Final Results

Capital & Regional plc 20 March 2007 CAPITAL & REGIONAL PLC: 2006 PRELIMINARY RESULTS ANOTHER YEAR OF STRONG OUT PERFORMANCE Capital & Regional plc, the co-investing property asset manager, today announces its unaudited preliminary results for the year ended 30 December 2006. Financial Highlights* 2006 2005 Growth Property under management £6.5bn £5.1bn 26% Triple net NAV per share £12.72 £9.85 29% Return on equity 32% 41% Recurring pre-tax profit £32m £23m 39% Dividend per share 26p 18p 44% Earnings per share (Note 4) 46p 33p 39% Profit before tax £251m £199m 26% * For definition of terms, refer to "Glossary of Terms" on page 34. Highlights • Four key metrics are all up by at least a quarter: - NAV per share + 29% - Property under management +26% - Recurring profits +39% - Dividend +44% • The Mall fund outperformed by nearly 5%. • Strong cash flows allow a 44% increase in the dividend. 10 year track record of increases at 24% per annum. • New portfolios are being built up in promising new sectors. Including leisure this is now 41% of our portfolio. Commenting on the results, Martin Barber, Chief Executive said: "This has been the fourth year in a row with returns of more than 30%, outperforming a buoyant market. The foundations of our business remain sound, and we remain confident that our specialist management teams will continue to outperform." For further information please contact: Martin Barber, Chief Executive, Capital & Regional Tel: 020 7932 8121 William Sunnucks, Group Finance Director, Capital & Regional Tel: 020 7932 8125 Emma Burdett or Martin Leeburn, Maitland Tel: 020 7379 5151 Chairman's statement Tom Chandos The Company has delivered another striking performance in 2006, with a total return on equity of 32%. Our share price has also performed strongly. Total shareholder return (dividends plus the increase in the share price over the year) was 81%, the highest of our peer group of 13 companies in the FTSE Real Estate sector capitalised at more than £1 billion. Dividend The board is recommending a final dividend of 17p (2005: 11p), bringing the total for the year to 26p (2005: 18p), a 44% increase. Over the past ten years dividends have increased at an average rate of 24% per annum. Year on Year 2006 2005 increase Interim 29% 9p 7p Final 55% 17p 11p -------------------------------------- Total 44% 26p 18p -------------------------------------- The proposed distribution for 2006 is fully covered by our recurring profits alone, allowing performance fees earned from the funds to be reinvested in the growth of the business. The Board During the year we appointed two new independent non-executive directors. Philip Newton was until recently the chief executive of Merchant Retail Group plc, where he built up the successful Perfume Shop chain. Manjit Wolstenholme, formerly a member of Gleacher Shacklock LLC and co-head of investment banking at Dresdner Kleinwort Wasserstein has also taken over as chair of the remuneration committee. Responsible business We are strongly aware of our responsibilities to staff and to the wider community. We have long regarded it as good business to engage with all stakeholders, and have more recently taken steps to co-ordinate and measure our efforts. To this end we have appointed a board committee chaired by Alan Coppin to supervise this initiative. In particular, we believe that good day to day shopping centre management can make a real difference to the environment. We have taken a lead with the Enviromall Partnership, where we have linked with a number of industry bodies to develop benchmarks for the industry. Our Twenty First Anniversary 2007 is our twenty first anniversary as a publicly traded company. We started on the Unlisted Securities Market (the predecessor of AIM) in 1986 with 55 employees and an initial market capitalisation of £7 million. Today we have 936 employees and a market capitalisation of well over £1 billion. That journey would not have been possible without the exceptional efforts and contribution of employees past and present and I would like to thank them warmly. At our coming of age, we can look back at our success so far with some satisfaction and pride; but, more importantly, we are looking forward to applying the strength and experience we have built up to make the very best of the opportunities in the years to come. Tom Chandos, Chairman Operational Review Martin Barber, Chief Executive Xavier Pullen, Deputy Chief Executive Our performance in 2006 has been superb. Certainly it was enhanced by yield compression but even without this the returns would have been in the early teens. This demonstrates the core strengths of our business model. Five years ago we refocused the Company on creating funds which we invested in as well as managed, and the results have been good. We earn significant management and performance fees from the assets that we manage which cover our management overhead and boost our co-investment returns. We are continuing to diversify into asset areas that are ripe for the application of our specialist skills. Total property assets under management increased by 26% in 2006, to £6.5 billion. This is more than seven times the portfolio we were managing in 2001. Most of the growth in our direct property portfolio came from the expansion of our German retail park and Fix UK trade park portfolios, which now account for 23% of our total property exposure. These new ventures are generating excellent returns, and may well become funds in their own right in due course alongside our established UK shopping centre, retail park and leisure property funds The Mall Fund, with assets of just over £3bn, now owns twenty-three shopping centres, about 10% of the covered shopping centre market in the UK. We believe that over the next three to five years this fund can expand to forty shopping centres, taking its market share to about 20%. The Mall Fund's performance has been particularly satisfying: since inception it has outperformed its Shopping Centre IRR benchmark at an ungeared level by an average of 3.8% per annum, and has shown a total return to investors averaging 26.8%. The Junction Fund has grown from £336m in 2002 to £1.6bn at the end of 2006. There is substantial development and redevelopment to take place in this fund over the next three to five years which could produce substantial returns. Since inception investors have enjoyed total returns averaging 26.6%. The X-Leisure Fund was created in 2004 with initial assets of £502m, rising to £807m at the end of 2006 and £917m at 28 February 2007. In 2006, The X-Leisure Fund delivered its strongest performance to date with a total return of 35.3% for the year ended 30 December 2006. This positions the Fund in the top quartile of all UK property funds. Our markets We believe the long term fundamentals for UK retail and leisure remain strong. A growing population with a high propensity to spend is serviced by a restricted supply of retail space, which remains well below other developed economies, particularly the US. In these circumstances long term rental growth can be expected. There have been some concerns that retail investment yields have fallen too far. We do not agree. In particular we see the reduction in IPD shopping centre equivalent yields from 7.3% in 2000 to 5.3% in 2006 as being in line with other real asset classes. The margin over index linked gilts is close to its long term average and therefore should be sustainable over time. We continue to watch the development of the UK REIT with interest. We have explained previously why REIT status will not suit C&R, which already has a tax-efficient structure. However, REITS may attract new cash to the sector, and provide acquisition opportunities for us, as long held assets with contingent gains are released. Outlook We believe that the following factors position us well for the future, whatever the economic background: • We have experienced management teams, with strength in depth, specialisation and experience. All are highly incentivised to perform. • We have a management business with long term fee income streams which enhances our cash flow and strengthens our business. • We are already seeding the next generation of specialist portfolios, in Germany and trade centres, which may become funds in the future. This has been our fourth year in a row with returns of more than 30%, ahead of a buoyant market. The foundations of our business are sound, and we remain confident that our management teams will continue to outperform. Financial Review William Sunnucks, Group Finance Director Key performance indicators We have focused our key measures of performance in four areas: business building, investment returns, recurring profitability and productivity Key performance indicators 2006 2005 Growth Business building Property under management £6.5bn £5.1bn 26% Investment returns Year end share price £15.42 £8.68 78% Total shareholder return 81% 28% Triple net NAV per share £12.72 £9.85 29% Return on equity 32% 41% Recurring profitability Recurring pre-tax profit £32.3m £23.1m 39% Dividend per share 26p 18p 44% Earnings per share (Note 4) 46p 33p 39% Productivity Overhead as % of property managed 0.29% 0.31% CRPM staff turnover 11.7% 13.5% Business building: During 2006 our property under management increased from £5.1bn to £6.5bn. The main changes were as follows: Portfolio Growth 2006 £m Property under management at 30 December 2005 5,139 Acquisitions Mall purchase of two shopping centres (net) 387 Additions to Fix trade park portfolio 33 Additions to German portfolio 229 Manchester Arena 67 Other (inc capital and development expenditure) 163 Disposals Junction sale of 4 retail parks (160) Revaluation surpluses 599 ------- Property under management at 30 December 2006 6,457 ------- In addition to building our property portfolios, we have strengthened our management teams and expanded SNO!zone to three locations. Investment returns: During the year our share price increased by 78% and the dividend we paid brought total shareholder return up to 81%. The property sector in general has moved from a discount to NAV to a premium. We believe that our increase may also reflect a better recognition by the market of the value of our two earnings businesses, CRPM and SNO!zone. Our total accounting return on equity was 32%, split between the increase in NAV and the dividend. There was a significant contribution from our two earnings businesses, CRPM and SNO!zone, and from the outperformance of our portfolios against the market. Some of the increase was also driven by the rise in property values during the year due to market yield shift. Recurring profitability: During the year our recurring pre-tax profit increased by 39% due to increased profits from our growing German portfolio and from our property management business: Increase in recurring pre-tax profit £m 2005 recurring pre-tax profit 23.1 Increase attributable to: UK portfolio 2.5 German portfolio 4.9 Property management 1.8 2006 recurring pre-tax profit 32.3 We use our recurring pre-tax profit, adjusted for notional tax, to calculate dividend cover. Dividend cover (pence per share) 2006 2005 pps pps Recurring pre-tax profit per share 44 32 Full notional tax charge at 30% (13) (10) ------------------- Net 31 22 ------------------- Proposed total dividend per share 26 18 Dividend cover 119% 125% This is a very conservative indicator of dividend coverage, but we believe it is the correct one for producing sustainable dividend growth as we have in the past. Under the EPRA definition of earnings per share, which would include performance fees, our dividend cover would increase to 173%. Productivity: Since forming the fund management business we have consistently improved productivity by focusing specialist management teams on growing portfolios. This benefits fund investors and C&R shareholders alike. Our fixed overhead has fallen as a percentage of property under management from 0.69% in 2001 to 0.29% now. Non financial measures: Our divisions monitor performance in ways that suit each individual business. For example they systematically survey customers, measure carbon emissions, and monitor achievement of recycling targets. The key non financial indicator measured for the Group is staff turnover for CRPM, which was 11.7% in 2006 and 13.5% in 2005. We continue to be able to retain the key people for running the business. In 2006 we had only one leaver among those participating in our senior management incentive schemes. Portfolio returns Each UK portfolio has a benchmark against which we monitor performance: • Mall IPD shopping centres index expressed as an IRR • Junction IPD retail parks index, expressed as an IRR • X-Leisure 12% • Fix UK IPD all industrials index At fund level we outperformed at geared and ungeared level in all funds. In the case of the Mall and X-Leisure Funds, the outperformance at both geared and ungeared level was significant. The Junction Fund was slightly ahead of its benchmark following some restructuring of its portfolio and it has outperformed on a three year basis. Fund performance over the last 3 years Geared Ungeared Benchmark return return return (IRR) (IRR) (IRR) Mall 2004 26.0% 19.6% 17.1% Mall 2005 22.8% 16.5% 16.3% Mall 2006 26.3% 17.6% 12.7% Junction 2004 35.6% 24.0% 23.5% Junction 2005 34.1% 23.3% 22.1% Junction 2006 18.3% 15.0% 14.7% X-Leisure 2004 (9 months) 18.0% 11.4% 8.9% X-Leisure 2005 28.3% 15.3% 12.0% X-Leisure 2006 30.4% 19.7% 12.0% German portfolio 34.2% 15.2% - Fix UK 37.6% 20.8%* 17.6% * excluding acquisition costs As in previous years we measure our returns using IRR methodology. The IRR benchmarks are calculated by IPD, but the figures will differ from the total return figures which appear in most IPD publications. Earnings businesses We continue to give information to help investors value our two earnings businesses CRPM and SNO!zone. Capital & Regional Property Management (CRPM) The value of CRPM lies in its management fee stream, and its performance fees, both after deduction of related management costs. The management fee stream is stable, and can be valued using a multiple. The performance fees are different in nature. The profit can be split between management and performance fees as follows: Capital & Regional Property Management business Profit and loss account 2006 2005 £m £m Fixed fees 17.0 15.3 Service charge fees 4.6 3.9 Other fees 5.8 3.6 Fixed management expense (14.0) (12.6) ------------------- Profit from management fees 13.4 10.2 ------------------- Mall performance fee 35.6 29.5 Junction performance fee 16.6 17.3 X-Leisure performance fee 10.4 4.1 Variable overhead - bonuses, CAP, (18.3) (18.6) LTIP Other non recurring items (2.1) - ------------------- 42.2 32.3 ------------------- CRPM profit before tax 55.6 42.5 ------------------- The right to receive performance fees is clearly valuable. Some analysts apply a multiple to past fees, others estimate the NPV of the immediate pipeline plus an option value for fees beyond. Past performance should deliver the Group fees of £62.6m for 2006 (included as a debtor on the 2006 balance sheet), £44.7m in 2007 and £22.1m in 2008 (neither on the balance sheet). The Group's variable overheads, including staff bonuses and management incentive schemes, are paid out of these fees. SNO!zone: SNO!zone now operates from three locations, and employs 466 people, many part time. It bears a full arms length rent, and involves very little working capital. It can be valued by applying a multiple to the earnings stream. The accounting adjustments relate to the new Xscape in Braehead, which benefited from a 9 month rent free period and a tenant incentive package worth £970,000. The accounting rules require us to spread the benefit over the 25 year period of the lease, rather than in the year in which they were received. SNO!zone operating profit 2006 2005 £m £m Income 13.1 9.3 Expenses (10.4) (7.6) ------------------- Cash profit 2.7 1.7 Tenant incentives* (0.9) - ------------------- Accounting profit 1.8 1.7 ------------------- * This is the carrying value of tenant incentives at 30 December 2006 after amortisation. Balance sheet, debt and hedging We look at our balance sheet in three ways: • The enterprise balance sheet shows the £6.5billion portfolio we manage, financed by £913m of shareholder equity and a further £2,288m of institutional equity invested directly into our funds. • The see through balance sheet gives our economic exposure to different market segments, and is the one we use for managing the business. It is notable that we have an increasing proportion of our exposure in the German and Fix portfolios • Our statutory balance sheet follows the accounting rules. Under these rules our three funds are treated as associates, and our joint ventures are consolidated on a proportional basis. The debt on this balance sheet excludes our share of fund and JV debt. Three balance sheets Enterprise See through Statutory £m format £m £m Shopping centres 3,185 772 401 Retail parks 1,575 430 245 Leisure property 1,252 359 210 German big box retail 382 359 381 Fix UK 110 110 110 ------------------------------------- Total property 6,504 2,030 1,347 Working capital (64) 21 24 Debt (3,239) (1,138) (458) ------------------------------------- Net assets 3,201 913 913 ------------------------------------- C&R shareholders 913 913 913 Fund investors 2,288 - - ------------------------------------- Total equity 3,201 913 913 ------------------------------------- Loan to value 50% 56% 34% Gearing (debt/equity) 101% 125% 50% The Mall "Since its formation in March 2002, the Mall has outperformed its benchmark in every year, as it has again in 2006. Our direct, active operational management approach to shopping centres continues to work well". Ken Ford What is the Mall? The Mall is the UK's Community Shopping Centre Brand. The Mall Fund owns and operates approximately 10% of the UK's covered retail space making it the largest portfolio of branded shopping centres in the UK. It is managed by a dedicated team of 62 from Capital & Regional's Mall Corporation. The Fund was formed in March 2002 with just two investors - the Capital & Regional Group and clients of Morley Fund Management. New investors have come in as the portfolio has expanded, and a secondary market for the units has developed. The fund now has 45 investors, including 3 overseas institutions. Our Malls have all been acquired under the following investment criteria: • Town centre locations • Dominant in localised town catchment or strong metropolitan catchment • Minimum 150,000 sq ft lettable area • Car park or public transport facilities • Covered, or able to be • Tenant profile "mass market" or "value" retail • Revenue and capital growth potential • Value adding management opportunities The Mall At 30 December At 30 December 2006 2005 Gross property asset value £3.125bn £2.338bn No. of properties 23 21 No. of lettable units 2,404 2,118 Initial property yield 4.56% 5.09% Equivalent yield 5.21% 5.73% No. of Investors 45 36 C&R share 24.2% 26.1% Debt £1.50bn £1.062bn Our Management Approach We regard The Mall as a business, not just a portfolio of assets. Each Mall is more than a collection of shops, it is a venue at the heart of its community. Local people serving local people. We aim to recruit General Managers with retail experience, and to place them at the centre of our operation. Each Mall has access to marketing, financial, HR, IT and surveying expertise located at our London and Glasgow offices. Our objective is to provide and promote a clean, safe and stimulating shopping environment, with the retail mix relevant to each local community. We both create the right space for retailers, and create, manage and market an exciting branded retail environment for our shoppers. Our Strategy There is a significant opportunity to enhance investor returns from further expansion of the portfolio. We are already seeing scale benefits in terms of financing, branding, ancillary incomes and co-operation with retailers and other commercial partners on a portfolio basis. When we buy an extra centre we have a distinct competitive edge - we can immediately link it to our management system, and take steps to improve the retail offer. In order to raise the equity to increase the size of the portfolio, we need to continue to outperform and to further build up our management infrastructure. The retailer market We have enjoyed a "business as usual" tenant market during 2006. We have seen fewer retailer failures than 2005 and footfall has held up well. We have survey evidence based on nearly 50,000 customer interviews to show that there has been an increase in spend per visit at our Malls, up 18% on 2005 on a 1.8 times per week shopping visit frequency. In the current competitive climate we believe our relatively low unit rental (average unit rent £69,000 pa) coupled with the cost effective Mall direct management approach, suggests positive profit contributions from retailers' Mall representation. The shopping centre investment market There has been debate about whether the low yields are sustainable in the long term. One view is that the fall in equivalent yields from 7.3% in 2000 to 5.3% will now reverse, especially now that interest rates are rising. An alternative view would suggest that yields have fallen in line with real returns available on other real asset classes. While yields on index linked gilts remain at 1.5%, shopping centre yields of 4-5% are easily justifiable. Our performance pipeline Our 2007 business plan includes capital expenditure of £347 million over the next five years. This statistic illustrates the volume of asset management opportunities within the portfolio - our performance pipeline. Even the centres we have owned the longest, at Aberdeen (first acquired by C&R in 1993) and Wood Green (1996) are still generating new opportunities. These opportunities are driven by continuing changes in retail formats: Some chains are growing with new formats, others declining and willing to give up space. Changes in supply chain management have meant that traditional service yards and storage areas are becoming redundant and can be converted to revenue generating space. Expansion opportunities can also arise through the acquisition of neighbouring properties. This capital expenditure envisaged is relatively low risk. Where possible we build to demand with a substantial element of preletting. Our construction contracts are in the main fixed price. In consultation with The Mall Fund Manager, our appraisal regime estimates the required returns before the expenditure is undertaken. The Junction "During 2006 we commenced a series of initiatives to reposition the portfolio, creating a strong base for future growth in what we anticipate will be a changing retail park market. The initiatives included portfolio restructuring, investment in the properties and an increasing development exposure." Andy Lewis-Pratt What is the Junction? The Junction Fund is a specialist retail warehouse fund with a dedicated in house management team. It owns a £1.6billion retail park portfolio which includes significant development opportunities. Our investment criteria are: • At least 80,000 sq ft multi-let retail park, freehold or long leasehold • Planning consent for open A1 , bulky goods or a mix thereof • Value enhancement opportunities • Either the dominant scheme in local catchment, or ability to become so The Junction At 30 December At 30 December 2006 2005 Gross property asset value £1,590m £1,459m No. of retail parks 16 19 No. of units 233 258 Initial property yield 3.29% 3.50% Equivalent yield 4.45% 4.87% No. of Investors 13 7 C&R share 27.3% 27.3% Bank Debt £696m £686m Market segments Retail warehousing can be split into four categories: Fashion Parks: These properties have open A1 planning (this consent allows any sort of retailing), are occupied predominately by typical high street fashion retailers and are a dominant retail destination. Prime Retail Parks: These properties have open A1 or bulky goods planning (or a mixture of the two). Bulky goods consent generally allows the sale of goods that cannot easily be carried away by the customer with occupiers typically including DIY chains such as B&Q and Homebase, furniture and carpet retailers and electrical outlet stores. Retail parks with open A1 planning often have a mixture of bulky goods and open A1 retailers, with the latter including operators who only tend to trade out of town. The properties are also well located and are dominant within their catchment or capable of dominance. The open A1 units will remain easier to let and thus we expect further rental growth from this expanding market. There is an oversupply of bulky goods space as new space has been built and tenants have consolidated but we anticipate rental growth can be achieved through a number of initiatives that we have identified on a location by location basis. Secondary Retail Parks. These properties in most cases have a bulky goods consent, have vacant space and are dominated by competing schemes. Solus Units: These properties are single let properties and tend to have a bulky goods consent. The Junction Fund has never had solus units, although these are in its benchmark index. During 2006 it sold the retail parks considered to be secondary, and now has a portfolio of more dominant parks which is positioned for future market developments. Market developments The out of town retail park sector has seen strong returns for 2006 as weight of money and investor demand continued to support a number of deals at high prices, particularly during the summer. Investors were attracted to the sector as sustained rental growth for retail warehousing was still anticipated. However we believe the investment market is now changing, particularly with the potential for yields on secondary stock to weaken. Opportunities for rental growth are seen to be strongest for fashion parks. Rental growth will also be seen in prime retail parks which benefit from either an open A1 or bulky goods planning consent. Little or no growth in rents is anticipated for solus and secondary properties due to vacancies and lack of tenant demand. Development and reconfiguration opportunities These exist throughout the portfolio. Our 2007 business plan shows capital expenditure in excess of £200m over the next three years. This can be split between: • Refurbishments, where space is upgraded for existing tenants e.g. Portsmouth. • Reconfigurations, where we change the tenant mix, and build new space to suit the requirements of new tenants eg Oxford. • Redevelopments. We have two major schemes in gestation, one in Oldbury and one in Thurrock. Refurbishments and reconfigurations are normally low risk, as we have pre-lets in place and a fixed price building contract. Our in house development team manages risk on the developments carefully, and will not go ahead without an acceptable level of pre-let, fixed price building contracts and appropriate development finance. Oldbury: The scheme comprises 460,000 sq ft of planning consent covering retail warehousing, food and beverage, leisure and offices. A revised consent was secured at the end of 2006. Site assembly is continuing with the majority of the remaining acquisitions under contract. Pre-letting has commenced with 25% contracted or in negotiation and a construction start targeted for Q3, 2007. Thurrock: The property currently comprises over 400,000 sq ft of existing retail warehousing. A major redevelopment opportunity is being progressed for our existing holding and an adjacent site. However this is unlikely to commence until late 2008. The X-Leisure Fund "2006 was an outstanding year for us, with a consistent performance across the portfolio. Leisure destinations have grown phenomenally in popularity over the past few years, both with consumers and investors." PY Gerbeau What is the X-Leisure Fund? The X-Leisure Fund is the largest UK specialist fund investing in leisure property. It has been built up using the following investment criteria: • 50% or more of rental income generated from leisure operators. • Either is, or is able to be, anchored by a cinema. • Potential to become the major park in the catchment. • Active management opportunities or latent performance potential to deliver required performance. X-Leisure At 28 February At 30 December At 30 December 2007 (est.) 2006 2005 Gross property asset value £917m £807m £702m No. of properties 18 17 17 No. of units 350 285 283 Initial property yield 4.86% 4.99% 5.68% Equivalent yield 5.58% 5.94% 6.32% No. of Investors 18 18 17 C&R share 20.0% 10.6% 10.7% Bank Debt £444m £403m £395m The commercial leisure property market We have a positive sentiment towards commercial leisure property and believe that the sector will continue to benefit from yield compression in 2007. Indeed two early transactions in 2007 demonstrate that there could be further yield compression within the leisure sector. We do not expect the restaurant sector to suffer materially from the indoor smoking ban that comes into force on 1 July 2007. Undoubtedly the bars and nightclubs will face challenges and we are addressing this by the construction, wherever feasible, of outdoor space. The bowl sector has been attracting attention from the venture capitalist funds and after a few years of limited competition for sites and therefore limited or negative rental growth, the right sites matching the operators' requirements are now commanding competition which is fuelling rental growth. We believe this is likely to continue into 2007. As always, relative out performance will come from asset management and the underlying key fundamentals of location, building and supply. The focus for the team is to deliver on the initiatives within the Business Plan which add rental income and rental value and ensure continued capital growth without a reliance on yield compression to deliver performance. German portfolio "In 2006 we were delighted to more than double the size of our German portfolio and with the returns we produced. We have expanded our UK based management team which will drive growth and management opportunities in the future". Xavier Pullen Our German portfolio: We acquired our first German assets in 2005. Our portfolio has now increased to €567m comprising 44 properties. Our investment criteria have been: • Established out of town retail locations. • Large standalone hypermarkets and retail parks with sales area of more than 3,500 sq m (current average 9,200 sq m) with substantial land and car parking. • Strong covenants. • Shorter leases preferred leading to asset management opportunities. German Portfolio At 30 December At 30 December 2006 2005 Gross property asset value €567m €198m No. of properties 44 13 Initial property yield 6.0% 6.6% (inc development land) C&R share 92.2% 87.4% Bank debt €419m €149m Why Germany? Our expansion into Germany has been management led and focused on a specific market segment. We identified the expertise of the Hahn Group and this led to the focus on big box edge of town retail, which has the following attractions: - Severe restrictions on further out of town development. - Good tenant covenants and long leases. - Index linked rents. - High yield off low rental value base. We are continuing to expand the portfolio, and we will look at ways of accessing third party equity when the scale of the portfolio and our track record permit. Market conditions There are signs that consumer spending is increasing, initially boosted by the 2006 World Cup. The 3% increase in VAT was a potential setback but it seems to have been absorbed by retailers and consumers alike. Since we started investing values have risen substantially, driven by an influx of overseas capital. We are continuing to see interesting opportunities from which we can achieve attractive returns. Asset management opportunities With our team and our partners, we are now well equipped to drive our German expansion forward. Examples of two of the larger opportunities are as follows: • At Lubeck we co-operated with a tenant on an expansion and refurbishment project. We invested a total of €13.76m, increasing the passing rent, and adding significantly to the value to our investment. • At Toenisvorst near Dusseldorf we have acquired a 17 hectare site including a brand new state of the art retail park anchored by Real (Metro) with additional land which gives substantial scope for further development over time. We are talking to potential tenants and occupiers on parts of the land, whilst working with the local authority to further enhance this superior location. FIX-UK We are building our Fix UK trade centre portfolio and are very encouraged by the reception we are getting from existing and new tenants alike. We see great opportunities to expand our operations. What is FIX-UK? FIX-UK is the brand name for C&R's portfolio of 24 trade centres. We are currently expanding the portfolio and creating a proactive management team. At present it is wholly owned by C&R, but we will consider including other investors when this is justified by its track record and size. Trade Centres A trade centre is generally made up of a number of units, occupied by tenants mainly servicing trade buyers such as builders, plumbers, joiners and electricians. The majority of the occupiers require a standard industrial consent. However a number of others do require a widening to allow trade counter sales from the units. The investment criteria agreed for the acquisition programme are: • A multi-let industrial / trade centre. • Minimum area of 20,000ft(2). • Catchments of no less than 50,000 people within a 20 minute drive time. • Strategically strong location - e.g. adjacent to main road. • Planning for an industrial or trade centre use. Key Statistics Fix UK At 28 February At 30 December At 30 December 2007 (est.) 2006 2005 Gross property asset value £143.1m £109.8m £67.6m No. of properties 33 24 18 No. of units 195 166 145 Initial property yield 4.70% 4.51% 5.50% Equivalent yield 5.69% 5.72% 6.37% C&R share 100% 100% 100% Bank Debt £79m £70m £50m Acquisitions and disposals During the year, the business acquired eight properties and sold two which did not meet our investment criteria. Since the year end we have acquired a further nine bringing the total portfolio to 33 properties. The growth of the portfolio over 2006 has been a very positive story, despite a very competitive investment market, with many acquisitions being secured off market. The lot sizes range from £2m-£10m, with the majority of stock being purchased from regional developers and private individuals. FIX-UK is aiming to continue to grow the portfolio significantly throughout 2007 maintaining its position as the largest and most progressive manager of trade centres in the UK. Joint venture and other interests C&R continues to invest in properties on its own account and in joint ventures. These ventures are strictly screened to ensure that we have the management capability and also to ensure that they do not fall within the Fund investment criteria. Where there is a potential conflict of interest, the properties are offered first to the relevant Fund. Business Partners C&R C&R Responsibility share Xscapes Milton Keynes Clients of Leisure team 50% Rockspring Castleford Client of Rockspring Leisure team 66.67% Braehead Capital Shopping Leisure team 50% Centres Glasgow Fort British Land Retail parks 50% team Manchester Arena GE Real Estate C&R group 30% Capital Retail Park, Cardiff PMG Estates Limited Retail parks 50% team Gt. Northern Warehouse, - Leisure team 100% Manchester Leisure World, Hemel - Leisure team 100% Hempstead SNO!zone, ski slope operator - Leisure team 100% The Xscapes We now have Xscapes operating in Milton Keynes, Castleford and Braehead. These landmark leisure destinations offer the public real snow skiing, bowling, dining, cinema and a host of other leisure activities. In February 2007 the first two Xscapes, at Milton Keynes and Castleford, were acquired by the X-Leisure Fund for a combined price of £192m paid in units, assumption of debt and cash. The Xscape in Milton Keynes was completed in 2000 at a cost of £60m. The price paid by the X-leisure Fund reflected a value of £116m in February 2007, proving that with the right management the format is highly profitable. The successful settlement of the majority of the rent reviews at rents ahead of rental values adds further evidence to support this. The Xscape in Castleford was completed in 2003 at a cost of £54m. It was sold to the X-Leisure Fund for £76m in February 2007. Xscape Castleford has gained significant publicity and awareness through numerous awards most notably in 2006 it was joint winner with The London Eye of "Visit Britain's Best Paid for Attraction Award". The Xscape in Braehead opened in April 2006. It is 90% let and the retail and catering units are trading well, despite a delay in opening the cinema. Glasgow Fort This highly successful fashion park was developed in partnership with Pillar Property, now part of the British Land Group. It was sold to the Hercules Fund in 2004 but C&R has a financial interest in further phases. In 2006 C&R received £6m in cash and a further £2.7m in profit was taken into account. Manchester Arena In July 2006 we acquired 30% of the Manchester Arena in a co-venture with GE Real Estate. The property is located on an eight acre site in the heart of Manchester city centre and comprises the 20,000 seat MEN Arena, 120,000 sq ft of offices, a 1,075 space car park and ancillary retail space. For C&R it is an opportunity to exploit some asset management opportunities and to use its leisure and co-venturing expertise alongside a major investor. Capital Retail Park, Cardiff The Capital Retail Park Partnership is a 50:50 joint venture with PMG Estates Ltd, a Welsh developer based in Cardiff. The project involves the construction of a 283,000 sq ft retail park in Cardiff, with a land sale of part of the site to Asda for a 90,000 sq ft foodstore. Cardiff Council is constructing a new football stadium for Cardiff City Football Club on an adjacent site. Construction is expected to start in April 2007 following acquisition of the site. Great Northern Warehouse, Manchester This property is now wholly owned by C&R and has delivered a strong performance in 2006 with a gross asset value increase of £4.25m which is not reflected in our balance sheet because the property is held as a trading property. The increase in value is mainly attributable to the practical completion and opening of the London Clubs International Casino, Manchester235, in 45,000sqft of the vacant warehouse space. The residual space is under offer to Luminar Leisure plc subject to planning and licensing. Applications for both are now pending. Leisure World, Hemel Hempstead This first generation leisure park let to Luminar Leisure Plc was acquired to provide a refurbishment/redevelopment opportunity. The redevelopment of the park for a mixed use scheme continues to be appraised and positive discussions have been held with planners, key city stakeholders and potential occupiers. In 2007 we anticipate finalising a scheme to take forward. SNO!zone Sno!zone is the ski operator which rents the real snow slopes in the three Xscapes. It is wholly owned by C&R, which built it up out of the bankruptcy of Leisurenet in 2001. It is the largest and most profitable indoor ski operator in the UK, but expects more competition from new operators and venues in the future. 2006 was a highly successful year, with operating profit (before adjustment for tenant incentives) growing to £2.7m despite the write-off of many of the costs of opening the third Sno!zone at Braehead in Scotland. The increase in profit was largely from organic growth at existing locations. Following intensive marketing and business development initiatives, turnover grew by 16% at Milton Keynes and 13% at Castleford. SNO!zone operating profit 2006 2005 £m £m Income 13.1 9.3 Cost of sales (9.3) (7.0) Management expense (1.1) (0.6) -------------------- Operating Profit 2.7 1.7 Tenant incentives* (0.9) - Profit after Adjustment 1.8 1.7 * This is the carrying value of tenant incentives at 30 December 2006 after amortisation. Management: This business requires highly specialist management focussed on increasing spend per head in each of its key market segments. It now has its own independent management team within our leisure division, which is achieving organic growth at Milton Keynes and Castleford as well as building up a new business in a very different market in Scotland. Our team is now well established in an increasingly strong leisure market. It has been asked to look at a number of opportunities to operate leisure attractions which do not compete with the Xscape real snow offer, and which could prove interesting for the future. New marketing initiatives have been plentiful. The management has developed the SNO!Academy, Kids Cap and Tours conscious of the growth and development of our youth and the athletes of the future. SNO!zone has hosted numerous very successful events throughout the year. Focusing on providing an exciting ever changing environment, it launched its programme of concerts, events on the snow, airbags on the slope, obstacle courses, and night training which increases the customer experience and maintains interest for return visits. The strength of SNO!zone within the market has attracted very professional and successful businesses to align themselves with the company, through sponsorships and other agreements. Future strategy: The business is clearly prospering under C&R ownership, and it makes sense for us to keep the expertise within the group to help in the development of further Xscape venues. Consolidated income statement For the year ended 30 December 2006 Unaudited Unaudited Unaudited Restated 1 2006 2005 Notes £m £m Revenue 2c 132.1 94.2 Cost of sales (15.5) (10.7) -------------------- Gross profit 116.6 83.5 Administrative costs (39.0) (34.5) Elimination of negative goodwill - 10.6 Share of profit in joint ventures 164.6 129.3 and associates Gain on revaluation of investment 26.0 21.3 properties Profit on sale of properties and 6.3 6.7 investments -------------------- Profit on ordinary activities 274.5 216.9 before financing Finance income 2.0 0.8 Finance costs (25.6) (19.0) -------------------- Profit before taxation 250.9 198.7 Current tax 3a (16.5) (2.5) Deferred tax 3a (12.1) 6.5 -------------------- Tax (charge) / credit 3a,b (28.6) 4.0 -------------------- Profit for the year 222.3 202.7 -------------------- Basic earnings per share 4 311p 294p Diluted earnings per share 4 305p 284p All results derive from continuing activities 1 Comparative figures have been restated from UK GAAP to IFRS. Consolidated balance sheet As at 30 December 2006 Unaudited Unaudited Unaudited Restated 1 2006 2005 Notes £m £m Non-current assets Investment property 511.4 318.3 Interest in long leasehold 16.0 13.8 property Goodwill 12.2 12.2 Plant and equipment 1.2 0.7 Receivables - 3.8 Investment in associates 5a 685.4 583.7 Investment in joint ventures 5b 67.6 49.8 -------------------- Total non-current assets 1,293.8 982.3 -------------------- Current assets Trading property assets 94.4 93.7 Receivables 89.0 74.5 Cash and cash equivalents 35.5 40.1 -------------------- Total current assets 218.9 208.3 -------------------- Total assets 1,512.7 1,190.6 -------------------- Current liabilities Trade and other payables (69.4) (42.9) Current tax liabilities (25.5) (13.7) -------------------- (94.9) (56.6) -------------------- Non-current liabilities Bank loans 6 (456.8) (395.7) Convertible subordinated unsecured 6 (1.3) (3.0) loan stock Other payables (32.8) (25.9) Deferred tax liabilities (13.8) (1.7) -------------------- Total non-current liabilities (504.7) (426.3) -------------------- Total liabilities (599.6) (482.9) -------------------- Net assets 913.1 707.7 -------------------- Equity Called-up share capital 7.2 7.1 Share premium account 219.5 216.9 Revaluation reserve 2.7 0.4 Other reserves 9.6 11.2 Capital redemption reserve 4.3 4.3 Own shares held (6.9) (1.4) Retained earnings 676.7 469.2 -------------------- Equity shareholders' funds 913.1 707.7 -------------------- Triple net, fully diluted net 7 £12.72 £9.85 assets per share EPRA diluted net assets per share 7 £12.75 £10.06 1 Comparative figures have been restated from UK GAAP to IFRS. Consolidated statement of recognised income and expense For the year ended 30 December 2006 Unaudited Unaudited Unaudited Restated 1 2006 2005 £m £m Foreign exchange translation differences (0.7) - Revaluation gains on owner occupied property 2.3 0.4 -------------------- Net income recognised directly in equity 1.6 0.4 Profit for the year 222.3 202.7 Net investment hedge - - -------------------- Total recognised income and expense 223.9 203.1 -------------------- Reconciliation of movement in equity shareholders' funds Unaudited Unaudited Unaudited Restated 1 2006 2005 £m £m Opening equity shareholders' funds as restated 707.7 501.2 Issue of shares 2.7 50.1 Acquisition of own shares (8.3) - LTIP credit in respect of LTIP charge 2.1 1.9 Arising on conversion/repurchase of CULS (0.8) (47.4) Reserve arising on acquisition - 9.5 Other movements (0.1) - -------------------- 703.3 515.3 Total recognised income and expense 223.9 203.1 -------------------- 927.2 718.4 Dividends paid (14.1) (10.7) -------------------- Closing equity shareholders' funds 913.1 707.7 -------------------- 1 Comparative figures have been restated from UK GAAP to IFRS. Consolidated cash flow statement For the year ended 30 December 2006 Unaudited Unaudited Unaudited Restated 1 2006 2005 Notes £m £m Net cash generated from operations 9 89.5 46.7 --------------------- Distributions received from joint ventures 21.9 6.7 and associates Interest paid (22.2) (16.6) Interest received 2.0 0.7 Income taxes paid (3.8) (0.4) --------------------- Cash flows from operating activities 87.4 37.1 --------------------- Investing activities Acquisitions of investment properties (266.9) (141.9) Proceeds from sale of investment properties 111.0 58.8 Investment in joint ventures (8.1) - Loans to joint ventures (0.7) (0.2) Proceeds from sale of units in associated 30.0 - entity Acquisitions and disposals of other fixed (0.9) (18.0) assets --------------------- Cash flows from investing activities (135.6) (101.3) --------------------- Financing activities Proceeds from the issue of ordinary share 0.4 49.6 capital Purchase of own shares (8.3) - Repurchase of CULS - (62.8) Bank loans received 639.4 325.6 Bank loans repaid (575.0) (201.7) Dividends paid to minority interests (0.6) - Equity dividends paid (14.1) (10.8) --------------------- Cash flows from financing activities 41.8 99.9 --------------------- Net (decrease)/increase in cash and cash (6.4) 35.7 equivalents Cash and cash equivalents at beginning of year 40.1 4.4 Effect of foreign exchange rate changes 1.8 - --------------------- Cash and cash equivalents at end of year 35.5 40.1 --------------------- 1 Comparative figures have been restated from UK GAAP to IFRS. Notes to the accounts 1 Status of financial information The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 30 December 2006 or 2005. The IFRS financial information for the year ended 30 December 2005 was derived by the restatement of information extracted from the annual report and accounts for the year, which was prepared under UK GAAP and which has been filed with the UK registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain a statement under s. 237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 30 December 2006 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's annual general meeting. 2 Business and geographic segments 2a Business segments The Group operates in two main business segments, an assets business and an earnings business. The assets business consists of property investment activities and the earnings business consists of property management activities and the ski slope business of Sno!zone. The businesses are the basis on which the Group reports its primary business segments. Unaudited Assets Earnings Year to 30 Property Property Property December investment investment management 2006 UK Germany UK Sno!zone Total 2006 Note £m £m £m £m £m Net rents 2b 65.5 11.5 - - 77.0 Net interest 2b (49.6) (5.7) - - (55.3) ------------------------------------------------------ Contribution 2b 15.9 5.8 - - 21.7 Management fees - - 27.4 - 27.4 Snozone income - - - 13.1 13.1 Snozone expenses - - - (11.3) (11.3) Management expenses (4.6) - (14.0) - (18.6) ------------------------------------------------------ Recurring pre-tax profit 11.3 5.8 13.4 1.8 32.3 Performance fees - - 62.6 - 62.6 Cost of performance fees (20.1) (0.3) - - (20.4) Variable overhead - - (18.3) - (18.3) Gain on investment 149.5 17.2 - - 166.7 properties Profit on disposals 11.1 - - - 11.1 Gain on interest rate swaps 23.5 - - - 23.5 Other non-recurring items (2.0) (2.5) (2.1) - (6.6) ------------------------------------------------------ Profit before tax 173.3 20.2 55.6 1.8 250.9 --------------------------------------------- Tax (28.6) --------- Profit after tax 222.3 --------- Assets 1,007.3 405.9 95.5 4.0 1,512.7 Liabilities (232.4) (302.4) (60.5) (4.3) (599.6) ------------------------------------------------------ Net assets/(liabilities) at 774.9 103.5 35.0 (0.3) 913.1 30 December 2006 ------------------------------------------------------ Unaudited Restated Assets Earnings Year to 30 Property Property Property December investment investment management 2005 UK Germany UK Sno!zone Total 2005 Restated Note £m £m £m £m £m Net rents 2b 54.0 3.3 - - 57.3 Net interest 2b (40.5) (2.4) - - (42.9) ------------------------------------------------------- Contribution 2b 13.5 0.9 - - 14.4 Management fees - - 22.8 - 22.8 Snozone income - - - 9.3 9.3 Snozone expenses - - - (7.6) (7.6) Management expenses (3.2) - (12.6) - (15.8) ------------------------------------------------------- Recurring pre-tax profit 10.3 0.9 10.2 1.7 23.1 Performance fees - - 50.9 - 50.9 Cost of performance fees (17.1) - - - (17.1) Variable overhead - - (18.6) - (18.6) Gain on investment 148.1 4.7 - - 152.8 properties Write back of negative 10.6 - - - 10.6 goodwill Profit on disposals 9.4 - - - 9.4 Loss on interest rate swaps (11.3) - - - (11.3) Other non-recurring items (1.1) - - - (1.1) ------------------------------------------------------- Profit before tax 148.9 5.6 42.5 1.7 198.7 -------------------------------------------- Tax - - - - 4.0 ----------- Profit after tax - - - - 202.7 ----------- Assets 967.9 149.4 70.9 2.4 1,190.6 Liabilities (332.2) (106.1) (42.1) (2.5) (482.9) ------------------------------------------------------- Net assets at 30 December 635.7 43.3 28.8 (0.1) 707.7 2005 ------------------------------------------------------- 2b Contribution and Net Assets Unaudited Unaudited Contribution Net Assets Year to 30 Year to 30 December December Gross Property Net Net 2006 2006 Rent Costs rent interest Total Total 2006 Note £m £m £m £m £m £m Mall (C&R share: 24.2%)1 45.1 (13.0) 32.1 (18.0) 14.1 397.7 Junction (C&R share: 27.3%)1 14.5 (3.5) 11.0 (9.2) 1.8 245.8 X-Leisure (C&R share: 10.6%)1 4.9 (1.0) 3.9 (2.5) 1.4 41.9 Joint ventures Xscape (C&R share)2 6.6 (1.6) 5.0 (4.8) 0.2 54.3 Others (C&R share: 50%)1 0.3 (0.1) 0.2 (0.1) 0.1 13.3 Wholly owned Other UK 4.6 1.3 5.9 (8.2) (2.3) 3.7 Fix UK 4.7 (1.5) 3.2 (3.0) 0.2 53.3 Great Northern3 5.3 (1.1) 4.2 (3.8) 0.4 (0.2) Germany 14.3 (2.8) 11.5 (5.7) 5.8 103.5 ---------------------------------------------------------- Total 100.3 (23.3) 77.0 (55.3) 21.7 913.3 ---------------------------------------------------------- Unaudited Unaudited Restated Restated Contribution Net Assets Year to to Year to 30 30 December December Gross Property Net Net 2005 2005 Rent Costs rent interest Total Total 2005 Restated Note £m £m £m £m £m £m Associates Mall (C&R share: 26.1%)1 41.4 (12.0) 29.4 (14.5) 14.9 344.3 Junction (C&R share: 27.3%)1 13.0 (2.7) 10.3 (8.0) 2.3 207.7 X-Leisure (C&R share: 10.7%)1 4.7 (0.9) 3.8 (2.5) 1.3 31.4 Joint ventures Xscape (C&R share)2 4.5 (0.9) 3.6 (3.6) - 45.8 Others (C&R share: 50%)1 2.4 (0.9) 1.5 (1.5) - 4.0 Wholly owned Other UK 3.3 0.2 3.5 (9.0) (5.5) 14.8 Fix UK 0.4 (0.1) 0.3 (0.2) 0.1 18.4 Great Northern3 2.0 (0.4) 1.6 (1.2) 0.4 (2.0) Germany 5.3 (2.0) 3.3 (2.4) 0.9 43.3 ---------------------------------------------------------- Total 77.0 (19.7) 57.3 (42.9) 14.4 707.7 ---------------------------------------------------------- Associates and Joint Ventures are all held within the United Kingdom. 1. Capital & Regional's share at end of year. 2. Capital & Regional's share consists of: Xscape Milton Keynes 50% (2005: 50%), Xscape Castleford 66.67% (2005: 66.67%) and Xscape Breahead 50% (2005:50%). 3. During 2005 Great Northern was a joint venture and became a subsidiary of the Group on 4 October 2005. Since this date Great Northern has been fully consolidated as a 100% subsidiary. The contribution relating to the period to 4 October 2005 is included under other joint ventures. The contribution since that date is included under wholly owned. 2c Revenue Unaudited Unaudited Restated Year to Year to 30 December 30 December 2006 2005 Total Total Note £m £m Property investment 28.9 11.0 Property management 90.0 73.7 Snozone 13.1 9.5 Other 0.1 - ------------------------ Revenue per consolidated income 132.1 94.2 statement Finance income 2.0 0.8 ------------------------ Total revenue 2d 134.1 95.0 ------------------------ CRPM earns performance fees, which are shown as property management revenue, on the out-performance of the Funds . The performance fees accrued in the period to 30 December 2006 are £62.6m (30 December 2005: £50.9m). 2d Geographical segments Unaudited Unaudited Restated Year to Year to 30 December 30 December 2006 2005 Total Total Revenue by geographical market Note £m £m United Kingdom 119.8 89.7 Germany 14.3 5.3 ------------------------- Total revenue 2c 134.1 95.0 ------------------------- Segment net assets United Kingdom 809.6 664.4 Germany 103.5 43.3 ------------------------- Net assets 913.1 707.7 ------------------------- 3 Tax 3a Tax charge/(credit) Unaudited Unaudited Restated Year to Year to 30 December 30 December 2006 2005 Total Total £m £m Current tax charge UK corporation tax 6.6 2.0 Adjustments in respect of prior years 9.7 0.5 Foreign tax 0.2 - ------------------------ Total current tax 16.5 2.5 ------------------------ Deferred tax On net income before revaluations and disposals 9.7 (6.1) On revaluations and disposals 0.3 (0.4) Adjustments in respect of prior years 2.1 - ------------------------ Total deferred tax 12.1 (6.5) ------------------------ Total taxation charge/(credit) 28.6 (4.0) ------------------------ 3b Tax charge reconciliation Unaudited Unaudited Restated Year to Year to 30 December 30 December 2006 2005 Total Total £m £m Profit before tax 250.9 198.7 ------------------------ Profit multiplied by the UK corporation tax 75.3 59.6 rate of 30% Non-allowable expenses and non-taxable items (6.1) (17.5) Utilisation of tax losses (3.9) - Tax on revaluation gains (3.5) 0.3 Unrealised gains on investment property not (45.0) (46.9) taxable Prior year adjustments 11.8 0.5 ------------------------ Tax charge/(credit) 28.6 (4.0) ------------------------ 3c Deferred tax movements Capital Other gains net of Capital timing Unaudited capital losses allowances differences Total £m £m £m £m As at 31 December 2005 3.8 6.8 (8.9) 1.7 Recognised in income 1.9 3.6 6.6 12.1 ----------------------------------------------- As at 30 December 2006 5.7 10.4 (2.3) 13.8 ----------------------------------------------- At balance sheet date, the Group has unused tax losses of £0.7million (2005: £3.5million) available for offset against future profits. No deferred tax asset has been recognised in respect of such losses (2005: £nil). The remaining tax losses have not been recognised due to the unpredictability of future profit streams. The calculation of the Group's tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until a formal resolution has been reached with the relevant tax authorities. In such cases, the Group has reserved on the basis that these provisions are required. If all such issues are resolved in the Group's favour, provisions of up to £18.4million could be released in future periods. A significant part of the Group's property interests is held offshore. The Group has also undertaken a restructuring of its activities to separate legally its income and earnings businesses, in line with its business model. The Group has been advised that no capital gains tax liability arises on these transactions and that certain tax deductions and losses will be available following the restructuring, although the relevant computations have yet to be agreed. 4 Earnings per share The European Public Real Estate Association ("EPRA") has issued recommended bases for the calculation of certain earnings per share information and these are shown in the following tables. Unaudited Weighted average Earnings number of Pence 2006 £m shares per share Basic 222.3 71.5 311p Dilutive share options - 0.5 - Conversion of Convertible Unsecured 0.2 0.9 - Loan Stock ------------------------------- Diluted 222.5 72.9 305p --------- Revaluation movements on investment (166.7) (228)p properties, development properties and other investments Profit on disposal of investment (10.8) (15)p properties (net of tax) Movement in fair value of interest rate swaps (23.5) (32)p Deferred tax charge 11.7 16p ---------- ------------ EPRA diluted 33.2 46p ---------- ------------ Unaudited and restated Weighted average Earnings number of Pence 2005 £m shares per share Basic 202.7 69.0 294p Dilutive share options - 0.7 - Conversion of Convertible Unsecured 1.1 2.1 - Loan Stock ------------------------------- Diluted 203.8 71.8 284p --------- Revaluation movements on investment (155.8) - (217)p properties, development properties and other investments Profit on disposal of investment (6.5) - (9)p properties Negative goodwill (10.6) - (15)p Movement in fair value of interest 7.9 - 11p rate swaps Deferred tax credit (2.4) - (3)p ---------- ------------ EPRA diluted 36.4 51p Excluce tax effect of CULS buyback (13.0) - (18)p ---------- ------------ Adjusted EPRA diluted 23.4 33p ---------- ------------ The calculation includes the full conversion of the Convertible Unsecured Loan Stock where the effect on earnings per share is dilutive. Own shares held are excluded from the weighted average number of shares. The Convertible Unsecured Loan Stock charge added back to give the diluted earnings figures is net of tax at the effective tax rate for the year. 5a Analysis of investment in associates Unaudited Unaudited Restated Year to 30 Year to 30 December December The The X-Leisure 2006 2005 Mall Junction * LP LP LP Total Total Note £m £m £m £m £m Income statement (100%) Revenue 176.3 53.2 46.0 275.5 243.8 Property expenses (33.9) (2.6) (6.0) (42.5) (34.1) Management expenses (17.0) (10.4) (3.5) (30.9) (30.1) ------------------------------------------------- Net rents 125.4 40.2 36.5 202.1 179.6 Net interest payable (70.4) (33.6) (23.5) (127.5) (108.3) ------------------------------------------------- Contribution 55.0 6.6 13.0 74.6 71.3 Performance fees (49.2) (22.2) (13.0) (84.4) (69.6) Gain on investment properties 325.5 148.7 85.1 559.3 495.6 Profit/(loss) on sale of 7.4 (0.9) 4.2 10.7 2.3 investment properties Fair value movement on 52.1 21.0 13.2 86.3 (33.0) interest rate swaps ------------------------------------------------- Profit before and after tax 390.8 153.2 102.5 646.5 466.6 (100%) ------------------------------------------------- Balance sheet (100%) Investment property 3,185.2 1,568.3 813.6 5,567.1 4,560.2 Current assets 158.8 91.1 43.9 293.8 244.4 Current liabilities (139.4) (68.2) (54.4) (262.0) (214.6) Non-current liabilities (1,562.8) (694.9) (407.9) (2,665.6) (2,217.8) ------------------------------------------------- Net assets (100%) 1,641.8 896.3 395.2 2,933.3 2,372.2 ------------------------------------------------- C&R interest at year end 24.24% 27.32% 10.59% C&R interest at start of year 26.12% 27.32% 10.72% C&R weighted average interest 25.62% 27.32% 10.62% during the year Group share of Net rents 2b 32.1 11.0 3.9 47.0 43.5 Net interest payable 2b (18.0) (9.2) (2.5) (29.7) (25.0) ------------------------------------------------- Contribution 2b 14.1 1.8 1.4 17.3 18.5 Performance fees 2a (12.6) (6.1) (1.4) (20.1) (17.3) Gain on investment properties 84.1 40.7 9.1 133.9 123.2 Profit/(loss) on sale of 1.9 (0.2) 0.4 2.1 0.6 investment properties Fair value movement on 13.1 5.7 1.4 20.2 (7.1) interest rate swaps ------------------------------------------------- Profit for the year 100.6 41.9 10.9 153.4 117.9 ------------------------------------------------- Investment property 772.1 428.5 86.2 1,286.8 1,099.2 Current assets 38.5 24.9 4.6 68.0 60.1 Current liabilities (33.8) (19.2) (5.8) (58.8) (70.8) Non-current liabilities (378.8) (189.3) (43.1) (611.2) (504.5) ------------------------------------------------- Associate net assets 398.0 244.9 41.9 684.8 584.0 Unrealised profit on sale of (0.3) 0.9 - 0.6 (0.3) property to associate ------------------------------------------------- Group share of associate net 397.7 245.8 41.9 685.4 583.7 assets ------------------------------------------------- * X-Leisure is accounted for as an associate as Capital & Regional has significant influence arising from its membership of the General Partner Board. 5b Analysis of investment in joint ventures Unaudited Unaudited Restated Xscape Year to 30 Year to 30 Milton Xscape* Xscape December December Keynes Castleford Braehead 2006 2005 Partnership Partnership Partnership Others** Total Total Note £m £m £m £m £m £m Income statement (100%) Revenue 5.6 3.2 3.3 1.1 13.2 12.7 Property expenses (0.2) (1.3) (0.9) (0.4) (2.8) (3.0) Management expenses (0.1) (0.1) (0.1) - (0.3) (0.3) ------------------------------------------------------------------- Net rents 5.3 1.8 2.3 0.7 10.1 9.4 Net interest payable (2.8) (3.1) (2.5) (0.4) (8.8) (9.2) ------------------------------------------------------------------- Contribution 2.5 (1.3) (0.2) 0.3 1.3 0.2 Gain on investment 11.9 0.9 (0.7) 1.7 13.8 21.0 properties Profit on sale of - - - 5.5 5.5 4.2 investment properties Fair value movement on 0.4 0.5 1.8 0.2 2.9 (0.6) interest rate swaps ------------------------------------------------------------------- Profit before and after 14.8 0.1 0.9 7.7 23.5 24.8 tax (100%) ------------------------------------------------------------------- Balance sheet (100%) Investment property 105.9 71.1 73.6 70.1 320.7 214.9 Current property assets - - - 0.5 0.5 0.5 Current assets 7.0 5.5 8.2 22.2 42.9 32.4 Current liabilities (3.4) (8.9) (10.6) (6.7) (29.6) (23.4) Non-current liabilities (46.7) (45.6) (54.8) (50.9) (198.0) (132.0) ------------------------------------------------------------------- Net assets (100%) 62.8 22.1 16.4 35.2 136.5 92.4 ------------------------------------------------------------------- C&R interest at beginning 50.00% 66.67% 50.00% 30-50% and end of year Group share of Revenue 2.8 2.1 1.7 0.3 6.9 6.9 ------------------------------------------------------------------- Net rents 2b 2.7 1.2 1.1 0.2 5.2 5.1 Net interest payable 2b (1.4) (2.1) (1.3) (0.1) (4.9) (5.1) ------------------------------------------------------------------- Contribution 2b 1.3 (0.9) (0.2) 0.1 0.3 (0.0) Gain on investment 6.0 0.7 (0.4) 0.5 6.8 11.3 properties Profit on sale of - - - 2.7 2.7 2.1 investment properties Fair value movement on 0.2 0.3 0.9 0.1 1.4 (0.3) interest rate swaps ------------------------------------------------------------------- Profit for the year 7.5 0.1 0.3 3.3 11.2 13.1 ------------------------------------------------------------------- Investment property 53.0 47.4 36.8 21.1 158.3 119.1 Current property assets - - - 0.3 0.3 0.3 Current assets 3.5 3.7 4.1 10.2 21.5 17.1 Current liabilities (1.7) (6.0) (5.3) (3.1) (16.1) (13.1) Non-current liabilities (23.4) (30.4) (27.4) (15.2) (96.4) (73.6) ------------------------------------------------------------------- Group share of joint 31.4 14.7 8.2 13.3 67.6 49.8 venture net assets ------------------------------------------------------------------- * Capital & Regional plc has a 66.67% share in Xscape Castleford Partnership. The investment is accounted for as a joint venture, rather than a subsidiary, as a result of joint control and deadlock agreements that are in place. ** Principally the joint ventures are at Glasgow Fort with British Land plc (C&R share 50%) and at the Manchester Evening News Arena Complex with GE Commercial Finance (C&R share 30%). The investment at the Manchester Evening News Arena is accounted for as a joint venture, rather than an associate, as a result of joint control agreements that are in place. 6 Borrowings Unaudited Unaudited Restated 30 December 30 December 2006 2005 £m £m Unsecured CULS 1.3 3.0 Swapped bank loan 17.0 - -------------------------- 18.3 3.0 Secured Fixed and swapped bank loans 382.5 219.2 Variable rate bank loans 59.6 177.5 -------------------------- 442.1 396.7 Less unamortised issue costs (2.1) (0.8) -------------------------- 440.0 395.9 Less current payable element (0.2) (0.2) -------------------------- Non-current borrowings 439.8 395.7 -------------------------- Security for secured borrowings as at 30 December 2006 is provided by charges on property. 7 Net assets per share The European Public Real Estate Association ("EPRA") has issued recommended bases for the calculation of certain net asset per share information and this is shown in the following notes. Unaudited Restated Unaudited 30 December 30 December 2006 2005 Net Number of Net Net assets assets assets shares per share per share £m (m) (£) (£) Basic 913.1 72.4 12.61 9.95 Own shares held - (1.3) - - Fair value of fixed rate loans (net 2.2 - - - of tax) Fair value of trading properties 3.7 - - - Conversion of CULS 1.2 0.8 - - Dilutive share options 1.2 0.5 - - --------------------------------------- Triple net diluted net assets per 921.4 72.4 12.72 9.85 share Exclude fair value of borrowings (11.9) - - - (net of tax) Exclude fair value of fixed rate (2.2) - - - loans (net of tax) Exclude deferred tax on unrealised 16.1 - - - gains and capital allowances --------------------------------------- EPRA diluted (net assets per share) 923.4 72.4 12.75 10.06 --------------------------------------- 8 Return on equity Unaudited Unaudited Restated 30 December 30 December 2006 2005 Total Total £m £m Total recognised income and expense attributable to 223.9 203.1 equity shareholders Opening equity shareholders' funds 707.7 501.2 Return on equity 31.6% 40.5% 9 Reconciliation of net cash generated from operations Unaudited Unaudited Restated Year to Year to 30 December 30 December 2006 2005 Total Total £m £m Profit on ordinary activities before financing 274.5 216.9 Adjusted for: Share of profit in joint ventures and associates (164.6) (129.3) Gain on revaluation of investment properties (26.0) (21.3) Negative goodwill released to income - (10.6) Profit on sale of trading and development properties 1.5 (2.4) Depreciation of other fixed assets 0.3 0.3 Amortisation of short leasehold properties 0.1 0.1 Amortisation of tenant incentives (0.9) - Profit on sale of investment properties (6.0) (4.3) Profit on disposal of fixed assets - 1.2 Increase in receivables (3.4) (23.8) Increase in payables 6.8 17.7 Unrealised loss on foreign exchange 4.9 - Non-cash movement relating to the LTIP 2.3 2.2 ----------------------- Net cash generated from operations 89.5 46.7 ----------------------- Portfolio information - unaudited Portfolio under management * # 30 30 30 December December December 2006 2005 2004 £m £m £m Investment properties 512 320 83 Trading properties 94 94 8 The Mall Fund 3,125 2,338 2,099 The Junction Fund 1,590 1,459 1,010 X-Leisure Fund 807 702 597 Other joint ventures 329 226 226 -------------------------- Total 6,457 5,139 4,023 -------------------------- Properties under management above are shown at valuation and do not include the adjustments in respect of: * Accounting for head leases that are deemed to be finance leases. # The treatment required by IFRS of rent free periods, capital contributions and leasing costs. Fund portfolio information calculated under UK GAAP* At 30 December 2006 Mall Junction X-Leisure German Fund Fund Fund Portfolio Fix UK Number of core properties 23 16 17 44 24 Number of lettable units 2,404 233 285 143 166 Square feet ('000s) 8,299 3,575 3,092 4,398 1,041 Properties at market value* £3,125m £1,590m £807m £382m £110m Initial yield % 4.56% 3.29% 4.99% 6.01% 4.51% Equivalent yield % 5.21% 4.45% 5.94% n/a 5.72% Vacancy rate % 4.21% 6.00% 3.20% 0.62% 7.62% Net rental income (£m per annum) £151.2m £55.7m £42.6m £23.0m £5.2m Estimated rental value (£m per £187.5m £72.6m £49.4m n/a £6.8m annum) Rental increase (ERV) 5.26% 3.59% 3.46% n/a 4.52% Reversionary % 12.97% 17.40% 5.84% n/a 13.69% Loan to value ratio 47.79% 43.79% 49.90% 74.00% 63.78% Underlying valuation change since 12.05% 11.00% 13.00% 9.59% 11.65% 30 December 2005** Property level return 17.60% 14.99% 19.70% 15.20% 17.41% Geared return 26.30% 18.33% 30.40% 34.20% 37.59% Published unit price £2.4883 £2.8481 £1.7586 n/a n/a (£1.00 at inception) C&R Share 24.24% 27.32% 10.59% 92.16% 100.00% * Properties under management include tenant incentives which are transferred to current assets for accounting purposes. ** Based on weighted average cost since 2005 less deposits Glossary of terms Capital allowances deferred tax provision. In accordance with IAS 12, full provision has been made for the deferred tax arising on the benefit of capital allowances claimed to date. However, in the Group's experience the liabilities in respect of capital allowances provided are unlikely to crystallise in practice and are therefore excluded when arriving at EPRA NAV. CRPM Capital & Regional Property Management Limited is a subsidiary of Capital & Regional plc and earns the management and performance fees arising from Capital & Regional's interests in the associated Funds and joint ventures. Contribution comprises Capital & Regional's share of the net rents less net interest arising from Capital & Regional's interests in its joint ventures, associates and wholly owned entities. CULS is the Convertible Subordinated Unsecured Loan Stock. EPRA adjusted fully diluted NAV per share includes the effect of those shares potentially issuable under the CULS or employee share options and excluding own shares held. The unrealised gains and capital allowances deferred tax provision, the fair value of borrowings net of tax and the fair value of trading properties are added back. EPRA earnings per share (EPS) is the profit after taxation excluding gains or losses on asset disposals and revaluations and their related taxation, movements in fair values of financial instruments, intangible asset movements and the capital allowance effects of IAS 12 where applicable, less taxation arising on these items, divided by the weighted average number of shares in issue during the year excluding own shares held. EPRA triple net, fully diluted NAV per share includes the effect of those shares potentially issuable under the CULS or employee share options and excluding own shares held. NAV is adjusted for the fair value of debt and the fair value of trading properties. Estimated rental value (ERV) is the Group's external valuers' opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property. Equivalent yield is a weighted average of the initial yield and reversionary yield and represents the return a property will produce based upon the timing of the income received. In accordance with usual practice, the equivalent yields (as determined by the Group's external valuers) assume rent received annually in arrears and on gross values including prospective purchasers' cost. ERV growth is the total growth in ERV on properties owned throughout the year including growth due to development. Gearing is the Group's net debt as a percentage of net assets. Seeing through gearing includes our share of non-recourse net debt in the associates and joint ventures. Initial yield is the annualised net rents generated by the portfolio expressed as a percentage of the portfolio valuation, excluding development properties. IPD is Investment Property Databank Ltd, a company that produces an independent benchmark of property returns. Loan to value (LTV) is the ratio of net debt excluding fair value adjustments for debt and derivatives, to the aggregate value of properties (including the surplus of the open market value over the book value of trading properties), investments in joint ventures and funds and other investments. Market value is an opinion of the best price at which the sale of an interest in the property would complete unconditionally for cash consideration on the date of valuation (as determined by the Group's external valuers). In accordance with usual practice, the Group's external valuers report valuations net, after the deduction of the prospective purchaser's costs, including stamp duty, agent and legal fees. Net assets per share (NAV) are shareholders' funds divided by the number of shares held by shareholders at the period end, excluding own shares held. Net rent is Capital & Regional's share, on a see through basis, of the rental income, less property and management costs excluding performance fees, of the Group, its associates and joint ventures. Net interest is Capital & Regional's share, on a see through basis, of the interest payable less interest receivable of the Group, its associates and joint ventures. Passing rent is the gross rent, less any ground rent payable under head leases. Return on equity is the total return, including revaluation gains and losses, divided by opening equity plus time weighted additions to share capital, excluding share options exercised, less reductions in share capital. Recurring pre-tax profit is the sum of Contribution plus management fees, Snozone income less Snozone expenses, less fixed management expenses. Reversion is the estimated increase in rent at review where the gross rent is below the estimated rental value. Reversionary percentage is the percentage by which the ERV exceeds the passing rent. Reversionary yield is the anticipated yield, which the initial yield will rise to once the rent reaches the estimated rental value. See through balance sheet is the pro forma proportionately consolidated balance sheet of the Group, its associates and joint ventures. See through income statement is the pro forma proportionately consolidated income statement of the Group, its associates and joint ventures. Total return is the Group's total recognised income for the year as set out in the Consolidated Statement of Recognised Income and Expense ("SORIE") expressed as a percentage of opening equity shareholders' funds, excluding CULS reserve. Total shareholder return is the growth in price per share plus dividends per share. SIC 15 "Operating lease - incentives" debtors under accounting rules the balance sheet value of lease incentives given to tenants is deducted from property valuation and shown as a debtor. The incentive is amortised through the income statement. Vacancy rate is the estimated rental value of vacant properties expressed as a percentage of the total estimated rental value of the portfolio, excluding development properties. Variable overhead includes discretionary bonuses and the cost of awards to employees made under the LTIP and CAP and is spread over the performance period. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Capital & Regional (CAL)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today