Directors’ report
The Directors have pleasure in presenting their Annual report and the audited financial statements for the year ended 31 December 2007.
Principal activities
During the period the principal activity of Liberty International PLC (“Liberty International”) was that of an investment holding company incorporated in the United Kingdom whose business is the making of selected investments with long-term potential in the property sector predominantly, but not exclusively, in the United Kingdom. On 1 January 2007, Liberty International converted into a Real Estate Investment Trust (“REIT”).
Liberty International’s activities are focused on its two major operating businesses: Capital Shopping Centres (“CSC”), which specialises in the ownership, management and development of regional shopping centres and Capital & Counties, which engages in commercial and retail property investment, management and development primarily in the United Kingdom but also in the USA and other parts of the world.
Business review
The Chairman’s statement, and the Financial review provide detailed information relating to the group, the operation and development of the business and the results and financial position for the year ended 31 December 2007. The Financial review, accounting policies and note 21, contain information on the use of financial instruments.
Future prospects
Future prospects are dealt with in the Chairman’s statement and Financial review.
Dividends
The Directors declared an interim ordinary dividend of 16.5p (2006 – 13.75p) per share on 26 July 2007, which was paid on 4 September 2007, and have recommended a final ordinary dividend of 17.6p per share (2006 – 17.25p) which will be paid on 28 May 2008 to shareholders on the register on the Record Date, 9 May 2008. The sterling/rand conversion rate on which payment of the dividend in South Africa will be calculated will be fixed on 22 April 2008. The payment will not be paid as a Property Income Distribution, or "PID" and no withholding tax will be deducted. Further information is given here. The Directors will not be offering a share dividend alternative to the 2007 final cash dividend.
Share capital and control of the company
Details of the company’s share capital including changes during the year in the issued share capital and details of the rights attaching to the company’s ordinary shares are set out in note 24. Details of shares repurchased by the company during the year are set out in note 24.
No shareholder holds securities carrying special rights with regards to control of the company. Shares held by the company’s Employee Share Ownership Plan rank pari passu with the shares in issue and have no special rights, but voting rights and rights of acceptance of any offer relating to the shares rests with the Plan’s Trustee and are not exercisable by the employees.
There are no restrictions on voting rights or any arrangements by which, with the company’s co-operation, financial rights are held by a person other than the shareholder, or any agreements between shareholders known to the company which may result in restrictions on the transfer of shares or on voting rights.
The company is not party to any significant agreements that would take effect, alter or terminate following a change of control of the company.
The company does not have any agreements with any Executive Director or employee that would provide compensation for loss of office or employment resulting from a takeover except that provisions of the company share schemes may cause options and awards outstanding under such schemes to vest on a takeover. The terms of appointment of the non-executive Directors provide for a payment equal to their basic annual fee in the event of change of control in recognition of the additional work involved in such an event.
Going concern
After making enquiries, the Directors have reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.
Internal control
The statement on Corporate Governance includes the Board’s assessment following a review of internal controls and consideration of the guidance issued by the Turnbull Committee of the Institute of Chartered Accountants of England and Wales.
Key risks
The key risks of the group are as set out in the table below:
| Risk | Description | Mitigation |
|---|---|---|
|
– Interest rate risk | Group policy to eliminate substantially all exposure to establish certainty over long-term cash flows. Hedging. |
| – Liquidity risk | Efficient treasury management and strict credit control. | |
| – Market price risk | Regular monitoring of fair value of debt and financial instruments. | |
| – Change in value of property portfolio | Regular market valuations; focus on quality assets; regular portfolio reviews including identifying properties for disposal. | |
| – General economic downturn | Internal group limits on debt to assets and interest cover ratios. | |
|
– Increased voids | Policy of active tenant mix management. Development and remodelling projects to respond to changing requirements of retailer and shopper. |
| – Failure to meet rental targets | Regular reporting of performance against targets | |
|
– Diversification into new areas of property use and geographical location | Retaining and appointing experienced management teams/overseas representatives. Securing local partners for overseas investment but retaining a measure of influence. |
|
– Acquisition of sites for development | Internal authority limits for capital expenditure. |
| – Securing planning consent for developments | Policy of sustainable development and regeneration of brownfield sites. Constructive dialogue with planning authorities. | |
| – Commitment to proceed | Approval process based on detailed project appraisals. | |
| – Construsction and letting risk | Regular monitoring and forecasting of project costs and rental income. | |
|
– Appointment and retention of key staff | Annual performance and remuneration reviews. Career development and succession planning. |
|
– Effect of natural disaster/terrorist strike on business continuity | Disaster recovery plan in place. Security and Health & Safety policies and procedures in shopping centres/offices. Terrorist insurance is in place. |
|
– Responsibility for the safety of visitors to shopping centres | Comprehensive Health & Safety policies and security systems installed at shopping centres. |
| – Impact on reputation of potential criminal/civil proceedings | Monitoring by Board of all litigation and legal risks. | |
Directors
The Directors of Liberty International, all of whom held office throughout the year, are as follows:
Chairman:
Sir Robert Finch
Executive Directors:
D.A. Fischel, Chief Executive
A.C. Smith, Finance Director
K.E. Chaldecott, Managing Director of Capital Shopping Centres
I.D. Hawksworth, Managing Director of Capital & Counties
R.M. Cable, Group Development Director
Non-Executive Directors:
J.G. Abel
R.W.T. Buchanan
D.P.H. Burgess MBE
G.J. Gordon (alternate: R.M. Gordon)
I.J. Henderson CBE
L. James CBE
M. Rapp
R. Rowley
N. Sachdev
Since the year end, Mr A.C. Smith has stepped down as Finance Director of Liberty International PLC with effect from the end of March 2008. In his place Liberty International has appointed Mr I.C. Durant who will join the group on 17 March 2008.
Additional information relating to the Directors can be found in note 36 on Directors’ interests, in the report on Corporate Governance, and in the Directors’ remuneration report.
The powers of the Directors are determined by UK legislation and the Memorandum and Articles of Association of the Company, together with any specific authorities that may be given to the Directors by shareholders from time to time, such as the power to allot shares and the power to make market purchases of the company’s shares which are described in note 24.
Articles of Association
The rules governing the appointment and replacement of Directors are contained in the Company’s Articles of Association.
Changes to the Articles of Association must be approved by shareholders in accordance with the legislation in force from time to time.
Substantial shareholdings
As at 10 February 2008 Liberty International had been notified of the following substantial holdings of voting rights over ordinary shares of Liberty International:
The family interests of Sir Donald Gordon 77‚310‚445 shares‚ (21.35 per cent)‚ Old Mutual plc 18,473,080 shares‚ (5.10 per cent)‚ Government of Singapore Investment Corporation Pvt Ltd 18,187,506 shares‚ (5.02 per cent)‚ Legal & General Investment Management Limited 15,812,694 shares‚ (4.37 per cent)‚ Liberty Group Limited 13,021,887 shares‚ (3.60 per cent) and Stichting Pensioenfonds ABP 11,622,271 shares‚ (3.21 per cent).
Employees
Employees are employed by Liberty International directly or by its subsidiaries, CSC and Capital & Counties. Liberty International actively encourages employee involvement and consultation and places emphasis on keeping its employees informed of the company’s activities and financial performance by such means as employee briefings and publication to all staff of relevant information and corporate announcements.
The annual bonus arrangements help develop employees’ interest in the company’s performance; full details of these arrangements are given in the Directors’ remuneration report. note 37 contains details of conditional awards of shares under the annual bonus scheme and bonus shares currently outstanding, as well as outstanding options.
Liberty International operates a non-discriminatory employment policy and full and fair consideration is given to applications for employment from the disabled where they have the appropriate skills and abilities and to the continued employment of staff who become disabled.
Liberty International encourages the continuous development and training of its employees and the provision of equal opportunities for the training and career development of disabled employees.
Information relating to employees is given in note 37.
The Liberty International group provides retirement benefits for the majority of its employees. Details of the group pension arrangements are set out in note 38.
The environment
The group has adopted a Corporate Responsibility (“CR”) strategy and details of the policy and the group’s aims and activities are given in the Corporate responsibility report. A summary booklet is also available for download or in hard copy on request.
The company recognises the importance of minimising the adverse impact on the environment of its operations – particularly through its two operating businesses, CSC and Capital & Counties – and the management of energy consumption and waste recycling.
The company strives continuously to improve its environmental performance. The environmental management system is regularly reviewed to ensure that the company maintains its commitment to environmental matters.
During the year, the group made charitable donations amounting to £270,749 (2006 – £175,750). No political donations were made in the year.
In addition, the UK shopping centres provided the equivalent of £972,000 (2006 – £755,000) in community support, including sponsorship of local causes, support for Town Centre management and provision of free mall space and services.
Creditor payment policy
The group’s policy and practice is to pay creditors promptly in accordance with agreed terms of business.
The ratio, expressed in days, between the amounts invoiced to the company by its suppliers in the year ended 31 December 2007 and the amounts owed to its creditors as at 31 December 2007 was nil days (2006 – nil days), as calculated in accordance with the requirements of the Companies Act.
Directors’ disclosure of information to the auditors
So far as the Directors are aware, there is no relevant audit information of which the auditors are unaware and each Director has taken all reasonable steps to make himself or herself aware of any relevant audit information and to establish that the auditors are aware of that information.
Auditors
The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution seeking to reappoint them will be proposed at the forthcoming Annual General Meeting.
Annual General Meeting
The notice convening the 2008 Annual General Meeting of the company is available here and is distributed separately to those shareholders who have elected to receive hard copies of the Annual report.
By order of the Board
S. Folger
Secretary
7 March 2008