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Article Excerpt
PATRICK BURGESS, CHAIRMAN, LIBERTY INTERNATIONAL PLC: Good morning everybody. I am Patrick Burgess, the Chairman of the Company. I'm simply welcoming you. I hope you'll find that we've got a very full presentation, better than -- fuller than ever I think this morning. So I hope you find it interesting. Please don't hesitate to ask if there's anything you think we haven't told you by the end of the meeting. And I'm going to hand over to David Fischel who's going to introduce the [exercise].
DAVID FISCHEL, CEO, LIBERTY INTERNATIONAL PLC: Yes thanks Patrick. Good morning everyone. Welcome. Thanks for attending our annual results presentation. Just starting with the front cover, that's a picture of MetroCentre, Europe's largest covered shopping center. And just as a reminder, we sold a 40% interest in this center in the early months of 2007, that's two years ago, just after we became a REIT, off an initial yield in the very low 4s for a gross consideration of GBP426 million.
You should have with you a copy of the presentation and hopefully also a copy of the results announcement which I will refer to.
So what do you get with Liberty International? You get a high quality and defensive UK regional shopping center and retail property business. Of all the major property companies, we are the most focused player with retail 85% of our business.
Since the downswing started at June 2007, we have consistently outperformed IPD and again in 2008. We've taken a number of important steps during the year to improve our liquidity and financial strength which I will come onto later.
Additional requirements to be addressed through further potential asset sales and new capital raising. I'd like to just add a couple of comments to this. Today is our 2008 year-end results announcement. Other than to the extent of comments in today's announcement, we do not intend to give details of timing, sizing, pricing or structure of any potential equity capital raising. As we said in the statement released last week on February 19, any firm proposals will be communicated directly to shareholders at the appropriate time.
There are some comments on the issue in today's statement. I particularly refer you to the Chairman's statement on page eight of the preliminary announcement. The primary focus of the Board has of course shifted from growth to reinforcing the financial strength of the Company. In the light of falling values and dislocation in the financing markets, we have concluded that additional measures are necessary including potential further asset sales and new capital raising.
Our predominantly non-recourse debt structure, with over 90% of our debt asset-specific and non-recourse, provides a great deal of financial flexibility, enabling the Group to address issues on an asset-by-asset basis with very limited cost default exposure.
In terms of the residual corporate debt, we appreciate the support shown by our lending bankers who have, since the year-end, agreed important changes to the terms of our GBP360 million corporate bank facilities including extending overall maturity into 2011. These changes are contingent on the Group raising not less than GBP350 million of additional equity. Given current market conditions, the Board's intention would be to raise a greater sum through a combination of asset disposals and new capital.
There is extensive relevant disclosure on this subject in the financial review which Ian Durant will give you later on.
So just going back to the overview here. We say Liberty International's predominantly non-recourse debt structure provides financial and timing flexibility; a big differentiating factor between us and the other major property companies. And we believe prime retail property has earlier recovery potential compared with other property types.
Just going onto the results themselves, NAV reduced from GBP12.64 to GBP7.45; a very sharp drop obviously in the last quarter for reasons we all know, from 975p at the end of September.
The overall property revaluation deficit just over GBP2 billion, 22.5%. And of that, 11.8% came in the last quarter. And nearly all of that was driven by rising yields.
Underlying profit before tax reduced from GBP128 million to GBP103 million. I won't dwell on this because Ian Durant will go through that in some detail later.
Adjusted earnings per share reduced from 36p to 29p. And our debt to assets ratio has been around the 40% level now for nearly a decade until 2008, has climbed to 58% in 2008.
Just on the dividend. Our 2008 interim dividend was 16.5p at a cost of approximately GBP60 million. That exceeds our minimum PID requirement for the year, property income distribution for a REIT, of 12.8p. That itself is substantially less than the EPS for the year of 29p reflecting capital allowances and capitalized interest as we have been an active developer, we've got a big brought forward pool of capital allowances.
The Board is recommending no final dividend for 2008 and again I'd just refer you to the Chairman's statement. Given financial market conditions and the debt contractionary environment, we believe it to be in shareholders' best interests to restrict the dividend for 2008 to the 16.5p interim dividend already paid which exceeds the minimum required under UK REIT legislation. This decision has been a particularly difficult one as we've had a long track record of steady dividend growth from 4.5p per share in 1985 to 34.1p in 2007.
And we anticipate a 2009 dividend of 16.5p per share or, if higher, the minimum PID requirement.
Just moving onto the Shopping Center business which is 70% of the business, and some performance indicators for last year. Just starting with footfall where we have some pretty encouraging figures actually. Last year's footfall taking the 12 completed centers was up from GBP225 million visitors to GBP229 million visitors. And encouragingly, we have actually seen positive year-on-year growth in the year-to-date in 2009. So there are no issues on footfall.
Estimated retailer sales. We get some turnover information, we don't get complete turnover information and we have to do some estimations. But we believe those retailer sales in our centers generally reflected national trends.
Headline occupancy was unchanged at 98.7% but if you take tenants in administration out of that, it drops to 93.6%. That compares with a number at the end of September of 97.9%, so a big drop in the last quarter. A lot of high profile failures as in Woolworth's, Zavvi, etc. If you take account of space in advanced re-letting negotiations, that percentage would have been 95.4% at the end of 2008. And I think what is encouraging is that although we have seen a further 1.3% by rent of tenant failures in 2009 to date, those figures have not changed materially. In other words, we've been re-letting during 2009 as fast as we have had tenants failing. So the position has not deteriorated since the year-end.
In terms of -- and Kay can give you lots of details on that later if you want to ask questions. There's also a detailed slide on page 51 of this presentation.
December quarter collections, 97%. The balance is mostly tenants on payment plans which Kay can talk about. Kay and her team, a very, very busy year for them and 2009 has been even busier; 244 tenancy changes. And she and her team, as I say, working flat out and doing a great job.
Rent review settlements in line with expectations. The large one in 2008 was Cribbs Causeway, Bristol. Very strong lease expiry profile, only 2% coming up for expiry in 2009, and 3% in 2010. And I will run through later some of the active management initiatives and developments of the Shopping Center business.
I just want to spend a moment talking about some of the actions we've taken in response to the changing environment really over the last couple of years; the self-help measures we've been engaged upon. Firstly, we have reduced capital expenditure and deferred projects other than where already committed. The obvious example of that was Westgate, Oxford.
We have taken some steps to reduce administrative expenses. Obviously the first thing you see actually is an increase in expenses, but we do have a target of significant reduction. There's a one-off cost this year for future benefit in 2009 and beyond. And...
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