Temp Cover 4/10/00 3:19 pm Page 1
Capital and Regional Properties plc
22 Grosvenor Gardens London SW1W ODH
Telephone 0171-730 5565 Facsimile 0171-730 0151
Capital and Regional Properties plc
Annual Report 1998
C&R Front 1998 4/10/00 2:44 pm Page ii
Capital and Regional Properties is a specialist property investment
company, owning some of the most exciting and distinctive retail
and leisure properties throughout the UK. The current portfolio
value is almost £750m of which around 90% is retail and leisure,
totalling over four million sq ft.
Capital and Regional’s objective is to use its in-house expertise to
create value for tenants and shareholders through the innovative
and dynamic management of property assets.
Contents
1 Highlights 2 Chairman’s Statement 4 Property Overview 6 Shopping Centres 10 Retail and Leisure Parks 14 Easter Group 16 Principal
Properties 18 Finance Review 20 Financial Statements Review 22 Directors 24 Ten Year Record 25 Report on Directors’ Remuneration
and Interests 29 Corporate Governance Statement 32 Auditors’ Report 33 Consolidated Profit and Loss Account
34 Notes of Historical Cost Profits and Losses 34 Statement of Total Recognised Gains and Losses 34 Reconciliation of Movements in
Shareholders’ Funds 35 Consolidated Balance Sheet 36 Consolidated Cash Flow Statement 37 Company Balance Sheet 38 Notes to
the Financial Statements 56 Directors’ Report 59 Notice of the Annual General Meeting 60 Advisers and Corporate Information
1999 Financial Calendar
C&R Front 1998 4/10/00 2:44 pm Page 1
Capital and Regional Properties plc 1
Highlights
• Net assets per share fully diluted of 321p increased 18% (1997: 272p)
• Profit on revenue activities up 89% to £11.5m (1997: £6.1m)
• Total shareholder return of £58.6m
• Earnings per ordinary share on revenue activities up 45% to 12.2p (1997: 8.4p)
• Dividends per share up 21% to 4.25p (1997: 3.5p)
• On a same store basis, that is property owned at the end of 1997 and
retained during the whole of 1998, achieved capital growth of 9% overall
compared to 4.2% for IPD
• Acquisitions of £198m during year, including The Pallasades Shopping
Centre, Birmingham for £93.8m, with rights issue raising £59m
• Disposals of £56m during 1998
• Announced in September a partnership with two funds managed by
PRICOA to develop the £57m ‘Sports Village’ in Milton Keynes City Centre
Since the year end:
• Acquisition of Westway Cross Shopping Park, Greenford for £33m
• Easter Capital acquired industrial portfolio owned by Phillips & Drew
Fund Management and Capital and Regional partnership for £28.2m
Earnings per share on
revenue activities pence
Dividend per share pence
Net assets per share (Diluted) pence
Figures after 1996 assume conversion of the loan stock
14
12
10
8
6
4
2
0
94 95 96 97 98
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
94 95 96 97 98
350
300
250
200
150
100
50
0
94 95 96 97 98
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2 Capital and Regional Properties plc
Chairman’s Statement
Capital and Regional has had an
excellent year. We believe our approach
and capability is unique in the UK quoted
property sector. The Company has the
property portfolio, the management
team and strategy in place to be confident
of continuing to achieve well above
average growth over the next several years.
Martin Barber Chairman
26th February 1999
1998 was an excellent year for Capital
and Regional. During the first half
of
the
the year we completed
rationalisation of our portfolio, which
commenced
this
realisations were
exercise,
approximately £120m,
comprising
£71m in 1997 and £49m during 1998. In
addition, during the year some £7m
was realised from trading properties.
in 1997. From
total
In April, we acquired The Pallasades
Shopping Centre in central Birmingham
for £93.8m, financed partly by an equity
issue, which raised £59.1m. We are
already making good progress with this
Centre and believe the opportunities
exist for superb future returns. Further
information is included later in Kenneth
Ford’s report.
In September, we announced one of
our most exciting developments to
date, Sports Village in Milton Keynes.
This is a new concept, providing over
400,000 sq ft of leisure and retail space,
including a ‘real snow’ indoor ski slope.
Approximately 83% of the development
was pre-let before we entered into our
commitments.
This project is a co-venture on a 50:50
basis with funds managed by PRICOA
Property Investment Management Ltd,
a wholly owned subsidiary of the
Prudential
Insurance Company of
America.
Results
Our net assets per share fully diluted of
321p have increased 18% from 272p.
revenue activities has
Profit on
increased 89% to £11.5m (1997: £6.1m).
Earnings per share on revenue activities
are up 45% to 12.2p (1997: 8.4p). A final
dividend of 2.75p per share is proposed,
making a total for the year of 4.25p per
share (1997: 3.5p), an increase of 21%.
We are arranging with our advisers, a
facility for dividend reinvestment by
shareholders and further details will be
provided later this year.
When one adds the increase in the
balance sheet reserves to the dividend,
the Company has delivered a total
return to shareholders of £58.6m during
this year.
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Customer care
Security
Marketing and promotion
Strategy
Capital and Regional recognised in
early 1997 that the rate of growth in
average rents in UK property was likely
to slow. We are now entering a low
inflation environment and over the long
term rents can only grow in line with
the economy as a whole. Our strategy
to enable our properties to grow at a
faster pace than the overall economy
has been
to add an additional
dimension to normal activities.
Over the past few years, Capital and
Regional has sought to differentiate
itself from other property companies,
by developing additional skills at
properties such as larger shopping
centres and retail and leisure parks. We
have developed the in-house expertise
to assist the tenants by encouraging
more consumers to visit the property,
through an ongoing programme of
events and excellent marketing and
promotion.
If footfall increases, our tenants are
more profitable and the rental income
potential of our properties increase.
Our tenants have seen their sales in our
Centres improve and welcome this style
of management. We are also working
closely with local authorities and the
police to ensure that the shopper has
a safe, secure and clean environment
to visit.
The success of the Capital and Regional
approach is addressed in greater
detail in Kenneth Ford’s and Andrew
Lewis-Pratt’s reports.
Easter Group
Our exposure to the industrial property
sector is through joint ventures with
Peter Taylor and associates. This is
implemented through two distinct and
separate companies, Easter Capital
Investment Holdings (75% Capital and
Regional owned), an
investment
property company and Easter Holdings
(50% Capital and Regional owned), a
merchant developing and management
company.
This industrial investment portfolio is
now approaching £100m and most of
the returns are contributed through
cash flow. This is extremely useful to
counter balance the initially lower
yielding retail investments that Capital
and Regional makes. Since this is now
Capital and Regional Properties plc 3
Capital and Regional NAV performance
Compared Warburg Dillon Read NAV Index
500
400
300
200
100
0
90 91 92 93 94 95 96 97 98
year ended December
Capital and Regional Warburg Dillon Read
NAV Index
Benchmark against IPD Monthly Index
Same Store
Growth
%
Annual
IPD Capital
Growth
%
Portfolio
Growth
%
Weighted
Average
IPD Growth
%
Shopping
Centres
4.7
0.6
5.4
0.4
Retail Parks
19.1
5.4
15.8
4.0
Industrials
14.4
4.1
7.1
2.0
Total
Investment
Portfolio
9.0
4.2
7.9
3.2
a significant part of our overall
portfolio, I have asked Peter Taylor to
include his report on activities within
this statement.
Employees
These results reflect the strength of our
professional team at all levels of the
business. On behalf of the Board and
all our shareholders, I would like to
express my sincere thanks to all our
management and
their
contribution to the continued success
of Capital and Regional.
staff
for
Outlook
We see the economic environment as
relatively stable for the next several
years. Even though inflation may be
low, we expect our growth
to
outperform the sector.
Capital and Regional believes
its
approach and capability is unique in
the UK quoted property sector.
the property
The Company has
portfolio, the management team and
strategy in place to be confident of
continuing to achieve well above
the next
average growth over
several years.
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4 Capital and Regional Properties plc
Property Overview
1998 was again a very active year in terms
of our property portfolio with acquisitions
totalling almost £198m and sales of £56m.
Our portfolio has performed extremely well.
We enter 1999 with a very optimistic view
of the prospects in our markets. We will
take advantage of any weaknesses in
the market which provide us with
opportunities to add value.
Xavier Pullen Joint Managing Director
26th February 1999
During 1998 tenant demand for our
properties has been strong resulting in
substantial rental and capital growth.
This proves that management counts.
We have
carried out physical
regeneration programmes comple-
mented by excellent marketing and
promotion initiatives within our retail
properties. The tenant response has
been good, as they know that they
will be able to trade more profitably
in a Capital and Regional managed
property. The tone of negotiations and
enquiries for 1999 is positive.
investment markets remained
The
strong during 1998, aside from a
slowdown during the third quarter
when buyers were unsure of the
economic outlook. We enter 1999 with
a highly competitive market and see no
reason
to diminish,
particularly with the trend towards
significantly lower medium to long
the
interest rates. Although
term
economy has slowed slightly, we
for demand
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Capital and Regional Properties plc 5
Analysis of investment property rental income
by lease expiry as at 25th December 1998*
Portfolio value by sector
As at 25th December 1998 – £655m
Current and estimated rental value £m
19% More than 20 years
31% 15-20 years
22% 10-15 years
12% 5-10 years
63% Shopping Centres
23% Retail and
Leisure Parks
60
50
40
30
20
10
0
16% Less than 5 years
*Assumes all tenant breaks clauses
are exercised, no leases are renewed
at expiry and no rental growth.
12% Industrial
2% Other
Current Rent
Passing
Vacant Space
at ERV
Rent Uplift on
Review to ERV
would certainly not describe our
market conditions as being recessionary
and are highly confident of our ability
to continue our growth record.
Property portfolio
1998 was again a very active year
in terms of our property portfolio
with acquisitions
totalling almost
£198m and sales of £56m. Our portfolio
has performed extremely well. On a
same store basis, that is property that
we owned at the end of 1997 and
retained during the whole of 1998, we
achieved capital growth of 9% overall
compared to 4.2% for IPD. This is
broken down as follows; shopping
centres 4.7% (IPD 0.6%); retail and
leisure parks 19.1% (IPD 5.4%) and
industrials 14.4% (IPD 4.1%). Our
portfolio now comprises 86% retail and
leisure, 12% industrial and 2% other.
It is worth noting that our portfolio
is highly reversionary. The estimated
rental value being about £12.4m higher
than the £45.4m rents passing at the
end of the year. This does not take
into account the significant expansion
and development opportunities within
the portfolio which my co-directors
describe in further detail on the
following pages.
The income from the investment
portfolio is high quality, with 72% of
leases
passing rent derived
expiring after more than ten years and
over 80% of retail income receivable
from recognised national or regional
multiple traders.
from
Capital and Regional is bringing together
the management, marketing and leasing
activities of our retail and leisure teams
both ‘in-town’ and ‘out-of-town’, as there
is increasing crossover between tenants
in either location.
Trading portfolio
We have acquired a number of
opportunities for our trading portfolio
to add short
where we are using our management
skills
term value.
The Company has purchased small
shopping centres in Bicester and
Dorchester, a leisure development
opportunity in Grimsby and High Street
retail development opportunities in
Birmingham, Liverpool and Glasgow.
With
tenant
the strength of our
connections and the development
expertise that we have built over the
past few years, we are happy to use
these skills to regenerate smaller
properties which can provide good
profits in the future, but would not be
suitable as core long term holdings.
Outlook
We enter 1999 with a very optimistic
view of the prospects in our markets.
take advantage of any
We will
the market which
weaknesses
provide us with opportunities
to
add value.
in
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6 Capital and Regional Properties plc
Shopping Centres
The shopping centre portfolio has had
a very active year, with its value rising
by 5.4%. From the Centres’ owned
throughout the year, income increased
by 6.6% and estimated rental value by
9.6%. With the Company’s energetic
and committed management teams in
London, Glasgow and at the Centres,
we look forward to building on last
year’s successes.
Kenneth Ford Executive Director
26th February 1999
shopping centre
The Company’s
portfolio has had a very active year,
with its value rising by 5.4%. From the
Centres’ owned throughout the year,
income
increased by 6.6% and
estimated rental value by 9.6%.
Meaningful progress has been made in
the implementation of the individual
Centres’ business plans, the highlights
of which are reviewed below.
The acquisition of The Pallasades,
Birmingham in April for £93.8m, the
Company’s largest purchase to date,
the expansion of our
continued
portfolio of centres which provide
opportunities to add value through
the application of the Company’s
management philosophy. Effectively
being part of New Street’s railway
station and the main entry point to
Birmingham city centre, we are in
active dialogue with Railtrack, the
station’s owners, to both extend and
modernise the retail area as part of a
greater integration with the station
concourse. With footfalls in excess of
one million people per week and a
significant under supply of retail
space in Birmingham, The Pallasades
represents an outstanding opportunity.
We completed the transition from
outsourcing centre management to
100% in-house management with the
establishment of Capital and Regional
Facilities Management Limited (CRFM).
This Company, headed by group asset
manager, Mark Bourgeois,
and
technical director, Ronnie Maclean,
provides support
to our on-site
managers, ensuring the Capital and
Regional management brand
is
synonymous with the highest standards
of security and mall cleanliness. At the
same time, we deliver value for money
to our tenants through economies
derived from utility and supplier bulk
purchasing. Development of staff
loyalty and pride through employment
by and direct communication with, the
Company is already producing benefits
of continuity and stability of personnel
at the Centres.
The Group Marketing and Promotion
Unit, headed by Sarah-Jane Berry, has
had another very successful year,
devising and implementing imaginative
campaigns which have resulted in
our Centres welcoming approximately
120 million visitors during 1998. There
was an increase of almost 5% on
shopping centres owned throughout
the year. This effort was acknowledged
by the British Council of Shopping
Centres who awarded the Company
both a merit for Excellence in Marketing
and the Best Exhibition Stand at their
annual conference in Birmingham.
In the coming year, the Company will
embark on a Brand Partner Programme
to provide additional benefits to the
Company, tenants and shoppers. We
intend to extend both our CRFM
capabilities outlined earlier and these
marketing skills to the retail and leisure
park portfolio.
the
across
These footfall figures and tenancy
synergies
portfolio,
co-ordinated by
leasing manager,
John Wood, have contributed to a
reduction in the portfolio void units
of 10%.
The widely reported difficult trading
conditions
retailers were not
generally evident across our portfolio.
for
C&R Front 1998 4/10/00 2:44 pm Page 7
Capital and Regional Properties plc 7
Alhambra Centre
Trinity Centre
shoppers’
sophistication
in
The
appreciating value is mirrored in our
selection of centres – community value
focused malls, established within local
and loyal catchments. Our core tenancy
base has generally maintained their
sales levels, year on year against an
exceptional 1997.
The Company’s established tenancy
relationships are now being further
developed by the introduction of
traditional High Street retailers to retail
park
format. The close working
relationship in our management teams,
enables the Company to also benefit
from the leisure experiences of the
retail park division as we introduce
leisure components to our Centres,
further enhancing their attractiveness to
their communities.
1998 Highlights
The Pallasades, Birmingham
Since our acquisition in April, we
have pursued various tenancy initiatives
to satisfy tenant demand. This has
income, whilst
improved
retaining the flexibility required to take
rental
advantage of the opportunity presented
by the greater integration of the rail
passenger function with an expanded
retail offer. Agreement has been
reached in principle with Railtrack, the
owner of both New Street Station and
the freeholder of The Pallasades; and
concept schemes are in preparation.
These plans include; the expansion of
the retail area into the existing station
concourse; the diffusion of pedestrian
flows through the enlarged Centre; the
to
improvement
in mall access
Birmingham City Centre and
the
external
the
modernisation
appearance of the property.
of
It is hoped that an agreed scheme will
be launched towards the end of 1999.
Integral to this exercise is a negotiation
to
leasehold
re-gear our present
arrangements with Railtrack.
is now being
We have completed the construction of
the 27,500 sq ft unit pre-let to JJB Sports
which
fitted out.
Negotiations are in hand, for a number
of new lettings, which if successfully
concluded, will establish rental levels
substantially in excess of present
estimated rental values.
Creative marketing and promotion
Strategic campaigns are developed
for individual properties.
These are constantly evaluated and
repositioned to maximise success.
C&R Front 1998 4/10/00 2:44 pm Page 8
8 Capital and Regional Properties plc
Shopping Centres
Trinity Centre
The Trinity Centre, Aberdeen
The benefits of our direct management
programme over the five years of
ownership are increasingly evident.
Year on year footfall has increased by
13.3%, with a new benchmark Zone A
rent of £65 per sq ft established.
The Railtrack feuhold has also been
acquired for £4.45m. The anchor store
Debenhams completed their £5m refit
and the new 12,000 sq ft HMV store
has opened. The next phase of
improvements to the Centre will be
completed during 1999.
The Howgate Centre, Falkirk
The feuhold of the Centre has been
acquired for £5.6m. Planning consent
has been achieved for the new entrance
canopy, branding and signage, which
will be installed during Spring 1999.
Negotiations continue to reconfigure
the Marks & Spencer atrium to increase
the retail area;
improve shopper
circulation and introduce a revitalised
catering offer. Prime rental value
continues to improve and £90 per sq ft
Zone A is now being established.
The Alhambra Centre, Barnsley
The extension to the Wilkinson anchor
store is now completed and trading
successfully, together with the new
ft Peacocks unit. The
6,000 sq
is under
remaining vacant space
discussion with
to
Barnsley. Planning consent has also
been achieved to rebrand the Centre’s
identity and signage which will be
completed during Spring 1999.
retailers new
Shopping City, Wood Green
1998 saw the launch of Shopping City
2000; a regeneration programme for the
Centre, embracing the introduction of a
12 screen multiplex pre-let to Cine UK,
which with the new restaurant catering
uses complement the health club which
opened last year. The popular market
hall is being relocated to an extended
ground floor and 30,000 sq ft on the
first
to
Wilkinsons. The mall environment is
being modernised. External and
internal signage will be improved to
complete the rebranding exercise.
floor has been pre-let
These proposals together with other
initiatives will results in estimated
capital expenditure of £21m. We expect
this exercise to produce estimated
additional income of £3m per annum.
We are introducing new retailers to the
Centre and early interest from both
retailers and shoppers in the Shopping
City 2000 concept is very encouraging.
The ‘Zero Tolerance Crime Initiative’
which we have undertaken
in
association with the local authority, has
been acknowledged by the Metropolitan
Police with a Secure Car Park Award.
Our success has also been recognised
by
the Home Office and British
Retail Consortium who chose to launch
their ‘Community Crime Reduction
Partnership Guide’ at Shopping City.
Sauchiehall Centre, Glasgow
Negotiations continue on reconfigura-
tion
for
and design proposals
interest. A planning
pre-letting
application has been lodged for a
health club, and the letting is currently
the
solicitors hands. Whilst
in
C&R Front 1998 4/10/00 2:44 pm Page 9
The Pallasades
Selborne Walk
Capital and Regional Properties plc 9
Selborne Walk
Alhambra Centre
Trinity Centre
redevelopment initiatives are being
explored, short term lettings are being
introduced to reduce void costs whilst
maintaining flexibility.
Selborne Walk, Walthamstow
During 1998, Selborne Walk celebrated
its 10th Anniversary with the successful
launch of a new identity. During the
year, over 75% of the Centre was
subject to a rent review and we secured
new benchmark rents which are
substantially above budget. Given the
Centres dominant position in the
community, we have applied for
integrate a
planning consent
multiplex based leisure component as
well as providing additional retail space
to satisfy proven tenant demand.
to
Liberty 2, Romford
The Centre has achieved key lettings to
Allsports, Lunn Poly and Pilot. Tenancy
demand is strong and we are presently
appraising a reconfiguration design to
improve customer flow, modernise the
atrium catering unit and create more
valuable space. We continue to monitor
opportunities to improve the Centre’s
critical mass. The footfall within this
Centre has increased by 2.2%.
Eldon Garden, Newcastle upon Tyne
At Eldon Garden, we were presented
with a Merit in the 1998 British Council
of Shopping Centres Marketing Awards.
Successful destination retailers within
the scheme continue to prosper and
expand, however, certain high fashion
retailers have experienced difficult
trading conditions during 1998. It is
hoped this will stabilise during 1999,
when a number of initiatives to
improve the Centre’s critical mass will
be finally appraised. In the interim, the
successful marketing and promotional
campaigns continue to improve footfall
which increased by 6.5% during 1998.
With the Company’s energetic and
committed management
in
London, Glasgow and at the Centres,
we look forward to building on last
year’s successes.
teams
Building a brand identity
Capital and Regional invests in
re-branding its properties to ensure
a strong position within the local
retail hierarchy.
C&R Front 1998 4/10/00 2:44 pm Page 10
10 Capital and Regional Properties plc
Retail and Leisure Parks
During 1998, the retail and leisure park
portfolio rose in value by 15.8% which is
an excellent result in this competitive retail
environment. With our dynamic
management team’s entrepreneurial flair,
retailer knowledge coupled with shopping
centre style marketing and promotion, we
are confident of continuing our success.
Andrew Lewis-Pratt Executive Director
26th February 1999
During 1998, the retail and leisure park
portfolio rose in value by 15.8% which
is an excellent result in this competitive
retail environment.
Since the emergence of retail parks
during the 1980’s, we have witnessed
numerous changes in the type, quality
and quantity of both the supply of
product and retailer demand. It is this
dynamic environment which continues
to create the opportunities for us to
succeed in continually outperforming
the property market, primarily as a
result of our in-depth expertise and
experience in this specialist sector.
Retailer demand
remains vibrant;
although a number of traditional bulky
goods retailers are experiencing trading
difficulties, other retailers such as
Dixons and Matalan are
trading
extremely well. Both these retailers are
continuing
their
expansion plans for 1999 and beyond.
We currently foresee less scope for
enhancing
and
expansion for the furniture and carpet
retailers, however, DIY retailers such as
B&Q and Homebase continue to trade
well and expand alongside
the
electrical retailers, such as PC World
and Comet, who are upsizing their
property requirements and continuing
their expansion plans. Our leasing
manager, Jim Adams, is constantly
reviewing all requirements to ensure
that we take early advantage of the
changes in retailer’s strategy.
The evolution of retail parks continues
with the rapid expansion plans ‘out-of-
town’ of major high street retailers such
as Boots, Next and Woolworths.
Independent research has shown that
high street retailers have the ability to
pay considerably higher rents than the
traditional bulky goods operators.
continuing and ever hardening clamp
down on ‘out-of-town’ retailing. This
will inevitably result in existing stock
becoming more valuable.
Over the past four years, we have
acquired a number of older retail parks
and transformed them into quality
bulky goods retail parks, such as
Wembley Retail Park, or into prime
retail parks such as Blythswood,
Glasgow. In the current economic
climate, we see
for
upgrading older bulky goods parks,
although there remains considerable
scope for further improvements on
our existing parks. Richard Gore,
investment director and the rest of the
retail park team are constantly seeking
further opportunities where we can
utilise our active management style.
less scope
Future supply of new retail parks,
especially those which benefit from
open A1 consent, is extremely limited,
as a direct result of the Government’s
In excess of 70% of our portfolio now
has the benefit of either open A1
or restricted A1 non food planning
consent; the average rent throughout
C&R Front 1998 4/10/00 2:44 pm Page 11
Blythswood Retail Park
Capital and Regional Properties plc 11
the retail park portfolio is only £9.77
per sq ft which provides considerable
opportunity for further growth.
portfolio
Furthermore, we have identified the
potential to increase the size of our
existing
the
construction of additional floor space
of over 210,000 sq ft. This represents
approximately 18% of the total floor
space.
through
Since the year end, we have acquired
Westway Shopping Park, Greenford
in Middlesex for £33m, which is
substantially let to retailers such as
Outfit, Boots and Holiday Hypermarket.
1998 Highlights
Blythswood Retail Park, Glasgow
the year construction of
During
90,000 sq ft of new retail floor space
was completed. This has been 95% let
to MFI, Harveys, Carpetright, Landmark,
JJB Sports, Texstyle World, Matalan and
Allied Carpets. The latest letting was
achieved at £16.50 per sq ft compared
to approximately £9.00 per sq ft on
acquisition
in March 1997. We
anticipate letting the final unit during
the first half of 1999, at a new market
rent. Further initiatives for 1999 include
a major food store. The park has
improved in value in less than two
years by £21m, an 85% increase on the
total cost of the investment.
Beckton Retail Park, London, E6
consent was obtained
Planning
in February 1999
further
for a
25,000 sq ft. A refurbishment of the
entire park is now proposed, subject
to certain pre-lettings currently in
negotiation being completed.
HMV
NEXT
MATALAN
Strong relationship with retail partners
Capital and Regional believes that close
working relationships with tenants
enables mutual success.
C&R Front 1998 4/10/00 2:44 pm Page 12
12 Capital and Regional Properties plc
Retail and Leisure Parks
Bognor Regis Retail Park
Blythswood Retail Park
Bognor Regis Retail Park
Since acquisition of this 69,000 sq ft
park in January 1998, we have settled
one rent review above expectations
and let two further units, the latest
one being at £12.00 per sq ft, some
£3.00 per sq ft higher than previously
obtained on the estate.
Lancaster Retail Park
This 101,000 sq ft investment was
acquired in June 1998 and is the
City’s only retail park. We have entered
into a new agreement with MFI for a
20,000 sq ft unit at a rental of £12.00 per
sq ft compared to the average rent on
the estate of £9.00 per sq ft. Planning
consent has been obtained to extend
the estate by some 5,000 sq ft and
negotiations are underway to secure
further lettings and extensions.
Wyrley Brook Retail Park, Cannock
Planning consent has been granted for
the redevelopment and refurbishment
of this estate to comprise approximately
105,000 sq ft. Construction is shortly to
commence for a new B&Q store of
44,000 sq ft and the latest letting to
Kingsway at £12.00 per sq ft is against
average rents for the estate of £6.00 per
sq ft upon acquisition.
We anticipate letting the remaining
units during the construction process
and completion is planned for the
year end.
Channons Hill Retail Park, Bristol
Following
the grant of planning
consent for a discount food store, a
new 12,000 sq ft unit has been let to
Lidl at a rental of £10.00 per sq ft.
Further lettings are under negotiation.
Wembley Retail Park
The next phase of the enhancement
programme for Wembley is now under
way, where we intend to relocate some
of our existing tenants into newly
created units, thereby providing a
further 30,000 sq ft to re-let, subject to
planning approval.
We intend marketing and letting these
units once consent is obtained for a
restricted A1 use, which we believe will
attract sports and lifestyle retailers. Due
to the parks location being adjacent to
the proposed new Wembley Stadium
and the new access road from the
North Circular, expectations for this
property are high.
Junction 10 Retail Park, Glasgow
This 100,000 sq ft open A1 retail park
has been substantially reconfigured
with the latest unit being let to
Landmark, at a new market rent for the
estate at £15.00 per sq ft.
Significant future proposals are planned
which will substantially enhance the
potential of the park.
Ashford Leisure Park, Kent
On acquisition of this leisure park site
in August 1998, we had substantially
pre-let the scheme to Cine UK, Pizza
Hut, Burger King, KFC and City Centre
Restaurants. We have since let a
28,000 sq ft healthclub to Stakis and
terms have been agreed to lease a 60
bedroom hotel and 7,000 sq ft public
house. Completion of this project is due
in the Autumn.
C&R Front 1998 4/10/00 2:45 pm Page 13
Capital and Regional Properties plc 13
Sports Village, Milton Keynes
Construction of our most exciting
development to date is currently on
time and on budget and completion
is due in May 2000. 83% of floor
space was pre-let by Simon Berry,
development director and his team
prior to acquisition, which we consider
to be a major achievement for such an
innovative scheme and illustrates the
confidence of
retail
operators in the concept. Our latest
letting to JD Weatherspoons is above
the rental level that we budgeted on
acquisition. A branding initiative is
currently underway and marketing for
the remaining space will commence in
April this year.
leisure and
With our dynamic management team’s
entrepreneurial flair, retailer knowledge
coupled with shopping centre style
marketing and promotion, we are
confident of continuing our success.
Westway Cross Shopping Park
Bringing retail and leisure together
The integration of retail and leisure
improves the overall consumer offer and
retailer profitability.
Sports Village, Milton Keynes (above), a
new concept providing over 400,000 sq ft
of retail and leisure space, including a
‘real snow’ indoor ski slope.
C&R Front 1998 4/10/00 2:45 pm Page 14
14 Capital and Regional Properties plc
Easter Group
Easter looks forward to 1999 with
confidence. The investment portfolio
continues to grow and will be enhanced
by the latest acquisitions. Further new
development, both for trading and
investment, will be carefully selected and
in areas we know and where tenant
demand exists.
Peter Taylor Chief Executive
Easter Group
26th February 1999
We have performed creditably in 1998.
The
investment company, Easter
Capital Investment Holdings has seen
gross assets rise from £21.6m at 1997
year end to £70.6m at the end of 1998.
The properties owned for the full year
produced a total return of over 21%.
Easter Capital Investment Holdings
During 1998, we continued to make
progress with existing holdings:
Wrexham Industrial Estate
Wrexham Industrial Estate has seen
considerable expansion over the last
three years, mainly as a consequence of
increased investment in manufacturing
facilities by major corporate owner
occupiers. Our holding on this estate is
some 515,000 sq ft.
On acquisition in 1996, approximately
36% of the floor space was vacant. This
has now been reduced to approximately
7% as a result of active on-site
management and by programmed
refurbishment of units and improved
management. We are shortly to start a
speculative phase of some 40,000 sq ft,
on part of the 30 acres that we hold for
future development.
Springvale, Cwmbran
Acquired in January 1998, we are
rebranding the 304,533 sq ft estate with
the approach adopted at Wrexham.
Improvements to external appearance,
new signage, a programme of refur-
bishment and improvements coupled
with the opening of our on-site office
has resulted in a substantial number
of new lettings and rental growth. Three
further acquisitions were made during
the year to increase the holding and
improve the quality of the investment.
Court Road, Cwmbran
A small 57,839 sq ft estate of 25 modern
units purchased which are com-
plementary to our existing holding at
Springvale and approximately one mile
away.
C&R Front 1998 4/10/00 2:45 pm Page 15
South Wales Portfolio
Three further holdings in South Wales
totalling 313,000 sq ft were purchased
to augment our existing properties in
the region. The principal buildings are
in Cardiff, Abercarn and an estate of
eighteen units at Nine Mile Point,
Cwmfelinfach.
Deeside, near Chester
This modern 174,450 sq ft estate is fully
let apart
small unit.
from one
The land acquired with this property
is now in the course of development
to provide a further 72,500 sq ft of
floorspace.
Kearsley, Bolton
Half of the Europa Trading Estate was
acquired comprising 125,908 sq ft in
14 units. Certain improvements will be
carried out, including the possible
development of surplus land.
Hay Hall Works, Tyseley, Birmingham
An old style estate of buildings
comprising 347,222 sq ft on a site of
some 13.4 acres close to Birmingham
City Centre was acquired. The estate is
fully let to good covenants on mainly
long leases.
Astmoor Industrial Estate, Runcorn
Astmoor is the most important light
industrial estate in Runcorn and we
have acquired a large section of it.
The property is 385,841 sq ft and of
a size where active management,
coupled with
refurbishment
the
of some 57,400 sq ft will make a
considerable impact on both cash flows
and value.
Since the year end the following
properties have been acquired:
Easter Industrial and Easter Runcorn
Portfolios
We have acquired from Phillips & Drew
Fund Management their 75% share in
these industrial portfolios comprising
794,638 sq ft that Easter have managed
since 1993 and 1994 respectively and in
which Capital and Regional has held a
25% interest.
Capital and Regional Properties plc 15
Libra, Milton Keynes
A development of four stand-alone,
headquarter type warehouse/production
units totalling 110,000 sq ft. Three units
have been let and the scheme is funded
by Norwich Union.
Hemel Hempstead
A bespoke building designed and
developed by Easter and pre-sold to
NGK Spark Plugs for their UK head
office and distribution facility.
Site F, Maidstone Road, Milton Keynes
A bespoke factory of 38,500 sq ft
pre-let to a local printing company and
forward sold to MGM Assurance.
Pisces, Trafford Park
A development of
two buildings
totalling 62,500 sq ft, one of which has
been let to Boots the Chemist whilst the
other is still available. The scheme is
funded by Scottish Provident.
Leo, Trafford Park
A development of 65,000 sq ft in
three units. The project is forward
funded by Xerox Pension Fund and will
be completed in the Spring.
Taurus, Oxford
A joint development with Abacus.
Three units on the ring road comprising
35,000 sq ft leased and sold to Abbey
Life.
Gemini 8, Warrington
A 14 acre site to be developed in two
phases with a total of 220,000 sq ft and
forward funded by Standard Life.
The first phase will be completed later
this year.
Easter looks forward to 1999 with
confidence. The investment portfolio
to grow and will be
continues
enhanced by the latest acquisitions.
Further new development, both for
trading and
investment, will be
carefully selected and in areas we know
and where tenant demand exists.
New developments
Twelve Quays, Birkenhead
We have a development agreement
with English Partnerships covering
some 20 acres. We are undertaking a
business park development which so
far comprises 87,252 sq ft and consists
of one office building and five factory
units of which 67% is let. Further
phases are planned.
North East England
Three sites at Thornaby on Tees,
Boldon and Cramlington have been
acquired and developed with new
factory units totalling 137,000 sq ft, half
of which is now let.
In 1999, we are expecting improved
occupancy and cashflows as a result
of programmes already put in place. We
continue to look for existing industrial
estates and sites in locations where we
believe our management skills can be
applied and where growth can be
achieved. To this end, we are acquiring
land at Stockton-on-Tees, Yate and
Nottingham
carry out new
developments in areas of serious
shortage of new space and have
various investments under review.
to
Easter Holdings
Our development trading company,
Easter Holdings, has had another
successful year, completing a number
of developments and starting work on
several new projects. The highlights
of the development programme are
as follows:
Kingsway North, Team Valley
We have completed the development of
some 40,000 sq ft, which is let to three
quality tenants on long leases and will
be sold this year.
West Acre, Willenhall
We completed a 57,000 sq ft pre-let
warehouse
for
A F Blakemore & Sons and sold the
finished project in the summer to the
Merchant Navy Pension Fund.
store
cold
and
C&R Front 2 1998 4/10/00 2:46 pm Page 16
16 Capital and Regional Properties plc
Principal Properties
Value in excess of £30m
Property
Pallasades Shopping Centre,
Birmingham
Sector
Tenure
Sq ft (Sq m)
Principal Tenants
Shopping
Centre
Leasehold
300,000
(27,781)
463,000
(41,821)
Argos
Austin Reed
Boots
JJB Sports
Mothercare
Woolworths
Argos
Boots
C&A
Evans
Pearsons Dept Store
Topshop/Topman
Wilkinsons
W H Smith
Shopping City, Wood Green,
London
Shopping
Centre
Freehold
Howgate Shopping Centre,
Falkirk
Shopping
Centre
Feuhold
190,000
(18,587)
Blythswood Retail Park,
Glasgow
Retail
Park
Freehold
270,619
(25,150)
Selborne Walk,
Walthamstow
Trinity Centre,
Aberdeen
Shopping
Centre
Leasehold
280,500
(26,487)
Shopping
Centre
Feuhold
214,000
(19,880)
Westway Cross Shopping Park,
Greenford
Retail
Park
Freehold
120,000
(11,152)
Wembley Retail Park,
Wembley
Sauchiehall Centre,
Glasgow
Value £20m-£30m
Property
Liberty 2,
Romford
Retail
Park
Freehold
Shopping
Centre
Feuhold
259,974
(24,161)
180,000
(16,728)
Sector
Tenure
Sq ft (Sq m)
Principal Tenants
Shopping
Centre
Leasehold
82,000
(29,739)
Alhambra Shopping Centre,
Barnsley
Shopping
Centre
Leasehold
165,000
(16,534)
Superdrug
Argos
Burton Group USC
Etam
Marks & Spencer Woolworths
New Look
Wallis
B&Q
Carpetright
Comet
Currys
Harveys
Bhs
Currys
Dixons
First Sport
Argos
Debenhams
HMV
Boots
Carphone
Warehouse
Hobbycraft
JJB Sports
Matalan
MFI
Texstyle World
Holland and Barratt
Mothercare
Our Price
River Island
Ottakers
Signet
Superdrug
Holiday
Hypermarket
McDonalds
The Outfit
Allied Carpets
Carpetright
Comet
Furnitureland
Harveys
MFI
Argos
Burtons
Menswear
Clinton Cards
Dorothy Perkins
John Menzies
Superdrug
TK Maxx
Allsports
Ciro Citterio
Jeffrey Rogers
McDonalds
Odeon Cinema
Peacocks
Pilot
Spoils
Allsports
Coop Living
Mothercare
Next
Peacocks
Wilkinsons
Woolworths
C&R Front 2 1998 4/10/00 2:46 pm Page 17
Capital and Regional Properties plc 17
Eldon Garden Shopping Centre,
Newcastle
Shopping
Centre
Leasehold
42,500
(4,087)
Manor Park Estate,
Runcorn
Industrial
Freehold
336,610
(31,283)
385,839
(35,858)
Industrial
Freehold
Value £10m-£20m
Property
Beckton Retail Park,
London
Junction 10 Retail Park,
Glasgow
Wrexham Industrial Estate,
Wrexham
Lancaster Retail Park,
Lancaster
St Andrew House,
Glasgow
Astmoor Industrial Estate,
Runcorn
Wyrley Brook Retail Park,
Cannock
Value £4m-£10m
Property
Springvale Industrial Estate,
Cwmbran
Deeside Industrial Estate,
Deeside
Bognor Regis Retail Park,
Bognor Regis
Channons Hill Retail Park,
Bristol
Twelve Quays,
Birkenhead
Europa Trading Estate,
Kearsley
Sector
Tenure
Sq ft (Sq m)
Principal Tenants
Retail
Park
Retail
Park
Freehold
140,000
(13,005)
Leasehold
99,557
Industrial
Freehold
Retail
Park
Retail
Office
Freehold
Feuhold
515,000
(47,862)
102,544
(9,527)
92,500
(8,593)
Homebase
Kwik Save
Landmark
Carpetright
Landmark
Poundstretcher
Sports Division
MFI
Top Rank Bingo
Barlow Handling JCB
Cookson
Duracell
Porvair Technology
Carpetright
Fads
Harveys
MFI
Wickes
Atlantic Telecom Thomas Cook
Bodycare
Burger King
Granada
Time Computer
Systems
TSB
Austin Reed
Morgan de Toi Wolford
Sony Centre
The Penshop
Churchills
Stairlifts
Fresenius
Paxar Europe
Pourshins
Warburtons
Whitford Plastics
Belfor Imbach Norton HealthCare
Cheshire Folding P & W Printers
Cartons
Shandon Scientific
Retail
Park
Freehold
105,570
(9,940)
Allied Carpets
B&Q
Fashion Brokers
Kingsway
Sector
Tenure
Sq ft (Sq m)
Principal Tenants
Industrial
Freehold
230,000
(21,375)
Cyril Luff
Kara Vale
Rolls Royce
Power Eng. plc
Enterprises
Siebe Gorman
Industrial
Freehold
247,500
(22,992)
Hydro Coatings
Kimberly Clark
Retail
Park
Retail
Park
Freehold
Freehold
Industrial
Freehold
Industrial
Freehold
62,165
(5,777)
59,204
(5,502)
87,252
(8,108)
Landmark
LIDL
Halfords
Harveys
Currys
Great Mills
Burall Carwood Telescope
LJMU
Technologies
125,908
(11,701)
Foseco (GB)
Health & Diet The Co-operative
Lansing Linde
Food Company Bank
C&R Front 2 1998 4/10/00 2:46 pm Page 18
18 Capital and Regional Properties plc
Finance Review
During the past three years the Group has
implemented a financing strategy with six banks
that have experienced property teams and
long-term commitment to the UK property
market. The Groups’ strategy is to enter into
extendable secured revolving credit facilities
with broadly similar terms and covenants.
Roger Boyland Joint Managing Director
26th February 1999
£24.6m
including
Summary
The Group’s borrowings at 25th Dec-
ember 1998 were £366.1m (1997:
£261.8m)
of
Convertible Subordinated Unsecured
Loan Stock (CULS). Borrowings by
associates and joint ventures were an
additional £16.9m (1997: £26.4m). Net
cash balances were £5.5m (1997:
£9.2m) and the Group had approxi-
mately £59.8m (1997: £17.3m) of
undrawn
facilities. The
increase in borrowing during 1998
reflects the financing of acquisitions
and the refurbishment of and improve-
ments to our properties during the year
net of property disposals.
secured
£59.1m was raised by way of an equity
issue in April 1998 to part finance the
acquisition of The Pallasades Shopping
Centre, Birmingham.
Financing strategy
During the past three years the Group
has implemented a financing strategy
with six banks that, in the opinion of
the Directors, have experienced
long-term
property
teams
and
to
the UK property
commitment
market. The Groups strategy is to enter
into extendable secured revolving
credit facilities with broadly similar
terms and covenants. These facilities
provide the group with the flexibility to
draw down and repay borrowings
within the covenant parameters, and
provide a cost efficient structure, which
allows the substitution and addition of
new properties as security.
Project loan finance is separately
arranged as required
for specific
developments and joint ventures.
Interest rate hedging strategy
The Group’s strategy is to enter into
mainly five year interest rate swaps on
a rolling basis, which provides both
protection against any sudden rise in
interest rates and scope to take
advantage of falling rates on expiring
swaps and unhedged borrowings.
The balance between borrowing on
floating and hedged interest rates is
continually reviewed in the light of
capital market conditions and business
requirements.
C&R Front 2 1998 4/10/00 2:46 pm Page 19
Capital and Regional Properties plc 19
Table 1
Fixed rate debt instrument
CULS
Bank borrowings
Interest rate swaps
Book
value
£m
24.6
15.3
n/a
39.9
Notional
principal
£m
n/a
n/a
247.9
247.9
Market
value
£m
25.3
16.1
257.7
299.1
Minority Interests
Fair Value Adjustment attributable to Group
Net of tax at 31%
Fair value
adjustment
£m
Table 2
Repayment
Drawn
Earliest
£m
“Evergreen”
£m
Undrawn
Earliest
£m
“Evergreen”
£m
1999
2000
2001
2002
Bank borrowings
2006/16 Convertible
loan stock
0.7
0.8
9.8
11.3
0.2
11.1
7.7
0.8
34.0
173.0
133.7
341.5
24.6
366.1
0.8
27.9
171.5
133.7
333.9
–
333.9
–
12.0
21.3
26.5
59.8
–
59.8
–
–
21.3
26.5
47.8
–
47.8
The expiry profile of the fair value adjustment is as follows:
1999
2000
2001
2002
2003
2004-2016
Total
Fair value
adjustment
£m
3.7
3.1
2.1
1.4
0.5
0.5
% of
total
33
28
19
12
4
4
11.3
100
Fixed and swapped interest rates at
25th December 1998 applied
to
borrowings of £287.8m (1997: £197.6m)
with the balance of £78.3m (1997:
£64.2m) being at variable interest rates
based on three month LIBOR. The
weighted average interest rate cost for
fixed and swapped borrowings at
25th December 1998, was 7.9% (1997:
8.4%) and for variable rates 7.5%
(1997: 8.5%).
The weighted average interest rate cost
of total borrowings at the year end has
reduced to 7.8% compared to 8.4% at
the end of 1997. The weighted average
period for which interest rates are
fixed on Group bank borrowings is
3.39 years and 4.58 years including
CULS.
Debt valuation
A valuation was carried out by
J C Rathbone Associates Limited as at
25th December 1998, to calculate the
market value of
fixed rate debt
instruments on a replacement basis and
the expiry profile of the resulting fair
value adjustment.
Table 1 shows the market value of fixed
rate debt instruments, and reflects the
difference between the interest rate
yield curve as at 25th December 1998
and the rates historically committed;
namely the fair value adjustment.
On 18th November 1998, Sports Village
Milton Keynes Partnership, in which the
Group has a 50% interest, entered into
a five year interest rate swap for £25m,
with a forward start date of 24th July
2000. The Group’s share of this
financial instrument is not included in
table 1, but if it had been, the fair value
adjustment would be increased by
£143,000.
The fair value adjustment relating to
fixed rate debt instruments in place at
25th December 1998 will be virtually
eliminated by the end of 2002.
The fair value adjustment represents
approximately 3% of Group borrowings
and has a notional adverse effect on
net asset value per share of 7p at
25th December 1998.
Debt maturity
Table 2 shows the maturity profile of
Group borrowings and undrawn
secured facilities at 25th December
1998. Over 97% (1997: 87%) of bank
the benefit of
borrowings had
“evergreen” arrangements which we
expect will extend maturity dates
beyond the earliest repayment date
shown. The evergreen arrangements
provide a minimum of two years’ notice
of repayment.
Gearing
Net debt to capital employed has fallen
to 107% at the year end (1997: 116%)
and reduces to 93% (1997: 94%)
assuming the conversion of the loan
stock to equity.
Rental income as a ratio to net interest
payable including capitalised interest
for 1998 is unchanged at 1.6 times
when calculated excluding non-
recurring income. The margin by which
rental income exceeds total net interest
payable has increased to over £20m in
1998 from £11m in 1997.
C&R Front 2 1998 4/10/00 2:46 pm Page 20
20 Capital and Regional Properties plc
Financial Statements Review
Profit on revenue activities has increased
from £6.1m to £11.5m reflecting the
substantial increase in the portfolio and
capital base during 1997 and 1998.
Lynda Coral Financial Director
26th February 1999
that affect
Accounting developments
A number of new Financial Reporting
Standards (“FRS”) are applicable or
adopted voluntarily for the first time this
year
the presentation,
classification and disclosures in the
financial statements. The Group has
adopted FRS 9 (Associates and Joint
Ventures), FRS 10 (Goodwill), FRS 11
(Impairment), FRS 12
(Provisions),
FRS 13 (Financial Instruments) and
FRS 14 (Earnings per share). Any
resulting changes
financial
statements have no impact on profit or
net assets attributable to shareholders for
the current or prior years.
the
in
Profit and loss account
Results for the year
Profit on revenue activities has increased
from £6.1m to £11.5m reflecting the
substantial increase in the portfolio and
capital base during 1997 and 1998. Profit
before tax has increased to £11.5m. Profit
last year of £11.1m included gains of
almost £5m on the excess of sale
proceeds of investment properties and
investments over carrying value.
Profit on revenue activities in the second
half of the year is £7.9m compared to
£3.6m reported for the first half. The
includes non-recurring
second half
surrender premiums and provision for
performance bonuses for the whole year,
both of which are referred to below.
Rental income
Group rental income increased by 55%
to £44.9m as shown in table 1. Also
shown is the effect of the changes during
1998 on gross passing rent to arrive at
£47.0m at the year end.
The gross passing rent at the end of
1998 does not include additional rent of
£2.2m (1997: £1.4m) under agreements
for lease executed to date. Surrender
premiums of £4.5m as shown in table 1
include £3m in respect of a retail
warehouse unit that has been relet at a
higher rent and £500,000 from the
former tenant of a trading property sold
at a profit.
Net property costs
The increase of £1.3m compared to the
previous year is partly due to marketing,
promotional and void costs relating to
acquisitions in the last two years, particu-
larly the shopping centres acquired in
June 1997 and April 1998. Higher ground
rents in 1998 of £918,000 include eight
months for The Pallasades with the full
year effect of three centres acquired
during 1997 offset by the feuhold
purchase of Howgate in February 1998.
Professional fees relating to rent reviews
and lettings in the year incurred a cost of
approximately £1m as compared to
£488,000 in the previous year.
Administrative expenses
General administrative costs reflect the
support required for the substantial
increase in the property portfolio since
1996 and include the effect for a full year
of the retail and leisure park team
following the purchase of Lanham PLC in
April 1997. Underlying administrative
costs represent under 0.75% of the total
property portfolio. Performance related
bonus payments to executive directors
and employees, including an allocation
for the profit sharing scheme, totalled
£1.4m (1997: £1.2m).
Net interest payable
Net interest costs have increased by £6.5m
during the year reflecting the financing of
acquisitions by additional bank debt.
Approximately £850,000 (1997: £900,000)
of interest has been capitalised during the
year, principally in relation to industrial
properties under construction (£396,000)
and development projects
including
Blythswood (£195,000) and the forward
sold scheme at Croydon (£231,000).
C&R Front 2 1998 4/10/00 2:46 pm Page 21
Capital and Regional Properties plc 21
Table 2
Properties
Investment
under
properties construction
£m
£m
Current
property
assets
£m
At 25th December 1997 438.0
Acquisitions
179.4
Refurbishments and
development
Disposals
Revaluation surplus
22.3
(40.4)
47.6
At 25th December 1998 646.9
–
–
5.4
–
2.3
7.7
Total
£m
445.8
197.9
33.0
(47.6)
49.9
7.8
18.5
5.3
(7.2)
–
24.4
679.0
Table 1
Year ended 25th December 1997
Full year effect of acquisitions and
disposals in 1997
Properties acquired in 1998
Properties sold in 1998
Net new lettings
Leases surrendered
Surrender premiums
Rent increases including reviews
Year ended 25th December 1998
Table 3
Associates
Joint ventures
Investment
£m
3.4
2.3
5.7
Debtors
after
1 year
£m
–
3.9
3.9
1998
Rental
income
£m
28.9
3.4
8.0
(2.9)
2.1
(0.2)
4.5
1.1
44.9
1998
Total
£m
3.4
6.2
9.6
1998
Rental
level
£m
33.6
–
14.0
(3.9)
2.1
(0.4)
–
1.6
47.0
1997
Total
£m
3.3
7.7
11.0
Taxation
The taxation charge for the year has been
substantially reduced to 3% of profit
before tax by capital allowances. The
Group has deferred the payment of its
1998 interim dividend until 7th April 1999
to take advantage of the abolition of
Advance Corporation Tax. At the end of
1998 there is approximately £200,000
(1997: £200,000) remaining of advance
corporation tax previously written off, the
tax written down value of assets subject to
capital allowance claims is estimated at
approximately £28m (1997: £19m) and
unutilised losses carried forward are
approximately £4.3m (£6.5m).
Earnings and dividends per share
Earnings per share on revenue activities
increased substantially from 8.4p to
12.2p. Although profit attributable to
shareholders increased from £10.1m in
1997 to £11.1m this year earnings per
share were reduced from 15.4p to 12.1p
as a result of applying the weighting of
shares issued in 1997 and 1998. The total
dividend proposed of 4.25p per share
is over one and a half times covered
by profit on revenue activities after
deducting non-recurring lease surrender
premiums.
Balance sheet
Property assets
Table 2 summaries the movement in the
Group’s property portfolio during the
year
for
including properties held
disposal and under development.
Associates and joint ventures
Table 3 shows the movement during
1998 in the Group’s total investment in
joint ventures and associates.
In accordance with FRS 9, the Sports
Village Milton Keynes Partnership is
treated as a joint arrangement that is not
an entity and the Group’s financial
statements include its share of assets,
liabilities and cash flows. Since the year
end investment in associates has reduced
as a result of buying in the industrial
properties owned in partnership with
Phillips & Drew Fund Management
Limited.
Minority interests
Minority interests at the end of 1998
include a £2m participation by Peter
Taylor and his associates in Easter
Capital Investment Holdings.
Year 2000
As reported with the interim results,
a programme is underway to address the
issues arising from the Millennium to
ensure that date sensitive systems using
two digits can recognise “00” as the Year
2000. The Group has reviewed its
exposure to the risks arising from the
“Millennium Bug” and is progressing any
action required to ensure all our
computer hardware and software is Year
2000 compliant.
The Group has substantially completed
detailed audit of systems that use
microchips within our properties with
the assistance of external consultants.
The aim is to ensure that any problem
the Year 2000 might otherwise create in
the provision of services is identified and
rectified. This includes liaison with our
tenants to inform them of our action plan
to deal with Year 2000 issues and ensure
that they are taking appropriate action in
respect of their equipment particularly
where it is interfaced to our systems for
common use.
As
the
the effort associated with
programme largely consists of the
diversion of existing internal resources,
the costs have not been separately
identified and are written-off to the profit
and loss account as they are incurred.
The costs of modifications and remedial
works specifically relating to the Year
2000 compliance are expected to be
minimal.
C&R Front 2 1998 4/10/00 2:46 pm Page 22
22 Capital and Regional Properties plc
Directors
Martin Barber
Roger Boyland
Kenneth Ford
Xavier Pullen
Lynda Coral
Andrew Lewis-Pratt
Executive Directors
Martin Barber
Chairman, age 54
Martin Barber has been involved in
commercial property as a developer
and investor for over 30 years. He was
a founder Director of the Company in
1979. He is Chairman of CenterPoint
Properties Trust,
estate
investment trust, listed on the New
York Stock Exchange and formerly a
subsidiary of Capital and Regional. He
is Non-executive Chairman of PRICOA
Property Investment Management Ltd,
a wholly owned subsidiary of The
Prudential
Insurance Company of
America.
real
a
Xavier Pullen
Joint Managing Director, age 47
Xavier Pullen has been active in the
property industry for over 30 years and
was a founder Director of the Company
in 1979. He has overall responsibility
for
investment and development
activities.
Roger Boyland FCA
Joint Managing Director, age 54
Roger Boyland is a chartered accountant
and has been involved in commercial
property for 24 years. He was a founder
Director of the Company in 1979. He
has responsibility for the Company’s
financing strategy, including banking
and corporate finance.
Lynda Coral BSC FCA
Financial Director and
Company Secretary, age 37
Lynda Coral has been a chartered
accountant for 14 years. She was
appointed as Company Secretary in
1989 and a Director in 1990. Her
responsibilities include accounting, tax
and co-ordination of management and
external reporting.
Kenneth Ford BSC FRICS
Executive Director, age 45
Ken Ford has been
in
commercial property for 25 years.
He was appointed a Director of the
Company in 1997 and is responsible for
the shopping centre portfolio.
involved
Andrew Lewis-Pratt BSC ARICS
Executive Director, age 41
Andrew Lewis-Pratt has over 16 years
experience within the out-of-town retail
and leisure sector. He was appointed as
a Director of the Company in 1997 and
is responsible for the retail and leisure
park portfolio.
C&R Front 2 1998 4/10/00 2:46 pm Page 23
Capital and Regional Properties plc 23
David Cherry
Peter Duffy
Viscount Chandos
Martin Gruselle
Peter Duffy†, age 62
Peter Duffy was appointed as a Director
of the Company in 1995. He was
previously Managing Director of
TR Property Investment Trust PLC. He is
also a Director of European City Estates
N.V. and Chairman of Seafield plc.
a
is
Martin Gruselle FCA†#, age 61
chartered
Martin Gruselle
accountant with wide experience in
corporate finance. He was appointed as
a Director of the Company in 1989 and
acts as Chairman of the Remuneration
and Audit Committees. He is also a
non-executive Director of Scarborough
Property Company plc.
Non-executive Directors
David Cherry BSC FRICS†#, age 61
David Cherry is a former Senior Partner
of Donaldsons, a national firm of
commercial Chartered Surveyors with a
significant reputation in retail property.
He has wide experience in both
the UK property market and was head
of the organisation for eight years. He
was appointed as a Director of the
Company in 1997.
Viscount Chandos#, age 46
Tom Chandos is a former investment
banker and currently Development
Director of the broadband interactive
television company, Video Networks
Limited. He was appointed as a
Director of the Company in 1993. He is
also Chairman of Lopex PLC and of
MediaKey plc. He is a non-executive
Director of a number of private
companies
†Member of Audit Committee
#Member of Remuneration Committee
C&R Mid 1998 4/10/00 1:09 pm Page 24
24 Capital and Regional Properties plc
Ten Year Record
for the year ended 25th December 1989 to 25th December 1998
No of shares in issue (million)
Diluted no. of shares
in issue (million)
Net assets per share‡
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
98.255
76.399
45.595
45.595
45.595
30.296
17.239
17.239
12.144
12.044
110.667
88.668
58.181
320.6p ††272.0p 223.1p 186.2p 183.5p 163.8p #157.8p 153.5p †163.3p 201.7p
Net assets per share growth
17.9% ††27.6% 19.8%
1.5% 12.0% #12.2%
2.8% †3.6% (19.1)% 22.1%
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Equity shareholders’ funds
Minority interests
Non-equity funding by
joint arrangement partners
Capital employed
Borrowings
Cash at bank
Net bank debt
330,816 217,299 104,701
2,458
2,101
933
84,882
1,431
83,654
719
49,636
797
27,206
10,426
26,454
7,545
19,825
5,619
24,397
5,522
3,250
–
–
–
–
–
–
–
–
–
336,167 218,232 107,159
86,313
84,373
50,433
37,632
33,999
25,444
29,919
340,926 237,036 143,872
6,261
9,229
5,476
76,674
2,431
50,129
2,259
39,051
2,693
49,937
4,206
35,568
9,978
31,088
598
25,025
3,210
335,450 227,807 137,611
74,243
47,870
36,358
45,731
25,590
30,490
21,815
Convertible loan stock
23,950
23,840
25,108
–
–
–
–
–
–
–
Net debt
359,400 251,647 162,719
74,243
47,870
36,358
45,731
25,590
30,490
21,815
Net debt/capital employed‡
93.3% 94.1% 104.3% 86.0% 56.7% 72.1% 121.5% 75.3% 119.8% 72.9%
Rental income
Net rental income
Net interest payable****
44,910
38,507
24,057
28,857
23,728
16,788
17,834
14,158
9,153
10,129
8,040
4,552
8,172
6,556
3,180
8,896
7,487
4,460
6,939
6,028
3,838
5,245
4,659
3,086
4,618
3,966
2,885
3,571
3,390
1,430
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Profit/(loss) on ordinary activities
before taxation***
Earnings per share**
Dividend per share
11,481
11,083
6,051
4,743
4,145
1,170
422
*(533)
351
*474
12.1p
15.4p
11.9p
4.25p
3.5p
3.0p
8.7p
2.5p
8.6p
2.1p
2.8p
1.5p
0.4p
*(4.2p)
1.1p
1.0p
0.9p
0.9p
*1.0p
0.9p
†† A Placing and Offer in May 1997 of 28,159,526 new Ordinary shares at 215p resulted in a dilution of 1997 diluted net assets per share to 213.1p.
The growth in net assets per share for 1998 is calculated after adjusting for the effect of this dilution on 1997.
# If adjusted to take into account the effect of the issue of 13,057,427 new Ordinary shares of 10p each during 1993 to raise £17,025,000 net of expenses 1992
net assets per share are reduced to 146.0p. The growth in net assets per share for 1993 is calculated after adjusting for the effect of this dilution on 1992.
†
‡
*
A Placing and Offer in May 1991 of 5,070,295 new Ordinary shares at 120p resulted in a dilution of 1990 net assets per share to 148.1p. The growth in
net assets per share for 1991 is calculated after adjusting for the effect of this dilution on 1990.
Assuming conversion of the convertible loan stock to equity.
As adjusted for Financial Reporting Standard No. 3 where necessary.
** Earnings per share for prior years have been adjusted to reflect the one for two Rights Issue in April 1994 and the two for seven rights issue in April 1998.
*** As adjusted for Financial Reporting Standard No. 9.
****Excludes share of net interest payable of Joint ventures and associates.
C&R Mid 1998 4/10/00 1:09 pm Page 25
Report on Directors’ Remuneration and Interests
Capital and Regional Properties plc 25
Remuneration Committee
The Remuneration Committee (“the Committee”) has been constituted by the Board of the Company and consists of not less
than three non-executive directors nominated by the full Board. The Committee meets at least twice a year, the quorum for
a meeting being at least two members. The present members are Tom Chandos, David Cherry, and Martin Gruselle
(Chairman).
The Committee is responsible for setting the remuneration policy for the executive directors and senior employees
and ensuring compliance with best practice provisions. The Committee determines the terms of the service agreements,
salaries, discretionary bonus payments, as well as deciding on the grant of share options for the executive directors.
The recommendations made by the Executive Committee for the grant of share options to other employees require the
approval of the Committee. In preparing this annual report to shareholders on behalf of the Board, the Committee has
complied with relevant provisions of the Combined Code including those set out in Schedule B thereof.
Remuneration policy
In setting the remuneration policies for the executive directors, the Committee has given full consideration to the
requirements of the Combined Code appended to the Listing Rules of the London Stock Exchange including the provisions
in Schedule A of the Combined Code relating to the design of performance-related remuneration.
The Committee, using published data and market research, seeks to ensure that the total remuneration received by the
executive directors under their contracts is competitive within the property industry and will motivate them to perform at
the highest level.
Basic salaries and benefits are reviewed annually. Following a review by the Committee at the end of 1997, the basic salaries
of the executive directors were increased from 1st January 1998. The Company’s contributions to the personal pension
schemes of M. Barber, R. Boyland and X. Pullen are 20% of basic salary, those of K. Ford, and A. Lewis-Pratt are 15% and
that of L. Coral is 10%.
In 1996, the Committee established guidelines for determining the level of discretionary bonus payable to the executive
directors, linking outperformance of growth in net asset value per share to predetermined percentages of pre-tax profits. In
1998 the Committee introduced a further guideline linking outperformance of growth in net asset value per share to
predetermined percentages of the increase in net shareholders funds generated in the year. The Committee currently uses
the Monthly Index of All Properties Capital Value published by the Investment Property Databank as a benchmark against
which to compare growth in net asset value per share. If the maximum level of outperformance in either case is achieved,
the higher of 10% of pre-tax, pre-bonus profits or 2.2% of the increase in net shareholders’ funds may be allocated as
discretionary bonus. The Committee will not necessarily allocate the whole of the amount determined under the criteria
in any year.
In 1998, net asset value per share has increased by 17.9% (year on year) compared with an increase of 4.2% in the benchmark
index; this level of performance generates a discretionary bonus of 8.5% of profits. The Committee has decided to allocate
£820,000 of discretionary bonus for 1998 (7.2% of pre-tax, pre-bonus profits).
The allocation of the total amount of discretionary bonus between the executive directors has been made by the Committee.
Each of the executive directors has a service agreement which can be terminated on one year’s notice by either party.
The terms of the existing service agreements do not allow the executive directors to engage in any other business outside
the Company except where prior written consent from the Committee is obtained.
The fees of the non-executive directors are determined annually by the Board acting on the recommendations of
the Executive Committee within the limits set by the Company’s Memorandum and Articles of Association and using external
market research for guidance. The formal appointments of Tom Chandos and Martin Gruselle were renewed on 1st January
1997 and that of Peter Duffy on 26th May 1998 in each case for a further three year period. David Cherry was given a formal
letter of appointment for a three year term from 4th April 1997. They do not receive share options or any other forms of
remuneration from the Company.
C&R Mid 1998 4/10/00 1:09 pm Page 26
26 Capital and Regional Properties plc
Report on Directors’ Remuneration and Interests
Remuneration
The remuneration of the directors is analysed below:
Salary and fees
Discretionary bonus
Pension contributions
Other benefits†
1998
£
1997
£
1998
£
1997
£
1998
£
1997
£
1998
£
1997
£
1998
£
Total
1997
£
Executives
M. Barber
R. Boyland
X. Pullen
L. Coral
K. Ford
A. Lewis-Pratt
190,000
150,000
150,000
110,000
145,000
145,000
170,000
135,000
135,000
100,000
82,500
93,750
170,000
140,000
140,000
100,000
135,000
135,000
170,000
130,000
130,000
90,000
130,000
115,000
38,000
30,000
30,000
11,000
21,750
21,750
34,000
27,000
27,000
10,000
12,375
14,063
20,325
19,846
16,257
13,953
9,813
19,605
18,622
17,662
17,504
13,548
5,698
10,646
418,325
339,846
336,257
234,953
311,563
321,355
392,622
309,662
309,504
213,548
230,573
233,459
890,000
716,250
820,000
765,000
152,500
124,438
99,799
83,680 1,962,299 1,689,368
Non-executives
Viscount Chandos* 26,875
20,000
D. Cherry
20,000
P. Duffy
30,000
M. Gruselle
20,000
15,000
20,000
30,000
96,875
85,000
26,875
20,000
20,000
30,000
20,000
15,000
20,000
30,000
96,875
85,000
Total
986,875
801,250
820,000
765,000
152,500
124,438
99,799
83,680 2,059,174 1,774,368
*
Including fees of £6,875 received from subsidiary companies. Viscount Chandos was appointed as a non-executive director of Easter Holdings Limited on
3rd March 1998 and received fees of £6,875 in the year from the joint venture company that are not included in the figures above.
† Other benefits include the taxable value of private medical insurance and company car, or if a director has opted out of the Company car scheme, a salary
supplement in lieu of a company car.
Directors’ interests
The directors and, where relevant, their connected persons (within the meaning of Section 346 of the Companies Act 1985)
are beneficially interested in the Ordinary share capital of the Company as follows:
M. Barber
X. Pullen
R. Boyland
L. Coral
K. Ford
A. Lewis-Pratt*
M. Gruselle
Viscount Chandos
P. Duffy
D. Cherry
Ordinary shares of 10p each
at 25th December
6.75% convertible subordinated
unsecured loan stock 2006/16
at 25th December
1998
Shares
1997
Shares
2,343,701
981,060
504,000
1,335
368,998
286,634
50,653
7,926
–
3,363
2,288,992
907,303
500,000
1,039
356,034
681,035
46,136
6,698
–
2,225
4,547,670
4,789,462
1998
£
35,394
23,693
13,000
25
–
–
943
3,313
–
–
76,368
1997
£
35,394
23,693
13,000
25
–
–
943
3,313
–
–
76,368
* A. Lewis-Pratt is only himself beneficially interested in 110,668 Ordinary shares of 10p each.
There have been no changes to the directors’ interests since 25th December 1998, except D. Cherry who purchased an
additional 775 Ordinary shares of 10p each on 24th February 1999 and X. Pullen who purchased 20,000 Ordinary shares of
10p each on 25th February 1999.
C&R Mid 1998 4/10/00 1:09 pm Page 27
Capital and Regional Properties plc 27
Share incentives
From time to time the Committee has recommended to the Board that options should be granted to executive directors and
other employees under the Executive Share Option Schemes introduced in 1988. The final options under this Scheme were
granted on 18th June 1997.
New Discretionary Share Option Schemes to replace the share option schemes which expired in May 1998 were approved
by shareholders at the Annual General Meeting held on 7th May 1998.
In 1998 options were granted over a total of 1,264,790 Ordinary shares under the 1998 Schemes, as follows:
Date
15th May 1998
22nd May 1998
28th September 1998
Exercise price
Directors
Executives
Total
279.5p
286.5p
196.5p
650,000
–
–
506,500
83,290
25,000
1,156,500
83,290
25,000
650,000
614,790
1,264,790
The table below gives details of the options granted to the executive directors:
Exercise
conditions met
Exercise price
At beginning
of year
1998
adjustment
Issued in year
Options over Ordinary shares of 10p each
Director
Date granted
M. Barber
22nd December 1993
28th October 1994
18th June 1997
R. Boyland
22nd December 1993
28th October 1994
18th June 1997
15th May 1998
X. Pullen
22nd December 1993
28th October 1994
18th June 1997
15th May 1998
L. Coral
22nd December 1993
28th October 1994
21st October 1996
18th June 1997
15th May 1998
Yes
Yes
Not yet
Yes
Yes
Not yet
Not yet
Yes
Yes
Not yet
Not yet
Yes
Yes
Yes
Not yet
Not yet
168.9p
*131.4p
*226.4p
*168.9p
*131.4p
*226.4p
279.5p
*168.9p
*131.4p
*226.4p
279.5p
*168.9p
*131.4p
*193.2p
*226.4p
279.5p
K. Ford
18th June 1997
15th May 1998
Not yet
Not yet
*226.4p
279.5p
A. Lewis-Pratt 18th June 1997
15th May 1998
Not yet
Not yet
*226.4p
279.5p
135,302
103,062
50,000
288,364
135,302
103,062
50,000
–
288,364
135,302
103,062
50,000
–
288,364
49,602
25,765
77,296
50,000
–
202,663
150,000
–
150,000
150,000
–
150,000
1,576
1,201
582
3,359
1,576
1,201
582
–
3,359
1,576
1,201
582
–
3,359
578
301
901
582
–
2,362
1,747
–
1,747
1,747
–
1,747
At end
of year
136,878
104,263
50,582
291,723
136,878
104,263
50,582
100,000
–
–
–
–
–
–
–
100,000
100,000
391,723
–
–
–
100,000
136,878
104,263
50,582
100,000
100,000
391,723
–
–
–
–
100,000
50,180
26,066
78,197
50,582
100,000
100,000
305,025
–
175,000
151,747
175,000
175,000
326,747
–
175,000
151,747
175,000
175,000
326,747
* Exercise price and number of options have been adjusted since being granted for subsequent share capital reorganisations, the Rights Issue in April 1994,
the Placing and Open Offer in May 1997 and the Rights Issue in April 1998.
C&R Mid 1998 4/10/00 1:09 pm Page 28
28 Capital and Regional Properties plc
Report on Directors’ Remuneration and Interests
Share incentives continued
The table below gives details of gains on the options granted to the executive directors:
M. Barber
£
R. Boyland
£
X. Pullen
£
L. Coral
£
K. Ford A. Lewis-Pratt
£
£
482,748
762,206
762,206
664,099
832,680
832,680
Options outstanding at the year end:
Total subscription price
Potential profit on exercise of options*:
options where exercise condition
has been met
options where exercise condition
has yet to be met
153,882
153,882
153,882
64,288
–
–
–
–
–
–
–
–
–
–
Total at year end
153,882
153,882
153,882
64,288
* Using a share price of 216.5p as at 24th February 1999.
The Company’s share price was 167.5p on 25th December 1998. During the year the share price ranged from 318p to 154.5p.
There has been no change in directors’ interests in options since 25th December 1998, except for K. Ford, A. Lewis-Pratt and
L. Coral who were granted 75,000, 75,000 and 25,000 unapproved options respectively, on 23rd February 1999 at an exercise
price of 191.5p.
Options granted prior to 1997, 13,000 options granted to each of K. Ford and A. Lewis-Pratt in June 1997 and those granted
in 1998 can only be exercised within the seven year period commencing three years after the date of grant. All other options
granted in 1997 can only be exercised within a four year period commencing three years after the date of grant.
All the options granted require the achievement of growth in net assets per share above predefined targets. Options granted
in 1993 and subsequent years can only be exercised if growth in fully diluted net asset value per share during any three year
period prior to the expiry date of the option exceeds the growth in the Monthly Index of Capital Values for All Properties
published by the Investment Property Databank for the same period. An additional exercise criteria for options granted in
1998 requires the total return for shareholders over any three year period to exceed the increase over the same period in
the Index of Total Returns for the Property Sector as shown in the FT-SE Actuaries Indices published in the Financial Times.
A total of 27,684 shares at a cost of £78,484 were issued to eligible employees in April 1998 under the Capital and Regional
Properties plc approved profit sharing scheme introduced in 1997. The Committee has set aside the sum of £149,000 out of
the profits of the current year to be allocated under this scheme.
Martin Gruselle Chairman
Remuneration Committee
26th February 1999
C&R Mid 1998 4/10/00 1:09 pm Page 29
Corporate Governance Statement
Capital and Regional Properties plc 29
Introduction
In June 1998 the Combined Code (“the Code”) was issued in final form by the Committee on Corporate Governance.
To demonstrate its support for the new corporate governance regime, the Board has determined to make full disclosure in
this report, notwithstanding that it is not required by the Listing Rules of the London Stock Exchange to provide a disclosure
statement on how it applies the principles in the Code and whether it has complied with the Code provisions during the
period, as its accounting period ends before 31st December 1998.
Governance: principles and procedures
At a Board meeting held on 24th September 1998, the Board formally adopted the Principles of Good Governance set
out in the Code. The Company’s governance policies already in place matched closely those set out in the Code.
Details of how the Company has applied the Code, after making changes as described in the Compliance statement set out
on page 31, are as follows for each of the Code’s four distinct areas:
Directors
The Company is controlled through the Board of Directors which consists of six executive and four non-executive directors,
thus providing an appropriate balance of power and authority. The non-executive directors are all independent of the Group.
The Board is chaired by Martin Barber. The joint managing directors are Xavier Pullen and Roger Boyland. The Board reviews
the schedule of matters reserved to it for decision at least once a year. Board approval is required for all significant or
strategic decisions including major acquisitions, disposals and financing transactions. A procedure for directors to take
independent professional advice if necessary has been agreed by the Board and formally confirmed to all directors.
Details of all the non-executive directors are set out on page 23. Martin Gruselle has been nominated as the senior
independent director as required by the Code.
The Board meets at least quarterly and each member receives up to date financial and commercial information prior to each
meeting, in particular quarterly management accounts and schedules of property income and outgoings (each with
comparisons against budget), schedules of acquisitions and disposal and relevant appraisals (prior Board approval being
required for large transactions) and cash flow forecasts and details of funding availability.
All members of the Board are subject to the re-election provisions of the Articles which requires them to offer themselves
for re-election at least once every three years. Any proposal to appoint new directors to the Board is discussed at a full Board
Meeting and all Board members are given an opportunity to meet the individual concerned prior to any formal decision
being taken. As the Board is small, it is considered inappropriate to establish a nomination committee.
The directors have delegated certain of their responsibilities to committees that operate within specified terms of reference
and authority limits that are reviewed annually or in response to changed circumstances. An Executive Committee, whose
members include the six executive directors, meets on a regular basis (normally monthly) and deals with all major decisions
of the Group not requiring full Board approval or authorisation by other Board Committees. The Executive Committee is
quorate with four directors in attendance; if decisions are not unanimous a matter is referred to the Board for approval. Notes
and action points from Executive Committee meetings are circulated to the Board. The Executive Committee includes the
Chairman of the Board. The directors believe that the process for making business decisions and the roles of the two joint
managing directors provides sufficient division of responsibilities to meet the requirements of corporate governance best
practice. The Audit and Remuneration Committees, which consist solely of non-executive directors, meet at least twice a year.
Directors’ remuneration
The Remuneration Committee makes recommendations to the Board, within existing terms of reference, on remuneration
policy and determines, on behalf of the Board, specific remuneration packages for each executive director. A proportion of
all executive directors’ remuneration consists of cash bonuses and share options (each linked to corporate and individual
performance achievements) the levels of which are determined by the Remuneration Committee.
The fees of the non-executive directors are reviewed by the Board at regular intervals. The statement of remuneration
policy and details of each director’s remuneration is set out in the report on Directors Remuneration and Interests on
pages 25 to 28.
C&R Mid 1998 4/10/00 1:09 pm Page 30
30 Capital and Regional Properties plc
Corporate Governance Statement
Shareholder relations
The Company has always encouraged regular dialogue with its institutional shareholders and private investors at the Annual
General Meeting, through corporate functions and property visits. Update meetings are held with institutional shareholders
following announcement of preliminary and interim results and as requested throughout the year. Directors are accessible
to all shareholders and queries received verbally or in writing are immediately addressed. Directors are introduced to
shareholders at the Annual General Meeting including the identification of non-executives and Committee Chairmen.
Accountability and audit
The Company’s annual report and accounts includes detailed reviews of the activity at each of the principal properties within
the portfolio each year, together with a detailed review of its financial results and financing position. In this way the Board
seeks to present a balanced and understandable assessment of the Company’s position and prospects.
Statement on internal financial control
The Group operates a system of internal financial control which is designed to provide reasonable but not absolute assurance
against misstatement or loss. There is a comprehensive system of procedures in place for financial reporting to the executive
directors and the Board. These procedures include the preparation of budgets and forecasts, variance analysis, property and
treasury reports. Authority limits are clearly defined throughout the organisation including the schedule of matters reserved
for the approval of the Board or a specified Committee of the Board. The Board has overall responsibility for the system of
internal financial control. The directors carried out their annual review of the current system and updated the documentation
of key risk, operational controls and procedures relating to different areas of the business. In this review, that is repeated at
least once a year, the directors have considered the effectiveness of the internal financial control framework.
The Group does not currently have an internal audit function but the need for one is reconsidered by the Audit Committee
from time to time.
Going concern
In compliance with the Listing Rules of the London Stock Exchange the directors can report that based on the Group’s
budgets and financial projections, they have satisfied themselves that the business is a going concern. The Board has a
reasonable expectation that the Company and Group have adequate resources and facilities to continue in operational
existence for the foreseeable future and therefore the accounts are prepared on a going concern basis.
Audit Committee
The Company’s Audit Committee, consisting of not less than three non-executive directors, has written terms of reference
under which it is responsible for the relationship with the Group’s auditors and for reviewing in depth the Company’s
financial reports, circulars to shareholders and internal controls. The terms of reference were reviewed and updated in 1999
to ensure the Audit Committee’s duties adequately cover all areas identified by the Code including review of cost
effectiveness and the volume of non-audit services provided to the Group. The Audit Committee meets prior to Board
meetings to consider the Interim and Annual results and on an ad hoc basis at other times during the year. In 1998 the
Committee met twice.
Directors’ responsibilities statement
The directors are required by UK company law to prepare financial statements for each financial year that give a true and
fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit and loss
of the Group for that period.
The directors confirm that suitable accounting policies have been used and applied consistently and reasonably and prudent
judgements and estimates have been made in the preparation of the financial statements for the year ended
25th December 1998. The directors also confirm that applicable accounting standards and the Companies Act 1985
have been followed with the exception of the departures disclosed and explained in note 1 to the financial statements and
that the financial statements have been prepared on the going concern basis.
The directors are responsible for keeping proper accounting records, for taking reasonable steps to safeguard the assets
of the Company and the Group and prevent and detect fraud and other irregularities.
C&R Mid 1998 4/10/00 1:09 pm Page 31
Capital and Regional Properties plc 31
Compliance statement
At a Board meeting held on 16th December 1998 the Board adopted a paper prepared by a sub-committee formed to review
the Company’s compliance with the Code provisions during the accounting period. This review commenced in August 1998
and initially identified action required to ensure that the Company complied with certain provisions of the Code including
amendments to the Articles of Association that were adopted by resolution of the shareholders on 4th November 1998.
Changes to the Company’s corporate governance procedures implemented during the year to comply with specified Code
provisions were as follows:
A6.1
In November 1998 new letters of appointment were provided to the non-executive directors confirming their
appointment for a term of three years subject to re-election by shareholders.
A1.3 The new appointment letters for non-executive directors confirmed the procedure agreed by the Board for directors
in furtherance of their duties to take independent professional advice if necessary, at the Company’s expense.
A clause to the same effect was added to the service agreements of the executive directors by variation dated
6th November 1998.
A2.1
Following discussion between the non-executive directors at a Board meeting on 24th September 1998 Martin Gruselle
was formally identified as the senior non-executive director although, as chairman of both Audit and Remuneration
Committees, he had effectively already been carrying out this role.
A6.2 The new Articles of Association clarified the position on re-election of directors to ensure such office is not retained
for more than three years without re-election by shareholder resolution.
B3.5 At a Board meeting held on 16th December 1998 it was agreed that approval of the remuneration policy as set out
in the annual report to shareholders would not be included on the agenda of the 1999 Annual General Meeting.
This conclusion and the adoption of an annual review of the circumstances were noted in the minutes of the meeting.
C2.4 The new Articles of Association require 20 working days’ notice to be given for Annual General Meetings.
In the current year, the terms of reference of the Audit Committee have been reviewed and updated to comply with
Code provision D3.2 and the Audit Committee has reviewed the need for an internal audit function as required by Code
provision D2.2.
As permitted by the London Stock Exchange, the Company has complied with Code provision D.2.1 on internal control by
reporting on internal financial control in accordance with the guidance for directors on internal control and financial
reporting that was issued in December 1994.
Other than disclosed above, throughout the year ended 25th December 1998, the Company has been in compliance
with the Code Provisions set out in Section 1 of the Combined Code on Corporate Governance issued by the London
Stock Exchange. The exceptions arise from the fact that the London Stock Exchange Listing Rules incorporating the
new Code provisions were published in June 1998 whilst the compliance statement relates to the whole year ended
25th December 1998.
By Order of the Board
L. Coral Secretary
26th February 1999
C&R Mid 1998 4/10/00 1:09 pm Page 32
32 Capital and Regional Properties plc
Auditors’ Report
to the members of Capital and Regional Properties plc
We have audited the financial statements on pages 33 to 55 which have been prepared under the accounting policies set out
on pages 38 and 39.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the Annual Report, including as described on page 30 the financial statements.
Our responsibilities, as independent auditors, are established by statute, the Auditing Practices Board, the Listing Rules of
the London Stock Exchange, and by our profession’s ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in
accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors’ report is not consistent with
the financial statements, if the Company has not kept proper accounting records, if we have not received all the information
and explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors’
remuneration and transactions with the Company and other members of the Group is not disclosed.
We review whether the statement on page 31 reflects the compliance with those provisions of the Combined Code specified
for our review by the Stock Exchange, and we report if it does not. We are not required to form an opinion on the
effectiveness of the corporate governance procedures or the Group’s internal controls.
We read the other information contained in the Annual Report, including the corporate governance statement, and consider
whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes
an assessment of the significant estimates and judgements made by the directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the
overall presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at
25th December 1998 and of the profit of the Group for the year then ended and have been properly prepared in accordance
with the Companies Act 1985.
Deloitte & Touche Chartered Accountants and Registered Auditors
Hill House, 1 Little New Street, London EC4A 3TR
26th February 1999
C&R Mid 1998 4/10/00 1:09 pm Page 33
Consolidated Profit and Loss Account
for the year ended 25th December 1998
Turnover: group rental income and share of joint ventures’ turnover
Less: share of joint ventures’ turnover
Group rental income
Net property costs
Net rental income
Profit on the sale of trading and development properties
Administrative expenses
Other operating income
Group operating profit
Share of operating profit in joint ventures
Share of operating profit in associates
Income from listed investments
Interest receivable and similar income
Interest payable and similar charges
Profit on revenue activities
(Loss)/profit on sale of investment properties
Profit on sale of investments
Profit on ordinary activities before taxation
Taxation
Profit on ordinary activities after taxation
Equity minority interests
Profit attributable to the shareholders of the Company
Equity dividends paid and payable
Profit retained in the year
Earnings per share
Earnings per share – diluted
Earnings per share on revenue activities
Capital and Regional Properties plc 33
Notes
2
18
3
4
5
18
19
6
7
3
8
11
29
12
13
28
14
14
14
1998
£000
52,732
7,822
44,910
(6,403)
38,507
517
39,024
(6,259)
32,765
669
33,434
789
684
34,907
1,095
807
(25,290)
11,519
(38)
–
11,481
(347)
11,134
(42)
11,092
(4,176)
1997
£000
33,275
4,418
28,857
(5,129)
23,728
1,326
25,054
(4,547)
20,507
449
20,956
1,639
495
23,090
1,039
1,043
(19,072)
6,100
4,828
155
11,083
(917)
10,166
(70)
10,096
(2,674)
6,916
7,422
12.1p
12.1p
12.2p
15.4p
14.9p
8.4p
The results of the Group for the year related entirely to continuing operations within the meaning of Financial Reporting
Standard No. 3. 1997 comparative amounts have been restated in accordance with Financial Reporting Standard No. 9 and
Financial Reporting Standard No. 14.
The notes on pages 38 to 55 form part of these financial statements.
C&R Mid 1998 4/10/00 1:09 pm Page 34
34 Capital and Regional Properties plc
Notes of Historical Cost Profits and Losses
for the year ended 25th December 1998
Reported profit on ordinary activities before taxation
Realisation of property revaluation surplus of previous years
Realisation of property revaluation (deficit)/surplus of previous years in joint ventures
Historical cost profit on ordinary activities before taxation
Historical cost profit for year retained after taxation, minority interests and dividends
Statement of Total Recognised Gains and Losses
for the year ended 25th December 1998
1998
£000
11,481
1,313
(54)
12,740
8,010
1997
£000
11,083
2,276
562
13,921
10,037
Total
1998
£000
Total
1997
£000
Six months to
Six months to
24th June 25th December
1998
£000
1998
£000
Share of unrealised surplus on valuation of investment properties
Share of unrealised surplus/(deficit) on valuation of properties
in joint ventures
Share of unrealised surplus/(deficit) on valuation of properties
in associates
Revaluation (deficit)/surplus on other investments
Tax on revaluation surpluses realised in year
Exchange differences
Notes
28
18
19
17
Profit attributable to shareholders
Total recognised gains and losses relating to the year
20,422
28,272
48,694
42,546
–
168
(1,383)
–
–
19,207
3,367
22,574
87
(55)
404
(165)
–
28,543
7,725
36,268
87
(288)
113
(979)
(165)
–
47,750
11,092
58,842
650
2,184
(223)
8
44,877
10,096
54,973
1997 comparative amounts have been restated in accordance with Financial Reporting No. 9.
Reconciliation of Movements in Shareholders’ Funds
for the year ended 25th December 1998
Profit for the year attributable to shareholders of the Company
Equity dividends paid and payable
Profit retained in the year
Share capital and share premium issued in year (net of expenses)
Goodwill written off
Other recognised gains and losses relating to year (see above)
Net addition to shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
The notes on pages 38 to 55 form part of these financial statements.
Notes
13
28
1998
£000
11,092
(4,176)
6,916
59,128
(277)
47,750
1997
£000
10,096
(2,674)
7,422
63,004
(2,705)
44,877
113,517
217,299
112,598
104,701
330,816
217,299
C&R Mid 1998 4/10/00 1:09 pm Page 35
Consolidated Balance Sheet
as at 25th December 1998
Fixed assets
Property assets
Other fixed assets
Other investments
Investment in joint ventures
Share of gross assets
Share of gross liabilities
Investment in associates
Current assets
Property assets
Debtors:
amounts falling due after more than one year
amounts falling due within one year
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets/(liabilities)
Total assets less current liabilities
Creditors: amounts falling due after more than one year
(including convertible unsecured loan stock)
Net assets
Capital and reserves
Called up share capital
Share premium account
Revaluation reserve
Other reserves
Profit and loss account
Equity shareholders’ funds
Equity minority interests
Non-Equity funding by joint arrangement partners
Capital employed
Net assets per share adjusted for minority interests
and non-equity funding
Net assets per share adjusted for minority interests
and non-equity funding – diluted
Capital and Regional Properties plc 35
Notes
£000
1998
£000
£000
1997
£000
15
16
17
18
19
20
21
21
22
23
24
27
28
28
28
28
29
30
31
31
24,412
3,914
18,802
5,476
52,604
(35,120)
654,606
844
655,450
22,000
7,715
(5,448)
2,267
3,446
683,163
17,484
700,647
(364,480)
336,167
9,826
161,863
131,553
591
26,983
330,816
2,101
3,250
336,167
336.7p
320.6p
7,846
800
24,656
9,229
42,531
(53,391)
438,044
1,025
439,069
20,651
15,425
(10,942)
4,483
3,304
467,507
(10,860)
456,647
(238,415)
218,232
7,640
104,921
84,897
591
19,250
217,299
933
–
218,232
284.4p
272.0p
1997 comparative amounts have been restated in accordance with Financial Reporting Standard No. 9.
The financial statements were approved by the board of directors and signed on their behalf on 26th February 1999 by:
M. Barber
L. Coral
The notes on pages 38 to 55 form part of these financial statements.
C&R Mid 1998 4/10/00 1:09 pm Page 36
36 Capital and Regional Properties plc
Consolidated Cash Flow Statement
for the year ended 25th December 1998
Net cash inflow from operating activities
Dividends received from joint ventures
Dividends received from associates
Returns on investments and servicing of finance
Dividends received from listed investments
Interest received
Interest paid
Loan arrangement costs
Taxation
UK corporation tax paid
UK advance corporation tax paid
UK income tax deducted at source
UK income tax recovered
USA tax paid
USA withholding tax recovered
Net operating cash flow
Capital expenditure and financial investment
Payments for:
Additions to investment properties
Additions to properties held as current assets
Additions to other tangible assets
Additions to listed investments
Purchase of minority interest
Investment in associate
Loans to joint ventures
Receipts from:
Sale of investment properties
Sale of properties held as current assets
Sale of other tangible assets
Sale of investments
Repayment of loans from associates
Repayment of loan by joint venture
Acquisitions and disposals
Additions to joint ventures
Acquisition of subsidiary
Equity dividends paid
Cash outflow before financing
Financing
Issue of ordinary share capital
Expenses of share issue
Bank loans received
Bank loans repaid
£000
Notes
36(a)
1998
£000
31,303
3,526
660
935
811
(24,065)
(535)
(315)
(606)
(90)
166
(35)
–
(202,465)
(27,759)
(738)
(2,328)
–
(270)
(5,109)
40,371
17,671
173
–
–
4,250
(725)
–
1997
£000
18,476
820
361
£000
1,039
326
(17,396)
–
(22,854)
12,635
(16,031)
3,626
–
(338)
(95)
–
(172)
82
(880)
11,755
(523)
3,103
(209,578)
(6,850)
(604)
–
(312)
(30)
(2,517)
51,331
18,719
63
155
274
4,850
(450)
(887)
(176,204)
(164,449)
(725)
(165,174)
(1,910)
(167,084)
(144,499)
(141,396)
(1,337)
(142,733)
(1,676)
(144,409)
61,198
(2,070)
200,934
(96,731)
61,215
(2,679)
161,182
(72,341)
163,331
(3,753)
147,377
2,968
(Decrease)/increase in cash
36(b)
1997 comparative amounts have been restated in accordance with Financial Reporting Standard No. 9.
The notes on pages 38 to 55 form part of these financial statements.
C&R Mid 1998 4/10/00 1:09 pm Page 37
Company Balance Sheet
as at 25th December 1998
Fixed assets
Other investments
Current assets
Debtors:
amounts falling due after more than one year
amounts falling due within one year
Cash at bank
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors
Amounts falling due after more than one year
(including convertible unsecured loan stock)
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Profit and loss account
Equity shareholders’ funds
Capital and Regional Properties plc 37
1998
£000
39,018
£000
1997
£000
31,897
Notes
£000
17
21
21
23
24
27
28
28
28
59,617
463,385
408
523,410
(21,592)
18,205
301,974
736
320,915
(14,398)
501,818
540,836
(329,044)
211,792
9,826
161,923
591
39,452
211,792
306,517
338,414
(198,382)
140,032
7,640
104,981
591
26,820
140,032
The financial statements were approved by the board of directors and signed on their behalf on 26th February 1999 by:
M. Barber
L. Coral
The notes on pages 38 to 55 form part of these financial statements.
C&R Back 1998 4/10/00 12:51 pm Page 38
38 Capital and Regional Properties plc
Notes to the Financial Statements
for the year ended 25th December 1998
1. Accounting policies
The financial statements have been prepared in accordance with applicable UK accounting standards and, except for the
non-depreciation of investment properties and the treatment of grants referred to below, with the Companies Act 1985. The
financial statements have been prepared under the historical cost convention, as modified by the revaluation of properties
and investments, using the following principal accounting policies, which have been applied consistently:
The Group has adopted FRS9 (Associates and Joint Ventures), FRS10 (Goodwill), FRS11 (Impairment), FRS12 (Provisions),
FRS13 (Financial Instruments) and FRS14 (Earnings per share). 1997 comparative figures have been restated accordingly.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of Capital and Regional Properties plc and
its consolidated entities and associated companies and joint ventures for the year ended 25th December 1998. Where
necessary, the financial statements of subsidiaries are adjusted to conform with the Group’s accounting policies. Subsidiaries
have been consolidated under the acquisition method of accounting and the results of companies acquired during the year
are included from the date of acquisition. Goodwill on consolidation represents the difference between the purchase
consideration and the fair value of net assets acquired and is capitalised in the year in which it arises and
is amortised over its useful economic life. This represents a change of accounting policy from previous years when the
Group’s policy was to write off goodwill on acquisition immediately to reserves. In accordance with the transitional
arrangements of FRS10, goodwill previously written off to reserves has not been reinstated. Details of accumulated goodwill
previously written off to reserves are detailed in note 28.
Joint ventures, associates and joint arrangements
In accordance with FRS9, joint ventures are included in the accounts under the gross equity method of accounting, and
associates under the net equity method. Comparative figures have been restated accordingly. Where the Group has entered
into a joint arrangement with a third party where no separate entity exists, the Group includes its proportion of assets,
liabilities, income and expenditure within the Group figures. Where necessary the financial statements of associates and joint
ventures are adjusted to conform with the Group’s accounting policies.
Foreign currency
Balances in foreign undertakings and the results for the year are translated into sterling at the rate of exchange ruling
at the balance sheet date of $1.67 to the £ (1997: $1.67 to the £).
Exchange differences, which arise from the translation of the share capital and reserves of foreign subsidiaries, are taken to
reserves.
Foreign currency transactions of UK companies are translated at the rates ruling when they occurred. Their foreign currency
monetary assets and liabilities are translated at the rate ruling at the balance sheet date. Any differences are taken to the profit
and loss account.
Depreciation
Depreciation is provided on all tangible fixed assets, other than investment properties, over their expected useful lives:
Fixtures and fittings
– over three to five years, on a straight line basis.
Motor vehicles
– over four years, on a straight line basis.
Investment properties
Investment properties are included in the financial statements at valuation. The aggregate surplus or temporary deficit below
cost arising from such valuations is transferred to a revaluation reserve. Deficits that are expected to be permanent are
charged to the profit and loss account.
The Group has now adopted a policy of valuing investment properties twice a year. On realisation any gain or loss
is calculated by reference to the carrying value at the last valuation and is included in the profit and loss account.
Any balance in the revaluation reserve is transferred to the profit and loss account reserve.
In accordance with SSAP19 (Revised) “Accounting for investment properties” no depreciation or amortisation is provided in
respect of freehold investment properties and leasehold investment properties with over 20 years unexpired. The Companies
Act 1985 requires all properties to be depreciated, but that requirement conflicts with the generally accepted principle set out
in SSAP19 (Revised). Depreciation is only one of many factors reflected in the annual valuation of properties and the amount
of depreciation or amortisation, which might otherwise have been charged, cannot be separately identified or quantified.
C&R Back 1998 4/10/00 12:51 pm Page 39
Capital and Regional Properties plc 39
Properties under development
Interest and directly attributable internal and external costs incurred during the period of development are capitalised.
Interest is capitalised gross before deduction of related tax relief. A property ceases to be treated as being under development
at the earlier of it being fully let or six months from practical completion.
Refurbishment expenditure
Refurbishment expenditure in respect of major works is capitalised. Renovation and refurbishment expenditure of a revenue
nature is written off as incurred.
Property transactions
Acquisitions and disposals are accounted for at the date of legal completion. Properties are transferred between categories
at the estimated market value on the transfer date.
Current property assets
Properties held with the intention of disposal and properties held for development are valued at the lower of cost and net
realisable value.
Investments
The investment in shares held in CenterPoint Properties Trust is included in the financial statements at market value at the
balance sheet date translated at the exchange rate ruling at that date. Investments in other quoted securities are also stated
at market value. The aggregate surplus or temporary deficit arising from such valuations is transferred to a revaluation
reserve. Deficits that are expected to be permanent are charged to the profit and loss account.
Loan arrangement costs
Costs relating to the raising of general corporate loan facilities and loan stock are amortised over the estimated life of the
loan and charged to the profit and loss account as part of the interest expense. The bank loans and loan stock are disclosed
net of unamortised loan issue costs.
Operating leases
Annual rentals under operating leases are charged to the profit and loss account as incurred.
Deferred taxation
Provision is made for timing differences between the treatment of certain items for taxation and accounting purposes to the
extent that it is probable that a liability or asset will crystallise.
Pension costs
Pension liabilities, all of which relate to defined contribution schemes, are charged to the profit and loss account in the year
in which they accrue.
Grants
Grants received relating to the construction or redevelopment of investment properties have been deducted from the cost
of the property. The Companies Act 1985 requires assets to be shown at their purchase price or construction cost and hence
grants to be presented as deferred income. The departure from the requirements of the Act is, in the opinion of the directors,
not material to the financial statements.
C&R Back 1998 4/10/00 12:51 pm Page 40
40 Capital and Regional Properties plc
Notes to the Financial Statements
2. Segmental analysis
Turnover:
Rental income
Surrender premiums
Share of joint ventures’
Less: share of joint ventures’
Group rental income
Net property costs
Net rental income
Profit on the sale of trading and development properties
Administrative expenses
Other operating income
Group operating profit
Share of operating profit in joint ventures
Share of operating profit in associates
Income from listed investments
Interest receivable and similar income
Interest payable and similar charges
Profit on revenue activities
Profit on ordinary activities before taxation
Continuing
Purchase of
operations The Pallasades
1998
£000
1998
£000
Total
1998
£000
Continuing
operations
1997
£000
35,536
4,535
7,822
47,893
7,822
40,071
(5,918)
34,153
517
34,670
(6,259)
28,411
669
29,080
789
684
30,553
1,095
807
(23,252)
9,203
9,165
4,839
–
–
4,839
–
4,839
(485)
4,354
–
4,354
–
4,354
–
4,354
–
–
4,354
–
–
(2,038)
2,316
2,316
40,375
4,535
7,822
52,732
7,822
44,910
(6,403)
38,507
517
39,024
(6,259)
32,765
669
33,434
789
684
34,907
1,095
807
(25,290)
11,519
11,481
27,889
968
4,418
33,275
4,418
28,857
(5,129)
23,728
1,326
25,054
(4,547)
20,507
449
20,956
1,639
495
23,090
1,039
1,043
(19,072)
6,100
11,083
Net assets adjusted for minority interests
225,316
105,500
330,816
217,299
The above segmental analysis of financial statements originates from the UK except, £1,070,000 (1997: £1,039,000) of income
from listed investments which originate from the US. There would be a corresponding adjustment to profit on revenue
activities and profit on ordinary activities before taxation. Net assets adjusted for minority interests originating from the US
are £20,445,000 (1997: £20,650,000).
The purchase of The Pallasades Shopping Centre is disclosed separately to provide additional information.
The Group operates in one class of business, property investment, development and management.
3. Property sales
Net sale proceeds
Cost of sales
Historical cost profit
Revaluation surplus
Share of joint ventures (see note 18)
(Loss)/profit recognised on sale of properties
Fixed property assets
Current property assets
1998
£000
1997
£000
1998
£000
1997
£000
1998
£000
Total
1997
£000
40,371
(39,141)
51,331
(44,267)
7,126
(6,609)
25,308
(23,982)
47,497
(45,750)
76,639
(68,249)
1,230
1,313
(83)
45
(38)
7,064
2,276
4,788
40
4,828
517
–
517
–
517
1,326
–
1,326
–
1,326
1,747
1,313
434
45
479
8,390
2,276
6,114
40
6,154
C&R Back 1998 4/10/00 12:51 pm Page 41
Capital and Regional Properties plc 41
4. Administrative expenses
General administrative costs
Corporate and public company expenses
5. Other operating income
Fee income from joint ventures and associates
Other income
6. Interest receivable and similar income
Bank interest
Interest from joint ventures and associates
Other interest
Share of joint ventures’ (see note 18)
Share of associates’ (see note 19)
7. Interest payable and similar charges
Bank loans and overdrafts wholly repayable within five years
Other loans
Capitalised during the year
Share of joint ventures’ (see note 18)
Share of associates’ (see note 19)
1998
£000
5,249
1,010
6,259
1998
£000
282
387
669
1998
£000
233
375
119
727
76
4
807
1998
£000
23,888
1,752
25,640
(856)
24,784
237
269
25,290
1997
£000
3,925
622
4,547
1997
£000
228
221
449
1997
£000
276
557
36
869
168
6
1,043
1997
£000
16,770
1,806
18,576
(919)
17,657
1,119
296
19,072
The interest relating to bank loans, overdrafts and other loans wholly repayable within five years included £2,796,000
(1997: £4,530,000) in respect of loans repayable by instalments.
The interest charge includes £285,000 (1997: £212,000) of loan arrangement costs amortised during the year.
C&R Back 1998 4/10/00 12:52 pm Page 42
42 Capital and Regional Properties plc
Notes to the Financial Statements
8. Profit on ordinary activities before taxation
This is arrived at after charging:
Loss on disposal of other fixed assets
Depreciation
Amortisation of goodwill
Auditors’ remuneration (see below)
Directors’ emoluments (see note 10)
Operating lease rentals for land and buildings
The Group’s auditors also charged the following amounts for the provision
of non-audit services during the year:
General taxation advice
Fees in relation to share issues
Other
1998
£000
113
569
5
89
2,059
918
85
92
18
195
1997
£000
31
342
–
98
1,774
770
119
144
2
265
The auditors’ remuneration for the Group includes £6,000 (1997: £6,000) in respect of the parent company.
9. Employee information
The staff engaged directly in property management are employed by subsidiaries, which recharge their employment costs to
the tenants of the shopping centres and properties owned by those companies. The aggregate payroll costs, excluding
shopping centre and property specific employees, were as follows:
Staff costs (including directors) consist of:
Salaries
Discretionary bonuses
Total salaries
Social security costs
Other pension costs
The average number of persons employed by the Group during the year was 74 (1997: 72).
Direct property services
Central management
1998
£000
2,564
1,107
3,671
380
166
4,217
1997
£000
1,886
1,077
2,963
306
143
3,412
Average number of employees
during 1998
during 1997
20
54
74
22
50
72
C&R Back 1998 4/10/00 12:52 pm Page 43
10. Directors’ emoluments
Emoluments of the highest paid director are as follows:
Aggregate emoluments
Pension contributions to defined contribution scheme
Gains made on exercise of share options
Total emoluments of all directors are as follows:
Aggregate emoluments
Pension contributions to defined contribution schemes
Gains made on exercise of share options
Capital and Regional Properties plc 43
1998
£000
380
38
418
–
418
1,907
152
2,059
–
2,059
1997
£000
359
34
393
217
610
1,650
124
1,774
805
2,579
Company pension contributions to defined contribution schemes are being made in respect of six directors.
Details of directors’ remuneration by director and details of their interests in the share capital of the Company are set out in
the report on Directors’ Remuneration and Interests on pages 25 to 28.
11. Taxation
UK corporation tax:
Current period
Prior periods
Advance corporation tax
Share of tax of joint ventures (see note 18)
Share of tax of associates (see note 19)
Income tax suffered
USA tax
1998
£000
351
(130)
1
125
–
–
–
347
1997
£000
1,557
(105)
(708)
77
(16)
41
71
917
The tax liability for the year has been reduced due to the benefit of capital allowances.
12. Profit of the holding company
Of the profit for the year attributable to shareholders, a profit of £16,808,000 (1997: £12,568,000) has been dealt with in the
accounts of the holding company and is made up as follows:
Dividends from subsidiaries
Net operating costs including interest and tax
1998
£000
1997
£000
36,550
(19,742)
24,700
(12,132)
16,808
12,568
The Company has taken advantage of the exemption provided by Section 230 of the Companies Act 1985 from presenting
its own profit and loss account.
C&R Back 1998 4/10/00 12:52 pm Page 44
44 Capital and Regional Properties plc
Notes to the Financial Statements
13. Equity dividends paid and payable
Interim of 1.5p per share payable on 7th April 1999 (1997: 1.0p per share)
Proposed final of 2.75p per share payable on 26th April 1999 (1997: 2.5p per share)
1998
£000
1,474
2,702
4,176
1997
£000
764
1,910
2,674
14. Earnings per share
Earnings per share have been calculated on the weighted average number of Ordinary shares of 10p each in issue during the
year 91,712,962 (1997: 65,402,068) and have been based on profit on ordinary activities after taxation and minority interests
of £11,092,000 (1997: £10,096,000). The 1997 comparative weighted average number of shares in issue has been adjusted to
reflect the bonus element of the 2 for 7 rights issue in 1998.
Diluted earnings per share have been calculated after allowing for the exercise of share options which have met the required
exercise conditions and the full conversion of the Convertible Unsecured Loan Stock, if the effect on earnings per share is
dilutive. The weighted average number of Ordinary shares of 10p each is 92,048,812 (1997: 78,790,488) and the relevant
earnings are £11,092,000 (1997: £11,752,000).
Earnings per share on revenue activities exclude the loss on the sale of investment properties and investments, and associated
tax charge and minority interest thereon, of £132,000 (1997 profit: £4,581,000).
15. Property assets
Group
Cost or valuation:
At beginning of year
Additions
Reclassification on purchase of freehold
Disposals
Revaluation
At end of year
The year end balance is analysed as follows:
Historical cost
Revaluation surplus
Investment properties
Freehold
properties
£000
Leasehold
properties
£000
Properties
under
construction
£000
278,122
94,218
80,918
(39,215)
37,552
159,922
107,537
(80,918)
(1,240)
10,036
451,595
195,337
347,957
103,638
182,388
12,949
–
5,397
–
–
2,277
7,674
5,397
2,277
A list of the valuers, and the basis of the valuations, are summarised in note 33.
The year end balance for leasehold properties is analysed as follows:
Leasehold with more than 50 years to run
Leasehold with less than 50 years to run
The net book value of property assets includes £623,000 (1997: £8,000) in respect of capitalised interest.
Total
£000
438,044
207,152
–
(40,455)
49,865
654,606
535,742
118,864
1998
£000
190,137
5,200
195,337
C&R Back 1998 4/10/00 12:52 pm Page 45
16. Other fixed assets
Group
Cost
At beginning of year
Additions
Disposals
At end of year
Depreciation
At beginning of year
Provided for year
Disposals
At end of year
Net book values:
At 25th December 1998
At 25th December 1997
17. Other investments
At beginning of year
Additions
Transfers from Group companies
Deficit on revaluation (see note 28)
At end of year
Capital and Regional Properties plc 45
Fixtures
and fittings
£000
Motor
vehicles
£000
1,145
481
(277)
1,349
527
393
(100)
820
529
618
664
193
(299)
558
257
176
(190)
243
315
407
Total
£000
1,809
674
(576)
1,907
784
569
(290)
1,063
844
1,025
Investment
in CenterPoint
Properties
Trust
£000
Other listed
investments
£000
20,650
–
–
(205)
20,445
1
2,328
–
(774)
1,555
Group
Company
Shares in
subsidiary and
joint venture
undertakings
£000
31,897
200
6,921
–
39,018
Total
£000
20,651
2,328
–
(979)
22,000
At 25th December 1998, the Group owned 5.0% of the common stock (4.9% on a fully diluted basis) of CenterPoint Properties
Trust, a Maryland real estate investment trust operating in Chicago, Illinois, USA. The stock is listed on the
New York Stock Exchange.
A list of subsidiaries, joint venture and associated undertakings is given in note 39.
18. Investment in joint ventures
At beginning of year
Transfer from creditors
Subscription for share capital
Amortisation of goodwill arising on additions
Disposals
Dividends and capital distributions received
Share of goodwill written off
Share of results (see below)
Share of taxation (see below)
Share of property revaluation surplus/(deficit)
Transfer to creditors (see note 23)
At end of year
1998
£000
4,483
(26)
4,457
725
(5)
26
(3,526)
–
628
(125)
87
2,267
–
2,267
1997
£000
4,472
(123)
4,349
450
–
68
(820)
59
716
(77)
(288)
4,457
26
4,483
1997 comparative amounts have been restated in accordance with Financial Reporting Standard No. 9.
C&R Back 1998 4/10/00 12:52 pm Page 46
46 Capital and Regional Properties plc
Notes to the Financial Statements
18. Investment in joint ventures continued
Group share of results:
Turnover
Operating profit
Interest receivable and similar income
Interest payable and similar charges
Profit on the sale of investment properties
Equity minority interests
Profit before tax
Taxation
Profit after tax
Group share of:
Investment properties
Development properties at cost
Other current assets
Gross assets
Current liabilities
Loans
Gross liabilities
Share of net assets
Effective Group share
Potential recourse to the Group
Actual recourse at end of year
Easter
Holdings Ltd
£000
Exchange
Court
Properties Ltd
£000
Others
£000
7,606
707
32
(96)
–
(45)
598
(127)
471
1,196
–
4,166
5,362
1,413
2,867
4,280
1,082
50%
Nil
Nil
83
7
1
(102)
–
–
(94)
2
(92)
–
2,062
8
2,070
118
1,050
1,168
902
133
75
43
(39)
45
–
124
–
124
78
70
135
283
–
–
–
283
50% 37.5% to 50%
Nil
Nil
Nil
Nil
A list of valuers and the basis of the valuation are summarised in note 33.
The joint ventures all operate in the UK.
19. Investment in associates
At beginning of year
Transfer from creditors
Share of results (see below)
Share of taxation (see below)
Dividends and capital distributions received
Disposals
Investment in associates
Share of property revaluation surplus
At end of year
1998
£000
3,304
–
3,304
419
–
(660)
–
270
113
3,446
1997 comparative amounts have been restated in accordance with Financial Reporting Standard No. 9.
Total
£000
7,822
789
76
(237)
45
(45)
628
(125)
503
1,274
2,132
4,309
7,715
1,531
3,917
5,448
2,267
1997
£000
3,054
(33)
3,021
195
16
(361)
(247)
30
650
3,304
C&R Back 1998 4/10/00 12:52 pm Page 47
19. Investment in associates continued
Group share of results:
Turnover
Operating profit
Interest receivable and similar income
Interest payable and similar charges
Profit before tax
Taxation
Profit after tax
Group share of:
Investment properties
Other current assets
Gross assets
Current liabilities
Loans
Gross liabilities
Share of net assets
Effective Group share
Potential recourse to the Group
Actual recourse at end of year
A list of valuers and the basis of the valuation are summarised in note 33.
The associates both operate in the UK.
20. Current property assets
Properties held for disposal
Properties under development
Capital and Regional Properties plc 47
Easter
Industrial
Partnership
£000
Easter
Runcorn
Partnership
£000
388
372
2
(163)
211
–
211
3,775
123
3,898
357
1,875
2,232
1,666
25%
7,500
Nil
338
312
2
(106)
208
–
208
3,150
91
3,241
99
1,362
1,461
1,780
25%
1,362
Nil
1998
£000
18,860
5,552
24,412
Total
£000
726
684
4
(269)
419
–
419
6,925
214
7,139
456
3,237
3,693
3,446
8,862
Nil
1997
£000
6,521
1,325
7,846
The net book value of current property assets includes £10,000 (1997: £Nil) in respect of capitalised interest.
21. Debtors
Amounts falling due after more than one year
Trade debtors
Amounts owed by subsidiaries
Amounts owed by joint ventures
Amounts falling due within one year
Trade debtors
Amounts owed by subsidiaries
Amounts owed by joint ventures
Other debtors
Tax recoverable (including advance corporation tax)
Prepayments and accrued income
1998
£000
–
–
3,914
3,914
12,095
–
–
2,712
461
3,534
18,802
Group
1997
£000
800
–
–
800
8,010
–
3,240
1,719
785
10,902
1998
£000
–
55,703
3,914
59,617
53
423,255
–
358
703
39,016
Company
1997
£000
–
18,205
–
18,205
25
271,936
3,204
1,058
1,052
24,699
24,656
463,385
301,974
C&R Back 1998 4/10/00 12:52 pm Page 48
48 Capital and Regional Properties plc
Notes to the Financial Statements
22. Cash at bank
Cash at bank includes £36,000 (1997: £222,000) specifically held as security deposits and retained in rent accounts and not
freely available to the Group for day to day commercial purposes.
23. Creditors: amounts falling due within one year
Bank loans (secured) (see note 25)
Amounts owed by subsidiaries
Trade creditors
Other creditors
Taxation and social security
Corporation tax (including advance corporation tax)
Accruals and deferred income
Proposed dividends
Share of net liabilities of joint venture (see note 18)
24. Creditors: amounts falling due after more than one year
Bank loans (secured) (see note 25)
Convertible loan stock (unsecured) (see note 26)
25. Bank loans
Aggregate amount repayable:
Between one and two years
Between two and five years
Loans due after more than one year
Loans due in one year or less or on demand
1998
£000
396
–
1,397
2,858
1,271
511
24,511
4,176
–
35,120
1998
£000
Group
1997
£000
22,461
–
1,122
4,404
1,474
1,487
20,507
1,910
26
53,391
Group
1997
£000
Company
1997
£000
(193)
8,824
9
1
–
668
3,179
1,910
–
1998
£000
(322)
13,262
7
–
–
–
4,469
4,176
–
21,592
14,398
Company
1997
£000
1998
£000
340,439
24,041
214,482
23,933
305,003
24,041
174,449
23,933
364,480
238,415
329,044
198,382
1998
£000
33,838
306,601
340,439
487
Group
1997
£000
61,745
152,737
214,482
22,554
1998
£000
(147)
305,150
305,003
(231)
Company
1997
£000
(172)
174,621
174,449
(100)
Total loans
340,926
237,036
304,772
174,349
Bank loans are secured on properties valued at £667,163,000.
Bank loans are stated net of unamortised issue expenses totalling £499,000 (1997: £186,000).
The following information has been produced in order to comply with Financial Reporting Standard No.13. A more detailed
analysis is given in the finance review on pages 18 and 19.
The Group’s interest rate profile is after taking account of the effect of swaps, as follows:
Fixed and swapped loans
Variable rate loans
Variable rate loan interest rates are based on three month LIBOR.
Weighted
average
interest rate
Weighted
average
period-years
7.9%
7.5%
4.6
n/a
Total
£000
287,792
78,275
366,067
C&R Back 1998 4/10/00 12:52 pm Page 49
Capital and Regional Properties plc 49
25. Bank loans continued
The table below shows the market value of fixed rate debt instruments, and reflects the difference between the interest rate
yield curve as at 25th December 1998 and the rates historically committed; namely the fair value adjustment.
Convertible unsecured loan stock
Bank borrowings
Interest rate swaps
Book
value
£000
24,642
15,250
247,900
Fair
value
£000
Fair value
adjustment
£000
25,349
16,088
257,728
(707)
(838)
(9,828)
287,792
299,165
(11,373)
Interest rate swaps and bank fixed rates have been valued on a replacement basis. They have been valued against
the offered side of the zero coupon yield curve commencing on 25th December 1998 and ending on the contracted
expiry dates.
Undrawn loan facilities as at 25th December 1998 are as follows:
Loans due to be repaid in:
Less than one year
Between one and two years
Between two and five years
£000
–
11,976
47,819
59,795
Financial assets
The fair value adjustment to financial assets and liabilities is, in the opinion of the directors, not material to the balance sheet.
Currency profile
All monetary assets and liabilities are denominated in sterling.
1997 comparative information
Comparatives have not been provided due to the impractical nature of obtaining the information and the early adoption
of Financial Reporting Standard No. 13.
26. Convertible subordinated unsecured loan stock
Convertible loan stock
Unamortised loan issue costs due after one year
Unamortised loan issue costs due within one year
1998
£000
24,642
(601)
24,041
(91)
Group
1997
£000
24,642
(709)
23,933
(93)
Company
1997
£000
24,642
(709)
23,933
(93)
1998
£000
24,642
(601)
24,041
(91)
23,950
23,840
23,950
23,840
The Convertible Subordinated Unsecured Stock (“CULS”) may be converted by the holders of the stock into 50.37 Ordinary
shares per £100 nominal value CULS in any of the years 1997 to 2015 inclusive, representing a conversion price of 199p per
Ordinary share. The Company has the right to redeem at par the CULS in any year from 2006 to 2016. The CULS are
unsecured and are subordinated to all other forms of unsecured debt but rank in priority to the holders of the Ordinary
shares in the Company. The CULS carries interest at an annual rate of 6.75%, payable in arrears on 30th June and
31st December in each year.
In accordance with Financial Reporting Standard No. 4 “Capital Instruments”, the CULS is shown net of its unamortised loan
issue costs.
C&R Back 1998 4/10/00 12:52 pm Page 50
50 Capital and Regional Properties plc
Notes to the Financial Statements
27. Called up share capital
Ordinary shares of 10p each
At beginning of year
Issued in respect of rights issue
Issued in respect of purchase of Lanham plc
Issued in respect of minority interests
Issued in respect of placing and open offer
Issued in respect of conversion of convertible loan stock
Issued on exercise of share options
Issued in respect of profit sharing scheme
At end of year
Ordinary shares of 10p each
Number of shares
issued and fully paid
Nominal value of shares
issued and fully paid
1998
Number
1997
Number
76,399,235
21,828,352
–
–
–
–
–
27,684
45,594,600
–
960,906
356,034
28,159,526
703,068
600,986
24,115
98,255,271
76,399,235
1998
£000
7,640
2,183
–
–
–
–
–
3
9,826
1997
£000
4,560
–
96
36
2,816
70
60
2
7,640
Authorised
1998
1997
150,000,000 120,000,000
On 16th April 1998, the authorised Ordinary share capital increased by 30,000,000 to 150,000,000 Ordinary shares.
The Ordinary share capital issued during the year was issued for a total consideration of £61,198,000.
There have been no changes to the number of shares in issue since the year end.
The options to subscribe for new Ordinary shares of 10p each under the share option schemes that were outstanding at
25th December 1998 are as follows:
Period within which options are exercisable:
22nd December 1996 to 22nd December 2003
28th October 1997 to 28th October 2004
13th April 1998 to 13th April 2005
21st October 1999 to 21st October 2006
18th June 2000 to 18th June 2004*
18th June 2000 to 18th June 2007*
15th May 2001 to 15th May 2008**
22nd May 2001 to 22nd May 2008**
28th September 2001 to 28th September 2008**
* Only exercisable if conditions relating to growth in net asset value per share are met.
** Only exercisable if conditions relating to growth in net asset per share and total return for shareholders are met.
25th December 1998
Number
of shares
Subscription
price
460,814
349,281
20,852
182,458
709,869
109,558
1,156,500
83,290
25,000
3,097,622
168.9p
131.4p
132.4p
193.2p
226.4p
226.4p
279.5p
286.5p
196.5p
C&R Back 1998 4/10/00 12:52 pm Page 51
Capital and Regional Properties plc 51
28. Reserves
Revaluation reserves Other reserves
Share
premium
account
£000
Property
revaluation
reserve
£000
Investment
revaluation
reserve
£000
Capital
redemption
reserve
£000
Profit and
loss account
£000
Group
At beginning of year
Issue of share capital
Expenses of share issue
Group share of revaluation of investment properties
Realisation of surplus on disposal of investment properties
Realisation of deficit on disposals in joint ventures
Share of unrealised revaluation surplus in joint ventures
Share of unrealised revaluation surplus in associates
Additional goodwill written off
Revaluation deficit on other investments
Profit for the year
Taxation in statement of recognised gains and losses
104,921
59,012
(2,070)
–
–
–
–
–
–
–
–
–
67,268
–
–
48,694
(1,313)
54
87
113
–
–
–
–
17,629
–
–
–
–
–
–
–
–
(979)
–
–
At end of year
161,863
114,903
16,650
Group’s share of post acquisition
Reserves of joint ventures and associates
At beginning of year
Movement during year
At end of year
Company
At beginning of year
Movement during the year
At end of year
475
254
729
104,981
56,942
161,923
591
–
–
–
–
–
–
–
–
–
–
–
591
591
–
591
19,250
–
–
–
1,313
(54)
–
–
(277)
–
6,916
(165)
26,983
3,613
(3,264)
349
26,820
12,632
39,452
The accumulated goodwill written off to reserves at end of year is £4,105,000 (1997: £3,828,000).
Additional goodwill written off in the year to 25th December 1998 relates to an amendment to the fair value of an acquisition
in the year ended 25th December 1997 when the Group’s accounting policy was to write off goodwill on acquisition
immediately to reserves. Financial Reporting Standard No. 10 is now applicable and all future purchased goodwill will be
capitalised and amortised over its useful economic life.
29. Equity minority interests
Share of net assets attributable to minority shareholders:
At beginning of year
Acquired by the Group
Minority interest in company acquired
Share of results
Share of joint ventures’ (see note 18)
Share of movements in revaluation reserve
At end of year
Profit and loss Balance sheet Profit and loss Balance sheet
1997
£000
1998
£000
1997
£000
1998
£000
–
–
–
(3)
45
–
42
933
–
–
(3)
–
1,171
2,101
–
–
–
43
27
–
70
2,458
(2,514)
33
43
–
913
933
Minority interests relate to participation in the net equity of subsidiary companies.
30. Non-equity funding by joint arrangement partners
This represents the additional non-equity funding in the 50:50 joint arrangement, named Sports Village Milton Keynes
Partnership, by funds managed by PRICOA Property Investment Management Limited.
31. Net assets per share
Net assets per share have been calculated on Ordinary shares of 10p each 98,255,271 (1997: 76,399,235) in issue at the year
end and have been based on net assets attributable to shareholders of £330,816,000 (1997: £217,299,000).
Diluted net assets per share assume that all the CULS had converted at the balance sheet date. Diluted net assets per share
have been calculated on 110,667,442 Ordinary shares of 10p each and have been based on adjusted net assets attributable to
shareholders of £354,766,000 by adding £23,950,000 balance sheet value of the CULS (see note 26).
C&R Back 1998 4/10/00 12:52 pm Page 52
52 Capital and Regional Properties plc
Notes to the Financial Statements
32. Deferred taxation
No provision has been made for the tax liability that would arise if assets were sold at their balance sheet valuation, on the
basis that no liability is expected to crystallise in the foreseeable future.
The potential Group liability is as follows:
Tax on capital gains if investment assets were sold at their current valuation
Accelerated capital allowances
Management expenses carried forward
1998
£000
31,985
5,182
(871)
1997
£000
20,506
3,197
(871)
36,296
22,832
33. Valuations
The properties were valued at 25th December 1998, as follows:
Valuer
Basis of valuation
Group properties:
DTZ Debenham Thorpe
St Quintin
Directors
Directors
Open market value
Open market value –
properties under construction*
Open market value
Open market value
Cost
Properties held by joint ventures
and associates:
The Capital Properties Partnership
Easter Holdings Limited
Easter Runcorn and Easter
Industrial Partnerships
Valuer
Basis of valuation
Directors
Easter Holdings Limited
Open market value
Open market value
Hillier Parker
Open market value**
£000
571,525
7,674
70,610
4,670
127
654,606
£000
155
2,393
27,700
30,248
Valuations are at open market value as defined in the Appraisal and Valuation Manual of The Royal Institution of Chartered
Surveyors.
* The valuation reflects the Group’s effective interest in properties under construction.
** The freehold and leasehold properties were independently valued at 31st December 1998.
34. Contingent liabilities and guarantees
At 25th December 1998, the Company or the Group had given guarantees in respect of:
– bank borrowings and interest payable of certain associates;
– the performance of certain subsidiaries in respect of their involvement in joint ventures;
– rental and grant repayment obligations of certain joint ventures;
– non-equity funding by joint arrangement partners
No security has been provided against any of these guarantees.
Recourse to the Group in respect of guarantees of the bank loans of joint ventures and associates not included in the
consolidated balance sheet is set out in note 18 and 19.
35. Future commitments
Capital expenditure commitments:
Contracted, but not provided for
Revenue expenditure commitments:
Commitments for 1999 in respect of operating leases for land and buildings which expire:
Between two and five years
In five years or more
1998
£000
23,900
–
779
779
1997
£000
86
5
782
787
C&R Back 1998 4/10/00 12:52 pm Page 53
36. Notes to the cash flow statement
(a) Net cash inflow from operating activities
Group operating profit
Profit on the sale of the trading and development properties
Depreciation
Loss on disposal of fixed assets
Amortisation of goodwill arising on acquisition of joint venture
Increase in trade debtors, other debtors and prepayments
Increase in trade creditors, other creditors, taxation and social security and accruals
Other non-cash movements
Net cash inflow from operating activities
(b) Reconciliation of net cash flow movement in net debt
(Decrease)/increase in cash in year
Cash inflow from increase in debt financing
Change in net debt resulting from cash flows
Loans and financing agreements acquired with subsidiary
Conversion of convertible loan stock to equity ordinary shares of 10p each
Other non-cash changes
Movement in net debt in the year
Net debt at beginning of year
Net debt at end of year
(c) Analysis of net debt
Cash in hand and at bank
Debt due within one year
Debt due after one year
Total
37. Related party transactions
Capital and Regional Properties plc 53
1998
£000
33,434
(517)
32,917
569
113
5
(5,305)
3,004
–
1997
£000
20,956
(1,326)
19,630
342
31
–
(1,931)
390
14
31,303
18,476
1998
£000
(3,753)
(104,203)
(107,956)
–
–
–
(107,956)
(252,635)
1997
£000
2,968
(88,841)
(85,873)
(4,178)
1,412
(37)
(88,676)
(163,959)
(360,591)
(252,635)
At
25th December
1997
£000
9,229
(22,658)
(239,206)
At
25th December
1998
£000
5,476
(760)
(365,307)
Cash flows
£000
(3,753)
21,898
(126,101)
(252,635)
(107,956)
(360,591)
The Group’s principal transactions with related parties, as defined by Financial Reporting Standard No. 8, are summarised
below:
Joint ventures and associates
Details of the Group’s principal joint ventures and associates, including recourse to the Group in respect of external
borrowings, are set out in notes 18 and 19.
The Group has provided a £5,000,000 loan facility to Easter Holdings Ltd which is repayable on or before 1st January 2001.
At 25th December 1998 the loan outstanding was £3,914,000 (1997: £3,000,000). Interest was charged on this facility at rates
ranging between 9.25% and 10.25% during the year. The interest receivable for the year is £364,000 (1997: £539,000). The
Group was charged £171,000 by a subsidiary of Easter Holdings Ltd in respect of property acquisition and management fees
during the year, and £270,000 to surrender a property it leased from the Group. The Group charged a £250,000 loan guarantee
fee to Easter Holdings Group during the year.
C&R Back 1998 4/10/00 12:52 pm Page 54
54 Capital and Regional Properties plc
Notes to the Financial Statements
37. Related party transactions continued
Directors
David Cherry is a former Senior Partner and currently a consultant to the firm of Donaldsons, which has continued to
act during 1998 as one of the Group’s property advisers and as such has received fees for its services on normal professional terms.
During 1998 Primesight plc purchased one of the Group’s properties on normal commercial terms for a total consideration of
£1,244,000. Martin Barber is a director and shareholder of Primesight plc. Roger Boyland, Xavier Pullen, Lynda Coral and
Viscount Chandos are shareholders of Primesight plc.
During 1998 the Company acquired from a third party a 50% share in a joint venture company, in which Kenneth Ford has
the remaining 50% interest; which has option rights over land for development. The Company subsequently transferred its
50% interest in the joint venture company to its 75% subsidiary Easter Capital Investment Holdings Limited.
During 1998 Cine UK Limited entered into agreements for lease at two of the Group’s properties on normal commercial terms.
Viscount Chandos is a director and shareholder of Cine UK Limited. Martin Barber is a shareholder of Cine UK.
During 1998 Lopex PLC leased one of the Group’s properties on normal commercial terms. At 25th December 1998
Lopex PLC agreed to surrender the lease for a premium, payable to the Group, of £68,000 which was paid after the year end.
Viscount Chandos is a director and shareholder of Lopex PLC.
During 1998 the Group entered into a partnership arrangement with funds managed by Pricoa Property Investment
Management Limited of which Martin Barber is non-executive chairman.
38. Post balance sheet events
On 4th January 1999 the Group purchased Bank House, Birmingham for a total consideration of £4,280,000.
On 5th January 1999 the Group purchased Court Road Industrial Estate, Cwmbran for a total consideration of £1,950,000.
On 29th January 1999 the Group purchased Imperial House, Grimsby for a total consideration of £1,586,000 and
36-38 Whitechapel and Williamson Street, Liverpool for a total consideration of £1,188,000.
On 18th February 1999 the Group purchased Westway Crosshopping Park, Greenford for a total consideration of £33,250,000.
On 18th February 1999 the Group purchased from Phillips & Drew Fund Management Limited the remaining 75% interest in
the properties at Manor Park Industrial Estate, Runcorn and properties held by Easter Industrial Partnership for a total
consideration of £9,750,000 and £11,381,000 respectively.
39. Subsidiary, joint arrangement entities, associated and joint venture undertakings at 25th December 1998
Principal subsidiaries, joint arrangement entities, associated companies and joint ventures
Nature of property business
Capital and Regional Shopping Centres Limited***
The Howgate Shopping Centre Limited**
Capital and Regional (Norwich) Limited
Capital and Regional (Out-of-Town) Ashford Limited
Capital and Regional UK Holdings Limited
Capital and Regional Property Investments Limited
Capital and Regional Retail (Northern) Limited***
Capital and Regional Retail (York) Limited
Exchange Court Properties Limited**
Capital and Lanham Retail Parks Limited
St Andrew House (Glasgow) Limited**
Capital and Regional Limited***
Cosmorole Limited
Capital and Regional (Sunderland) Limited
Capital and Regional (Victoria) Limited
Jearon Properties Limited
Capital and Lanham Retail Parks (Wolverhampton) Limited
Capital and Regional Property Management Limited
Capital and Regional Land Holdings Limited
Capital and Regional (Milton Keynes) Ltd
Sports Village Milton Keynes Partnership
Philcap One Limited*
The Easter Industrial Partnership*
Investment and management
Investment and management
Development
Development
Investment and holding
Investment and holding
Investment and management
Development
Development
Investment and management
Investment and management
Investment and management
Investment and management
Investment and management
Investment and management
Investment and management
Development
Management
Investment and management
Investment and management
Investment and management
Investment and management
Investment and management
Group effective
share of
business
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
25%
C&R Back 1998 4/10/00 12:52 pm Page 55
Capital and Regional Properties plc 55
39. Subsidiary, joint arrangement entities, associated and joint venture undertakings at 25th December 1998 continued
Principal subsidiaries, joint arrangement entities, associated companies and joint ventures
Nature of property business
Group effective
Share of
business
Philcap Two Limited*
The Easter Runcorn Partnership*
Realcap Management Limited
Realcap Investments Limited
The Capital Properties Partnership
Capital and Regional Green Holdings Limited
R. Green Properties (Holdings)
R. Green Properties Limited
Capital and Regional Investments Limited***
Capital and Regional Estates Limited
R. Green (Bedford) Limited
R. Green (Brighton) Limited
Green-Sinfield Limited
Capital and Regional USA Holdings Limited
Capital and Regional Out-of-Town Limited
Sports Villages (Milton Keynes) Limited
Sports Villages Developments Limited
Sports Villages (Cardiff) Limited
Applied Solutions (Projects) Limited
Capital and Lanham PLC
Capital and Lanham Holdings Limited
Capital and Lanham Wembley Limited
Capital and Lanham Developments (Pontefract) Limited
Capital and Lanham Developments (Cannock) Limited
Capital and Lanham Developments (Doncaster) Limited
Capital and Lanham Developments (Telford) Limited
Capital and Lanham Developments (Croydon) Limited
Capital and Lanham Developments (Dagenham) Limited
Capital and Lanham Developments (Orchard) Limited
Capital and Lanham Construction (Coventry) Limited
Easter Capital Investment Holdings Limited
Easter Capital Investments Limited
Easter Properties (North East) Limited
Twelve Quays Limited
Twelve Quays One Limited
Netherton Developments Limited
Easter Holdings Limited
Easter Management Limited
Easter Projects Limited
Easter Development Group Limited
Easter Properties Limited
Easter Properties (Sunderland) Limited
Easter Properties (Bredbury) Limited
Easter Properties (Willenhall) Limited
Easter Properties (Hemel Hempstead) Limited
Easter Properties (Basingstoke) Limited
Easter Properties (Trafford Park) Limited
Easter Properties (Loudwater) Limited
Easter Properties (Warrington) Limited
Easter Properties (Milton Keynes) Limited
Easter and Northern (Team Valley) Limited
Easter and Cairn Property Developments (Aylesbury) Limited
Hibiscus Properties Limited
Easter & Arun (Oldbury) Limited
Investment and management
Investment and management
Investment and management
Investment and management
Investment and management
Investment and holding
Investment and holding
Investment and holding
Investment and management
Development and trading
Investment and management
Investment and management
Investment and management
Investment and holding
Development
Development
Development
Development
Project management
Investment and holding
Investment and holding
Investment and holding
Development
Development
Development
Development
Development
Development
Development
Development
Investment and holding
Investment and management
Investment and management
Investment and management
Investment and management
Development
Investment and holding
Management
Project management
Development
Development
Development
Development
Development
Development
Development
Development
Development
Development
Development
Development
Development
Development
Development
100%
25%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
75%
75%
75%
75%
75%
37.5%
50%
50%
25%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
37.5%
27.5%
25%
25%
The subsidiary and associated companies and joint ventures are registered in England and Wales, and Scotland. Except as identified these operate in England
and Wales.
Investment in joint ventures and associates are dealt with in notes 18 and 19.
All voting rights are in line with effective share of business.
*Financial period ended 30th September.
**Operates in Scotland.
***Operates in England and Wales, and Scotland.
C&R Back 1998 4/10/00 12:52 pm Page 56
56 Capital and Regional Properties plc
Directors’ Report
for the year ended 25th December 1998
The directors present their report together with the audited financial statements for the year ended 25th December 1998.
Results and proposed dividends
The consolidated profit and loss account is set out on page 33 and shows a profit on ordinary activities after taxation
of £11.134m.
The directors recommend the payment of a final dividend of 2.75p per Ordinary share on 26th April 1999, to members on the
register at the close of business on 6th April 1999, which together with an interim dividend of 1.5p per Ordinary share,
payment deferred until 7th April 1999, makes a total of 4.25p for the year.
Principal activities, trading review and future developments
The principal activity of the Group is that of property investment, development and management.
A review of the activities and prospects of the Group is given in the Chairman’s Statement and reviews on pages 2 to 21.
Directors
The directors of the Company at 25th December 1998, all of whom have been directors for the whole of the year are
as follows:
M. Barber, X. Pullen, R. Boyland, L. Coral, Viscount Chandos, M. Gruselle, P. Duffy, K. Ford, A. Lewis-Pratt and D. Cherry.
In accordance with the Articles of Association, R. Boyland, Viscount Chandos (who is a member of the Remuneration
Committee), K. Ford and A. Lewis-Pratt retire by rotation, and being eligible, offer themselves for re-appointment. R. Boyland,
K. Ford and A. Lewis-Pratt have service contracts, which require notice of one year. Viscount Chandos has a letter of
appointment for a period of three years expiring on 31st December 1999 under the terms of which he is required to vacate
office without compensation if not re-appointed by shareholders on retirement by rotation. Biographies of the Directors of the
Company are set out on pages 22 and 23.
The Company maintains insurance for the directors in respect of liabilities arising from the performance of their duties.
Directors’ interests
The directors and, where relevant, their connected persons (within the meaning of Section 346 of the Companies Act 1985)
are interested in 4,547,670 issued shares representing 4.6% of the issued Ordinary share capital of the Company as detailed
in the Report on Directors’ Remuneration and Interests on pages 25 to 28.
Save as set out in note 37 to the accounts there were no contracts of significance subsisting during or at the end of
the year in which a director of the Company was materially interested.
Share options
Details of options to subscribe for new Ordinary shares of 10p each under the Executive Share Option Schemes and the
Discretionary Share Option Schemes 1998 are set out in note 27 to the accounts.
Details of options granted to the directors, under the same Schemes, are contained in the Report on Directors’ Remuneration
and Interests on pages 25 to 28.
C&R Back 1998 4/10/00 12:52 pm Page 57
Capital and Regional Properties plc 57
Substantial shareholdings
In addition to the interests of the directors, the Company has been notified pursuant to Sections 198 to 202 of the Companies
Act 1985, as amended, of the following notifiable interests in its issued share capital as at 25th February 1999:
Phillips & Drew Fund Management Limited
Royal & Sun Alliance
Clerical Medical & General Life Assurance Society
Legal & General
United Nations Pension Fund
Norwich Union Investment Management
BAT Industries plc
Total
Charitable donations
Shares
19,446,461
4,549,915
4,447,748
4,398,395
4,168,834
3,773,621
3,173,914
43,958,888
%
19.79
4.63
4.53
4.47
4.24
3.84
3.23
44.73
During the year the Group contributed £7,746 (1997: £5,073) to UK charities.
Payment of suppliers
The policy of the Company is to settle supplier invoices within the terms of trade agreed with individual suppliers.
Where no specific terms have been agreed payment is usually made within one month of receipt of the goods or service. At
the year end the Company had an average of 26 days purchases outstanding.
Compliance with Combined Code
A statement on Corporate Governance is set out on pages 29 to 31.
Employee involvement
The Group places considerable value upon the involvement of its employees, at all levels, in its affairs and has continued its
practice of keeping them regularly and systematically informed on matters of concern affecting them as employees and on
the financial and economic factors affecting the Group’s performance. Consultations with them or their representatives take
place on a regular basis so that their views can be taken into account when decisions are made which are likely to affect their
interests. This is achieved by regular meetings between management and employees at all levels.
Disabled employees
The Group gives full consideration to applications for employment from disabled persons where the requirements of the job
can be adequately fulfilled by a handicapped or disabled person.
Euro
The Group is reviewing the potential effect of the introduction of the single European currency on the administration of
its business.
C&R Back 1998 4/10/00 12:52 pm Page 58
58 Capital and Regional Properties plc
Directors’ Report
Auditors
Deloitte & Touche have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed
at the Annual General Meeting.
Special business of the Annual General Meeting
Authority to purchase own shares
At the 1998 Annual General Meeting, the Company was granted authority to make purchases in the market of its own shares
subject to specified limits. This authority expires at the conclusion of the Company’s Annual General Meeting for this year and
under resolution 8, which is proposed as a special resolution, the Company is seeking to renew such authority, until the
conclusion of the 2000 Annual General Meeting, or for 15 months after the date on which the resolution is passed, whichever
is the earlier. The authority relates to 5% of the current issued share capital, details of which are set out in note 27 to the
accounts. The directors will only exercise this authority if they consider that it will result in an increase in asset value per share
for the remaining shareholders and that it will be in the best interests of the Company to do so.
Pre-emption rights
Shares allotted for cash must normally first be offered to shareholders in proportion to their existing shareholdings.
Under resolution 9, which is proposed as a special resolution, the directors seek to renew their annual authority to
allot shares for cash as if the pre-emption rights contained in Section 89(1) of the Companies Act 1985 did not apply
up to a maximum of 5% of the Company’s issued share capital.
By Order of the Board
L. Coral Secretary
26th February 1999
C&R Back 1998 4/10/00 12:52 pm Page 59
Notice of the Annual General Meeting
Capital and Regional Properties plc 59
Notice is hereby given that the twentieth Annual General Meeting of the Company will be held at Mandarin Oriental Hyde
Park hotel, 66 Knightsbridge, London SW1X 7LA in the Ballroom on 23rd April 1999 at 12 noon for the following purposes.
Ordinary business
1. To consider and, if thought fit, adopt the accounts for the year ended 25th December 1998, and the reports of the
directors and auditors thereon.
2. To declare a final dividend of 2.75p per Ordinary share.
3. To re-appoint R. Boyland as a director of the Company.
4. To re-appoint Viscount Chandos as a director of the Company.
5. To re-appoint K. Ford as a director of the Company.
6. To re-appoint A. Lewis-Pratt as a director of the Company.
7. To appoint Deloitte & Touche as auditors for the period prescribed by Section 385(2) of the Companies Act 1985 and to
authorise the directors to determine their remuneration for the ensuing year.
Special business
8. To consider and, if thought fit, pass the following resolution which will be proposed as a special resolution:
In compliance with Section 166 of the Companies Act 1985, the Company is hereby generally and unconditionally
authorised to make market purchases of its own shares provided always that:
(a) this authority is limited to a maximum number of 4,912,764 Ordinary shares of 10p each in the Company;
(b) the maximum price which may be paid for the shares shall not exceed 105% of the average of the prices at which
business was done in the Ordinary shares of 10p each in the Company during the period of five business days
immediately preceding the day on which the shares are contracted to be purchased, or, if no such business was done
during that period, 105% of the price at which business was last done in the Ordinary shares of 10p in the Company
prior to the day on which the shares are contracted to be purchased, in either case as derived from the London Stock
Exchange Daily Official List and exclusive of expenses; and
(c) the minimum price which may be paid for the shares shall not be less than 10p.
This authority shall expire at the Company’s Annual General Meeting in 2000 or 15 months after the date on which this
resolution is passed (whichever is the earlier).
9. To consider and, if thought fit, pass the following resolution which will be proposed as a special resolution:
That:
(a) the directors be and are hereby empowered pursuant to Section 95 of the Companies Act 1985 to allot equity securities
(within the meaning of Section 94 of the said Act) for cash, in accordance with any authority conferred on them by
any previous meeting of the members of the Company as if Section 89(1) of that Act did not apply to the allotment;
and reference in this resolution to the allotment of equity securities includes reference to the grant of a right to
subscribe for, or to convert any securities into, relevant shares (as so defined) in the Company; provided that the
power conferred by this resolution shall be limited to:
(i) the allotment of equity securities in connection with a rights issue in favour of holders of Ordinary shares of 10p
each in the Company (notwithstanding that, by reason of such exclusion as the directors may deem necessary
having regard to legal or procedural requirements in any overseas territory, or in connection with fractional
entitlements or otherwise howsoever, the equity securities to be issued are not offered to all of such holders in
proportion to the number of shares held by each of them) and
(ii) the allotment (otherwise than pursuant to sub-paragraph (i) of this resolution) of equity securities up to an
aggregate amount in nominal value equal to 5% of the issued Ordinary share capital of the Company immediately
prior to the passing of this resolution; and
(b) this power, unless renewed, shall expire at the Company’s Annual General Meeting in 2000 save that the Company
may before such expiry make an offer or agreement which would or might require equity securities to be allotted in
accordance with paragraph (a) of this resolution after such expiry and the directors may allot equity securities in
pursuance of such an offer or agreement as if the power conferred hereby had not expired.
By Order of the Board
L. Coral Secretary
26th February 1999
Notes:
1. A member of the Company entitled to attend and vote at the Annual General Meeting may appoint one or more proxies
to attend and, upon a poll, vote on his/her behalf. A proxy need not be a member of the Company. The Form of Proxy
for use by shareholders is enclosed.
2. To be valid, the Form of Proxy, duly executed, together with the power of attorney or other authority (if any) under which
it is signed (or a notarially certified copy of such power or authority) must be received at the offices of the Company’s
Registrars, Bank of Scotland, Registrar Services, Ground Floor, Apex House, 9 Haddington Place, Edinburgh EH7 0LA not
later than 12 noon on 21st April 1999.
C&R Back 1998 4/10/00 12:52 pm Page 60
60 Capital and Regional Properties plc
Advisers and Corporate Information
Auditors
Deloitte & Touche
Hill House
1 Little New Street
London EC4A 3TR
Investment bankers
Credit Suisse First Boston
1 Cabot Square
Canary Wharf
London E14 4QJ
Warburg Dillon Read
2 Finsbury Avenue
London EC2M 2PA
Principal legal advisers
D J Freeman
43 Fetter Lane
London EC4A 1JU
Olswang
90 Long Acre
London WC2E 9TT
Cole & Co
St. Andrew House
141 West Nile Street
Glasgow G1 2RN
Fladgate Fielder
25 North Row
London
W1R 1DJ
Principal valuers
DTZ Debenham Thorpe
3-5 Swallow Place
London W1A 4NA
St. Quintin
33 Cavendish Square
London W1M 0LU
Registrars and transfer office
Bank of Scotland
Registrars Department
Ground Floor
Apex House
9 Haddington Place
Edinburgh EH7 4AL
Registered office
22 Grosvenor Gardens
London SW1W 0DH
Telephone: 0171-730 5565
Facsimile: 0171-730 0151
Registered number
1399411
Principal lenders
Bank of Scotland
The Mound
Edinburgh EH1 1YZ
Barclays Bank PLC
Luton Corporate Banking Centre
1 Capability Green
Luton LU1 3US
HSBC Property Finance
Midland Bank plc
Poultry
London EC2P 2BX
HypoVereinsbank
Property Finance
29 Gresham Street
London EC2V 7HN
Société Générale
S G House
41 Tower Hill
London EC2N 4SG
The Royal Bank of Scotland plc
Waterhouse Square
138-142 Holborn
London EC1N 2TH
BHF – Bank
BHF – Bank House
61 Queen Street
London EC4R 1AE
C&R Back 1998 4/10/00 12:52 pm Page 61
1999 Financial Calendar
Annual General Meeting – 23rd April
Final dividend record date – 6th April
1998 Interim dividend payment – 7th April
Final dividend payment – 26th April
Interim results – 13th July
1999 Interim dividend – August
1999 Preliminary results announcement –
February/March 2000
Designed and printed by Radley Yeldar (London)
Directors’ photography by Antoinette Eugster
Locational photography by Antony Brien
Temp Cover 4/10/00 3:19 pm Page 1
Capital and Regional Properties plc
22 Grosvenor Gardens London SW1W ODH
Telephone 0171-730 5565 Facsimile 0171-730 0151
Capital and Regional Properties plc
Annual Report 1998