CAPC.L Regulatory News (CAPC)

26 JULY 2016

CAPITAL & COUNTIES PROPERTIES PLC ("Capco")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016

Ian Hawksworth, Chief Executive of Capco, commented:

"We have two of London's very best estates at Covent Garden and Earls Court. Covent Garden is established as a world class retail location, attracting high retailer and consumer demand and continues to deliver immediate value creation. We are delighted to have signed brands such as Mulberry and Petersham Nurseries over the period.

At Earls Court, we continue to make positive progress on site. Whilst the last quarter has been characterised by uncertainty in the London market as a whole, the value of this estate will increasingly be realised in the years ahead.

The business is in a strong financial position with a low LTV and high liquidity. Capco's strategy remains unchanged as we aim to deliver value creation for shareholders over time from two exceptional real estate investments in the world's greatest city."

Key financials

- Equity attributable to owners of the Parent £2.8 billion (Dec 2015: £2.9 billion)

- EPRA adjusted, diluted NAV down 5 per cent to 344 pence per share (pre-SDLT increase: 348 pence per share) (Dec 2015: 361 pence)

- Total property value £3.6 billion, down 4 per cent (like-for-like) (Dec 2015: £3.7 billion)

- Proposed interim 2016 dividend of 0.5 pence per share (Jun 2015: 0.5 pence per share)

Strong financial structure

- Group loan-to-value ratio 20 per cent (Dec 2015: 16 per cent)

- Cash and available facilities of £457 million (Dec 2015: £412 million)

- Capital commitments of £194 million (Dec 2015: £207 million)

Creative asset management driving rental growth at Covent Garden

- Covent Garden total property value of £2.1 billion up 3 per cent (like-for-like) (Dec 2015: £2.0 billion)

- ERV up 4 per cent (like-for-like) at £90 million

- ERV target of £100m by December 2017 on track

- New leases and renewals 7 per cent above December 2015 ERV

- Significant pre-let at Kings Court to Petersham Nurseries

Long-term plans on track at Earls Court

- Earls Court interests valued at £1.2 billion, a decrease of 14 per cent (like-for-like) (Dec 2015: £1.4 billion)

- Opportunity to maximise the Earls Court Masterplan

- Demolition of EC1 & EC2 progressing well

- Lillie Square Phase 1 construction on plan with first completions expected later this year

§ 59 per cent of first release of Phase 2 reserved at prices 4 per cent higher than comparable units in Phase 1; positive level of enquiries

Operational strength at Venues

- EBITDA of £11 million, up 19 per cent compared to the first half of 2015 (full year 2015: £15 million)

- Property valuation unchanged at £295 million (Dec 2015: £295 million)

FINANCIAL HIGHLIGHTS

1. On a Group share basis. Refer to Property Data on page 48 for the Group's percentage ownership of property.

2. On a Group share basis. Refer to the Financial Review.

Outlook

We have two of London's very best estates at Covent Garden and Earls Court. Covent Garden is established as a world class retail location, attracting high retailer and consumer demand and continues to deliver immediate value creation. We are delighted to have signed brands such as Mulberry and Petersham Nurseries over the period.

At Earls Court, we continue to make positive progress on site. Whilst the last quarter has been characterised by uncertainty in the London market as a whole, the value of this estate will increasingly be realised in the years ahead.

Whilst it is too early to make firm predictions following the result of the EU referendum, we remain confident in our estates and current conditions on the ground remain positive. Since 23 June, at Covent Garden we have signed three leases as well as putting a further £1 million of space under offer; and at Lillie Square four new reservations have been agreed. Covent Garden is well positioned to outperform and the ERV target of £100 million remains on track as it consolidates its position as a prime retail destination. At Earls Court, we will continue to progress with land enablement and planning activities as we prepare the site for the future.

Capco's financial position is strong and with low leverage, high liquidity and modest capital commitments, the business is well placed to withstand macroeconomic uncertainty. Capco's strategy remains unchanged as we aim to deliver value creation for shareholders over time from two exceptional real estate investments in the world's greatest city.

ENQUIRIES

Capital & Counties Properties PLC:

Media enquiries:

A presentation to analysts and investors will take place today at 09:45am at UBS, 1 Finsbury Avenue, London, EC2M 2PP. The presentation will also be available to international analysts and investors through a live audio call and webcast and after the event on the Group's website www.capitalandcounties.com.

A copy of this announcement is available for download from our website at www.capitalandcounties.com and hard copies can be requested via the website or by contacting the Company (feedback@capitalandcounties.com or telephone +44 (0)20 3214 9153).

OPERATING REVIEW

Overview

Capco is focused on two prime assets in central London which are underpinned by a clear and focused strategy to create long-term value for shareholders. As a result of its embedded repositioning strategy, Covent Garden, which represents 59 per cent of Capco's portfolio, is now at the forefront of global destinations for brands and visitors. Capco's distinct approach to creating places, together with creative asset management and strategic investment, continues to attract target brands, visitors and residents and drive rental growth across the estate.

Representing over 70 acres of strategic land in Chelsea and Fulham, the consented Masterplan at Earls Court provides a unique long-term opportunity to create the next great estate of London. The Earls Court Masterplan is the only consented scheme capable of scale within central London due to the strong existing transport infrastructure and consolidated land ownerships. It is a key strategic scheme for the Capital, providing the opportunity to create much needed new homes, jobs and places for London.

London is a world class global city with a diverse economy and a growing population. The capital has attracted people who wish to live, work, invest in and enjoy the city and the Greater London Authority ("GLA") estimates that the Capital's population will continue to grow significantly. London's long-term economic and population growth trends are deeply embedded and we believe these trends will continue despite the result of the EU referendum. Against this backdrop of London's continued prosperity, Capco's two exceptional central London estates are well placed for long-term success.

In addition, Capco regularly considers opportunities where its core skills of placemaking and masterplanning can be utilised and in 2015 acquired a 50 per cent interest in the Solum Regeneration joint venture with Network Rail which will explore potential opportunities for future redevelopments at significant railway station sites across London.

Valuations

The total property value of the Group declined 3.8 per cent (like-for-like) in the six months to 30 June 2016 to £3.6 billion. These June 2016 valuations incorporate the increased Stamp Duty Land Tax ("SDLT") levels announced in the March 2016 Budget which had an impact of £34 million (0.9 per cent).

Covent Garden has performed positively in the first six months of 2016. The valuation has risen 3.0 per cent (like-for-like) to £2.1 billion, driven by the rental growth achieved over the period. The equivalent yield remains unchanged at 3.5 per cent, reflecting the valuers current view of the strength of demand for central London retail investments.

At Earls Court, the downward move in property valuations reflects the valuers' assessment of the weakened sentiment in the central London residential market following the EU referendum. At ECPL, the valuer has reflected a higher risk premium post the EU referendum through a higher developers margin for consented development land as well as trimming sales values. At Lillie Square, the valuer has taken a more cautious view of costs and growth in sales values for subsequent releases although the sales value assumed is in excess of that achieved in Phase 1. The valuation of Earls Court Properties is £1.2 billion, a decrease of 14.3 per cent (like-for-like).

It should be noted that property valuers across the industry are stating within their valuation reports that their valuations carry a higher than normal level of uncertainty because there is little or no empirical evidence as at the valuation date due to the unprecedented nature of the EU referendum result, which has created considerable uncertainty in the market. The Group's valuers, CB Richard Ellis and Jones Lang Lasalle, have followed this industry wide approach in respect of the valuations this period.

1. Valuation change takes account of amortisation of tenant lease incentives, capital expenditure, fixed head leases and unrecognised trading surplus.

2. Market value represents the Group's 63 per cent interest in ECPL.

3. Represents the Group's 50 per cent interest in Lillie Square.

4. A reconciliation of the carrying value of investment, development and trading property to the market value is shown in note 12 'Property Portfolio' within the condensed consolidated financial statements.

The Group has a 63 per cent controlling interest in Earls Court Partnership Limited ("ECPL"), the investment vehicle with Transport for London ("TfL") which owns the land formerly occupied by the Earls Court Exhibition Centres ("EC1 & EC2"). As a result, it is fully consolidated in the condensed consolidated financial statements and TfL's interest is represented as a non-controlling interest. See page 7 of the Financial Review for further information. 

COVENT GARDEN

Driving rental growth through creative asset management, strategic investment and placemaking

Providing over one million square feet of lettable space in London's West End, Covent Garden has established itself as a leading destination for global retail and dining brands. Retailers are attracted to Capco's distinct approach to placemaking as well as the vibrancy and energy of the estate. Footfall remains consistently strong at over 44 million customers as visitors are drawn to the estate's unique retail, dining and cultural experience.

In the six months to 30 June 2016, Covent Garden performed positively with the value of the estate up 3.0 per cent like-for-like to £2.1 billion. The ERV for the estate has increased 3.7 per cent like-for-like to £89.9 million. The ERV target of £100 million by December 2017 remains in place. Covent Garden's rental growth prospects remain strong and the estate is well placed to outperform the wider central London market due to its innovative repositioning strategy, global reputation and active plan for every street.

During the period to 30 June 2016, 50 leasing transactions including new leases and renewals representing £9.2 million of rental income per annum were transacted at 7 per cent above 31 December 2015 ERV. Net rental income is £20.2 million for the first half of the year, up 6.4 per cent (like-for-like) compared to the same period of 2015. Occupancy on the estate is high at 97 per cent.

Retail

In line with the strategy to reposition the Royal Opera House Arcade with a luxury accessories and gifting focus, the estate is delighted to welcome luxury British lifestyle brand, Mulberry, which has signed a new lease to open its latest store. Fine watch boutique, The Watch Gallery, has also taken space in The Royal Opera House Arcade and will offer Swiss-made luxury watches with over 50 per cent of the store dedicated to the Rolex brand. French luxury jeweller, Poiray, has also taken a unit and will open its first UK store.

On Henrietta Street, British brand Albam is the latest signing, reflecting the success of the 'Street to Suit' strategy to reposition the street with a menswear focus. Henrietta Street is now home to seven menswear stores and offers an array of premium menswear brands including Club Monaco, Nigel Cabourn, Edwin and Oliver Sweeney.

Dining

The quality and variety of the dining offer at Covent Garden continues to strengthen, further enhancing the estate's reputation for destination dining.

A new letting to Experimental Group will see them open their latest concept in London on Henrietta Street. Plans from the team behind The Experimental Cocktail Club include a new restaurant and bar as well as an 18 bedroom hotel. The Experimental Group will join recent addition Frenchie which opened its first London restaurant earlier this year.

Acclaimed New York restaurant, RedFarm, has taken space alongside Balthazar on Russell Street. The new restaurant, the Group's first outside of New York, will bring RedFarm's famed menu of modern and inventive Chinese food to London's West End.

Adding to the depth of variety on the estate, Italian-style boulangerie VyTA Santa Margherita will open in the Market Building offering all-day dining on the Piazza. VyTA is renowned for its high quality ingredients and selection of wines and will be a UK first. This further builds upon the success of dining in the Market Building following recent lettings to French delicatessen Aubaine and renowned fusion dining restaurant SushiSamba which will open on the iconic Opera Terrace, providing exceptional views across the Piazza.

Developments

The Kings Court and Carriage Hall developments are progressing well and are on track for completion in 2017. The schemes will create a new connecting passage between Long Acre and King Street transforming pedestrian flow and unlocking the placemaking opportunity on Floral Street. The expected total development cost of Kings Court and Carriage Hall is £100 million.

At Kings Court, a significant pre-let has been agreed with Petersham Nurseries, the world-renowned lifestyle brand which will occupy over 16,000 square feet (NIA), creating new bespoke retail and dining concepts across four units. Covering approximately 60 per cent of the commercial space at Kings Court, the pre-let significantly de-risks the scheme and begins the repositioning of Floral Street.

Residential

13 new lettings have been agreed across the estate with average rents of between £70-£80 per square foot. In addition, post the period end, one of the penthouses in the Beecham has been sold in excess of £3,000 per square foot and contracts have been exchanged for the second.

EARLS COURT PROPERTIES

Strategic consented land in Chelsea and Fulham

Representing over 70 acres of prime, consented, strategic land in Chelsea and Fulham, the Earls Court Masterplan is the largest regeneration opportunity in central London. The Masterplan is currently consented to provide 7,500 new homes (including Lillie Square), creating 10,000 new jobs and will deliver over £450 million of community benefits.

The site is well connected with strong transport infrastructure and is located in an established neighbourhood with history and heritage, where people want to live and enjoy London. Underpinned by Capco's distinct approach to placemaking, the Earls Court Masterplan represents an opportunity to create the next great estate of London providing much needed homes, jobs and places for people to enjoy.

Earls Court is a GLA 'Opportunity Area', making it a key strategic scheme for the Capital. The current GLA London Plan estimates that London's population will grow by two million to 10 million by 2031 with the Capital requiring over 40,000 new homes per annum. Against this backdrop of a growing population, housing is a key priority and maximising Opportunity Areas is seen as vital in order to meet London's housing demands.

Earls Court Properties represents Capco's interests in Earls Court, which principally comprise:

- 63 per cent interest in ECPL: the investment vehicle with TfL in respect of EC1 & EC2, and including certain assets on and around Lillie Road

- 100 per cent of the Empress State Building

- 50 per cent interest in the Lillie Square joint venture

In addition, in 2013, Capco exercised its option under the Conditional Land Sale Agreement ("CLSA"), a binding agreement in relation to the West Kensington and Gibbs Green Estates. To date, Capco has paid £45 million of the £105 million cash consideration payable including the first of five annual instalments of £15 million which was paid in December 2015. Plans are progressing towards the construction of Block D of Lillie Square to facilitate the first phase of replacement housing for the West Kensington and Gibbs Green estates' residents.

The complex demolition of the former Exhibition Centres is well progressed. Construction of Phase 1 of Lillie Square is on track and first completions are expected later this year. 

For the period to 30 June 2016, the valuation of Capco's interests at Earls Court was £1.2 billion, a like-for-like decrease of 14.3 per cent. The downward move reflects the valuers' assessment of the weakened sentiment in the central London residential market following the EU referendum. At ECPL, the valuer has reflected a higher risk premium through higher developers margins for consented development land as well as trimming sales values. At Lillie Square, the valuer has taken a more cautious view of costs and growth in sales values for subsequent releases although the sales value assumed is in excess of that achieved in Phase 1.

Planning

The Earls Court Masterplan is a consented mixed-use scheme comprising 10.1 million square feet (Gross External Area ("GEA")) of residential-led space across Chelsea and Fulham. Outline planning consent for the Masterplan was granted in November 2013 and the scheme was designated an Opportunity Area by the GLA in July 2011.

As a designated GLA Opportunity Area, Earls Court is a strategic scheme for the Capital and options are being considered which enhance and maximise the potential of this important London scheme. In preparation for the next revision of the London Plan which is expected next year, representations have been submitted to the GLA outlining Earls Court's ability to deliver a minimum of 10,000 new homes, well in excess of the 7,500 currently consented.

Land enablement

The complex demolition of the former Exhibition Centres began in December 2014 and is progressing well. Demolition to ground level of the EC2 building is now complete and demolition to ground level for the entire site is on track for completion later this year at an expected cost of £60 million. Following this, demolition to basement level will further de-risk the site and enable the land for future development. This final phase of demolition (not currently committed) is expected to take 12 months at a cost of £30 - £40 million.

A £150 million (£95 million Group share) facility has been signed with a Government agency, the Homes and Communities Agency ("HCA"). This attractive and long-term government funding will finance infrastructure costs on ECPL land, such as the demolition.

Lillie Square

Located in Fulham, Lillie Square is one of the most centrally located and connected schemes in London. The development will deliver modern garden-square living through 608 private and 200 affordable homes across three phases.

The Lillie Square development launched in 2014 and to date 44 per cent of the entire scheme has been pre-sold representing over £300 million of sales across the development.

Phase 1 launched in 2014 and is predominantly sold, representing over £250 million of sales. The average price per square foot for Phase 1 is circa £1,500 with the range of pricing achieved at £1,200 - £2,800 per square foot including a penthouse sold for £6.3 million in January this year. Construction of Phase 1 is underway and progressing positively with first completions on track for delivery later in the year.

In Phase 2, 70 units have been released for sale and 41 have been reserved or exchanged, representing 59 per cent of the first release (four reserved since the result of the EU referendum). Whilst the level of enquiries has been strong since the beginning of the year, the rate of sales has been slow with the uncertainty in the weeks leading up to the EU referendum impacting buyers' decision-making. Sales prices achieved in Phase 2 have remained positive with prices 4 per cent higher than comparable units in Phase 1.

VENUES

A leading central London venue

Olympia London continues to cement its status as the venue of choice for premium shows in central London. The venue has had a busy start to 2016 with over 90 events hosted to date including two of the UK's largest exhibitions, London Book Fair and Ideal Home Show, reflecting its excellent prospects as a central London venue.

As previously reported, Capco has undertaken a strategic review of the Venues business. This review has concluded that, whilst the business is not a long-term core holding for Capco, ownership will be retained as it offers a reliable and growing income stream.

EBITDA for the first half is £10.6 million, up 19.1 per cent compared to the first half of 2015. The valuation of the Venues business, which includes Olympia London property assets and Maclise Road, is unchanged at £295 million. 

FINANCIAL REVIEW

Capco continues to maintain a robust and disciplined financial position with low leverage of 20 per cent, available liquidity of £457 million with modest capital commitments of £194 million. Our capital structure is well equipped to weather short-term market dislocation.

EPRA adjusted, diluted net assets per share fell by 4.7 per cent during the period, decreasing from 361 pence at 31 December 2015 to 344 pence. This 17 pence decrease together with the 1 pence dividend paid in June represents a total return of -4.5 per cent.

At Covent Garden rental growth achieved during the period was the main driver of the increase in the value of the estate by 3.0 per cent.

The market value of Earls Court Properties, which comprises the Group's interests at Earls Court, has decreased by 14.3 per cent, reflecting the valuer's assessment of the weakened sentiment in the central London residential market following the result of the EU referendum.

Basis of preparation

In line with the requirements of IFRS 11 'Joint Arrangements' ("IFRS 11") the Group is required to present its joint ventures under the equity method in the condensed consolidated financial statements. Under the equity method, the Group's interest in joint ventures is disclosed as a single line item in both the consolidated balance sheet and consolidated income statement rather than proportionally consolidating the Group's share of assets, liabilities, income and expenses on a line-by-line basis.

Internally the Board, including the chief operating decision maker, focuses on and reviews information and reports prepared on a Group share basis, which includes the Group's share of joint ventures but exclude the non-controlling interest share of our subsidiaries. Therefore, to align with the way the Group is managed, this financial review presents the financial position, performance and cash flow analysis on a Group share basis. In previous periods the Board focused on and reviewed information on a proportionally consolidated basis therefore the comparative summary income statement and summary cash flow statements have been re-presented.

FINANCIAL POSITION

At 30 June 2016 the Group's EPRA adjusted net assets were £2.9 billion (31 December 2015: £3.1 billion) representing 344 pence per share (31 December 2015: 361 pence).

The Group presents EPRA adjusted, diluted NAV in addition to the net assets attributable to owners of the Parent as the EPRA alternative performance measures are intended to make financial statements of public real estate companies in Europe clearer, more transparent and comparable.

SUMMARY ADJUSTED BALANCE SHEET

1. Primarily Lillie Square.

2. Represents TfL's 37 per cent share of ECPL.

3. IFRS includes amounts receivable from joint ventures which eliminate on a Group share basis.

4. Adjusted, diluted number of shares in issue at 30 June 2016 was 847.5 million.

1. Primarily Lillie Square.

2. Represents TfL's 37 per cent share of ECPL.

3. IFRS includes amounts receivable from joint ventures which eliminate on a Group share basis.

4. Adjusted, diluted number of shares in issue at 31 December 2015 was 847.7 million.

Investment, development and trading property

The revaluation deficit on the Group's property portfolio was £140.8 million for the period, a 3.8 per cent decrease on a like-for-like basis compared with the IPD Capital Return for the equivalent period of a 0.3 per cent loss.

Total property return for the period was a deficit of 2.7 per cent. The IPD Total Return index recorded a 2.4 per cent gain for the corresponding period. Of the total property return deficit, 0.9 per cent is attributable to the increased SDLT rates on property.

Trading property is carried on the consolidated balance sheet at the lower of cost and market value therefore valuation surpluses on trading property are not recorded. Any unrecognised surplus is however reflected within the EPRA adjusted net asset measure. At 30 June 2016, the unrecognised surplus on trading property was £63.6 million (31 December 2015: £99.9 million). This primarily arises on trading property at Lillie Square.

Debt and gearing

During the period the Group increased its share of available facilities by £150 million, with three new agreements.

- In January 2016 the Group replaced the £665 million Covent Garden debt facility with a £705 million five year Covent Garden debt facility which increased available facilities by £40 million.

- In March 2016, a £150 million (£95 million Group share) ten year secured credit agreement was signed by Earls Court Partnership Limited to fund infrastructure-related costs on land interests at Earls Court.

- In June 2016 the Group entered into an agreement to extend the existing construction facility which funds the Lillie Square development by £30 million (£15 million Group share) for a one year period.

The Group's cash and undrawn committed facilities at 30 June 2016 were £456.6 million (31 December 2015: 412.1 million).

During the period additional hedging was entered into taking advantage of the low prevailing rates. This hedging provides additional interest rate risk protection for £200 million up to February 2019 and £400 million up to December 2022.

Net debt increased by £107.2 million to £686.1 million, principally as a result of further investment in the business through acquisition of property and subsequent expenditure.

The gearing measure most widely used in the industry is loan-to-value ("LTV"). LTV is calculated on the basis of net debt divided by the carrying value of the Group's property portfolio. The Group focuses most on an LTV measure that includes the notional share of joint venture interests but excludes the share of the non-controlling interest. The LTV of 19.6 per cent remains comfortably within the Group's limit of no more than 40 per cent.

The Group's policy is to substantially eliminate the medium and long-term risk arising from interest rate volatility. The Group's banking facilities are arranged on a floating rate basis but swapped to fixed rate or capped using derivative contracts. At 30 June 2016 the proportion of gross debt with interest rate protection was 87 per cent (31 December 2015: 91 per cent).

The Group remains compliant with all of its debt covenants and has substantial levels of headroom against its covenants across all its debt facilities. Details of the covenants are included on page 51. 

At 30 June 2016 the Group had capital commitments of £193.6 million compared to £206.5 million at 31 December 2015, of which Covent Garden represents £84.9 million, Earls Court Properties £70.5 million (including the £60 million of CLSA instalments) and Lillie Square £38.2 million. The pipeline has been significantly de-risked, for example at Kings Court where approximately 60 per cent of the commercial space has been pre-let to Petersham Nurseries, and through over £300 million (£150 million Group share) of pre-sales at Lillie Square. On a pro forma basis, not taking into account any property valuation movements or any receipts, expenditure on capital commitments would increase the LTV from 19.6 per cent to 25.1 per cent.

CASH FLOW

A summary of the Group's cash flow for the period ended 30 June 2016 is presented below:

SUMMARY CASH FLOW

1. The 30 June 2015 summary cash flow has been prepared on a Group share basis. In the 'Interim Results for the six months ended 30 June 2015' the summary cash flow was presented on a proportionate consolidation basis.

Operating cash outflows were £3.8 million compared with £5.7 million for the period to 30 June 2015, as a result of changes to net working capital requirements.

During the period, £56.7 million was invested at Covent Garden for the purchase of one property and subsequent expenditure for the development of property predominately at Kings Court. At Earls Court £37.4 million was spent on subsequent expenditure for the construction of Lillie Square Phase 1 and the demolition of the Earls Court Exhibition Centres.

Sales proceeds from property and investments primarily comprise the disposal of a residential unit at The Beecham, Covent Garden.

Net borrowings drawn during the period were £86.9 million. Refinancing activities and purchase of derivatives resulted in a cash outflow of £4.5 million.

Dividends paid of £4.1 million reflect the final dividend payment made in respect of the 2015 financial year. This was in line with the period to June 2015 due to similar take up of the scrip dividend alternative, 51 per cent (30 June 2015: 51 per cent). 

FINANCIAL PERFORMANCE

The Group presents underlying earnings and underlying earnings per share in addition to the amounts reported on a Group share basis. The Group considers this presentation to provide useful information as it removes unrealised and other one-off items and therefore represents the recurring, underlying performance of the business.

SUMMARY INCOME STATEMENT

1. The 30 June 2015 summary income statement has been prepared on a Group share basis. In the 'Interim Results for the six months ended 30 June 2015' the summary income statement was presented on a proportionate consolidation basis.

Income

Net rental income has increased by £2.1 million (6.3 per cent like-for-like) during the period as a result of strong performances at Covent Garden and Olympia London.

(Loss)/gain on revaluation of investment and development property

The loss on revaluation of the Group's investment and development property was £105.2 million. Covent Garden recorded a gain on revaluation of £60.2 million as a result of rental growth. The loss on revaluation at Earls Court of £164.9 million reflects the valuer's assessment of the weakened sentiment in the central London residential following the result of the EU referendum.

Administration expenses

Administration expenses have remained in line with the comparative period at £25.0 million.

Net finance costs

Net finance costs have increased by 5.5 per cent to £9.6 million as a result of the increased net debt.

Taxation

The total tax credit for the period of £12.2 million is made up of both underlying tax and non-underlying tax.

Tax on underlying profits of the Group was £1.4 million which reflects a rate in line with the current rate of UK corporation tax. Following the Chancellor's announcement in the July 2015 Budget, the main rate of corporation tax will fall to 19 per cent from April 2017. A further reduction to the corporation tax rate to 17 per cent from April 2020 was announced in the March 2016 Budget.

Contingent tax, the amount of tax that would become payable on a theoretical disposal of all investment property held by the Group, was £nil million (31 December 2015: £11.1 million). A disposal of the Group's trading property at market value would result in a corporation tax charge to the Group of £12.7 million (20 per cent of £63.6 million).

The provisions of IAS 12 provide for the recognition of a deferred tax asset where it is probable there will be future taxable profit against which a deductible temporary difference can be utilised. As a result of the application of this provision, the Group has not recognised the deferred tax asset on investment property and losses carried forward.

The Group's tax policy, which has been approved by the Board and has been disclosed to HM Revenue & Customs, is aligned with the business strategy. The Group seeks to protect shareholder value by structuring operations in a tax efficient manner, with external advice as appropriate, which complies with all relevant tax law and regulations and does not adversely impact our reputation as a responsible taxpayer. As a Group, we are committed to acting in an open and transparent manner.

Consistent with the Group's policy of complying with relevant tax obligations and its goal in respect of its stakeholders, the Group maintains a constructive and open working relationship with HM Revenue & Customs which regularly includes obtaining advance clearance on key transactions where the tax treatment may be uncertain.

Dividends

The Board has proposed an interim dividend of 0.5 pence per share to be paid on 30 September 2016 to shareholders on the register at 9 September 2016. Subject to SARB approval a scrip dividend alternative will be offered.

Soumen DasChief Financial Officer

26 July 2016 

PRINCIPAL RISKS AND UNCERTAINTIES

The Board has overall responsibility for Group risk management. It determines its risk appetite and reviews principal risks and uncertainties regularly, together with the actions taken to mitigate them. The Board has delegated responsibility for the review of the adequacy and effectiveness of the Group's internal control framework to the Audit Committee.

During 2015, a comprehensive review of risk management across the Group was undertaken. The purpose of the review was to set the right tone regarding risk at Board level and to develop a more risk aware culture and consistency in decision making across the organisation in line with the corporate strategy and risk appetite. Following the review, risk is now a standing agenda item at all management meetings. All corporate decision making takes risk into account while continuing to drive entrepreneurial culture.

The Executive Directors are responsible for the day to day operational and commercial activity across the Group and are therefore responsible for the management of business risk. The Executive Risk Committee, consisting of the Executive Directors, the General Counsel and the Financial Controller, is the executive level management forum for the review and discussion of risks, controls and mitigation measures. The corporate and business division risks are reviewed on a quarterly basis by the Executive Risk Committee so that trends and emerging risks can be identified and reported to the Board.

Senior management from every division and corporate function of the business identify and manage the risks for their division or function and complete and maintain a risk register. The severity of each risk is assessed through a combination of each risk's likelihood of an adverse outcome and its impact. In assessing impact, consideration is given to financial, reputational and regulatory factors and risk mitigation plans established. A full risk review is undertaken annually where the risk registers are aggregated and reviewed by the Executive Risk Committee. The Directors confirm that they have completed a robust assessment of the principal risks faced by the business, assisted by the work performed by the Executive Risk Committee.

On the following pages are the principal risks and uncertainties from across the business and these are reflective of where the Board has invested time during the period. These principal risks are not exhaustive. The Group monitors a number of additional risks and adjusts those considered 'principal' as the risk profile of the business changes. See also the risks inherent in the compilation of financial information, as disclosed within note 1 'Principal Accounting Policies' to the consolidated financial statements for the year ended 31 December 2015, 'Estimation and uncertainty'.

CORPORATE RISKS

PROPERTY

DIRECTORS' RESPONSIBILITIES

Statement of Directors' responsibilities

The Directors are responsible for preparing the condensed consolidated financial statements, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge:

· the condensed consolidated financial statements on pages 18 to 47 has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union; and

· the condensed consolidated financial statements on pages 18 to 47 includes a true and fair view of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

The operating and financial review on pages 3 to 11 refers to important events which have taken place during the period.

The principal risks and uncertainties facing the business are referred to on pages 12 to 14.

Related party transactions are set out in note 27 of the condensed consolidated financial statements.

A list of current Directors is maintained on the Capital & Counties Properties PLC website: www.capitalandcounties.com.

By order of the Board

Ian Hawksworth

Chief Executive

Soumen Das

Managing Director & Chief Financial Officer

26 July 2016

Independent review report to Capital & Counties Properties PLC

Report on the condensed consolidated financial statements

Our conclusion

We have reviewed Capital & Counties Properties PLC's condensed consolidated financial statements (the interim financial statements) in the interim results of Capital & Counties Properties PLC for the six month period ended 30 June 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

· the Consolidated Balance Sheet as at 30 June 2016;

· the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the period then ended;

· the Consolidated Statement of Cash Flows for the period then ended;

· the Consolidated Statement of Changes in Equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the Directors

The interim results, including the interim financial statements, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim results in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

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 enquiries, 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.

We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

26 July 2016

Notes:

(a) The maintenance and integrity of the Capital & Counties Properties PLC website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

CONSOLIDATED INCOME STATEMENT (unaudited)

For the six months ended 30 June 2016

1. Adjusted earnings per share from continuing operations is shown in note 11 'Earnings Per Share and Net Assets Per Share'.

Notes on pages 24 to 47 form part of these condensed consolidated financial statements. 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

For the six months ended 30 June 2016

Notes on pages 24 to 47 form part of these condensed consolidated financial statements. 

CONSOLIDATED Balance sheet (unaudited)

As at 30 June 2016

Notes on pages 24 to 47 form part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENT OF changes in equity (unaudited)

For the six months ended 30 June 2016

1. Represents non-qualifying consideration received by the Group following the share placing in May 2014 and previous share placements. The amounts taken to the merger reserve do not currently meet the criteria for qualifying consideration as they form part of linked transactions.

2. Refer to note 22 'Other Reserves'.

 Notes on pages 24 to 47 form part of these condensed consolidated financial statements. 

CONSOLIDATED STATEMENT OF changes in equity (unaudited)

For the six months ended 30 June 2016

1. Represents non-qualifying consideration received by the Group following the share placing in May 2014 and previous share placements. The amounts taken to the merger reserve do not currently meet the criteria for qualifying consideration as they form part of linked transactions.

2. Refer to note 22 'Other Reserves'.

Notes on pages 24 to 47 form part of these condensed consolidated financial statements. 

CONSOLIDATED STATEMENT OF cash flowS (unaudited)

For the six months ended 30 June 2016

1. Cash inflows from sale of subsidiaries relate to deferred consideration on the disposal of The Brewery by EC&O Limited on 9 February 2012.

2. VAT received on an internal property transfer was deemed to be a VAT supply. Input VAT was received prior to 30 June 2015 whilst the output VAT was settled in July 2015.

Notes on pages 24 to 47 form part of these condensed consolidated financial statements.

Notes to the accounts (unaudited)

1 PRINCIPAL ACCOUNTING POLICIES

General information

Capital & Counties Properties PLC (the "Company") was incorporated and registered in England and Wales on 3 February 2010 under the Companies Act as a public company limited by shares, registration number 7145051. The registered office of the Company is 15 Grosvenor Street, London, W1K 4QZ, United Kingdom. The principal activity of the Company is to act as the ultimate parent company of Capital & Counties Properties PLC Group (the "Group"), whose principal activity is the development and management of property.

The Group's assets principally comprise investment and development property at Covent Garden, Earls Court and the exhibition halls at Olympia London.

Basis of preparation

The Group's condensed consolidated financial statements are prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The condensed consolidated financial statements should be read in conjunction with the Annual Report & Accounts for the year ended 31 December 2015, which have been prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated financial statements are prepared in British pounds sterling.

The condensed consolidated financial statements for the six months ended 30 June 2016 are reviewed, not audited and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015 were approved by the Board of Directors on 24 February 2016 and delivered to the Registrar of Companies. The auditors' report on these accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement made under Section 498 of the Companies Act 2006.

The condensed consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation of property, available-for-sale investments and derivative financial instruments.

Having reassessed the principal risks, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the condensed consolidated financial statements.

There is no material seasonal impact on the Group's financial performance.

These condensed consolidated financial statements were approved by the Board of Directors on 26 July 2016.

Except as described below, the condensed consolidated financial statements have been prepared using the accounting policies, significant judgements, key assumptions and estimates set out on pages 102 to 106 of the Group's Annual Report & Accounts for 2015.

Income taxes

Taxes on income in the interim periods are accrued using tax rates expected to be applicable to total annual earnings.

During the six months to 30 June 2016, the following standards and guidance were adopted by the Group:

IFRS 5 'Non-current assets held for sale and discontinued operations' (amendment)

IFRS 7 'Financial instruments: Disclosures' (amendment)

IAS 1 'Presentation of financial statements' (amendment)

IAS 16 'Property, plant and equipment' (amendment)

IAS 19 'Employee benefits' (amendment)

IAS 27 'Separate Financial Statements' (amendment)

IAS 34 'Interim financial reporting' (amendment)

These pronouncements did not have a material impact on the condensed consolidated financial statements.

There were no standards and guidelines relevant to the Group that were in issue and endorsed at the date of approval of the condensed consolidated financial statements but not effective at the balance sheet date.

2 SEGMENTAL REPORTING

Management has determined the operating segments based on reports reviewed by the Chief Executive, who is deemed to be the chief operating decision maker. The principal performance measures have been identified as net rental income and net asset value.

For management and reporting purposes the Group is organised into four divisions:

- Covent Garden;

- Earls Court Properties represents the Group's interests in the Earls Court area, comprising properties held in ECPL, Lillie Square, the Empress State Building and a number of smaller properties in the Earls Court area;

- Venues comprises the exhibitions business including the Olympia London property assets and Maclise Road1; and

- Other comprises Solum, the discontinued activity of The Great Capital Partnership, the Group's residual China investments, other head office companies and investments.

1. The period to 30 June 2015 has been re-presented to reflect the transfer of Maclise Road from the Earls Court Properties segment to the Venues segment in the second half of 2015.

Management information, previously reported on a proportionate consolidation basis until December 2015 is now reported to the chief operating decision maker on a Group share basis. Consequently the comparative periods are also re-presented in line with reporting requirements. Outlined below is the Group share by segment:

Segmental reporting has been presented in line with management information and therefore consolidation adjustments are presented to reconcile segmental performance and position to the IFRS total.

The Group's operating segments derive their revenue primarily from rental income from lessees, with the exception of Venues which generates revenue principally from the exhibition business.

Unallocated expenses consist primarily of costs incurred centrally which are neither directly nor meaningfully attributable to individual segments.

Reportable segments

1. Comprises service charge and other non-recoverable costs.

2. The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and the majority of the Group's cash balances.

3. Total segmental assets and total segmental liabilities exclude loans between and investments in Group undertakings.

Reportable segments

1. Comprises service charge and other non-recoverable costs.

2. The Group operates a central treasury function which manages and monitors the Group's finance income and costs on a net basis and the majority of the Group's cash balances.

3. Total segmental assets and total segmental liabilities exclude loans between and investments in Group undertakings.

Reportable segments