Liberty International PLC 2009 Interim Results Presentation 31 July - - PowerPoint PPT Presentation

Page 1 Liberty International 2009 Interim Results

Liberty International PLC 2009 Interim Results Presentation 31 July 2009

Eldon Square, Newcastle, southern extension opening February 2010

Page 2 Liberty International 2009 Interim Results

Important Notice

This presentation includes statements that are forward-looking in nature. Forward- looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Liberty International PLC to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Any information contained in this presentation on the price at which shares or other securities in Liberty International PLC have been bought or sold in the past, or on the yield on such shares or other securities, should not be relied upon as a guide to future performance.

Page 3 Liberty International 2009 Interim Results

Liberty International Interim Report 2009

Group overview David Fischel Financial review Ian Durant Operating review Kay Chaldecott Ian Hawksworth Group prospects David Fischel Questions

Page 4 Liberty International 2009 Interim Results

Group overview

A measure of stability, if not yet recovery Financial position improved by £592 million capital raising Slowdown in property valuation declines

– 8.5 per cent (Q1), 4.3 per cent (Q2)

£187 million disposals of non-core assets Resilient net rental income

– 2 per cent decline

Slowdown in tenant failures and steady re-letting progress Specialist in quality retail property

– 86 per cent of investment properties

Page 5 Liberty International 2009 Interim Results

Property valuations

H1 2009

– CSC (12.8) per cent – Capital & Counties UK (10.0) per cent – USA (14.8) per cent – Overall (12.4) per cent vs. IPD (13.2) per cent

Cumulative since 30 June 2007

– (36.2) per cent vs. IPD (44.1) per cent

NEY increase for CSC from 6.67 per cent to 7.37 per cent CSC ERV decline 3 per cent Yields stabilising for prime assets Rental levels now the key to performance

Page 6 Liberty International 2009 Interim Results

Valuations Liberty International’s assets have outperformed IPD since 30 June 2007 36.2% vs 44.1%

• 45.0%
• 40.0%
• 35.0%
• 30.0%
• 25.0%
• 20.0%
• 15.0%
• 10.0%
• 5.0%

0.0% 5.0% Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Cumulative change in capital value from June 2007

CSC capital value C&C UK capital value C&C USA capital value IPD monthly all property, capital value index

Page 7 Liberty International 2009 Interim Results

Financial Review

St David’s 2, Cardiff

Page 8 Liberty International 2009 Interim Results

First half performance

First half 2009 £m First half 2008 £m Change Net rental income 190 194

• 2%

Underlying earnings 47 50

• 7%

Cash flow before financing 76 (151) +151% Adjusted earnings per share 11.6p 13.9p

• 17%

Dividend per share 5.0p 16.5p

• 70%

Page 9 Liberty International 2009 Interim Results

Net rental income “bridge”

CSC – tenant failures reducing the rent roll, C&C – acquisitions and disposals

(6.8) (1.4) (0.5) CSC 140.1 (4.2) CSC 132.7 2.7 6.2 C&C 57.5 C&C 54.1

75 100 125 150 175 200 First half 2008 CSC like-for- like C&C UK like- for-like Acquisitions Disposals Foreign Exchange Other First half 2009 £'M

Page 10 Liberty International 2009 Interim Results

Underlying profit before tax “bridge”

Finance costs – servicing higher debt including Empress, not yet fully reflecting capital raise Administration costs – on track for £45m for the full year

(11.0) (7.4) 49.3 57.1 3.4 0.8 6.4

10 20 30 40 50 60 70 First half 2008 CSC net rental income C&C net rental income Other income Administration costs Net finance costs First half 2009 £'M

Page 11 Liberty International 2009 Interim Results

Items excluded from underlying profit

First half 2009 £m First half 2008 £m Adjusted earnings after tax for the period 11.6p 47 50 Property revaluation deficit and losses on sales (891) (639) Change in fair value of derivatives 417 140 Deferred tax on the above (42) 8 Minority interests on the above 25 33 Other finance (costs)/income (20) 4 Impairment of goodwill

• (22)

Other non-operating items (6)

• Basic (loss) for the period

(117.0p) (470) (426 )

Page 12 Liberty International 2009 Interim Results

Net assets per share 448 pence

(105p) (147p) (11p) (57p) 745p 448p 9p 493p 4p 10p

100 200 300 400 500 600 700 800 31 Dec 2008 Valuation deficit Q1 Capital raising Proforma Underlying profit Valuation deficit Q2 Other 'non-

• perating'

Taxation Minority interest 30 Jun 2009 pence

30 June 2009 £b 31 Dec 2008 £b Total properties 6.1 7.1 Net external debt (3.4) (4.1) Other assets/liabilities (0.6) (1.0) Net assets 2.1 2.0 Net assets diluted, adjusted 2.6 2.8

Page 13 Liberty International 2009 Interim Results

Cash flow Cash generation from capital raising & disposals

£m £m Opening net external debt 1 January 2009 (4,100) Recurring cash flow from operations* 13 REIT entry charge (1) Cash flow from operating activities 12 Investments: CSC (110) Capital & Counties (13) Disposals 187 Cash flow before financing 76 Proceeds of capital raising 592 Effect of exchange rate changes on US debt 29 Other 13 Closing net external debt 30 June 2009 (3,390)

*after working capital movements

Page 14 Liberty International 2009 Interim Results

Capital commitments UK commitments £172 million, principally Cardiff

Other capital commitments - £53m overseas investments

50 100 150 200 250 2009 2010 2011 Total

Year £m

St David's 2, Cardiff Eldon Square, Newcastle Metrocentre Yellow Quadrant Other CSC committed projects C&C UK committed projects

£103m £58m £11m £172m £104m

Page 15 Liberty International 2009 Interim Results

Financial position

30 June 2009 31 Dec 2008 Net external debt ` £3,390m £4,100m Cash balances £568m £71m Undrawn available facilities £360m £220m Net debt to assets 56% 58% Weighted average cost of gross debt 6.0% 6.0% Interest cover (for period) 147% 145% Weighted average maturity of debt 5.5 years 5.8 years

Page 16 Liberty International 2009 Interim Results

Financial covenants In compliance with all loan covenants

Detail of covenants and current compliance

– contained in appendix to interim report

In compliance with all loan covenants Some remedies applied since 30 June

– £19m cash deployed – includes Bromley, Uxbridge, Watford, Norwich – constructive dialogue with lenders including Nottingham

Page 17 Liberty International 2009 Interim Results

Derivatives – interest rate hedging

Reduction in liability by £431m to £358m at 30 June 2009 Remaining liability diminishes as interest is paid over time Closed £1.6 billion of forward-starting swaps in the period for a cash cost of £10m

• (2)

(14) (23) (22) (41) (105) (217) (358) (500) (400) (300) (200) (100) 1 2 3 - 5 6 - 10 11 - 15 16 - 20 21 - 25 26 - 30 Time Periods (Years)

Estimated Carrying Value (£m)

Page 18 Liberty International 2009 Interim Results

Financial prospects

New debt/refinancing

– Cardiff – outstanding £79m convertible bond September 2010 – Lakeside CMBS refinancing July 2011

Second half earnings prospects affected by capital raising and CSC net rental income

Page 19 Liberty International 2009 Interim Results

Operating review

Page 20 Liberty International 2009 Interim Results

Compelling destinations

– footfall up over 3% – outperforming “FootFall index” down 2.1% (Experian) – total sales – CSC centres estimated to have outperformed ONS non-food (down 3.1%

first half 2009 compared to 2008)

– vacancy decreased from 6.3% to 3.7% – compares favourably to market reduction to

5.1% (source DTZ – top 20 prime shopping centres)

– cash collection June quarter date – 98% collected excluding tenants in administration and

payment plans (December 2008 – 97%)

Short and long term lettings – 142 deals

– £11.5m new annual passing rent, previously £14.2m – reduction as a result of short term

lettings

– short term deals provide flexibility to benefit from market recovery eg Hawkshead, Punky

Fish, Hawkins Bazaar

Mitigation of costs

– empty rates and non-recoverables

Financial impact: like-for-like net rental income down 5.1% first half 2009

Operating review – Capital Shopping Centres Asset management in a downturn (1)

Page 21 Liberty International 2009 Interim Results

Benefit of scale and quality

– specialised management skills – tenant relationships – speed of response – single negotiation covering top destinations

“Pre-pack” tenants keeping majority of units, eg. Mosaic, USC Demand for space from eg Next, H&M, New Look, River Island, Top Shop, JD Sports, Bank, Cult and new brands….

Operating review – Capital Shopping Centres Asset management in a downturn (2)

Page 22 Liberty International 2009 Interim Results

Retailer Demand New retail partners

Page 23 Liberty International 2009 Interim Results

Dealing with failures – inevitable short term income statement strain but maintaining flexibility to benefit from market recovery:

– All voids – Tenant failures

Operating review – Capital Shopping Centres Asset management in a downturn (3)

2.1% 4.1% 1.4% 5.0%

• 8.4%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% In admin, not relet at 31- Dec-08 Failures Q1 Failures Q2 Relet or under offer In admin, not relet at 30- Jun-09

% of rent

71 units 92 units 33 units 156 units 40 units

Occupied, including relet or under offer Occupied by administrator - not yet relet True void

96.3% 93.6% 98.3% 97.1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Dec-07 Jun-08 Dec-08 Jun-09 % of rent

Page 24 Liberty International 2009 Interim Results

Major Developments

Cardiff – Opening October 2009 / John Lewis – opening September 2009 64% committed by floor area, 53% by income with a further 8% in active negotiation

New names: Cult, Fat Face, Folli Follie, Ollie & Nic, Quiksilver, Disney, Slaters, All Saints, Crabtree & Evelyn, Jamie’s Italian, J4 Jeans

Page 25 Liberty International 2009 Interim Results

Increases size to 1.3 million sq.ft., Debenhams fitting out

Investment activities

Eldon Square – St Andrews Way Mall – opening February 2010

85% committed by floor area, 83% by income with a further 9% in active negotiation

Page 26 Liberty International 2009 Interim Results

Phase 1 Restaurants complete Phase 2 Due to open Autumn 2009 – Cinema and Namco fitting out Phase 3 Additional retail in Blue Quadrant due to open Autumn 2010

Investment activities

MetroCentre – Remodelling of Yellow and Blue Quadrants

81% committed by floor area, 70% by income with a further 11% in active negotiation

Page 27 Liberty International 2009 Interim Results

Asset Management Projects Completion 2009

MetroCentre

• Next expansion into redundant fire escape to provide 40,000

sq.ft. store - currently fitting out. Cribbs Causeway, Bristol

• Remodelling of food court to provide 8 casual dining

restaurants. Braehead, Renfrew, Glasgow

• Sainsbury have taken possession of ex B&Q unit on adjacent

retail park for 120,000 sq.ft. store. Advanced negotiations for replacing Sainsbury in the main scheme. Lakeside

• Marks and Spencer 2 phase expansion - Phase 1 complete.

Cribbs Causeway, food area M&S Kitchen, Brompton Walk - Lakeside

Page 28 Liberty International 2009 Interim Results

Marketing Activity Creating compelling, attractive destinations

National Story Telling Day (Lakeside) National Men’s Health Week (MetroCentre) National Family Week – Family Sports Day (Chapelfield) World Record Attempt for Largest Family Picnic (Victoria Centre)

Page 29 Liberty International 2009 Interim Results

Capital & Counties First half 2009 highlights

Focus on Central London:

– £162m non core property disposals to date 2009, total £437m since 2006 – Now 77% Central London, 57% retail

Significant outperformance of IPD benchmark:

– UK assets valuation deficit 10% first half 2009 (IPD 13%), 27% since June 2007, (IPD

44%)

Capco London positioned for recovery:

– Covent Garden like-for-like income up 3%, 99% let or under offer. Bedford Chambers

fitting out for major new flagship store

– Earls Court & Olympia continuing to trade satisfactorily – EBITDA £15m, slightly above

2008

– Good progress made on future options for Earls Court – GCP like-for-like income up 6%, occupancy 97%

Overseas investment:

– US valuation declines 15%, like-for-like US$ rental income down 3% – China and India limited to existing commitments

Page 30 Liberty International 2009 Interim Results

King Street – Public realm and tenant re-engineering Bedford Chambers (artist’s impression)

Covent Garden

99% let or under offer Retail ERV maintained Valuation decline of 8.8% Like-for-like income increase of 3% Q2 footfall estimated up 7% on Q2 2008

Page 31 Liberty International 2009 Interim Results

Earls Court & OIympia Negotiations with TfL and LBH&F

Negotiations with adjacent land owners proceeding well Local planning authorities have published core strategy drafts Earls Court and adjacent areas now identified for comprehensive redevelopment

Page 32 Liberty International 2009 Interim Results

Group prospects

Page 33 Liberty International 2009 Interim Results

Group prospects

Public sector finances to constrain UK economic growth prospects Strong relative performance of group’s assets over 2 year downturn Disposals over £1 billion since becoming a REIT. Non-core asset disposal

programme now largely complete

Flexibility of non-recourse asset-specific debt structure Short term pressure on earnings per share post capital raising

– tenant failures – cash balances – temporary over-hedging

Internal growth opportunities Positioned for market recovery

– retail supply pipeline sharply diminished – continued outperformance of large scale quality retail over inferior locations

Page 34 Liberty International 2009 Interim Results

Questions and answers

Eldon Square, Newcastle, southern extension opening February 2010

Page 35 Liberty International 2009 Interim Results

Appendices

Liberty International 2009 Interim Results Page 36

The market and CSC’s position Leading market position

CSC has more large shopping centres in the 50 highest quality locations than any other owner

2 4 6 8 10 12 14

CSC Hammerson PruPIM Morley Land Sec Westfield Hermes Henderson Standard Life Grosvenor GIC Lend Lease Legal & General British Land USS

Number of shopping centres (open at end 2008) >400k sq ft in 50 highest rented locations where owner has more than 40% share

Source: PMA 2009

Liberty International 2009 Interim Results Page 37

1 2 3 4 5 6 7 8 9 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Town centre completions (GB), mil sq ft Complete Under Con Planned / proposed

Shopping centre supply pipeline – halved since March 2007 Several years of low town centre completions 2007/8/9 almost 20% lower than 1989/90/91

Source: PMA (forecasts, Summer 2009 – Main Scenario)

Liberty International 2009 Interim Results Page 38

CSC ERV £352m passing rent £264m Passing rent reduced by 5% due to tenant failures, largely Q1, ERV reduced by 3.5%

(6) (20) 49 20 352 264 9 1 35

200 210 220 230 240 250 260 270 280 290 300 310 320 330 340 350 360 370 380 390 400

Passing Rent Other Income Historic reviews Redevelopments Contracted uplifts, future rent reviews & expiries Vacancies Non recoverable costs Over-rented ERV

£m

Excludes all leases with tenants in administration Eldon Square and MetroCentre Includes £6m contracted on expiry of rent free periods includes 104 units under offer

Liberty International 2009 Interim Results Page 39

St David’s 2 valuation assumptions

Opening October 2009 (John Lewis September 2009) £47m deficit: yield + 65bp, expected rental income down 11% and increase in tenant incentives

30 June 2009 31 December 2008 31 December 2007 Yield 7.15% 6.50% 5.00% Rental income £15.4m £17.3m £19.5m Anticipated market value on completion £223m £273m £394m Committed costs to complete £104m £134m £186m Valuation of development £93m £90m £139m Valuation deficit period ended: £47m £125m £14m

Liberty International 2009 Interim Results Page 40

Tenant diversity

CSC’S top 20 tenants account for 40% of CSC’s rent

Rank Tenant group % of rent 1. Arcadia 5% 2. Metropolitan Police 4% 3. Boots 3% 4. Next 3% 5. Monsoon Accessorize 2% Top 5 Tenants Total 16%

Group top 5 tenants account for 16% of group’s rent:

Rank Tenant group No of % of units rent 1. Arcadia 45 5% 2. Boots 17 3% 3. Next 19 3% 4. HMV 20 2% 5. Primark 8 2% 6. Monsoon Accessorize 25 2% 7. H&M 11 2% 8. DSG 12 2% 9. New Look 12 2% 10. Sports World 13 2% 11. Clinton Cards 21 2% 12. River Island 12 2% 13. W H Smith 11 2% 14. House of Fraser 4 2% 15. Bhs 9 2% 16. Signet 25 1% 17. Debenhams 5 1% 18. JD Sports 12 1% 19. Superdrug 10 1% 20. Clarks 13 1% Top 20 Tenants Total 304 40%

Liberty International 2009 Interim Results Page 41

Internet Sales – growing but still relatively small

£0 £50,000 £100,000 £150,000 £200,000 £250,000 £300,000 £350,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% Value Of Online E-Retail Spend (£Mn) % Online E-Retail Spend Of All Retail Spend

Source: Verdict

Liberty International 2009 Interim Results Page 42

Overview Divergence between property yields and interest rates

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jun-09

YIELD

Dividend yield All Share Weighted average nominal equivalent yield CSC Gilts 15 years IPD Monthly Index Retail

Page 43 Liberty International 2009 Interim Results

Debt maturity profile No major secured debt refinancing before 2011

100 200 300 400 500 600 700 800 900 1000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 £m

Lakeside CMBS July 2011 Convertible Bond Sept 2010 Earls Court Covent Garden, GCP, Empress State MetroCentre, Braehead, Watford CMBS Bromley, Uxbridge, Nottingham, Chapelfield Covent Garden C&C Debenture

Weighted average maturity 5.5 years

Page 44 Liberty International 2009 Interim Results

EPRA non-GAAP measures Adjusted earnings

Profit effect before tax £m Taxation effect £m Profit effect after tax £m Earnings per share (pence) Reported loss, basic earnings per share (427) (43) (470) (117.0) Adjustments Property-related valuation adjustments* 891 (26) 865 215.3 Financial instrument-related valuation adjustments* (417) 69 (348) (86.6) Exceptional finance costs 20

• 20

3.5 Other non-operating items 4 1 5 0.7 Minority interests in respect of the above (25)

• (25)

(4.3) Adjusted net profit 46 1 47 11.6 *A detailed breakdown of all adjustments is given in note 15 to the interim report

Page 45 Liberty International 2009 Interim Results

EPRA non-GAAP measures “Triple net” asset value

As at 30 June 2009 £m p per share Diluted net asset value (EPRA) 2,585 448 Fair value of derivatives financial instruments (net of tax) (323) (56) Excess of book value of debt over fair value 637 110 “Triple net” asset value (EPRA) 2,899 502

Page 46 Liberty International 2009 Interim Results

Proportionally consolidated income statement & balance sheet

Summarised income statement

Group as MetroCentre Earls Court Empress Proportional Reported Partnership & Olympia State consolidation 100% 40% 50% 50% £m £m £m £m £m Investment property 6,062 293 168 94 5,507 Cash 568 1 4 3 560 Other net current liabilities (537) (27) (56) (10) (444) Gross debt (4,083) (267) (113) (79) (3,624) Other non-current net assets 91

• (1)
• 92

Net assets 2,101

• 2

8 2,091

Summarised balance sheet

Group as MetroCentre Earls Court Empress Proportional Reported Partnership & Olympia State consolidation 100% 40% 50% 50% £m £m £m £m £m Net rental income 190 10 8 3 169 Other income 1

• 1

Administration expenses (22)

• (1)
• (21)

Net finance costs (120) (12) (5) (3) (100) Underlying profit before tax 49 (2) 2

• 49

Valuation and exceptional items (501) (5) (16) (4) (476) Taxation (43)

• (43)

Net loss for the period (495) (7) (14) (4) (470)

Page 47 Liberty International 2009 Interim Results

Corporate responsibility Reducing our environmental impact

Leading – multiple accreditations:

– Aim to reduce CO2 emissions by 5% pa, achieved 7% in 2008 – 95% of energy comes from renewable sources – 42% of centres’ waste recycled 2008, only 37% going to land

fill, total waste reduced by 15%

– 100% of development programme is on brownfield sites, with

sustainability built into design

Carbon Reduction Commitment (CRC):

– Well prepared - finalising energy management processes for the

Carbon Standard

– CRC scheme mandates up front purchase of allowances,

repayment depends on emissions reduction performance

– Tenants are responsible for their own meters, landlord for common

areas of shopping centres and, eg, Earls Court.

Page 48 Liberty International 2009 Interim Results

Shareholder geography Before and after capital raise

Gordon Family South Africa Institutions UK Institutions USA Continental Europe Singapore Australia Crest (Market making/Stock lending) Individuals etc.

Shareholder Base - 10 July 2009

16.3% 20.6% 23.2% 12.9% 7.7% 3.6% 2.0% 3.4% 10.3%

Shareholder Base - 15 May 2009

21.7% 16.9% 18.6% 7.8% 8.2% 5.2% 2.9% 4.2% 14.6%