Interim Results

CAPITAL AND REGIONAL PROPERTIES PLC 13 July 1999 1999 INTERIM RESULTS Capital and Regional Properties plc, the specialist retail and leisure property company, today announces its interim results for the six months ended 24th June 1999. Highlights Fully diluted net assets per share increased by 8% over six months to 347p (December 1998: 321p) compared to 7% in the same period last year Over twelve months the net assets per share increased by 20% (June 1998: 290p) Net rental income up 43% to £21.8m (1998: £15.2m) Profit on revenue activities up 58% to £5.7m (1998: £3.6m) Earnings per share on revenue activities up 35% to 5.4p (1998: 4.0p) Dividend per share up 33% to 2.0p (1998: 1.5p) On a same store basis, that is property we owned at December 1998 through to June 1999, capital growth of 2.2% was achieved in six months, compared to 1.4% IPD's Monthly Index of Capital Value for All Property November 1998 to May 1999 Total trading and investment property acquisitions of £93.7m and disposals of £27.9m. Refurbishment and development costs of £24.5m Acquisition of Westway Cross Shopping Park, Greenford in February for £33m. Recent major letting to Next, supporting our view that this will become a leading fashion park Unveiled re-branding of £60m Xscape, formerly Sports Village, retail and entertainment destination in Milton Keynes. Progressing selective roll-out of Xscape concept in Europe Entered into a conditional agreement with Glasgow City Council to develop a major 500,000 sq ft retail and leisure project adjacent to our existing 100,000 sq ft Junction 10 Retail Park Commenting on the results, Martin Barber, Chairman of Capital and Regional said: 'Once again, these results demonstrate the value we are creating for shareholders by Capital and Regional's partnership approach with its tenants.We believe the innovative and dynamic management of our portfolio is unique in the UK. The focus is on assisting our retailers to trade more profitably and this strategy will sustain our strong growth.' For further information please contact: Martin Barber, Chairman, Capital and Regional 0171 730 5565 Lynda Coral, Financial Director, Capital and Regional 0171 730 5565 Sarah Carrell, Corporate Communications, Capital and Regional 0171 730 5565 or 0585 059212 CHAIRMAN'S STATEMENT RESULTS I am pleased to report in the six months to 24th June 1999, fully diluted net assets per share increased by 8% to 347p (December 1998: 321p) compared to 7% in the same period last year. Over twelve months the net assets per share increased by 20% (June 1998: 290p). Profit on revenue activities over the six months are up 58% to £5.7m (1998:£3.6m) and net rental income has increased by 43% to £21.8m (1998: £15.2m). Earnings per share on revenue activities of 5.4p (1998: 4.0p). DIVIDEND The Directors have resolved to pay an interim dividend of 2.0p (1998: 1.5p) per share on 23rd August 1999 to shareholders on the register at the close of business on 23rd July 1999. I am pleased to inform you that the Company is offering shareholders a service whereby you can use your cash dividends to buy more shares in the Company at competitive dealing rates. A circular explaining this Dividend Reinvestment Plan will be sent to all shareholders on 19th July 1999. REVIEW OF ACTIVITIES During the first half, we had a very active period and our portfolio performed extremely well. On a same store basis, that is property we owned at December 1998 through to June 1999, capital growth of 2.2% was achieved in six months, compared to 1.4% IPD's Monthly Index of Capital Value for All Property November 1998 to May 1999. It is worth noting that our portfolio is highly reversionary. The estimated rental value being approximately £14m higher than the £51m rents passing as at 24th June 1999. This does not take into account the significant expansion and development opportunities within the portfolio outlined in this statement. Trading and investment property acquisitions totalled £93.7m and we completed disposals of £27.9m. Refurbishment and development costs were £24.5m. In February, we acquired Westway Cross Shopping Park in Greenford from Sears for £33m and have subsequently let a major unit to Next, the fashion retailer. During that month, we also acquired the PDFM interests in the Easter Industrial portfolios for £28.3m and these portfolios have since been rationalised with the sale of seven properties for £11m. During June, we launched the re-branding of Xscape, formerly Sports Village, in Milton Keynes, one of our most exciting developments to date. Costing £60m,Xscape is a 550,000 sq ft integrated retail and entertainment destination on schedule to open in May 2000. The project is a 50:50 partnership between Capital and Regional Properties and two funds managed by PRICOA Property Investment Management, TransEuropean Property Limited Partnership II and Hanover Property Unit Trust. We are pleased to announce that the Company has entered into a conditional agreement with Glasgow City Council to co-operate in the development of a major retail and leisure project of approximately 500,000 sq ft adjacent to our existing Junction 10 Retail Park. MARKET AND STRATEGY Our confidence at the beginning of 1999 in both the investment and tenant markets was justified as sentiment in both markets improved strongly. Consumer confidence returned with retail sales improving. Our strategy is to enable our properties to outperform the overall market through active management, branding and improvement of the tenant mix. We continue to explore the right opportunities where Capital and Regional can add value and benefit from the economies of scale and close relationships with our tenants. SHOPPING CENTRES The first six months of 1999 has seen a high level of activity in all our centres. Our management style is being vigorously applied to all of our businesses. This includes tenancy restructuring and concept planning at The Pallasades, Birmingham and Selborne Walk, Walthamstow; major regeneration at Shopping City, Wood Green, London and the Howgate Centre, Falkirk with re- branding at the Alhambra, Barnsley. Our tenants, shoppers, local authority and other partners continue to respond well and support our energetic management approach. In association with our Centre Managers, Capital and Regional Facilities Management Limited (CRFM) continues to provide value for money for our tenants through economies derived from utility and supplier bulk purchasing. At The Pallasades in Birmingham, the 27,500 sq ft JJB Sports flagship store is open and trading successfully. In addition, lettings to Simply Internet, Time Computers and Grinders Coffee have all been completed. Solicitors are instructed on two further major lettings, which once concluded will yet again establish a record rental level for the scheme. The development teams of Railtrack and the Company continue to jointly progress scheme design for the regeneration of New Street Station and the expansion of the retail provision. An integral part of these discussions is the renegotiation of the present ground lease. The teams are expected to finalise these proposals during the Summer and launch the scheme by the end of the year. Work on site is expected to commence by Spring 2001. The Trinity Centre, Aberdeen, is now fully let with the last remaining unit being taken by Clinton Cards who are upsizing within the scheme. The unit they are vacating is under offer and when concluded will establish a rent level more than double that passing at acquisition in 1993. The Centre's continuing trading success is further reinforced by Ottakars expanding their bookstore by an additional 20% within the first year of opening. Work is underway to install the frontage canopy and branding which will be complete in the Autumn. Within the half year, lettings have been concluded at The Howgate Centre, Falkirk, to Bodycare, Going Places, Olivers and MVC. We also purchased a long leasehold interest within the scheme. Work is underway on the remodelling of the Marks and Spencer's atrium, which will extend and revitalise the Centre's catering offer and produce an additional 6,000 sq ft of retail. In addition, a new Collection Cafe will be introduced in the mall's central square, together with a new entrance canopy and frontage branding. It is hoped that the refurbishment of the car park will be completed prior to the year end. In addition to introducing MVC to Falkirk, we were also able to provide them with representation at The Alhambra Centre, Barnsley, letting almost 4,500 sq ft. The first phase of re-branding and signage has been completed, with an increase in footfall of almost 12% year on year being recorded. The major regeneration of Shopping City, Wood Green, London, is now well underway. Construction of the new market hall and major anchor store for Wilkinsons is scheduled to complete in August. The twelve screen multiplex cinema will be handed over to Cine UK for their fit-out at the end of the year. Construction is also underway on the reconfiguration of the major Boots store, as is the re-modelling works to the malls. Tenant interest in the Centre is strong and discussions are underway with new retailers seeking representation in Shopping City. At the Sauchiehall Centre, Glasgow, planning consent for a major health and fitness facility has been achieved and pre-let to Healthlands, who are shortly to commence fitting out for opening in November. In addition, a letting to Pocket Phone Shop has been concluded, together with the restructuring of a lease to the Royal Bank of Scotland. Encouraged by pre-letting interest, we are submitting a planning application for the reconfiguration of the Centre, designed to focus value on prime Sauchiehall Street. Subject to consent, it is hoped construction can commence during the first half of year 2000. Selborne Walk, Walthamstow remains fully let. Our planning application to integrate a multiplex-based leisure component plus the retail space has been favourably considered by the local authority, whose formal notification is anticipated during the Summer. Pre-letting discussions for the cinema and the majority of the space are at an advanced stage. We continue to explore the possibilities at Liberty 2, Romford, to improve retail visibility by reconfiguring the central area space. This should improve the prospects for letting the remaining units, presently obscured by escalators and provide a contemporary catering offer. Negotiations continue with the local authority and others on opportunities to improve the Centre's critical mass. At Eldon Garden, Newcastle, a major letting to the Pier of the remaining 7,000 sq ft of the former Debenhams space has been agreed. They are presently fitting out and hope to trade in the Autumn. This letting necessitated the relocation of Tribal within the Centre. The central catering offer has been re-branded 'Cafe in the Garden' and Richard Sinton Jewellers has expanded their retail space by an additional 30%. RETAIL AND LEISURE PARKS Progress on our major acquisition during the first half at Westway Cross Shopping Park, Greenford, is encouraging. Since acquisition, we have let a 10,000 sq ft vacant unit to Next and are at an advanced stage of negotiation for two further units. These lettings support our view that Westway Cross will become a leading fashion park. New marketing initiatives, re-branding and estate improvements are all underway. Tenant demand for our other retail parks improved during the second quarter, which has led to a number of lettings being agreed, which should be realised during the second half of the year. At Blythswood Retail Park, Glasgow, progress continues to be made on the next phase, which could include up to 70,000 sq ft of further retail space. A re- branding exercise is progressing well. Refurbishment and reconfiguration works have commenced at Junction 10 Retail Park, Glasgow, and marketing of the final unit will commence during the second half. We have entered into a conditional agreement with Glasgow City Council to co- operate in the development of a major retail and leisure project of approximately 500,000 sq ft adjacent to our existing 100,000 sq ft retail park at Junction 10 of the M8. The proposed development will include a 170,000 sq ft retail park, a 130,000 sq ft foodstore and a leisure park to include a multiplex cinema, familyentertainment centre, healthclub, hotel, restaurants and bars. Our aim is to create a landmark development for Glasgow and Scotland. At Beckton Retail Park, London E6, we have exchanged an Agreement for Lease with Matalan for up to 30,000 sq ft and a refurbishment, reconfiguration and re-branding programme of this 170,000 sq ft park will commence during the second half. We have let a 10,000 sq ft unit to Poundstretcher at the Bognor Regis Retail Park, subject to planning consent and the refurbished units let to Lidl and Landmark are now open and trading well. At the Lancaster Retail Park, letting negotiations are at an advanced stage in respect of two units totalling 40,000 sq ft. Following completion of these negotiations, works will commence on the extension and refurbishment of the park. Construction is progressing well at the Wyrley Brook Retail Park in Cannock for the new B&Q and Kingsway stores, together with other estate improvements. At the Channons Hill Retail Park, Bristol, a 10,000 sq ft unit has been let to Dixons at a new market rent of £12.00 per sq ft and refurbishment works have commenced. At the Eureka Leisure Park, formerly Ashford Leisure Park, practical completion of the first phase is anticipated in August. The second phase will comprise a larger healthclub unit of 35,000 sq ft let to Stakis, a 60 bedroom hotel and a 7,000 sq ft public house for Allied Domecq. Subject to obtaining detailed planning consent, construction should commence on this phase in the Autumn, with completion due in Summer 2000. At the Cardiff International Sports Village, where we are the leading partner in a development consortium, planning consent has been obtained, subject to legal agreement. The proposed development will include a new sports arena and swimming pool, 110,000 sq ft of retail and 100,000 sq ft of leisure floor space, together with hotels, offices and residential. Pre-lets and pre-sales for the major elements of the scheme are currently being sought. Construction is well advanced at Xscape, formerly Sports Village, Milton Keynes, and currently on budget and programme to complete in May 2000. The new branding and marketing launch in early June has resulted in a further three units being placed under offer. Following extensive research, the company intends to selectively roll out the Xscape concept in Europe and two potentially suitable sites have already been identified. INDUSTRIAL Continued positive progress has been made by Easter Group in the first six months of the year and after a slow start, a number of lettings within the investment portfolio have been concluded. After our recent acquisition of the PDFM interests in the Easter Industrial portfolios for £28.3m, these portfolios have been rationalised with the sale of seven properties for £11m. This was followed by the acquisition of an industrial estate near Chepstow for £6.2m. Development trading activity continues to be buoyant with the sale of one scheme and the completion of the letting at another. FINANCIAL POSITION The Company's borrowings at 24th June 1999 were £444.4m against £366.1m at December 1998. Net cash balances were £6.4m (December 1998: £5.5m) and the Company had approximately £78m (December 1998: £59.8m) of undrawn secured facilities. Net debt to capital employed has risen to 119% at the end of the first half of 1999 compared to 107% at December 1998. Assuming the conversion of the loan stock to equity net debt to capital employed was 106% at June 1999 (December 1998: 93%). The weighted average interest rate cost of total borrowings at 24th June 1999 has reduced to 7.25% compared to 7.8% at the end of 1998. Rental income as a ratio to net interest payable including capitalised interest was maintained at the 1998 level of 1.6 times for the first half of 1999. The market value of fixed rate debt instruments at 24th June 1999 on a replacement basis and the expiry profile of the resulting fair value adjustment is set out in note 12 of the accounts. The fair value adjustment of £2.4m at 24th June 1999 has reduced from £11.1m at previous year end representing approximately 0.5% (December 1998: 3%) of Company borrowings. This has a notional adverse effect on net asset value per share of 1.5p at 24th June 1999 that has reduced from 7p at December 1998 due to time expiry and increases in market interest rates. YEAR 2000 UPDATE As reported at the year end, the programme to ensure that any issues arising from the 'Millennium Bug' is substantially completed. It is anticipated that action identified to confirm Year 2000 compliance will be implemented by 31st August 1999 and contingency plans to deal with unforeseen failure will be in place. OUTLOOK Once again, these results demonstrate the value we are creating for shareholders by Capital and Regional's partnership approach with its tenants. We believe the innovative and dynamic management of our portfolio is unique in the UK. The focus is on assisting our retailers to trade more profitably and this strategy will sustain our strong growth. We continue to seek actively opportunities where we can continue to add value to previously under managed assets. Martin Barber Chairman 13th July 1999 CONSOLIDATED PROFIT AND LOSS ACCOUNT (Unaud- (Unaud- (Audited) ited) ited) 6 6 Year to months months 25th Notes to to December 24th 24th 1998 June June £000 1999 1998 £000 £000 Turnover: group rental income and share of joint ventures' turnover 27,190 19,046 52,732 Less: share of joint ventures' (1,662) (875) (7,822) turnover Group rental income 25,528 18,17144,910 Net property costs (3,716) (2,942) (6,403) Net rental income 21,812 15,229 38,507 Profit on the sale of trading and 4 910 - 517 development properties 22,722 15,229 39,024 Administrative expenses (3,097) (2,295) (6,259) 19,625 12,934 32,765 Other operating income 468 629 669 Group operating profit 20,093 13,563 33,434 Share of operating profit in 18 621 1,473 joint ventures and associates 20,111 14,184 34,907 Income from listed investments 649 538 1,095 Interest receivable and similar 308 431 807 income Interest payable and similar charges 5 (15,366) (11,563) (25,290) Profit on revenue activities 5,702 3,590 11,519 Profit/(loss) on sale of 4 893 (9) (38) investment properties Profit on ordinary activities 6,595 3,581 11,481 before taxation Taxation 6 (149) (158) (347) Profit on ordinary activities 6,446 3,423 11,134 after taxation Equity minority interests (222) (56) (42) Profit attributable to the 6,224 3,367 11,092 shareholders of the Company Equity dividends paid and payable (1,965) (1,474) (4,176) Profit retained in the period 4,2591,893 6,916 Earnings per share 7 6.3 p 4.0 p 12.1 p Earnings per share - diluted 7 6.3 p 3.9 p 12.1 p Earnings per share on revenue 7 5.4 p 4.0 p 12.2 p activities CONSOLIDATED BALANCE SHEET (Unaudi (Audited) (Unaudi ted) ted) As at As at As at 24th 25th 24th Notes June December June 1999 1998 1998 £000 £000 £000 Fixed assets Property assets 8 756,549 654,606 569,353 Other fixed assets 779 844 1,032 Tangible assets 757,328 655,450 570,385 Other investments 9 23,877 22,000 21,597 Investment in joint ventures Share of gross assets 6,090 7,715 9,039 Share of gross liabilities (4,356) 5,448) (6,438) 1,734 2,267 2,601 Investment in associates 5 3,446 3,495 782,944 683,163 598,078 Current assets Property assets 8 38,420 24,412 23,254 Debtors: amounts falling due after 3,804 3,914 - more than one year amounts falling due within 17,716 18,802 28,925 one year Cash at bank and in hand 6,404 5,476 356 66,344 52,604 52,535 Creditors: amounts falling due (38,935) (35,120) (29,124) within one year Net current assets 27,409 17,484 23,411 Total assets less current 810,353 700,647 621,489 liabilities Creditors: amounts falling due after more than one year (including convertible unsecured loan stock) (443,559) (364,480) (323,260) Net assets 366,794 336,167 298,229 Capital and reserves Called up share capital 9,826 9,826 9,826 Share premium account 161,863 161,863 161,869 Revaluation reserve 154,197 131,553 103,515 Other reserves 591 591 591 Profit and loss account 33,227 26,983 21,463 Equity shareholders' funds 359,704 330,816 297,264 Equity minority interests 3,090 2,101 965 Non-equity funding by joint 4,000 3,250 - arrangement partners Capital employed 366,794 336,167 298,229 Net assets per share adjusted for minority interests 10 366.1 p 336.7 p 302.5 p and non-equity funding Net assets per share adjusted for minority interests 10 346.7 p 320.6 p 290.2 p and non-equity funding - diluted STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (Unaudi (Unaudi (Audited) ted) ted) 6 6 Year to months months 25th to to December 24th 24th 1998 June June £000 1999 1998 £000 £000 Share of unrealised surplus on 22,752 20,422 48,694 valuation of investment properties Share of unrealised surplus on valuation of investment properties - - 87 in joint ventures Share of unrealised surplus on valuation of investment properties - 168 113 in associates Revaluation surplus/(deficit) on other 1,877 (1,383) (979) investments Tax on revaluation surpluses realised - -(165) in year 24,629 19,207 47,750 Profit for the period attributable to 6,224 3,367 11,092 the shareholders of the Company Total recognised gains and losses 30,853 22,574 58,842 relating to the period RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (Unaudi (Unaudi (Audited) ted) ted) 6 6 Year to months months 25th to to December 24th 24th 1998 June June £000 1999 1998 £000 £000 Profit for the period attributable to 6,224 3,367 11,092 the shareholders of the Company Equity dividends paid and payable (1,965) (1,474) (4,176) Profit retained in the period 4,259 1,893 6,916 Share capital and share premium issued - 59,133 59,128 in year (net of expenses) Goodwill written off - (268) (277) Other recognised gains and losses 24,629 19,207 47,750 relating to the period (see above) Net addition to shareholders' funds 28,888 79,965 113,517 Opening shareholders' funds 330,816 217,299 217,299 Closing shareholders' funds 359,704 297,264 330,816 SUMMARY CASH FLOW STATEMENT (Unaudit (Unaudit (Audited) ed) ed) 6 months 6 months Year to to to 25th Notes 24th 24th December June June 1998 1999 1998 £000 £000 £000 Net cash inflow from 11 25,536 12,965 31,303 operating activities Dividends received from 300 313 3,526 joint ventures Dividends received from 714 180 660 associates Net cash outflow from returns on investments (14,393) (9,611) (22,854) and servicing of finance 12,157 3,847 12,635 Taxation (2) (366) (880) Net operating cash flow 12,155 3,481 11,755 Capital expenditure and (85,371) (131,639) (176,204) financial investment (73,216) (128,158) (164,449) Acquisitions and disposals - (665) (725) (73,216) (128,823) (165,174) Equity dividends paid (4,176) (1,910) (1,910) Cash outflow before (77,392) (130,733) (167,084) financing Financing 78,319 121,860 163,331 Increase/(decrease) in cash 927 (8,873) (3,753) in the period Reconciliation of net cash flow to movement in net debt (Unaudit (Unaudit (Audited) ed) ed) 6 months 6 months Year to to to 25th 24th 24th December June June 1998 1999 1998 £000 £000 £000 Increase/(decrease) in cash in the 927 (8,873) (3,753) period Cash inflow from increase in debt (78,319) (63,017) (104,203) financing Change in net debt resulting from (77,392) (71,890) (107,956) cash flows Net debt at beginning of period (360,591) (252,635) (252,635) Net debt at end of period (437,983) (324,525) (360,591) Analysis of net debt (Unaudit (Unaudit (Audited) ed) ed) 6 months 6 months Year to to to 25th 24th 24th December June June 1998 1999 1998 £000 £000 £000 Cash in hand and at bank 6,404 3565,476 Debt due within one year - (760) (760) Debt due after one year (444,387) (324,121) (365,307) (437,983) (324,525) (360,591) NOTES TO THE ACCOUNTS 1. Accounting policies The financial information included in the Interim Report comprises consolidated profit and loss account and balance sheet, statement of total recognised gains and losses, reconciliation of movement in shareholders' funds and summary cash flow statement. These have been prepared in accordance with the normal accounting policies of the Group, and do not constitute statutory accounts. 2. Financial information and presentation The financial information for the year to 25th December 1998 does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. It is extracted from the statutory accounts for that year, on which the auditors Deloitte & Touche gave an unqualified report under Section 236 of the Companies Act 1985 which did not contain a statement under Section 237(2) or Section 237(4) of the Companies Act 1985. Statutory accounts for the year ended 25th December 1998 have been delivered to the Registrar of Companies. The financial information for the six months to 24th June 1999 is unaudited and has not been reviewed by the Group's auditors. 3. Segmental analysis Net Profit on assets Operating ordinary adjusted Turnover profit activities for £000 after before minority interest taxation interests £000 £000 £000 6 months ended 24th June 1999 Continuing operations 25,528 5,289 6,182 335,942 - UK Share of joint 1,662 (174) (174) 1,733 ventures - UK 27,190 5,115 6,008 337,675 Continuing operations - 587 587 22,029 - USA 27,190 5,702 6,595 359,704 6 months ended 24th June 1998 Continuing operations 18,171 2,859 2,850 275,094 - UK Share of joint 875 193 193 2,601 ventures - UK 19,046 3,052 3,043 277,695 Continuing operations - 538 538 19,569 - USA 19,046 3,590 3,581 297,264 Year ended 25th December 1998 Continuing operations 40,375 5,286 5,202 308,104 - UK Surrender premiums - 4,535 4,535 4,535 - UK Share of joint 7,822 628 674 2,267 ventures - UK 52,732 10,449 10,411 310,371 Continuing operations - 1,070 1,070 20,445 - USA 52,732 11,519 11,481 330,816 CONTINUED NOTES TO THE ACCOUNTS 4. Property sales Fixed property Current property assets assets (Unaud (Unaud (Unaud (Unaud ited) ited) ited) ited) 6 months 6 month 6 months 6 months ended ended ended ended 24th June 24th 24th June 24th June 1999 June 1999 1998 £000 1998 £000 £000 £000 Net sale proceeds 15,523 37,070 12,347 - Cost of sales (12,644) (36,553) (11,437) - Historical cost profit 2,879 517 910 - Revaluation surplus (1,986) (576) - - Profit/(loss) recognised on sale 893 (59) 910 - of properties Share of joint ventures profit on sale of - 50 - - investment properties Profit/(loss) recognised on sale of 893 (9) 910 - properties 5. Interest payable and similar charges (Unaudited) (Unaudited) (Audited) 6 months to Year to 6 months 24th June 25th December to 1998 1998 24th June £000£000 1999 £000 Bank loans and overdrafts wholly 15,092 10,720 23,888 repayable within five years Other loans 876 868 1,752 15,968 11,588 25,640 Capitalised in period (732) (301) (856) 15,236 11,287 24,784 Share of joint ventures 98 143 237 interest payable Share of associates 32 133 269 interest payable 15,366 11,563 25,290 6. Taxation The taxation charge for the period has been estimated from the expected taxable profits of the Group after taking account of losses brought forward and capital allowances available. 7. Earnings per share Earnings per share have been calculated on a weighted average of 98,255,271 Ordinary share of 10p each in issue during the period (year to 25th December 1998: 91,712,962, six months to 24th June 1998: 85,062,217) and have been based on profit on ordinary activities after taxation and minority interests of £6,224,000 (year to 25th December 1998: £11,092,000, six months to 24th June 1998: £3,367,000). Diluted earnings per share have been calculated after allowing for the exercise of share options which have met the required exercise conditions and the full conversion of the Convertible Unsecured Loan Stock, if the effect on earnings per share is dilutive. The weighted average number of Ordinary shares of 10p each is 98,546,290 (year to 25th December 1998: 92,048,812, six months to 24th June 1998: 85,436,677) and the relevant earnings are £6,224,000 (year to 25th December 1998: £11,092,000, six months to 24th June 1998: £3,367,000). CONTINUED NOTES TO THE ACCOUNTS Earnings per share on revenue activities exclude the profit on the sale of investment properties and investments, and associated tax charge and minority interests thereon, of £890,000 (year to 25th December 1998 loss: £132,000, six months to 24th June 1998 loss: £9,000). 8. Property assets Properties Total Current Investm fixed property Cost or valuation ent under property assets propert construct assets £000 ies ion* £000 £000 £000 At beginning of 646,9327,674 654,606 24,412 period Acquisitions 73,328 - 73,328 20,395 Refurbishment and 12,979 6,681 19,660 4,787 development Disposals (14,630) - (14,630) (11,174) Revaluation 19,893 3,692 23,585 - At end of period 738,502 18,047 756,549 38,420 The fixed property assets were valued at 24th June 1999, as follows: DTZ Debenham Thorpe Open market value 630,660 Open market value - properties under 18,047 construction* Richard Ellis St. Quintin Open market value 107,234 Directors Open market value 420 Directors Cost 188 756,549 Valuations are at open market value as defined in the Appraisal and Valuation Manual of The Royal Institution of Chartered Surveyors. *The valuation reflects the Group's effective interest in properties under construction 9. Other investments The investment in the shares held in CenterPoint Properties Trust is included in the balance sheet at 24th June 1999 at the market value at that date of $34.69 per share translated into sterling at the rate of exchange at 24th June 1999 of $1.59 to the £. The effect of the increase since the last balance sheet date in the share price as quoted on the New York Stock Exchange has been recognised in the period by a transfer to reserves. 10. Net assets per share Net assets per share have been calculated on 98,255,271 Ordinary shares of 10p each and have been based on net assets attributable to shareholders of £359,704,000 (25th December 1998: £330,816,000, 24th June 1998: £297,264,000). Diluted net assets per share assumes that all of the Convertible Unsecured Loan Stock ('CULS') had been converted at the balance sheet date. Diluted net assets per share have been calculated on 110,667,442 Ordinary share of 10p each and have been based on adjusted net assets attributable to shareholders of £383,699,000 (25th December 1998: £354,766,000, 24th June 1998: £321,168,000) by adding the £23,995,000 (25th December 1998: £23,950,000, 24th June 1998; £23,904,000) balance sheet value of the CULS. CONTINUED NOTES TO THE ACCOUNTS 11. Reconciliation of Net cash inflow from operating activities (Unaudi (Unaudit (Audited) ted) ed) Year to 6 6 months 25th months to December to 24th 1998 24th June £000 June 1998 1999 £000 £000 Group operating profit 20,093 13,563 33,434 Profit on sale of trading and (910) - (517) development properties 19,183 13,563 32,917 Depreciation 222 267 569 Loss/(profit) on disposal of fixed 3 (28) 113 assets Amortisation of goodwill arising on acquisition of joint venture - - 5 Decrease/(increase) in trade debtors, other debtors and 97 (1,961) (5,305) prepayments Increase in trade creditors, other creditors, taxation and 6,031 1,124 3,004 social security and accruals Net cash flow from operating 25,536 12,965 31,303 activities 12. Debt Valuation The table below shows the market value of fixed rate debt instruments, and reflects the difference between the interest rate yield curve as at 24th June 1999 and the rates historically committed; namely the fair value adjustment. Book Notional Market Fair Value principal value value £000 £000 £000 adjustment £000 Convertible Unsecured Loan 24,642 n/a 24,642 - Stock Bank borrowings 15,250 n/a 15,624 374 Interest rate swaps n/a 254,961 257,099 2,138 39,892 254,961 297,365 2,512 Minority interests 94 Fair Value Adjustment 2,418 attributable to the Group Net of tax at 30% 1,693 The expiry profile of the fair value adjustment is as follows: Fair % of value total Adjustment £000 1999 (six months) 2,017 80% 2000 1,621 65% 2001 (325) (13%) 2002 (519) (21%) 2003 (282) (11%) Total 2,512 100% 13. Copies of the Interim Report Copies of the Interim Report are available from the Company's registered office at 22 Grosvenor Gardens, London SW1W ODH. Copies are also available through the FT Free Annual Reports Services, details of which can be found in the London Share Service pages of the Financial Times.

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