Capital & Regional Regulatory News (CAL)

12 August 2015

Capital & Regional plc

Half Year Results to 30 June 2015

CAPITAL & REGIONAL DELIVERS STRONG GROWTH

AND ANNOUNCES FIRST REIT DIVIDEND

Capital & Regional plc (LSE: CAL), the UK focused specialist REIT with a portfolio of dominant in-town community shopping centres, today announces its half year results to 30 June 2015.

HIGHLIGHTS

Financial

· Operating Profit increased 76% to £11.8 million (June 2014: £6.7 million) with a profit for the period of £57.0 million (June 2014: £11.7 million)

· Interim dividend of 1.5p per share, (June 2014: 0.35p per share) under new REIT dividend policy. Based on H1 Mall Operating Profit we anticipate paying a 2015 total dividend of at least 3.0p per share

· NAV and EPRA NAV per share of 67p, increases of 12% and 13% respectively from December 2014

· UK shopping centre portfolio valued at £958.2 million (Group share £827.7 million) up from £895.7 million (Group share £774.9 million) at 30 December 2014 as a result of £51.8 million valuation uplift and the acquisition of the Buttermarket shopping centre in Ipswich

· See-through net debt to property value reduced to 43% (December 2014: 45%)

· Total shareholder return of 10.1% for the period (June 2014: 6.4%)

Operational 

· 26 new lettings totalling £1.5 million and £0.8 million of lease renewals, both at rents significantly above ERV, driven by the attractive and affordable space in the Group's UK shopping centres

· Year-on-year occupancy increased by 2.1% to 96.4% (June 2014: 94.3%)

· Continued progression of strategy to upgrade portfolio with:

o Completion of the £3 million refurbishment at Walthamstow

o Commencement of a £5 million project to upgrade Maidstone which is scheduled to complete by June 2016

· Acquisition of the Buttermarket Centre, Ipswich in March for £9.2 million in a 50:50 joint venture, following which planning permission for reconfiguring the centre has been secured, construction has started and pre-lets have been signed or are in solicitors' hands for just under 80% of the redeveloped scheme

· C&R in-house Trade Index shows our retailers' sales are up 1.7%

· Footfall stable and outperforming the industry benchmark by 1.9%

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

2 As defined in Glossary.

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

4 See-through net debt divided by property valuation.

John Clare, Chairman, commented:

"Capital & Regional has made a strong start to its first year as a specialist UK shopping centre REIT.  

"Our hands-on approach to asset management, combined with improving economic conditions for our retailers and leisure operators, have driven both letting and occupancy across our portfolio. This provides a sound platform to deliver future growth through the capital expenditure programme supporting our existing portfolio, as well as through the acquisition of retail assets where we can see potential to grow income, such as the Buttermarket Centre in Ipswich.

"The Board is therefore pleased to announce an Interim Dividend of 1.5p per share, ahead of previous guidance, reflecting our confidence in the prospects for the business. Based on H1 Mall Operating Profit we now anticipate paying a 2015 total dividend of at least 3.0p per share."

For further information:

Notes to editors:

About Capital & Regional plc

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

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

For further information see www.capreg.com.

Operating review

The core strength and expertise of Capital & Regional lies in its ability to create and deliver asset management improvements across its c.£1 billion portfolio of eight UK shopping centres which have a dominant market share in the communities they serve and which provide attractive and affordable space for retailers.

UK Shopping Centres

The Group's UK Shopping Centres business comprises The Mall portfolio and joint venture interests in the Kingfisher Centre, Redditch and the Buttermarket Centre, Ipswich.

The Mall portfolio comprises six properties and has a strong south east bias. The schemes are characterised by being dominant within the community they each serve, having strong footfall and robust income, whilst offering our occupiers attractive and affordable space with an average rent to sales ratio of 6.2%. The portfolio has a total lettable space of over 3.2 million sq ft over 703 retail and leisure units.

The Group also owns a 20% interest in the Kingfisher Centre, Redditch which is a dominant 900,000 sq ft scheme and a 50% interest in the Buttermarket Centre, Ipswich, which was acquired in March 2015. Gross retailer sales across the Group's portfolio exceed £1 billion per annum.

We are improving our centres to create a more attractive environment for our customers and retailers through a series of refurbishment initiatives, as well as via the introduction of a complementary mix of leisure uses to enhance the customer experience and drive footfall, as exemplified by the following initiatives:

Walthamstow

We successfully completed the £3 million mall refurbishment and new letting to Sports Direct at Walthamstow during the period. Work is also progressing to create a new 27,500 sq ft unit for TK Maxx which is due to be handed over in November, further enhancing the centre. We are making good progress with our plans for an 86,000 sq ft retail extension to the scheme and the addition of over 300 apartments. A number of developers have shown strong interest in the residential element and the local authority is very supportive with negotiations on both the commercial and planning aspects well advanced. We are targeting exchange on the commercial agreement by Q4 of 2015 with a planning application to be submitted by the end of Q1 2016.

Camberley

At Camberley, we continue to work on our plans for the redevelopment of the north end of the scheme in order to maximise the potential of this important local retail centre. In addition, we are currently advancing our plans for a £4.5 million refurbishment of the remainder of the centre with the majority of this expense expected to be incurred in 2016. This will improve the overall environment, drive income and be complementary to our plans for a potential larger development.

Maidstone

In January, we commenced the £5 million refurbishment of our Maidstone centre, which is scheduled to complete in June 2016. In addition, a major focus has been to achieve full occupation of the offices within the centre and a lease was signed on one of the two vacant floors shortly after 30 June 2015.

Blackburn

In Blackburn works are due to commence in the second half of the year on the £3.1 million reconfiguration of the part of the centre which is adjacent to the town's new bus station. These plans include the creation of a new 15,000 sq ft gym, which has been pre-let to Pure Gym, and the amalgamation of a number of smaller units to create two attractive new units totalling 4,500 sq ft which will front onto the bus station. Two further lettings to Swarovski and Subway have been completed since 30 June 2015.

Redditch

We are seeing the impact of our investment in Redditch coming through strongly and have secured a significant upsize with H&M, which will extend its unit from 14,300 to 22,300 sq ft for a 15 year term, and a new letting with Pep & Co for a 6,000 sq ft unit for a five year term. Leisure also continues to drive letting activity with the final restaurant space in The Hub let to Prezzo shortly after the period end, Ed's Diner opening a 3,000 sq ft unit and a Burger King franchise taking a 20 year lease of a new 2,400 sq ft unit created from the combination of three smaller units.

Ipswich

The Buttermarket Centre in Ipswich was acquired in a 50:50 joint venture with Drum Property Group for £9.2 million, equivalent to a Net Initial Yield of 8.5% and follows on from our successful investment in Lincoln. In the case of Ipswich, we intend to reconfigure and modernise the centre to create a new retail and leisure complex in this regional centre, which is undersupplied by such offerings. The retail space is to be consolidated onto the ground floor of the scheme and will be anchored by TK Maxx and New Look, while Empire Cinemas will take a 12 screen cinema on the upper floors as part of a mixed leisure element incorporating eight restaurant units for which a wide range of operators are showing strong interest. In the six months since we acquired the centre we have already secured planning consent, made strong letting progress, with just under 80% of the redeveloped scheme either pre-let or in solicitors' hands, and commenced work on site. Total capex spend is expected to be approximately £25 million, to be largely funded through new bank debt within the joint venture which has been credit approved. Completion of the works is expected by the third quarter of 2016.

Beyond retail

We continue to position our schemes at the centre of the community by expanding the range of uses to complement the retail offering.  As well as the Pure Gym letting at Blackburn, at Wood Green we have agreements for lease with Easy Gym to take a newly extended 25,000 sq ft gym and with Travelodge for a 35 room hotel created from the conversion of three floors of office accommodation. There is the potential to increase the Travelodge by a further 36 rooms.

There is also scope to expand the leisure and food offers in Luton. This is being realised partly through the creation of a new gym with terms currently being negotiated. In addition, a new food zone is being created to increase the centre's attraction to shoppers and to add vibrancy.

As mentioned above, a number of lettings have been made to food and restaurant operators in Redditch and, at Ipswich, it is expected that 45% of the scheme by ERV will be let to leisure operators.

Property portfolio performance 

Across the Group's UK shopping centres, investment market yields have compressed over the first half of 2015 resulting in broad based increases in values during the period.

1 Value of 100% of the asset - Capital & Regional share is £31.3 million

2 Value of 100% of the asset - Capital & Regional share is £5.35 million

The portfolio has seen yield compression of 27 basis points resulting in a valuation increase of £51.8 million, primarily driven by the two London based schemes at Walthamstow and Wood Green. Total capex spend in the first half of the year was £7.0 million, of which £4.4 million was within the Mall. The rate of investment in The Mall is expected to accelerate in the second half of the year as the Group's multi-year £65 million investment programme, which is targeting income returns of at least 10%, gains further momentum.

The strength of the shopping centre investment market has generated attractive capital returns across the portfolio as set out below:

1 Weighted average by period end property valuation (excluding Buttermarket Centre, Ipswich)

New lettings, renewals and rent reviews

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

The outperformance of new lettings versus ERV reflects the lettings secured with leisure operators referred to above.

Rental income

There has been a year-on-year increase in passing rent of £2.9 million and contracted rent has increased by £0.9 million. The increase in contracted rent includes the impact of the agreements for lease signed with Pure Gym at Blackburn and Travelodge at Wood Green. The income from these lettings will commence once this space has been created and handed over to tenants.

There has been strong letting activity since 30 June 2015 with 8 new lettings and renewals generating contracted rent of £0.7 million.

Administrations

The level of tenant failures continues at a modest level. At 30 June 2015, there were two units which were in administration that were still trading.

Occupancy levels

The year-on-year occupancy has increased by 2.1% reflecting the strong letting and tenant retention performance achieved across the portfolio.

Footfall

In our UK Shopping Centres, year-on-year footfall to end of July 2015 has outperformed the national index, being flat compared to a decrease in the benchmark of 1.9%, demonstrating our ability to sustain the attractiveness of our schemes to our customers.

Snozone

Snozone has again enjoyed another successful trading period with revenue increasing 2% to £5.4 million and profits up 10% to £1.0 million compared to the prior year period.

FINANCIAL REVIEW

Key performance indicators

The key performance indicators we use to measure our performance against our strategy and objectives are:

1 As defined in Glossary.

2 30 December 2014 adjusted for £42.1 million of German joint venture net proceeds received in February 2015 and £8.9 million of payments due in respect of Mall performance fees and Mall income due to former unit holders.

3 See-through net debt divided by property valuation.

To provide a greater understanding of the composition of the business, the Group presents its balance sheet in two separate ways, with the "statutory" balance sheet following the accounting and statutory rules and the "see-through" balance sheet showing the Group's proportionate economic exposure to the different property portfolios as set out below. Following completion of the sale of Germany in February 2015 the Group's business is now almost entirely based on UK shopping centres.

1 Held for sale at 30 December 2014

Profitability

The breakdown of Operating Profit, as defined in the Glossary, is as follows (and as set out further in note 3a):

Operating Profit

Group Operating Profit

1 Proforma as published in the Financial Review of the Full Year Results announcement for year ending 30 December 2014.

The increase in Operating Profit reflects the impact of the acquisition of 70.74% of Mall units during the second half of 2014. A breakdown of Mall Operating Profit is provided further below.

Profits within Other UK Shopping Centres for 2014 included an operating loss in Lincoln in the period until its disposal in November 2014. Group/Central costs are higher than the comparative period in 2014 reflecting the loss of management income following the disposals of Lincoln and Germany, partly offset by a small reduction in central costs.

The following table provides a further breakdown of the Operating Profit for The Mall with comparative data on a like for like basis showing The Mall at 100% and with adjustments made to exclude one-off items. The table illustrates the benefit of the costs savings achieved from restructuring the fund which are running ahead of the minimum of £1.5 million per annum originally anticipated.

The Mall Operating Profit

1 Six months to 30 June 2014 for The Mall on a 100% basis (C&R's actual ownership was 29.26% during that period) restated on a like for like basis to exclude one-off items.

2 Notional interest charge with offsetting opposite and materially equal credit within other property operating expenses above.

Profit for the period

As well as the Operating Profit discussed above, the other key driver of Profit for the Period was £43.4 million of property valuation gains, primarily within The Mall.

Financing

Proforma see-through debt

1 Excluding unamortised issue costs.

2 Excluding cash beneficially owned by tenants.

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

The Mall

The Mall debt facility comprises a fixed rate tranche of £233.3 million with interest fixed at 1.86% plus applicable margin and a floating rate tranche based on three month LIBOR of £146.7 million. The floating rate tranche has been hedged using interest rate caps with a strike rate no higher than 2.75%. Based on the prevailing market rate at the end of 30 June 2015 the overall cost of this facility was 3.46% at that date. The debt matures in May 2019.

Group Revolving Credit Facility (RCF)

At 30 December 2014, the Group had £23.4 million drawn from a total available facility of £35.2 million. Following completion of the sale of the Group's German joint venture in February 2015, the outstanding drawings were paid off in full. Under the terms of the facility, as amended in June 2014, the available limit reduced to £20 million from 11 February 2015. The facility was undrawn at 30 June 2015 with the full £20 million available.

Interest on the facility is charged at a margin of 3.2% per annum above LIBOR. A non-utilisation fee of 1.44% is payable. The facility is available until 31 July 2016 (but will be reduced to £15 million from 1 January 2016).

Credit approved terms for a new £30 million facility to 30 May 2019 have been received and documentation is expected to be completed in the next month.

Covenants

The Group and its associates and joint ventures were compliant with their banking and debt covenants at 30 June 2015.

Potential secondary listing

Having received positive interest from South African institutional investors we are considering the merits of a secondary listing in South Africa. We are currently at the early stages of investigating whether this could add value and liquidity to the stock and we will update the market as appropriate.

Property under management

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

1 Value of 100% of the assets - Capital & Regional share is £36.7 million

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

German disposal

On 10 February 2015, the Group completed the sale of its 50:50 German joint venture to clients and funds under management of Rockspring Property Investment Managers. Under the terms of the transaction the Group will retain for approximately five years a 5.1% minority stake in each of the five German portfolios sold.

The total net proceeds received were €54.8 million. This equated to £42.3 million (after all costs and including the benefit of the Group's Forward Contract which hedged €50 million at 1.2721) and resulted in an uplift to the year-end NAV of £0.8 million. The total profit on disposal was £2.4 million, reflecting this £0.8 million and £1.6 million of realised foreign currency gain reclassified from reserves.

On completion, and included within the proceeds, the Group entered into a long term loan of €3.5 million repayable after five years. After completion, a distribution of €1.5 million was made in respect of the retained minority stakes and this was used to reduce the outstanding amount of the loan owing to €2.0 million. A further distribution was received in June 2015 of €0.1 million, which was not offset against the loan. The carrying value of the retained minority stake was €2.2 million (£1.6 million) at 30 June 2015, the carrying value of the loan payable was a liability of €2.0 million (£1.4 million) at the same date.

Going concern

As stated in note 2 to the condensed financial statements, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Adoption of Financial Reporting Standard (FRS 101) - reduced disclosure framework

The UK Generally Accepted Accounting Principles (UK GAAP) were withdrawn on 1 January 2015. Accordingly, for its financial year ending 30 December 2015, the Company intends to transition to reporting under FRS 101, as published by the Financial Reporting Council, in its parent company financial statements. The Board considers that it is in the best interests of the Company to adopt FRS 101 Reduced Disclosure Framework. No disclosures in the current UK GAAP financial statements would be omitted following transition to FRS 101.

Any shareholder or shareholders holding in aggregate 5% or more of the allotted shares in the Company may serve objections on the Company to the use of the disclosure exemptions by writing to the Company Secretary at the Registered Office at 52 Grosvenor Gardens, London, SW1W 0AU no later than 31 October 2015.

Dividend

The Board has reviewed the strong progress that the Group has made during the first half and, in keeping with its policy of distributing at least 90% of Mall Operating Profit, is announcing an interim dividend of 1.5p per share (June 2014: 0.35p per share), all of which will be paid as a Property Income Distribution (PID). The proportion of the final 2015 dividend to be paid as a PID will be confirmed at the time of the year-end results announcement in March 2015.

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

Outlook

We expect to see a significant increase in momentum in delivery of the capex programme in the second half of 2015 and remain confident that the asset management initiatives across the portfolio will deliver very attractive returns. We anticipate that further increases in property valuations will be driven primarily by growth in income and repositioning of the shopping centres even if there still remains some scope for yield compression particularly for shopping centres in London.

We are also reviewing a number of investment opportunities with our focus on those where we can utilise our asset management skills to generate attractive returns based on the repositioning of the underlying scheme.

Forward looking statements

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

Principal risks and uncertainties

There are a number of risks and uncertainties which could have a significant impact on future performance and could cause actual results to differ materially from expected or historical results. The Group carries out a regular review of the major risks it faces and monitors the controls that have been put in place to mitigate them.

A detailed explanation of the principal risks and uncertainties was included on pages 16 to 19 of the Group's 2014 Annual Report. A further review was carried out for the 30 June 2015 half year. The conclusion of this was that Valuation risk, defined as the risk of an absence of relevant transactional evidence creating uncertainty, was no longer a principal Group risk following the completion of the sale of the Group's German investment and the exclusive property focus on UK Shopping Centres. Furthermore new risks were added being Competition Risk, Development Risk and Acquisition/Disposal strategy, these are summarised along with those that remain relevant from 30 December 2014 below:

Property risks:

· Property investment market risks - Weak economic conditions and poor sentiment in commercial real estate markets may lead to low investor demand and a market pricing correction. Small changes in property market yields have a significant effect on the value of the properties owned by the Group and the impact of leverage could magnify the effect on the Group's net assets.

· Impact of the economic environment (tenant risks) - Tenant insolvency or distress and a prolonged downturn in tenant demand could put pressure on rent levels. Tenant failures and reduced tenant demand could adversely affect rental income revenues, lease incentive costs, void costs, available cash and the value of properties owned by the Group.

· Threat from the internet - The trend towards online shopping may adversely impact consumer footfall in shopping centres. A change in consumer shopping habits towards online purchasing and delivery may reduce footfall and therefore potentially reduce tenant demand for space and the levels of rents which can be achieved.

· Concentration and scale risks - By having a less diversified portfolio the business is more exposed to specific tenants or types of tenant. Failures of such tenants could therefore have a significant impact on rental income revenues impacting Group Operating Profit and property valuations.

· Competition risk - The threat to the Group's property assets of competing in town and out of town retail and leisure schemes.

· Development risk - There is a risk that where capital expenditure and development projects are undertaken that delays and other issues may occur leading to increased cost and reputational damage. There is also the risk that planned realisation of value is not achieved, for example if the property cannot subsequently be sold for the anticipated amount or if tenants are not contracted on sufficiently attractive terms.

Funding and treasury risks:

· Liquidity and funding - Inability to fund the business or to refinance existing debt on economic terms when needed may result in the inability to meet financial obligations (interest, loan repayments, expenses, dividends) when due and put a limitation on financial and operational flexibility. Cost of financing could be prohibitive in the future.

· Covenant compliance risks - Breach of any loan covenants could cause default on debt and possible accelerated maturity. Unremedied breaches can trigger demand for immediate repayment of loans.

· Interest rate exposure risks - Exposure to rising or falling interest rates. If interest rates rise and are unhedged, the cost of debt facilities can rise and ICR covenants could be broken. Hedging transactions used by the Group to minimise interest rate risk may limit gains, result in losses or have other adverse consequences.

Other risks:

· Execution of business plan - the failure to execute the Group's business plan in line with internal and external expectations could lead to potential loss of income or value and reputational damage, negatively impacting investor market perception.

· Property acquisition/disposal strategy - The Group is exposed to risks around overpayment for acquisitions and that acquisitions do not deliver the returns forecast. In addition, if the portfolio is not effectively managed through the property cycle, with sales and deleveraging at the appropriate time, the Group is exposed to risks in not being able to take advantage of other investment opportunities as they arise and the potential for LTVs to move adversely when the cycle changes, with adverse consequences for banking covenants and shareholder value.

· Tax risks - Changes in tax legislation or the interpretation of tax legislation or previous transactions where the tax authorities disagree with the tax treatment adopted could result in tax related liabilities and other losses arising.

· Regulation risks - Exposure to changes in existing or forthcoming property related or corporate regulation could result in financial penalties or loss of business or credibility.

· Loss of key management - The Group's business is partially dependent on the skills of a small number of key individuals. Loss of key individuals or an inability to attract new employees with the appropriate expertise could reduce the effectiveness with which the Group conducts its business.

The risks noted above do not comprise all those potentially faced by the Group and are not intended to be presented in any order of priority. Additional risks and uncertainties currently unknown to the Group, or which the Group currently deems immaterial, may also have an adverse effect on the financial condition or business of the Group in the future. These issues are kept under constant review to allow the Group to react in an appropriate and timely manner to help mitigate the impact of such risks.

Responsibility statement

The directors confirm that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting", as adopted by the European Union;

· the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

· the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Hugh Scott-Barrett Charles Staveley

Chief Executive Group Finance Director

11 August 2015 11 August 2015

Independent review report to Capital & Regional plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' responsibilities

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

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

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

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

11 August 2015

Condensed consolidated income statement

For the six months to 30 June 2015

1 Results for the six months to 30 June 2014 have been restated to separate discontinued operations as detailed in note 14.

Condensed consolidated statement of comprehensive income

For the six months to 30 June 2015

Condensed consolidated balance sheet

At 30 June 2015

Condensed consolidated statement of changes in equity

At 30 June 2015

Condensed consolidated cash flow statement

For the six months to 30 June 2015

Notes to the condensed financial statements

For the six months to 30 June 2015

1 General information

The information for the year ended 30 December 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor has reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

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

2 Accounting policies

Basis of preparation

The annual financial statements of Capital & Regional plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union.

The principal exchange rates used to translate foreign currency denominated amounts are:

Balance sheet: £1 = €1.406 (30 June 2014: £1 = €1.248; 31 December 2014: £1 = €1.278)

Income statement: £1 = €1.367 (30 June 2014: £1 = €1.218; 31 December 2014: £1 = €1.240).

The Half-Year Report was approved by the Board on 11 August 2015.

Going concern

The Group prepares cash flow and covenant compliance forecasts to demonstrate that it has adequate resources available to continue in operation for the foreseeable future, being at least 12 months from the date of this report. In these forecasts the directors specifically consider anticipated future market conditions and the Group's principal risks and uncertainties. Further information on the Group's financing position is contained within the Financial Review with additional details of the Group's cash position and borrowing facilities provided in notes 9 and 10 of the condensed financial statements.

In summary the directors believe that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future and accordingly continue to adopt the going concern basis in preparing the annual report and financial statements.

Change in accounting policies

Except as described below, the condensed consolidated interim financial information has been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates as set out in the notes to the Group's annual financial statements for the year ended 30 December 2014. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following accounting standards or interpretations were effective for the financial year beginning 31 December 2014 and have been applied in preparing these interim financial statements to the extent they are relevant to the preparation of interim financial information:

 IFRS 10 'Consolidated Financial Statements'

 IFRS 11 'Joint Arrangements'

 IFRS 12 'Disclosure of Interests in Other Entities'

 IAS 27 (revised) 'Separate Financial Statements'

 IAS 28 (revised) 'Investments in Associates and Joint Ventures'

 IAS 32 (amendment) 'Financial instruments: Presentation' (assets and liability offsetting)

 IAS 36 (amendment) 'Impairment of Assets'

 IAS 39 (amendment) 'Financial Instruments: Recognition and Measurement'

 Amendments to IFRS 10, IFRS 11, IFRS 12 (transition guidance)

None of the standards have resulted in any changes to the Group's financial position or performance.

The following accounting standards and interpretations which are relevant to the Group have been issued, but are not yet effective:

 IFRS 9 'Financial Instruments'

 IFRS 15 'Revenue from Contracts with Customers'

These standards and interpretations have not been early adopted by the Group. The Group is in the process of assessing the impact of these new standards and interpretations on its financial reporting.

3 Operating segments

3a Operating segment performance

The Group's reportable segments under IFRS 8, consistent with the presentation at the 2014 year end, are The Mall, Other UK Shopping Centres, Snozone and Group/Central. Other UK Shopping Centres consists of the Group's interests in Kingfisher Limited Partnership (Redditch), the Buttermarket Centre, Ipswich, from its acquisition on 3 March 2015, and, until its disposal on 12 November 2014, The Waterside Lincoln Limited Partnership. Group/Central includes management fee income, Group overheads incurred by Capital & Regional Property Management, Capital & Regional plc and other subsidiaries and the interest expense on the Group's central borrowing facility.

The Group's results from its Germany segment, including the profit on disposal recorded in the six months to 30 June 2015, have been classified as Discontinued Operations with the prior year comparatives restated following its reclassification as held for sale at 24 December 2014. See note 14 for further details.

The Mall and Other UK Shopping Centres derive their revenue from the rental of investment properties. The Snozone and Group/Central segments derive their revenue from the operation of indoor ski slopes and the management of property funds or schemes respectively. The split of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues from different products and services. Depreciation and charges in respect of share-based payments represent the only significant non-cash expenses.

The Group's share of ownership of The Mall reflected in the segmental analysis below, was 29.26% from 1 January 2014 to 14 July 2014, 91.82% from 14 July 2014 until 8 October 2014, 99.45% from 8 October 2014 to 1 December 2014 and 100% from 1 December 2014 onwards. See note 25 of the financial statements for the year ended 30 December 2014 for further details.

3 Operating segments (continued)

3a Operating segment performance