TIDMBA59

RNS Number : 3525F

Capital Shopping Centres PLC

21 April 2011

21 April 2011

Capital Shopping Centres PLC ("the Company")

ANNUAL FINANCIAL REPORT

Capital Shopping Centres PLC has today published its Annual Report for the year ended 31 December 2010 ("Annual Report"). The Annual Report is available for download at www.capital-shopping-centres.co.uk.

A copy of the Annual Report has been submitted to the National Storage Mechanism, and will shortly be available for inspection at www.hemscott.com/nsm.do.

In accordance with DTR 6.3.5, the following information is extracted from the company's Annual Report and in unedited full text.

Management Report

Principal Activities

The Capital Shopping Centres PLC group ("the Group") specialises in the ownership, management and development of prime UK regional shopping centres.

The Group's assets comprise four major out-of-town centres being - Lakeside, Thurrock; Metrocentre, Gateshead; Braehead, Glasgow and The Mall at Cribbs Causeway, Bristol - and eight in-town centres including centres in prime destinations such as Cardiff, Manchester, Norwich and Nottingham.

With a dedicated and skilled management team, the Group aims to be the landlord of choice for retailers and to provide compelling destinations for shoppers. The Group is a responsible and environmentally conscious participant in the communities where it invests. The Group focuses on the creation of long term and sustainable growth in net rental income with a view to generating superior returns to its parent company.

Review of Business and Future Developments

The Group's results and financial position for the year ended 31 December 2010 are set out in full in the consolidated income statement, the consolidated statement of comprehensive income, the Group and Company balance sheets, the Group and Company statements of changes in equity, the Group and Company statements of cash flows and the related notes. The Group's profit before taxation was GBP474.0 million (2009 loss GBP324.7 million). The Group's net assets attributable to equity shareholders increased from GBP52.9 million to GBP1,028.1 million, due to a GBP500.0 million capital injection by the parent company and the property revaluation surplus in the year of GBP482.4 million (2009 deficit of GBP425.3 million). Net external debt decreased by GBP176.2 million to GBP2,447.2 million at 31 December 2010.

Prospects and Priorities

The 2010 results demonstrate that the Group's recovery is on track with increased like-for-like net rental income, the key driver of growth in earnings, improved operational performance and property valuation surpluses. The opportunities for value creation through development and active management described below will be vigorously pursued, through the planning stages of major extensions to Victoria Centre, Nottingham, Lakeside, Thurrock and Braehead, Glasgow, as well as embarking on other active management projects. With the demand for space in the top 50 UK shopping centres increasing ahead of supply, a range of return-enhancing organic opportunities, a strongly reinforced corporate position and a reinvigorated approach to ensuring our assets are attractive for the shopping public, the Group is well placed to achieve growth.

The key areas of focus for 2011 to realise that potential are:

-- growth in like-for-like net rental income

-- value creation through continued enhancement of all centres as retail and leisure destinations by progressing our development and active management opportunities

Performance in 2010

The Group has made good progress on its major priority for 2010 - to improve net rental income, particularly from short-term lease re-lettings and larger space renegotiations. Net rental income has increased 17.7 per cent in total and 2 per cent like-for-like, following two years of intense letting activity.

The Group's other major objectives for 2010 were to progress the value-enhancing organic growth opportunities and to progress the initial letting of St David's, Cardiff. Significant progress has been made in enhancing the Group's centres through their active management as retail and leisure destinations. This is discussed in the Major Centres section below.

UK Retail Property Market

The Group's focus is the top 50 million sq. ft. of UK shopping centre locations, some four per cent of the UK's 1.3 billion sq. ft. of retail space of which it owns 26 per cent by area. Such centres are and will remain rare and change hands infrequently. Shopping centres in total represent only around 13 per cent of the UK's 1.3 billion sq. ft. of retail space, the top 50 centres representing only around 4 per cent. The highly regulated planning environment combined with the recent challenging economic environment for financing of new centres has contributed to a limited development pipeline.

The Group's centres can offer retailers flagship stores in top locations. Such stores are increasingly becoming a crucial marketing tool for the retailer's brand. The development of other retail channels such as online shopping reinforce the concentration of physical comparison retailing into the destinations, such as the Group's, most attractive to the shopper for retail and broader entertainment. Online sales comprise only a small but growing proportion of total retail spend - 8 per cent in 2010 according to ONS. The most successful retailers now have an integrated approach to online and in-store sales, with strong evidence of high levels of interaction between the two. This is highlighted by the popularity of "click and collect" and "return to store" facilities, both of which reinforce the need for a physical store and produce incremental sales.

As a result, as successful UK and international retailers look to their growth plans for the next couple of years we expect to see increased competition for high profile, good quality space in those best locations.

Investment Property Valuations

The UK commercial property investment market continued to experience valuation recovery in 2010, following its turning point in mid 2009. In particular, good quality property has continued to perform well while secondary assets have remained under pressure. Prime shopping centres are proving increasingly desirable to major international investors searching for quality UK investments in an environment of low interest rates and relatively attractive currency rates. Yields for prime shopping centres tightened significantly in the first half and, after a cluster of transactions in the autumn, maintained an inward progression while other sub-sectors slowed. Despite the recovery, capital values as measured by the IPD UK monthly retail capital growth index remain well below peak levels, currently at early 2003 levels. We are just over a year on from the largest decline in UK commercial property values for decades and valuation yields remain above the Group's long-run average.

The valuation outcome for the Group's assets for the year was very positive. Values rose by 11.2 per cent for the full year. This represents a significant out-performance of the IPD UK monthly retail capital growth index which produced an increase of 7.5 per cent for the year.

Net Rental Income

The Group's net rental income which increased by 17.7 per cent to GBP263.3 million in the year benefitted from the income generated by the new development at St David's, Cardiff and the full year benefit of the 2009 acquisitions of the Mall and Retail Park at Cribbs Causeway, Bristol; The Chimes Shopping Centre, Uxbridge and Arndale Centre, Manchester. These centres were acquired from another Capital Shopping Centres Group PLC company. Like-for-like net rental income for 2010 is 2.0 per cent above that of 2009.

Occupancy

Occupancy remains high at 97.4 per cent (31 December 2009 - 97.8 per cent) excluding the recently completed extension to St David's, Cardiff. Including this extension, occupancy for the Group was 96.6 per cent (31 December 2009 - 95.9 per cent).

Footfall

Estimated footfall across the Group's 12 centres was over 240 million in the year, up 5 per cent in the year largely due to the successful opening of St David's, Cardiff.

Major Centres

Lakeside, Thurrock, (GBP1,053 million, 18 per cent valuation surplus) has had an excellent year with an extended flagship store for Primark opened and trading well, 20 new long term lettings including Cult, Guess and Panasonic and a broadened catering offer including Ed's Easy Diner and Taco Bell's first UK store. The local regional planning framework, which is due to be adopted in the summer of 2011, indicates scope for significant additional retail space in the Lakeside area.

Metrocentre, Gateshead, (GBP843 million, 8 per cent valuation surplus). The completion of the new leisure and catering offering, including Wagamama, TK Maxx/Homesense and Handmade Burger, has revitalised the yellow quadrant and driven an increase in retail spend. 39 new long term lettings have been completed in 2010 including new brands to Metrocentre, Radley and Office. With the 25th anniversary of opening approaching, good progress is being made in extending leases nearing expiry. Around half of the anticipated peak in the maturity profile has now been renegotiated. In January 2011, an impressive new Next Home store opened on the Retail Park, the first step in the planned evolution of its retail mix.

Braehead, Glasgow, (GBP576 million, 13 per cent valuation surplus) has benefited from the opening of the flagship Primark store in the former Sainsbury's location. In turn, H&M are due in March 2011 to open a flagship store in the former Primark location. Five new brands have been signed up in 2010 including Apple and Hollister, who have chosen to locate flagship stores at Braehead rather than competing retail areas. The broader Braehead destination continues to evolve with the opening shortly of a major garden centre and retail park planning applications in progress.

Arndale, Manchester, (GBP336 million, 16 per cent valuation surplus). The 2006 northern extension has evolved a more aspirational style during 2010 with the addition of brands such as Bose, Pandora and Luke. Further, New Cathedral Street now has the UK flagship Hugo Boss store, opened in November, in place of Heal's.

St David's, Cardiff, (GBP243 million, 19 per cent valuation surplus) achieved footfall of 37 million for 2010, well above target for its first full year after opening. The new extension is now 83 per cent committed by income up from approximately 65 per cent on opening day. 20 of 2010's new lettings are to retailers new to Wales, including Lego, Nike and Carluccios. The Group was delighted that the development was awarded the British Council of Shopping Centres (BCSC) Supreme Gold for Best In-town Retail Scheme in 2010.

Cashflow

The Group cash flow shows a net inflow from operating activities of GBP145.3 million in 2010. This is a decrease of GBP39.1 million from 2009 largely due to the increase in other finance costs, in particular the costs on terminating interest rate swap contracts.

2010 investment in property related assets was mainly limited to existing 2009 commitments, with the most significant expenditure in the period being in respect of St David's, Cardiff (GBP13 million) and Braehead (GBP5 million).

Cash proceeds from the disposal of properties and investments generated GBP64.4 million, including GBP54.3 million net proceeds received from the disposal of Westgate, Oxford.

Financial Position

The Group's debt is largely arranged on an asset-specific basis, with limited or non-recourse from the borrowing entities to other Group companies. This structure permits the Group a high degree of financial flexibility in dealing with debt issues and importantly avoids the concentration of covenant and refinancing risk associated with a single group-wide borrowing.

Net external debt, which excludes the Metrocentre compound financial instrument of GBP138.7 million, decreased from GBP2,623.4 million at 31 December 2009 to GBP2,447.2 million at 31 December 2010. The Group had cash of GBP87.4 million at 31 December 2010 (2009 - GBP53.8 million).

Financial Covenants

Financial covenants apply to GBP2.5 billion of secured asset-specific debt. The two main covenants are Loan to Value (LTV) and Interest Cover (IC). The actual requirements vary and are specific to each loan.

In the first half of 2010 the Group made asset-specific loan prepayments of GBP48 million and GBP36 million of swap repayments to reduce financial covenant risk. GBP2 million was injected into Xscape Braehead Partnership in April 2010, as part of a loan prepayment and covenant moderation agreement which included the Loan to Value covenant being waived until 2012.

The Group is in compliance with all of its corporate and asset-specific loan covenants.

Refinancing Activity

The GBP546 million loan and associated CMBS notes secured on Lakeside, Thurrock were scheduled to mature in July 2011 but were re-financed in January 2010 with a new GBP525 million, 7 year loan maturing in 2017 to take advantage of the improvement in bank liquidity and reduce near term refinancing risk.

Key Performance Indicators

The performance of the business is monitored through a number of Key Performance Indicators (KPI's) including both financial and non-financial measures. The main KPI's used by the Board to monitor the business are like-for-like net rental income, occupancy and prime property asset performance. These KPI's can be found in this Directors' Report containing details of our portfolio and operational performance and additionally in the notes to these financial statements, in particular, note 21.

Key Risks and Uncertainties

The key risks and uncertainties facing the Group are set out in the table below:

 
 Risk                Description         Impact              Mitigation 
------------------  ------------------  ------------------  ------------------ 
 Financing 
------------------------------------------------------------------------------ 
 Liquidity           Reduced             Insufficient        Regular reporting 
                     availability         funds to meet      of current and 
                                          operational        projected 
                                          and financing      position to the 
                                          needs              Board Efficient 
                                                             treasury 
                                                             management and 
                                                             active credit 
                                                             control process 
------------------  ------------------  ------------------  ------------------ 
 Economic            Property values     Impact on           Regular 
  and property       decrease            covenants and       monitoring of 
  market downturn    Reduction in        other loan          Loan to Value 
                     rental income       agreement           (LTV) and 
                     Macro economic      obligations         Interest Cover 
                     conditions                              Ratio (ICR) 
                     deteriorate                             covenants and 
                                                             other obligations 
                                                             Covenant headroom 
                                                             monitored and 
                                                             maintained; 
                                                             regular market 
                                                             valuations; focus 
                                                             on quality 
                                                             assets. 
------------------  ------------------  ------------------  ------------------ 
 Interest            Interest rates      Lack of certainty   Hedging to 
  cover               fluctuate           over interest      establish 
                                          costs              long-term 
                                                             certainty 
------------------  ------------------  ------------------  ------------------ 
 Market price        Interest rates      Potential cash      Manage derivative 
  risk of fixed      fluctuate           outflow if          contracts to 
  rate derivatives   resulting in        derivative          achieve a balance 
                     significant         contract contains   between hedging 
                     assets and or       break clause        interest rate 
                     liabilities on                          exposure and 
                     derivative                              minimising 
                     contracts                               potential cash 
                                                             calls 
------------------  ------------------  ------------------  ------------------ 
 REIT                Breach REIT         Tax penalty or be   Regular 
                     conditions PID      forced to leave     monitoring of 
                     requirements        the REIT regime     compliance and 
                                         Requirement to      tolerances 
                                         pay 90 per cent     Alternative 
                                         of income           sources of 
                                         restricts ability   investment 
                                         to retain cash      funding 
                                         for investment      constantly under 
                                                             review 
------------------  ------------------  ------------------  ------------------ 
 Joint ventures      Reliance on JV      Partners under      Agreements are in 
                     partners'           perform or          place and regular 
                     performance and     provide incorrect   communication 
                     reporting           information         with partners 
------------------  ------------------  ------------------  ------------------ 
 Asset management 
------------------------------------------------------------------------------ 
 Tenants             Tenant failure      Financial loss      Initial and 
                                                             subsequent 
                                                             assessment of 
                                                             tenant covenant 
                                                             strength Active 
                                                             credit control 
                                                             process 
------------------  ------------------  ------------------  ------------------ 
 Voids               Increased voids,    Financial loss      Policy of active 
                      failure to let                         tenant mix 
                      developments                           management 
------------------  ------------------  ------------------  ------------------ 
 Reputation 
------------------------------------------------------------------------------ 
 Responsibility      Failure of Health   Impact on           Annual audits 
  for visitors        & Safety           reputation or       carried out by 
  to shopping                            potential           external 
  centres                                criminal/ civil     consultant Health 
                                         proceedings         & Safety policies 
                                                             in place 
------------------  ------------------  ------------------  ------------------ 
 Business            Lost access to      Impact on           Documented 
  interruption        centres or head    footfall and        Business Recovery 
                      office             tenant income       Plans in place 
                                         Adverse             Security team 
                                         publicity           training and 
                                                             procedure in 
                                                             shopping centres 
                                                             Terrorist risks 
                                                             monitored 
------------------  ------------------  ------------------  ------------------ 
 People/HR 
------------------------------------------------------------------------------ 
 Staff               Loss of key staff   Adverse impact      Succession 
                                          on the Group's     planning; 
                                          performance        performance 
                                                             evaluation; 
                                                             training and 
                                                             development; 
                                                             incentives & 
                                                             rewards 
------------------  ------------------  ------------------  ------------------ 
 Developments 
------------------------------------------------------------------------------ 
 Time                Planning            Securing planning   Policy of 
                                          consent for        sustainable 
                                          developments       development and 
                                                             regeneration of 
                                                             brownfield sites 
                                                             Constructive 
                                                             dialogue with 
                                                             planning 
                                                             authorities. 
------------------  ------------------  ------------------  ------------------ 
 Costs and           Construction cost   Returns reduced     Approval process 
  letting risk       overrun, low         by increased       based on detailed 
                     occupancy levels     costs or delay     project costs; 
                                          in securing        regular 
                                          tenants            monitoring and 
                                                             forecasting of 
                                                             project costs and 
                                                             rental income; 
                                                             fixed cost 
                                                             contracts. 
------------------  ------------------  ------------------  ------------------ 
 Strategy 
------------------------------------------------------------------------------ 
 Defining            Inappropriate       Financial loss      Experienced 
  and executing      strategy defined     Sub-optimal        management team 
  Group' strategy    or poor execution    returns            familiar with 
                     of strategic         Reputational       shopping centre 
                     plans                impact             industry Use of 
                                                             research and 
                                                             third party 
                                                             diligence 
                                                             expertise as 
                                                             required Board 
                                                             review process 
------------------  ------------------  ------------------  ------------------ 
 

Share Capital

Details of share capital are set out in note 22. On 19 July 2010, the Company issued a total of 100,000 shares at a price of GBP5,000 per share in respect of the capitalisation of inter-company debt.

Going Concern

The directors have reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

Attention is drawn to the Going Concern disclosure included in Note 1 to the consolidated financial statements.

Dividends

The directors do not recommend a final dividend for the year (2009 - nil).

Creditor Payment Policy

The Group's policy and practice is to pay creditors in accordance with agreed terms of business. The Company does not ordinarily pay its creditors directly as this is carried out by other companies in Capital Shopping Centres Group PLC. As a result, the Company has a nil trade creditor balance and it is not practical to calculate creditor days for the Company as at 31 December 2010 (2009 - nil trade creditor balance).

Directors' Indemnity Provision

A qualifying indemnity provision (as defined in S234 of the Companies Act 2006) is in force for the benefit of the Directors of the Company and its associated companies. The Company's parent, Capital Shopping Centres Group PLC, maintains Directors' and Officers' insurance which is reviewed annually.

Charitable Donations

During the year the Group made charitable donations of GBP79,810 (2009 - GBP109,305) and no political donations (2009 - GBPnil).

Directors

The directors who held office during the year and until the date of this report are given below:

M G Butterworth appointed 11 March 2011

K E Chaldecott

M Ellis

D A Fischel

C Kirby

T Pereira

E M Roberts appointed 13 August 2010

J G Abel resigned 7 May 2010

D P H Burgess resigned 7 May 2010

M Rapp resigned 7 May 2010

L Woodhouse resigned 18 June 2010

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

-- select suitable accounting policies and then apply them consistently;

-- make judgements and estimates that are reasonable and prudent;

-- state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;

-- prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each of the Directors, whose names and functions are listed in the Directors' Report confirm that, to the best of each person's knowledge and belief:

(a) the Group financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and

(b) the Directors' report contained in the annual report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

Disclosure of Information to Auditors

So far as the Directors are aware, there is no relevant audit information of which the auditors are unaware and each Director has taken all reasonable steps to make himself or herself aware of any relevant audit information and to establish that the auditors are aware of that information.

Auditors

The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution seeking to reappoint them will be proposed at the forthcoming Annual General Meeting.

By order of the Board on

D A Fischel T Pereira

Director Director

15 April 2011 15 April 2011

i) Audited Financial Statements

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2010

 
                                                         2010     2009 
                                               Notes     GBPm     GBPm 
 
Revenue                                          2      389.9    336.0 
                                                      =======  ======= 
 
Net rental income                                2      263.3    223.7 
 
Net other income                                 4        0.7      4.9 
Revaluation and sale of investment and 
 development property                            5      479.0  (425.2) 
Administration expenses                                (11.1)    (2.4) 
Impairment of goodwill                                  (3.1)        - 
                                                      -------  ------- 
 
Operating profit/(loss)                                 728.8  (199.0) 
                                                      -------  ------- 
 
Finance costs                                    6    (173.1)  (154.1) 
Finance income                                   7        2.3      3.6 
Other finance costs                              8     (50.6)   (20.8) 
Change in fair value of derivative financial 
 instruments                                           (33.4)     45.6 
                                                      -------  ------- 
 
Net finance costs                                     (254.8)  (125.7) 
                                                      -------  ------- 
 
Profit/(loss) before tax                         9      474.0  (324.7) 
 
Current tax                                     10        1.2      0.1 
Deferred tax                                    10      (0.1)        - 
REIT entry charge                               10      (3.0)    (2.6) 
                                                      -------  ------- 
 
Taxation                                                (1.9)    (2.5) 
                                                      -------  ------- 
 
 
Profit/(loss) for the year                              472.1  (327.2) 
                                                      =======  ======= 
 
Attributable to: 
Equity shareholders of Capital Shopping 
 Centres PLC                                            455.3  (315.4) 
Non-controlling interest                                 16.8   (11.8) 
                                                      -------  ------- 
 
                                                        472.1  (327.2) 
                                                      =======  ======= 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

 
                                           2010     2009 
                                           GBPm     GBPm 
 
Profit/(loss) for the year                472.1  (327.2) 
 
Total comprehensive income for the year   472.1  (327.2) 
                                          =====  ======= 
 
Attributable to: 
Equity shareholders of Capital Shopping 
 Centres PLC                              455.3  (315.4) 
Non-controlling interest                   16.8   (11.8) 
                                          -----  ------- 
 
Total comprehensive income for the year   472.1  (327.2) 
                                          =====  ======= 
 

BALANCE SHEETS

AS AT 31 DECEMBER 2010

 
                                        Group      Group    Company    Company 
                                         2010       2009       2010       2009 
                             Notes       GBPm       GBPm       GBPm       GBPm 
 
Non-current assets 
Investment and development 
 property                     13      4,807.5    4,361.2          -          - 
Investment in group 
 companies                    14            -          -    1,024.4      918.6 
Derivative financial 
 instruments                  21          4.6          -          -          - 
Trade and other receivables   17         69.5       41.1          -          - 
Deferred tax                                -        0.1          -          - 
                                    ---------  ---------  ---------  --------- 
                                      4,881.6    4,402.4    1,024.4      918.6 
                                    ---------  ---------  ---------  --------- 
 
Current assets 
Trading property              16         25.5       13.9          -          - 
Trade and other receivables   17         48.2       54.7    1,911.8    1,793.2 
Cash and cash equivalents     24         87.4       53.8       52.3        1.9 
                                    ---------  ---------  ---------  --------- 
                                        161.1      122.4    1,964.1    1,795.1 
                                    ---------  ---------  ---------  --------- 
 
Total assets                          5,042.7    4,524.8    2,988.5    2,713.7 
                                    ---------  ---------  ---------  --------- 
 
Current liabilities 
Trade and other payables      18    (1,085.1)  (1,415.1)  (1,739.7)  (2,085.5) 
Borrowings                    19       (45.5)     (76.2)          -          - 
                                    (1,130.6)  (1,491.3)  (1,739.7)  (2,085.5) 
                                    ---------  ---------  ---------  --------- 
Non-current liabilities 
Borrowings                    19    (2,627.8)  (2,730.9)     (26.7)     (26.7) 
Derivative financial 
 instruments                  21      (251.0)    (224.7)          -          - 
Other payables                          (5.2)     (25.0)      (4.9)      (8.8) 
                                    (2,884.0)  (2,980.6)     (31.6)     (35.5) 
                                    ---------  ---------  ---------  --------- 
 
Total liabilities                   (4,014.6)  (4,471.9)  (1,771.3)  (2,121.0) 
 
Net assets                            1,028.1       52.9    1,217.2      592.7 
                                    =========  =========  =========  ========= 
 
Equity 
Share capital                 22        197.3      197.3      197.3      197.3 
Share premium                         1,146.9      646.9    1,146.9      646.9 
Other reserves                            8.3        8.3        8.3        8.3 
Retained earnings                     (344.3)    (799.6)    (135.3)    (259.8) 
                                    ---------  ---------  ---------  --------- 
Attributable to equity 
 shareholders of Capital 
 Shopping Centres PLC                 1,008.2       52.9    1,217.2      592.7 
Non-controlling interest                 19.9          -          -          - 
                                    ---------  ---------  ---------  --------- 
 
Total equity                          1,028.1       52.9    1,217.2      592.7 
                                    =========  =========  =========  ========= 
 

The notes form part of these consolidated financial statements.

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

 
 Group 
                               Share                                       Non- 
                     Share    premium    Other     Retained             controlling    Total 
                    capital   account   reserves   earnings    Total     interest     equity 
                     GBPm      GBPm       GBPm       GBPm      GBPm        GBPm        GBPm 
 
 At 1 January 
  2009                197.3     646.9        8.3    (573.2)     279.3             -     279.3 
 
 Loss for the 
  year                    -         -          -    (315.4)   (315.4)        (11.8)   (327.2) 
                   --------  --------  ---------  ---------  --------  ------------  -------- 
 
 Total 
 comprehensive 
 income for the 
  year                    -         -          -    (315.4)   (315.4)        (11.8)   (327.2) 
                   --------  --------  ---------  ---------  --------  ------------  -------- 
 
 Dividends paid           -         -          -       89.0      89.0             -      89.0 
                   --------  --------  ---------  ---------  --------  ------------  -------- 
 Non-controlling 
  interest 
 additions                -         -          -          -         -          11.8      11.8 
                   --------  --------  ---------  ---------  --------  ------------  -------- 
 
 At 31 December 
  2009                197.3     646.9        8.3    (799.6)      52.9             -      52.9 
                   ========  ========  =========  =========  ========  ============  ======== 
 
 At 1 January 
  2010                197.3     646.9        8.3    (799.6)      52.9             -      52.9 
 
 Profit for the 
  year                    -         -          -      455.3     455.3          16.8     472.1 
                   --------  --------  ---------  ---------  --------  ------------  -------- 
 
 Total 
 comprehensive 
 income for the 
  year                    -         -          -      455.3     455.3          16.8     472.1 
                   --------  --------  ---------  ---------  --------  ------------  -------- 
 
 Ordinary shares 
  issued                  -     500.0          -          -     500.0             -     500.0 
 Non-controlling 
  interest 
 additions                -         -          -          -         -           3.1       3.1 
                   --------  --------  ---------  ---------  --------  ------------  -------- 
 
 At 31 December 
  2010                197.3   1,146.9        8.3    (344.3)   1,008.2          19.9   1,028.1 
                   ========  ========  =========  =========  ========  ============  ======== 
 
 
 Company                                Share 
                              Share    premium    Other     Retained 
                             capital   account   reserves   earnings    Total 
                              GBPm      GBPm       GBPm       GBPm      GBPm 
 
 At 1 January 2009             197.3     646.9        8.3    (308.3)     544.2 
 
 Loss for the year                 -         -          -     (40.5)    (40.5) 
                            --------  --------  ---------  ---------  -------- 
 
 Total comprehensive 
  income for the year              -         -          -     (40.5)    (40.5) 
                            --------  --------  ---------  ---------  -------- 
 
 Dividends paid                    -         -          -       89.0      89.0 
                            --------  --------  ---------  ---------  -------- 
 
 At 31 December 2009           197.3     646.9        8.3    (259.8)     592.7 
                            ========  ========  =========  =========  ======== 
 
 At 1 January 2010             197.3     646.9        8.3    (259.8)     592.7 
 
 Profit for the year               -         -          -      124.5     124.5 
                            --------  --------  ---------  ---------  -------- 
 
 Total comprehensive 
  income for the year              -         -          -      124.5     124.5 
                            --------  --------  ---------  ---------  -------- 
 
 Ordinary shares issued            -     500.0          -          -     500.0 
                            --------  --------  ---------  ---------  -------- 
 
 At 31 December 2010           197.3   1,146.9        8.3    (135.3)   1,217.2 
                            ========  ========  =========  =========  ======== 
 

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2010

 
                                           Group     Group   Company   Company 
                                            2010      2009      2010      2009 
                                 Notes      GBPm      GBPm      GBPm      GBPm 
 
 Cash generated from 
  operations                      23       388.4     387.2      58.2    (66.3) 
 Interest paid                           (210.2)   (174.9)    (63.8)    (15.5) 
 Interest received                           2.3       3.6      56.0      17.8 
 Tax received/(paid)                         1.4     (0.1)         -     (0.1) 
 REIT entry charge paid                   (36.6)    (31.4)         -         - 
 
 Cash flows from operating 
  activities                               145.3     184.4      50.4    (64.1) 
                                        --------  --------  --------  -------- 
 
 Purchase and development 
  of property                             (27.4)   (101.5)         -         - 
 Sale of property                           64.4       0.7         -         - 
 Other derivative instruments              (7.3)         -         -         - 
 
 
 Cash flows from investing 
  activities                                29.7   (100.8)         -         - 
                                        --------  --------  --------  -------- 
 
 Borrowings repaid                       (663.2)   (190.6)         -    (31.6) 
 Borrowings drawn                          518.7      35.5         -         - 
 Cash transferred from/(to) 
  restricted accounts             24        19.8    (19.8)         -         - 
 Partnership equity introduced               3.1      11.8         -         - 
 Equity dividends                 11           -      89.0         -      89.0 
                                        --------  --------  --------  -------- 
 
 Cash flows from financing 
  activities                             (121.6)    (74.1)         -      57.4 
                                        --------  --------  --------  -------- 
 
 Net increase/(decrease) in 
  cash and cash 
 equivalents                                53.4       9.5      50.4     (6.7) 
 Cash and cash equivalents 
  1 January                                 34.0      24.5       1.9       8.6 
                                        --------  --------  --------  -------- 
 
 Cash and cash equivalents 
  at 31 December                  24        87.4      34.0      52.3       1.9 
                                        ========  ========  ========  ======== 
 

The notes form part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2010

1. Principal accounting policies

Accounting convention and basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the European Union (IFRS), IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Directors have taken advantage of the exemption offered by Section 408 of the Companies Act not to present a separate income statement for the Company.

The financial statements have been prepared under the historical cost convention as modified by the revaluation of properties, available-for-sale investments, financial assets and liabilities held for trading. A summary of the more important Group accounting policies is set out below.

The accounting policies used are consistent with those applied in the last annual financial statements, as amended to reflect the adoption of new standards, amendments, and interpretations which became effective in the year. During 2010, the following standards, amendments and interpretations endorsed by the EU are effective for the first time for the Group's 31 December 2010 year end:

IFRS 2 Share-based Payment (amendment);

IFRS 3 Business Combinations;

IAS 27 Consolidated and Separate Financial Statements;

IAS 39 Financial Instruments: Recognition and Measurement (amendment);

IFRIC 12 Service Concession Arrangements;

IFRIC 15 Arrangements for Construction of Real Estate;

IFRIC 16 Hedges of a Net Investment in a Foreign Operation;

IFRIC 17 Distributions of Non-cash Assets to Owners; and

Amendments arising from the 2008 and 2009 annual improvements project.

These either had no material impact on the financial statements or only resulted in changes to presentation and disclosure.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. Where such judgements are made they are included within the accounting policies below.

Comparative information is re-presented for the income statement and statement of cash flows but not the balance sheet. Balance sheet comparatives have been re-presented to classify derivative financial instruments according to their maturity date.

The following standards and interpretations have been issued and adopted by the EU but are not effective for the year ended 31 December 2010 and have not been adopted early:

IAS 24 Related Party Disclosures;

IAS 32 Financial Instruments: Presentation (amendment);

IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (amendment); and

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.

These pronouncements are not expected to have a material impact on the financial statements, but will result in changes to presentation or disclosure where they are applicable.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Directors' Report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are also described in the Directors' Report. In addition note 21 includes the Group's risk management objectives, details of its financial instruments and hedging activities, its exposures to liquidity risk and details of its capital structure.

The Directors have undertaken a review of the projected financial position of the Company and the Group, which includes reasonable assumptions about future trading and cash flows. This review included an assessment of cash balances, the debt maturity profile, the economic conditions faced by tenants and the financial position of the Group's parent company, Capital Shopping Centres Group PLC.

The Directors have therefore concluded, based on the Group's forecasts and projections and taking into account reasonably possible changes in trading performance along with the factors listed above, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Basis of consolidation

These accounts include the consolidation of The Metrocentre Partnership. The Victoria Centre Partnership. The Chapelfield Partnership, The Potteries Shopping Centre Limited Partnership, Xscape Braehead Partnership and St. David's Limited Partnership. The members of these qualifying partnerships have taken advantage of the exemptions in The Partnerships (Accounts) Regulations 2008.

The consolidated financial information includes the Company and its subsidiaries and their interests in joint ventures.

All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.

- subsidiaries

Subsidiary undertakings are those entities for which the Group has the ability to govern the financial and operating policies, whether through a majority of the voting rights or otherwise. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases.

The Company's investment in Group companies is carried at cost less accumulated impairment losses.

- joint ventures

A joint venture is an entity over which the Group, either directly or indirectly, is in a position to jointly control the financial and operating policies of the entity.

The Group's interest in joint ventures is accounted for using proportional consolidation.

The Group's share of the assets, liabilities, income and expenses are combined with the equivalent items in the consolidated financial statements on a line-by-line basis

- non-controlling interest

A non-controlling interest is the equity in a subsidiary not owned, directly or indirectly, by the Company. Non-controlling interests are presented in the balance sheet within equity, separately from the amounts attributable to equity shareholders of the Company. Profit or loss and each component of other comprehensive income is attributed to equity shareholders of the Company and to non-controlling interests.

Revenue recognition

The Group recognises revenue on an accruals basis, when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Group.

- property revenue

Gross rental income is calculated on an accruals basis. Rental income receivable is spread evenly over the period from lease commencement to expiry. Directly attributable lease incentives are recognised within net rental income on the same straight-line basis as rental income.

Contingent rents, being those lease payments that are not fixed at the inception of a lease, for example increases arising on rent reviews or rents linked to tenant revenues, are recorded as income in the periods in which they are earned.

Rent reviews are recognised as income from the date of the rent review, based on management's estimates, when they can be measured reliably. Estimates are derived from knowledge of market rents for comparable properties determined on an individual property basis and updated for progress of negotiations.

Service charge income is recognised on an accruals basis in line with the service being provided.

- interest and other income

Revenue in respect of investments and other income represents investment income, earned on an accruals basis and profits or losses recognised on investments held for the short term. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate.

- dividend income

Dividend income is recognised when the shareholders' right to receive payment has been established.

- trading property income

Revenue on the sale of trading property is recognised when the significant risks and rewards of ownership have been transferred to the buyer. This will normally take place on exchange of contracts.

Income taxes

Current tax is the amount payable on the taxable income for the year and any adjustment in respect of prior years. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax, on non-REIT items, is provided using the balance sheet liability method in respect of temporary differences between the carrying amounts of assets and liabilities in the financial statements and the amounts used in the computation of taxable profit, with the exception of deferred tax on revaluation surpluses where the tax basis used is the accounts' historic cost.

Temporary differences are not provided on the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will not reverse in the foreseeable future.

Deferred tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that management believe it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are offset only when they relate to taxes levied by the same authority and the Group intends to settle them on a net basis.

Tax is included in the income statement except when it relates to items recognised in other comprehensive income, or directly in equity, in which case the related tax is also recognised in other comprehensive income or directly in equity.

Investment and development property

Investment and development properties are owned or leased by the Group and held for long-term rental income and capital appreciation.

The Group has elected to use the fair value model. Properties are initially recognised at cost and subsequently revalued at the balance sheet date to fair value as determined by professionally qualified external valuers on the basis of market value. Valuations conform with the Royal Institution of Chartered Surveyors ("RICS"), Valuation Standards 6th Edition and IVS1 of International Valuation Standards.

The main estimates and judgements underlying the valuations are in relation to market rent, taking into account forecast growth rates and yields based on known transactions for similar properties and likely incentives offered to tenants.

Property held under leases are stated gross of the recognised finance lease liability.

The cost of investment and development property includes capitalised interest and other directly attributable outgoings incurred during development, except in the case of properties and land where no development is imminent, in which case no interest is included. Interest is capitalised (before tax relief), on the basis of the average rate of interest paid on the relevant debt outstanding, until the date of practical completion.

Gains or losses arising from changes in the fair value of investment and development property are recognised in the income statement. Depreciation is not provided in respect of investment and development property.

When the use of a property changes from that of investment to trading, the property's deemed cost for subsequent accounting in accordance with IAS 2 Inventories is its fair value at the date of change in use.

Gains or losses arising on the sale of investment and development property are recognised when the significant risks and rewards of ownership have been transferred to the buyer. This will normally take place on exchange of contracts. The gain or loss recognised is the proceeds received less the carrying value of the property and costs directly associated with the sale.

Impairment of assets

The Group's assets are reviewed at each balance sheet date to determine whether events or changes in circumstances exist that indicate that their carrying amount may not be recoverable. If such an indication exists, the asset's recoverable amount is estimated. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. An impairment loss is recognised in the income statement for the amount by which the asset's carrying amount exceeds its recoverable amount. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (referred to as cash generating units).

Leases

Leases are classified according to the substance of the transaction. A lease that transfers substantially all the risks and rewards of ownership to the lessee is classified as a finance lease. All other leases are normally classified as operating leases.

- Group as lessee:

Finance leases of investment property are accounted for as finance leases and recognised as an asset and an obligation to pay future minimum lease payments. The investment property asset is included in the balance sheet at fair value, gross of the recognised finance lease liability.

Other finance lease assets are capitalised at the lower of the fair value of the leased asset or the present value of the minimum lease payments and depreciated over the shorter of the lease term and the useful life of the asset.

Lease payments are allocated between the liability and finance charges so as to achieve a constant financing rate.

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the lease term.

- Group as lessor:

Properties are leased out under operating leases, with rental income being recognised on a straight-line basis over the lease term. For more detail see the revenue recognition policy.

Trading property

Trading property comprises those properties either intended for sale or in the process of construction for sale. Where such properties were previously categorised as investment and development property they are transferred at their fair value which forms their deemed cost. Trading property is carried at the lower of cost and net realisable value.

Trade receivables

Trade receivables are recognised and subsequently measured at amortised cost.

The Directors' exercise judgement as to the collectability of the trade receivables and determines if it is appropriate to impair these assets. Factors such as days past due, credit status of the counterparty and historical evidence of collection are considered.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits with banks, whether restricted or unrestricted and other short-term liquid investments with original maturities of three months or less.

Trade payables

Trade payables are recognised and subsequently measured at amortised cost.

Borrowings

Borrowings are recognised initially at their net proceeds on issue and subsequently carried at amortised cost. Any transaction costs and premiums or discounts are recognised over the contractual life using the effective interest method.

In the event of early repayment, all unamortised transaction costs are recognised immediately in the income statement.

Derivative financial instruments

The Group uses derivative financial instruments to manage exposure to interest rate and foreign exchange risk. They are initially recognised on the trade date at fair value and subsequently re-measured at fair value based on market price.

Changes in fair value are recognised directly in the income statement.

Compound instruments

At the date of issue of compound instruments, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-compound debt. The difference between the proceeds of issue and the fair value of the liability is included in equity. Issue costs are apportioned between the liability and equity components based on their relative initial carrying values. The liability element of compound instruments is subsequently measured using the expected interest rate method. The value of the equity component is not re-measured in subsequent periods.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.

Current/non-current classification

Current assets include assets held primarily for trading purposes, cash and cash equivalents, and assets expected to be realised in, or intended for sale or consumption in, the course of the Group's operating cycle. All other assets are classified as non-current assets.

Current liabilities include liabilities held primarily for trading purposes, liabilities expected to be settled in the course of the Group's operating cycle and those liabilities due within one year from the reporting date. All other liabilities are classified as non-current liabilities.

2. Segmental reporting

The Group operates a single business activity in a single economic environment, namely the development and management of regional shopping centres within the United Kingdom. The Group manages the portfolio through a single operating division which it manages and reports as one business. The single segment described represents the information used by the Board to make operating decisions.

 
                                                                 2010     2009 
                                                                 GBPm     GBPm 
 
            Revenue                                             389.9    336.0 
                                                             ========  ======= 
 
            Rent receivable                                     326.0    277.3 
            Service charge income                                53.6     53.8 
                                                             --------  ------- 
                                                                379.6    331.1 
            Rent payable                                       (15.1)   (13.8) 
            Service charge and other non-recoverable costs    (101.2)   (93.6) 
                                                             --------  ------- 
 
            Net rental income                                   263.3    223.7 
                                                             ========  ======= 
 

3. Operating leases

The Group earns rental income by leasing its investment properties to tenants under operating leases.

In the UK, the standard shopping centre lease is for a term of 10 to 15 years. Standard lease provisions include service charge payments, recovery of other direct costs and review every five years to market rent. Standard turnover based leases have a turnover percentage agreed with each lessee which is applied to a retail unit's annual sales and any excess between the resulting turnover rent and the minimum rent is receivable by the Group.

The future minimum lease amounts receivable under non-cancellable operating leases are as follows:

 
                                                                 2010     2009 
                                                                 GBPm     GBPm 
 
            Not later than one year                             325.7    325.0 
            Later than one year and not later than five 
             years                                            1,062.2  1,065.0 
            Later than five years                             1,359.7  1,137.1 
 
                                                              2,747.6  2,527.1 
                                                              =======  ======= 
 

4. Net other income

 
                                        2010    2009 
                                        GBPm    GBPm 
 
 Sale of trading property               10.3       - 
 Cost of sales                         (9.3)       - 
                                      ------  ------ 
 Profit on sale of trading property      1.0       - 
 Write down of trading property        (0.3)   (0.1) 
 Insurance recovery                        -     5.0 
                                      ------  ------ 
 
                                         0.7     4.9 
                                      ======  ====== 
 

5. Revaluation and sale of investment and development property

 
                                               2010      2009 
                                               GBPm      GBPm 
 
 Revaluation of investment and development 
  property                                    482.4   (425.3) 
 Sale of investment property                  (3.4)       0.1 
                                             ------  -------- 
 
                                              479.0   (425.2) 
                                             ======  ======== 
 

6. Finance costs

 
                                         2010     2009 
                                         GBPm     GBPm 
 
 On bank loans and overdrafts           134.2    145.9 
 On amounts due to related companies     36.2     18.2 
 On obligations under finance leases      3.7      3.8 
                                       ------  ------- 
 Gross finance costs                    174.1    167.9 
 
 Interest capitalised on development    (1.0)   (13.8) 
                                       ------  ------- 
 
                                        173.1    154.1 
                                       ======  ======= 
 

Interest is capitalised, before tax relief, on the basis of the average rate of interest paid on the relevant debt, applied to the cost of developments during the year.

7. Finance income

 
                                          2010   2009 
                                          GBPm   GBPm 
 
 On amounts due from related companies     2.2    3.5 
 Other                                     0.1    0.1 
                                         -----  ----- 
 
                                           2.3    3.6 
                                         =====  ===== 
 

8. Other finance costs

 
                                                   2010   2009 
                                                   GBPm   GBPm 
 
 Metrocentre amortisation of compound financial 
  instrument                                        8.8    9.7 
 Costs on termination of financial instruments     41.8   11.1 
 
                                                   50.6   20.8 
                                                  =====  ===== 
 

9. Profit/(loss) before tax

Group:

The profit before tax of GBP474.0 million (2009 loss GBP324.7 million) is arrived at after charging:

 
                                                            2010      2009 
                                                         GBP'000   GBP'000 
 Fees payable to the company's auditor for 
  the audit of the Company and 
 consolidated accounts                                         -         3 
 
 Fees payable for the audit of company's subsidiaries 
  pursuant to legislation                                      -       150 
                                                        --------  -------- 
 
                                                               -       153 
                                                        ========  ======== 
 

Auditors' remuneration is in respect of the statutory audit of the company and consolidated accounts. Auditors' remuneration of GBP70,000 (2009 - GBPnil) was settled on behalf of the Company by its ultimate parent Capital Shopping Centres Group PLC and has not been recharged.

10. Taxation

Taxation charge for the year

 
                                                            2010    2009 
                                                            GBPm    GBPm 
 
           Current UK corporation tax at 28% (2009 28%)        -       - 
           Prior year items                                (1.2)   (0.1) 
                                                          ------  ------ 
 
           Current tax                                     (1.2)   (0.1) 
 
           Deferred tax                                      0.1       - 
           REIT entry charge                                 3.0     2.6 
 
           Total tax charge                                  1.9     2.5 
                                                          ======  ====== 
 

The tax charge for the year is lower (2009 - higher) than the standard rate of corporation tax in the UK. The differences are explained below:

 
                                                                2010      2009 
                                                                GBPm      GBPm 
 
          Profit/(loss) before tax                             474.0   (324.7) 
                                                            --------  -------- 
          Profit/(loss) before tax multiplied by the 
           standard 
          rate in the UK of 28% (2008 28%)                     132.7    (90.9) 
          Capital allowances not reversing on sale             (3.7)     (3.5) 
          Disposal of properties and investments              (18.3)         - 
          Prior year corporation tax items                     (1.2)     (0.1) 
          Expenses disallowed, net of capitalised interest       3.1     (3.8) 
          UK transfer pricing adjustment                         3.3       8.7 
          Group relief (without payment)                         1.3     (5.3) 
          REIT exemption - corporation tax                       7.3    (11.5) 
          REIT exemption - deferred tax                      (125.7)     106.3 
          REIT exemption - entry charge                          3.0       2.6 
          Losses utilised in the period                          0.1 
 
          Total tax charge                                       1.9       2.5 
                                                            ========  ======== 
 

Tax items that are taken directly to equity are shown in the consolidated statement of comprehensive income.

11. Dividends

 
                                     2010    2009 
                                     GBPm    GBPm 
Ordinary shares 
Prior period final dividend repaid      -  (89.0) 
                                     ====  ====== 
 

The Board has not proposed a final dividend in respect of 2010 (2009 nil). In 2008 a dividend of 22.55 pence per share was paid, this was subsequently repaid to Capital Shopping Centres PLC during 2009.

12. Profit for the financial year attributable to shareholders of Capital Shopping Centres PLC

A profit of GBP124.5 million is dealt with in the accounts of the holding company in respect of the year (2009 loss GBP40.5 million). No income statement is presented for the company as permitted by Section 408 of the Companies Act 2006.

13. Investment and development property

 
            Group                               Freehold   Leasehold     Total 
                                                    GBPm        GBPm      GBPm 
 
            At 1 January 2009                    2,505.4     1,482.0   3,987.4 
            Reclassification                     (173.1)       173.1         - 
            Addition from acquisition of 
            subsidiary 
            companies                              230.4       431.0     661.4 
            Additions from subsequent 
             expenditure                            25.6       112.7     138.3 
            Disposals                              (0.6)           -     (0.6) 
            Deficit on revaluation               (212.9)     (212.4)   (425.3) 
                                               ---------  ----------  -------- 
 
            At 31 December 2009                  2,374.8     1,986.4   4,361.2 
 
            Addition from acquisition of 
            subsidiary 
            companies                               27.0           -      27.0 
            Additions from subsequent 
             expenditure                            12.1         8.1      20.2 
            Transferred to trading property            -      (16.1)    (16.1) 
            Disposals                             (36.1)      (31.1)    (67.2) 
            Surplus on revaluation                 302.1       180.3     482.4 
                                               ---------  ----------  -------- 
 
            At 31 December 2010                  2,679.9     2,127.6   4,807.5 
                                               =========  ==========  ======== 
 

Included within additions is GBP1.0 million (2009 GBP13.8 million) of interest capitalised on developments in progress.

 
             Group                                               2010     2009 
                                                                 GBPm     GBPm 
             Balance sheet carrying value of investment 
             and development property                         4,807.5  4,361.2 
             Adjustment in respect of tenant incentives          79.0     64.4 
             Adjustment in respect of head leases              (36.7)   (37.9) 
 
             Market value of investment and development 
              property                                        4,849.8  4,387.7 
                                                              =======  ======= 
 

The fair value of the Group's investment and development properties as at 31 December 2010 was determined by independent external valuers at that date. The valuations conform with the Royal Institution of Chartered Surveyors ("RICS") Valuation Standards 6th Edition and with IVS 1 of International Valuation Standards, and were arrived at by reference to market transactions for similar properties.

The main assumptions underlying the valuations are in relation to market rent, taking into account forecast growth rates and yields based on known transactions for similar properties and likely incentives offered to tenants.

There are certain restrictions on the realisability of investment property when a credit facility is in place. In most circumstances the Group can realise up to 50 per cent without restriction providing the Group continues to manage the asset. Realising an amount in excess of this would trigger a change of control and mandatory repayment of the facility.

14. Investments in Group companies

 
                                                         Accumulated 
                                                  Cost    impairment       Net 
                                                  GBPm          GBPm      GBPm 
 
            At 1 January 2009                  1,056.3       (319.5)     736.8 
            Acquisitions                         224.5             -     224.5 
            Impairment charge for the year           -        (42.7)    (42.7) 
                                              --------  ------------  -------- 
 
            At 31 December 2009                1,280.8       (362.2)     918.6 
 
            Acquisitions                           9.9             -       9.9 
            Impairment reversed in the year          -          95.9      95.9 
                                              --------  ------------  -------- 
 
            At 31 December 2010                1,290.7       (266.3)   1,024.4 
                                              ========  ============  ======== 
 

IAS 36 Impairment of Assets allows for reversal of impairment charges providing the reversal is calculated on a consistent basis to the original impairment. At 31 December 2010, this resulted in a reversal of GBP95.9 million.

In March 2010, Capital Shopping Centres PLC acquired two subsidiary companies from Capital Shopping Centres Debenture PLC, a subsidiary of Capital Shopping Centres Group PLC, full details can be found in note 29 on Business Combinations.

The principal subsidiary undertakings are listed below. All subsidiaries are wholly owned by the company and are registered in England and Wales unless otherwise stated. All subsidiary undertakings have been included in the consolidated results.

 
            Company and principal 
            activity                       Class of share capital   % held 
            Belside Limited (property)         Ordinary shares of 
             (Jersey)                                   GBP1 each      100 
            Braehead Glasgow Limited          "A" ordinary shares 
             (property)                              of GBP1 each      100 
                                              "B" ordinary shares 
                                                     of 1.3 Euros 
                                                             each      100 
            Braehead Park Investments          Ordinary shares of 
             Limited (property)                         GBP1 each      100 
            Braehead Park Estates              Ordinary shares of 
             Limited (property)                         GBP1 each      100 
            Chapelfield GP Limited 
             acting as General Partner 
             of The Chapelfield                Ordinary shares of 
             Partnership (property)                     GBP1 each      100 
            Chelmsford Property 
             Investments Limited               Ordinary shares of 
             (property)                                 GBP1 each      100   1 
            CSC Harlequin Limited              Ordinary shares of 
             (property)                                 GBP1 each      100 
            CSC Lakeside Limited               Ordinary shares of 
             (property)                                 GBP1 each      100 
            CSC Enterprises (commercial        Ordinary shares of 
             promotion)                                 GBP1 each      100 
            CSC Properties Investments         Ordinary shares of 
             Limited (property)                         GBP1 each      100 
            CSC Bromley Limited                Ordinary shares of 
             (property)                                 GBP1 each      100 
            CSC Uxbridge (Jersey) 
             Limited (property)                Ordinary shares of 
             (Jersey)                                   GBP1 each      100 
            Curley Limited (property)          Ordinary shares of 
             (Jersey)                                   GBP1 each      100 
            Metrocentre (GP) Limited 
             acting as General Partner 
             of The Metrocentre                Ordinary shares of 
             Partnership (property)                     GBP1 each      100   2 
            WRP Management Limited             Ordinary shares of 
             (property)                                 GBP1 each      100   3 
 
 

1 Chelmsford Property Investments Limited was acquired on 2 March 2010 from Capital Shopping Centres Debenture PLC, a subsidiary of Capital Shopping Centres Group PLC, for consideration of GBP1.

2 By virtue of their 40% interest in The Metrocentre Partnership, GIC Real Estate is entitled to appoint 40 per cent of the Directors of Metrocentre (GP) Limited. The non-controlling interest balance of GBP19.9 million balance shown in the Group balance sheet as at 31 December 2010 relates to GIC Real Estate's interest in The Metrocentre Partnership and is calculated in accordance with IAS 27 Consolidated and Separate Financial Statements.

3 WRP Management Limited was acquired on 25 March 2010 from Capital Shopping Centres Debentures PLC, a subsidiary of Capital Shopping Centres Group PLC, for a consideration of GBP9.9 million.

15. Joint ventures

 
                                                                          2010 
                                        Xscape    St David's 
                                      Braehead       Limited 
                                   Partnership   Partnership   Other     Total 
                                          GBPm          GBPm    GBPm      GBPm 
       Summarised income 
        statements 
       Gross rental income                 0.9          13.4     0.9      15.2 
                                  ------------  ------------  ------  -------- 
 
       Net rental income                   0.5           6.6     0.2       7.3 
       Net other income                      -           1.0       -       1.0 
       Revaluation and sale of 
        investment and 
       development property                0.6          39.3       -      39.9 
       Administration expenses               -         (0.1)       -     (0.1) 
       Net finance costs                 (1.5)         (3.1)       -     (4.6) 
 
       Profit/(loss) for the 
        year                             (0.4)          43.7     0.2      43.5 
                                  ============  ============  ======  ======== 
 
       Summarised balance sheets 
       Investment and 
        development property              22.6         231.0       -     253.6 
       Other non-current assets            2.4           0.2       -       2.6 
       Current assets                      1.9          35.9     0.2      38.0 
       Partners loans                    (8.4)       (102.3)       -   (110.7) 
       Current liabilities               (2.9)        (28.5)       -    (31.4) 
       Non-current liabilities          (24.0)        (37.8)       -    (61.8) 
                                                ------------ 
 
       Net assets/(liabilities)          (8.4)          98.5     0.2      90.3 
                                  ============  ============  ======  ======== 
 
 
                                                                          2009 
                                         Xscape    St David's 
                                       Braehead       Limited 
                                    Partnership   Partnership   Other    Total 
                                           GBPm          GBPm    GBPm     GBPm 
       Summarised income 
        statements 
       Gross rental income                  1.9           6.4     0.7      9.0 
                                   ------------  ------------  ------  ------- 
 
       Net rental income                    1.6           3.9     0.7      6.2 
       Net other income                     5.0             -       -      5.0 
       Revaluation and sale of 
        investment and 
       development property               (4.3)        (65.1)       -   (69.4) 
       Administration expenses                              -   (0.3)    (0.3) 
       Net finance costs                  (1.9)           2.3              0.4 
       Tax                                    -             -   (0.1)    (0.1) 
 
       Profit/(loss) for the year           0.4        (58.9)     0.3   (58.2) 
                                   ============  ============  ======  ======= 
 
       Summarised balance sheets 
       Investment and development 
        property                           22.4         209.2       -    231.6 
       Other non-current assets             3.2           1.2       -      4.4 
       Current assets                       2.7           5.1     0.1      7.9 
       Partners loans                     (7.4)        (84.6)       -   (92.0) 
       Current liabilities                (4.2)        (40.3)           (44.5) 
       Non-current liabilities           (24.5)        (35.9)       -   (60.4) 
                                                 ------------ 
 
       Net assets/(liabilities)           (7.8)          54.7     0.1     47.0 
                                   ============  ============  ======  ======= 
 

Joint ventures are accounted for in the consolidated accounts using proportional consolidation. The Group's share of the assets, liabilities, income and expenditure shown above are included in the consolidated financial statement on a line-by line basis.

Joint ventures principally comprise the Xscape Braehead Partnership and the St David's Limited Partnership. The Xscape Braehead Partnership was established in 2004, for investment in the Xscape Leisure Scheme at Braehead, Renfrew, Glasgow and has a 31 December year end. The St David's Limited Partnership was established in 2004 for investment in the existing St David's shopping centre, Cardiff, and development of a 967,500 sq. ft. retail-led mixed-use extension and has a 31 December year end. Full details of all joint ventures will be attached to the company's annual return to be filed with the Registrar of Companies.

All joint ventures are held equally with other joint venture investors on a 50:50 basis.

16. Trading property

 
Group                     2010  2009 
                          GBPm  GBPm 
 
Undeveloped sites         11.5  13.9 
Property in development   11.1     - 
Completed properties       2.9     - 
                          ----  ---- 
 
                          25.5  13.9 
                          ====  ==== 
 

The estimated replacement of cost of trading properties based on market value amounted to GBP27.4 million (2009 GBP13.9 million).

17. Trade and other receivables

 
                                    Group  Group  Company  Company 
                                     2010   2009     2010     2009 
                                     GBPm   GBPm     GBPm     GBPm 
Current: 
Rents receivable                     13.7   17.6        -        - 
Amounts owed by subsidiary 
undertakings                            -      -  1,908.9  1,786.9 
Amounts owed by related companies     5.0      -        -        - 
Tax recoverable                         -    0.2        -      0.9 
Other receivables                    10.0    4.7      2.4      1.1 
Prepayments and accrued income       19.5   32.2      0.5      4.3 
 
                                     48.2   54.7  1,911.8  1,793.2 
                                    =====  =====  =======  ======= 
 
Non-current: 
Prepayments and accrued income       69.5   41.1        -        - 
                                    =====  =====  =======  ======= 
 

Amounts owed by subsidiary undertakings and related companies are unsecured, repayable on demand and for amounts falling within formalised loan agreements, interest bearing.

Included within prepayments and accrued income are tenant lease incentives of GBP79.0 million (2009 GBP64.4 million).

18. Trade and other payables

 
                                      Group    Group  Company  Company 
                                       2010     2009     2010     2009 
                                       GBPm     GBPm     GBPm     GBPm 
Current: 
Rents received in advance              69.1     71.9        -        - 
Amounts owed to subsidiary 
undertakings                              -        -    805.7    850.5 
Amounts owed to related companies     926.4  1,236.9    926.1  1,230.1 
Accruals and deferred income           38.8     46.9      3.1      2.2 
Other payables                         17.0     13.0      3.6      1.9 
Other tax and social security          33.8     46.4      1.2      0.8 
 
                                    1,085.1  1,415.1  1,739.7  2,085.5 
                                    =======  =======  =======  ======= 
 

Amounts owed to subsidiary undertakings and related companies are unsecured and payable on demand.

19. Borrowings

 
           Group                                      2010 
                           Carrying                         Fixed   Floating      Fair 
                              value   Secured   Unsecured    rate       rate     value 
                               GBPm      GBPm        GBPm    GBPm       GBPm      GBPm 
 
            Current 
            Bank loans 
             and 
             overdrafts        16.5      16.5           -       -       16.5      16.5 
            Commercial 
             mortgage 
            backed 
             securities 
            ("CMBS") 
             notes             25.4      25.4           -       -       25.4      20.0 
 
            Borrowings 
             excluding 
            finance 
             leases            41.9      41.9           -               41.9      36.5 
            Finance 
             lease 
             obligations        3.6       3.6           -     3.6          -       3.6 
                          ---------  --------  ----------  ------  ---------  -------- 
 
                               45.5      45.5           -     3.6       41.9      40.1 
                          =========  ========  ==========  ======  =========  ======== 
 
            Non-current 
            CMBS notes 
             2015           1,110.7   1,110.7           -       -    1,110.7     852.7 
            Bank loans 
             2014              58.4      58.4           -       -       58.4      58.4 
            Bank loans 
             2016             749.1     749.1           -       -      749.1     749.1 
            Bank loans 
             2017             511.1     511.1           -       -      511.1     511.1 
            CSC bonds 
             2013              26.7         -        26.7    26.7          -      27.3 
                          ---------  --------  ----------  ------  ---------  -------- 
 
            Borrowings 
             excluding 
            finance 
             leases and 
            Metrocentre 
             compound 
            instrument      2,456.0   2,429.3        26.7    26.7    2,429.3   2,198.6 
            Metrocentre 
             compound 
            financial 
             instrument       138.7         -       138.7              138.7     138.7 
            Finance 
             lease 
             obligations       33.1      33.1           -    33.1          -      33.1 
                          ---------  --------  ----------  ------  ---------  -------- 
 
                            2,627.8   2,462.4       165.4    59.8    2,568.0   2,370.4 
                          =========  ========  ==========  ======  =========  ======== 
 
            Total 
             borrowings     2,673.3   2,507.9       165.4    63.4    2,609.9   2,410.5 
                          =========  ========  ==========  ======  =========  ======== 
 
            Cash and 
             cash 
            equivalents      (87.4) 
                          --------- 
 
            Net debt        2,585.9 
                          ========= 
 

Net external debt (adjusted for the Metrocentre compound financial instrument) at 31 December 2010 was GBP2,447.2 million.

The Group substantially eliminates its interest rate exposure to floating rate debt as illustrated in note 21.

 
           Company                                   2010 
                           Carrying                         Fixed   Floating    Fair 
                              value   Secured   Unsecured    rate       rate   value 
                               GBPm      GBPm        GBPm    GBPm       GBPm    GBPm 
 
            Non-current 
            CSC bonds 
             2013              26.7         -        26.7    26.7          -    27.3 
                          ---------  --------  ----------  ------  ---------  ------ 
 
            Total 
             borrowings        26.7         -        26.7    26.7          -    27.3 
                          =========  ========  ==========  ======  =========  ====== 
 
            Cash and 
             cash 
            equivalents      (52.3) 
 
            Net cash         (25.6) 
                          ========= 
 

19. Borrowings (continued)

 
           Group                                      2009 
                           Carrying                         Fixed   Floating      Fair 
                              value   Secured   Unsecured    rate       rate     value 
                               GBPm      GBPm        GBPm    GBPm       GBPm      GBPm 
 
            Current 
            Bank loans 
             and 
             overdrafts         4.3       4.3           -       -        4.3       4.3 
            Commercial 
             mortgage 
            backed 
             securities 
            ("CMBS") 
             notes             67.4      67.4           -       -       67.4      50.6 
 
            Borrowings 
             excluding 
            finance 
             leases            71.7      71.7           -       -       71.7      54.9 
            Finance 
             lease 
             obligations        4.5       4.5           -     4.5          -       4.5 
                          ---------  --------  ----------  ------  ---------  -------- 
 
                               76.2      76.2           -     4.5       71.7      59.4 
                          =========  ========  ==========  ======  =========  ======== 
 
            Non-current 
            CMBS notes 
             2011             436.0     436.0           -       -      436.0     357.3 
            CMBS notes 
             2015           1,135.5   1,135.5           -       -    1,135.5     738.0 
            Bank loans 
             2011             100.0     100.0           -       -      100.0     100.0 
            Bank loan 
             2014              60.0      60.0           -       -       60.0      60.0 
            Bank loans 
             2016             809.3     809.3           -       -      809.3     809.3 
            CSC bonds 
             2013              26.7         -        26.7    26.7          -      28.8 
                          ---------  --------  ----------  ------  ---------  -------- 
 
            Borrowings 
             excluding 
            finance 
             leases and 
            Metrocentre 
             compound 
            instrument      2,567.5   2,540.8        26.7    26.7    2,540.8   2,093.4 
            Metrocentre 
             compound 
            financial 
             instrument       129.9         -       129.9       -      129.9     129.9 
            Finance 
             lease 
             obligations       33.5      33.5           -    33.5          -      33.5 
                          ---------  --------  ----------  ------  ---------  -------- 
 
                            2,730.9   2,574.3       156.6    60.2    2,670.7   2,256.8 
                          =========  ========  ==========  ======  =========  ======== 
 
            Total 
             borrowings     2,807.1   2,650.5       156.6    64.7    2,742.4   2,316.2 
                          =========  ========  ==========  ======  =========  ======== 
 
            Cash and 
             cash 
            equivalents      (53.8) 
                          --------- 
 
            Net debt        2,753.3 
                          ========= 
 

Net external debt (adjusted for the Metrocentre compound financial instrument) at 31 December 2009 was GBP2,623.4 million.

The Group substantially eliminates its interest rate exposure to floating rate debt as illustrated in note 21.

 
           Company                                   2009 
                           Carrying                         Fixed   Floating    Fair 
                              value   Secured   Unsecured    rate       rate   value 
                               GBPm      GBPm        GBPm    GBPm       GBPm    GBPm 
 
            Non-current 
            CSC bonds 
             2013              26.7         -        26.7    26.7          -    28.8 
                          ---------  --------  ----------  ------  ---------  ------ 
 
            Total 
             borrowings        26.7         -        26.7    26.7          -    28.8 
                          =========  ========  ==========  ======  =========  ====== 
 
            Cash and 
             cash 
            equivalents       (1.9) 
 
            Net debt           24.8 
                          ========= 
 

20. Finance lease obligations

 
                                                      Group   Group 
                                                       2010    2009 
                                                       GBPm    GBPm 
Minimum lease payments under finance leases 
 fall due: 
Not later than one year                                 3.6     4.5 
Later than one year and not later than five 
 years                                                 17.8    17.6 
Later than five years                                  65.9    69.1 
                                                     ------  ------ 
                                                       87.3    91.2 
Future finance charges on finance leases             (50.6)  (53.2) 
                                                     ------  ------ 
 
Present value of finance lease liabilities             36.7    38.0 
                                                     ======  ====== 
 
Present value of minimum finance lease obligations 
Not later than one year                                 3.6     4.5 
Later than one year and not later than five 
 years                                                 14.0    13.8 
Later than five years                                  19.1    19.7 
 
                                                       36.7    38.0 
                                                     ======  ====== 
 

Finance lease liabilities are in respect of leasehold investment property. Many leases provide for payment of contingent rent in addition to the rents above, usually a proportion of net rental income.

Finance lease liabilities are effectively secured obligations, as the rights to the leased asset revert to the lessor in the event of default.

21. Financial risk management

Market risk

The Group is exposed to a variety of risks arising from the Group's operations, these are principally market risk (including interest rate risk and market price risk), liquidity risk and credit risk.

The majority of the Group's financial risk management is carried out by Capital Shopping Centres Group PLC's treasury department and the policies for managing each of these risks and the principal effects of these policies on the results for the year are summarised below.

Interest rate risk

Interest rate risk comprises both cash flow and fair value risks:

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Fair value interest rate risk is the risk that the fair value of financial instruments will fluctuate as a result of changes in market interest rates.

The Group's interest rate risk arises from borrowings issued at variable rates that expose the Group to cash flow interest rate risk, whereas borrowings issued at fixed interest rates expose the Group to fair value interest rate risk.

Bank debt is typically issued at floating rates linked to LIBOR. Bond debt and other capital market debt are generally issued at fixed rates.

It is Group policy, and often a requirement of the Group's lenders, to eliminate substantially all short and medium-term exposure to interest rate fluctuations in order to establish certainty over medium-term cash flows by using floating to fixed interest rate swaps. Such swaps have the economic effect of converting borrowings from floating to fixed rates. As a consequence, the Group is exposed to market price risk in respect of the fair value of its fixed interest rate swaps.

The below table shows the effects of interest rate swaps on the Group borrowings profile of the Group:

 
                                       Fixed    Floating     Fixed    Floating 
                                        2010        2010      2009        2009 
                                        GBPm        GBPm      GBPm        GBPm 
 
            Borrowings                  63.4     2,609.9      64.7     2,742.4 
            Derivative impact        2,222.4   (2,222.4)   2,571.7   (2,571.7) 
                                    --------  ----------  --------  ---------- 
 
            Net borrowings profile   2,285.8       387.5   2,636.4       170.7 
                                    --------  ----------  --------  ---------- 
 
            Interest rate 
            protection 
            on floating debt                       85.2%                 93.8% 
                                    ========  ==========  ========  ========== 
 

The weighted average rate of interest rates contracted through interest rates swaps is 4.9 per cent (2009 5.3 per cent).

The approximate impact of a 50 basis point shift upwards in the level of interest rates would be a positive movement of GBP53.6 million (2009 GBP87.9 million) in the fair value of derivatives. The approximate impact of a 50 basis point shift downwards in the level of interest rates would be a negative movement of GBP54.6 million (2009 GBP92.3 million) in the fair value of derivatives. In practice, a parallel shift in the yield curve is highly unlikely. However, the above sensitivity analysis is a reasonable illustration of the possible effect from the changes in slope and shifts in the yield curve that may actually occur. Because the fixed rate derivative financial instruments are matched by floating rate debt, the overall effect on Group cash flow of such a movement would be very small.

Liquidity risk

Liquidity risk is managed to ensure that the Group is able to meet future payment obligations when financial liabilities fall due. Liquidity analysis is conducted to ensure that sufficient headroom is available to meet the Group's operational requirements and committed investments. The Group treasury policy aims to meet this objective through maintaining adequate cash, marketable securities and committed facilities to meet these requirements. The Group's policy is to seek to optimise its exposure to liquidity risk by balancing its exposure to interest rate risk and to refinancing risk. In effect the Group seeks to borrow for as long as possible at the lowest acceptable cost.

The maturity profile of Group debt showed an average maturity of five years (2009 - six years). The Group regularly reviews the maturity profile of its financial liabilities and seeks to avoid bunching of maturities through the regular replacement of facilities and by using a selection of maturity dates. Refinancing risk may be reduced by re-borrowing prior to the contracted maturity date, effectively switching liquidity risk for market risk.

The Group may pre-fund capital expenditure by arranging facilities or raising debt in the capital markets and then placing surplus funds on deposit until required for the project. Efficient treasury management and strict credit control minimise the costs and risk associated with this policy which ensures that funds are available to meet commitments as they fall due.

The tables below set out the maturity analysis of the Group's financial liabilities based on the undiscounted contractual obligations to make payments of interest and to repay principal. Where interest payment obligations are based on a floating rate the rates used are those implied by the par yield curve.

 
            Group                                  2010 
                            Within 
                                 1       1-2         3-5      over 5 
                              year     years       years       years      Totals 
                              GBPm      GBPm        GBPm        GBPm        GBPm 
 
           Borrowings 
            (including 
           interest)        (89.6)   (101.2)   (1,547.2)   (1,148.3)   (2,886.3) 
           Tax and other 
            payables        (50.8)     (1.9)       (2.8)       (0.5)      (56.0) 
           Finance lease 
            obligations      (3.7)     (4.4)      (13.4)      (65.9)      (87.4) 
            Derivatives 
             payments      (103.8)   (105.9)     (279.6)      (31.8)     (521.1) 
            Derivative 
             receipts         19.4      28.1       187.6        33.8       268.9 
                          --------  --------  ----------  ----------  ---------- 
 
                           (228.5)   (185.3)   (1,655.4)   (1,212.7)   (3,281.9) 
                          ========  ========  ==========  ==========  ========== 
 
 
            Group                                 2009 
                            Within 
                                 1       1-2       3-5      over 5 
                              year     years     years       years      Totals 
                              GBPm      GBPm      GBPm        GBPm        GBPm 
 
           Borrowings 
            (including 
           interest)       (200.5)   (694.4)   (622.3)   (2,477.6)   (3,994.8) 
           Tax and other 
            payables        (61.3)    (19.7)     (2.8)       (0.5)      (84.3) 
           Finance lease 
            obligations      (4.5)     (4.5)    (13.1)      (69.1)      (91.2) 
            Derivatives 
             payments      (229.5)   (180.2)   (448.7)     (607.4)   (1,465.8) 
            Derivative 
             receipts        100.1      90.3     384.8       550.2     1,125.4 
                          --------  --------  --------  ----------  ---------- 
 
                           (395.7)   (808.5)   (702.1)   (2,604.4)   (4,510.7) 
                          ========  ========  ========  ==========  ========== 
 
 
            Company                                    2010 
                                     Within 
                                          1     1-2      3-5   over 5 
                                       year   years    years    years   Totals 
                                       GBPm    GBPm     GBPm     GBPm     GBPm 
 
           Borrowings (including 
            interest)                 (1.8)   (1.8)   (27.8)        -   (31.4) 
           Tax and other payables     (4.8)   (1.7)    (2.8)    (0.4)    (9.7) 
                                    -------  ------  -------  -------  ------- 
 
                                      (6.6)   (3.5)   (30.6)    (0.4)   (41.1) 
                                    =======  ======  =======  =======  ======= 
 
 
            Company                                     2009 
                                      Within                     over 
                                           1     1-2      3-5       5 
                                        Year   years    years   years   Totals 
                                        GBPm    GBPm     GBPm    GBPm     GBPm 
 
           Borrowings (including 
            interest)                  (1.8)   (1.8)   (29.6)       -   (33.2) 
           Tax and other payables      (2.0)   (3.5)    (2.8)   (0.5)    (8.8) 
                                     -------  ------  -------  ------  ------- 
 
                                       (3.8)   (5.3)   (32.4)   (0.5)   (42.0) 
                                     =======  ======  =======  ======  ======= 
 

Credit risk

Credit risk is the risk of financial loss if a tenant or counterparty fails to meet an obligation under a contract. Credit risk arises primarily from trade receivables relating to tenants but also from the Group's holdings of assets with counterparties such as cash deposits, loans and derivative instruments.

Credit risk associated with trade receivables is actively managed; tenants are managed individually by asset managers, who continuously monitor and work with tenants, anticipating and, wherever possible, identifying and addressing risks prior to default.

Prospective tenants are assessed via a review process, including obtaining credit ratings and reviewing financial information which is conducted internally. As a result deposits or guarantors may be obtained. The amount of deposits held as collateral at 31 December 2010 is GBP2.2 million (2009 GBP2.2 million).

Due to the nature of tenants being managed individually by asset managers, it is Group policy to calculate any impairment specifically on each tenant receivable balance.

The ageing analysis of the Group's trade receivables is as follows:

 
                      Group  Group 
                       2010   2009 
                       GBPm   GBPm 
 
Up to three months     11.0   15.0 
Three to six months     2.7    2.6 
 
Trade receivables      13.7   17.6 
                      =====  ===== 
 

In 2010 trade receivables impaired amounted to GBP2.5 million (2009 GBP3.7 million), this is considered to be within an acceptable range given current economic conditions.

The credit risk relating to cash, deposits and derivative financial instruments is actively managed centrally by Capital Shopping Centres Group PLC, the Company's ultimate parent. Relationships are maintained with a number of tier one institutional counterparties, ensuring compliance with Capital Shopping Centres Group PLC Group policy relating to limits on the credit ratings of counterparties (between BBB+ and AAA).

Excessive credit risk is avoiding through adhering to authorised limits for all counterparties.

Classification of financial assets and liabilities

The table below sets out the Group's accounting classification of each class of financial assets and liabilities, and their fair values at 31 December 2010 and 31 December 2009.

The fair values of quoted borrowings are based on the ask price. The fair values of derivative financial instruments are determined from observable market prices or estimated using appropriate yield curves at 31 December each year by discounting the future contractual cash flows to the net present values.

 
 
 
                                                                 Gain/(loss) 
                                          Carrying        Fair     to income 
                                             value       value     statement 
            2010                              GBPm        GBPm          GBPm 
 
            Derivative financial 
            instrument assets                  4.6         4.6             - 
                                        ----------  ----------  ------------ 
 
            Total held for trading 
             assets                            4.6         4.6             - 
 
            Trade and other 
             receivables                     117.7       117.7             - 
            Cash and cash equivalents         87.4        87.4             - 
                                        ----------  ----------  ------------ 
 
            Total cash and receivables       205.1       205.1             - 
                                        ----------  ----------  ------------ 
 
            Derivative financial 
            instrument liabilities         (251.0)     (251.0)        (33.4) 
                                        ----------  ----------  ------------ 
            Total held for trading 
            liabilities                    (251.0)     (251.0)        (33.4) 
                                        ----------  ----------  ------------ 
 
            Trade and other payables     (1,090.3)   (1,090.3)             - 
            Borrowings                   (2,673.3)   (2,410.5)             - 
                                        ----------  ----------  ------------ 
 
            Total loans and payables     (3,763.6)   (3,500.8)             - 
                                        ==========  ==========  ============ 
 
 
            2009 
 
            Trade and other receivables        95.8        95.8      - 
            Cash and cash equivalents          53.8        53.8      - 
                                         ----------  ----------  ----- 
 
            Total cash and receivables        149.6       149.6      - 
                                         ----------  ----------  ----- 
 
            Derivative financial 
            instrument liabilities          (224.7)     (224.7)   45.6 
                                         ----------  ----------  ----- 
            Total held for trading 
            liabilities                     (224.7)     (224.7)   45.6 
                                         ----------  ----------  ----- 
 
            Trade and other payables      (1,440.1)   (1,440.1)      - 
            Borrowings                    (2,807.1)   (2,316.3)      - 
                                         ----------  ----------  ----- 
 
            Total loans and payables      (4,247.2)   (3,756.4)      - 
                                         ==========  ==========  ===== 
 

Capital structure

The company is a wholly owned subsidiary of Capital Shopping Centres Group PLC and owns the majority of Capital Shopping Centres Group PLC's property investments.

The Company's capital structure has been designed to ensure an appropriate balance is achieved between permitting all subsidiary companies to operate effectively and allowing the ultimate parent company the ability to allocate capital across the larger group in a flexible and efficient manner. The Group uses a mix of equity, third party and intergroup debt to achieve these aims.

During the year Capital Shopping Centres Group PLC capitalised an intercompany balance of GBP500 million, substantially increasing the capital base of the Company.

The only financial assets and liabilities of the company recognised at fair value are derivative financial instruments. These are all held at fair value through profit or loss and are categorised as level 2 in the fair value hierarchy as explained below.

Fair value hierarchy

Level 1: valuation based on quoted market prices traded in active markets.

Level 2: valuation techniques are used, maximising the use of observable market data, either directly from market prices or derived from market prices.

Level 3: where one or more inputs to valuation are not based on observable market data. Valuations at this level are more subjective and therefore more closely managed, including sensitivity analysis of inputs to valuation models. Such testing has not indicated that any material difference would arise due to a change in input variables.

22. Share capital

 
                                                               Share Capital 
                                                                      GBP000 
          Issued and fully paid 
          At 31 December 2009 - 394,551,178 ordinary shares 
           of 50p each                                               197,276 
          Shares issued                                                   50 
 
          At 31 December 2010 - 394,651,178 ordinary shares 
           of 50p each                                               197,326 
                                                              ============== 
 

On 19 July 2010, the Company issued a total of 100,000 shares at a price of GBP5,000 per share in respect of the capitalisation of inter-company debt.

Under saving provisions, the current maximum number of shares which may be issued by the company is 600,000,000 ordinary shares of 50p each.

23. Cash generated from operations

 
                                           Group     Group   Company   Company 
                                            2010      2009      2010      2009 
                                            GBPm      GBPm      GBPm      GBPm 
 
            Profit/(loss) before tax       474.0   (324.7)     125.5    (39.7) 
 
            Adjustments for: 
            Revaluation and sale of 
            investment 
            and development property     (479.0)     425.2         -         - 
            Amortisation of lease 
            incentives 
            and other direct costs         (1.2)       5.0       0.5         - 
 Net impairment of financial assets 
                                               -         -         -       0.2 
 Impairment of investments in group 
 
            companies                          -         -    (95.9)      42.8 
            Finance costs                  173.1     154.1      63.8      15.8 
            Finance income                 (2.3)     (3.6)    (56.0)    (17.8) 
            Other finance costs             50.6      20.8         -         - 
            Impairment of goodwill           3.1         -         -         - 
            Change in fair value of 
            derivative 
            financial instruments           33.4    (45.6)         -         - 
            Changes in working 
            capital: 
            Change in trading property       4.5     (0.6)         -         - 
            Change in trade and other 
            receivables                   (27.4)      13.0   (130.0)   (526.8) 
            Change in trade and other 
             payables                      159.6     143.6     150.3     459.2 
                                        --------  --------  --------  -------- 
 
            Cash generated from 
             operations                    388.4     387.2      58.2    (66.3) 
                                        ========  ========  ========  ======== 
 

24. Cash and cash equivalents

 
                                 Group   Group   Company   Company 
                                  2010    2009      2010      2009 
                                  GBPm    GBPm      GBPm      GBPm 
 
            Unrestricted cash     87.4    34.0      52.3       1.9 
            Restricted cash          -    19.8         -         - 
                                ------  ------  --------  -------- 
 
                                  87.4    53.8      52.3       1.9 
                                ======  ======  ========  ======== 
 

Restricted cash at 31 December 2009 related to amounts placed on deposit to ensure continued compliance with certain loan facility financial covenants.

25. Directors' emoluments

The aggregate emoluments of the directors were GBP1,388,694 (2009 GBP1,877,836). Under the annual bonus scheme for the year ended 31 December 2010, four directors were awarded a bonus in 2011. Part of the bonus was taken in cash, part in the form of shares under the Capital Shopping Centres Group PLC Share Incentive Plan ("SIP"), and a further part as conditional awards of shares in Capital Shopping Centres Group PLC. The SIP shares are held in trust for a period of five years to qualify for tax advantages. The dividend payable in respect of the shares held in trust is used to purchase additional shares, known as Dividend Shares, which are also held in trust. The Dividend Shares are generally required to be held in trust for a minimum period of three years from the date of acquisition. The conditional awards comprise "restricted" shares. The restricted shares will be released two years after the date of the award provided the individual director remains in service. In aggregate, 3,100 (2009 nil) SIP shares and 123,253 (2009 nil) restricted shares were awarded.

In previous years, conditional share awards comprising "restricted" and "additional" shares were made. The restricted and additional shares were to be released respectively two and four years after the date of the award provided the director remained in service. As noted in the Directors' Remuneration Report contained in Capital Shopping Centres Group PLC's 2009 Annual Report, the Remuneration Committee of Capital Shopping Centres Group PLC decided that all outstanding deferred bonus shares held by directors and staff should vest in March 2010. Accordingly, restricted and additional shares awarded in previous years were released to four directors, including the highest paid director.

During the year, GBP178,141 was paid to one former director in connection with the termination of her employment by CSC Management Services Limited.

During the year, four directors were granted options to acquire Capital Shopping Centres Group PLC shares. The options were granted under the Capital Shopping Centres Group PLC Unapproved Share Option Scheme and are subject to a performance condition in respect of the smoothed earnings growth of Capital Shopping Centres Group PLC. The award of options made to the highest paid director is disclosed in the Capital Shopping Centres Group PLC 2010 Annual Report.

Four directors were members of a money purchase pension arrangement. A company contribution in aggregate of GBP77,167 (2009 GBP81,000) was paid in respect of directors who were members of money purchase arrangements.

The highest paid director received aggregate emoluments of GBP532,798 (2009 GBP660,100). In 2009, the highest paid director elected to cease accruing benefit in the Liberty International PLC defined benefit scheme. The highest paid director receives an actuarially determined payment subject to PAYE and NI deductions. This amount is included in the aggregate emoluments figure above. The awards of SIP and conditional shares made to this director under the annual bonus scheme are disclosed in the Capital Shopping Centres Group PLC 2010 Annual Report.

26. Employees information

At 31 December 2010 the number of persons employed was nil (2009 4). The average number of employees during the year was 1 (2009 14).

UK salaried employees are contracted with a related company, CSC Management Services Limited, and the salary and related costs are shown in the accounts of CSC Management Services Limited. Costs of employees are as follows:

 
                           2010     2009 
                        GBP'000  GBP'000 
 
Wages and salaries         25.2    185.8 
Social security costs       0.7      7.8 
Pension contributions         -      6.7 
                        -------  ------- 
 
                           25.9    200.3 
                        =======  ======= 
 

27. Pensions

The company participates in Group pension arrangements as disclosed in the notes to the report and accounts of Capital Shopping Centres Group PLC, the ultimate parent company. Pension costs, representing contributions payable by the company to the Group pension arrangements, totalled GBP89 (2009 GBP6,670).

28. Capital commitments

At 31 December 2010 the Group was contractually committed to GBP86.2 million (2009 GBP100.3 million) of future expenditure for the purchase, construction, development and enhancement of investment property. All of the GBP86.2 million committed is expected to be spent in 2011.

29. Business combinations

Chelmsford Property Investments Limited

On 2 March 2010 the company acquired 100% of the issued share capital of Chelmsford Property Investments Limited from Capital Shopping Centres Debenture PLC, a fellow subsidiary undertaking of Capital Shopping Centres Group PLC, for a consideration of GBP1. The fair value of the net liabilities acquired was GBP3.1 million resulting in goodwill of GBP3.1 million which was immediately written off.

WRP Management Limited

On 25 March 2010 the company acquired 100% of the issued share capital of WRP Management Limited from Capital Shopping Centres Debenture PLC, a fellow subsidiary undertaking of Capital Shopping Centres Group PLC, for a consideration of GBP9.9 million. The fair value of the net assets acquired at 25 March 2010 were GBP9.9 million.

30. Key management compensation

 
                                                           2010   2009 
                                                           GBPm   GBPm 
 
            Salaries and short-term employee benefits       1.5    1.9 
            Pensions and other post-employment benefits     0.1    0.1 
            Share based payment                             0.2      - 
            Long term incentives                              -      - 
            Termination benefits                            0.2      - 
                                                          -----  ----- 
 
                                                            2.0    2.0 
                                                          =====  ===== 
 

Key management comprise the Managing Director of Capital Shopping Centres PLC, and those Executive Directors of Capital Shopping Centres PLC who are not also directors of Capital Shopping Centres Group PLC. These directors are paid by a related company and not the Group.

31. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation for the Group.

Group

Transactions between the Group and its related companies are shown below:

 
  Nature of                                                       2010   2009 
            Related company                transaction            GBPm   GBPm 
 
            Liberty International Group 
            Treasury Limited               Interest receivable     2.2    2.0 
  Interest payable                                                36.2   18.1 
            CSC (Eldon Square) Limited     Interest receivable       -    1.2 
 

Company

Transactions between the parent company and its subsidiaries and related companies are shown below:

 
  Nature of                                                        2010   2009 
            Subsidiary                      transaction            GBPm   GBPm 
 
            CSC Bromley Limited             Interest receivable     2.1    1.3 
            CSC Harlequin Limited           Interest receivable    14.9   12.7 
            CSC Lakeside Limited            Interest receivable    20.7   12.2 
            CSC Metrocentre Limited         Interest receivable    18.0   17.0 
            CSC Potteries Limited           Interest receivable     2.6    4.7 
            WRP Management Limited          Interest receivable     0.3      - 
            Whitesun Limited                Interest receivable     0.1      - 
            Xscape Braehead Partnership     Interest receivable     0.5    0.6 
            Braehead Glasgow Limited        Interest payable        2.1    4.9 
            Braehead Park Estates Limited   Interest payable        0.9    0.7 
            CSC Properties Limited          Interest payable       42.1   39.4 
            The Metrocentre Partnership     Interest payable        3.4    1.1 
            CSC Uxbridge (Jersey) Limited   Interest payable        1.0      - 
  Dividend receivable                                              66.0      - 
            Braehead Glasgow Limited        Dividend receivable    10.0      - 
            Braehead Park Investments 
             Limited                        Dividend receivable     2.8      - 
 
  Nature of                                                        2010   2009 
            Related company                 transaction            GBPm   GBPm 
 
            Liberty International Group 
            Treasury Limited                Interest receivable     2.2    2.0 
  Interest payable                                                 36.2   18.2 
            CSC (Eldon Square) Limited      Interest receivable       -    1.2 
 

Group

Balances outstanding between the Group and related companies are shown below:

 
                                         Amounts owed         Amounts owed 
                                        by subsidiaries      to subsidiaries 
                                          2010      2009      2010        2009 
            Related company               GBPm      GBPm      GBPm        GBPm 
 
 Capital Shopping Centres Group PLC 
                                             -         -     (5.1)       (5.1) 
            Liberty International 
            Group 
            Treasury Limited                 -         -   (921.3)   (1,227.5) 
            Liberty Payments Limited       5.0         -         -           - 
 

Company

Balances outstanding between the parent company and its subsidiaries and related companies are shown below:

 
                                       Amounts owed           Amounts owed 
                                      by subsidiary          to subsidiary 
                                        2010       2009       2010        2009 
           Subsidiary                   GBPm       GBPm       GBPm        GBPm 
 
           Belside Limited             134.8      133.0          -           - 
           Braehead Glasgow 
            Limited                        -          -      (8.1)      (70.6) 
           Braehead Park Estates 
            Limited                        -          -     (17.8)      (12.1) 
           Braehead Park 
           Investments Limited             -        5.7          -           - 
           Broadway Retail 
            Leisure Limited             10.9       10.4          -           - 
           Chapelfield LP 
            Limited                        -       19.5     (14.0)           - 
           Chelmsford Property 
           Investments Limited           2.6          -          -           - 
           Cribbs Causeway JV 
           Limited                         -          -      (5.9)           - 
           CSC Braehead Leisure 
            Limited                      7.9        7.7          -           - 
           CSC Bromley Limited          37.3       29.3          -           - 
           CSC Chapelfield 
            Residential Limited          7.3        7.1          -           - 
           CSC Enterprises 
            Limited                      2.8        2.8          -           - 
           CSC Harlequin Limited       252.2      232.7          -           - 
           CSC Lakeside Limited        346.8      279.7          -           - 
           CSC Metrocentre 
            Limited                    304.7      280.2          -           - 
           CSC Potteries Limited       174.2      183.2          -           - 
           CSC Properties 
            Investment Limited             -          -     (48.1)      (29.2) 
           CSC Properties 
            Limited                        -          -    (702.1)     (664.9) 
           CSC The Hayes Limited       383.7      368.3          -           - 
           CSC Uxbridge (Jersey) 
            Limited                      5.3          -          -      (60.8) 
           Curley Limited              201.2      198.2          -           - 
           Manchester JV Limited           -          -      (8.2)       (6.3) 
           The Metrocentre 
           Partnership                     -        0.7          -           - 
           Westgate Oxford 
            Investments Limited         16.9       16.8          -           - 
           Whitesun Limited              2.4          -          -           - 
           WRP Management 
           Limited                       8.1          -          -           - 
           Xscape Braehead 
            Partnership                  9.4        7.8          -           - 
 
                                       Amounts owed           Amounts owed 
                                    by related company     to related company 
           Related company              2010       2009       2010        2009 
                                        GBPm       GBPm       GBPm        GBPm 
 
           Capital Shopping 
            Centres Group PLC              -          -      (5.1)       (5.1) 
           Liberty International 
            Group Treasury 
            Limited                        -          -    (921.0)   (1,225.0) 
 

32. Contingent liabilities

As at 31 December 2010, the Group has no material contingent liabilities other than those arising in the normal course of business.

33. Ultimate parent company

The immediate and ultimate parent company is Capital Shopping Centres Group PLC, a company incorporated and registered in England and Wales, copies of whose consolidated financial statements may be obtained from the Company Secretary, 40 Broadway, London, SW1H 0BT.

34. General information

The company is a public limited company incorporated in England and Wales and domiciled in the UK. The address of its registered office is 40 Broadway, London SW1H 0BU.

--- ENDS ---

This information is provided by RNS

The company news service from the London Stock Exchange

END

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