Interim Results

RNS Number : 1723C

Capital & Regional plc

28 August 2008

CAPITAL & REGIONAL PLC:

HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS TO 30 JUNE 2008

Capital & Regional plc, the co-investing property asset manager, today announces its unaudited interim results for the six months ended 30 June 2008.

Highlights

Financial position much improved through transactions totalling nearly £800m.*
Agreement on revised financial covenants with our principal lending bank for the core banking facility.*
Introduction of Apollo Real Estate as a new 50% joint venture partner in the Group's German business, subject to shareholder approval.*
Occupancy rates and lettings robust during the period.
Net assets £493m (Dec 2007: £703m).
Triple net diluted Net Asset Value per share £7.06 (Dec 2007: £10.04).
Recurring pre-tax profit for six months £16.4m (Jun 2007: £17.6m).
Interim dividend 5p (Jun 2007: 10p).
Loss after tax, including revaluation deficit, of £201m (Jun 2007: profit of £43m).
Property under management £5.3bn (Jun 2007: £6.6bn).

Commenting on the results, Tom Chandos, Chairman, said:

"Management's focus on increasing financial flexibility is delivering a more durable capital structure for the Group. This will better position the company given the expectation of further falls in property values in the second half of the year and possibly beyond.

In very challenging market conditions the value of our property asset management expertise is reflected in a robust operating performance. The 30% fall in net asset value during the first half can clearly be attributed to problems in the banking and property investment markets, exacerbated by high leverage, rather than in the tenant facing business which has been resilient."

* including events between 30 June 2008 and the current date.

For further information:

Hugh Scott-Barrett, Chief Executive, Capital & Regional	Tel: 020 7932 8000
William Sunnucks, Group Finance Director, Capital & Regional	Tel: 020 7932 8000
Emma Burdett, Martin Leeburn, Maitland	Tel: 020 7379 5151

Interim Management Report

Chief Executive's statement

Highlights

My arrival as Chief Executive of Capital & Regional has coincided with some of the most challenging market conditions the property sector has seen in many years. The resulting fall in valuations is the major factor in reporting a post-tax loss of £201m for the first half of 2008.

Despite this, our underlying tenant-facing business remained healthy during the half year, with solid underlying rental growth and we continued to generate significant recurring pre-tax profits after excluding all performance-related and one-off items.

	June 2008	June 2007	Dec 2007
	(6 months)	(6 months)	(12 months)
Scale of business:
Property under management	£5.3bn	£6.6bn	£6.1bn

Balance sheet
Triple net diluted NAV per share	£7.06	£13.18	£10.04
Period end share price	£1.90	£11.64	£3.92

Profitability
Recurring pre-tax profit	£16.4m	£17.6m	£32.7m
Dividend per share	5p	10p	27p
IFRS (Loss)/profit after tax	£(201)m	£43m	£(167)m

De-gearing: In the first half we carried out a number of transactions which enhanced the Group's financial position.

On 6 March we sold 80% of the FIX portfolio, reducing the Group's debt by £155m.
On 20 March the Junction Fund completed on the disposal of Great Western Retail Park, Glasgow for £58.5m.
On 27 June the Mall Fund raised £286m equity through a rights issue to unit holders.

Since 30 June our position has been further enhanced as follows:

On 2 July the Mall Fund completed the disposal of three shopping centres to Carlyle for £286m.
On 19 August we announced the sale of a 50% interest in our German portfolio to Apollo for a cash consideration of €65.6m.
On 22 August the Junction exchanged contracts for the sale of the Templars Retail Park in Oxford for £57m.
On 27 August we finalised the renegotiation of our financial covenants with our principal lending bank to provide us with greater covenant headroom within our facilities.

Following completion of these transactions our total debt calculated on a pro forma basis will have fallen by 40% as follows:

C&R debt position - summary
	Dec-07	Jun-08	Pro-forma
	£m	£m	£m
Group debt	625	516	223
Off balance sheet debt (our share)	709	551	575
Total debt (our share)	1,334	1,067	798
Reduction in 2008 YTD			(40)%

German portfolio: We will be sending shortly a circular letter to shareholders to request approval for the introduction of Apollo as a joint venture partner for our German portfolio. The benefits of the transaction are threefold:

Financial: It generates £44m of cash, and reduces the Group's gearing on both a statutory and see through basis.
Operational: With the support of Apollo, our German property asset management team will be able to implement a business plan in which capital is recycled more aggressively and capital expenditure is funded largely from disposals.
Strategic: It points the way to the Group's new strategy described in more detail below, where C&R's operating skills combine with third party pools of equity to create additional value for shareholders.

Operating review

Tenant markets: C&R's tenant facing business has delivered a resilient operating performance in the first half of the year. Although there are early signs of the impact of the consumer downturn, the Group's three main fund portfolios delivered a solid underlying rental performance. Occupancy remains close to last year's level whilst rent reviews continue to be settled above ERV.

Passing rent for the funds, calculated on a weighted average basis, was 3.2% higher in June 2008 than in June 2007. Growth has ranged from 1.8% for X-Leisure, where approximately 37.7% of rents are index-linked, to 5.3% for the Junction where there have been significant new lettings.

Occupancy across the three funds has fallen only slightly from last year's levels, at 94.8% in June 2008 compared to 95.4% in June 2007. Occupancy increased for the Junction and X-Leisure, but decreased from 95.5% to 94.1% at the Mall where space was taken back for development activity in late 2007. In Germany occupancy remains high at 98.1%.

In the first half of the year we completed 97 rent reviews for the funds representing passing rent of £13m at 1.6% above ERV at December 2007.

The number of new lettings in the funds increased to 174 in H1 2008 from 123 in H1 2007, albeit that the new passing rent was slightly lower at £6.25m compared to £6.59m. The new lettings averaged 2.0% over ERV at December 2007. Outside the funds there has been particular letting success as our joint venture retail park development at Cardiff nears practical completion with four lettings in recent weeks, and the development is now 88% let by area.

Tenants in 66 units, representing passing rent of £6.3m or 2.2% of the total, went into administration in the first six months of the year. This compares to 71 units and £5.3m, representing 2.0% of the total, in the equivalent period in 2007. Of those tenants, 64% are continuing to trade and pay rent, compared to 66% by value in 2007.

Property investment markets: the limited availability of bank finance combined with a sharp increase in the cost of term funding had a significant impact on valuations in the first half. In addition the five year swap rate rose during the period to a peak of 6.2% in June. Since then it has fallen back to circa 5.3% which may, if the trend is sustained, ultimately help strengthen investment demand.

Fund performance
	Full year	Full year	Full year	Full year	Period to
					30 June
Mall	2004	2005	2006	2007	2008
Property level returns	19.6%	16.5%	17.6%	(3.3)%	(12.8)%
Geared returns	26.0%	22.8%	26.3%	(13.2)%	(32.0)%
IPD shopping centre index	17.1%	16.3%	12.7%	(3.2)%	(5.9)%**

Junction
Property level returns	24.0%	23.3%	15.0%	(16.8)%	(7.3)%
Geared returns	35.6%	34.1%	18.3%	(34.0)%	(16.5)%
IPD retail parks index	23.5%	22.1%	14.7%	(9.6)%	(7.2)%**

X-Leisure
Property level returns	11.4%^	15.3%	19.7%	2.1%	(4.9)%
Geared returns	18.0%^	28.3%	30.4%	(3.0)%	(12.1)%

Weighted average*
Property level returns	20.3%	18.5%	16.8%	(7.5)%	(10.2)%
Geared returns	28.3%	26.6%	23.7%	(19.6)%	(28.7)%

* based on C&R exposure to the three funds
** total return rather than IRR.
^ nine month period.

From the above table, it is clear that The Mall significantly underperformed its index. This was attributable, at least in part, to the timing of the sale of three shopping centres to Carlyle, which was used as comparable evidence for the Mall valuation.

The valuation falls have been predominantly caused by adverse yield shift rather than deterioration in tenant markets. The following table shows the yield movements experienced in the first half.

	June 2008	Dec 2007	Yield shift
			over 6
			months
Nominal equivalent yields
Mall	6.65%	5.69%	0.96%
Junction	5.80%	5.32%	0.48%
X-Leisure	6.17%	5.78%	0.39%
Weighted average	6.28%	5.60%	0.68%

Germany	6.24%	5.99%	0.25%


Initial yields
Mall	5.66%	4.84%
Junction	4.95%	4.37%
X-Leisure	5.38%	5.06%
Weighted average	5.37%	4.75%

Germany	6.24%	5.99%

The table above shows the nominal equivalent yields on our portfolios. The true equivalent yields are approximately 0.2% higher, and this adjustment should be made in comparison to IPD benchmark yields.

Financial review

Recurring profits: our recurring profit, which excludes valuation movements and other one-off items such as performance fees, comes from our four business segments as follows:

	6 months to	6 months to
	30 June	30 June
	2008	2007
	£m	£m

Property investment UK	4.5	6.2
Property investment Germany	5.8	4.9
Managing property funds	4.6	4.8
SNO!zone	1.5	1.7
Recurring pre tax profit	16.4	17.6

The notable increase in recurring profits from our German portfolio is attributable to the strength of the euro, which magnifies euro denominated cash flows when translated into sterling. There has been a drop in management fee income due to the reduction in the size and valuation of the funds.

Dividend: the Board is proposing a 5p interim dividend payable in cash. Although this represents a significant reduction from the level of the previous year, the Board believes it is important to maintain maximum financial flexibility against the background of very challenging market conditions. A decision on the amount of the final dividend will be taken in light of the then prevailing market conditions and the outlook for recurring profits in 2009 and subsequent years.

	2004	2005	2006	2007	2008
	pps	pps	pps	pps	pps
Interim	5	7	9	10	5
Final	9	11	17	17
Total	14	18	26	27
Increase	56%	29%	44%	4%
% of recurring ptp	54%	55%	58%	59%

Performance fees: in 2007 we provided in full for all performance fees repayable for Mall and Junction and there is no further accounting impact in the first half. As part of the rights issue negotiations we agreed to repay £25m to the Mall Fund, 50% in September 2008 and 50% December, which represents the full £37m repayable adjusted for our share as investors. There are no further performance fee repayments to be made to the Junction Fund.

During the first half we have provided an extra £4m out of a possible £10.4m for performance fees potentially repayable to the X-Leisure Fund, based on current expectations of 2008 returns.

Balance sheet: we present our balance sheet in three ways.

The enterprise balance sheet shows what we manage.
The see through balance sheet shows our economic exposure to different market segments.
The statutory balance sheet reflects the accounting rules and more closely reflects our legal responsibilities.

Three balance sheets at 30 June 2008
	Enterprise	See through	Statutory
	£m	£m	£m
Fund properties
Mall	2,700	452	220
Junction	1,029	281	138
X-Leisure	887	172	79
Fix UK	173	35	8

Joint venture properties
Xscape Braehead	64	32	1
Manchester Arena	64	19	5
Cardiff	44	22	-

Wholly owned properties
Germany	505	461	505
Hemel Hempstead and others	32	32	32
Great Northern	89	89	89

Total property	5,587	1,595	1,077

Working capital etc.	28	(35)	(68)
Debt	(3,289)	(1,067)	(516)

Net assets	2,326	493	493

C&R shareholders	493	493	493
Fund investors	1,833
Total equity	2,326	493	493
Leverage (LTV)	59%	67%	48%
Leverage (LTV) pro forma*	57%	61%	33%

* after impact of sale of three shopping centres, Templars Retail Park and the German joint venture.

Our NAV per share is £7.06 on a triple net basis, down from £10.04 in December 2007. The major cause of this fall is an adverse shift in valuation yields. A lesser cause of the fall in NAV per share is the one-off impact of the Mall rights issue. The Group benefited from the stability the rights issue brought to the Mall but suffered a loss from the dilution effect of not subscribing, which we reported at 60p per share in relation to the May valuations. Using June valuations, as required by accounting rules, the adverse impact (before recognising the Carlyle sales) was £29m or 41p per share.

Debt and bank covenants: during the first half of the year Group debt fell from £625m to £516m. 74% of this Group debt relates to the German portfolio which is strictly self-supporting and non-recourse to Capital & Regional plc. Following the formation of the joint venture with Apollo our Group debt will fall further to £223m.

Group Debt	Debt at	Average		Duration	Duration to
	30 June	interest	%	of fixing	loan expiry
	2008 £m	rate %	Fixed	(months)	(months)

Core revolving credit facility	44	5.72	148%	31	31
Great Northern debt	69	6.39	100%	27	27
Hemel Hempstead debt	12	5.52	100%	2	14
Victoria debt	8	6.90	0%	n/a	16
Germany debt	383	4.68	102%	38	38
Group debt	516	5.05	103%	35	35

We have recently reached agreement with our principal lending bank in relation to the covenants on our £175.5m revolving credit facility. We have previously disclosed that this facility had a see through gearing covenant set at 250%, and that the calculation at 31 March 2008 showed 204%.

In return for a reduction in the amount of the facility from £175.5m to £125.5m and an increase in interest margin from 0.9% to 1.4%, the bank has amended the see through gearing covenant so that only debt with recourse to the Group is included. This removes all fund, German and other non-recourse debt from the calculation, as we have given no guarantees in respect of these facilities. The new covenant is set at 200%, and the calculation at 30 June on this basis showed 38%.

The revised £125.5m bank facility is £49.3m drawn at 28 August and is supported by the Group's investments in the Mall, Junction and X-Leisure Funds, and the cash flows arising from SNO!zone and Capital & Regional Property Management. In addition to the amended gearing covenant described above, it has an interest cover covenant set at > 150% (actual 871% for 6 months ending 30 June), and an asset cover set at > 2:1 (actual 9:1 at 30 June), under which the carrying value of the fund units in our accounts cannot fall below 200% of the amount drawn.

Off balance sheet debt: our share of fund and joint venture debt fell from £709m to £551m during the first half of the year, following the Mall rights issue. Since 30 June this figure will have decreased due to the sale of three Malls and one retail park, but will increase following the completion of the proposed Apollo transaction.

Off balance sheet debt	Debt at	Average		Duration	Duration to
	30 June	interest	%	of fixing	loan expiry
	2008 £m	rate%	Fixed	(months)	(months)

JV debt (our share)	63	6.43	56%	44	45
German minorities	(33)	4.68	100%	38	38
Mall (16.7% share)	239	5.14	88%	46	46
Junction (27.3% share)	161	5.18	100%	43	33
X-Leisure (19.4% share)	94	6.08	82%	30	41
FIX UK (20% share)	27	6.66	94%	41	48
Off balance sheet debt	551	5.56	86%	42	42

Fund level de-gearing: the following actions either have been taken or are being pursued:

The Mall Fund has significantly increased its financial resilience by raising new equity and selling three shopping centres to Carlyle.

The proceeds of the rights issue were used to pay off the entire outstanding balance of £263m on the RBS facility, removing the 60% LTV covenant contained in that facility. Of the balance, £22m has been retained to fund committed capital expenditure.

The proceeds of the sale to Carlyle will be used to pay down £189m of the Mall bonds, and the remainder will be set aside for potential future capital expenditure, pending the outcome of the business plan review scheduled for autumn 2008.

The only remaining LTV constraint is in the partnership deed rather than any bank facility, and is defined on an "incurrence basis". In other words if the 60% LTV limit were exceeded as a result of falling valuations no remedy would be required and no event or default would occur, although additional borrowing could not be incurred until the LTV fell below 60%. At 30 June before completion of the Carlyle disposal this stood at 53.4%.

The Mall bonds contain an interest cover covenant set at 130%. During the first half of 2008 interest cover was 182%.

The Junction Fund has an LTV banking covenant of 60%, and was standing at 56% at 30 June. The Oxford disposal will, when complete, reduce it by about 2%. There is also an interest cover covenant currently set at 127.5%. Interest cover during the first half of 2008 was 160%.

The fund is at an advanced stage of negotiating with its banks a package of amendments which will provide significantly enhanced headroom within its banking covenants. In addition to seeking flexibility from the banks, the fund is working closely with Morley and Hermes on longer term solutions to achieve the most advantageous outcome for unit holders.

Until and unless a strategic solution can be found, the Junction will continue to dispose of assets to ensure it remains within its banking covenants.

On 22 August contracts were exchanged for the sale of Templars Retail Park in Oxford for £57m, which compares to a book value of £66m at the end of June. The proceeds of the sale will be used to pay down debt.

The X-Leisure Fund has a fund LTV of 54.2%. It has three property level banking facilities, and a £415m central facility which was £350m drawn. The central facility has an LTV covenant of 70% and the ratio at 30 June 2008 stood at 59.9%. Further headroom can be generated by charging one property on which there is no charge to any bank facility at present. Adjusted for this, the LTV on the central facility is close to the fund LTV.

There is also an interest cover covenant on the central facility currently set at 130%. Interest cover during the first half of 2008 was 167%.

We retain a 20% interest in the FIX portfolio and account for it as an associate. However we do not manage the portfolio and have therefore excluded it from our property under management statistics.

We currently have three joint ventures with bank debt, and have provided cost over-run and interest shortfall guarantees for two of them, at Braehead and Cardiff. At both Braehead and Cardiff, the developments are complete and we have agreed terms with the banks to extend the period of the development finance or provide long term investment finance.

Strategy

Management attention has concentrated on safeguarding the financial position of the Group. However, since joining on 1 April, I have still had the opportunity to form views on the strategic priorities for the Group.

In conjunction with the delivery of a more resilient capital structure for the Group, we will focus our efforts on improving returns to shareholders. In particular:

We will continue to support the delivery of out performance from the funds where we act as property asset manager. The Mall and X-Leisure in particular provide a core distinctive offering for their respective unit holder base and C&R expects to be able to generate stable cash flows from its position both as investor and property asset manager. We welcome potential changes in the structure of performance fees since they are likely to focus such fees on relative property level performance which is exactly where C&R's expertise can best be leveraged.
We will free up capital from the sale of assets held at the Group level. Improved financial stability means that we are not under pressure to sell such assets but will do so in such a way to protect value. Great Northern represents one such asset. Whilst it is a high quality property, C&R has now substantially completed the asset management opportunities. We will not, therefore, compromise on value but a disposal will free up capital for reinvestment. The proceeds will be used to reinforce our capital base and provide a source of further capital to invest in due course.
We will build on the strength of our management teams as property asset managers in the retail and leisure sectors. The commitment of capital remains integral to the future strategy of C&R. However, it is the operating experience which is C&R's core capability and we wish to deploy this in partnership with institutions which have access to significant pools of equity (as we have done with Apollo in Germany). Consequently, we will limit the amount of capital we commit to new ventures.
We will look to ensure that future commitments of capital do not result in concentration of risk for the Group or tie up capital for long periods without the ability to create liquidity over the medium-term. It is the intention to recycle capital more quickly in the future as asset management opportunities are realised. Benchmark returns on a risk adjusted basis will be established for all such investments. If hurdle rates cannot be met then surplus capital will be returned to shareholders once a sound capital structure has been assured.

We will look to deliver a more integrated platform to both our existing and prospective partners. We believe that operational synergies can be achieved whilst still respecting our commitments to deliver a dedicated support to the funds for which we act as property asset manager. Further details will be communicated in due course.
We will ensure that management is incentivised to continue to deliver excellent operating performance. A plan will be presented to shareholders to ensure that management interests are fully aligned with those of our shareholders.

Management changes

Shortly after I joined the company, William Sunnucks, our Group Finance Director, indicated that he wanted to leave to spend a period attending to the needs of his family business. It was agreed that he should stay at C&R until I had settled in and steps had been taken to resolve the emerging balance sheet issues. He has undertaken this task with energy and commitment and will be leaving in December this year with the company now able to point to significant improvement in its financial resilience.

Charles Staveley, who has already been with the company for 12 months as Deputy Group Finance Director, will take over as Group Finance Director on 1 October. Charles will, at that time, join the Board of C&R plc, and William will step down from the Board. This is an opportune moment for the transition. I would like to thank William for his contribution over the last six years and wish him well for the future.

Outlook

We expect market conditions to remain challenging for the foreseeable future. In the absence of any increased availability of bank finance, property values are likely to fall further. We also expect the operating environment to become more difficult as depressed consumer confidence impacts our tenant markets.

The measures that have been taken to create increased financial flexibility nonetheless give us confidence that we are much better able to respond to the challenges ahead and are increasingly positioned to take advantage of the opportunities that are likely to emerge.

I am excited by the prospect of C&R once again demonstrating entrepreneurial capabilities which have been a key ingredient to its past success.

Hugh Scott-Barrett

Chief Executive

Risks and uncertainties

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

In our Annual Report for the year ended 30 December 2007 we identified seven specific risk areas of which shareholders should be aware and we believe these to remain the main risk areas facing the Group in the future.

Property market risks: small changes in property market yields can have a significant effect on the value of our portfolios. The effect of debt funding magnifies the impact of valuation movements. These issues are monitored regularly by our executive committee, and the results of monthly valuations are published monthly with our unit price announcements.

As a company with retail and leisure tenants we are also exposed to a downturn in consumer spending. This could reduce the profitability of our occupiers, and thereby lead to a reduction in retail income through defaults and increased vacancies. We manage this risk by diversification both across a large number of tenants and between different market segments and by deliberately targeting properties with strong defensive characteristics, where retailers are best placed to make profits.

Treasury risks: interest rate and currency movements can have an impact on our cash flow and net assets. We normally offset between 50% and 100% of these risks through interest rate swaps or forward exchange contracts.

The Group, like many other companies, is dependent on its ability to obtain external funding to meet a portion of its financing requirements. In the current turbulent financial climate and property market volatility, the risk that the Group will not be able to raise sufficient funding to continue to finance its property portfolio, or that it may breach its covenants has increased. We handle these risks by monitoring compliance and available headroom, and by locking in our debt for significant periods ahead, and planning renewals well ahead of expiry.

Changes in the tax and regulatory environment: our business could be affected by tax law changes or by the increasing burden of regulation. These risks are monitored by the Finance Director and Chief Executive.

Loss of key management: our property management business is dependent on the skills of key individuals whose departure could adversely impact on the business. The risk is mitigated by the development of a next generation of management and through the company's long-term remuneration schemes, which defer payments by two to three years and align shareholder and management interests.

Development risks: over recent years we have carried out a substantial development programme both inside and outside our funds. This activity is subject to significant market, construction and commercial risk, which we mitigate by pre-letting a high proportion of the space and negotiating fixed price building contracts.

Fund investors and joint venture partners: the institutional investors who invest in our funds and our joint venture partners are important to the continued success of our business. For the funds our relationships are documented in long-term management contracts, but these can be terminated under certain circumstances.

We work closely with our fund managers, Morley and Hermes, to maintain their support, keeping them fully informed through regular briefings and listening to their input on strategy.

Our joint ventures are governed by various legal agreements and we work closely with our joint venture partners to ensure that these businesses are managed for the mutual benefit of both parties.

Internet retailing and hypermarket diversification: traditional retail outlets have to compete, in many cases, both with major supermarkets as they expand the range of products offered and with the increased penetration of on line retailers. We actively manage our centres so as to provide our tenants with the best possible platform from which to operate, with an attractive environment, good tenant mix, wide range of food and other offerings and strong marketing.

Directors' Statement of responsibility

The Directors confirm to the best of their knowledge:

a)	the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union;
b)	the Interim Management Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
c)	The Interim Management Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

28 August 2008

F Desai

Company Secretary

Forward Looking Statements

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond Capital & Regional's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this document. Capital & Regional does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Company should not be relied upon as a guide to future performance.

INDEPENDENT REVIEW REPORT TO CAPITAL & REGIONAL PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of recognised income and expense, the reconciliation of movement in equity shareholders' funds, the consolidated cash flow statement and related notes 1 to 24. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. Our work has been undertaken so that we might state to the company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

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

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

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte & Touche LLP

Chartered Accountants and Registered Auditor

28 August 2008

London, UK

Consolidated income statement

For the 6 months ended 30 June 2008

		(Unaudited)	(Unaudited)
		six months	six months	Year
		to	to	to
		30-Jun	30-Jun	30-Dec
		2008	2007	2007
	Note	£m	£m	£m

Rents, management fees and other revenue	4a	43.4	41.9	86.8
Performance fees	4a,4b	(4.0)	7.9	(52.8)
Revenue	4a	39.4	49.8	34.0
Cost of sales	5	(16.3)	(8.7)	(19.1)
Gross profit		23.1	41.1	14.9

Administrative costs		(14.6)	(14.4)	(13.7)
Share of (loss)/profit in joint ventures and associates	12a	(159.1)	31.1	(119.2)
(Loss)/gain on revaluation of investment properties	11a	(25.5)	6.6	(14.8)
(Loss)/profit on sale of properties and investments	11c	(11.5)	2.0	1.8

(Loss)/profit on ordinary activities before financing		(187.6)	66.4	(131.0)

Finance income	6	0.8	0.9	3.5
Finance costs	7	(9.7)	(13.8)	(39.5)

(Loss)/profit before taxation		(196.5)	53.5	(167.0)

Current tax	8a	(0.1)	(1.4)	3.9
Deferred tax	8a	(4.8)	(9.4)	(3.7)
Tax (charge)/credit		(4.9)	(10.8)	0.2

(Loss)/profit for the year		(201.4)	42.7	(166.8)


Basic (loss)/earnings per share	10	(286)p	59p	(236)p
Diluted (loss)/earnings per share	10	(286)p	59p	(236)p

All results derive from continuing activities

Consolidated balance sheet

As at 30 June 2008

		(Unaudited)	(Unaudited)
		six months	six months	Year
		to	to	ended
		30-Jun	30-Jun	30-Dec
		2008	2007	2007
	Note	£m	£m	£m
Non-current assets
Investment property	11a	522.9	633.6	678.5
Interest in long leasehold property	11a	13.4	17.3	15.6
Goodwill		12.2	12.2	12.2
Plant and equipment		1.4	0.9	1.5
Investments		0.3	-	0.3
Receivables		7.6	8.5	7.2
Investment in associates	12b	444.4	752.8	599.4
Investment in joint ventures	12d	8.6	19.4	12.0
Total non-current assets		1,010.8	1,444.7	1,326.7

Current assets
Trading property assets	11a	89.5	95.0	95.9
Receivables		24.9	97.6	19.9
Tax recoverable		1.6	-	1.6
Cash and cash equivalents		27.8	37.7	37.1
Total current assets		143.8	230.3	154.5

Total assets		1,154.6	1,675.0	1,481.2

Current liabilities
Trade and other payables	13	(90.7)	(84.6)	(102.4)
Current tax liabilities		(18.4)	(26.2)	(18.4)
		(109.1)	(110.8)	(120.8)

Non-current liabilities
Bank loans		(515.5)	(603.7)	(622.4)
Convertible subordinated unsecured loan stock		-	(0.1)	-
Other payables	14	(14.5)	(15.1)	(17.5)
Deferred tax liabilities	8c	(22.3)	(23.2)	(17.5)
Total non-current liabilities		(552.3)	(642.1)	(657.4)

Total liabilities		(661.4)	(752.9)	(778.2)

Net assets		493.2	922.1	703.0

Equity
Called-up share capital		7.1	7.1	7.1
Share premium account	16	220.5	219.6	219.7
Revaluation reserve	16	0.4	4.0	2.4
Other reserves	17	15.6	9.2	10.9
Capital redemption reserve	16	4.4	4.4	4.4
Own shares held	16	(8.7)	(6.1)	(8.7)
Retained earnings	16	253.9	683.9	467.2
Equity shareholders' funds		493.2	922.1	703.0

Triple net, fully diluted net assets per share	19	£7.06	£13.18	£10.04

EPRA diluted net assets per share	19	£6.86	£13.21	£10.08

Consolidated statement of recognised income and expense

For the 6 months ended 30 June 2008

		(Unaudited)	(Unaudited)
		six months to	six months to	Year ended
		30-Jun	30-Jun	30-Dec
		2008	2007	2007
	Note	£m	£m	£m

Foreign exchange translation differences	17	9.5	0.1	7.6
Revaluation (loss)/gain on owner occupied property	16	(2.0)	1.3	(0.3)
Net investment hedge	17	(4.7)	-	(5.6)
		2.8	1.4	1.7
(Loss)/profit for the year		(201.4)	42.7	(166.8)

Total recognised income and expense		(198.6)	44.1	(165.1)

Attributable to:
Equity shareholders	20	(198.6)	44.1	(165.1)

Reconciliation of movement in equity shareholders' funds

		(Unaudited)	(Unaudited)
		six months to	six months to	Year ended
		30-Jun	30-Jun	30-Dec
		2008	2007	2007
	Note	£m	£m	£m

Opening equity shareholders' funds	20	703.0	913.1	913.1
Issue of shares	16	0.8	0.1	0.2
Share buy back and cancellation		-	(15.2)	(17.2)
LTIP credit in respect of LTIP charge		-	0.9	0.2
Arising on conversion/repurchase of CULS		-	(8.8)	(9.0)
Amortisation of IFRS 1 reserve	17	(0.1)	-	(0.1)
		703.7	890.1	887.2
Total recognised income and expense		(198.6)	44.1	(165.1)
		505.1	934.2	722.1
Dividends paid	9	(11.9)	(12.1)	(19.1)

Closing equity shareholders' funds		493.2	922.1	703.0

Consolidated cash flow statement

For the 6 months ended 30 June 2008

		(Unaudited)	(Unaudited)
		six months	six months	Year
		to	to	ended
		30-Jun	30-Jun	30-Dec
		2008	2007	2007
	Note	£m	£m	£m


Net cash generated from operations	18	3.2	4.0	62.6

Distributions received from joint ventures and associates		9.6	15.9	25.6
Interest paid		(16.5)	(13.5)	(30.7)
Interest received		0.8	1.0	2.7
Income taxes (paid)/received		(0.2)	0.3	(3.8)

Cash flows from operating activities		(3.1)	7.7	56.4

Investing activities
Acquisitions of investment properties		-	(102.0)	(62.8)
Capital expenditure on investment and trading properties		(1.1)	(6.0)	(15.2)
Acquisitions and disposals of other fixed assets		(0.1)	-	(1.1)
Disposals/(acquisitions) of subsidiaries	21	32.2	-	(39.4)
Cash (disposed)/acquired in business combinations	21	(4.0)	-	1.0
Proceeds from sale of investment and trading properties		-	-	1.0
Proceeds from sale of investments		-	0.2	0.2
Investment in joint ventures		(1.7)	(2.7)	(3.3)
Loans to joint ventures		(0.9)	(2.8)	(6.1)
Loans repaid by joint ventures		-	0.7	0.7
Acquisitions and disposals		-	(0.1)	-

Cash flows from investing activities		24.4	(112.7)	(125.0)

Financing activities
Proceeds from the issue of ordinary share capital		0.8	0.1	0.1
Purchase of own shares		-	(1.3)	(1.3)
Share buy backs and cancellation		-	(15.3)	(17.2)
Repurchase of CULS		-	(10.5)	(10.5)
Bank loans drawn down		71.3	147.0	172.3
Bank loans repaid		(88.3)	(0.1)	(48.5)
Loan arrangement costs		-	-	(0.9)
Settlement of foreign exchange forward		(2.9)	-	(4.6)
Dividends paid to minority interests	15	(0.7)	(0.6)	(1.4)
Equity dividends paid	9	(11.9)	(12.1)	(19.1)

Cash flows from financing activities		(31.7)	107.2	68.9

Net (decrease)/increase in cash and cash equivalents		(10.4)	2.2	0.3

Cash and cash equivalents at the start of the period		37.1	35.5	35.5
Effect of foreign exchange rate changes		1.1	-	1.3

Cash and cash equivalents at the end of the period		27.8	37.7	37.1

Notes to the accounts

1. Accounting Policies and General Information

The half year financial statements have been prepared using the accounting policies set out in the annual report for the year ended 30 December 2007 and have been prepared solely to provide additional information to shareholders as a body to assess the Group's strategies and the potential for those strategies to succeed, and the half year financial statements should not be relied upon by any other party or for any other purpose.

The half year financial statements contain forward looking statements and these statements:

have been made by the directors in good faith based on the information available to them up to the time of their approval of this report; and

should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward looking information.

The annual financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting'.

The comparative figures represent the Group's results and cash flows for the period from 31 December 2006 to 30 June 2007 and for the year from 31 December 2006 to 30 December 2007.

The comparative figures for the year ended 30 December 2007 do not constitute the Company's statutory accounts for that period as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

The Group's financial performance does not suffer materially from seasonal fluctuations.

As a consequence of the weaker than forecasted property market an amount of £4m of performance fees recognized in prior periods are now likely to be repayable as disclosed in Note 4b.

Change in accounting policies

In the current financial year the Group will adopt International Financial Reporting Standard 7 'Financial instruments: Disclosures' (IFRS 7) for the first time. As IFRS 7 is a disclosure standard, there is no impact of that change in accounting policy on the half-yearly financial reporting. Full details of the change will be disclosed in the annual report for the year ended 30 December 2008.

Under IAS 34, the following accounting policy has been adopted in relation to the recognition of performance fees at the half year: Performance fees are recognised, in line with the property management contracts, in the last year of the performance period to which they relate. The performance period is normally three years. Performance fees are recognised in the half year financial statements based on actual performance of each of the funds to the half year date, but are adjusted to reflect any under performance that is anticipated in the remainder of the performance period. The Group earns performance fees for the Mall and Junction Funds on the outperformance relative to the greater of 12% and the appropriate IPD index plus 1%. For the X-Leisure Fund the benchmark is 12%. Where performance falls short of these benchmarks, fees are repayable, up to the amount received for the previous two years. Where there is a reasonable likelihood that part of a performance fee will be repaid the estimated repayment will not be recognised as income until the outcome can be reliably estimated.

On adoption of this accounting policy, the impact on prior period comparatives was considered. It was concluded that the difference on profit after tax of £(1m) was not material and therefore those comparatives have not been restated.

2. Segmental analysis - non statutory see through basis

2a. Business segments on a see through basis

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.

Non statutory information		Assets		Earnings		(Unaudited)
						six months
		Property	Property	Property		ended
		investment	investment	management		30 June 2008
		UK	Germany	UK	SNO!zone	Total
30-Jun-08	Note	£m	£m	£m	£m	£m

Net rents	2b	32.3	15.7	-	-	48.0
Net interest	2b	(25.3)	(9.5)	-	-	(34.8)

Contribution	2b	7.0	6.2	-	-	13.2
Management fees	4a	-	-	11.8	-	11.8
SNO!zone income	4a	-	-	-	8.0	8.0
SNO!zone expenses	5	-	-	-	(6.5)	(6.5)
Management expenses		(2.5)	(0.4)	(7.2)	-	(10.1)

Recurring pre-tax profit		4.5	5.8	4.6	1.5	16.4

Performance fees clawback	4a,4b	-	-	(4.0)	-	(4.0)
Benefit of performance fees	12c	1.0	-	-	-	1.0
Variable overhead		-	-	(1.4)	-	(1.4)
Revaluation of investment properties	10	(161.3)	(24.2)	-	-	(185.5)
Deemed disposal from Mall rights issue and related costs	12a	(26.2)	-	(2.9)	-	(29.1)
Impairment of trading property	5	(6.4)	-	-	-	(6.4)
Loss on disposals		(11.9)	-	-	-	(11.9)
Gain on financial instruments		20.3	3.9	-	-	24.2
Other non-recurring items		-	1.9	(1.7)	-	0.2

(Loss)/profit before tax		(180.0)	(12.6)	(5.4)	1.5	(196.5)
Tax charge						(4.9)
Loss after tax						(201.4)

Net assets/(liabilities) at 30 June 2008		430.8	113.3	(49.6)	(1.3)	493.2

2b. Contribution

Non statutory information -							(Unaudited)
							six months
see through basis							ended
							30 June
		Gross	Property	Void	Net	Net	2008
		rents	costs	costs	rents	interest	Total
30-Jun-08	Note	£m	£m	£m	£m	£m	£m



Mall (Group share: 24.2%) (1)		22.0	(5.2)	(0.8)	16.0	(10.6)	5.4
Junction (Group share: 27.3%) (2)		7.2	(1.2)	(0.2)	5.8	(4.2)	1.6
X-Leisure (Group share: 19.4%) (2)		5.2	(1.1)	(0.2)	3.9	(2.8)	1.1
FIX UK (Group share: 20%) (3)		0.9	(0.1)	-	0.8	(0.6)	0.2
Total associates	12c	35.3	(7.6)	(1.2)	26.5	(18.2)	8.3

Xscape Braehead (Group share: 50%) (2)		1.0	(0.2)	(0.1)	0.7	(1.1)	(0.4)
Manchester Evening News Arena (Group share; 30%) (2)		0.8	(0.2)	-	0.6	(0.5)	0.1
Others (Group share: 50%) (2)		-	-	-	-	-	-
Total joint ventures	12e	1.8	(0.4)	(0.1)	1.3	(1.6)	(0.3)

Statutory information

Other UK		0.6	(0.1)	-	0.5	(2.4)	(1.9)
FIX UK (3)		1.7	(0.3)	-	1.4	(1.2)	0.2
Germany		18.0	(2.3)	-	15.7	(9.5)	6.2
Total rental income investment property	4a	20.3	(2.7)	-	17.6	(13.1)	4.5
Great Northern (4)	4a	3.3	(0.4)	(0.3)	2.6	(1.9)	0.7
Total wholly owned rental income	4a	23.6	(3.1)	(0.3)	20.2	(15.0)	5.2

Total on a see through basis	2a	60.7	(11.1)	(1.6)	48.0	(34.8)	13.2

Associates and Joint Ventures are all held within the United Kingdom.

1 The Group's share during the period. As described in note 12c, following the rights issue on 27 June 2008, the Group's share fell to 16.7%.

2 The Group's share at the end of the period.

3 FIX UK was wholly owned until 6 March 2008, after which the Group's share was reduced to 20% and it became an associate.

4 Great Northern is carried as a trading property in the balance sheet.

2a. Segmental analysis - non statutory see through basis

						(Unaudited)
						six months	Year
						ended	ended
		Property	Property	Property		30 June	30 Dec
Non statutory information		investment	investment	management		2007	2007
		UK	Germany	UK	SNO!zone	Total	Total
2007	Note	£m	£m	£m	£m	£m	£m

Net rents	2b	34.6	12.6	-	-	47.2	94.9
Net interest	2b	(26.1)	(7.4)	-	-	(33.5)	(68.6)

Contribution	2b	8.5	5.2	-	-	13.7	26.3
Management fees	4a	-	-	12.5	-	12.5	26.0
SNO!zone income	4a	-	-	-	7.5	7.5	14.3
SNO!zone expenses	5	-	-	-	(5.8)	(5.8)	(12.2)
Management expenses		(2.3)	(0.3)	(7.7)	-	(10.3)	(21.7)

Recurring pre-tax profit		6.2	4.9	4.8	1.7	17.6	32.7

Performance fees	4a,4b	-	-	7.9	-	7.9	(52.8)
(Cost)/benefit of performance fees	12c	(2.2)	-	-	-	(2.2)	18.1
Variable overhead		-	-	(2.9)	-	(2.9)	7.9
Revaluation of investment properties		(0.3)	11.0	-	-	10.7	(164.4)
Profit on disposals		3.7	-	-	-	3.7	1.6
Gain on financial instruments		18.1	3.9	-	-	22.0	(7.0)
Other non-recurring items		-	(2.9)	-	(0.4)	(3.3)	(3.1)

Profit before tax		25.5	16.9	9.8	1.3	53.5	(167.0)
Tax charge						(10.8)	0.2
Profit after tax						42.7	(166.8)

Net assets		734.7	111.7	73.6	2.1	922.1	703.0

2b. Contribution

							(Unaudited)
							six months	Year
							ended	ended
							30 June	30 Dec
		Gross	Property	Void	Net	Net	2007	2007
		rents	costs	costs	rents	interest	Total	Total
2007	Note	£m	£m	£m	£m	£m	£m	£m

Non statutory information - see through basis

Mall (Group share: 24.2%) (1)		21.3	(4.9)	(0.9)	15.5	(9.2)	6.3	12.7
Junction (Group share: 27.3%) (1)		8.5	(1.2)	(0.1)	7.2	(4.6)	2.6	3.0
X-Leisure (Group share: 20.5%) (1)		4.3	(0.9)	(0.1)	3.3	(2.2)	1.1	2.4
Total associates	12c	34.1	(7.0)	(1.1)	26.0	(16.0)	10.0	18.1

Xscape Braehead (Group share: 50%)		1.1	(0.3)	(0.1)	0.7	(0.9)	(0.2)	(0.4)
Manchester Evening News Arena (Group share: 30%)		0.8	(0.1)	-	0.7	(0.5)	0.2	0.3
Others (Group share: 50%-66.67%) (3)		0.7	(0.3)	(0.1)	0.3	(0.4)	(0.1)	-
Total joint ventures	12e	2.6	(0.7)	(0.2)	1.7	(1.8)	(0.1)	(0.1)

Statutory information

Other UK		0.6	(0.3)	-	0.3	(3.7)	(3.4)	(5.1)
Fix UK		4.2	(0.3)	(0.1)	3.8	(2.7)	1.1	1.2
Germany		13.9	(1.3)	-	12.6	(7.4)	5.2	10.5
Total rental income investment property	4a	18.7	(1.9)	(0.1)	16.7	(13.8)	2.9	6.6
Great Northern (2)	4a	3.2	(0.2)	(0.2)	2.8	(1.9)	0.9	1.7
Total wholly owned rental income	4a	21.9	(2.1)	(0.3)	19.5	(15.7)	3.8	8.3

Total	2a	58.6	(9.8)	(1.6)	47.2	(33.5)	13.7	26.3

Associates and Joint Ventures are all held within the United Kingdom.

1 The Group's share at the end of the period.

2 Great Northern is carried as a trading property in the balance sheet.

3 Others include the share of results for Xscape Milton Keynes and Xscape Castleford up to the date of sale (23 February 2007).

3. Segmental analysis - statutory basis

3a. Primary business segments - statutory basis

						(Unaudited)
						Six
						months
						ended
		Property	Property	Property		30 June
		investment	investment	management		2008
		UK	Germany	UK	SNO!zone	Total
30-Jun-08	Note	£m	£m	£m	£m	£m

Revenue from external sources	4a,3b	5.6	18.0	7.8	8.0	39.4
Transactions with other segments		0.5	-	0.2	-	0.7
Total segment revenue		6.1	18.0	8.0	8.0	40.1
Cost of sales	5	(7.5)	(2.3)	-	(6.5)	(16.3)
Transactions with other segments		(0.1)	-	(0.5)	(0.1)	(0.7)
Property and administration costs		(1.0)	(0.4)	(10.3)	-	(11.7)
Loss on sale of properties and investments	11c	(11.5)	-	-	-	(11.5)
Loss on revaluation of investment properties		(1.3)	(24.2)	-	-	(25.5)
Segment result		(15.3)	(8.9)	(2.8)	1.4	(25.6)
Share of loss in joint ventures and associates		(132.9)	-	-	-	(132.9)
Deemed disposal from Mall rights issue and related costs		(26.2)	-	(2.9)	-	(29.1)
Net finance costs		(4.5)	(3.7)	(0.7)	-	(8.9)
(Loss)/profit before tax		(178.9)	(12.6)	(6.4)	1.4	(196.5)

Segment assets		169.0	523.2	3.6	4.2	700.0
Interest in joint ventures and associates						453.0
Tax assets						1.6
Consolidated total assets						1,154.6

Segment liabilities		(19.8)	(21.1)	(58.7)	(5.6)	(105.2)
Interest bearing liabilities						(515.5)
Tax liabilities						(40.7)
Consolidated total liabilities						(661.4)

Capital expenditure		-	0.2	0.1	0.1	0.4
Depreciation		-	-	0.1	0.2	0.3
Significant other non cash expenses		-	-	0.3	-	0.3

Aggregate investment in joint ventures and associates		453.0	-	-	-	453.0

3b. Secondary business segments - statutory basis

		UK	Germany	Total
	Note	£m	£m	£m

Revenue	4a,3b	21.4	18.0	39.4
Segment gross assets		176.8	523.2	700.0
Capital expenditure		0.4	-	0.4

3a. Primary business segments - statutory basis

						(Unaudited)
						Six
						months	Year
						ended	ended
		Property	Property	Property		30 June	30 Dec
		investment	investment	management		2007	2007
		UK	Germany	UK	SNO!zone	Total	Total
2007	Note	£m	£m	£m	£m	£m	£m

Revenue from external sources	4a,3b	8.0	13.9	20.4	7.5	49.8	34.0
Transactions with other segments		0.4	-	0.5	-	0.9	2.1
Total segment revenue		8.4	13.9	20.9	7.5	50.7	36.1
Cost of sales	5	(1.6)	(1.3)	-	(5.8)	(8.7)	(19.1)
Transactions with other segments		(0.4)	-	(0.4)	(0.1)	(0.9)	(2.1)
Property and administration costs		(2.3)	(1.5)	(10.6)	-	(14.4)	(13.7)
Profit/(loss) on sale of properties and investments	11c	2.0	-	-	-	2.0	1.8
(Loss)/profit on revaluation of investment properties		(4.4)	11.0	-	-	6.6	(14.8)
Segment result		1.7	22.1	9.9	1.6	35.3	(11.8)
Share of profit/(loss) in joint ventures and associates		31.1	-	-	-	31.1	(119.2)
Net finance costs		(5.5)	(7.4)	-	-	(12.9)	(36.0)
Profit/(loss) before tax		27.3	14.7	9.9	1.6	53.5	(167.0)

Segment assets		319.3	454.6	122.8	6.1	902.8	868.2
Interest in joint ventures and associates						772.2	611.4
Tax assets						-	1.6
Consolidated total assets						1,675.0	1,481.2

Segment liabilities		(12.0)	(34.6)	(49.2)	(4.0)	(99.8)	(119.9)
Interest bearing liabilities						(603.7)	(622.4)
Tax liabilities						(49.4)	(35.9)
Consolidated total liabilities						(752.9)	(778.2)

Capital expenditure		150.7	36.6	1.2	-	188.5	150.1
Depreciation		0.1	-	0.1	0.1	0.3	0.6
Significant other non cash expenses		-	-	-	-	-	(10.3)

Aggregate investment in joint ventures and associates		772.2	-	-	-	772.2	611.4

3b. Secondary business segments - statutory basis

				(Unaudited)
				Six months	Year
				ended	ended
				30 June	30 Dec
				2007	2007

		UK	Germany	Total	Total
	Note	£m	£m	£m	£m

Revenue	4a,3b	35.9	13.9	49.8	34.0
Segment gross assets		448.2	454.6	902.8	868.2
Capital expenditure		151.9	36.6	188.5	150.1

4a. Revenue

		(Unaudited)	(Unaudited)
		six months	six months	Year
		to	to	to
		30 June	30 June	30 Dec
		2008	2007	2007
		Total	Total	Total
	Note	£m	£m	£m
Assets business
Property investment - wholly owned investment property gross rents	2b	20.3	18.7	40.1
Property investment - wholly owned trading property gross rents	2b	3.3	3.2	6.4
Property investment - wholly owned total gross rents	2b	23.6	21.9	46.5
Earnings business
Property management - management fees	2a	11.8	12.5	26.0
SNO!zone income	2a	8.0	7.5	14.3
Revenue per consolidated income statement		43.4	41.9	86.8
Property management - performance fees	2a,4b	-	7.9	-
Property management - estimated future repayment of performance fees	2a,4b	(4.0)	-	(52.8)
Net revenue	3a,3b	39.4	49.8	34.0
Finance income	6	0.8	0.9	3.5
Total revenue		40.2	50.7	37.5

4b. Performance fees

		(Unaudited)	(Unaudited)
		six	six
		months	months	Year to
		to	to	30
		30 June	30 June	Dec
		2008	2007	2007
		Total	Total	Total
	Note	£m	£m	£m

Property manager - payable to the Group	2a,4a	-	7.9	-
Property manager - payable by the Group to others		-	-	-
Fund manager - payable to others		-	3.1	-
Performance fees included in associates accounts	12c	-	11.0	-

Property manager future estimated repayment of performance fees		(4.0)	-	(54.2)
Fund manager future estimated repayment of performance fees		(1.0)	-	(17.8)
Total performance fees included in associates adjusted accounts Property manager future estimated repayment of performance fees to others	12c	(5.0)	-	(72.0)
		-	-	1.4
Total future estimated repayment of performance fees		(5.0)	-	(70.6)

Group share of future estimated repayments of performance fees
Property manager future estimated repayment of performance fees		(4.0)	-	(54.2)
Property manager future estimated repayment of performance fees to others		-	-	1.4
Total Group share of future estimated repayment of performance fees	2a,4a	(4.0)	-	(52.8)

The overall effect of the repayment of performance fees is reduced as a result of the Group's share as an investor in the Funds and reduction in management incentive payments.

5. Cost of sales

		(Unaudited)	(Unaudited)
		six months	six months	Year
		to	to	to
		30 June	30 June	30 Dec
		2008	2007	2007
		Total	Total	Total
	Note	£m	£m	£m

Property and void costs		3.4	2.9	6.9
SNO!zone expenses	2a	6.5	5.8	12.2
Impairment of trading property	2a,11a	6.4	-	-
Total cost of sales		16.3	8.7	19.1

6. Finance income

		(Unaudited)	(Unaudited)
		six months	six months	Year
		to	to	to
		30 June	30 June	30 Dec
		2008	2007	2007
		Total	Total	Total
	Note	£m	£m	£m

Interest receivable	4a	0.8	0.9	3.5

7. Finance costs

	(Unaudited)	(Unaudited)
	six months	six months	Year
	to	to	to
	30 June	30 June	30 Dec
	2008	2007	2007
	Total	Total	Total
	£m	£m	£m

Interest on bank loans and overdrafts	15.7	14.6	31.4
Interest receivable on swaps	(1.4)	(0.6)	(0.4)
Interest on other loans	-	0.4	0.4
Interest payable	14.3	14.4	31.4
Amortisation of loan issue costs	0.3	-	0.8
Unwinding of discounting of CAP awards	0.5	1.0	2.0
Share of (income)/loss attributable to minority interest classified as a liability	(0.9)	1.5	1.9
Other interest payable	1.3	1.5	1.9
(Gain)/loss in fair value of financial instruments	(5.8)	(4.5)	1.6
Fair value gains on interest rate swaps transferred from equity	-	(0.1)	(0.1)

Total finance costs	9.7	13.8	39.5

8. Tax

8a. Tax charge/(credit)

		(Unaudited)	(Unaudited)
		six months	six months	Year
		to	to	to
		30 June	30 June	30 Dec
		2008	2007	2007
		Total	Total	Total
	Note	£m	£m	£m

Current tax charge/(credit)
UK corporation tax		-	-	0.1
Adjustments in respect of prior years		(0.1)	(0.1)	(4.0)
Foreign tax		0.2	1.5	-
Total current tax		0.1	1.4	(3.9)

Deferred tax charge/(credit)
On net income before revaluations and disposals		4.8	5.5	6.9
On revaluations and disposals		-	3.9	-
Adjustments in respect of prior years		-	-	(3.2)
Total deferred tax	10	4.8	9.4	3.7

Total tax charge/(credit)		4.9	10.8	(0.2)

8b. Tax charge/(credit) reconciliation

	(Unaudited)	(Unaudited)
	six months	six months	Year
	to	to	to
	30 June	30 June	30 Dec
	2008	2007	2007
	Total	Total	Total
	£m	£m	£m

(Loss)/profit before tax	(196.5)	53.5	(167.0)

(Loss)/profit multiplied by the UK corporation tax rate of 28%/30%	(55.0)	16.1	(50.1)
Non-allowable expenses and non-taxable items	11.7	(9.9)	8.6
Utilisation of tax losses	-	-	(4.2)
Tax on revaluation gains	-	-	0.1
Unrealised losses on investment property not deductable/taxable	49.7	5.1	52.6
Timing differences	(1.4)	(0.3)	-
Prior year adjustments	(0.1)	(0.2)	(7.2)

Total tax charge/(credit)	4.9	10.8	(0.2)

8c. Deferred tax movements

				(Unaudited)	(Unaudited)
				six months	six months	Year
	Capital			to	to	ended
	gains net		Other	30 June	30 June	30 Dec
	of capital	Capital	timing	2008	2007	2007
	losses	allowances	differences	Total	Total	Total
	£m	£m	£m	£m	£m	£m
UK
As at 30 December	(0.2)	7.0	2.8	9.6	6.9	6.9
Recognised in income	(0.5)	0.4	6.9	6.8	5.1	2.7

As at 30 June	(0.7)	7.4	9.7	16.4	12.0	9.6

Germany
As at 30 December	5.1	2.8	-	7.9	6.9	6.9
Recognised in income	(3.2)	1.2	-	(2.0)	4.3	1.0

As at 30 June	1.9	4.0	-	5.9	11.2	7.9

Total deferred tax at 30 June	1.2	11.4	9.7	22.3	23.2	17.5

At the balance sheet date, the Group has unused tax losses available for offset against future profits.

Unused tax losses	(Unaudited)	(Unaudited)
	30 June	30 June	30 Dec
	2008	2007	2007
	£m	£m	£m

United Kingdom	42.5	1.2	42.1
Overseas	8.7	-	5.4
Total	51.2	1.2	47.5

No deferred tax asset has been recognised in respect of such losses (2007: £nil). The remaining tax losses have not been recognised due to insufficient probability that future taxable profit will arise in the relevant loss making companies, or for other reasons restricting the losses.

With effect from 1 April 2008 the mainstream corporation tax rate was reduced from 30% to 28%. The German Government has reduced the corporate income tax rate from 26.375% to 15.825%, effective from 1 January 2008. Consequently, the rate at which deferred tax is provided on UK deferred tax items is now 28% and the rate applied to German deferred tax items is 15.825%.

The effect of these rate adjustments was shown in note 10 to the financial statements for the year ended 30 December 2007 and as a deferred tax prior year adjustment in the income statement for that year.

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 £17.7m 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.

9. Dividends

	(Unaudited)	(Unaudited)
	six	six
	months	months	Year
	to	to	to
	30 June	30 June	30 Dec
	2008	2007	2007
	Total	Total	Total
	£m	£m	£m

Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 30 December 2007 of 17p (2006: 17p) per share	11.9	12.1	12.1

Interim dividend for the year ended 30 December 2007 of 10p per share			7.0

Proposed interim dividend for the year ended 30 December 2008 of 5p (2007: 10p) per share	3.6	7.0	-
Proposed final dividend for the year ended 30 December 2007 of 17p per share			11.9

The proposed interim dividend was approved by the Board on 26 August 2008 and has not been included as a liability in these financial statements.

10. 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.

		Basic	Diluted	EPRA
				Diluted
	Note	£m	£m	£m
Earnings
Profit for the period		(201.4)	(201.4)	(201.4)
Revaluation movements on investment properties	2a	-	-	185.5
Impairment of trading property	2a			6.4
Loss on disposal of investment properties (net of tax)		-	-	8.6
Movement in fair value of financial instruments		-	-	(24.2)
Deferred tax charge	10	-	-	4.8
		(201.4)	(201.4)	(20.3)

Number of shares		71.3	71.3	71.3
Own shares held		(0.9)	(0.9)	(0.9)
		70.4	70.4	70.4


Earnings per share (pence) - six months ended 30 June 2008		(286)p	(286)p	(29)p
Earnings per share (pence) - six months ended 30 June 2007		59p	59p	22p
Earnings per share (pence) - year ended 30 December 2007		(236)p	(236)p	1p

11. Property assets

11a. Wholly-owned property assets

					Long
		Freehold	Leasehold	Sub-total	Leasehold	Freehold
		Investment	Investment	Investment	owner	trading	Total
		property	property	property	occupied	property	property
		assets	assets	assets	building	assets	assets
	Note	£m	£m	£m	£m	£m	£m
Cost or valuation
As at 31 December 2007		661.8	16.7	678.5	15.6	95.9	790.0
Exchange adjustments		39.3	-	39.3	-	-	39.3
Additions		0.2	-	0.2	-	-	0.2
Disposals	21	(169.8)	-	(169.8)	-	-	(169.8)
Impairment of trading properties	5,18	-	-	-	-	(6.4)	(6.4)
Revaluation movement recognised in income	18	(24.6)	(0.7)	(25.3)	(0.2)	-	(25.5)
Revaluation movement recognised in equity	16	-	-	-	(2.0)	-	(2.0)

As at 30 June 2008		506.9	16.0	522.9	13.4	89.5	625.8

On 6 March 2008 the Group disposed of 80% of its interest in FIX UK. Full details of the disposal are disclosed in note 21. During the period the Group did not make any material acquisitions or disposals of plant and equipment.

11b. Property assets

				(unaudited)	(unaudited)
				Six	Six	Year
				months to	months to	ended
				30 June	30 June	30 Dec
				2008	2007	2007
		Basis of		Valuation	Valuation	Valuation
	Valuer	valuation	Note	£m	£m	£m

Group property assets	DTZ Debenham Tie Leung	Fair value		506.7	434.1	492.3
	CB Richard Ellis Limited	Fair value		-	183.3	169.9
	Directors' valuations	Fair value		0.2	0.2	0.2
	King Sturge	Fair value		16.0	17.4	16.7
				522.9	635.0	679.1
Less: unamortised tenant incentives				-	(1.4)	(0.6)
Total investment properties			11a	522.9	633.6	678.5

Owner occupied property	DTZ Debenham Tie Leung	Fair value	11a	13.4	17.3	15.6
Trading property assets	DTZ Debenham Tie Leung/ Directors' valuations	Cost /Net realisable value	11a	89.5	95.0	95.9

Total wholly owned property assets			11a	625.8	745.9	790.0

Properties held by joint ventures
Xscape Braehead Partnership	DTZ Debenham Tie Leung	Fair value		73.5	81.8	79.6
Manchester Evening News Arena	CB Richard Ellis Limited	Fair value		60.4	68.0	64.0
Capital Retail Park Partnership	King Sturge	Fair value		43.8	18.5	28.9
				177.7	168.3	172.5
Plus: head leases treated as finance leases				3.2	3.4	3.3
Less: unamortised tenant incentives				(9.1)	(6.8)	(8.2)

Total investment properties held by joint ventures			12e	171.8	164.9	167.6

Properties held by associates
The Mall Limited Partnership (including properties held for sale)	DTZ Debenham Tie Leung	Fair value		2,573.8	3,194.3	3,015.7
The Junction Limited Partnership	King Sturge	Fair value		1,055.9	1,564.0	1,223.0
X-Leisure Limited Partnership	Jones Lang LaSalle	Fair value		890.2	940.6	947.1
The FIX UK Limited Partnership	CB Richard Ellis Limited	Fair value		173.3	-	-
				4,693.2	5,698.9	5,185.8
Plus: head leases treated as finance leases				165.5	124.8	124.9
Less: unamortised tenant incentives				(61.1)	(50.3)	(57.7)

Total investment properties and properties held for sale held by associates			12c	4,788.6	5,773.4	5,253.0

The fair value of the Group's investment and owner occupied properties at 30 June 2008 has been arrived at on the basis of a valuation carried out at that date by independent qualified professional valuers working for DTZ Debenham Tie Leung, Chartered Surveyors, CB Richard Ellis Limited, Chartered Surveyors and King Sturge, Chartered Surveyors. These external valuers are not connected with the Group. The valuation, which conforms to International Valuation Standards, was arrived at by reference to market evidence of transaction prices for similar properties.

11c. (Loss)/profit on sale of properties and investments

		(unaudited)	(unaudited)
		Six	Six	Year
		months to	months to	ended
		30 June	30 June	30 Dec
		2008	2007	2007
	Note	£m	£m	£m

(Loss)/profit on sale of investment properties	21	(10.1)	-	-
Profit on sale of units in associates and joint ventures		-	1.7	2.6
Other writedowns, impairments and release of provisions		(1.4)	0.3	(0.8)
	3a,18	(11.5)	2.0	1.8

12. Associates and joint ventures

12a. Share of results

		(unaudited)	(unaudited)
		Six	Six	Year
		months to	months to	ended
		30 June	30 June	30 Dec
		2008	2007	2007
	Note	£m	£m	£m

Associates	12b	(127.8)	24.4	(118.1)
Dilution effect of Mall rights issue	2a,12b	(26.2)	-	-
Total associates	12c	(154.0)	24.4	(118.1)
Joint ventures	12d,e	(5.1)	6.7	(1.1)
Total associates and joint ventures	18	(159.1)	31.1	(119.2)

12b. Investment in associates

		(unaudited)	(unaudited)
		Six	Six	Year
		months to	months to	ended
		30 June	30 June	30 Dec
		2008	2007	2007
	Note	£m	£m	£m

At the start of the period		599.4	685.4	685.4
Investment in X-Leisure		-	53.9	53.9
Share of net assets in FIX UK retained by the Group	21	8.6	-	-
Dilution effect of Mall rights issue	2a,12a	(26.2)	-	-
Dividends and capital distributions received		(9.6)	(10.9)	(21.8)
Share of results	12a	(127.8)	24.4	(118.1)

At the end of the period	12c	444.4	752.8	599.4

12c. Analysis of investment in associates

						(unaudited)	(unaudited)
						Six	Six	Year
						months to	months to	ended
						30 June	30 June	30 Dec
		The Mall (1)	The Junction	X-Leisure (1)	The FIX UK	2008	2007	2007
		LP	LP	LP	LP	Total	Total	Total
	Note	£m	£m	£m	£m	£m	£m	£m
Income statement (100%)
Revenue		90.8	26.2	26.8	4.3	148.1	143.6	291.5
Property expenses		(17.5)	(1.1)	(3.8)	(0.2)	(22.6)	(19.7)	(42.0)
Management expenses		(7.1)	(3.8)	(2.9)	(0.2)	(14.0)	(14.8)	(31.5)

Net rents		66.2	21.3	20.1	3.9	111.5	109.1	218.0
Net interest payable		(43.7)	(15.6)	(14.5)	(3.0)	(76.8)	(68.8)	(143.8)

Contribution		22.5	5.7	5.6	0.9	34.7	40.3	74.2
Performance fees		-	-	-	-	-	(11.0)	6.7
C&R accounting policy adjustment (2)	4b	-	-	5.0	-	5.0	-	65.3
(Loss)/gain on revaluation of investment properties		(457.3)	(109.0)	(67.0)	(9.0)	(642.3)	7.3	(573.9)
Loss on sale of investment properties		-	(0.9)	-	-	(0.9)	(2.8)	(16.3)
Fair value of interest rate swaps		44.9	16.1	7.9	4.1	73.0	69.8	(20.4)

(Loss)/profit before tax (100%)		(389.9)	(88.1)	(48.5)	(4.0)	(530.5)	103.6	(464.4)

Balance sheet (100%)
Investment property		2,401.0	1,029.6	886.6	172.5	4,489.7	5,773.4	5,253.0
Property held for sale	23	298.9	-	-	-	298.9	-	-
Total property assets	11b	2,699.9	1,029.6	886.6	172.5	4,788.6	5,773.4	5,253.0
Non current assets		-	-	-	-	-	2.2	-
Current assets		243.7	95.7	51.1	11.0	401.5	357.4	311.3
Current liabilities		(81.3)	(32.8)	(96.1)	(9.3)	(219.5)	(317.5)	(258.2)
Non-current liabilities		(1,569.3)	(587.9)	(432.9)	(135.2)	(2,725.3)	(2,750.1)	(2,820.1)

Net assets (100%)		1,293.0	504.6	408.7	39.0	2,245.3	3,065.4	2,486.0

Group interest at the end of the period		16.72%	27.32%	19.37%	20.00%
Group interest at the start of the period		24.24%	27.32%	19.37%	0.00%
Group average interest during the period		24.24%	27.32%	19.37%	20.00%

Group share of
Revenue	2b	22.0	7.2	5.2	0.9	35.3	34.1	69.8
Net rents	2b	16.0	5.8	3.9	0.8	26.5	26.0	52.3
Net interest payable	2b	(10.6)	(4.2)	(2.8)	(0.6)	(18.2)	(16.0)	(34.2)

Contribution	2b	5.4	1.6	1.1	0.2	8.3	10.0	18.1
Performance fees		-	-	-	-	-	(2.2)	2.2
C&R accounting policy adjustment (2)	2a	-	-	1.0	-	1.0	-	15.9
Loss on revaluation of investment properties		(108.9)	(30.7)	(13.0)	(1.8)	(154.4)	(1.4)	(146.5)
Deemed disposal from Mall rights issue	2a,12a,b	(26.2)	-	-	-	(26.2)	-	-
(Loss)/profit on sale of investment properties		-	(0.3)	-	-	(0.3)	1.1	(2.7)
Fair value of interest rate swaps		10.9	4.4	1.5	0.8	17.6	16.9	(5.1)

(Loss)/profit before tax	12a	(118.8)	(25.0)	(9.4)	(0.8)	(154.0)	24.4	(118.1)

Investment property		401.5	281.3	171.7	34.5	889.0	1,411.5	1,264.4
Property held for sale		50.0	-	-	-	50.0	-	-
Total property assets		451.5	281.3	171.7	34.5	939.0	1,411.5	1,264.4
Non current assets		-	-	-	-	-	0.5	-
Current assets		40.7	26.1	9.9	2.2	78.9	87.6	76.0
Current liabilities		(13.6)	(9.0)	(18.5)	(1.9)	(43.0)	(75.4)	(61.6)
Non-current liabilities		(262.4)	(160.6)	(83.9)	(27.0)	(533.9)	(672.0)	(680.0)

Associate net assets		216.2	137.8	79.2	7.8	441.0	752.2	598.8
C&R accounting policy adjustment (3)		3.4	-	-	-	3.4	0.6	0.6

Group share of associate net assets	12b	219.6	137.8	79.2	7.8	444.4	752.8	599.4

1 The Mall LP and X-Leisure LP are accounted for as associates as the Group has significant influence arising from its membership of the General Partner boards.

2 The results of the associates above have been adjusted to ensure the consistency of accounting in relation to the estimated repayment of performance fees between the Group and its associates.

3 The results of the Mall Fund have been adjusted to reflect the Group's share of performance fees repayable at its percentage interest before the dilutive effect of the rights issue described below.

Mall rights issue

On 27 June 2008 the Mall Fund completed a £286m rights issue. The Group did not take up its rights and consequently its share in the Mall Fund fell from 24.24% to 16.72%.

12d. Investment in joint ventures

		(unaudited)	(unaudited)
		Six	Six	Year
		months to	months to	ended
		30 June	30 June	30 Dec
		2008	2007	2007
	Note	£m	£m	£m

At the start of the period		12.0	67.6	67.6
Net assets disposed of on sale of Xscape Milton Keynes and Xscape Castleford to X-Leisure Fund		-	(51.3)	(51.3)
Investment in joint ventures		1.7	2.4	3.3
Dividends and capital distributions receivable		-	(6.0)	(6.5)
Share of results	12a,12e	(5.1)	6.7	(1.1)

At the end of the period	12e	8.6	19.4	12.0

12e. Analysis of investment in joint ventures

					(unaudited)	(unaudited)
					Six	Six	Year
					months to	months to	ended
		Xscape			30 June	30 June	30 Dec
		Braehead	Manchester		2008	2007	2007
		Partnership (3)	Arena	Others (1,2)	Total	Total	Total
	Note	£m	£m	£m	£m	£m	£m
Income statement (100%)
Revenue		1.9	2.5	0.1	4.5	6.1	10.8
Property expenses		(0.4)	(0.5)	-	(0.9)	(1.6)	(2.5)
Management expenses		(0.1)	(0.1)	-	(0.2)	(0.2)	(0.3)

Net rents		1.4	1.9	0.1	3.4	4.3	8.0
Net interest payable		(2.1)	(1.5)	-	(3.6)	(4.1)	(7.6)

Contribution		(0.7)	0.4	0.1	(0.2)	0.2	0.4
(Loss)/gain on revaluation of investment properties		(8.2)	(3.6)	(1.0)	(12.8)	10.9	(8.1)
Income and fair value movements on financial assets		-	-	(0.3)	(0.3)	1.2	4.8
Fair value of interest rate swaps		1.1	1.0	-	2.1	1.7	(0.7)

(Loss)/profit before tax (100%)		(7.8)	(2.2)	(1.2)	(11.2)	14.0	(3.6)

Balance sheet (100%)
Investment property	11b	64.4	63.6	43.8	171.8	164.9	167.6
Current assets		13.4	6.6	9.3	29.3	22.8	27.5
Other financial assets2		-	-	0.2	0.2	-	0.4
Current liabilities		(61.8)	(5.6)	(7.9)	(75.3)	(20.0)	(23.1)
Non-current liabilities		(14.0)	(47.8)	(40.4)	(102.2)	(120.0)	(140.9)

Net assets (100%)		2.0	16.8	5.0	23.8	47.7	31.5

Group interest at the end of the period		50.00%	30.00%	50.00%
Group interest at the start of the period		50.00%	30.00%	50.00%
Group average interest during the period		50.00%	30.00%	50.00%

Group share of
Revenue	2b	1.0	0.8	-	1.8	2.6	4.5
Net rents	2b	0.7	0.6	-	1.3	1.7	3.1
Net interest payable	2b	(1.1)	(0.5)	-	(1.6)	(1.8)	(3.2)

Contribution	2b	(0.4)	0.1	-	(0.3)	(0.1)	(0.1)
(Loss)/gain on revaluation of investment properties		(4.1)	(1.1)	(0.4)	(5.6)	5.6	(3.1)
Income and fair value movements on financial assets		-	-	(0.1)	(0.1)	0.6	2.4
Fair value of interest rate swaps		0.6	0.3	-	0.9	0.6	(0.3)

(Loss)/profit before tax	12d	(3.9)	(0.7)	(0.5)	(5.1)	6.7	(1.1)

Investment property		32.2	19.1	21.9	73.2	68.2	70.3
Current assets		6.7	2.0	4.7	13.4	10.8	12.9
Other financial assets2		-	-	0.1	0.1	-	0.2
Current liabilities		(30.9)	(1.7)	(4.0)	(36.6)	(9.0)	(10.5)
Non-current liabilities		(7.0)	(14.3)	(20.2)	(41.5)	(50.6)	(60.9)

Group share of joint venture net assets	12d	1.0	5.1	2.5	8.6	19.4	12.0

1 Principally the other joint ventures are at Glasgow Fort (with the British Land Company plc) and at Cardiff.

2 Since the sale in 2004 of its interest in Glasgow Fort the Group has received a total of £8.3m further profits from its remaining interest in the joint venture. Further profits are potentially receivable, largely dependent upon planning consent being obtained for future phases of the development and the letting of units at above target rents. The Group has also given certain rental guarantees for a 5 year period and has made provision for the amounts which are expected to be paid in respect of these. The estimate of the Group's share of the fair value of the right to receive these future profits at 30 June 2008 is £0.1m (30 December 2007 £0.2m). The value reflects an assessment of the considerable uncertainty surrounding the receipt of further amounts and the fact that there is no ready market for such assets. In accordance with acounting standards this right has been recognised as a financial asset.

3 The Braehead centre was opened in April 2006 but problems have been encountered with the cinema's ceiling, which has required significant repair work. The cinema opened in October 2007. Some of the costs associated with the additional repair works are being sought from the main contractors and the possibility of claiming other costs from the arising delay is also being pursued. The Group has fully provided for costs to which it is exposed.

13. Current liabilities - trade and other payables

	(Unaudited)	(Unaudited)
	30 June	30 June	30 Dec
	2008	2007	2007
	£m	£m	£m

Bank loans - secured	0.2	0.2	0.2
Trade payables	2.1	22.9	3.6
Accruals and deferred income	22.6	44.0	32.6
Payable to joint ventures and associates	41.0	0.2	42.3
Other payables	11.9	14.2	14.9
Other taxation and social security	8.2	3.1	8.8
Fair value of interest rate swaps	4.7	-	-

	90.7	84.6	102.4

14. Non-current liabilities - other payables

		(Unaudited)	(Unaudited)
		30 June	30 June	30 Dec
		2008	2007	2007
	Note	£m	£m	£m

Other payables		2.1	2.6	2.0
Minority interest classified as a liability	15	12.4	12.5	13.0
Accruals and deferred income		-	-	2.5

		14.5	15.1	17.5

15. Minority interest

The minority interest, which arises from the Group's German operations, is classified as a liability. Under the tems of the contract the minority has a put option to sell their share back to the Group typically after 5 years from acquisition.

		(Unaudited)	(Unaudited)
		30 June	30 June	30 Dec
		2008	2007	2007
		Total	Total	Total
	Note	£m	£m	£m

As at the start of the period at closing rate		13.0	9.3	10.1
Exchange movement		1.0	-	(0.8)
Financing income		(0.9)	1.5	1.9
Dividend received		(0.7)	(0.6)	(1.4)
Arising on acquisition		-	2.3	3.2

As at the end of the period	14	12.4	12.5	13.0

16. Reserves

	Share			Capital	Own
	premium	Revaluation	Other	redemption	shares	Retained
	account	reserve	reserves	reserve	held	earnings	Total
	£m	£m	£m	£m	£m	£m	£m

As at 31 December 2006	219.5	2.7	9.6	4.3	(6.9)	676.7	905.9
Exchange differences	-	-	2.0	-	-	-	2.0
Shares issued at premium	0.2	-	-	-	-	-	0.2
Share buy back and cancellation	-	-	-	0.1	-	(17.2)	(17.1)
Revaluation of owner-occupied property	-	(0.3)	-	-	-	-	(0.3)
Arising on CULS conversion/repurchase	-	-	(0.6)	-	-	(8.4)	(9.0)
Amortisation of IFRS 1 reserve	-	-	(0.1)	-	-	-	(0.1)
Credit in respect of LTIP charge	-	-	-	-	-	0.2	0.2
Amortisation of cost of own shares	-	-	-	-	(1.8)	1.8	-
Dividends paid	-	-	-	-	-	(19.1)	(19.1)
Loss for the year	-	-	-	-	-	(166.8)	(166.8)

As at 31 December 2007	219.7	2.4	10.9	4.4	(8.7)	467.2	695.9

Exchange differences	-	-	4.8	-	-	-	4.8
Shares issued at premium	0.8	-	-	-	-	-	0.8
Revaluation of owner-occupied property	-	(2.0)	-	-	-	-	(2.0)
Amortisation of IFRS 1 reserve	-	-	(0.1)	-	-	-	(0.1)
Dividends paid	-	-	-	-	-	(11.9)	(11.9)
Loss for the period	-	-	-	-	-	(201.4)	(201.4)

As at 30 June 2008	220.5	0.4	15.6	4.4	(8.7)	253.9	486.1

17. Other reserves

					Net
	CULS			Foreign	investment
	equity	Acquisition	IFRS	currency	hedging
	reserve (1)	reserve (2)	reserve (3)	reserve	reserve	Total
	£m	£m	£m	£m	£m	£m

As at 31 December 2006	0.6	9.5	0.2	(0.7)	-	9.6
Amortisation	-	-	(0.1)	-	-	(0.1)
Arising on CULS conversion	(0.6)	-	-	-	-	(0.6)
Exchange differences	-	-	-	7.6	(5.6)	2.0

As at 31 December 2007	-	9.5	0.1	6.9	(5.6)	10.9
Amortisation	-	-	(0.1)	-	-	(0.1)
Exchange differences	-	-	-	9.5	(4.7)	4.8

As at 30 June 2008	-	9.5	-	16.4	(10.3)	15.6

1 CULS equity reserve - CULS are regarded as compound instruments, consisting of a liability component and an equity component. At the date of issue the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of the issue of the convertible loan notes and the fair value assigned to the liability component, representing the option to convert the liability into equity of the Group is included in equity.

2 The acquisition reserve relates to the acquisition of the remaining 50% of Morrison Merlin in 2005. Prior to this, Morrison Merlin was a joint venture in which the Group had a 50% interest. The acquisition reserve arose from the difference between the fair value of the company's existing 50% interest and the carrying value of that interest at the date of acquisition of the outstanding 50%. The reserve will remain in the balance sheet until Morrison Merlin is sold.

3 IFRS reserve relates to the requirements of IFRS 1. Where cash flow hedge accounting was being applied under a previous GAAP, IFRS 1 requires reserves are debited with the fair value of hedging derivatives at the date of transition for the Group to IFRS (31 December 2004). The entire gain or loss has been taken to equity and recycled to the income statement when the hedged transaction impacts profit or loss or as soon as the hedged transaction is no longer expected to occur.

18. Reconciliation of net cash generated from operations

		(Unaudited)	(Unaudited)
		Six	Six	Year
		months to	months to	ended
		30 June	30 June	30 Dec
		2008	2007	2007
		Total	Total	Total
	Note	£m	£m	£m

(Loss)/profit on ordinary activities before financing		(187.6)	66.4	(130.9)
Adjusted for:
Share of profit in joint ventures and associates	12a	159.1	(31.1)	119.2
Loss/(gain) on revaluation of investment properties	11a	25.5	(6.6)	14.8
Loss/(profit) on sale of trading and development properties	11a	6.4	(0.3)	(0.2)
Loss on sale of subsidiaries	11c	11.5	-	-
Profit on sale of investments		-	-	(1.5)
Depreciation of other fixed assets		0.3	0.1	0.5
Amortisation of tenant incentives		-	0.2	0.7
Amortisation of short leasehold properties		-	-	0.1
Profit on sale of investment properties		-	(1.7)	(0.1)
Decrease/(increase) in receivables		3.2	(20.2)	58.4
(Decrease)/increase in payables		(16.3)	(3.7)	2.6
Unrealised loss on exchange		-	-	(1.2)
Non-cash movement relating to the LTIP		1.1	0.9	0.2

Net cash generated from operations		3.2	4.0	62.6

19. 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 note.

				(Unaudited)
		(Unaudited)		30 June	30 Dec
	30 June 2008			2007	2007
			Net	Net	Net
		Number	assets	assets	assets
	Net	of	per	per	per
	assets	shares	share	share	share
	£m	(m)	(£)	(£)	(£)
Basic	493.2	71.3	6.92	12.97	9.89
Own shares held	-	(0.9)
Fair value of fixed rate loans (net of tax)	4.7	-
Dilutive share options	0.2	0.1
Dilutive share options
Triple net diluted net assets per share	498.1	70.5	7.06	13.18	10.04

Exclude fair value of interest rate swaps (net of tax)	(22.6)	-
Exclude fair value of fixed rate loans (net of tax)	(4.7)	-
Exclude deferred tax on unrealised gains and capital allowances	12.6	-

EPRA diluted net assets per share	483.4	70.5	6.86	13.21	10.08

20. Return on equity

	(Unaudited)	(Unaudited)
	30 June	30 June	30 Dec
	2008	2007	2007
	Total	Total	Total
	£m	£m	£m

Total recognised income and expense attributable to equity shareholders	(198.6)	44.1	(165.1)
Opening equity shareholders' funds	703.0	913.1	913.1
Return on equity	(28.3%)	4.8%	(18.1%)

21. Disposals

On 6 March 2008 the Group disposed of 80% of its interest in FIX UK, held through the T3 Trade Park Unit Trust. The net assets at the date of disposal and at 30 December 2007 were as follows:

		6 March	30 Dec
		2008	2007
	Note	£m	£m

Investment property	11a	169.8	169.2
Trade receivables		1.0	2.1
Bank balance and cash		4.0	6.4
Trade payables		(5.4)	(6.3)
Non current payables		(119.6)	(118.9)
		49.8	52.5
Units redeemed on disposal		(2.1)
Loss on disposal	11c	(10.1)
Provisions released on disposal		3.4
Share of net assets retained by Group	12b	(8.6)
Deferred consideration		(0.2)
Total cash consideration		32.2

Net inflow arising on disposal:
Cash consideration		32.2
Cash and cash equivalents disposed of		(4.0)
		28.2

22. Contingent liabilities

Since 30 December 2007, the Group has received an expert determination in relation to the limit on negative performance fees for the previous two years and has concluded there is no longer a contingent liability in relation to the amounts potentially repayable.

The Group has given certain guarantees relating to interest shortfalls and cost overruns in connection with the joint ventures at Braehead, Cardiff and Manchester Arena. The fair value of these guarantees is £0.3m (2007: £0.3m).

23. Events after the balance sheet date

On 2 July 2008 the Mall Fund completed on the sale of 3 shopping centres for total proceeds of £286m, representing the external valuation of £284m and £2m in tenant guarantees. The carrying value under IFRS at 30 June 2008, including headlease and tenant incentive adjustments, was £298.9m.

On 19 August 2008, the Group exchanged contracts on the sale of 50% of its interest in its German operations, which is subject to shareholder approval.

On 22 August 2008 the Junction Fund exchanged contracts for the sale of Templars Retail Park, Oxford for £57m.

24. Related party transactions

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint ventures and associates are disclosed below.

During the year, Group companies entered into the following transactions with related parties who are not members of the Group.

	Management and performance fees
	receivable from/(payable to) related parties			Amounts owed by/(to) related parties
	30 June	30 June	30 Dec	30 June	30 June	30 Dec
CRPM	2008	2007	2007	2008	2007	2007
	£m	£m	£m	£m	£m	£m
Associates

The Mall LP	6.5	9.7	(22.5)	(34.1)	4.6	(34.4)
The Junction LP	2.4	2.7	(10.9)	0.5	2.8	(0.2)
X-Leisure LP	(0.7)	8.0	7.0	(1.1)	7.1	2.1

Joint ventures

Xscape Braehead Partnership	-	0.1	0.1	-	-	-


SNO!zone Limited (1) and SNO!zone Braehead Limited
	Rents payable to related parties			Amounts owed by/(to) related parties
	30 June	30 June	30 Dec	30 June	30 June	30 Dec
	2008	2007	2007	2008	2007	2007
Associates	£m	£m	£m	£m	£m	£m

X-Leisure LP - Milton Keynes	0.3	0.3	0.7	-	-	-
X-Leisure LP - Castleford	0.4	0.4	0.6	-	-	-

Joint ventures

Xscape Braehead Partnership	0.4	0.4	0.7	-	-	-

1 SNO!zone Limited includes the ski slopes at Milton Keynes and Castleford. All rents payable by SNO!zone Limited are payable to the relevant Xscape Partnerships, which are owned by X-Leisure LP.

At 30 June 2008 the Group had loans outstanding to Xscape Braehead of £7.0m (2007: £2.9m) and Capital Retail Park Partnership of £1.5m (2007: £1.5m).

During 2008 the Group purchased IT and communication equipment from Redstone plc, on normal commercial terms. Alan Coppin was appointed as a director of Redstone plc in June 2006.

All the above transactions occurred at normal commercial rates.

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 the Group's interests in the associated Funds and joint ventures.

Contribution comprises the Group's share of the net rents less net interest arising from the Group's interests in its joint ventures, associates and wholly owned entities, including foreign exchange forward points movements.

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 on asset disposals and revaluations and their related taxation, movements in the fair value of financila 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 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. See through gearing includes the Group's 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 Independent 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, other investments and net current assets.

Like for like (LfL) figures exclude the impact of property purchases and sales on year to year comparatives.

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 the Group'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 the Group'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 rental income excluding the effects of tenant incentives.

Property under management (PUM). Valuation of properties for whom CRPM is the asset manager, plus the wholly-owned German properties.

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, SNO!zone income less SNO!zone expenses, less fixed management expenses.

Recurring pre-tax profit per share is the recurring pre-tax profit divided by the weighted average number of shares less own shares held.

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, to which the initial yield will rise 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 movement in price per share plus dividends per share.

Triple net, fully diluted NAV per share includes the dilutive effect of share options and CULS and adjusts all items to market value, including trading properties and fixed rate debt.

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.

Portfolio information

Portfolio under management *

	30 June	30 June	30 Dec
	2008	2007	2007
	£m	£m	£m

Investment properties	523	652	679
Trading property	89	100	96
The Mall Fund	2,574	3,194	3,016
The Junction Fund	1,056	1,564	1,223
X-Leisure Fund	890	941	947
Other joint ventures	178	168	174

Total	5,310	6,619	6,135

* Shown at fair value, excluding the treatment required by IFRS of rent free periods, capital contributions and leasing costs.

Fund portfolio information (100% figures)

As at 30 June 2008

				German
	The Mall	Junction	X-Leisure	Portfolio
Physical data
Number of core properties	24	13	19	50
Number of lettable units	2,514	217	360	193
Lettable space (sq feet-'000s)	8,561	3,187	3,681	5,083
Valuation data
Properties at market value (£m)*	2,574	1,056	890	505
Revaluation in the year (£m)	(457.3)	(109.0)	(67.0)	(24.2)
Initial Yield (%)	5.66%	4.95%	5.38%	6.24%
Equivalent yield (%)	6.65%	5.80%	6.17%	n/a
Geared returns (%)	(32.02%)	(16.50%)	(12.14%)	(10.19%)
Property level return (%)	(12.82%)	(7.26%)	(4.91%)	(0.79%)
Reversionary %	16.80%	10.87%	4.70%	n/a

Lease Data
Average lease length to Break	9.72	12.48	16.35	7.90
Average lease length to Expiry	10.07	13.02	17.39	7.90

Passing rent of leases expiring in:
2008	14.15	0.44	1.42	0.34
2009	6.07	0.59	0.43	2.21
2010-2012	32.02	1.82	1.54	5.77

ERV of leases expiring in:
2008	16.55	0.44	1.55	n/a
2009	7.65	0.75	0.53	n/a
2010-2012	33.39	2.24	1.58	n/a

Passing rent subject to review in:
2008	29.03	13.34	12.88	n/a
2009	16.52	12.62	2.56	n/a
2010-2012	51.05	24.13	14.64	n/a

ERV of passing rent subject to review in:
2008	29.25	14.65	15.48	n/a
2009	20.61	14.27	2.62	n/a
2010-2012	54.04	26.40	17.63	n/a

Fund portfolio information (100% figures)

As at 30 June 2008

				German
	The Mall	Junction	X-Leisure	Portfolio
Rental Data
Passing rent (£m)	171.13	53.66	52.46	34.80
Estimated rental value (£m per annum)	199.80	62.92	58.69	n/a
Rental Increase (ERV) %	(1.00%)	(0.58%)	0.32%	n/a
Vacancy rate (%)	5.88%	4.96%	3.12%	1.89%

Like for like net rental income (100%)
Current year net rental income	£m	£m	£m	£m
Properties owned throughout 2007/2008	69.5	25.7	19.3	13.5
Acquisitions	1.5	-	4.0	1.5
Disposals	-	0.7	-	-

Total net rental income	71.0	26.4	23.3	15.0

Prior year net rental income
Properties owned throughout 2006/2007	70.2	25.2	19.1	13.3
Acquisitions	0.3	-	3.1	0.9
Disposals	-	3.0	0.2	-

Total net rental income	70.5	28.2	22.4	14.2

Other Data
Unit Price (£1.00 at inception)	£1.2450	£1.5010	£1.4568	n/a
C & R Share	16.7%	27.3%	19.4%	91.4%

Shareholder information

2008 financial calendar

Ex-dividend date	1 October 2008
Record date	3 October 2008
Last day for election	3 October 2008
Post warrants/vouchers	16 October 2008
Dividend payment date	17 October 2008
Post certificates/CREST statements	22 October 2008
CREST credit date	23 October 2008