPRA triple net assets per share	59p	54p	51p	56p	50p
EPRA net assets per share	59p	56p	55p	63p	57p
Gearing (%)	96.3%	-	32.6%	34.3%	40.4%
Gearing (%) on a see through basis	100.3%	134.9%	179.2%	253.6%	305.0%
Income statement1
Group revenue	46.6	17.6	22.0	28.9	30.7
Gross profit	28.4	9.6	13.1	17.2	20.3
Profit/(loss) on ordinary activities before financing	77.0	7.4	(13.3)	16.2	52.6
Net interest payable	(9.8)	0.2	0.6	(3.4)	(6.2)
Profit/(loss) before tax	67.2	7.3	(12.7)	12.8	46.4
Tax (charge)/credit	2.5	0.2	0.9	(2.0)	(2.0)
Profit/(loss) after tax	69.7	7.5	(11.8)	10.8	44.4
Operating Profit	19.3	13.0	16.3	15.01	13.6
Interest cover (x)	4.4	3.9	3.7	5.5	4.1
Earnings per share (pence)
Basic2	15p	3p	(5)p	6p	13p
Diluted2	15p	3p	(5)p	6p	13p
EPRA2	3p	2p	1p	5p	4p
Dividends per share	0.95p	0.65p	-	-	-

¹ 2013 and 2012 results have been restated from those originally presented in those respective years to separate discontinued operations as explained in Note 14. 

² Continuing and discontinued operations.

Property under management information

As at 30 December 2014

	30 December	30 December	30 December	30 December	30 December
	2014	2013	2012	2011	2010
Property under management	£m	£m	£m	£m	£m
Wholly owned	745	-	81	81	82
Associates	151	820	983	1,824	2,132
Joint ventures	-	368	365	576	547
Other property	-	-	-	-	71
Total	896	1,188	1,429	2,481	2,832

Excludes The Broadwalk Centre, Edgware in which the Group has no investment interest. Figures exclude adjustments to property valuations for tenant incentives and head leases treated as finance leases. Trading properties are included at the lower of cost and net realisable value.

EPRA performance measures

As at 30 December 2014

		2014	2013
EPRA earnings (£m)1		17.9	8.5
EPRA earnings per share1		3p	2p
EPRA net assets (£m)		418.1	195.3
EPRA net assets per share		59p	56p
EPRA triple net assets (£m)		414.5	188.7
EPRA triple net assets per share		59p	54p
EPRA net initial yield		5.4%	6.3%
EPRA topped-up net initial yield		5.7%	6.7%
EPRA vacancy rate (UK portfolio only)		3.6%	4.4%

Reconciliation of EPRA net initial yield and EPRA topped-up net initial yield

		2014	2013
		£m	£m
Investment property - wholly owned		744.7	8.5
Investment property - share of joint ventures and associates		30.2	411.5
Less developments		-	(8.4)
Completed property portfolio		774.9	411.6
Allowance for capital costs		27.7	8.2
Allowance for estimated purchasers' costs		44.8	14.3
Grossed up completed property portfolio valuation		847.4	434.1
Annualised cash passing rental income		58.9	32.3
Property outgoings		(10.2)	(4.9)
Annualised net rents		48.7	27.4
Add: notional rent expiration of rent free periods or other lease incentives		3.1	1.5
Topped up annualised rent		51.8	29.0
EPRA net initial yield		5.7%	6.3%
EPRA topped-up net initial yield		6.1%	6.7%

¹ Continuing and discontinued operations.

Covenant information

Based on data as at 30 December 2014

	See through borrowings	Covenant	30 December	Future changes
	£m		2014
Core revolving credit facility (100%)
Asset cover	23.4	Greater than 200%	863%
Gearing		Less than 50%	6%
ICR		Greater than 150%	2000%
The Mall (100%)
LTV	380.0	75%	57%1
ICR		Greater than 125%	244%
Redditch (20%)
LTV	16.9	73%	56%	Reducing to 69% in May 2015
ICR		Greater than 175%	230%	Reducing to 200% in May 2015
Debt to rent2		< 1000%	956%
	420.3

¹ Based on bank valuation at 31 March 2014, updated annually.

² Agreement has been reached with the banks to remove this covenant.

Mall portfolio information (100% figures)
At 30 December 2014
Physical data
Number of properties				6
Number of lettable units				711
Lettable space (sq feet - '000s)				3,220
Valuation data
Properties at independent valuation (£m)				744.7
Adjustments for head leases and tenant incentives (£m)				46.1
Properties as shown in the financial statements (£m)				790.8
Revaluation in the year (£m)				42.0
Initial yield				6.3%
Equivalent yield				6.5%
Property level return				14.8%
Reversionary				16.3%
Loan to value ratio				51.0%
Net debt to value ratio1				48.1%
Lease length (years)
Weighted average lease length to break				7.8
Weighted average lease length to expiry				8.9
Passing rent (£m) of leases expiring in:
2015				7.7
2016				5.4
2017-2019				9.5
ERV (£m) of leases expiring in:
2015				8.8
2016				5.5
2017-2019				10.3
Passing rent (£m) subject to review in:
2015				7.2
2016				4.0
2017-2019				8.1
ERV (£m) of passing rent subject to review in:
2015				7.4
2016				3.7
2017-2019				8.3
Rental Data
Contracted rent at year end (£m)				56.6
Passing rent at year end (£m)				53.5
ERV at year end (£m per annum)				62.3
ERV movement (%)				0.5%
Vacancy rate (%)				3.4%
Like for like net rental income (100%)
Current year net rental income (£m)
Properties owned throughout 2013/2014				47.9
Disposals				0.2
Net rental income				48.1
Prior year net rental income (£m)
Properties owned throughout 2013/2014				47.9
Disposals				4.8
Net rental income				52.7

¹ Adjusted for £8.9 million of payments due in respect of Mall performance fees and Mall income due to former unit holders.

 

END

 

 

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