Annual Report and Accounts
for the year ended 30 December 2012
Stock Code: CAL
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Progress in execution of strategy
■■ Sale of Group’s stakes in The Junction Fund and Xscape Braehead and, in early 2013, its interest in the X-Leisure Fund and FIX
■■ Purchase of Mall Fund units increased Group share from 18.16% to 20.33%
■■ Acquisition of 20% interest in Kingfisher Centre, Redditch, in joint venture with Oaktree Capital Partners
Financial
■■ Robust recurring pre-tax profit up 3.7% to £17.0 million (2011 – £16.4 million)
■■ Proforma see-through net debt1 to property value fell to 55% compared to 65% at 2011 year end
■■ Fall in net assets and EPRA net assets per share to 51p and 55p, respectively (2011 – 56p and 63p) primarily as a result of value
adjustments and impairment of the German portfolio 4 joint venture
Operational
■■ Occupancy on a like for like basis in our UK Shopping Centres up to 96.7% from 96.1% notwithstanding significant administrations
during the first half of the year
■■ Attractive and affordable space supported by 88 new lettings for £5.1 million, 25 renewals for £1.7 million, both at above ERV
■■ Significant step forward for asset management and development with key terms agreed to enable the reconfiguration of Waterside
Lincoln; Hemel Hempstead redevelopment gaining planning permission and a number of pre-lets finalised; The Hub leisure concept at
Redditch gaining momentum
Future priorities
■■ Recycle cash from disposals of non-core assets to create shareholder value by strengthening our core UK Shopping Centre business
as well as the buyback of shares
■■ Resume dividend payments to shareholders to be covered by cash earnings once Mall is in a position to recommence distributions to
unit holders
Recurring pre-tax profit2
(Loss)/profit for year
NAV per share
EPRA NAV per share
Proforma Group net debt1
Proforma see through net debt1
2012
£17.0m
£(16.0)m
51p
55p
13%
55%
2011
£16.4m
£21.1m
56p
63p
30%
65%
1 Adjusted for £30.6 million X-Leisure proceeds received in January 2013.
2 As defined in Note 1 to the financial statements.
See further information on our performance on page 17
See futher information online:
www.capreg.com
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Contents
Overview
02 Chairman’s statement
03 Chief executive’s etatement
05 Our business
Business Review
10 Operating review
17 Financial review
24 Principal risks and uncertainties
27 Significant contracts or arrangements
Corporate Governance
28 Board of directors
30 Directors’ report
05
Our Business
33 Statement of directors’ responsibilities
The core strength of Capital & Regional
is managing dominant UK Community
Shopping Centres. Embedded in
our culture is a passion to deliver
outstanding operational performance.
34 Directors’ remuneration report
40 Corporate governance report
44 Responsible business
Financial Statements
51 Consolidated income statement
51 Consolidated statement of comprehensive income
52 Consolidated balance sheet
53 Consolidated statement of changes in equity
54 Consolidated cash flow statement
55 Notes to the financial statements
104 Independent auditor’s report
106 Company balance sheet
107 Notes to the Company financial statements
Other Information
110 Glossary of terms
111 Five year review
112 Property under management information
112 EPRA performance measures
113 Covenant information
114 Fund portfolio information (100% figures)
115 Property information
117 Advisers and corporate information
117 Shareholder information
02
Chairman’s Statement
I am pleased to report that
the Group has this year both
successfully responded to the
challenges created by a tough
operating environment and made
significant progress in the execution
of its strategy.
10
Operating Review
The principal focus of management
during 2012 has been to implement its
strategy of disposing of non-core assets
in order to concentrate resources on its
core UK Shopping Centre business.
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01
www.capreg.comStock Code: CALOverview Chairman’s statement
We continually adapt to meet changing retailer and consumer
needs. Free Cloud Wi-Fi has been rolled out across the
shopping centres; the Mall smart phone app has been launched
and we are reconfiguring space to support the multi-channel
strategies of our retailers.
Dividend
The dividend policy continues to link future payments to the
Group’s cash generating ability. Following the renegotiation
of the Group’s banking arrangements, the restrictions limiting
the payments to 50% of operating cash flow less interest and
tax have been removed. Following further de-gearing, the Mall
is likely to be in a position to recommence distributions in the
second half of the year. Distributions from The Mall should enable
the Group to resume the payment of a dividend, to be covered
by cash earnings, at the end of 2013. Until this happens the
Board is not recommending the payment of a dividend meaning
that no dividend will be payable for the full year 2012.
Responsible business
The Group attaches great importance to maintaining its
commitment to responsible business in the still challenging
operating environment.
At the beginning of the year a number of key objectives across
The Market Place, The Environment and The Workplace were
identified, each with target key performance indicators. Good
progress has been made in each of these areas. The Group was
awarded ROSPA Gold Award status for a sixth consecutive year
and has exceeded stretching targets for reduction in energy,
water use and water recycling.
Further details are set out in the Responsible Business review in
the financial statements.
Our people
The management platform is key to the future and the creation
of value for our shareholders. I would like to thank all staff who
have once again delivered a robust set of operating results in
the face of challenging market conditions. The prompt re-letting
of space vacated by retailers in administration earlier in the year
reflects the unique asset management skills of our teams.
With the sale of The Junction and X-Leisure we have also said
goodbye to a number of colleagues who have been, directly and
indirectly, part of the C&R family for some years. We wish them
every success in their future careers.
The success of the restructuring programme in recent years
gives me confidence the management team can execute the
next phase of the Group’s strategy.
The Board
I would like to thank Manjit Wolstenholme for her contribution
to the Board’s deliberations over the last six years. Tony Hales
has succeeded Manjit as Chairman of the Audit Committee
and Philip Newton will take on the role of Chairman of the
Remuneration Committee. I believe the current non-executive
directors bring a depth of experience of internet retailing and
consumer markets to the Board in addition to their significant
contribution to property, financial and strategic matters.
John Clare
Chairman
John Clare Chairman
“I am pleased to report that the Group has
this year both successfully responded to
the challenges created by a tough operating
environment and made signficiant progress in
the execution of its strategy.”
Strategy
The Group’s strategy is to focus its financial resources and
management skills on dominant community shopping centres
in the UK. The Group intends to recycle capital from non-core
assets to strengthen its position as a leading retail property
investment company.
Performance Overview
I am pleased to report that the Group has this year not only
successfully responded to the challenges created by a tough
operating environment but has also made significant progress in
the execution of its strategy.
The UK shopping centres have performed well during a difficult
time for UK retailing. The Mall Fund, at the property level, continues
to outperform its IPD benchmark and occupancy levels at the
year-end are higher than 12 months ago, as the very high levels
of retail failures in recent months have provided opportunities to
reconfigure space. Success in re-letting this space reinforces
earlier decisions to retain and acquire those assets, such as
Redditch, with dominant market shares in the communities in
which they operate, and to dispose of those which do not.
During the course of this year, the Group has either disposed
of or taken significant steps to dispose of non-core assets. The
Group has sold its interest in The Junction Fund, the X-Leisure
Fund and X-Leisure Limited, our 50% interest in Xscape
Braehead as well as the sale of our interest in FIX, completed
shortly after the end of the year.
Relevance of our property assets
Our shopping centres demonstrate the key characteristics to
remain relevant in the current environment. They are specifically
founded on a strong community involvement, affordable rents
and continued investment to enhance the shopping experience.
02
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Chief Executive’s statement
Hugh Scott-Barrett Chief Executive
“We have a unique management platform
that supports our aim to be a leading investor
and property and asset manager of dominant
community schemes. Our focus is in shopping
centres which have a dominant market share in
the communities they serve and which provide
attractive and affordable space for retailers.”
Operations
Occupancy levels across the UK shopping centres have further
improved this year from 96.1% to 96.7%, having fallen to 94.9%
at 30 June. This reflects the benefits of a pro-active approach on
re-letting vacant space arising from retailers in administration even
if, in the short-term, it results in a reduction of income. During the
course of the year, 69 units representing £5.8 million or 7% of the
year end passing rent fell into administration. At December 2012
only 12% of the affected space was not income producing or part
of an asset management initiative. This highlights the effectiveness
of the asset management focus during the year which has
supported valuations across the portfolio. We believe that in the
medium and longer term, a vibrant well let scheme offers the best
potential to boost income. Whilst passing rent has therefore fallen
by 3% to £82.3 million it is some 1% higher than at the half-year.
Against this background, it is pleasing that the Mall, which is
at the core of the Group’s shopping centre activities, has again
out performed its benchmark at the property level. An increase
in pre-tax recurring profit from £16.4 million to £17.0 million
(including results from discontinued operations) is also particularly
encouraging in these circumstances.
In our core German portfolio valuations have been stable and
occupancy has remained high at 97.9% at December 2012.
Contracted rent has remained stable but, importantly, a number
of lease re-gears and renewals have enabled us to maintain the
weighted average lease length of the core portfolios at 7.8 years.
Asset Management
In spite of the challenging environment for our retailers, we have
continued to see demand for good quality affordable space
across our shopping centres and other assets.
Key themes include:-
• Increasing demand from leisure operators (in particular value
restaurants) within our shopping centres. The progress we are
making in establishing The Hub leisure concept at Redditch
highlights the increased importance of such operators to
increased dwell time by the shoppers in our schemes
• Demand for space from fashion and department stores such
as H&M in Luton and Debenhams at Blackburn
• Reconfiguration of space and introduction of new
technologies to accommodate multi-channel strategies
• Significant progress in asset management initiatives at Hemel
Hempstead and Great Northern Warehouse where All Star
Lanes has now opened
• Negotiations with anchor retailers on the key expansion and
development opportunities within our schemes notably at
Lincoln, Walthamstow and Camberley
Encouragingly, many of the new lettings have agreed at or above
ERV. Indeed, for the full-year, 88 new lettings representing
£5.1 million of passing rent were agreed at 0.2% above ERV.
Financial Position
Significant steps have been taken not only to reduce gearing but
also to de-risk the Group balance sheet during the course of the
year.
Adjusted for the disposal proceeds from the sale of X-Leisure,
gearing at the Group level has fallen from 24% to 13% at
December 2012 whilst see-through net debt to property value
again adjusted for the sale of X-Leisure, has fallen from 65% to
55%.
The impact of disposals on debt levels has therefore more than
offset the impact of the acquisition of Redditch. The reduction
in statutory NAV from £196 million to £180 million or 56p to 51p
has been primarily caused by the impairment and devaluation of
the German portfolio 4 and the related Euro B-Note of
£15.1 million.
At the same time, the Group has repaid the Hemel bank facility
and has extended its two remaining facilities at the Group level
being:
• A £25 million Revolving Credit Facility which now matures in
July 2016
• A £57.6 million facility for the Great Northern Warehouse
which now matures in October 2014
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03
www.capreg.comStock Code: CALOverview Chief Executive’s statement continued
Following the disposal of The Junction, X-Leisure and FIX, the
Mall is the only Fund in which C&R is invested. Following the
disposal of the Castle Shopping Centre in Norwich and utilising
the cash generated from operations, the Fund’s debt has fallen
by £91.4 million to £570.9 million. This represents a reduction
in gross LTV from 69% to 67%. This is expected to fall further
in 2013 following bondholder approval to repay £13.4 million
in April 2013 from blocked cash. Adjusted for the unrestricted
cash in the Mall, net debt to property value stood at 55% as at
December 2012.
The decrease in total German debt of €170.1 million primarily
reflects the impact of the full impairment of the investment in
Holding 4. Following amortisation of €10 million and with values
of the rest of the portfolio broadly stable, gearing levels have
fallen slightly from 76% to 74%.
Outlook
The operating environment for our retailers remains challenging
as the twin pressures of changing consumer behaviour and
weak economic growth continue to impact sentiment. I am
encouraged that our proven track record in prompt re-letting
of space on retailer administrations is already having a positive
impact in the early part of this year as asset management
initiatives to re-let space from recent retailer failures are well
advanced.
Disposals of non-core assets will continue to be a major focus.
We expect to recycle capital from the remaining on-balance
sheet assets of Hemel and Great Northern Warehouse as well
as from the portfolio of German retail investments. Improved
investment market sentiment gives us confidence that further
progress will be possible this year.
We expect further deleveraging of the Mall. The objective is
to reduce the quantum of debt below £400 million and the
leverage to a level where we can both recommence distributions
and look forward with confidence to the refinancing of the
CMBS which matures in April 2015.
Our focus on shopping centres which are dominant in the
communities they serve gives us confidence that we will
continue to be able to respond to changing consumer
behaviours. As in prior years the priority will be to ensure that
occupancy levels remain high to maintain the vibrancy of the
schemes in the belief that we will be able to rebuild and grow
income levels over time. Plans will be progressed for each of
our schemes ranging from refurbishment to extensions and
major redevelopments which will enhance their relevance to the
consumers and retailers they serve.
Hugh Scott-Barrett
Chief Executive
Strategy
The Group has delivered on its commitment to make significant
progress in 2012 in focusing Capital & Regional on its core
UK Shopping Centre activities. We have achieved this through
disposals of The Junction, X-Leisure and Braehead, whilst the
acquisition of Kingfisher Centre, Redditch adds critical mass and
reinforces our core shopping centre activities.
Our objective remains to grow our portfolio of UK shopping
centres which are held both through our investment in the
Mall and in joint ventures with our key partners. We have a
unique management platform that supports our aim to be a
leading investor and property and asset manager of dominant
community schemes. Our focus is on shopping centres which
have a dominant market share in the communities they serve
and which provide attractive and affordable space for retailers.
The Mall remains at the centre of C&R’s strategy and will
continue to be a priority for the allocation of capital. Each of
the underlying core properties offers attractive opportunities for
asset management initiatives and development opportunities.
Our aim is to help position the Mall to access the necessary
capital to exploit these opportunities. We will seek to take
advantage of opportunities to increase further our stake in order
to support the execution of our strategy for the Mall. To date,
these purchases have been very accretive for our shareholders.
Capital & Regional will continue to leverage its management
platform by investing with our key partners in shopping centres
which share similar characteristics to the Mall. Our acquisition
in partnership with Oaktree of the Kingfisher Centre, Redditch,
confirms the belief that we are able to generate superior returns
from investing in and managing such assets.
04
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Our business
UK Shopping Centres
The Group’s Shopping Centre business comprises its
investment in The Mall Fund, a specialist UK community
shopping centre brand, owning eight properties with a
total lettable space of over four million square feet which
accommodates over 950 retail units. In addition the Group
has interests in The Waterside Centre, Lincoln and The
Kingfisher Centre, Redditch.
Our approach
The core strength of Capital & Regional is managing
dominant UK community shopping centres. Embedded in
our culture is a passion to deliver outstanding operational
performance. This ethos has been built up over many years
of shopping centre ownership during which we have created
a unique in-house platform with demanding operating
standards. The platform comprises specialists covering all
the relevant disciplines of property and asset management.
Our teams think like retailers so they create and maintain
environments that deliver sustained profits for our
occupiers and an outstanding shopping experience for the
communities we serve. Branding to us is not a name change
or new sign, it’s a culture that runs through every element
of our shopping centre business and is why the Mall brand
is recognised as being synonymous with best practice in
managing shopping centres.
See further information on our properties on page 115
United Kingdom
Shopping Centres
10 Locations
Pictured Above:
The Mall, Wood Green
Pictured Above:
The Mall, Walthamstow
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05
www.capreg.comStock Code: CALOverview Our business continued
The elements which help to differentiate us include:
• Our people – our teams hold strong common values and a
clear vision as to what makes our business special.
• Operational standards – we regularly measure each Mall
against well defined and detailed brand standards, always
striving for improvement. Amongst other aspects this ensures
we provide clean and safe places to shop.
• Retail relationships – we have built up excellent relationships
with our retailers and they trust us to deliver on our promises
and recognise the value in our operating culture. We
understand their needs for space which allows us to plan to
optimise the configuration of space as well as helping us to
mitigate the exposure from tenant administrations.
• Technology – shopping habits are changing with a continuing
trend towards online shopping, ‘click and collect’, social
media and mobile marketing. Successful retailers now operate
through genuine multi-channel formats which enhance
the physical shopping experience with the use of mobile
technologies. We are absolutely committed to meeting both
the challenges and the opportunities which can be derived
from technological change.
Specific aspects include:
– The Mall website (www.themall.co.uk) which was launched
in 2007 and was the first UK branded website covering a
portfolio of shopping centres. We have received 25 million
page views since then, 55% of which now arrive through
our mobile enabled site.
– Enhancing our marketing and social media feedback
through the development of mobile enabled websites, social
networking and The Mall smart phone apps and loyalty
based marketing and promotions.
– Introducing free Cloud Wi-Fi across the shopping centre
portfolio.
– We recently signed up fulfilment company “Bybox” to drive
our click and collect service.
– We are working with our retail partners to help them fulfil
their evolving omni channel requirements utilising our
existing Mall digital media platforms.
– Retailer affiliate marketing hosted on: themall.co.uk.
• Ancillary revenues – using the portfolio scale and leverage from the
Mall brand, we have driven income from many sources – including
advertising, promotional space, Retail Merchandising Units
(RMU’s), digital commerce, gift cards, and telecoms, amongst
others. Our ancillary income was up 4.5% like for like in 2012.
• Marketing – by regularly talking to our community of shoppers,
we engage and encourage repeat visits and more spend.
• Operational costs – leveraging the scale of our portfolio we
drive down costs in all areas of expenditure. Service charges
sit at an average £4.30 psf, 15.7% below the industry
benchmark (source: Jones Lang LaSalle 2011 survey).
• Environment – we are passionate about operating responsibly,
and through our Enviromall operating system, now established
for ten years, we have an industry leading track record of
year on year improvements with specific excellence in energy
reduction and waste management.
Our Assets
Our operational excellence is complemented by the assets that
we own and manage. We ensure that our property assets are
aligned with the constantly evolving demands of our tenants and
shoppers, developments in technology, and consumer behaviour.
The key features we look for in our assets are:
• Town centre locations which are dominant in the local
community with significant catchment
• Affordable and sustainable rents
• Attractive opportunities to generate future growth in value
from asset management or development opportunities
• Ownership of car parking and good local transport facilities
06
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Our shoppers have demanding expectations of the level of
service, convenience, range and quality of facilities, together
with a real appreciation of value and local community. These
community hubs provide our retailers with a cost effective
location from which to serve their customers and sit as an
essential element of the multichannel operation. We believe only
those shopping centres which can consistently deliver these
different elements will continue to be successful.
Our non-executive directors also bring a depth of experience of
the internet, retailer and consumer markets to the Board. This
ensures our strategy is responsive to the changing retailer and
consumer demands that impact on our property assets.
The Waterside Shopping Centre,
Lincoln
The Waterside Shopping Centre was purchased in February
2011 and the Group owns a 50% interest in a joint venture with
Karoo. The shopping centre is located on a prime retail pitch in
the centre of the cathedral city of Lincoln and has a total lettable
space of 118,000 square feet and 46 retail units.
The Kingfisher Centre, Redditch
The Kingfisher Centre was acquired in May 2012 through a joint
venture with funds managed by Oaktree Capital Partners with
the Group taking a 20% interest. The centre forms the majority
of the town centre of Redditch comprising 920,000 square feet
and 166 retail units.
The Mall Fund
Its key statistics are:
Number of properties
Property value at independent
valuation
Passing rent (like for like)
Initial yield (like for like)
Property level return
Occupancy (like for like)
Loan to value ratio
Net debt to value ratio
C&R share
1 Increased to 20.33% after year end
At
30 December
2012
8
At
30 December
2011
9
£851m
£68m
7.00%
1.0%
97.0%
67%
55%
20.15%1
£971m
£70m
6.92%
6.2%
95.8%
69%
56%
18.16%
All of the assets of the UK Shopping Centre business are
managed by Capital & Regional Property Management (‘CRPM’)
as asset and property manager. For The Mall, Aviva Investors
fulfils the regulated fund management role and investors hold
units in a Jersey Property Unit Trust (JPUT) which provides
exposure to a diversified portfolio of properties without direct
investment and the ability to transfer units without incurring
Stamp Duty Land Tax.
See further information on our properties on page 115
Pictured Above:
The Mall, Camberley
Pictured Above:
The Kingfisher Centre, Redditch
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07
www.capreg.comStock Code: CALOverview Germany
Retail Properties
26 Locations
Our business continued
Germany
The commercial retail property portfolio in Germany is a joint
venture with AREA Property Partners. The joint venture owns 26
properties with a total lettable space of over 3.3 million square
feet. Its key statistics excluding portfolio 4 are:
Number of properties
Property value at independent
valuation
Contracted rent
Initial yield
Property level return
Occupancy (like for like)
Loan to value ratio
Net debt to value ratio
C&R share
At
30 December
2012
26
At
30 December
2011
26
€414.8m
€32.5m
6.6%
6.6%
97.9%
74%
71%
49.60%
€417.9m
€32.5m
6.6%
7.8%
99.0%
76%
72%
49.60%
Garigal Asset Management GmbH, a German asset and
property manager, is responsible for the asset and property
management of the German property portfolio and the Group
holds a 30% stake in Garigal.
The key characteristics of the German portfolio are:
• Established out-of-town retail locations, typically anchored by
food retailers
• Standalone hypermarkets and retail parks with sales areas of
more than 3,500 square metres with car parking
• Strong cash generation with generally shorter leases
Pictured Above:
Tönisvort Retail Park
08
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Other UK interests
Leisure: Great Northern Warehouse,
Manchester
The Group owns 100% of this 399,000 square foot property,
which is a converted Victorian warehouse in the heart of
Manchester city centre including a multiplex cinema, casino and
bars, health and fitness, ten pin bowling, restaurants and shops.
The principal occupiers of its 46 units are AMC Cinema, Virgin
Active, London Clubs International and All Star Lanes.
Leisure: Leisure World, Hemel
Hempstead
The Group owns 100% of the 156,000 square foot leisure
property which is located in Hemel Hempstead. Planning
permission has been granted for a comprehensive
redevelopment and re-branding of the scheme replacing
the swimming complex and nightclub with family oriented
restaurants.
Ski operator: SNO!zone
The Group owns 100% of SNO!zone which is the largest indoor
ski slope operator in the UK. SNO!zone operates in the two
Xscapes at Milton Keynes and Castleford which are owned by
the X-Leisure Fund.
Pictured Above:
Pictured Above:
All Star Lanes, Great Northern Warehouse, Manchester
Great Northern Warehouse, Manchester
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09
www.capreg.comStock Code: CALOverview Operating review
The principal focus of management during 2012 has been to
implement its strategy of disposing of non-core assets in order to
concentrate resources on its core UK Shopping Centre business.
During the year the Group realised £15.0 million in cash from the
disposal of its interest in The Junction and its 50% share of Xscape
Braehead. In addition £2.6 million of Performance Fee income was
received in respect of The Junction. The Group also exchanged
contracts for the sale of its interest in the X-Leisure Fund and
X-Leisure Limited which completed after the year end raising a
further £30.6 million after related transaction costs. During the last
three years the Group has disposed of its interest in £1.9 billion of
property at a discount to prevailing valuation of around 0.7%. As a
result of these actions the Group’s see-through net debt has fallen
to 55% from 75% since December 2009.
Since the year end the Group has completed the disposal of its
interest in FIX and a parcel of land raising up to £1 million.
UK Shopping Centres
Occupancy levels
Occupancy (like for like)
UK Shopping Centres
30 December1
2012
%
96.7
30 June
2012
%
94.6
30 December1
2011
%
96.1
1 Occupancy at December 2012 and December 2011 includes a seasonal increase
Wood Green
in temporary lettings.
The increase in occupancy has been achieved in difficult market
conditions for our tenants and despite a significant number
of administrations during the year. We continue to focus on
maintaining high levels of occupancy which create shopping
destinations which are appealing to shoppers and tenants and
which acts as a springboard for growth in rental values.
New lettings, renewals and rent reviews
There has been good letting activity across the portfolio.
Retailers are prepared to invest in new stores and in refurbishing
their existing space as demonstrated by Debenhams, who
have extended and refitted their store in Blackburn showing a
willingness to invest in strong schemes.
Blackburn
Maidstone
UK Shopping Centres
Number of new lettings1
Rent from new lettings (£m)
Comparison to ERV (%)2
Renewals settled
Revised rent (£m)
Comparison to ERV (%)
Rent reviews settled
Revised passing rent (£m)
Uplift to previous rent (%)
Comparison to ERV (%)
88
5.1
0.2
25
1.7
2.9
140
8.3
0.1
10.8
1 Excluding the temporary letting of the TJ Hughes space in the Mall Maidstone to
Beales on a flexible basis.
2 For lettings which did not include a turnover rent.
Lettings to new occupiers continued at an encouraging level
during the year and it is particularly pleasing to see new fascias
such as Apple and Pandora taking space in our schemes.
Significant highlights during the year are set out below:
Lettings
Luton
New letting to H&M for a newly created
22,500 sq ft unit. Further lettings totalling
7,000 sq ft to Vodafone, Pandora and
Stormfront who operate an Apple franchise.
We have taken advantage of the administration
of Peacocks to re-let their space as an
extension for TK Maxx at a premium to
previous passing rent. Further lettings include
ten year leases to Schuh on 3,750 sq ft and
Tiger Retail who have taken a 2,700 sq ft unit.
Debenhams have now taken access to their
extended space which has involved combining
three additional units with their existing store
to 95,000 sq ft on a supplemental lease
expiring in 2080. Amongst other notable
events there has been an 11,000 sq ft letting
to Poundworld until 2020.
We are continuing to work to optimise the
returns from the former TJ Hughes space to
catalyse growth in the scheme in conjunction
with a significant refurbishment of the scheme.
In the meantime we have completed ten year
leases with Sports Direct, who took
25,000 sq ft and with The Entertainer for a
5,000 sq ft unit.
Sutton Coldfield We have made excellent letting progress with
a 15 year lease with Barclays Bank and nine
lettings in the second half including deals
with Stormfront (Apple), Card Factory, Sharps
Bedrooms and Paperchase for a total of
8,800 sq ft.
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Lettings
Camberley
Walthamstow
Uxbridge
Lincoln
Redditch
We capitalised on the Clinton’s administration
and used their unit in conjunction with two
others to create a 20,000 sq ft unit over two
floors which has been let to TK Maxx with
occupation targeted for in the second half
of 2013. We also secured the lease of the
nightclub following Luminar’s administration
and made further lettings to Trespass and
Barratts totalling 6,300 sq ft.
New ten year leases were completed with JD
Sports and Carphone Warehouse. Deichmann
Shoes and Warren James have taken space. The
combined space of these lettings is 15,500 sq ft.
New lettings have been completed with
Trespass, Lui Menswear and TFS for
7,000 sq ft.
New letting of the former Barratts unit at the
entrance to the scheme to Office has improved
the appearance of the scheme. Vision Express
were relocated from the rear of the centre
to maintain momentum on the intended
reconfiguration and occupational flexibility was
achieved in respect of the Optical Express and
Julian Graves units following their administration.
The Entertainer was the first new occupier to
take space since the acquisition in May taking
a ten year lease. This was followed by Select
and Pandora with a total of 5,200 sq ft.
As part of our continued support of mobile commerce we
concluded agreements with Cloud Networks, a Wi-Fi operator,
across our portfolio on a six year deal. This importantly provides
free Wi-Fi across our portfolio improving accessibility to our
mobile apps whilst creating an additional income stream.
Since the year end new lettings in the UK Shopping Centres
have been made for contracted rent of £0.9 million.
Administrations
Whilst the number of administrations in 2012 increased
compared to the prior year we have re-let most of those units
that ceased trading, which has supported the strong occupancy
levels reported above.
Year ended
30 December
2012
69
5.8
6 months
ended
30 December
2012
20
1.0
6 months
ended
30 June
2012
49
4.8
UK Shopping Centres
Administrations (units)
Passing rent (£m)
During the year, the UK shopping centre business was
adversely affected by a number of significant administrations.
The most notable of these were Peacocks, Bon Marche, Julian
Graves, Game Group, Clinton Cards and Birthdays. Throughout
our primary objective was to maintain occupancy unless there
was a preferable asset management opportunity such as the
TK Maxx extension at Wood Green. This strategy has sustained
income and mitigated void costs thus preserving the vibrancy of
the centres.
Of the 69 units affected by administrations during the year
46 have been re-let while nine either continue to trade and
are expected to be re-let or will be re-let as part of on going
asset management plans. There were 14 units affected by
administration which closed and have not yet been re-let with
pre-administration passing rent of £0.7 million.
By the end of February 2013 there had been 13 units that
had entered administration with passing rent of £1.3 million
representing 1.6% of the year end passing rent. 11 of these
insolvencies relate to the widely reported HMV, Jessops and
Republic administrations. At the end of February 2013, of the
13 units six remained trading, two had been re-let (including
one to Morrisons Local with the lease being extended at an
increased rent) and one forms part of the new TK Maxx store
being created in Camberley. Four units had been closed.
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Income security
Credit risk is managed through the assessment of the covenant
strength of all incoming tenants and by monitoring credit ratings
of key existing tenants. Where possible we look to pre-empt the
consequences of administrations through contingency planning
and actively seeking to reduce exposure to known risks. For
example, in Walthamstow we had previously taken a surrender
of the HMV lease and re-let the space at ERV. The ten largest
occupiers by rental income at 30 December 2012 are given
below.
UK Shopping Centres
Alliance Boots Limited
Debenhams Properties Limited
BHS Limited
Primark Stores Limited
Superdrug Stores Plc
New Look Retailers Limited
Arcadia (excluding BHS)
Wilkinsons Hardware Stores
Argos
WH Smith
%
4.8
3.3
2.9
2.8
2.4
2.3
2.3
2.2
1.9
1.8
Rent collection rates in the UK shopping centres (adjusted
for tenants in administration) have continued to be strong
throughout the year, with 97.4% of rent being paid within
14 days of the due date for December 2012.
Footfall
The UK Shopping Centres’ footfall has outperformed the
national footfall index by 2.5% although there has been a fall in
shopper numbers over the year of 1.8% compared to a decline
of 4.3% in the benchmark index, demonstrating the strength of
the portfolio. In 2013 UK Shopping Centre footfall has continued
to outperform the benchmark; in the ten weeks to 4 March
2013 The Mall decline of 2.5% on the prior year was 1.1%
better than the benchmark index.
Temporary lettings
At 30 December 2012 on a like for like basis there were 128
temporary lettings (2011: 113) for a net rent of £3.1 million
(2011: £3.2 million) compared to an ERV of £6.4 million
(2011: £5.8 million).
Passing rent
Passing rent across our UK shopping centres increased in the second half of the year following the fall in passing rent which
occurred in the first half of the year.
Passing rent (like for like)
UK Shopping Centres
December
2012
£m
82.3
June
2012
£m
81.6
December
2011
£m
84.6
The UK Shopping Centre passing rent decreased by £2.3m during the year principally due to income lost as a result of tenant
failures in the first half of the year. This was offset by the income generated from new lettings as set out above. There was a further
£3.6 million of contracted rent at 30 December 2012 which is not included in the passing rent figures above.
Investment portfolio performance
The property level total returns are set out below:
30 December 2012
UK Shopping Centres1
1 Weighted average by year end property valuation.
Property
valuation
£m
1,009
Capital
return
%
(4.1)
Total return
%
1.5
Initial yield
%
7.1
Equivalent
yield
%
7.6
Within UK shopping centres there has been a differential return performance with those schemes located in the south east and,
particularly, in London being capitalised on tighter investment yields than those in the rest of the country.
The Mall Fund has outperformed its quarterly IPD index by 50 basis points during 2012.
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Asset management and development
Capital for new asset management initiatives will be recycled from within existing businesses into projects which will deliver value
using our in-depth knowledge of retailer requirements for each location. Across the portfolio there is an attractive and exciting
pipeline with near term plans for a number of properties as set out below.
Shopping Centres
Maidstone
Securing a long-term anchor tenant for the former TJ Hughes store is the key initiative. We are in discussions with a number of
major space users in conjunction with a significant investment in the appearance of the scheme.
Camberley
The key letting activity over the year has been securing TK Maxx, who take occupation of a 20,000 sq ft unit in July 2013.
Our ambition is for a 291,000 sq ft extension to the centre. We are in discussions with the local authority and an anchor tenant to
secure the requisite agreements during 2013.
Luton
Following the successful opening of the 22,500 sq ft store for H&M who were not previously represented in Luton we are in
advanced negotiations with River Island for a store upsize and with Deichmann for a new store.
Longer term development opportunities remain around the current market site and the Silver Street land between the centre and
railway station.
Walthamstow
We have continued discussions with the local authority from both a planning and head lease perspective for a 60,000 sq ft
extension. Our aim is to submit a planning application during the latter part of 2013.
We are progressing options in the existing scheme to create bigger format retail space to accommodate both existing tenant
upsizes and create space suitable for new MSU retailers.
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Lincoln
Our reconfiguration proposals are at an advanced stage. Terms have been agreed with two fashion anchors with a third agreement
imminent. Together, these lettings account for 52,000 sq ft of lettable space. We also have agreed terms to relocate the food court
operator to a newly created Riverside unit.
Development flexibility around existing occupiers has been largely secured and a full planning application covering the
reconfiguration works will be submitted before the end of Q1 2013 to enable a start on site by the end of June 2013 and a
completed opening by October 2014.
Redditch
We have submitted a planning application to reconfigure the former TJ Hughes to
create 19,000 sq ft of restaurant space at ground floor and a 15,000 sq ft gym on
the lower level, the letting of which is in solicitor’s hands. Offers have been received
from nationally recognised operators for the restaurants and we are continuing to
negotiate these.
We are creating a fashion zone on Evesham Walk and terms have been agreed to
relocate Poundland from this unlocking the space to introduce better fashion offers
targeting Top Shop, H&M and River Island.
We are exploring opportunities to create a food store offer in the centre. Architects
have created developed plans that are under discussion with mainstream
supermarket operators.
Other properties
Hemel Hempstead
We are well progressed with our repositioning proposals for the leisure scheme. We
are in legals with operators for five catering units which we are working to document
by the end of Q1 2013, with good interest in the final two units under active
consideration.
Negotiations continue with operators for the leisure space, covering bowling, fitness
and bingo uses and we are targeting legal agreements by the end of Q1 2013/early
Q2 2013.
Pictured Above:
The Hub Leisure Concept, The Kingfisher Centre,
Redditch
Pictured Above:
Leisure World, Hemel Hempstead
Great Northern
A new letting of the ground floor to the ten pin bowling operator, All Star Lanes, has completed and they opened in March 2013.
This will increase activity at the venue and has helped secure a letting to Almost Famous Burgers on a ten year term. Further lettings
to a bar-nightclub and a further restaurant are in legals.
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Other UK Operations
SNO!zone
The SNO!zone business has had an excellent year increasing its recurring pre-tax profit by 71% to £1.2 million. This has been the
result of like for like income growth of 2% which was achieved despite disruption from the weather in January 2012. Significant
cost reductions have been achieved following a detailed management review of the business’s operations which included the
disposal of the loss making site in Braehead, Glasgow last year. We expect further efficiency gains will be achieved in 2013 with the
implementation of new online booking systems.
German portfolio
The Group’s commercial retail property portfolio in Germany is in a joint venture with AREA Property Partners and is held in six
individual and separate joint venture portfolios.
As reported more fully in note 17c to the Financial Statements the Group impaired its investment in German portfolio 4 to £nil in
June 2012 and as a consequence data on this is excluded from the review below. Portfolio 4 differs from the remaining portfolios
in that it had the weakest assets in the joint venture with greater exposure to East Germany and non-food retailers. Portfolio 4 had
gearing 28% higher at 102% and 30% shorter lease lengths at the date of its impairment.
The key portfolio property data at 30 December 2012 is as follows:
Weighted
average
lease
length
Years
6.8
4.8
10.8
8.2
6.2
7.8
Occupancy
%
96.2
98.3
99.0
99.8
95.3
97.9
Property sizes
Total
#
6
3
9
4
4
26
>€50m
#
–
1
–
–
–
1
€50m -
€20m
#
–
1
2
1
2
6
€10m -
€20m
#
3
–
4
2
1
10
Average
Property
value
€million
9.2
30.9
16.0
14.6
16.8
16.1
Passing
rent
€million
4.4
6.8
11.0
4.6
5.7
32.5
<€10m
#
3
1
3
1
1
9
Portfolio
1
2
3
5
6
Total
The movement in German portfolio properties is as follows:
Portfolio
1
2
3
5
6
Total
Valuation
30 December
2012
€million
54.2
92.3
143.5
54.7
70.1
414.8
Valuation
30 December
2011
€million
55.3
92.7
144.3
58.3
67.3
417.9
Valuation
movement
€million
(1.0)
(0.5)
(0.7)
(1.6)
3.2
(0.6)
NIY
30 December
2012
%
6.6
6.3
6.5
7.2
6.8
6.6
NIY
30 December
2011
%
6.8
6.3
6.4
6.8
7.0
6.6
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15
www.capreg.comStock Code: CALBusiness Review Operating review continued
In our German portfolio contracted rent has remained broadly stable at €32.5 million with 20 rent increases through indexation and
ten new lettings increasing rent by €0.5 million. These were offset by seven expiries and three lease regears which had a downward
impact on rent levels. The focus has been to extend the length of the income stream to increase or maintain valuation, improve
marketability and to aid refinancing of the properties. Passing rent decreased marginally from €32.5 million to €31.8 million due to
€0.7 million of rent free periods.
Occupancy remains strong at 97.9%, only marginally less than 98.7% at December 2011 due to two lease expiries. The weighted
average lease length (WALL) has been maintained at 7.8 years.
The key initiatives undertaken in the year were:
• An agreement has been signed to renew the lease with Real at Ingelheim which was due to expire in August 2014, with a new 15
year lease at the same rent. We have contributed €0.5 million to the refit of their store.
• In Bruhl we have negotiated a further five year extension to 2024 with Real in consideration of which we have agreed to upgrade
the car park and entrance.
• At Herne we are working on improvements and an extension to the scheme, which on completion will result in Toom taking a new
15 year lease on their existing unit.
• At Lauchhammer a new ten year lease with Toom and a seven year lease extension with Edeka improved the WALL by six years
following refurbishment.
• At Kreuztal a letting has been signed for 1,000m2 to Rossman and terms agreed with Medimax for a further 1,250m2.
Negotiations are advanced for a letting to a major food retailer which would generate combined additional rent of €0.5 million per
annum.
• At Hameln a planning application has been submitted for a proposed 550m2 extension. A letting to Expert, an electronics retailer,
has been agreed to take 2,200m2 with a target lease start date of June 2014 subject to planning. At the same time we are
negotiating lease extensions with tenants in conjunction with a refurbishment of the scheme.
• At Aachen we have agreed a ten year lease to replace the current tenant, Praktiker, on expiry in July 2013. This is conditional on
successful change of use planning application.
• A sale of Taufkirchen has been agreed at the year end valuation of €6.4 million.
16
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Financial review
Key performance indicators
The key performance indicators we use to measure our
performance against our strategy and objectives are:
Investment returns
Net assets per share
EPRA net assets per share
Return on equity
Total shareholder return
Financing
Group net debt
Proforma net debt to equity ratio2
Proforma see-through net debt to
property value1,2
Profitability
Recurring pre-tax profit
(Loss)/profit for year
Basic earnings per share –
continuing and discontinued
operations
2012
2011
51p
55p
(8.5)%
(9.5)%
£53.3m
13%
56p
63p
11.9%
(3.8)%
£47.2m
24%
55%
64%
£17.0m
£(16.0)m
£16.4m
£21.1m
(5)p
6p
Property under management
£1.4 billion
£2.5 billion
1 See-through debt and see-through net debt divided by IFRS property value as
disclosed in note 23a.
2 Adjusted for £30.6 million X-Leisure proceeds received in January 2013. See note
23a for figures pre-adjustment.
Investment returns
Net assets per share decreased in the year to 51p, down 5p or
8.9% since 30 December 2011, and EPRA net assets per share
decreased to 55p, down 8p, or 12.6% since 30 December
2011. The change in net assets resulted in a -8.5% return on
equity for the year.
£0.6
£0.5
£0.4
£0.3
£0.2
£0.1
£0
2010
2011
2012
NAV Per Share (£)
United Kingdom
Germany
NAV Constituents (%)
The Mall
Germany
X-Leisure (held for sale)
Great Northern
Kingfisher Redditch
Hemel Hempstead
Waterside Lincoln
Other net assets
37.9%
23.4%
17.0%
7.4%
5.2%
4.8%
3.8%
0.4%
To provide a greater understanding of the composition of the business, the Group presents its balance sheet in two separate ways,
with the “statutory” balance sheet following the accounting and statutory rules, and the “see-through” balance sheet showing the
Group’s proportionate economic exposure to the different property portfolios. These are shown below as at 30 December 2012:
See-through
Debt
£m
(115.0)
(124.3)
–
–
(57.6)
(17.2)
(6.8)
–
–
–
(1.0)
(321.9)
Property
£m
180.8
168.9
–
–
70.0
26.3
13.0
8.4
–
–
–
467.4
Statutory
30 December
2012
£m
68.0
42.6
30.6
–
12.8
9.4
7.1
8.2
–
–
0.9
179.6
Other
£m
2.2
(2.0)
30.6
–
0.4
0.3
0.9
(0.2)
–
–
1.9
34.1
See-through
Property
£m
184.8
247.8
66.5
36.7
71.5
–
13.0
8.3
24.1
26.1
0.2
679.0
Debt
£m
(120.3)
(197.5)
(35.4)
(21.8)
(61.9)
–
(6.8)
(5.3)
(22.8)
(25.2)
–
(497.0)
The Mall
Germany
X-Leisure1
The Junction
Great Northern
Kingfisher Redditch
Waterside Lincoln
Hemel Hempstead
Xscape Braehead
FIX
Other net assets
Net assets
1 For 2012 X-Leisure shown at net realisable value of £32.2 million less related costs of £1.6 million as per note 30.
Other
£m
0.4
4.4
(0.6)
2.2
(1.7)
–
0.4
–
2.9
0.1
5.9
14.0
Statutory
30 December
2011
£m
64.9
54.7
30.5
17.1
7.9
–
6.6
3.0
4.2
1.0
6.1
196.0
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www.capreg.comStock Code: CALBusiness Review
Financial review continued
Financing
The Group net debt to equity ratio increased from 24% to 30% over the course of the year, primarily due to the acquisition
of the Kingfisher Centre, Redditch combined with a decrease in shareholders’ equity of £12.4 million. Following the receipt in
January 2013 of the proceeds for the Group’s interest in the X-Leisure Fund the proforma net debt to equity ratio at 30 December
2012 was 13%. A summary of the movements in Group and off balance sheet debt during the year is set out below:
At 30 December 2011
Property acquisition
Other drawdowns
Repayments from disposals
X-Leisure – excluded on reclassification as asset held for sale
Other repayments
Increased investment in The Mall
Impairment of German portfolio 4
Impairment of FIX
Foreign exchange
At 30 December 2012
Group debt
£m
67.2
3.6
1.0
–
–
(13.2)
–
–
–
–
58.6
Off balance
sheet debt
£m
429.8
17.2
–
(60.2)
(35.6)
(9.1)
13.2
(63.2)
(24.5)
(4.3)
263.3
See-
through
debt
£m
497.0
20.8
(2.6)
(60.2)
–
(17.9)
13.1
(63.2)
(25.2)
(4.3)
321.9
Group debt
Group debt fell by £8.6 million to £58.6 million at 30 December 2012 (2011: £67.2 million). This fall was due to a £3.8 million loan
repayment of the Great Northern Warehouse loan and the repayment of the £5.3 million loan on the Hemel Hempstead property
which matured during the year. Both of these repayments were made using central funds. The breakdown of Group debt and net
debt at 30 December 2012 are set out below with the proforma impact of the X-Leisure disposal:
30 December 2012
Core revolving credit facility
Great Northern
Group debt
Cash and cash equivalents
Group net debt
Proforma proceeds from X-Leisure disposal
Proforma net debt
Debt1
£m
1.0
57.6
58.6
(5.3)
53.3
(30.6)
22.7
Loan to
value3
%
Average
interest rate2
%
n/a
79
3.70
7.51
7.45
Duration to
loan expiry
Years
3.6
1.8
Fixed
%
–
102
102
1 Excluding unamortised issue costs.
2 In the case of variable rate loans, based on LIBOR at 30 December 2012 plus the appropriate margin.
3 Debt and net debt divided by investment property at fair value and trading property at the lower of cost and net realisable value.
The core revolving credit facility was utilised during the year and the maximum amount drawn down was £14.8 million (2011: £nil).
This was mainly as a result of the £5.3 million repayment of the Hemel Hempstead loan at maturity and the repayment of
£3.6 million of the Great Northern Warehouse loan. At 30 December 2012 there was £1 million drawn down on the central facility.
The forecast covenant tests indicate that there is sufficient headroom for the full £25 million facility available to be drawn down.
18
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 In August 2012 the Group signed a new revolving credit facility for £25 million with Bank of Scotland, a reduction from £58 million
and with maturity extended to July 2016 from September 2013. This revised facility better reflects the Group’s working capital
requirements and reduces the cost of the undrawn facility. At the same time the Group extended the maturity of the loan on Great
Northern Warehouse by one year to October 2014. The main covenant terms of the revolving facility are reproduced in the section
“Covenant Information”.
Off balance sheet debt
Off balance sheet debt, which is non-recourse to the Group, fell by £130.9 million to £298.9 million at 30 December 2012
(2011: £429.8 million) as a consequence of asset disposals and the exclusion of the German portfolio 4 and FIX following their
impairment.
The proforma breakdown of the Group’s share of off balance sheet debt and net debt at 30 December 2012 after adjustment of
£35.6 million for the disposal of the X-Leisure Fund was as follows:
Group share
30 December 2012
The Mall
Germany
Waterside Lincoln
Kingfisher Redditch
Off balance sheet
Debt1
£m
115.0
124.3
6.8
17.2
263.3
Cash3
£m
(21.4)
(4.1)
(1.0)
(1.6)
(28.1)
Net debt
£m
93.6
120.2
5.8
15.6
235.2
1 Excluding unamortised issue costs.
2 Debt and net debt divided by investment property at fair value.
3 Excluding cash beneficially owned by tenants.
Loan to
value2
%
67
73
52
65
Net debt
to value2
%
55
71
44
59
Average
interest
rate
%
4.23
3.93
4.70
6.17
4.23
Weighted
average
duration to
loan expiry
Years
2.3
2.2
2.1
4.3
2.4
Fixed
%
100
90
100
100
95
The Mall Fund’s debt was reduced by £91.4 million to £570.9 million at 30 December 2012 (2011: £662.3 million). This decrease
was due to debt repayments from the sale proceeds of Norwich and from cash generated from operations. The second amortisation
target required by the Mall Fund’s CMBS of £600 million by December 2014 has been achieved well in advance of the required date.
The Mall Fund will be permitted to recommence distributions when the LTV of the Fund, which is currently 67%, is less than
60% and we expect this to be achieved later in 2013. Approval has been received from the bond holders to utilise approximately
£13.4 million of funds held in Camberley Unit Trust to repay debt which would result in a proforma LTV of 65%.
Total German debt decreased by €170.1 million to €306.7 million at 30 December 2012 (2011: €476.8 million). At the applicable
exchange rates this was equivalent to £250.5 million (2011: £398.2 million). The decrease is due to the exclusion of €156.4 million of
debt in the German portfolio 4 following the impairment and loss of joint control and amortisation payments of €13.7 million during
the year.
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www.capreg.comStock Code: CALBusiness Review Financial review continued
Maturity analysis
The table below shows the maturity profile of the see-through debt and undrawn core credit facility at 30 December 2012 excluding
debt relating to the X-Leisure Fund:
Sterling debt drawn
Euro debt drawn
Undrawn core credit facility
As at 31 December 2012
2013
£m
–
43.2
–
43.2
2014
£m
57.6
27.0
–
84.6
2015
£m
121.8
28.0
–
149.8
2016
£m
1.0
11.1
24.0
36.1
2017
£m
17.2
15.0
–
32.2
Total
£m
197.6
124.3
24.0
345.9
In relation to the Euro debt secured on the German properties discussions have already begun with a number of lenders to refinance
these loans and we expect this debt to be refinanced by June 2013 well in advance of maturity.
Covenants
The Group and its associates and joint ventures were compliant
with their banking and debt covenants at 30 December 2012,
except as disclosed below:
• The German joint venture has obtained a covenant waiver
until maturity on 31 December 2013 for two loans in the same
portfolio which had marginally breached their LTV covenants
albeit that the overall portfolio covenant was met.
• The German portfolio 4 formally defaulted on 16 July 2012
and was placed into special servicing.
Further details on the various debt covenants are disclosed in
the ‘other information’ section in covenant information.
Interest rate hedging
The majority of current borrowing, both at Group level and in the
funds and joint ventures, continues to be covered by interest
rate swaps or caps. At 30 December 2012, the see-through
valuation of the Group’s swaps and caps was a liability of
£14.4 million (2011: £18.8 million) which will not be crystallised
unless the underlying contracts are closed out before their expiry
date. During the year, The Mall and The Junction terminated
swaps at a total cash cost of £13.3 million, of which the Group’s
share was £1.9 million.
Cash distributions
The Group received total cash distributions of £2.4 million during
the year comprising a £0.9 million tax distribution from The Mall
Fund; £1.1 million from the X-Leisure Fund; £0.2 million from
Garigal Asset Management and £0.2 million from FIX UK.
Profitability
Recurring pre-tax profit
The Group’s recurring pre-tax profit increased by £0.6 million
to £17.0 million for the year ended 30 December 2012
(2011: £16.4 million). The breakdown of recurring pre-tax
profit, as defined in note 1, is as follows (and as set out further in
note 2a):
UK Shopping Centres
German property investment
Property management
SNO!zone
Other including Leisure
Group items
Discontinued Operations
(The Junction, X-Leisure and
Xscape Braehead)
Recurring pre-tax profit
Year to
30 December
2012
£m
5.6
7.1
3.4
1.2
1.6
(4.6)
Year to
30 December
2011
£m
4.3
7.9
4.1
0.7
2.5
(4.7)
2.7
17.0
1.6
16.4
The recurring pre-tax profit of £5.6 million from UK Shopping
Centres reflects the acquisition of The Kingfisher Centre,
Redditch and additional Mall units during the period. The fall
in recurring profitability in Germany principally reflects the loss
of income from portfolio 4. Recurring profits within Property
Management have decreased due to the net impact of the loss
of fees in respect of The Junction and Mall disposals partially
offset by fees arising from The Kingfisher Centre and the
agreement of an asset management and development contract
with Scottish Widows Investment Partners for the Broadwalk
Centre, Edgware. The improvement in SNO!zone recurring profit
reflects cost savings delivered from the restructuring of the
business during the year.
20
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Loss for the year
The loss for the year ended 30 December 2012 was £16.0 million
(2011: profit of £21.1 million) and is analysed below:
Recurring pre-tax profit
Property revaluation
(Loss)/profit on disposal of
properties within funds
Performance fees – net of Group
share of cost
Impairments in respect of German
portfolio 4
Other impairments
Financial instruments revaluation
on interest rate swaps
Investment income
Gain on investment in The Mall
Loss on disposal of JV and
Associates
Other items
Tax
(Loss)/profit for the year
Year to
30 December
2012
£m
17.0
(20.8)
Year to
30 December
2011
£m
16.4
1.7
(1.6)
2.0
(6.5)
(3.1)
3.6
–
1.4
(4.0)
(2.9)
(1.1)
(16.0)
0.7
–
–
(0.1)
2.6
4.0
1.1
–
(3.0)
(2.3)
21.1
As well as the recurring pre-tax profit discussed above, the other
main factors behind the loss in the year were:
• Property devaluation of £20.8 million was mainly due to a fall
in the value of Germany of £10.0 million, of which £8.6 million
relates to the impairment of German portfolio 4 and a decline
in the value of The Mall of £7.6 million attributable to the loss
of income due to the level of administrations, most of which
occurred in the first half of the year.
• Impairments in respect of German portfolio 4 include
£3.3 million related to the write down of the carrying value of
the equity investment in German portfolio 4 to £nil to reflect
the significant fall in property values during 2012 which
resulted in the portfolio defaulting on its debt and being
put into special servicing in July 2012. Since the year end
an administrator has been appointed over the properties in
portfolio 4. A further £3.2 million impairment was recognised
on the Group’s investment in the Euro B-Note, reducing the
carrying value to £2.3 million, reflecting the risk of recovering
the loan due from German portfolio 4 given the continuing
uncertainty.
• Other impairments include £1.8 million of Goodwill previously
held in respect of X-Leisure Limited and £1.3 million related to
the write down of the carrying value of FIX UK to £nil to reflect
the fall in value of the assets such that the net asset value was
negative. Since 30 December 2012 the Group has disposed
of its interest in FIX realising up to £0.5 million.
• Gain on investment in The Mall related to the Group’s
purchase of 18.7 million units in The Mall Fund as detailed
below.
Tax
The tax credit for the year on continuing operations was
£0.9 million compared to a charge of £2.0 million in the prior
year consisting of £1.4 million credit of current tax and £0.5
million of deferred tax charge (2011: £1.8 million of current tax
charge and £0.2 million of deferred tax charge). The reduction
in the current tax charge arises primarily due to a prior year tax
credit to the income statement of £2.1 million.
The current tax liability was £1.3 million at year end (2011: £3.0
million). The final payment of £5.0 million was made in the year
for the settlement concluded with the tax authorities during 2009
in relation to the tax structuring of certain property disposals by
the Group in 2004 and 2005 and as such no further liabilities
exist at 30 December 2012 in respect of this matter.
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21
www.capreg.comStock Code: CALBusiness Review Financial review continued
Property under management
During the year, property under management fell due to property and fund disposals, which was partially offset by the acquisition of
Redditch. The overall impact on property under management is set out below and has been adjusted for the disposal of the X-Leisure
Fund which completed after the year end.
100%
UK Shopping Centres
The Junction
X-Leisure
German joint venture (excluding portfolio 4)
Other properties
Property under management
Valuation
30 December
20111
£m
Disposals/
additions
£m
Other
movements2
£m
Revaluation
£m
Valuation
30 December
20121
£m
997
288
565
496
135
2,481
60
(256)
(587)
–
(50)
(833)
(2)
(4)
(3)
(140)
(6)
(155)
(46)
(28)
25
(17)
2
(64)
1,009
–
–
339
81
1,429
1 Valuation excludes adjustments to property valuations for tenant incentives and head leases treated as finance leases and trading properties are included at the lower of
cost and net realisable value.
2 Primarily the exclusion of German portfolio 4 and foreign exchange movements in Germany.
The split of property under management by sector has changed
as a result of the sale of The Junction during the year and the
reclassification of X-Leisure to an asset held for sale. The sector
analysis at 30 December 2012 and prior year end is as follows:
Property under management by sector (%)
Property acquisitions
On 1 May 2012, the Group acquired a 20% interest in The
Kingfisher Shopping Centre in Redditch for a total consideration
of £10.6 million in partnership with funds managed by Oaktree
Capital Management Limited. The Kingfisher Centre was
purchased for £130.0 million at an 8% initial yield. The Group acts
as property and asset manager for the partnership.
Shopping Centres
Leisure
Germany
70.7%
5.6%
23.7%
Shopping centres
Leisure
Germany
Retail parks
2012
%
70.7
5.6
23.7
–
100.0
2011
%
40.2
28.2
20.0
11.6
100.0
Disposals
On 12 July 2012 The Mall sold The Castle Mall Shopping
Centre, Norwich for £77.3 million at a net initial yield of 7.8%.
On 19 October 2012 the Group disposed of its 13.4% interest
in The Junction fund for proceeds of £14.0 million including
Performance Fee of £2.6 million.
On 24 December 2012 the Group sold its 50% interest in the
Braehead Partnership for £4 million.
On 4 December 2012 the Group announced the conditional
sale of its interest in the X-Leisure Fund and its 50% interest
in X-Leisure Limited for gross proceeds of £32.2 million. This
disposal subsequently completed on 16 January 2013.
22
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012
Mall unit purchases
On 8 February 2012, the Group purchased 18.7 million units in
The Mall Fund at £0.30 per unit for a total consideration of
£5.6 million and this further increased the holding in The Mall
Fund from 18.16% to 20.15%.
On 18 January 2013 the Group purchased 1.6 million units in
The Mall Fund at £0.25 per unit for a total consideration of
£0.4 million. As a consequence the Group’s holding in The Mall
Fund is now 20.33%.
Foreign currency exposure management
The Group uses a forward foreign exchange contract as a
hedge of its net investment in the German joint ventures. At
30 December 2012, this was achieved through a contract for
€47.0 million (2011: €47.0 million) at a fixed exchange rate of
1.1797 (2011: 1.1797) which hedges 97% (2011: 81%) of the
Group’s German investment. At 30 December 2012 the value
of the contract was an asset of £1.4 million (2011: asset of
£0.6 million). After the year end the Group closed out the
forward contract of €47.0 million which matures on 28 March
2013 and entered into a new forward contract for €37.6 million
until 31 December 2013 at a fixed exchange rate of 1.1617.
To the extent the hedge is effective under accounting rules,
valuation movements on the forward contract is shown in
reserves, where they partially offset the gain or loss in the value
of the net investment in the Group’s German joint ventures.
Financing strategy
Our financing structure needs to be flexible and cost effective
and this was achieved through having cash of £5.3 million and
a central revolving credit facility of £25 million at 30 December
2012 of which £1 million was drawn at that date. At end of
February 2013 following receipt of the X-Leisure disposal
proceeds the Group had cash of approximately £32 million. This
gives the Group the scope to fund future property investments
as opportunities arise.
At an associate and joint venture level, debt has been raised
from a variety of sources, with a spread of maturities to mitigate
refinancing risk as set out in the debt maturity analysis chart.
Debt held in associates and joint ventures is non-recourse to
the Group.
Going concern
As stated in note 1 to the consolidated financial statements, the
directors are satisfied that the Group has sufficient resources to
continue in operation for the foreseeable future, a period of not
less than 12 months from the date of this report. Accordingly,
they continue to adopt the going concern basis in preparing the
consolidated financial statements.
Charles Staveley
Group Finance Director
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23
www.capreg.comStock Code: CALBusiness Review Principal risks and uncertainties
There are a number of risks and uncertainties which could have a material impact on the Group’s future performance and could cause
actual results to differ materially from expected and historical results. References to “the Group” include the funds and joint ventures in
which Capital & Regional has an interest. The Group carries out a regular review of the major risks it faces and monitors the controls
that have been put in place to mitigate them. Property risks are also monitored at various levels within divisional management.
Risk
Impact
Mitigation
Property risks
Property investment market risks
• Weak economic conditions and poor
sentiment in commercial real estate
markets leading to low investor demand
and market pricing correction
• Small changes in property market yields
have a significant effect on the value of
the properties owned by the Group
• Impact of leverage could magnify the
effect on the Group’s net assets
Impact of the economic environment (tenant risks)
• Tenant insolvency or distress
• Tenant failures and reduced tenant
• Prolonged downturn in tenant demand
and pressure on rent levels
demand could adversely affect rental
income revenues, lease incentive costs,
void costs, available cash and the value
of properties owned by the Group
Threat from the Internet
• The trend towards online shopping may
adversely impact consumer footfall in
shopping centres
• A change in consumer shopping habits
towards online purchasing and delivery
may reduce footfall and therefore
potentially reduce tenant demand for
space and the levels of rents which can
be achieved
• Monitoring of indicators of market
direction and pursuit of opportunistic
asset sales in those schemes and
locations most likely to suffer adverse
impact
• Review of debt levels and
consideration of strategies to reduce if
relevant
• Geographical diversification of
investments
• Large, diversified tenant base
• Review of tenant covenants before
new leases signed
• Long term leases and active credit
control process
• Good relationships with, and active
management of, tenants
• Void management through temporary
lettings and other mitigation strategies
• Strong location and dominance of
shopping centres (predominantly
South East England)
• Strength of the community shopping
experience
• Increasingly retailers within our
shopping centres use stores as
collection points for purchases made
by consumers online
• Monitoring of footfall for evidence of
falling visitors to shopping centres
• Monitoring of retail trends and
shopping behaviour
• Mobile smart phone marketing
initiatives
24
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Impact
Mitigation
• Stated property valuations may not reflect
• Use of experienced, external valuers
Risk
Valuation risks
• In the absence of relevant transactional
evidence, valuations can be inherently
subjective leading to a degree of
uncertainty
Property management income risks
• Fee income, although largely fixed, may
still fall based on value of property under
management
• Contracts allow for termination under
certain circumstances, which are largely
outside management’s control
the price received on sale
• Changes in property values, sales of
properties or other events not wholly
under management’s control could result
in a reduction in or the loss of property
management income
Nature of investments and relationships with key business partners
• The market for the Group’s investments
• Inability to sell investments or fully control
exit/asset sale strategies could result
in investments in associates and joint
ventures not being realisable at reported
values
can be relatively illiquid
• Restrictions on ability to exercise full
control over underlying investments in
joint ventures or fund structures
Funding and treasury risks
Liquidity and funding
• Inability to fund the business or to
refinance existing debt on economic
terms when needed
• Inability to meet financial obligations
(interest, loan repayments, expenses,
dividends) when due
• Limitation on financial and operational
flexibility
• Cost of financing could be prohibitive
Covenant compliance risks
• Breach of any of loan covenants causing
default on debt and possible accelerated
maturity
• Unremedied breaches can trigger
demand for immediate repayment of loan
• Rotation of valuers
• Valuations reviewed by internal
valuation experts
• Monitoring of compliance with terms of
contracts
• Close dialogue with other investors
and stakeholders
• Contracts have now been largely
renegotiated to fix income
• Reduction of cost base as fee income
falls to mitigate loss
• Close dialogue with other investors
and stakeholders to align strategies
and increase influence over the
direction of investments
• Exercise of significant influence over
associates and joint ventures through
representation on management boards
• Capital raising, debt refinancing and asset
sales at both Group and fund levels have
improved liquidity position, reduced the
potential impact of falls in property values
and positioned the Group to respond
quickly to the turning point in the cycle
• Ensuring that there are significant
undrawn facilities
• Option of further asset sales if necessary
• Efficient treasury management and
regular proactive reporting of current and
projected position to the board to ensure
debt maturities are dealt with in good time
• Regular monitoring and projections
of liquidity, gearing and covenant
compliance
• Review of future cash flows and
predicted valuations to ensure
sufficient headroom
25
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www.capreg.comStock Code: CALBusiness Review Principal risks and uncertainties continued
Risk
Foreign exchange exposure risks
• Fluctuations in the exchange rate
between sterling and the euro in respect
of the Group’s German joint venture
• Uncertainty over the Eurozone and the
future of the euro currency
Interest rate exposure risks
• Exposure to rising or falling interest rates
Other risks
Tax risks
• Exposure to changes in tax legislation or
the interpretation of tax legislation and
property related regulations
• Potential exposure to tax liabilities in
respect of transactions undertaken where
the tax authorities disagree with the tax
treatment adopted
Regulation risks
• Exposure to changes in existing or
forthcoming property related or corporate
regulation
Loss of key management
• Dependence of the Group’s business
on the skills of a small number of key
individuals
Impact
Mitigation
• Adverse impact on sterling valuation
of investments and income flows, and
losses as a result of the Group having
not, or not effectively, hedged its risk
• Exposure minimised by funding the
German investment through euro
denominated borrowings and hedging
a large proportion of the remaining
investment through derivatives
• Regular monitoring of the effectiveness
of hedging and performance of
derivative contracts
• If interest rates rise and are unhedged,
the cost of debt facilities can rise and ICR
covenants could be broken
• Regular monitoring of the performance
of derivative contracts and corrective
action taken where necessary
• Hedging transactions used by the Group
to minimise interest rate risk may limit
gains, result in losses or have other
adverse consequences
• Use of alternative hedges such as
caps
• Tax related liabilities and other losses
• Expert advice taken on tax positions
could arise
and other regulations
• Maintenance of a regular dialogue with
the tax authorities
• Failure to comply could result in financial
penalties, loss of business or credibility
• Management undertake training to
keep aware of regulatory changes
• Loss of key individuals or an inability
to attract new employees with the
appropriate expertise could reduce
the effectiveness with which the Group
conducts its business
• Expert advice taken on complex
regulatory matters
• Key management are paid market
salaries and offered competitive incentive
packages to ensure their retention
• Succession planning for key positions is
undertaken
• Performance evaluation, training and
development programmes are in place
to maintain and enhance the quality of
staff
The risks noted above do not comprise all those potentially faced by the Group and are not intended to be presented in any order of
priority. Additional risks and uncertainties currently unknown to the Group, or which the Group currently deems immaterial, may also
have an adverse effect on the financial condition or business of the Group in the future. These issues are kept under constant review to
allow the Group to react in an appropriate and timely manner to help mitigate the impact of such risks.
26
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Significant contracts or arrangements
The Company is required to disclose any contractual or other arrangements which it considers are essential to its business.
• The asset and property management agreement in relation to The Mall is considered to be essential for the Company because of
the fee income it generates for the Company’s subsidiary CRPM and the significant influence it allows the Group to assert over
its investment. The asset and property management agreement for the German portfolio is also considered to be essential for the
Company because of the fee income it generates for the Garigal associate, and the significant influence it allows the Group to
assert over the investment.
• The Bank of Scotland £25.0 million central credit facility which provides the Group with liquidity.
• The Company also acts as a guarantor of the Great Northern loan and the Group’s central credit facility.
Certain of these agreements can be terminated in the event of a change of control of the Company as disclosed in the Directors’
report.
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27
www.capreg.comStock Code: CALCorporate Governance Board of directors
Executive directors
Hugh Scott-Barrett
Chief Executive, 54
Kenneth Ford
Executive Director, 59
Xavier Pullen
Executive Director, 61
Hugh has been Chief Executive since April 2008.
He was previously a member of ABN AMRO’s
managing board and served as Chief Operating
Officer between 2003 and 2005 and Chief
Financial Officer from 2006 to July 2007. Hugh
brings over 25 years’ banking experience having
also worked at SBC Warburg and Kleinwort
Benson prior to joining ABN AMRO. He
was educated both in Paris and at Oxford
University. Hugh is a non-executive director of
GAM Holding AG, a Swiss asset management
company, and a non-executive director of The
Goodwood Estate Company Limited.
Ken Ford has been involved in commercial
real estate for over 30 years and has been an
executive director of Capital & Regional Plc
since 1997. At C&R he has responsibility for the
development of new business initiatives and
has oversight of the Group’s shopping centre
portfolios. Ken has a BSc in Land Economics
and is a Fellow of the Royal Institute of Chartered
Surveyors.
Member of Responsible Business Committee.
Xavier is a founder director of the Company
formed in 1979 and now responsible for
managing the German joint venture and the
wholly-owned Great Northern property.
Charles Staveley
Group Finance Director, 49
Charles was appointed to the Board as
Group Finance Director in October 2008. He
qualified as a Chartered Accountant with
Arthur Andersen and has additional tax and
treasury qualifications. Before joining the Group
he was Head of Tax and Treasury at
Colt Telecommunications, prior to which he held
roles with various other companies including
De La Rue plc, Textron Inc and Novar plc.
28
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Non-executive directors
John Clare
Chairman, 62
Neno Haasbroek
Non-executive, 58
Philip Newton
Non-executive, 64
Chairman of Nomination Committee, member of
Audit and Remuneration Committees
John was Group Chief Executive of Dixons
Group plc between 1993 and 2007 and a
non-executive director of Hammerson plc
between 1988 and 2009. He was also Chairman
of JobCentrePlus between 2006 and 2012 and
Chairman of Dreams Plc between 2008 and
2011. John was appointed as a director and
Chairman of the Company in 2010.
Neno was a co-founder and director of
Attfund Limited (one of the largest private
property investment companies in South Africa)
until the company was restructured and sold to
Hyprop Investments Limited (a company listed
on the Johannesburg Stock Exchange in South
Africa) on 1 September 2011. He is a director of
the Parkdev Group of Companies, and serves
on the board of a number of other companies,
including The Karoo Investment Fund. He has a
BSc Building Science degree from the University
of Pretoria and an MBA from the University of the
Witwatersrand. Neno was appointed a director
of the Company in 2009.
Senior Independent Director, Chairman of
Remuneration and Responsible Business
Committees and member of Audit Committee
Philip is the former CEO of Merchant Retail
Group plc, owners of The Perfume Shop, a
150 store chain that he developed from its
beginnings. He is Chairman of Windsor Vehicle
Leasing Limited, a vehicle finance and fleet
management company and a trustee and
board member of the British Thoroughbred
Breeders Association. His early career was in
the District Valuer’s Office and then the property
development industry. Philip was appointed as a
director of the Company in 2006.
Louis Norval
Non-executive, 57
Tony Hales
Non-executive, 64
Louis was a co-founder, Executive Chairman and
Chief Executive of Attfund Limited (one of the
largest private property investment companies in
South Africa) until the company was restructured
and sold to Hyprop Investments Limited (a
company listed on the Johannesburg Stock
Exchange in South Africa) on 1 September 2011.
He was appointed a non-executive director on
the Board of Hyprop Investments Limited. Louis
is also managing director of the Parkdev Group
of Companies, and serves on the board of a
number of other companies. He graduated in
BSc (QS) (with distinction) from the University of
Pretoria. Louis was appointed a director of the
Company in 2009.
Chairman of Audit Committee, member of
Nominations and Remuneration Committees
Tony is currently Chairman of the British Canal
and River Trust, Senior Independent Director of
International Personal Finance plc and chairs
NAAFI Pension Fund Trustees. Tony was
previously Chief Executive of Allied Domecq plc
and a non-executive director of HSBC Bank plc,
as well as Chairman of Workspace Group plc.
Tony was appointed as a director of the
Company in 2011.
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29
www.capreg.comStock Code: CALCorporate Governance
Directors’ report
Introduction
The directors present their report together with the audited
financial statements for the year ended 30 December 2012.
Results and proposed dividends
The consolidated income statement shows a loss for the year
(after taxation and results of discontinued operations) of
£16.0 million (2011: profit of £21.1 million).
The directors are not recommending the payment of a final
dividend meaning that no dividend will be payable for the full
year. The current dividend policy links future payments to the
Group’s cash generating ability and will normally be restricted
to not more than 50% of operating cash flow less interest
and tax to comply with the undertakings given for the Group’s
banking arrangements. Following further de-gearing, the Mall
is likely to recommence distributions in the second half of
2013. Should this happen, the Board expects to resume the
payment of a dividend to be covered by cash earnings with the
announcement of the 2013 results.
Principal activities, trading review and future developments
The principal activity of the Group is that of a specialist property
company focusing on retail investments in the UK and Germany.
The Group uses in-house asset and property management
teams to maximise the value from the properties for investors
and tenants. The Group has an investment in a well established
UK retail fund; a joint venture with a German retail property
portfolio; joint ventures in two UK retail properties and interests
in wholly owned retail and leisure properties.
A review of the activities and prospects of the Group is given in
the Chairman’s statement, the operating review and the financial
review.
Business review
The information that fulfils the requirements of the business
review including key performance indicators can be found in the
operating review and the financial review which are incorporated
in this report by reference.
Events after the reporting period are set out in note 34 to the
financial statements.
More detail on the financial risks facing the Group is set out in
note 23 to the financial statements.
The purpose of this annual report is to provide information
to the members of the Company. The annual report contains
certain forward-looking statements with respect to the
operations, performance and financial condition of the Group.
By their nature, these statements involve uncertainty since
future events and circumstances can cause results and
developments to differ materially from those anticipated. The
forward-looking statements reflect knowledge and information
available at the date of preparation of this annual report and the
Group undertakes no obligation to update them. Nothing in this
annual report should be construed as a profit forecast.
Directors
The directors of the Company during the period were:
H Scott-Barrett, J Clare, K Ford, N Haasbroek, P Newton,
L Norval, X Pullen, C Staveley, M Wolstenholme (retired
31 August 2012), and T Hales.
In connection with the Parkdev Investors’ acquisition of
Parkdev Firm Placed Shares and pursuant to the Relationship
Agreement that the Parkdev Investors and the Company
entered into in 2009, the Company agreed, upon request, to
appoint two non-executive directors nominated by Parkdev
to the Board for so long as the Parkdev Investors own 20%
or more of the issued ordinary share capital in the Company
and one non-executive director to the Board if the Parkdev
Investors own less than 20%, but not less than 15% of the
issued ordinary share capital in the Company. L Norval and N
Haasbroek are Parkdev nominated non-executive directors.
In accordance with best practice under the UK Corporate
Governance Code 2010, all the directors will retire at the AGM
and will offer themselves for annual re-election.
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 252 of the Companies Act 2006)
are interested in 108,117,053 issued shares representing 30.9%
of the issued ordinary share capital of the Company as detailed
in the directors’ remuneration report.
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. No director had a material interest in the
share capital of other Group companies during the year.
30
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Substantial shareholdings
In addition to the interests of the directors, the Company has
been notified pursuant to Section DTR5 of the FSA Disclosure
& Transparency Rules of the following notifiable interests in
its issued ordinary share capital at (7 March 2013) (the latest
practicable date prior to the issue of this report):
Parkdev International Asset
Managers
Henderson Global Investors
Standard Life Investments
Morgan Stanley Investment
Management
Pinelake International
APG Asset Management
Number of
shares
82,505,610
40,016,140
35,043,641
33,330,837
18,924,243
15,820,147
%
23.58
11.44
10.01
9.53
5.41
4.52
Capital structure
The Company has one class of Ordinary shares of one pence
each with equal voting rights. In addition, the trustees of the
Long Term Incentive Share Scheme have the right to vote on
behalf of the Group’s employees. Further information is given in
notes 24 and 25 to the financial statements.
The Group has agreements in place which alter upon a change
of control of the Company as follows:
• The £25 million core revolving credit facility can be called
in if there is a change of control of the Company, which is
defined to be either the Company ceasing to hold not less
than 100% of the issued share capital and voting rights of
the borrower, or 50% of its issued share capital being held by
or on behalf of a single entity or group, or 30% of the issued
share capital being held by or on behalf of a single entity
or group and more than 50% of the directors immediately
following the completion of the Amendment and Restatement
of the current facility in August 2012, ceasing to be directors
at the time the 30% limit is breached. If this occurs the
bank has the right to repayment of the loan. In the case of
Parkdev, the 30% limit is ignored if their holding exceeds 30%
and no mandatory takeover offer is required as a result of a
whitewash resolution being passed.
• In addition, certain taxes could be potentially levied, and
certain tax losses could be lost in some circumstances where
there are varying degrees of change of ownership of the
Group’s shares.
• The Mall Fund has the right to remove CRPM as asset and
property manager of the fund if there is a change of control
of Capital & Regional plc. The Mall General Partner board has
discretion whether to trigger this provision and it has indicated
that it will not exercise its discretion to enforce this provision
were it to come about. In addition, this provision will be
removed upon the refinancing of the Mall Bond.
Use of financial derivatives
The use of financial derivatives is set out in note 23 to the
financial statements.
Charitable donations
The main thrust of charitable support is at local level through
the Group’s associates and joint ventures. At Group level small
donations have been made during the year totalling £13,600
(2011: £10,818).
Political donations
The Group made no political donations during the year
(2011: £nil).
Payment of suppliers
The policy of the Group is to settle supplier invoices within
the terms of trade agreed with individual suppliers. Where no
specific terms have been agreed, the Group endeavours to
make payment within one month of the receipt of the goods or
service. At the year end, the Group had an average of 20 days
(2011: 20 days) purchases outstanding.
Purchase of own shares
At the balance sheet date, the Company had authority to
purchase 10.0% of the issued share capital and this authority
will be renewed at 10.0% at the AGM.
On 10 January 2013, the Company obtained a waiver under
Rule 9 of the City Code on Takeovers and Mergers such that if
the AGM authority were exercised in full, the aggregate holding
of Parkdev International Asset Managers Pty Limited and their
related parties (the “Concert Party”) would represent 32.4567%
of the issued share capital.
As at 11 March 2013 (the last practical date prior to the
publication of this report) the Company had bought back
698,958 shares in 2013.
Shares acquired during the year
The Capital & Regional Employee Share Ownership Trust did
not acquire any shares in 2012 (2011: nil). Details are set out in
note 26 to the financial statements.
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31
www.capreg.comStock Code: CALCorporate Governance Auditors’ information
Each of the persons who is a director at the date of approval of
this annual report confirms that:
• So far as the director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and
• The director has taken all the steps that he/she ought to have
taken as a director in order to make himself/herself aware
of any relevant audit information and to establish that the
Company’s auditors are aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of s418 of the Companies Act
2006.
A resolution to re-appoint Deloitte LLP as the Company’s
auditors will be proposed at the forthcoming AGM.
By order of the Board
Falguni Desai
Company Secretary
12 March 2013
Directors’ report continued
Compliance with UK Corporate Governance Code
A statement on corporate governance is set out in the
corporate governance report, which is incorporated in this
report by reference.
Responsible business
The responsible business statement is set out in the responsible
business report, which is incorporated in this report by
reference.
Employees
The Group is committed to a policy that treats all of its
employees and job applicants equally. No employee or potential
employee receives less favourable treatment or consideration
on the grounds of race, colour, religion, nationality, ethnic
origin, sex, sexual orientation, marital status, or disability. Nor
is any employee or potential employee disadvantaged by any
conditions of employment or requirements of the Group that
cannot be justified as necessary on operational grounds.
During the year, the Group maintained arrangements to provide
employees with information on matters of concern to them, to
regularly consult employees for views on matters affecting them,
to encourage employee involvement in the Group’s performance
through share schemes, and to make all employees aware of
financial and economic factors affecting the performance of the
Group.
Stakeholder pensions
As a result of the Government’s introduction of stakeholder
pensions in April 2001, employers must provide their employees
with access to a stakeholder pension scheme. The Group
appointed consultants, who put such a scheme in place, and
also nominated a stakeholder pension provider at that time.
Employees have been able to join this scheme since May 2001.
Registered office
The Company’s registered office address is 52 Grosvenor
Gardens, London SW1W 0AU.
32
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and Article 4 of the
IAS Regulation and have elected to prepare the parent company
financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company
law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the
state of affairs of the Company and of the profit or loss of the
Company for that period.
In preparing the parent company financial statements, the
directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 requires that directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance; and
• make an assessment of the Group’s ability to continue as a
going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Group’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Directors’ responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and
• the Operating Review and Financial Review, which are
incorporated by reference into the directors’ report,
includes a fair review of the development and performance
of the business and the position of the Company and
the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board
Hugh Scott-Barrett
Chief Executive
Charles Staveley
Group Finance Director
12 March 2013
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33
www.capreg.comStock Code: CALCorporate Governance Directors’ remuneration report
Unaudited information
Remuneration Committee
The Company has a Remuneration Committee (“the
Committee”) appointed by the Board, consisting entirely of
non-executive directors, which is constituted in accordance with
the recommendation of the UK Corporate Governance Code. P
Newton acted as Chairman until 14 August 2012, with
M Wolstenholme (retired 31 August 2012) and T Hales
(appointed as Chairman on 14 August 2012) as the other
members of the Committee. J Clare was appointed as a
member of the Committee on 4 February 2013.
J Clare is not classified as an independent non-executive
director for the purposes of the UK Corporate Government
Code, solely by virtue of him being the Chairman of the Board,
however, he was an independent non-executive director at the
time of his appointment as Chairman. All of the other members
were and remain independent non-executive directors.
The terms of reference of the Committee are available for
inspection on the Group’s website.
The Committee is responsible for setting the remuneration
policy for the executive directors and senior employees. The
Committee determines the terms of the service agreements,
salaries and discretionary bonus payments, as well as deciding
on the awards to be made to all participants in the Group’s
share schemes. Advice from independent external advisers
PwC was obtained during the year.
This year the Committee has reviewed remuneration policy
particularly with regard to the operation of its LTIP to align it
more closely with the Company’s current strategy. That strategy
is designed to simplify the Group, strengthen the balance sheet
and create greater liquidity for shareholders, whilst maintaining
operational momentum and in doing so improve overall returns
for shareholders. An extensive consultation with shareholders
took place regarding proposed changes to both short and long
term schemes. As a result of those consultations the Company
will be making new LTIP awards shortly. The intended awards
are outlined later in this report.
The executive directors’ annual salaries are shown below:
Remuneration policy
The Committee 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 delivering improved returns to
shareholders through the execution of a challenging strategy.
In order to align the interests of executive directors with the interests
of shareholders, a significant proportion of directors’ remuneration is
performance related through the use of annual bonus and incentive
schemes. Performance-related payments are deferred to aid
retention. Clawback provisions will be introduced going forward from
the 2013 LTIP awards in the event of misconduct or misstatement
of results. Annual cash bonus payments will not be subject to a
clawback. In addition, the Committee aims to achieve an appropriate
balance between directors’ remuneration packages and those of
other key management.
Basic salaries
The Committee’s policy is to set the basic salaries of executive
directors at levels which reflect their roles, experience and the
practices in the employment market. The basic salaries have
been set in the past with reference to the FTSE 350 Real Estate
comparative group and this will be reviewed by the Committee
on an ongoing basis.
From 1 January 2010 , the executive directors (CEO from 2009)
voluntarily reduced their annual salaries for two years whilst
the Group went through a period of strengthening the balance
sheet and refocusing the business.
With effect from 1 January 2011, The Committee approved a
4.4% inflationary salary increase for the executive directors. The
salary increase was applied to the reduced level of salaries.
Following expiry of the two year voluntary reduction in executive
director salaries on 1 January 2012, the Committee considered it
was appropriate to conduct a review of executive director salaries.
This review used external benchmarking data to ensure that
executive director salaries are in line with current market rates for
similar sized listed property companies and director experience.
The executive directors will not receive an increase in salaries
in 2013.
Executive directors
H Scott-Barrett
X Pullen
C Staveley
K Ford
Compound
growth*
%
4.2
0.3
1.9
1.1
2013
£000
400
295
280
295
2012
£000
400
295
280
295
2011
£000
313
209
261
261
2010
£000
300
200
250
250
2009
£000
340**
292
260
282
* Compound growth per annum from 2009 to 2013 in executive directors’ annual salaries.
** Salary reduced from £360,000 in 2008 to £340,000 in 2009, the compound growth per annum from 2008 to 2013 is 2.2%.
34
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Annual bonus scheme
The Committee may award cash bonuses to executive directors
up to 100% of salary based on the Committee’s independent
assessment of the Group’s financial performance during the year
and the performance of each executive director against specific
and measurable objectives agreed with the Committee at the
beginning of each year.
The Committee calibrates the targets for each executive director so
that achievement of a maximum pay out under these arrangements
would represent performance in excess of the Group budget and
individual targets. Achievement of Group budget and of individual
targets broadly corresponds to a 50% pay out.
75% of the potential bonus is based on the performance against
key financial and business targets for the Group as well as for
the areas of the business for which they are responsible. The
remaining 25% is based upon the achievement of objectively
measurable personal key performance targets.
In 2012, the key group financial objectives reflected the EPRA
NAV and NAV targets agreed for the Group budget as well
as the level of recurring pre-tax profit. Recurring pre-tax profit
constituted 50% of the Group financial metric with the balance
accounted for by the two NAV measures. Business objectives
were geared to the success in execution of strategy and in
particular the disposal of non-core assets including X-Leisure
and The Junction, the further de-risking of the Group balance
sheet including the extensions granted for both the Group’s
revolving credit facility and the Great Northern facilities and the
successful integration of the Redditch acquisition.
Against these finance, business and personal objectives, the
executive directors achieved ratings of between 3.0 and 3.75.
A rating of 3 (out of 5) constitutes “on target” performance.
In each of the years 2008, 2009 and 2010, the Committee
declined to award any bonus in the light of the very challenging
outlook for the Company in this period and it was only in 2011
that the Committee took the view that the improved financial
position of the Company provided sufficient comfort to consider
the award of cash bonuses to executive directors.
Based on the above mentioned performance, the Committee
has decided to award the directors the following cash bonus
amounts:
Hugh Scott-Barrett
Kenneth Ford
Xavier Pullen
Charles Staveley
£276,000
£155,000
£148,000
£165,000
The Committee has recently reviewed the appropriateness of
the current cash bonus policy and has decided to retain it in its
current form.
Incentive schemes
The Group had two incentive schemes under which awards
subsisted during the year:
• The Long Term Incentive Plan (the “2008 LTIP”)
• The Save As You Earn Plan (the “SAYE Scheme”)
A summary of the principal features of the 2008 LTIP and the
SAYE Scheme are set out under “Audited information” below.
Pension arrangements
The Group makes contributions, at proportional rates to
basic salary, to defined contribution pension schemes of each
executive director’s choice, except in the case of X Pullen where
a salary supplement of £51,845 was paid in lieu of pension
contributions.
Other benefits
Benefits consist of private medical insurance cover, permanent
health insurance cover, critical illness cover and life cover.
Service contracts
Each of the present executive directors has a rolling service
agreement which can be terminated on one year’s notice by
either party. In the event of early termination of an executive
director’s agreement, the Committee will determine the
amount of compensation (if any) to be paid by reference to the
circumstances of the case at the time. It is the Committee’s
policy not to reward poor performance and to take account of
the executive director’s duty to mitigate loss. The dates of the
executive directors’ service agreements are as follows:
H Scott-Barrett
X Pullen
K Ford
C Staveley
9 March 2008
28 October 1993
17 May 1996
1 October 2008
The Group allows executive directors to take up external positions
outside the Group, providing they do not involve a significant
commitment and do not cause conflict with their duties to the
Group. Directors are allowed to retain all remuneration arising
from any external position.
X Pullen is a non-executive director for Brandeaux, a privately
owned fund management group. H Scott-Barrett is a
non-executive director of GAM Holding AG, a leading Swiss
asset management company, and a non-executive director of
The Goodwood Estate Company Limited. The Group does not
consider that these appointments involve significant commitment
or that the roles conflict with their duties to the Group. Any
earnings received from the appointments are kept by the
individuals concerned and have not been disclosed to the Group.
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35
www.capreg.comStock Code: CALCorporate Governance Directors’ remuneration report continued
Chairman and non-executive directors
Each non-executive director received fees of £40,000 per annum in
2012, compared to £36,000 per annum in 2009. From 1 January
2010, the non-executive directors had voluntarily reduced their
annual fees for two years. The Senior Independent Director and
Chairmen of the Audit and Remuneration Committees received an
additional fee of £5,000 per annum. The Chairman received a total
fee of £125,000 per annum.
The non-executive directors are not entitled to bonuses, benefits,
pension contributions or to participate in any incentive schemes.
Their remuneration comprises a standard director’s fee and a fee,
where relevant, for additional responsibilities. The remuneration
provided takes into account the level of responsibility, experience
and abilities required and the marketplace for similar positions
in comparable companies. In certain circumstances, if there is a
requirement for extra work to be carried out by a non-executive
director, an additional fee is paid by the Group to that director
from time to time. Details of the non-executive directors’ fees are
set out under ‘Audited information’ below.
None of the non-executive directors has a service agreement and
they are all appointed for three year fixed terms.
Performance graph
The graph below is prepared in accordance with the Directors’
Remuneration Report Regulations 2002 and illustrates the
Company’s performance compared to a broad equity market
index. The Group uses The Thomson Reuters Datastream Real
Estate Index. Performance is measured by total shareholder
return (share price growth plus dividends paid).
300
250
200
150
100
50
0
36
2005
2006
2007
2008
2009
2010
2011
2012
Capital & Regional: TOT Return Ind
FTSE All Share: TOT Return Ind
UK-DS Real Est Inv, Svs: TOT Return Ind
Audited information
2008 LTIP
The 2008 LTIP was set up to replace the 2002 LTIP but no
awards were made under this scheme in 2008 or 2009. The
rules of the 2008 LTIP originally permitted awards of up to
150% of salary on an annual basis (up to 200% in exceptional
circumstances) but were amended in 2010 to allow one-off
awards to be made up to 360% of salary. The Committee made
one-off awards to the executive directors during 2010 covering
the three year period 2010 to 2012 to address the need for
management retention and incentivisation, whilst also reflecting
the turnaround through which senior management were leading
the Company.
On 14 June 2010 the Trustees of the LTIP granted awards to the
following executive directors:
Director
H Scott-Barrett
K Ford
X Pullen
C Staveley
Shares awarded
3,000,000
2,000,000
2,000,000
2,000,000
The awards under the LTIP were based on achieving Total
Shareholder Return (“TSR”) targets over a three year period,
based on the average TSR over a 30 day period prior to the
date of award and date of vesting. The targets and vesting
levels are:
Growth in TSR over period
Under 12% per annum
12% per annum
Between 12% and 40%
per annum
40% per annum or above
Percentage of
award vesting
Nil
20%
Pro-rata between
20% and 100%
100%
Only 50% of the vested award will be capable of exercise at the
end of the three year performance period with the remaining
50% deferred for a further twelve months in order to provide a
further “lock-in” for participants.
The awards made in 2010 are due to mature in June 2013 and
are unlikely to deliver any material value.
If these awards do not vest there will be no subsisting long-term
incentive awards for the senior executive team (or indeed any
employee of the Group). The Committee considers it essential to
address this gap and therefore proposes to make new awards
under the LTIP in 2013 as summarised below. Additionally,
there is an acute need to ensure that key management are also
incentivised and locked-in over the short to medium term.
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 of the three year performance period of the LTIP awards, the
Committee strongly believes that management should not be
penalised for ‘early’ delivery of the strategic objectives.
As a result, if an event occurs within the three year performance
period which causes the awards to vest early (eg takeover or a
significant liquidity event with a return of cash to shareholders)
and the TSR performance targets have been met at that time or
as a result of the transaction, the Committee does not propose
to reduce the level of vesting to take account of the length of
the performance period remaining. Although any final decision
would be taken based on the circumstances at the relevant
time, the Committee’s current intention is to exercise discretion
to allow full vesting if the performance targets have been met
in full. If the performance target is met in part, the vesting
schedule mentioned above would be followed although again,
the Committee would not anticipate applying a time proration of
the awards.
The Committee intends to adopt the same approach if the
liquidity event does not give rise to early vesting under the
rules but instead results in an executive leaving employment.
Again, in these circumstances, for the award to vest in full, the
performance targets must have been met in full at that time.
However, if there is no liquidity event within the three year
performance period but the TSR targets are achieved, a
discretionary underpin will apply to the LTIP such that the
Committee must be satisfied that the TSR performance
genuinely reflects management effort and action in delivering
financial performance.
In addition, a deferral/holding period will apply to vested LTIP
awards. Vested awards will not be capable of exercise for a
period of 12 months following vesting (this will not apply in the
case of a liquidity event within three years).
Clawback provisions will apply during this 12 month deferral/
holding period. The level of vesting may be reduced (including
to nil) if there is a material restatement of any of the accounts of
the Company covered by the LTIP performance period or in the
event of serious misconduct by a participant which brings the
Company into disrepute.
These provisions have been discussed with key shareholders.
2013 – intended LTIP Awards
The Committee has engaged and consulted with key
shareholders on its proposals and also considered the current
market practice in structuring long-term incentive arrangements.
As a result, the Committee intends to make the next awards
under the LTIP in 2013 with the intention that they become
the first of a rolling annual cycle of LTIP awards linked to
performance targets measured over a three year period.
These annual awards will fall within the individual limits
contained in the rules of the LTIP (150% or 200% in exceptional
circumstances). It is proposed that awards will be made in 2013
to executive directors as follows:
Participant
Chief Executive
Executive directors
Proposed % of salary award
200%
150%
Awards will also be made to a small group of the senior
managers.
Awards in subsequent years will be at a lower level to ensure
dilution remains within the Plan limits.
Performance targets for the 2013 awards will be based on
absolute growth in TSR with a range of 40p to 70p. 25% of the
award will vest at threshold (40p) and 100% will vest at 70p.
Vesting between these two points will be on a straight line basis.
Linking the new LTIP awards to absolute TSR targets means
that they are closely aligned to the strategic objective of delivery
of value to shareholders.
The Company is in the midst of an ambitious programme to
simplify and increase the focus of the business through the
disposal of non-core assets and the recycling of capital into its
core shopping centre activities.
We have concluded, however, that absolute TSR is appropriate
for the 2013 award, on the basis:
1) The business of Capital & Regional differs from almost all
other quoted companies in the property sector during this
transformation;
2) The level of de-risking of the Company’s balance sheet
(through the gradual reduction of debt) will mean that its
geared growth potential will differ from other companies in
the sector.
As noted above, a key objective of the Company’s strategy is
delivery of value to shareholders. Although this may be achieved
simply through share price growth and superior returns, it
is possible that in seeking to deliver value to shareholders,
management may look to create a significant liquidity event.
The Committee considers it essential that management take
the right decisions for the future of the business in the interests
of shareholders. If this results in a liquidity event before the end
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37
www.capreg.comStock Code: CALCorporate Governance Directors’ remuneration report continued
their option within six months (or 12 months in the case of their
personal representatives after death) from the date of cessation
of employment, but only to the extent of their total savings plus
any interest or bonus accrued.
Takeover, reconstruction or winding up
In the event of a takeover, reconstruction, amalgamation or
voluntary winding up of the Company during the savings period,
participants may exercise options early and within a specified
period to the extent of their total savings plus any interest or
bonus accrued to the date of exercise. If the acquiring company
agrees, the option may be exchanged for an option over shares
in the acquiring company.
Invitations
The SAYE scheme was set up in 2008 when employees were
invited to participate in the scheme. No invitations were made in
2009 or 2010 but a new invitation under this scheme was made
to eligible employees in 2011
SAYE Scheme
Employee eligibility
Generally, all UK resident and ordinarily resident employees and
executive directors of a participating company (who in the case
of directors are contracted to work at least 25 hours per week
for the Group) are eligible to participate in an SAYE scheme.
The Grantor will have the discretion to set a minimum service
requirement of up to five years in order for an employee or
executive director to be eligible to participate in a particular offer
under the SAYE Scheme. All executive directors have waived
their right to participate in the SAYE Scheme.
Savings contract
When an employee accepts an invitation to participate in an issue
of SAYE Scheme options, they will be required to enter into a
savings contract for a period of three or five years under which
they must save between £5 and £250 per month (or such other
minimum or maximum amount determined by the directors and
permitted by legislation). The £250 limit is reduced by any other
savings contract linked to this or any other savings related share
option scheme. These contributions will be deducted from the
employee’s salary. If the participant ceases to make contributions
before the third or fifth anniversary of the commencement of the
savings contract, the option will lapse, except in the case of a
deferral of contributions for a period of up to six months.
Exercise price
The option exercise price shall be determined by the directors and
will be not less than 80% of the market value of a share on the
dealing day, or the average of up to five dealing days, immediately
prior to the date of invitation (or, in the case of an option where
the Group has determined that the option exercise will be satisfied
by the issue of shares directly to the participant, the exercise price
shall not be less than the nominal value of a share, if higher).
Exercise of options
During the period of six months following the end of the savings
contract, the participant may exercise their option to acquire,
at the exercise price, ordinary shares up to the total value of
his monthly savings contributions (plus any bonus or interest
paid On 1 February 2012, the first invitation made in 2008
matured and participants were eligible to exercise their options
for up to six months from this date. thereon where appropriate).
Alternatively, the participant may withdraw their contributions
and any bonus or interest.
Termination of employment
If a participant ceases to be employed within the Group during
the savings period their option will lapse except where cessation
is due to death, injury, disability, redundancy or retirement or as
a result of the Company or the part of the business by which the
participant was employed ceasing to be a member or part of
the Group, in which case the participant will be able to exercise
38
22158.04
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Directors’ emoluments
Director
H Scott-Barrett
X Pullen
K Ford
C Staveley
Subtotal Executive
Directors
J Clare
P Newton
M Wolstenholme
T Hales
L Norval
N Haasbroek
Total
PPP/
Other
Salary
£
£
400,000 3,510
295,000 2,921
295,000 3,787
280,000 2,961
Total
Benefits
£
Salary &
Benefits
£
Bonus
£
3,510 403,510 276,000
2,921 297,921 148,000
3,787 298,787 155,000
2,961 282,961 165,000
Total Mgt
Total
Remun
Cap
£
£
– 679,510
– 445,921
– 453,787
– 447,961
Directors’
Fees
£
–
–
–
–
Ex
Total
Pension
Gratia
£
£
£
– 77,575 757,085
– 51,845 497,766
– 44,250 498,037
– 42,000 489,961
1,270,000 13,179 13,179 1,283,179 744,000
– 2,027,179
–
– 215,670 2,242,849
–
–
–
–
–
–
–
–
–
–
–
–
1,270,000 13,179 13,179 1,283,179 744,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 125,000
–
45,000
–
–
30,000
–
–
42,917
–
–
40,000
–
–
–
40,000
–
– 2,027,179 322,917
– 125,000
–
–
–
45,000
–
–
30,000
–
–
42,917
–
–
40,000
–
–
40,000
– 215,670 2,565,766
The Company encourages executive directors to hold shares,
in the medium term, which are equivalent in value to one
year’s salary of the aggregate purchase price of the shares. In
addition, where shares vest from the LTIP, executive directors
are expected to retain the number of shares required to make
up the amount equivalent to one year’s salary, if this is not
already the case. The Executive Directors are currently in
compliance with these guidelines.
Approval
This report has been prepared in accordance with the Directors’
Remuneration Report Regulations 2002 and was approved by
the Board of directors and signed on its behalf by:
Falguni Desai
Company Secretary
12 March 2013
Interests in shares
The directors and, where relevant, their connected persons
(within the meaning of Section 252 of the Companies Act 2006)
were beneficially interested in the ordinary share capital of the
Company at the dates shown in the table below.
H Scott-Barrett
X Pullen
K Ford
C Staveley
J Clare
N Haasbroek
L Norval
P Newton
M Wolstenholme
T Hales
30 December
2012
Shares
1,202,055
1,914,854
1,851,710
283,121
224,350
102,042,913
102,427,163
163,800
n/a
50,000
30 December
2011
Shares
1,202,055
2,796,181
1,851,710
233,121
224,350
99,429,309
99,636,559
163,800
84,687
50,000
L Norval and N Haasbroek are each beneficially interested in
the shares registered in the name of Parkdev International Asset
Managers (Pty) Limited and Pinelake International Limited.
There have been no changes to the directors’ interests in shares
between 30 December 2012 and the date of this report, except
for H Scott-Barrett who acquired 75,000 shares on 11 January
2013 and K Ford who sold 172,278 shares on 11 January
2013.
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39
www.capreg.comStock Code: CALCorporate Governance
Corporate governance report
Introduction
The Board of directors is accountable to the Company’s
shareholders for the management and control of the Group’s
activities and is committed to high standards of corporate
governance. This report and the directors’ remuneration report
describe how the Company complies with the provisions of
the UK Combined Code on Corporate Governance Code (“the
Code”).
N Haasbroek, are independent. The Nomination Committee
will however continue to review this position. All the Company’s
non-executive directors act independently of management. The
terms and conditions of appointment of non-executive directors
are available for inspection at the Company’s registered office.
L Norval and N Haasbroek as non-executive directors are not
considered independent for the purposes of the Code, as they
represent a significant shareholder of the Company.
Statement of compliance
The Company has complied throughout the year ended
30 December 2012 with the provisions set out in Section 1
of the UK Corporate Governance Code with the following
exceptions:
• The Audit and Remuneration Committees did not comprise
of three members throughout the year up to when P Newton
was appointed on 6 March 2012 and after M Wolstenholme
retired on 31 August 2012. On 4 February 2013, a third
member for both Committees was appointed.
• P Stobart continued to serve as the Senior Independent
Director as required by the Code until he retired on
31 October 2011. Philip Newton was appointed the new
Senior Independent director on 6 March 2012.
The Board has considered these matters and considers that this
non-compliance with the Code does not impede the effective
operation of the Board or the Committees in light of the strength
and skills of the independent non-executive directors.
This section applies to the Capital & Regional plc Group and all
its subsidiaries.
Application of the principles
The Company has applied the principles set out in section
1 of the Code, including both the main principles and the
supporting principles, by complying with the Code as reported
above. Further explanation of how the principles and supporting
principles have been applied is set out below and in the
directors’ remuneration report.
The Board of directors
Details of the directors are set out before the directors’ report.
The Company is controlled through the Board of directors which
comprised the Chairman, four executive and five non-executive
directors. During the year, M Wolstenholme retired on 31 August
2012.
Board balance and independence
The Board and Nomination Committee are satisfied that the
current Board composition provides an appropriate balance of
power and authority within the Company. The Board believes
that all the non-executive directors, excluding L Norval and
P Newton continued to serve as the Senior Independent
Director as required by the Code.
The Company has well established differentiation between
the roles of Chairman and Chief Executive. Written terms
of reference, which have been approved by the Board, are
available for inspection on the Group’s website.
In the Company’s view, the breadth of experience and
knowledge of the Chairman and the non-executive directors’
detachment from the day-to-day issues within the Company
provide a sufficiently strong and experienced balance with the
executive members of the Board. The breadth of experience
attributed to the non-executive directors, allied to the
management information provided by the Company, enables
them to assess and advise the full Board on the major risks
faced by the Company. The other commitments of the Chairman
are detailed in the directors’ biographies.
Board effectiveness
The Board has adopted a schedule of matters reserved for its
decision and a schedule of matters delegated to committees,
both of which are reviewed at least annually. The Board reserves
approval for all significant or strategic decisions including major
acquisitions, disposals and financing transactions. The directors
are entitled to take independent professional advice as and
when necessary.
The responsibilities, which the Board has delegated, are given
to committees that operate within specified terms of reference
and authority limits, which are reviewed annually or in response
to a change in circumstances. The executive directors take
operational decisions and also approve certain transactions
within defined limited parameters. An Executive Directors’
Committee meets on a weekly basis and deals with all major
decisions of the Group not requiring full Board approval or
authorisation by other Board committees. The Executive
Directors’ Committee is quorate with three executive directors in
attendance; if decisions are not unanimous the matter is referred
to the Board for approval. Minutes from the Executive Directors’
Committee meetings are circulated to the Board.
The Audit Committee, Remuneration Committee and
Nomination Committee consist solely of non-executive directors
and meet at least twice a year.
40
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Re-election
available for inspection on the Group’s website.
In accordance with best practice under the UK Corporate
Governance Code 2012, all the directors will retire at the AGM
and will offer themselves for annual re-election.
Performance evaluation
A performance evaluation of the Board and the committees is
conducted each year with each director giving detailed input.
The Chairman meets as necessary, but at least once each year,
with the non-executive directors without the executive directors
present. The non-executive directors meet annually without the
Chairman in order to appraise his performance. This meeting
is chaired by the Senior Independent Director. The Chairman
evaluates the performance of the remaining directors and the
results of the appraisals are analysed and summarised by the
Chairman. Subsequently, the results are discussed by the Board
and relevant consequential changes are made.
Information and professional development
The Board schedules five meetings each year as a minimum,
and arranges further meetings as the business requires. Prior
to each Board meeting, each member receives up-to-date
financial and commercial information in respect of the divisions,
and specifically, management accounts, budgets and forecasts,
details of acquisitions and disposals and relevant appraisals
(prior Board approval being required for large transactions), cash
flow forecasts and details of funding availability.
Induction training is given to all new directors appointed to the
Company and consists of an introduction to the Board, onsite
visits to properties managed by the Group, an introduction
to the divisional teams, an induction pack and access to
independent advisers. The ongoing training requirements of
the directors are reviewed on a regular basis and undertaken
individually, as necessary, although it is recognised that all
members of the Board experience continuous professional
development from working together. This is achieved by virtue of
the dynamic and diverse mix of the Board members, and their
sharing of knowledge and experiences gained from a range of
commercial backgrounds.
Nomination Committee
The Committee comprises of J Clare (Chairman), M Wolstenholme
(retired 31 August 2012) and T Hales. The appointment of a third
member is under review. The Nomination Committee meets as
required to select and recommend to the Board suitable candidates
for both executive and non-executive appointments to the Board.
On an annual basis, the Nomination Committee also considers
succession planning for the Board. The Board members are given
an opportunity to meet the individual concerned prior to any formal
decision. The terms of reference of the Nomination Committee are
Board and committee meetings
The number of meetings of the Board and of the Audit,
Remuneration and Nomination Committees, and individual
attendance by directors, is set out below.
Board meeting attendance in 2012
Scheduled
Ad hoc
Total
Number of
meetings
Attended by:
J Clare
K Ford
X Pullen
H Scott-Barrett
C Staveley
N Haasbroek
L Norval
P Newton
M Wolstenholme*
T Hales
6
6
6
6
6
6
6
6
6
5
6
4
4
4
3
4
4
2
3
4
2
3
10
10
10
9
10
10
8
9
10
7
9
* This director was no longer eligible to attend once they had ceased to be a
director.
Other committee meeting attendance
Audit
Committee
Remuneration
Committee
Nomination
Committee
Responsible
Business
Committee
Number of
meetings
Attended by:
J Clare
P Newton
X Pullen
M Wolstenholme*
T Hales*
3
–
1
–
2
3
1
–
1
–
1
1
1
1
–
–
1
–
4
–
4
4
–
–
* These directors became eligible to attend meetings on appointment to the
Board or were no longer eligible to attend once they had ceased to be directors
and they attended all of the meetings they were eligible to attend.
On occasion, Board meetings or committee meetings may be
missed due to circumstances beyond the director’s control.
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. The statement of
remuneration policy and details of each director’s remuneration
are set out in the directors’ remuneration report.
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41
www.capreg.comStock Code: CALCorporate Governance Corporate governance report continued
Shareholder relations
The Company has always encouraged regular dialogue with its
institutional shareholders and private investors at the AGM, and
through corporate functions and property visits. The Company
also attends road shows in Europe, and participates in sector
conferences. In addition, following the announcement of final
and interim results, and throughout the year, as requested, the
Company holds update meetings with institutional shareholders.
All the directors are accessible to all shareholders, and queries
received verbally or in writing are immediately addressed. The
directors are introduced to shareholders at the AGM each year
and the non-executive directors and committee chairmen are
clearly identified.
Announcements are made to the London Stock Exchange
and the business media concerning business developments to
provide wider dissemination of information. In particular, regular
announcements of fund unit valuations provide an update on
the progress of the business. Registered shareholders are sent
copies of both the annual report and the interim report. The
Group’s website is kept up to date with all announcements,
reports and shareholder circulars.
Accountability and audit
Financial reporting
The Group’s annual report includes detailed reviews of the
activities of the business, together with a detailed review of
their financial results and financing position. In this way, and as
required by the Code, the Board seeks to present a balanced
and understandable assessment of the Group’s position and
prospects.
Internal control
The Board is responsible for maintaining a sound system of
internal control and risk management to safeguard shareholders’
investment. Such a system is designed to manage, but not
eliminate, the risk of failure to achieve business objectives. There
are inherent limitations in any control system and, accordingly,
even the most effective system can provide only reasonable,
and not absolute, assurance against material misstatement or
loss. The key risks identified are set out in the Principal risks and
uncertainties section.
In accordance with the revised version of the Turnbull
Committee on internal control and the Code, an ongoing
process has been established for identifying, evaluating and
managing risks faced by the Group, and the Board is satisfied
that its process accords with the guidance in these documents.
This process has been in place for the year under review to
the date of approval of these financial statements. Each year
the Board conducts a review of the effectiveness of the current
system of internal control.
The Group has undertaken a comprehensive risk and controls
review for the year involving interviews with each divisional
management team, which has identified the principal risks facing
the Group and its individual divisions. An updated risk map and
internal control matrix have been produced for each division in
the Group, clearly outlining the principal risks and the actions
being taken to manage those risks to the desired level. Each
risk has been evaluated in terms of its impact on the business
and the likelihood of it occurring, and responsibility for the
management of each risk has been clearly identified.
Other key features of the Group’s system of internal control are
as follows:
• Defined organisational responsibilities and authority limits exist
throughout the Group. The day-to-day involvement of the
executive directors in the running of the business ensures that
these responsibilities and limits are adhered to.
• Financial reporting to the Board with regular reports from
the Fund Managers of The Mall, the Property and Asset
Manager for the German portfolio and for the Group as a
whole, including the preparation of budgets and forecasts,
cash management, variance analysis, property, taxation and
treasury reports and a report on financing.
The Group has established a whistleblowing policy to enable
employees to raise issues of concern in relation to dishonesty or
malpractice on an entirely confidential basis.
Steps are continuously being taken to embed internal control
and risk management further into the operations of the
business and to deal with areas of improvement which come to
management’s and the Board’s attention.
Audit Committee
The Audit Committee usually consists of three non-executive
directors. M Wolstenholme acted as Chairman until her
retirement on 31 August 2012. The other members are T Hales
and P Newton who was appointed a member of the Committee
on 6 March 2012. John Clare was appointed a member of the
Committee on 4 February 2013. The qualifications of the Audit
Committee members are set out in the directors’ biographies.
T Hales took the role of acting Chairman following Manjit
Wolstenholme’s retirement and was appointed Chairman of the
Committee on 4 February 2013.
The terms of reference of the Audit Committee are available
for inspection on the Group’s website. The role of the Audit
Committee is to maintain a relationship with the Group’s
external auditors and to review, in depth, the Group’s financial
statements, internal financial control and risk management
systems and circulars to shareholders in order to monitor
financial integrity within the Group.
42
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 The Audit Committee is also responsible for reviewing the cost-
effectiveness and the volume of non-audit services provided to
the Group by its external auditors. The Group does not impose
an automatic ban on the Group’s external auditors undertaking
non-audit work, and details of fees paid to the Group’s external
auditors are detailed in note 7 to the financial statements. The
Group’s aim is always to have any non-audit work involving the
Group’s external auditors carried out in a manner that affords
value for money and ensures independence is maintained by
monitoring this on a case by case basis.
The Group’s policy is that the audit firm must not be in a position
of conflict in respect of the work in question and must have the
skill, competence and integrity to carry out the work in the best
interests of the Group. The Audit Committee reviews and makes
recommendations to the Board for the re-appointment of the
Group’s external auditors. In order to maintain independence
the audit partner of the Group’s external auditors is subject
to rotation at least every five years in accordance with latest
guidance. As such the 2012 audit will be the last year of Andrew
Clark’s tenure, he will be replaced by Georgina Robb subject to
shareholders’ approval of Deloitte LLP’s re-appointment at the
next AGM.
The Audit Committee normally meets four times a year; there is
one meeting to approve the audit plan and the meetings take
place prior to the interim and final announcements. The first of
the pre-announcement meetings is held early enough to allow
the Committee members to have input into the presentation of
the financial statements. The Chairman of the Audit Committee
reports back to the Board on the key conclusions.
The Committee discharged its obligations in respect of the
financial year as follows:
• Financial reporting: during the year the Committee reviewed
the interim and annual financial statements. The Committee
received a report from the external auditors setting out
accounting or judgemental issues which required its attention,
and considered papers prepared by management both on
these issues and on the impact of any changes in accounting
standards. The auditors’ reports were based on a full
audit (annual report) and a high level review (interim report)
respectively. The Committee also advised the Board on a
number of other matters.
• Internal Controls and Risk Management: the Committee met
with the external auditors to discuss internal control matters.
In the year under review the Committee met with the external
auditors on three occasions. The Committee also approved
the periodic risk reviews that were carried out by the Group.
• Internal Audit: The Group does not have an internal audit
function but carries out periodic control reviews, the results of
which are discussed with the Committee. The Committee will
continue to review the position, but the belief at present is that
the current size and complexity of the Group does not justify
establishing an internal audit function.
Going concern
In compliance with the Code and the Guidance on Going
Concern and Liquidity Risk Guidance for Direction UK
Companies 2009 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 believes that the Company and Group have adequate
resources and facilities to continue in operational existence for
the foreseeable future and therefore the financial statements
are prepared on the going concern basis. Further details are
included in note 1 to the financial statements.
Falguni Desai
Company Secretary
12 March 2013
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43
www.capreg.comStock Code: CALCorporate Governance Responsible business
Introduction
We believe that being a responsible business is good business. By reducing the impact we have on the environment, concentrating
on our employees and serving our stakeholders and the communities around us we contribute to our most important responsibility –
building a stronger and more successful Capital & Regional.
We have a practical, applied and engaged approach to responsible business; it is part of what we do every day, not an exercise in
compliance.
We continue to focus on the four key areas Marketplace, Environment, Workplace and Community. The following information reports
our performance against the 2012 objectives and details the targets for 2013.
The Responsible Business Committee met four times in 2012 to provide strategic direction and a forum to support the operating
team involved. This was chaired by P Newton and attended by X Pullen and H Scott-Barrett as Board representatives.
The Marketplace
Our aim is to engage with customers, suppliers and stakeholders, to understand their needs and identify ways of improving our
collective responsible business performance. We recognise the positive impact our customers and suppliers can have on our
sustainability efforts and continue to work in partnership to deliver our goals.
2012 Objective
2012 KPI target
2012 Performance
1 Perform a full review of the Major
Incident Management Plan (MIMP) to
include post riots security and retail
engagement in disabled evacuation.
100% of MIMPs to be
audited with no issues
raised and E-Permits
system in place.
MIMPs updated and tested at all sites through our external
audit process. The E-Permit system has been developed
and successfully trialled, a rolling implementation
programme is underway.
To be audited in the 2012 C&R Safe
Compliance Audit.
2 To improve the accuracy of reporting
of key statistics including slips, trips
and falls to enable more detailed root
cause analysis.
10% reduction in slips, trips
and falls.
3 Through the implementation of the
Mall Maintain Project the vendor base
will be reduced, Group purchasing
power increased and improved risk
management controls for planned
preventative maintenance (PPM) tasks
and routine repairs.
Zero enforcement
challenges on Mall Maintain
contract.
Minimum of 95%
completion rate of PPMs.
4 Update the C&R Safe compliance
audit to challenge the already high
levels of compliance and drive best
practice performance.
5 Retain ROSPA Gold Award status.
Greater than 90% average
audit score across the
Group.
An improved methodology for even more accurate
reporting of slips, trips and falls has been implemented
and as a result of this improved recording process and
the unusually wet weather conditions in 2012 showed an
increase of nine additional incidents on 2011 (6%).
Zero enforcement challenges on the Mall Maintain contract.
All maintenance with the exception of lifts and escalators is
now contracted to Initial Facilities Services. This has seen a
significant reduction in our vendor base with approximately 40
individual contracts now being placed within the overall remit of
this contract.
Maintenance PPM rate is currently 98%.
The average audit score achieved across the sites in 2012
was 91.6%.
Six consecutive gold awards
from 2007 to 2012.
ROSPA Gold award achieved 2012.
6 To achieve a minimum score of 90%
90% minimum score.
for the annual technical Structured Site
Visit for each property.
All Structured Site visit scores were above the 90% target
with an average of 94%.
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 2013 Objectives
1 To ensure 100% of all site risk assessments have been fully integrated into the recently
launched online risk assessment database.
2 To launch a new Compliance Structured site visit with all sites achieving a rating of
at least 90%.
3 To continue to be awarded the ROSPA Gold Award.
2013 KPI Target
100% of site risk assessments in new
format and tested at 2013 audit.
All sites to achieve a score of 90%
or above.
Retention of ROSPA Gold Award.
4 To achieve an average of over 92% across the sites in the 2013 C&R Safe audit.
Average score of over 92%
5 To launch the new bespoke C&R Health and Safety course externally accredited by IOSH.
6 To maintain our commitment to reducing costs for our retailers and tenants through the full
re-tender and market testing of the main security and cleaning contracts that support the
business.
At least one day of this training
course at each site.
Re-tender of key service contracts
during 2013 to best value.
The Environment
Our aim is to adopt a proactive approach to tackling our impact on the environment. For many years we have worked hard to
reduce our impact on the environment in the three key areas of waste, water and energy. In addition, we continue the focus on
reducing the carbon footprint of our properties. We have long recognised that any development activity should mirror this and
have proactively ensured we minimise energy consumption and mitigate the effects of climate change throughout the design,
refurbishment or building phase.
2012 Objectives
1 To continue to reduce our environmental
2012 KPI target
5% reduction in energy.
impact through the use of five year carbon
plans; operational improvements; low
carbon retrofit and plant replacement
projects.
5% reduction in water use.
90% diverted from landfill.
85% waste recycled.
2012 Performance
Energy
An 8% reduction in energy was achieved
across the Group, a total reduction of
1,446 tonnes of carbon equating to
£320,000 in saved energy cost.
Over a four year period from 2008 to
2012 C&R has saved over 4,600 tonnes
of carbon which has saved over
£1 million in energy cost.
Water
There was a reduction of 8% in water
consumption across the Group; some
seven million litres of water.
Waste
The Group generated just under 7,500
tonnes of waste in 2012 of which 96%
was diverted from landfill.
61% was recycled for re-use, 17% was
used as energy and 9% to anaerobic
digestion also used as energy or compost.
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45
www.capreg.comStock Code: CALCorporate Governance
Responsible business continued
2 Meet all carbon reduction commitment
regulations to retain the Carbon Trust
Standard in 2012 and reduce carbon
impact by 4% across the Group.
4% reduction in carbon across the
Group.
Retain Carbon Trust Standard.
3 Install automatic meter readers (AMR) for
all electrical supplies to accurately bill,
monitor and target energy usage at The
Junction retail park sites.
100% The Junction retail parks with
AMR installed.
The Group in 2012 achieved an 8%
reduction in carbon on a like for like
basis. This follows a 2011 saving of 6%.
The Carbon Trust Standard is due for
renewal in April 2013, this will be the fifth
year of having the standard.
The Mall Fund and Capital and Regional
were participants in 2012 in the Carbon
Reduction Commitment (CRC) and are
fully compliant.
AMR for The Junction was 90%
completed prior to sale of the properties
in October 2012.
Other Environmental Highlights 2012
Global Real Estate Sustainability Benchmark (GRESB) The Mall Fund retained Green Start Rating and rated 22nd globally for
sustainability management and implementation.
2013 Objectives
2013 KPI Target
1 Continue to reduce our environmental impact through operational improvements,
Reduce Energy Consumption by 4.5%.
consider further challenges and opportunities and focus further on low carbon retrofit
projects.
Reduce Water Consumption by 2%.
2 Continue to improve our waste handling and management.
Recycle 65% of our waste material for
re-use.
Maintain 15% of our waste to energy re-
use and 95% of all waste diverted from
landfill.
3 Meet all carbon reduction commitment regulations.
Retain The Carbon Trust Standard.
4 Ensure readiness for mandatory GHG reporting in 2014.
Data fully prepared.
46
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 The Work Place
Our aim is to engage, develop and reward our people, retaining our reputation as the employer of choice within the sectors in
which we operate. We want to provide relevant, engaging training for all our employees in order that they can make their fullest
contribution to our success. We set out to provide a working environment which supports the wellbeing and health of all our people,
taking account of the diversity of our workforce and reflecting our values and ethics.
2012 Objectives
1 To evaluate engagement and
satisfaction levels by conducting an
employee survey.
2012 KPI target
>60% response rate.
>70% satisfaction level.
2 To build training and development
initiatives around the specific operational
needs of the business and deliver a full
programme of customer service and sales
training to all appropriate staff.
>200 delegate days of training delivered
across the Group.
3 To evolve and implement the Legacy
2012 Programme and further develop
relationships with our charity partners.
>50 training days invested in the Legacy
programme.
4 Implementation of the Continuous
Successful implementation of the plan.
Improvement Plan agreed with Investors
in People following reassessment in
2011.
2012 Performance
We conducted an employee engagement
survey for all our employees. We are
pleased to have had an average of
74.5% response rate and average
positive satisfaction scoring of 79%.
This produced a great deal of important
feedback on which we are now working.
The C&R Learning Programme has
again been targeted to the needs of the
business and contributed positively in
our continuing operational performance
and the high levels of motivation required
of our people (see staff survey). We
ran over 25 different courses under the
C&R Learning Programme. Employee
numbers have reduced throughout
the year with the sales of assets and
therefore the number of training days in
line with this reduction. The number of
days training completed in 2012 was
203. Evaluation is very positive for all the
training interventions at over 98% positive
feedback.
Our Legacy Programme partner
(Fairbridge) was taken over by The
Princes Trust and could no longer
continue the partnership. We have
refocused our ‘legacy’ effort to Land Aid
and will continue to build this type of
programme alongside our commitment
as a Foundation Partner. There are many
developments at Land Aid which are
moving in the right direction to allow us to
use this connection most productively in
the future.
There were six key action areas in our
IIP Continuous Improvement Plan, all of
which are now completed.
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47
www.capreg.comStock Code: CALCorporate Governance Responsible business continued
2013 Objectives
2013 KPI Target
1 Design and delivery of a motivational training and personal development initiative for
all central team employees and General Managers (GM) early in the year.
All central team and GM attendance on
programme over four days.
2 Design and implementation of our bespoke Institute of Leadership and Management
(ILM) accredited Management Skills Programme for new and first line supervisors.
3 Communicate the employee feedback from the survey and use this to inform our
actions and further increase engagement with our people.
>70% positive evaluation.
6 modules up to 60 delegate days.
>70% positive evaluation.
Communication of the feedback to all
employees.
4 Design and deliver a new Leadership Experience Programme over two days for
All Manager level attendance.
managers and leaders in the business.
>70% positive evaluation.
The Community
Our aim is to have a key role in the regeneration of the communities and environments in which we operate. We work closely with
key stakeholders to ensure we listen, engage and use feedback to develop or refine our approach. We use social media, such as
Facebook, to collect feedback and respond. We aim to provide safe, welcoming, clean and attractive shopping and leisure venues
where people choose to shop, work and socialise. We aim to make a positive contribution to each local community by being a
responsible, socially aware and proactive partner.
2012 Objectives
1 Increase our involvement as a Land
Aid Foundation Partner and make a
contribution in pro bono expertise if
possible.
2012 KPI target
>20 employee days.
2012 Performance
We have offered the equivalent of at least
30 employee days to Land Aid and other
local charities throughout 2012.
We have taken a more proactive part
in Land Aid events throughout the year
with the appointment of an executive to
the Land Aid Grant Committee. We have
also been closely involved in the plans for
Land Aid’s forthcoming pro bono project
which is close to launching and when it
does we will offer our services as part of
the programme.
In addition many of our onsite employees
give time to support local charities under
the Mall Cares fundraising banner.
48
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 2012 Objectives
2012 KPI target
2012 Performance
2 Following the 2011 riots, maintain close
working relationships with local police and
ensure our centre teams are actively part
of local crime prevention initiatives as we
strive to improve the community safety in
our town centres.
5% reduction in incidents of recorded
crime.
3
–
Contribute to the revival of the High
Street through industry bodies such
as BCSC, Business in The Community
and The Association of Town Centre
Management. Use our own local
influence in towns that we invest in to
promote positive policy aimed at high
street regeneration.
During 2012 all site security teams have
continued their active involvement in
local crime prevention initiatives closely
working with local police and business
crime partnerships resulting in a slight fall
in the overall level of crime recorded of
1%. Specialist training in child protection
enabled the team in Blackburn to support
police in securing a significant conviction.
New procedures and methodology for the
recording of crimes and security incidents
was launched during 2012 enabling
accurate data capture of incidents within
the Malls and retailers demised areas.
Our innovative approach to CCTV system
management has been recognised at the
Mall Blackburn by an individual award
from the BSIA for the use of technology.
Significant time and resource has been
dedicated to ensuring that C&R is at the
forefront of thought leadership on these
issues. From executives engaging with
The Portas Report Group to General
Managers refocusing even more on
town centre partnerships as part of their
responsibilities. We house Town Centre
Management (TCM) offices on a number
of sites and we offer financial support to
fund TCM projects. A number of GM’s are
BIDS chairmen – assisting in the process of
investment and regeneration for their area.
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49
www.capreg.comStock Code: CALCorporate Governance Responsible business continued
2013 Objectives
1 To maintain our involvement in the local business crime partnerships, supporting the
police with targeted crime reduction and community safety campaigns in order to
further reduce the levels of recorded crime during 2013.
2013 KPI Target
To achieve a 5% reduction in recorded
crime during 2013.
2 As CCTV becomes an increasingly powerful tool in the management of public safety
and crime reduction it is important that we trial and adopt proven new technology
and ensure a consistent approach to system management.
Full trial of body worn CCTV equipment
to enable at scene recording.
3 Continue to develop the already high number of local Community projects in the
Increase number by 10%.
towns in which we operate.
Pictured Above:
The Mall, Uxbridge
50
Pictured Above:
The Mall, Camberley
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Consolidated income statement
For the year to 30 December 2012
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative costs
Share of (loss)/profit in associates and joint ventures
Loss on revaluation of investment properties
Other gains and losses
(Loss)/profit on ordinary activities before financing
Finance income
Finance costs
(Loss)/profit before tax
Tax
(Loss)/profit for the year from continuing operations
Discontinued operations
(Loss)/profit for the year from discontinued operations
(Loss)/profit for the year
Continuing operations
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Continuing and discontinued operations
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Note
3
4
17a
11a
5
6
7
9a
30
10a
10a
10a
10a
2012
£m
28.7
(11.1)
17.6
(13.6)
(12.8)
(0.2)
–
(9.0)
2.9
(5.6)
(11.7)
0.9
(10.8)
(5.2)
(16.0)
(3)p
(3)p
(5)p
(5)p
1 2011 results have been restated to separate discontinued operations as explained in note 30.
The loss for the current year and the profit for the preceding year, including amounts from discontinued operations, are fully
attributable to equity shareholders.
Consolidated statement of comprehensive income
For the year to 30 December 2012
(Loss)/profit for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Gain on a hedge of a net investment taken to equity
Total items that that may be reclassified subsequently to profit or loss:
Total comprehensive income for the year
2012
£m
(16.0)
(1.3)
0.7
(0.6)
(16.6)
The total comprehensive income for the current year and preceding year is fully attributable to equity shareholders.
20111
£m
28.9
(11.7)
17.2
(11.2)
11.6
(1.5)
0.1
16.2
2.3
(5.7)
12.8
(2.0)
10.8
10.3
21.1
3p
3p
6p
6p
2011
£m
21.1
(1.3)
0.9
(0.4)
20.7
51
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Proof 7
www.capreg.comStock Code: CALFinancial Statements Consolidated balance sheet
At 30 December 2012
Non-current assets
Investment properties
Goodwill
Plant and equipment
Available for sale investments
Receivables
Investment in associates
Investment in joint ventures
Total non-current assets
Current assets
Trading properties
Receivables
Cash and cash equivalents
Assets classified as held for sale
Total current assets
Total assets
Current liabilities
Bank loans
Trade and other payables
Current tax liabilities
Liabilities directly associated with assets classified as held for sale
Non-current liabilities
Bank loans
Other payables
Deferred tax liabilities
Non-current tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Other reserves
Capital redemption reserve
Own shares held
Retained earnings
Equity shareholders’ funds
Basic net assets per share
EPRA triple net assets per share
EPRA net assets per share
Note
11a
12
13
14
15
17b
17c
11a
18
19
30
2b
22a
20
30
22a
21
9c
9e
2b
24
26
28
28
28
2012
£m
8.4
–
0.8
–
23.6
80.7
25.7
139.2
70.0
7.4
5.3
32.2
114.9
254.1
–
(11.7)
(1.3)
(1.6)
(14.6)
(58.3)
(0.7)
(0.9)
–
(59.9)
(74.5)
179.6
9.9
72.0
4.4
(0.7)
94.0
179.6
£0.51
£0.51
£0.55
2011
£m
8.5
1.8
0.7
0.3
33.3
120.2
27.2
192.0
71.5
5.0
20.0
–
96.5
288.5
(5.0)
(10.0)
(3.0)
–
(18.0)
(61.6)
(4.0)
(3.9)
(5.0)
(74.5)
(92.5)
196.0
9.9
72.8
4.4
(6.8)
115.7
196.0
£0.56
£0.56
£0.63
These financial statements were approved by the Board of directors, authorised for issue and signed on their behalf on 12 March
2013 by:
Charles Staveley
Group Finance Director
52
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Consolidated statement of changes in equity
For the year to 30 December 2012
Other reserves
Share
capital
£m
Special
reserve
£m
Merger
reserve
£m
Acquisition
reserve
£m
9.9
–
79.5
–
60.3
–
9.5
–
Foreign
currency
reserve
£m
Net
investment
hedging
reserve
£m
Capital
redemption
reserve
£m
Own
shares
held
£m
Retained
earnings
£m
Balance at
30 December 2010
Profit for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
Credit to equity for
equity-settled share-
based payments
Transfer between
reserves
Other movements
Balance at
30 December 2011
Loss for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
Credit to equity for
equity-settled share-
based payments
Transfer between
reserves
Transfer to income
statement for German
portfolio 4
Other movements
Balance at
30 December 2012
–
–
–
–
–
9.9
–
–
–
–
–
–
–
9.9
7.4
–
(1.3)
(1.3)
–
–
(0.5)
5.6
–
(1.3)
(1.3)
–
–
(0.7)
–
(3.5)
–
0.9
0.9
–
–
–
(2.6)
–
0.7
0.7
–
–
–
0.5
–
–
–
(79.5)
–
–
–
–
–
–
–
–
–
–
–
60.3
–
9.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
equity
£m
174.5
21.1
4.4
–
(9.7)
–
16.7
21.1
–
–
–
–
–
4.4
–
–
–
–
–
–
–
–
–
–
–
2.9
(6.8)
–
–
–
–
–
–
(0.4)
21.1
20.7
0.8
0.8
79.5
(2.4)
–
–
115.7
(16.0)
196.0
(16.0)
–
(0.6)
(16.0)
(16.6)
0.8
–
0.8
–
–
6.1
–
(6.5)
(0.7)
0.1
60.3
9.5
3.6
(1.4)
4.4
(0.7)
94.0
179.6
The special reserve arose on the cancellation of the Company’s share premium account in 2009 when £141.0 million of the share
premium account was credited to retained earnings and the balance of £79.5 million remained in the special reserve pending
consent from all of the Company’s creditors. During 2011 the special reserve of £79.5 million was transferred to retained earnings
following the resolution of the outstanding required consent from the Company’s creditors.
The merger reserve of £60.3 million arose on the Group’s capital raising in 2009 which was structured so as to allow the Company
to claim merger relief under section 612 of the Companies Act 2006 on the issue of Ordinary shares. The merger reserve is available
for distribution to shareholders.
The acquisition reserve of £9.5 million relates to the purchase of the entire ordinary share capital of Morrison Merlin Limited in
2005, prior to which it had been a joint venture in which the Group had a 50% interest. The balance on the reserve arose from the
difference at the date of acquisition between the carrying value of the Group’s existing interest and its fair value. The reserve will
remain on the balance sheet until Morrison Merlin Limited is sold.
The foreign currency reserve of £3.6 million and the net investment hedging reserve deficit of £2.0 million respectively show foreign
exchange translation differences from the Group’s investment in its German joint venture and any hedges of that investment. £0.7
million has been reclassified from the foreign currency reserve to the income statement during the year related to the impairment of
German portfolio 4 (see note 17c).
53
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www.capreg.comStock Code: CALFinancial Statements
Consolidated cash flow statement
For the year to 30 December 2012
Operating activities
Net cash from operations
Distributions received from associates
Distributions received from joint ventures
Distributions received from fixed asset investments
Interest paid
Interest received
Income taxes paid
Cash flows from operating activities
Investing activities
Purchase of investment property
Sale of equity interest in Waterside Lincoln
Disposal of interests in Joint Ventures and Associates
Other disposals
Purchase of plant and equipment
Investment in associates
Investment in joint ventures
Loans to joint ventures
Loans repaid by joint ventures
Cash flows from investing activities
Financing activities
Bank loans drawn down
Bank loans repaid
Loan arrangement costs
Settlement of forward foreign exchange contract
Premium cost of interest rate swaption
Cash flows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
27
17b
17c
11a
17c
13
17b
17c
19
2012
£m
4.3
2.2
0.6
0.2
(5.1)
–
(7.2)
(5.0)
–
–
14.9
0.5
(0.4)
(16.2)
–
–
0.4
(0.8)
4.6
(13.2)
(0.3)
–
–
(8.9)
(14.7)
20.0
5.3
2011
£m
8.2
11.2
4.5
–
(5.3)
0.1
(9.9)
8.8
(26.1)
6.4
–
(0.1)
(0.3)
(4.0)
(1.2)
(1.3)
1.2
(25.4)
13.6
(3.2)
(0.3)
1.5
(0.7)
10.9
(5.7)
25.7
20.0
54
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Notes to the financial statements
For the year to 30 December 2012
1 Significant Accounting Policies
General information
Capital & Regional plc is a company domiciled and incorporated in the United Kingdom under the Companies Act 2006. The
address of the registered office is 52 Grosvenor Gardens, London, SW1W 0AU. The nature of the Group’s operations and its
principal activities are disclosed in note 2a and in the operating and financial reviews.
Basis of accounting
The financial statements comprise the consolidated income statement, the consolidated statement of comprehensive income, the
consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and notes 1 to
35. They are prepared on the historical cost basis except for the revaluation of certain properties and financial instruments. Other
than as noted in the ‘Accounting developments and changes’ section below, the accounting policies have been applied consistently
to the results, other gains and losses, assets, liabilities, income and expenses.
The financial statements are presented in pounds sterling because that is the currency of the primary economic environment in
which the Group operates. Foreign operations are included in accordance with the accounting policies set out below.
Restatement of prior year comparatives
In accordance with the requirements of IFRS5 Non-current Assets Held for Sale and Discontinued Operations the income statement
and segmental amounts for the year to 30 December 2011 have been restated to show the results relating to the Group’s interests
in The Junction Fund, X-Leisure Fund, X-Leisure Limited and Xscape Braehead within discontinued operations. The results of
discontinued operations are set out in note 30.
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union (EU) and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.
Accounting developments and changes
Developments – during 2012
During 2012 the new standards and amendments that have been issued and adopted by EU and the Group have not resulted in a
material change to the consolidated financial statements.
Developments – not yet adopted
At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in
these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
• IFRS1 (amended) Severe hyperinflation and removal of fixed dates for first time adopters
• IFRS7 (amended) Disclosures – Transfers of financial assets
• IFRS9 Financial Instruments
• IFRS10 Consolidated financial statements
• IFRS11 Joint arrangements
• IFRS12 Disclosure of interests in other entities
• IFRS13 Fair value measurement
• IAS1 (amended) Presentation of items of other comprehensive income
• IAS12 (amended) Deferred tax: Recovery of underlying assets
• IAS19 (revised) Employee benefits
• IAS27 (revised) Separate financial statements
• IAS28 (revised) Investments in associates and joint ventures
• IAS32 (amended) Offsetting Financial Assets and Financial Liabilities
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55
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
1 Significant Accounting Policies continued
The directors are in the process of assessing the impact that the adoption of these standards may have on the financial statements
of the Group in future periods. The directors do not expect that the adoption of the standards listed above will have a material
impact on the financial statements, however it is not practicable to provide a reasonable estimate of the effect of these standards
until a detailed review has been completed.
Going concern
The Group prepares cash flow and covenant compliance forecasts to demonstrate that it has adequate resources available to
continue in operation for the foreseeable future, being at least 12 months from the date of this report. In these forecasts the
directors specifically consider anticipated future market conditions and the Group’s principal risks and uncertainties. The directors
believe that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future
and accordingly continue to adopt the going concern basis in preparing the annual report and financial statements.
Further detail is contained within the Financial Review. The Group’s borrowing facilities and its financial risk management objectives;
details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risks are provided in notes 22
and 23 of the financial statements.
Critical accounting judgements
The preparation of financial statements requires the directors to make judgements, estimates and assumptions that may affect the
application of accounting policies and the reported amounts of assets and liabilities, income and expenses.
The following are the critical judgements, apart from those involving estimation uncertainty which are dealt with separately, that the
directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the
amounts recognised in the financial statements. The critical accounting judgements are:
Property valuation
Reliance upon the work undertaken at 30 December 2012 by independent professional qualified valuers, as disclosed in note 11b,
in assessing the fair value of certain of the Group’s investment and trading properties.
Associates
An assessment of whether the Group exercises significant influence over its investment in The Mall as discussed in note 17b.
Derivative financial instruments
Reliance upon the work undertaken at 30 December 2012 by independent third party experts in assessing the fair values of the
Group’s derivative financial instruments, which are disclosed in notes 15, 18, 21 and 23f.
Lease classification
Consideration of the potential transfer of risks and rewards of ownership in accordance with IAS17 Leases for all properties leased
to tenants. The directors have determined that all such leases are operating leases.
Performance fees
Where performance conditions have not already been met the likelihood that CRPM and Garigal will receive performance fee
revenue under their respective asset and property management contracts. The directors have concluded that it is not yet probable
that any amounts will be received but the performance criteria are disclosed in note 35.
56
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 1 Significant Accounting Policies continued
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a
risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are:
Taxation
An assessment of the likelihood that potential historic tax liabilities will arise as well as the impact of changes in recent legislation,
case law and accounting standards, along with future projections for the Group, in determining the current and deferred tax assets,
liabilities and charge to the income statement, as disclosed in note 9.
Valuation of loan receivable in Euro B-Note Holding Limited
Determining whether the subordinated loan receivable held indirectly by Euro B-Note Holding Limited is impaired requires an
estimation of the credit risk of the relevant German investment portfolio. An independent valuation was obtained as at 30 June 2011
for the loan receivable fair value at the time of the debt refinancing. This fair value was based on the future cash flows expected to
arise from the loan receivable and an appropriate discount rate of 15.35% was applied for the calculation of the present value. This
discount rate assumed that the loan principal was discounted by 12.0% per annum to reflect credit risk. The discount rate was
based on a risk adjusted yield curve. Subsequent to the refinancing the loan receivable is held at amortised cost and tested for
impairment at each reporting date.
At 30 December 2012 management performed an impairment review over the relevant German joint venture portfolio which
included an assessment of the actual and forecast loan to value, liquidity, net rental income and contribution and the ability of the
joint venture entity to repay the debt. This impairment assessment resulted in the Group’s share of the loan receivable being carried
at £2.3 million compared to a nominal value of £14.7 million (2011 : Group’s share of carrying value of £5.6 million compared to
nominal value of £15.0 million) as disclosed in note 17b.
The directors believe that the estimates and associated assumptions used in the preparation of the financial statements are
reasonable, but actual outcomes may differ from those anticipated and so the judgements, estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised
if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future
periods.
Principal accounting policies
The principal accounting policies adopted are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company at 30 December and entities controlled
by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal. The reporting period for subsidiaries and affiliates ends on
31 December and their financial statements are consolidated from this date. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
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57
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
1 Significant Accounting Policies continued
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition
is measured at the aggregate at the date of exchange of the fair values of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the income
statement as incurred. Where a business combination is achieved in stages, the Group’s previously-held interests in the acquired
entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any,
is recognised in the income statement.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted
during the remeasurement period or additional assets or liabilities are recognised to reflect new information obtained about facts
and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that
date. The measurement period is the period from the date of acquisition to the date the Group obtains complete information and is
subject to a maximum of one year.
Assets held for sale
Assets held for sale are measured at the lower of carrying amount and fair value less costs to sell. Assets are classified as held
for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition
is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition.
Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one
year of the date of classification.
Investments in associates and joint ventures
A joint venture is an entity over which the Group has joint control, which is the contractually agreed sharing of control over an
economic activity which exists when the strategic financial and operating decisions relating to the activity require the unanimous
consent of the parties sharing control. An associate is an entity over which the Group has significant influence and that is neither
a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies.
In accordance with IAS28 Investments in Associates and IAS31 Interests in Joint Ventures, associates and joint ventures are
accounted for under the equity method, whereby the consolidated balance sheet and income statement incorporate the Group’s
share of net assets and profits or losses after tax. The profits or losses include revaluation movements on investment properties.
Losses of an associate or joint venture in excess of the Group’s interest in that associate or joint venture (which includes any
long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture) are recognised
only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or
joint venture.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent
liabilities of an associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying
amount of the associate and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair
value of the identifiable assets, liabilities and contingent liabilities of the associate over the cost of acquisition, after reassessment, is
recognised immediately in the income statement.
The reporting period for associates and joint ventures ends on 31 December and their financial statements are equity accounted
to this date. In accordance with IAS39 Financial Instruments: Recognition and Measurement, associates and joint ventures are
reviewed at the end of the reporting period to determine whether any impairment loss should be recognised.
58
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 1 Significant Accounting Policies continued
Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired and is measured as the
excess of the sum of consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any
equity interest in the entity already held by the acquirer over the net of the acquisition date amounts of identifiable assets acquired
and liabilities assumed.
Goodwill is not amortised but is reviewed for impairment at least annually. The impairment is calculated on the value in use of the
goodwill and is recognised immediately in the income statement and not subsequently reversed. Where the Group’s interest in the
fair value of the acquiree’s identifiable net assets exceeds the sum of consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of any equity interest in the entity already held by the acquirer, the excess is recognised
immediately in the income statement as a bargain purchase gain.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated into sterling at exchange rates approximating to the exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated
to sterling at the exchange rate ruling at that date and, unless they relate to the hedging of the net investment in foreign operations,
differences arising on translation are recognised in the income statement.
Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated
into sterling at the exchange rates ruling at the balance sheet date. The operating income and expenses of foreign operations are
translated into sterling at the average exchange rates for the period. Significant transactions, such as property sales, are translated
at the foreign exchange rate ruling at the date of each transaction. The principal exchange rate used to translate foreign currency
denominated amounts in the balance sheet is the rate at the end of the year: £1 = €1.2241 (2011: £1 = €1.1972). The principal
exchange rate used for the income statement is the average rate for the year: £1 = €1.2333 (2011: £1 = €1.1522).
Net investment in foreign operations
Exchange differences arising from the translation of the net investment in foreign operations are taken to the foreign currency reserve
and the effective portions of related foreign currency hedges are taken to the net investment hedging reserve. The net investment in
foreign operations includes the equity of the underlying entities and the portion of shareholder loans to those entities that is treated
as equity where there is no intention of repayment in the foreseeable future. All exchange differences previously accumulated in
equity are transferred to the income statement upon disposal or, where control is lost, part-disposal of the foreign operation.
Plant and equipment
Plant and equipment is stated at the lower of cost or valuation, net of depreciation and any provision for impairment. Depreciation
is provided on all tangible fixed assets, other than investment properties and land, on a straight line basis over their expected useful
lives:
• Leasehold improvements – over the term of the lease
• Fixtures and fittings – over three to five years
• Motor vehicles – over four years
22158.04
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Proof 7
59
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
1 Significant Accounting Policies continued
Property portfolio
Investment properties
Investment properties are properties owned or leased under finance leases which are held either for long-term rental income or for
capital appreciation or both. Investment property is initially recognised at cost (including directly related transaction costs) and is
revalued at the balance sheet date to fair value, being the market value determined by professionally qualified external or director
valuers, with changes in fair value being included in the income statement. Valuations are generally carried out twice a year. In
accordance with IAS 40 Investment Property, no depreciation is provided in respect of investment properties.
Leasehold properties
Leasehold properties that are leased to tenants under operating leases are classified as investment properties or development
properties, as appropriate, and included in the balance sheet at fair value.
Refurbishment expenditure
Refurbishment expenditure in respect of major works is capitalised. Renovation and refurbishment expenditure of a revenue nature
is expensed as incurred.
Property transactions
Acquisitions and disposals are accounted for at the date of legal completion. Investment properties are reclassified as held for sale
once contracts have been exchanged and are transferred between categories at the estimated market value on the transfer date.
Properties held for sale are shown at fair value less costs of disposal.
Trading properties
Properties held with the intention of disposal are valued at the lower of cost and net realisable value. Any impairment in the value of
trading properties is shown within the cost of sales line in the income statement.
Head leases
Where an investment property is held under a head lease, the head lease is initially recognised as an asset at the present value of
the minimum ground rent payable under the lease. The corresponding rent liability to the leaseholder is included in the balance sheet
as a finance lease obligation.
Tenant leases and incentives
Incentives and costs associated with entering into tenant leases are amortised over a straight line basis over the term of the lease.
Operating leases
Annual rentals under operating leases are charged to the income statement on a straight line basis over the term of the lease.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes party to the
contractual provisions of the instrument.
60
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 1 Significant Accounting Policies continued
Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL),
’held to maturity’ investments, ‘available for sale’ financial assets and ‘loans and receivables’. The classification depends on the
nature and purpose of the financial assets and is determined at the time of initial recognition.
Effective interest rate method
The effective interest rate method is a method of calculating the amortised cost of a debt instrument and of allocating the interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including
all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount in
initial recognition.
Available for sale financial assets
The Group has investments in unlisted shares and unit trusts that are not traded in an active market but whose fair value
the directors consider can be reliably measured. Gains and losses arising from changes in fair value are recognised in other
comprehensive income, with the exception of impairment losses which are recognised in the income statement. Dividends are
recognised in the income statement when the Group’s right to receive the dividends is established.
Loans and receivables
Loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as
‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method, less any
impairment. Interest income is recognised by applying the effective interest rate, except for short term receivables when the
recognition of interest would be immaterial.
Trade receivables
Trade receivables are carried at the original invoice amount less allowances made for doubtful accounts. An allowance for doubtful
accounts is recorded for the difference between the carrying value and the recoverable amount where there is objective evidence
that the Group will not be able to collect all amounts due. Discounts and similar allowances are recorded on an accrual basis
consistent with the recognition of the related sales, using estimates based on existing contractual obligations, historical trends
and the Group’s experience. Long-term accounts receivable are discounted to take into account the time value of money, where
material.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
Borrowings
Borrowings are initially measured at fair value, net of transaction costs. Borrowings are subsequently measured at amortised cost
using the effective interest method, with interest expense recognised on an effective yield basis. In accordance with IAS 39 Financial
Instruments: Recognition and Measurement, a substantial modification of the terms of an existing borrowing is accounted for as an
extinguishment of the original liability and the recognition of a new liability. Where the terms of the modification are not substantially
different, any costs paid in connection with the modification are treated as an adjustment to the carrying amount of the liability and
are amortised over the remaining life of the modified liability.
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61
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
1 Significant Accounting Policies continued
Derivative financial instruments
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to
their fair value at each balance sheet date. The fair value of forward foreign exchange contracts is calculated by reference to spot
and forward exchange rates at the balance sheet date. The fair value of interest rate swaps is calculated by reference to appropriate
forecasts of yield curves between the balance sheet date and the maturity of the instrument. Changes in fair value are included
as finance income or finance costs in the income statement, except for gains or losses on the portion of an instrument that is an
effective hedge of the net investment in a foreign operation, which are recognised in the net investment hedging reserve. Derivative
financial instruments are classified as non-current when they have a maturity of more than twelve months and are not intended to be
settled within one year.
Trade payables
Trade payables are carried at fair value, with any gains or losses arising on remeasurement recognised in the income statement.
Taxation
Tax is included in the income statement except to the extent that it relates to items recognised directly in equity, in which case the
related tax is recognised in equity.
Current tax is based on the taxable profit for the year and is calculated using tax rates that have been enacted or substantively
enacted. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense
that are never taxable or tax deductible (permanent differences) or will be taxable at a later date (temporary differences). Temporary
differences principally arise when using balance sheet values for assets and liabilities that are different to their respective tax base
values.
Deferred tax is provided using the balance sheet liability method on these temporary differences with the exception of goodwill
not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates applicable at the balance sheet date. A deferred tax asset is regarded as recoverable and therefore
recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable
taxable profits from which the future reversal of the underlying temporary differences can be deducted. Deferred tax assets and
liabilities are offset where the Group has a legally enforceable right to do so.
Employee benefits
Pension costs
Pension liabilities, all of which relate to defined contribution schemes, are charged to the income statement as incurred.
Share-based payments
The Group has applied the arrangements of IFRS2 Share-based Payment. Equity settled share-based payments are measured at
fair value at the date of grant. The fair values of the 2008 LTIP, the COIP, the Matching Share Agreement and the SAYE scheme
are calculated using Monte Carlo simulations or the Black-Scholes model as appropriate. The fair values are dependent on factors
including the exercise price, expected volatility, period to exercise and risk free interest rate. Market related performance conditions
are reflected in the fair values at the date of grant and are expensed on a straight line basis over the vesting period. Non-market
related performance conditions are not reflected in the fair values at the date of grant. At each reporting date, the Group estimates
the number of shares likely to vest under non-market related performance conditions so that the cumulative expense will ultimately
reflect the number of shares that do vest. Where awards are cancelled, including when an employee ceases to pay contributions
into the SAYE scheme, the remaining fair value is expensed immediately.
62
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 1 Significant Accounting Policies continued
Own shares
Own shares held by the Group are shown as a deduction from shareholders’ funds and included in other reserves. The cost of own
shares is transferred to retained earnings when shares in the underlying incentive schemes vest. The shares are held in an Employee
Share Ownership Trust.
Revenue
Management fees
Management fees are recognised, in line with the property management contracts, in the period to which they relate. They include
income in relation to services provided by CRPM to associates and joint ventures for asset and property management, project
co-ordination, procurement, and management of service charges and directly recoverable expenses. Income earned by X-Leisure
Limited (up to date of reclassification as held for sale) and Garigal for similar services is recognised in the share of profit/(loss) in
associates and joint ventures.
Net rental income
Net rental income is gross rental income adjusted for tenant incentives, recognised on a straight line basis over the term of the
underlying lease, less expenses directly related to letting and holding the properties.
Dividend and interest income
Dividend income from investments is recognised when the shareholders’ right to receive payment has been established. Interest
income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying
amount.
Performance fees
Performance fees are recognised as revenue by the Group or the relevant associate or joint venture when both the amount of
performance fee and the stage of completion of the relevant performance conditions can be measured reliably, and when it is
probable that the performance fee will be received. Performance fees may be earned as follows:
• The Mall: by CRPM on property level outperformance relative to the IPD Shopping Centre Index (taking the 30 June 2010
valuation as the start point) of more than 50 basis points provided that the fund level return is greater than zero, payable at the
end of the life of the fund or on an exit event, which is defined as a listing, sale of all the interests in the fund or the making of
a cash offer which is accepted by a majority of the investors in the fund. For i) between 50 basis points and 150 basis points,
CRPM receives 10% of the outperformance proceeds; ii) for between 150 basis points and 300 basis points of outperformance,
CRPM receives 15% of the outperformance proceeds; and iii) for over 300 basis points of outperformance, CRPM receives no
additional fee to ensure excessive risks are not taken. The provisions in the management agreements relating to removal for
underperformance, which currently apply with effect from 31 December 2012, have been amended such that the GP board will
only have the right to remove CRPM as the asset and property manager in the event of underperformance of at least 100 basis
points below the IPD Shopping Centre Index over the period ending 31 December 2014.
• German portfolio: by Garigal on any realised geared returns in excess of an internal rate of return of 12% over the period from
June 2010 to the disposal of the entire portfolio or its conversion into a listed structure, subject to a maximum of €15 million.
Provisions for performance fees payable by the underlying associate or joint venture are made when there is a present obligation
to settle the performance fee, its amount can be measured reliably and it is probable that it will be paid. Further disclosure on
performance fees is included in note 35.
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Proof 7
63
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
1 Significant Accounting Policies continued
Finance costs
All borrowing costs are recognised under Finance costs in the income statement in the period in which they are incurred. Finance
costs also include the amortisation of loan issue costs, any loss in the value of the Group’s wholly owned interest rate swaps and
any loss in the ineffective portion of the Group’s hedge of its net investment in a foreign operation.
Operating segments
The Group’s share of results for the year from The Junction Fund, Xscape Braehead, X-Leisure Fund and X-Leisure Limited has
been classified as Discontinued Operations with the prior year comparatives restated. The Junction Fund and X-Leisure Fund were
previously presented as separate segments, X-Leisure Limited was included within Property Management and Xscape Braehead
was previously aggregated within ‘Other’.
Following these changes and reflecting the smaller and simplified Group structure management have re-evaluated the reportable
segments under IFRS8. This has resulted in a further partial breakdown of what was previously included within the ‘Other’ segment
into new segments of Leisure, consisting of Great Northern Warehouse and Hemel Hempstead, and ‘Other UK Shopping Centres’
consisting of The Waterside Lincoln Limited Partnership and Kingfisher Limited Partnership (Redditch). The prior year comparatives
have also been restated on this basis.
The Group’s other reportable segments remain The Mall, Germany, Property Management (consisting of CRPM and Garigal
Asset Management GmbH) and SNO!zone. Other segments not individually reportable and therefore aggregated as ‘Other’ are
the Group’s remaining associates and joint ventures, comprising FIX UK, until the loss of significant influence, and The Auchinlea
Partnership. Group items include Group overheads incurred by Capital & Regional plc and other subsidiaries, and the interest
expense on the Group’s central borrowing facility.
The Mall, Other UK Shopping Centres, Germany and Leisure derive their revenue from the rental of investment and trading
properties. The Property Management and SNO!zone segments derive their revenue from the management of property funds
or schemes and the operation of indoor ski slopes respectively. The split of revenue between these classifications satisfies the
requirement of IFRS8 to report revenues from different products and services. Depreciation and the variable overhead represent the
only significant non-cash expenses.
The Group’s interests in the assets, liabilities and profit or loss of its associates and joint ventures are proportionately consolidated
and also shown on a see-through basis as this is how they are reported to the Board of directors. There are no differences between
the measurements of the segments’ assets, liabilities and profit or loss as they are reported to the Board of directors and their
presentation under the Group’s accounting policies.
Inter-segment revenue and expenses represent items eliminated on consolidation and are accounted for on an arm’s length basis.
Management fees and other revenue items in the property management segment are earned from the asset business segments,
where they are included under property and void costs. Since these asset business segments are proportionately consolidated, the
costs would not eliminate against the income and have therefore not been split out separately as inter-segment expenses.
Recurring pre-tax profit
Recurring pre-tax profit is the total of Contribution, the Group’s share of management fees less fixed management expenses earned
by CRPM, X-Leisure Limited (until reclassification as held for sale) and Garigal, the profit from SNO!zone and any central costs
and interest adjusted for any significant one off items such as Performance Fees. Recurring pre-tax profit includes results from
Discontinued Operations up until the point of disposal or reclassification as held for sale.
64
22158.04
18 April 2013 4:26 PM
Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 2a Operating segments
UK Shopping
Centres
Other UK
Shopping
Centres
£m
The Mall
£m
Germany
£m
Leisure
£m
Other
£m
Property
Management
£m
SNO!zone
£m
Total
continuing
operations
£m
Discon-
tinued
operations
£m
Group
items
£m
15.4
(4.3)
11.1
–
(6.6)
4.5
–
–
–
–
–
–
–
4.5
–
–
(7.6)
(1.6)
–
–
–
–
–
1.6
1.4
–
(1.7)
3.0
(0.8)
2.2
–
(1.1)
1.1
–
–
–
–
–
–
–
1.1
–
–
(1.3)
–
–
–
–
–
–
(0.6)
–
–
(0.8)
15.9
(3.0)
12.9
0.7
(6.5)
7.1
–
–
–
–
–
–
–
7.1
–
–
(10.0)
0.1
–
–
(3.3)
0.7
(3.2)
(0.1)
0.2
–
(8.5)
6.7
(0.6)
6.1
–
(5.0)
1.1
–
–
–
–
–
(0.1)
–
1.0
–
–
(1.7)
–
–
–
–
–
–
1.7
–
–
1.0
1.1
(0.1)
1.0
–
(0.4)
0.6
–
–
–
–
–
–
–
0.6
–
–
(0.1)
0.1
–
(1.3)
–
–
–
(0.1)
–
–
(0.8)
210.5
(142.5)
68.0
49.2
(32.9)
16.3
191.9
(149.8)
42.1
84.2
(62.3)
21.9
0.2
–
0.2
–
–
–
–
–
–
10.4
(7.0)
–
–
(0.1)
0.1
–
3.4
2.6
(0.9)
–
–
–
–
–
–
–
–
(0.2)
–
4.9
4.8
(4.2)
0.6
–
–
–
–
–
–
–
–
10.1
(8.7)
(0.2)
–
–
1.2
–
(0.1)
–
–
–
–
–
–
–
–
(0.2)
–
0.9
2.5
(2.0)
0.5
–
–
–
–
–
–
–
(3.9)
–
–
–
–
(0.7)
(4.6)
–
(1.7)
–
–
–
–
–
–
–
–
(0.4)
42.1
(8.8)
33.3
0.7
(19.6)
14.4
10.4
(10.9)
10.1
(8.7)
(0.3)
–
(0.7)
14.3
2.6
(2.7)
(20.7)
(1.4)
–
(1.3)
(3.3)
0.7
(3.2)
2.5
0.8
–
(6.7)
–
(11.7)
0.9
(10.8)
4.0
547.3
(4.6)
(398.3)
(0.6) 149.0
8.9
(3.7)
5.2
–
(3.1)
2.1
2.3
(1.7)
–
–
–
–
–
2.7
(0.6)
–
(0.1)
(0.2)
(1.8)
–
–
–
–
1.1
(0.3)
(4.0)
(3.2)
(2.0)
(5.2)
32.2
(1.6)
30.6
Year to 30 December 2012
Rental income from external
sources
Property and void costs
Net rental income
Interest income
Interest expense
Contribution
Management fees
Management expenses
SNO!zone income
SNO!zone expenses
Depreciation
Inter-segment eliminations
Interest expense on central
facility
Recurring pre-tax profit/
(loss)
Performance fees
Variable overhead
Revaluation of properties
(Loss)/profit on disposal of
properties
Impairment of goodwill
Impairment of FIX UK
Impairment of German
portfolio 4
Transfer from foreign currency
reserve for German portfolio 4
Impairment of Euro B-Note
Gain/(loss) on financial
instruments
Other items
Loss on disposal of JVs and
Associates
Profit/(loss) before tax
Tax credit/(charge)
Profit after tax
Total assets
Total liabilities
Net assets
Note
2b
2b
2b
2b
2b
12
9a
2b
2b
Total
£m
51.0
(12.5)
38.5
0.7
(22.7)
16.5
12.7
(12.6)
10.1
(8.7)
(0.3)
–
(0.7)
17.0
2.0
(2.7)
(20.8)
(1.6)
(1.8)
(1.3)
(3.3)
0.7
(3.2)
3.6
0.5
(4.0)
(14.9)
(1.1)
(16.0)
579.5
(399.9)
179.6
65
22158.04
18 April 2013 4:26 PM
Proof 7
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
2a Operating segments continued
UK Shopping
Centres
Other UK
Shopping
Centres
£m
The Mall
£m
Germany
£m
Leisure
£m
Other
£m
Property
Management
£m
SNO!zone
£m
Total
continuing
operations
£m
Discon-
tinued
operations
£m
Group
items
£m
Year to 30 December 2011
Rental income from external
sources
Property and void costs
Net rental income
Interest income
Interest expense
Contribution
Management fees
Management expenses
SNO!zone income
SNO!zone expenses
Depreciation
Inter-segment eliminations
Net interest expense on
central facility
Recurring pre-tax
profit/(loss)
Variable overhead
Revaluation of properties
Profit/(loss) on disposals
Impairment of goodwill
Gain on financial instruments
Investment income
Other items
Profit/(loss) before tax
Tax charge
Profit after tax
Total assets
Total liabilities
Net assets
Note
2b
2b
2b
2b
12
9a
2b
2b
16.0
(4.0)
12.0
–
(8.1)
3.9
–
–
–
–
–
–
–
3.9
–
(1.1)
(0.7)
–
0.1
–
1.1
3.3
1.0
(0.3)
0.7
–
(0.3)
0.4
–
–
–
–
–
–
–
0.4
–
–
–
–
(0.2)
–
–
0.2
19.3
(2.6)
16.7
0.8
(9.6)
7.9
–
–
–
–
–
–
–
7.9
–
(2.4)
(0.1)
–
0.7
4.0
(1.1)
9.0
7.4
(0.8)
6.6
–
(4.7)
1.9
–
–
–
–
–
(0.1)
–
1.8
–
(0.7)
–
–
1.0
–
–
2.1
2.2
(0.2)
2.0
–
(1.3)
0.7
–
–
–
–
–
–
–
0.7
–
(1.0)
–
–
0.2
–
–
(0.1)
212.9
(148.0)
64.9
20.4
(13.9)
6.5
277.3
(222.6)
54.7
84.3
(73.2)
11.1
27.3
(26.3)
1.0
–
–
–
–
–
–
10.4
(6.2)
–
–
(0.2)
0.1
–
4.1
(0.6)
–
–
–
–
–
–
3.5
6.6
(3.8)
2.8
–
–
–
–
–
–
–
–
12.4
(11.5)
(0.2)
–
–
0.7
–
–
–
–
–
–
0.1
0.8
–
–
–
–
–
–
–
(3.9)
–
–
–
–
(0.8)
(4.7)
(1.1)
–
–
–
–
–
(0.2)
(6.0)
2.1
(2.1)
–
17.0
(14.0)
3.0
Total
£m
55.8
(10.0)
45.8
0.8
(30.6)
16.0
12.7
(12.0)
12.4
(11.5)
(0.4)
–
(0.8)
16.4
45.9
(7.9)
38.0
0.8
(24.0)
14.8
10.4
(10.1)
12.4
(11.5)
(0.4)
-
(0.8)
14.8
9.9
(2.1)
7.8
–
(6.6)
1.2
2.3
(1.9)
–
–
–
–
–
1.6
(1.7)
(5.2)
(0.8)
–
1.8
4.0
(0.1)
12.8
(2.0)
10.8
647.9
(503.9)
144.0
–
6.9
1.5
(0.1)
0.8
–
(0.1)
10.6
(0.3)
10.3
152.7
(100.7)
52.0
(1.7)
1.7
0.7
(0.1)
2.6
4.0
(0.2)
23.4
(2.3)
21.1
800.6
(604.6)
196.0
66
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 2b Reconciliations of reportable revenue, assets and liabilities
Revenue
Rental income from external sources
Inter-segment revenue
Management fees
Performance fees
SNO!zone income
Revenue for reportable segments – continuing operations
Elimination of inter-segment revenue
Rental income earned by associates and joint ventures
Management fees earned by associates and joint ventures
Revenue per consolidated income statement – continuing operations
Revenue for reportable segments by country – continuing operations
UK
Germany
Revenue for reportable segments – continuing operations
Year to
30 December
2012
£m
42.1
0.1
10.4
2.6
10.1
65.3
(0.1)
(35.3)
(1.2)
28.7
Year to
30 December
2011
£m
45.9
0.1
10.4
–
12.4
68.8
(0.1)
(38.5)
(1.3)
28.9
Note
2a
2a
2a
2a
2a
2a
17d, 17e
17d, 17e
3
48.2
17.1
65.3
48.2
20.6
68.8
Revenue is attributed to countries on the basis of the location of the underlying properties. Revenue from the Group’s major
customer is management fee income from The Mall LP, included in the property management segment, which represented
£6.7 million (2011: £7.1 million) of the Group’s total revenue of £28.7 million (2011: £28.9 million). Further information on related
party transactions is disclosed in note 35 to the financial statements.
Assets
Total assets of reportable segments
Adjustment for associates and joint ventures
Non-segment assets
Group assets
Liabilities
Total liabilities of reportable segments
Adjustment for associates and joint ventures
Non-segment liabilities
Group liabilities
Net assets by country
UK
Germany
Group net assets
Note
2a
2a
2a
2a
30 December
2012
£m
575.5
(325.4)
4.0
254.1
30 December
2011
£m
783.6
(512.1)
17.0
288.5
(395.3)
325.4
(4.6)
(74.5)
136.5
43.1
179.6
(590.6)
512.1
(14.0)
(92.5)
140.1
55.9
196.0
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Proof 7
67
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
3 Revenue
Statutory
Gross rent from wholly owned properties
Management fees
SNO!zone income
Revenue per consolidated income statement – continuing operations
Finance income
Total revenue from continuing operations
Year to
30 December
2012
£m
6.6
12.0
10.1
28.7
2.9
31.6
Year to
30 December
2011
£m
7.4
9.1
12.4
28.9
2.3
31.2
Note
2a
2b
5
Management fees represent revenue earned by the Group’s wholly-owned CRPM subsidiary.
With effect from 21 July 2010, the fee basis earned by CRPM for asset and property management on The Mall changed from a
percentage of property under management to a fixed fee of £4.5 million per annum. 25% of this fee is subject to reduction on a
sliding scale from 100% to 75% if the valuation of the properties in the fund falls to between £850 million and £600 million.
4 Cost of sales
Property costs of wholly owned properties
Void costs of wholly owned properties
SNO!zone expenses
Impairment/(Impairment reversal) of trading properties
Total cost of sales
5 Finance income
Interest receivable
Dividend income from investments
Gain in fair value of financial instruments:
– Interest rate swaps
– Ineffective portion of forward foreign exchange contracts
– Unhedged element of forward foreign exchange contracts
Total finance income
Year to
30 December
2012
£m
0.5
0.2
8.9
1.5
11.1
Year to
30 December
2011
£m
0.3
0.4
11.7
(0.7)
11.7
Note
11a
Year to
30 December
2012
£m
1.0
0.2
Year to
30 December
2011
£m
1.3
–
1.5
0.2
–
2.9
0.5
0.2
0.3
2.3
68
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18 April 2013 4:26 PM
Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 6 Finance costs
Interest payable on bank loans and overdrafts
Interest receivable on swaps
Interest payable
Amortisation of loan issue costs
Other interest payable
Total finance costs
7 Profit before tax
The profit before tax has been arrived at after charging the following items:
Depreciation of plant and equipment
Property revaluation
Staff costs
Auditor’s remuneration for audit services (see below)
Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
Year to
30 December
2012
£m
5.1
(0.5)
4.6
0.4
0.6
5.6
Year to
30 December
2011
£m
4.8
(0.5)
4.3
0.4
1.0
5.7
Year to
30 December
2012
£m
0.3
0.2
13.8
0.3
Year to
30 December
2011
£m
0.4
1.5
13.5
0.3
Note
13
11a
8
30 December
2012
£m
30 December
2011
£m
Fees payable to the Company’s auditor and their associates for the audit of the Company’s annual
financial statements
Fees payable to the Company’s auditor and their associates for other services to the Group – the audit
of the Company’s subsidiaries
Total audit fees for the Company and its subsidiaries
Fees payable to the Company’s auditor and their associates for other services to the Group – the audit
of the Company’s affiliates
Total audit fees
Tax compliance services
Other non-audit services
Total non-audit fees
Total fees paid to auditor and their associates
0.1
0.1
0.2
0.1
0.3
0.1
0.1
0.2
0.5
0.1
0.1
0.2
0.1
0.3
0.1
0.1
0.2
0.5
Included in other non-audit services is an amount for audit related assurance services of £44,200 (2011: £41,500) for the review of
the Group’s interim report.
The fees in relation to the audit of the Company’s affiliates have been disclosed gross and have not been pro-rated to reflect the
Company’s equity investment percentage.
Of the tax compliance services payable to the Company’s auditor, £nil (2011: £nil) was payable by the Company, with the balance of the
fee relating to amounts incurred by affiliates. No fees were charged in the current or prior period pursuant to contingent fee arrangements.
22158.04
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Proof 7
69
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
8 Staff costs
All remuneration, including directors, is paid by either CRPM or the SNO!zone companies.
Salaries
Discretionary bonuses
Share-based payments
Social security
Other pension costs
Note
25
Year to
30 December
2012
£m
9.5
2.1
0.8
12.4
1.2
0.2
13.8
Year to
30 December
2011
£m
10.5
1.0
0.8
12.3
1.1
0.1
13.5
Except for the directors, the Company has no employees. The costs of the directors shown in the directors’ remuneration report are
borne by CRPM and appropriate amounts recharged to the Company.
Staff numbers
The monthly average number of persons, including directors, employed by the Group during the year was as follows:
Year to
30 December
2012
Number
79
203
282
Year to
30 December
2011
Number
84
251
335
Year to
30 December
2012
£m
Year to
30 December
2011
£m
Note
1.0
2.0
(2.6)
0.2
0.6
0.5
(3.5)
(3.0)
(2.4)
(0.9)
(1.5)
1.9
0.3
(0.2)
0.1
2.1
0.2
–
0.2
2.3
2.0
0.3
9c
9c
9b
30
CRPM
SNO!zone
Total staff numbers
9 Tax
9a Tax charge
Current tax charge
UK corporation tax – continuing operations
UK corporation tax – discontinued operations
Adjustments in respect of prior years – continuing operations
Foreign tax – continuing operations
Total current tax charge
Deferred tax charge
Origination and reversal of temporary timing differences
Deferred tax credit – discontinued operations
Total deferred tax (credit)/charge
Total tax (credit)/charge
Total tax (credit)/charge – continuing operations
Total tax (credit)/charge – discontinued operations
£nil (2011: £nil) of the tax charge relates to items included in other comprehensive income.
70
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 9b Tax charge reconciliation
(Loss)/profit before tax on continuing operations
Profit multiplied by the UK corporation tax rate of 24.5% (2011: 26.5%)
Non-allowable expenses and non-taxable items
Utilisation of tax losses
Tax on realised gains/(losses)
Unrealised losses on investment properties not taxable
Temporary timing and controlled foreign companies income
Adjustments in respect of prior years
Total tax (credit)/charge
9c Deferred tax
Year to
30 December
2012
£m
(11.7)
(2.9)
(1.0)
(1.3)
0.5
4.7
1.7
(2.6)
(0.9)
Year to
30 December
2011
£m
12.8
3.4
(2.7)
(1.1)
0.2
1.6
0.9
(0.3)
2.0
Note
9a
The following are the major deferred tax assets and liabilities recognised by the Group and movements during the current and
preceding year.
At 30 December 2010
Deferred tax charge
At 30 December 2011
Deferred tax credit/(charge) – continuing operations
Deferred tax credit – discontinued operations
At 30 December 2012
Capital
allowances
£m
(4.9)
(0.3)
(5.2)
0.1
3.3
(1.8)
Other timing
differences
£m
1.2
0.1
1.3
(0.6)
0.2
0.9
Total
deferred tax
liability
£m
(3.7)
(0.2)
(3.9)
(0.5)
3.5
(0.9)
Note
9a
9a
The reduction in the UK corporation tax rate at 1 April 2013 from 25% to 23% was substantively enacted on 3 July 2012.
Consequently, the UK corporation tax rate at which deferred tax is booked in the financial statements is 23% (2011: 25%).
There are no temporary differences relating to the unremitted earnings of subsidiaries as the Group’s overseas subsidiaries are
controlled foreign companies under UK tax legislation and their profits are treated as taxable in the UK in the year they arise. No
deferred tax asset has been recognised in respect of temporary differences arising from investments in associates and interests in
joint ventures of £0.9 million (2011: £2.2 million) as it is not certain that a deduction will be available when the asset crystallises.
9d Unused tax losses
The Group has £46.0 million (2011: £55.8 million) of unused revenue tax losses, all of which are in the UK. During the period several
historic tax matters were successfully concluded with the tax authority which has resulted in the closure of all open tax years up to
and including 2009 and a prior year tax credit to the income statement of £2.1 million. A deferred tax asset of £0.5 million (2011:
£0.5 million) has been recognised in respect of £2.0 million (2011: £2.1 million) of these losses, based on future profit forecasts. No
deferred tax asset has been recognised in respect of the remainder owing to the unpredictability of future profit streams and other
reasons which may restrict the utilisation of the losses. The Group has unused capital losses of £20.6 million (2011: £21.4 million)
that are available for offset against future gains but similarly no deferred tax has been recognised in respect of these losses owing to
the unpredictability of future capital gains and other reasons which may restrict the utilisation of the losses. The losses do not have
an expiry date.
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Proof 7
71
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
9e Factors affecting tax
The Budget on 21 March 2012 revised the previously announced phased reduction in the UK statutory corporation tax rate. The
rate is now proposed to reduce to 22% (previously 23%) by 1 April 2014. The reduction in the UK corporation tax rate at 1 April
2012 to 24% was substantively enacted on 26 March 2012. The reduction to 23% from 1 April 2013 was substantively enacted on
3 July 2012. This change will not have a significant impact on the Group.
In 2009 agreement was reached with the tax authorities related to tax structuring of previous property disposals by the Group in
2004 and 2005 which resulted in a liability of £19.5 million including interest. During the period the final instalment of £5.0 million
was paid and as at 30 December 2012 no further liability exists.
10 Earnings per share
The European Public Real Estate Association (“EPRA”) has issued recommendations for the calculation of earnings per share
information as shown in the following tables:
10a Earnings per share calculation
(Loss)/profit (£m)
(Loss)/profit for the year from continuing
operations
Revaluation of investment properties
Profit on disposal of investment properties
(net of tax)
Movement in fair value of financial instruments
(net of tax)
Deferred tax charge on capital allowances
(Loss)/profit from continuing operations
Discontinued operations
(Loss)/profit
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Dilutive contingently issuable shares and share
options
(Loss)/Earnings per share (pence)
(Loss)/Earnings per share (pence) –
continuing operations
Year to 30 December 2012
Year to 30 December 2011
Note
Basic
Diluted
EPRA
diluted
Basic
Diluted
EPRA
diluted
10b
10b
10b
9c
(10.8)
–
(10.8)
–
(10.8)
19.2
10.8
–
10.8
–
10.8
5.9
–
–
1.1
–
–
0.6
–
–
(10.8)
(5.2)
(16.0)
–
–
(10.8)
(5.2)
(16.0)
(1.9)
(0.1)
7.5
(4.6)
2.9
–
–
10.8
10.3
21.1
–
–
10.8
10.3
21.1
(1.2)
–
16.1
1.9
18.0
24
350.6
(1.3)
350.6
(1.3)
350.6
(1.3)
350.6
(1.8)
350.6
(1.8)
350.6
(1.8)
–
349.3
(5)p
–
349.3
(5)p
–
349.3
1p
–
348.8
6p
0.2
349.0
6p
0.2
349.0
5p
(3)p
(3)p
2p
3p
3p
5p
At the end of the year, the Group had 13,987,306 (2011: 15,569,672) share options and contingently issuable shares granted under
share-based payment schemes that could potentially have diluted basic earnings per share in the future but which have not been
included in the calculation because they are not dilutive or the conditions for vesting have not been met.
72
22158.04
18 April 2013 4:26 PM
Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 10b Reconciliation of earnings figures included in earnings per share
calculations
Associates
Joint ventures
Wholly owned
Tax effect
Total
Note
17d
17e
10a
Year to 30 December 2012
Profit/(loss)
on disposal
of investment
properties
£m
(1.6)
0.1
0.1
0.3
(1.1)
Movement
in fair value
of financial
instruments
£m
1.0
(0.4)
1.9
(0.6)
1.9
Revaluation
movements
£m
(8.9)
(10.2)
(0.1)
–
(19.2)
Year to 30 December 2011
Profit/(loss)
on disposal of
investment
properties
£m
0.7
0.1
–
(0.2)
(0.6)
Revaluation
movements
£m
(1.9)
(2.5)
(1.5)
–
(5.9)
Movement
in fair value
of financial
instruments
£m
0.3
0.5
1.0
(0.6)
1.2
11 Property assets
11a Wholly-owned properties
Cost or valuation
At 30 December 2010
Acquisition
Disposal into a joint venture
Impairment reversal of trading properties
Revaluation movement
At 30 December 2011
Capital expenditure
Disposal of freehold investment properties
Impairment of trading properties
Revaluation movement
At 30 December 2012
Note
17c
17c
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Sub-total
investment
properties
£m
Freehold
trading
properties
£m
Total
property
assets
£m
0.2
26.1
(26.1)
–
–
0.2
–
(0.2)
–
–
–
9.8
–
–
–
(1.5)
8.3
0.3
–
–
(0.2)
8.4
10.0
26.1
(26.1)
–
(1.5)
8.5
0.3
(0.2)
–
(0.2)
8.4
70.8
–
–
0.7
–
71.5
–
–
(1.5)
–
70.0
80.8
26.1
(26.1)
0.7
(1.5)
80.0
0.3
(0.2)
(1.5)
(0.2)
78.4
The Group did not have any wholly-owned development property in either the current year or the preceding year. The Group has
pledged land and buildings with a carrying amount of £70.0 million (2011: £79.8 million) to secure banking facilities granted to the
Group, including amounts relating to trading properties of £70.0 million (2011: £71.5 million). Those banking facilities restrict the
remittance of income from the properties to elsewhere in the Group. The historical cost of wholly-owned property at 30 December
2012 was £92.2 million (2011: £90.0 million).
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Proof 7
73
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
11b Property assets summary
Wholly-owned
Investment properties at fair value
Trading properties at the lower of cost and net realisable value
Unamortised tenant incentives on trading properties
Joint ventures (100%)
Investment properties at fair value
Unamortised tenant incentives on investment properties
Associates (100%)
Investment properties at fair value
Head leases treated as finance leases on investment properties
Unamortised tenant incentives on investment properties
Held for sale properties at fair value
30 December
2012
Valuation
£m
30 December
2011
Valuation
£m
Note
8.4
72.5
(2.5)
78.4
364.1
(0.2)
363.9
982.6
65.5
(19.1)
–
1,029.0
8.5
72.0
(0.5)
80.0
575.9
(6.0)
569.9
1,871.7
70.2
(44.8)
84.2
1,981.3
17e
17d
Valuations
In addition to the wholly-owned properties shown above, the Group’s property assets include its share in the investment
properties held by its associates and joint ventures. External valuations at 30 December 2012 were carried out on £1,428.7 million
(2011: £2,479.7 million) of the property assets held by the Group and its associates and joint ventures, of which the Group’s share
was £461.3 million (2011: £650.2 million).
The valuations were carried out by independent qualified professional valuers from CB Richard Ellis Limited, Cushman & Wakefield
LLP, DTZ Debenham Tie Leung Limited and Jones Lang LaSalle Limited. These valuers are not connected with the Group and
their fees are charged on a fixed basis that is not dependent on the outcome of the valuations. The valuations, which conform to
International Valuation Standards, were arrived at by reference to market evidence of transaction prices for similar properties.
No directors’ valuations were performed at 30 December 2012. At 30 December 2011 directors’ valuations were carried out on
£132.6 million of the property assets of the Group’s associates and joint ventures, of which the Group’s share was £26.7 million. The
valuations were carried out by Kenneth Ford BSc FRICS and were arrived at by reference to market evidence of transaction prices
for similar properties.
12 Goodwill
At the start of the year
Impairment losses for the year
At the end of the year
30 December
2012
£m
1.8
(1.8)
–
30 December
2011
£m
1.9
(0.1)
1.8
The goodwill carried in the Group balance sheet relating to the management contracts for the X-Leisure fund held by the Group’s
X-Leisure Limited joint venture was fully impaired during the year through discontinued operations on assessment that the likely
future cash benefit arising to the Group from the X-Leisure Limited joint venture would not support the carrying value either through
sale or continuing use.
74
22158.04
18 April 2013 4:26 PM
Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 13 Plant and equipment
Cost or valuation
At the start of the year
Additions
Disposals
At the end of the year
Accumulated depreciation
At the start of the year
Charge for the year
Eliminated on disposal
At the end of the year
Carrying amount
At the end of the year
14 Available for sale investments
Fair value
At the start of the year
Disposals
At the end of the year
30 December
2012
£m
30 December
2011
£m
2.3
0.4
–
2.7
(1.6)
(0.3)
–
(1.9)
0.8
2.7
0.3
(0.7)
2.3
(1.8)
(0.4)
0.6
(1.6)
0.7
30 December
2012
£m
30 December
2011
£m
0.3
(0.3)
–
0.3
–
0.3
On 12 January 2012 the Group disposed of its 0.3% interest in the units of the Paddington Central III Unit Trust for £0.3 million.
15 Non-current receivables
Financial assets
Loans to joint ventures
Non-derivative financial assets
Financial assets carried at fair value through the profit or loss:
– Foreign exchange forward contracts
– Interest rate swaption
Non-financial assets
Prepayments – tenant incentives
Interest is payable on the majority of loans to joint ventures at normal commercial rates. The Group has pledged loans to joint
ventures with a carrying amount of £15.0 million (2011: £15.0 million) to secure banking facilities granted to the Group.
22158.04
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Proof 7
30 December
2012
£m
30 December
2011
£m
21.2
21.2
–
–
21.2
2.4
23.6
32.1
32.1
0.6
0.2
32.9
0.4
33.3
75
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
16 Subsidiaries
A list of the significant investments in subsidiaries, including the name, country of incorporation, and proportion of ownership interest
is given in note G to the Company financial statements.
The terms of the Group’s central borrowing facility may restrict the ability of Capital & Regional Holdings Limited and its subsidiaries
to make cash distributions or repay loans and advances to the Company or elsewhere in the Group if they would thereby cause a
default on the facility.
The terms of the borrowing facilities for the Great Northern property includes a cash sweep that restricts the ability of Morrison
Merlin Limited to make cash distributions or repay loans and advances to the Company or elsewhere in the Group as disclosed in
note 19.
17 Investment in associates and joint ventures
17a Share of results
Share of results of associates
Impairment of FIX UK
Share of results of joint ventures
Impairment of German portfolio 4
Transfer from foreign currency reserve for German portfolio 4
17b Investment in associates
At the start of the year
Investment in associates
Share of results of associates
Share of results of associates within discontinued operations
Dividends and capital distributions received
Reclassified as held for sale (X-Leisure Fund)
Foreign exchange differences
Impairment of FIX UK
Disposal of The Junction Fund
At the end of the year
Note
17d
17e
Year to
30 December
2012
£m
(5.6)
(1.3)
(3.3)
(3.3)
0.7
(12.8)
Year to
30 December
2011
£m
7.7
–
3.9
–
–
11.6
30 December
2012
£m
120.2
16.2
(5.6)
0.5
(2.2)
(33.9)
–
(1.3)
(13.2)
80.7
30 December
2011
£m
110.8
4.0
7.7
9.0
(11.2)
–
(0.1)
–
–
120.2
Note
17d
17d
35
17d
76
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 17b Investment in associates continued
The Group’s associates are:
The Mall Limited Partnership
Kingfisher Limited Partnership
The Junction Limited Partnership
X-Leisure Limited Partnership1
The FIX UK Limited Partnership
Garigal Asset Management GmbH (“Garigal”)
Euro B-Note Holding Limited
1 Reclassified as asset held for sale.
Group interest
Average
during the
year/until
disposal
%
19.98
20.00
13.29
11.93
20.00
30.06
49.90
At the start
of the year
%
18.16
–
13.29
11.93
20.00
30.06
49.90
At the end
of the year
%
20.15
20.00
–
11.93
20.00
30.06
49.90
Whilst the Group held less than 20% in The Mall Limited Partnership at the start of the year it has been accounted for as an
associate throughout the year and in the preceding year as the Group have maintained significant influence arising from its
representation on the General Partner boards. For the same reason the Group’s investments in The Junction Limited Partnership
and X-Leisure Limited Partnership were also accounted for as associates prior to their disposal and reclassification to held for sale
respectively. The share of results of these investments shown in note 17d therefore relates to the period up to disposal and being
transferred to held for sale respectively (see note 30 for further details). The Group holds 20% or more of Garigal Asset Management
GmbH and Kingfisher Limited Partnership and exercises significant influence through its representation on the General Partner or
advisory boards. The Group holds an effective 49.90% of Euro B-Note Holding Limited and exercises significant influence through
its ownership interest.
The Mall Limited Partnership
On 8 February 2012 the Group purchased 18.7 million units in The Mall Fund at £0.30 per unit for a total consideration of
£5.6 million. This purchase was at a discount to the net asset value of The Mall and resulted in a gain on investment of £1.4 million.
This purchase increased the holding in The Mall Fund from 18.16% to 20.15%.
On 12 July 2012, The Mall completed the sale of The Castle Mall Shopping Centre in Norwich for £77.3 million at a 7.8% net
initial yield.
After the year end on 4 January 2013, the Group purchased 1.6 million units in The Mall Fund at £0.25 per unit for a total
consideration of £0.4 million. This increased the holding in The Mall Fund from 20.15% to 20.33%.
Kingfisher Limited Partnership
On 1 May 2012, the Group completed its acquisition of a 20% interest in The Kingfisher Shopping Centre in Redditch for a total
consideration of £10.6 million in partnership with funds managed by Oaktree Capital Management L.P. The Kingfisher Centre was
purchased for £130.0 million at an 8% net initial yield.
22158.04
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Proof 7
77
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
17b Investment in associates continued
The FIX UK Limited Partnership
At 30 June 2012, the Group made a provision for impairment of £1.3 million to write down the carrying value of its investment
in FIX UK Limited Partnership to £nil. This was to take account of the significant refinancing risk associated with the FIX debt
(non-recourse to the Group) amounting to £125.0 million at 30 June 2012 that was due to mature in February 2013. At that date
the Group also concluded it had lost significant influence given the debt of the fund exceeded the value of the property and the
impending refinancing. As such the following share of results of FIX UK that has been included within note 17d relates purely to the
period to 30 June 2012.
Net rent
Contribution
Profit after tax
£m
1.0
0.3
0.3
The impairment resulted in the following share of assets and liabilities of FIX UK being removed from the see-through analysis in
note 18d:
Investment properties
Other assets
Current liabilities
Non-current liabilities
Net assets
£m
26.1
1.1
(25.0)
(0.9)
1.3
Euro B-Note Holding Limited
At 30 December 2012, the loan receivable due from German portfolio 4 is being carried at an amortised cost less impairment of
€5.7 million (Group share of £2.3 million) compared to the principal value of €18.0 million of the junior debt. The carrying value
at 30 December 2011 was €13.5 million (Group share of £5.6 million). The additional impairment of €7.8 million (Group share of
£3.2 million) recognised in the period reflects an assessment of the risk of recovering the loan value due to the continuing
uncertainty impacting the portfolio as detailed in note 17c.
Cash distributions
Distributions received from Joint Ventures and Associates are disclosed in note 35.
17c Investment in joint ventures
At the start of the year
Investment in joint ventures
Share of results of joint ventures
Share of results of joint ventures within discontinued operations
Dividends and capital distributions received
Reclassified as held for sale (X-Leisure Limited)
Impairment of German portfolio 4
Disposal of interest in Xscape Braehead
Foreign exchange differences
At the end of the year
78
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Proof 7
30 December
2012
£m
27.2
–
(3.3)
2.0
(0.6)
(0.8)
(3.3)
5.4
(0.9)
25.7
30 December
2011
£m
25.7
1.2
3.9
1.7
(4.5)
–
–
–
(0.8)
27.2
Note
17e
17e
35
17e
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 17c Investment in joint ventures continued
The Group’s significant joint ventures are:
German portfolio
X-Leisure Limited
Xscape Braehead Partnership
The Auchinlea Partnership
Waterside Lincoln Limited Partnership
Group interest
Average during the
year/until disposal
since acquisition
%
50.00
50.00
50.00
50.00
50.00
At the start
of the year
%
50.00
50.00
50.00
50.00
50.00
At the end
of the year
%
50.00
50.00
–
50.00
50.00
The Group’s investments in joint ventures include its share of the German portfolio (49.6%), and its investments in The Waterside
Lincoln Limited Partnership (50%) and The Auchinlea Partnership (50%). The Group’s interest in X-Leisure Limited (50%) was
reclassified as held for sale during the year while the interest in Xscape Braehead Partnership (50%) was disposed of on
24 December 2012 (See note 30 for further details). The Group’s share in the German portfolio is accounted for at 50% as the
minority interests are included as a liability on the joint venture balance sheet.
German portfolio
At 30 June 2012, the Group made a provision for impairment of £3.3 million to write down the carrying value of its investment in
the German portfolio 4 joint venture to £nil. This was to take account of the fall in property values during the first half of 2012 which
resulted in portfolio 4 defaulting on its €157.9 million debt as it did not meet the required 93% loan to value covenant test that was
required to extend the loan into the second year of its extension period. As a result the loan maturity date was 16 July 2012 and
the loan was placed into special servicing by the loan servicer. The Group concluded that it had lost joint control of its investment
in German portfolio 4 at 30 June 2012 given the known inability to repay the debt on maturity and as such the following share of
results of German portfolio 4 that has been included within note 17d relates purely to the period to 30 June 2012:
Net rent
Net interest payable
Contribution
Revaluation of investment properties
Profit on sale of investment properties
Loss before tax
Tax
Loss after tax
The impairment recorded at 30 June 2012 resulted in the following share of assets and liabilities of German portfolio 4 being
removed from the see-through analysis in note 17e:
Investment properties
Other assets
Current liabilities
Non-current liabilities
Net assets
£m
1.6
(0.7)
0.9
(8.6)
0.1
(7.6)
1.0
(6.6)
£m
63.6
4.2
(63.2)
(1.3)
3.3
At 30 June 2012, £0.7 million was reclassified from the foreign currency reserve to the income statement related to portfolio 4.
Following receipt of a demand for repayment in December 2012 the portfolio was placed into administration in January 2013. The
securitised loan is non-recourse to the Group or any properties in the other German joint venture portfolios.
22158.04
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Proof 7
79
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
17c Investment in joint ventures continued
Waterside Lincoln Limited Partnership
On 22 February 2011, the Group completed the purchase of The Waterside Shopping Centre (“Waterside”) in Lincoln for total
cash consideration of £26.1 million, being a property cost of £24.8 million and directly related transaction costs of £1.3 million.
The acquisition was completed utilising a new four year £13.6 million facility from Deutsche PostBank, together with existing cash
resources.
On 8 March 2011, the Group conditionally exchanged contracts with Karoo Investment Fund II S.C.A SICAV-SIF (“Karoo”) to form a
joint venture by selling 50% of the Group’s interest in Waterside (“the Disposal”). As the Group and Karoo have common significant
shareholders the formation of the joint venture was conditional upon shareholder approval which was granted on 1 April 2011.
On 8 April 2011 the Group completed the Disposal. The Group initially acquired the Waterside through an English Limited
Partnership consisting of a General Partner and two equal Limited Partners. In order to form the joint venture, the Group sold the
entire share capital of one of the Limited Partners and 50% of the share capital of the General Partner to Karoo. Under the terms
of the Disposal it was agreed that Karoo would fund half of the total costs and related expenses incurred by the Group in acquiring
Waterside. Accordingly, the total amount paid by Karoo was £6.4 million comprising a purchase price for the shares being sold of
£58k and £6.37 million of financing that had been provided by the Group to complete the purchase of Waterside. Following the
Disposal the Group’s remaining 50% interest in Waterside is classified as a loan to joint venture amounting to £6.4 million at
30 December 2012 (2011: £6.4 million).
80
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18 April 2013 4:26 PM
Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 17d Analysis of investment in associates
Other UK
Shopping
Centres
£m
Discontinued Operations
Other
£m
The
Junction
£m
X-Leisure
£m
Year to 30
December
2012
Total
£m
Year to 30
December
2011
Total
£m
Note
The Mall
£m
Income statement (100%)
Revenue – gross rent
Property and management expenses
Void costs
Net rent
Net interest payable
Contribution
Revenue – management fees
Management expenses
Revaluation of investment properties
(Loss)/profit on sale of investment
properties
Fair value of interest rate swaps
Investment income
Impairment of Euro B-Note
(Loss)/profit before tax
Tax
(Loss)/profit after tax
Balance sheet (100%)
Investment properties
Investment properties held for sale
Other assets
Current liabilities
Non-current liabilities
Net assets (100%)
Income statement (Group share)
Revenue – gross rent
Property and management expenses
Void costs
Net rent
Net interest payable
Contribution
Revenue – management fees
Management expenses
Revaluation of investment properties
(Loss)/profit on sale of investment
properties
Fair value of interest rate swaps
Investment income
Impairment of Euro B-Note
Gain recognised on investment in Mall
(Loss)/profit before tax
Tax
(Loss)/profit after tax
Balance sheet (Group share)
Investment properties
Investment properties held for sale
Other assets
Current liabilities
Non-current liabilities
Net assets (Group share)
17b
77.5
(17.0)
(4.3)
56.2
(33.2)
23.0
–
–
(38.7)
(8.1)
8.1
–
–
(15.7)
–
(15.7)
897.5
–
147.4
(36.4)
(671.2)
337.3
15.4
(3.4)
(0.9)
11.1
(6.6)
4.5
–
–
(7.6)
(1.6)
1.6
–
–
1.4
(1.7)
–
(1.7)
180.8
–
29.7
(7.3)
(135.2)
68.0
9.0
(2.1)
–
6.9
(3.7)
3.2
–
–
(5.8)
–
(3.3)
–
–
(5.9)
0.1
(5.8)
131.5
–
11.0
(7.5)
(87.9)
47.1
1.8
(0.4)
–
1.4
(0.7)
0.7
–
–
(1.2)
–
(0.7)
–
–
–
(1.2)
–
(1.2)
26.3
–
2.2
(1.5)
(17.6)
9.4
5.5
(0.6)
(0.1)
4.8
(3.6)
1.2
4.1
(2.7)
(0.5)
(0.1)
0.6
–
(6.3)
(3.7)
(0.4)
(4.1)
–
–
9.3
(1.3)
–
8.0
1.1
(0.2)
–
0.9
(0.7)
0.2
1.2
(0.8)
(0.1)
–
0.1
–
(3.2)
–
(2.6)
(0.1)
(2.7)
–
–
3.7
(0.4)
–
3.3
14.4
(4.3)
(0.8)
9.3
(6.6)
2.7
–
(2.6)
(29.8)
(1.1)
1.5
–
–
(29.3)
–
(29.3)
–
–
–
–
–
–
1.9
(0.6)
(0.1)
1.2
(0.9)
0.3
–
(0.3)
(4.0)
(0.2)
0.2
–
–
–
(4.0)
–
(4.0)
–
–
–
–
–
–
42.6
(7.1)
(1.3)
34.2
(21.2)
13.0
–
(7.5)
25.4
–
6.9
–
–
37.8
–
37.8
–
–
–
–
–
–
5.1
(0.9)
(0.1)
4.1
(2.5)
1.6
–
(1.0)
3.1
–
0.8
–
–
–
4.5
–
4.5
–
–
–
–
–
–
149.0
(31.1)
(6.5)
111.4
(68.3)
43.1
4.1
(12.8)
(49.4)
(9.3)
13.8
–
(6.3)
(16.8)
(0.3)
(17.1)
170.1
(29.9)
(7.7)
132.5
(95.1)
37.4
4.3
(2.9)
33.9
6.8
7.1
8.1
–
94.7
(0.4)
94.3
1,029.0
–
167.7
(45.2)
(759.1)
392.4
1,897.1
84.2
250.0
(86.2)
(1,383.6)
761.5
25.3
(5.5)
(1.1)
18.7
(11.4)
7.3
1.2
(2.1)
(9.8)
(1.8)
2.0
–
(3.2)
1.4
(5.0)
(0.1)
(5.1)
207.1
–
35.6
(9.2)
(152.8)
80.7
26.3
(4.5)
(1.3)
20.5
(14.7)
5.8
1.3
(0.9)
3.5
0.8
1.2
4.0
–
1.1
16.8
(0.1)
16.7
298.8
15.3
45.6
(14.2)
(225.3)
120.2
81
22158.04
18 April 2013 4:26 PM
Proof 7
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
17e Analysis of investment in joint ventures
German
portfolio
£m
Other UK
Shopping
Centres
£m
Discontinued
Operations
£m
Others
£m
Year to 30
December
2012
Total
£m
Year to 30
December
2011
Total
£m
31.8
(5.8)
(0.3)
25.7
(12.9)
12.8
–
–
(20.1)
0.1
(0.7)
(7.9)
0.4
(7.5)
337.8
11.7
(31.0)
(268.6)
49.9
15.9
(2.8)
(0.2)
12.9
(6.5)
6.4
–
–
(10.0)
0.1
(0.4)
(3.9)
0.2
(3.7)
168.9
5.9
(15.5)
(134.3)
25.0
2.5
(0.6)
(0.2)
1.7
(0.7)
1.0
–
–
(0.3)
–
0.1
0.8
–
0.8
26.1
2.6
(0.9)
(26.7)
1.1
1.2
(0.1)
(0.1)
1.0
(0.4)
0.6
–
–
(0.2)
–
–
0.4
–
0.4
13.0
1.3
(0.5)
(13.3)
0.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
(0.1)
–
0.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
0.2
3.8
(4.2)
(0.2)
(0.6)
0.6
–
4.7
(2.3)
1.6
–
0.1
4.1
(0.6)
3.5
–
–
–
–
–
1.9
(1.9)
(0.1)
(0.1)
0.3
0.2
2.3
(1.1)
0.8
–
0.1
2.3
(0.3)
2.0
–
–
–
–
–
38.1
(10.6)
(0.7)
26.8
(13.0)
13.8
4.7
(2.3)
(18.8)
0.1
(0.5)
(3.0)
(0.2)
(3.2)
44.2
(6.0)
(0.8)
37.4
(23.4)
14.0
4.7
(3.9)
(1.9)
(0.1)
0.7
13.5
(2.3)
11.2
363.9
14.7
(32.0)
(295.3)
51.3
569.9
29.7
(45.2)
(500.0)
54.4
19.0
(4.8)
(0.4)
13.8
(6.6)
7.2
2.3
(1.1)
(9.4)
0.1
(0.3)
(1.2)
(0.1)
(1.3)
22.1
(3.0)
(0.4)
18.7
(11.6)
7.1
2.3
(1.9)
(1.0)
(0.1)
0.4
6.8
(1.2)
5.6
181.9
7.4
(16.0)
(147.6)
25.7
284.9
14.9
(22.6)
(250.0)
27.2
Income statement (100%)
Revenue – gross rent
Property and management expenses
Void costs
Net rent
Net interest payable
Contribution
Revenue – management fees
Management expenses
Revaluation of investment properties
Profit/(loss) on sale of investment properties
Fair value of interest rate swaps
(Loss)/profit before tax
Tax
(Loss)/profit after tax
Balance sheet (100%)
Investment properties
Other assets
Current liabilities
Non-current liabilities
Net assets (100%)
Income statement (Group share)
Revenue – gross rent
Property and management expenses
Void costs
Net rent
Net interest payable
Contribution
Revenue – management fees
Management expenses
Revaluation of investment properties
Profit/(loss) on sale of investment properties
Fair value of interest rate swaps
(Loss)/profit before tax
Tax
(Loss)/profit after tax
Balance sheet (Group share)
Investment properties
Other assets
Current liabilities
Non-current liabilities
Net assets (Group share)
82
22158.04
18 April 2013 4:26 PM
Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 18 Current receivables
Financial assets
Trade receivables
Amounts owed by associates
Amounts owed by joint ventures
Other receivables
Accrued income
Non-derivative financial assets
Financial assets carried at fair value through the profit or loss:
– Foreign exchange forward contract
Non-financial assets
Prepayments
30 December
2012
£m
30 December
2011
£m
0.7
2.0
–
1.7
0.3
4.7
1.4
6.1
1.3
7.4
0.7
1.4
0.2
0.9
0.5
3.7
–
3.7
1.3
5.0
Trade receivables largely comprise amounts owed by tenants of the Group’s wholly-owned properties. Before accepting a
new tenant, a review of its creditworthiness is carried out using an external credit scoring system and other publicly available
financial information. Included in the non-derivative financial assets balance are receivables with a carrying amount of £0.5 million
(2011: £1.1 million) which are past due at the reporting date for which the Group has not provided, as there has not been a
significant change in credit quality and the amounts are still considered recoverable. The Group holds collateral of £0.1 million
(2011: £0.1 million) over trade receivables as security deposits held in rent accounts. The average age of trade receivables is 35
days (2011: 35 days).
Analysis of non-derivative current financial assets
Not past due
Past due but not individually impaired:
Less than one month
One to three months
Three to six months
Over six months
Allowances for doubtful receivables
At the start of the year
Additional allowances created
Utilised during the year
At the end of the year
22158.04
18 April 2013 4:26 PM
Proof 7
30 December
2012
£m
30 December
2011
£m
4.2
–
0.4
–
0.1
4.7
2.6
0.4
0.1
–
0.6
3.7
30 December
2012
£m
30 December
2011
£m
0.2
0.2
(0.2)
0.2
0.8
–
(0.6)
0.2
83
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
19 Cash and cash equivalents
Cash at bank
Security deposits held in rent accounts
Other restricted balances
30 December
2012
£m
2.9
0.1
2.3
5.3
30 December
2011
£m
16.2
0.1
3.7
20.0
Other restricted balances include amounts subject to a charge against various borrowings and may therefore not be available for
general use by the Group.
The analysis of cash and cash equivalents by currency is as follows:
Sterling
Euro
20 Current payables
Financial liabilities
Trade payables
Accruals
Payable to associates
Other payables
Non-derivative financial liabilities
Financial liabilities carried at fair value through the profit or loss
Interest rate swaps
Non-financial liabilities
Deferred income
Other taxation and social security
30 December
2012
£m
4.7
0.6
5.3
30 December
2011
£m
19.7
0.3
20.0
30 December
2012
£m
30 December
2011
£m
0.6
4.6
0.8
0.8
6.8
1.8
8.6
1.9
1.2
11.7
0.4
4.1
0.7
1.7
6.9
–
6.9
1.9
1.2
10.0
The average age of trade payables is 20 days (2011: 20 days) and no amounts incur interest (2011: £nil).
84
22158.04
18 April 2013 4:26 PM
Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 21 Non-current payables
Financial liabilities
Accruals
Other payables
Non-derivative financial liabilities
Financial liabilities carried at fair value through profit or loss:
– Interest rate swaps
22 Borrowings
22a Summary of borrowings
30 December
2012
£m
30 December
2011
£m
0.7
–
0.7
–
0.7
0.2
0.3
0.5
3.5
4.0
The Group generally borrows on a secured basis and borrowings are arranged to ensure an appropriate maturity profile and to
maintain short-term liquidity. Short, medium and long-term funding is raised principally through revolving credit facilities from a range
of banks and financial institutions. There were no defaults or other breaches of financial covenants that were not waived under any
of the Group borrowings during the current year or the preceding year.
Borrowings at amortised cost
Secured
Fixed and swapped bank loans
Variable rate bank loans
Total borrowings before costs
Unamortised issue costs
Total borrowings after costs
Analysis of total borrowings after costs
Unamortised issue costs (within prepayments)
Current
Non-current
Total borrowings after costs
Note
23e
23e
30 December
2012
£m
30 December
2011
£m
57.6
1.0
58.6
(0.6)
58.0
(0.3)
–
58.3
58.0
59.6
7.6
67.2
(0.6)
66.6
–
5.0
61.6
66.6
On 31 August 2012 the Group signed a new revolving credit facility for £25 million, a reduction from £58 million and with the
maturity extended to July 2016 from September 2013. These changes better reflect the Group’s working capital requirements
and reduce the cost of the undrawn facility. At the same time the Group extended the maturity of the loan on the Great Northern
Warehouse by one year to October 2014. The loan on Great Northern Warehouse is secured by charges on that property. The
Group’s central credit facility is secured by charges over the units the Group holds in The Mall carried at £68.0 million at
30 December 2012 (2011: £64.9 million), X-Leisure carried as an asset held for sale at £32.2 million less associated liabilities of
£1.6 million (2011: interest in associate of £30.5 million), the units the Group held in The Junction until its disposal (2011: £17.1
million), charges over certain holdings in and loans to the German joint venture carried at £35.5 million (2011: £34.9 million) and
guarantees by the Company.
The core revolving credit facility was drawn by £1.0 million at 30 December 2012 (30 December 2011: £nil).
22158.04
18 April 2013 4:26 PM
Proof 7
85
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
22b Maturity of borrowings
From two to five years
From one to two years
Due after more than one year
Current
22c Undrawn committed facilities
Expiring between one and two years
Expiring between two and five years
30 December
2012
£m
1.0
57.6
58.6
–
58.6
30 December
2011
£m
–
61.9
61.9
5.3
67.2
Note
23a
30 December
2012
£m
–
24.0
30 December
2011
£m
58.0
–
Under the terms of the loan covenants, as disclosed in note 24e, a total of £25.0 million (2011: £58.0 million under the previous
facility) was available for drawdown at year end on this facility. The Articles of the Company also restrict borrowing but this did not
limit the amount available for drawdown on the facility during the current year or the preceding year.
22d Interest rate and currency profile of borrowings
Fixed and swapped rate borrowings
6% to 7%
Floating rate borrowings
30 December
2012
£m
30 December
2011
£m
57.6
57.6
1.0
58.6
59.6
59.6
7.6
67.2
Note
23a
23a
All loans are sterling denominated with the weighted average length of fix being 1.8 years (2011: 1.8 years). Floating rate borrowings
bear interest based on three month LIBOR.
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 23 Financial instruments and risk management
23a Overview
Capital risk management
The Group manages its capital to ensure that all entities in the Group will be able to continue as going concerns while maximising
the returns to shareholders through the optimisation of the debt and equity balance. The overall strategy of reducing the Group’s
levels of balance sheet and see-through debt remained unchanged from 2011.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 22a; cash and cash equivalents
as disclosed in note 19; and equity attributable to equity holders of the parent, comprising issued share capital, reserves and
retained earnings as disclosed in the statement of changes in equity. For the purpose of calculating gearing ratios, debt is defined as
long and short-term borrowings (excluding derivatives) excluding unamortised issue costs. Equity includes all capital and reserves of
the Group attributable to equity holders of the Company.
The Group is not subject to externally imposed capital requirements. The Board reviews the capital structure and cost of capital
on an annual basis but does not set specific targets for gearing ratios. The risks associated with each class of capital are also
considered as part of the risk reviews presented to the Audit Committee and the Board. The Group has met its objectives for
managing capital during 2012, with a reduction in its net debt to equity ratios largely as a result of property disposals.
Gearing ratios
Statutory
Debt before unamortised issue costs
Cash and cash equivalents
Group net debt
Equity
Debt to equity ratio
Net debt to equity ratio
See-through
Debt before unamortised issue costs
Cash and cash equivalents
See-through net debt1
Equity
Debt to equity ratio
Net debt to equity ratio
Property assets – wholly-owned
Investment properties – associates1
Investment properties – joint ventures1
Property value
Debt to property value ratio
Net debt to property value ratio
Note
22a
19
Note
23f
11a
17d
17e
30 December
2012
£m
58.6
(5.3)
53.3
179.6
33%
30%
30 December
2011
£m
67.2
(20.0)
47.2
196.0
34%
24%
30 December
2012
£m
321.9
(33.4)
288.5
179.6
179%
161%
78.4
207.1
181.9
467.4
69%
62%
30 December
2011
£m
497.0
(56.8)
440.2
196.0
254%
225%
80.0
314.1
284.9
679.0
73%
65%
1 See-through values for 2012 do not include the Group’s share of German portfolio 4 and FIX UK following the impairment of the investments and loss of joint control/
significant influence during the year (see notes 17b and 17c). The X-Leisure Fund has also been excluded following its reclassification as an asset held for sale (see note
30).
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For the year to 30 December 2012
23a Financial instruments and risk management – Overview continued
Categories of financial assets/(liabilities)
Financial assets
Investments
Available for sale
Loans to joint ventures
Current receivables
Cash and cash equivalents
Loans and receivables
Foreign exchange forward contracts
Derivatives in effective hedges
Interest rate swaption
Assets at fair value held for trading
Financial liabilities
Current payables
Non-current payables
Current borrowings
Non-current borrowings
Liabilities at amortised cost
Interest rate swaps
Liabilities at fair value held for trading
Total financial (liabilities)/assets
2012
Gain/
(loss) to
income
£m
(Loss)/
gain to
equity
£m
Carrying
value
£m
2011
Carrying
value
£m
Gain/(loss)
to income
£m
(Loss)/gain
to equity
£m
–
–
21.2
4.7
5.3
31.2
1.4
1.4
–
–
(6.8)
(0.7)
–
(58.3)
(65.8)
(1.8)
(1.8)
(35.0)
–
–
0.9
–
–
0.9
0.9
0.9
(0.2)
(0.2)
–
–
–
(5.0)
(5.0)
1.7
1.7
(1.7)
–
–
(0.4)
–
–
(0.4)
0.6
0.6
–
–
–
–
–
–
–
–
–
0.2
0.3
0.3
32.1
3.7
20.0
55.8
0.6
0.6
0.2
0.2
(6.9)
(0.5)
(5.0)
(61.6)
(74.0)
(3.5)
(3.5)
(20.6)
–
–
1.2
–
0.1
1.3
0.5
0.5
(0.5)
(0.5)
0.5
–
–
(4.7)
(4.2)
1.0
1.0
(1.9)
–
–
(0.4)
–
–
(0.4)
0.9
0.9
–
–
–
–
–
–
–
–
–
0.5
Note
14
15
18
19
15,18
15
20
21
22a
22a
20
Significant accounting policies
Details of the significant accounting policies adopted in respect of each class of financial asset, financial liability and equity
instrument, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are
recognised, are disclosed in the accounting policies in note 1.
Financial risk management objectives
Exposure to credit, interest rate and currency risks arise in the normal course of the Group’s business. The Group seeks to minimise
the effect of these risks by using derivative financial instruments to manage exposure to fluctuations in interest rates and foreign
currency exchange rates. Such instruments are not employed for speculative purposes. The use of any derivatives is approved by
the Board, which provides guidelines on the acceptable levels of interest rate risk, credit risk, foreign exchange risk and liquidity risk,
and the ranges of hedging required against these risks.
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 23b Interest rate risk
The Group normally raises bank debt on a floating rate basis and fixes a substantial portion of the interest payments by entering into
interest rate swaps. The Group’s objective in managing its interest rate risk is to ensure that it always maintains sufficient headroom
to cover interest payments from anticipated cash flows and the directors regularly review the ratio of fixed to floating rate debt to
assist this process. The Group is exposed to fair value risk from its fixed rate debt and interest rate risk from its floating rate debt,
loans to joint ventures and cash. The Group does not hedge account its interest rate swaps and states them at fair value with
changes in fair value included in the income statement.
The following table shows a summary of the Group’s interest rate swap contracts and their maturity dates:
Interest rate swap
Interest rate swaption2
Maturity date
10 October 2013
2 September 2017
1 The notional principal at 30 December 2011 was £59.6 million.
2 The exercise date of the interest rate swaption is 2 September 2013.
Notional
principal
£m
58.91
50.0
Contract
Fixed rate
%
4.42
2.75
Fair value
30 December
2012
£m
(1.8)
0.0
Gain/(loss)
to income
2011
£m
1.7
(0.2)
Fair value
30 December
2011
£m
(3.5)
0.2
Sensitivity analysis
The following table shows the Group’s sensitivity to a 1% increase or decrease in Sterling and Euro interest rates. To calculate the
impact on the income statement for the year the interest rates on all external floating rate interest bearing loans and borrowings
and interest earning cash, including loans and cash within associates and joint ventures, have been increased or decreased by 1%.
The income statement impact includes the effect of a 1% decrease or increase in interest rates on the market values of interest rate
derivatives.
Floating rate loans and cash – gain/(loss)
Interest rate derivatives – gain/(loss)
Impact on the income statement – gain/(loss)
Impact on equity – gain/(loss)
23c Credit risk
1% increase in interest rates 1% decrease in interest rates
Year to
30 December
2011
£m
0.4
(8.0)
(7.6)
(7.6)
Year to
30 December
2012
£m
(0.2)
(5.4)
(5.6)
(5.6)
Year to
30 December
2011
£m
(0.4)
8.0
7.6
7.6
Year to
30 December
2012
£m
0.2
5.4
5.6
5.6
The Group’s principal financial assets are loans to joint ventures, bank and cash balances, short-term deposits, trade and other
receivables and investments. Credit risk, being the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group, is primarily attributable to loans to joint ventures, and trade and other receivables, which are principally
amounts due from associates and joint ventures and from tenants. As a result there is a concentration of credit risk arising from the
Group’s exposure to these associates and joint ventures but the Group does not consider this risk to be material as it is mitigated by
the significant influence that it is able to exercise through its holdings and management responsibilities in relation to those associates
and joint ventures. Credit risk arising from tenants is mitigated as the Group monitors credit ratings for significant tenants and there
is an allowance for doubtful receivables that represents the estimate of potential losses in respect of trade receivables.
The credit risk on short-term deposits and derivative financial instruments is limited because the counterparties are banks with high
credit ratings assigned by international credit-rating agencies. The Group is not exposed to significant credit risk on its other financial
assets.
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89
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
23d Currency risk
The Group publishes its consolidated financial statements in Sterling but has investments and loans to its German joint venture
portfolio which have the Euro as their functional currency. Therefore the Group is subject to currency risk due to exchange rate
movements which affect the translation of results and underlying net assets of the German joint venture portfolio.
Net investment hedge
The Group uses a forward foreign exchange contract as a hedge of its net investment in the German joint ventures. At 30 December
2012, this was achieved through a contract for €47.0 million (2011: €47.0 million) at a fixed exchange rate of 1.1797 (2011: 1.1797)
which hedges 97% (2011: 81%) of the Group’s German investment. After the year end the Group closed out the forward contract of
€47.0 million which will mature on 28 March 2013 and entered into a new forward contract for €37.6 million until 31 December 2013
at a fixed exchange rate of 1.1617.
Only the spot element of the forward foreign exchange contracts is designated as the hedging instrument, determined as the
undiscounted difference between the spot rate on the trade date and the spot rate on the revaluation date applied to the notional.
The unhedged forward element of the fair value is determined as the total fair value less the spot element. Changes in the forward
element of the fair value are reported through the income statement as finance income or finance costs as appropriate. During
the year, this change in the unhedged element of the fair value was £0.0 million (2011: gain of £0.3 million) as disclosed in note 6.
During the year, the ineffective portion of the hedge resulted in a charge of £0.2 million (2011: charge of £0.2 million) to the income
statement as disclosed in note 5.
Sensitivity analysis
The following table shows the Group’s sensitivity to a 10% strengthening or weakening in Sterling against the Euro. To calculate the
impact on the income statement for the year the average exchange rate has been decreased or increased by 10%. The translational
effect on equity is limited due to the Euro hedging in place. The effect on equity is calculated by decreasing or increasing the closing
exchange rate with an adjustment for the movement in the currency hedge. It is assumed that the net investment hedge will be
100% effective.
Impact on the income statement – gain/(loss)
Impact on equity – gain/(loss)
10% strengthening in Sterling 10% weakening in Sterling
Year to
30 December
2011
£m
0.9
2.1
Year to
30 December
2012
£m
0.2
(0.4)
Year to
30 December
2012
£m
(0.4)
1.2
Year to
30 December
2011
£m
(0.8)
(1.2)
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 23e Liquidity risk
Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due. The
day-to-day operations of the Group are largely funded through the items included in the breakdown of recurring profit included in
note 2a. The majority of income within recurring profit is received quarterly, since the inflows and outflows from net rental income
and net interest payable generally coincide with English quarter days, and property management fees are billed to the funds
quarterly. As a result, the Group normally has sufficient funds to cover recurring administrative expenses which occur throughout the
year. Liquidity risk therefore arises principally from the need to make payments for non-recurring items, such as tax payments and
the close out of derivative financial instruments. Payments may also be necessary against bank debt facilities to prevent covenant
breaches on loans related to the Group’s wholly-owned properties or to cover losses in the Group’s joint ventures, or to repay loans
when they fall due.
The Group’s objective in managing liquidity risk is to ensure that it has sufficient funds to meet all its potential liabilities as they fall
due, both in normal market conditions and when considering negative projections against expected outcomes, so as to avoid
the risk of incurring contractual penalties or damaging the Group’s reputation. The Group’s treasury department maintains a
rolling eighteen month forecast of anticipated recurring and non-recurring cash flows under different scenarios. This is compared
to expected cash balances and amounts available for drawdown on the Group’s core revolving credit facility to ensure that any
potential shortfalls in funding are identified and managed. The Group’s primary means of managing liquidity risk is the £25.0 million
core revolving credit facility, expiring in July 2016, of which £1.0 million was drawn down at 30 December 2012 with the remainder
fully available for drawdown at the end of the year as disclosed in note 22c.
The following table shows the maturity analysis of non-derivative financial assets/(liabilities) at the balance sheet date and, where
applicable, their effective interest rates.
2012
Financial assets
Available for sale investments
Non-current receivables
Current receivables
Cash and cash equivalents
Financial liabilities
Borrowings – fixed and swapped bank loans1
Borrowings – variable rate bank loans
Current payables
Non-current payables
Effective
interest
rate
%
Less than
1 year
£m
1-2 years
£m
2-5 years
£m
More than
5 years
£m
3.5
0.5
7.51
3.70
–
–
4.7
5.3
10.0
–
–
(6.8)
–
(6.8)
–
–
–
–
–
(57.6)
–
–
(0.7)
(58.3)
–
21.2
–
–
21.2
–
(1.0)
–
–
(1.0)
–
–
–
–
–
–
–
–
–
Note
14
15
18
19
22a
22a
20
21
Total
£m
–
21.2
4.7
5.3
31.2
(57.6)
(1.0)
(6.8)
(0.7)
(66.1)
91
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Proof 7
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
23e Liquidity risk continued
2011
Financial assets
Available for sale investments
Non-current receivables
Current receivables
Cash and cash equivalents
Financial liabilities
Borrowings – fixed and swapped bank loans1
Borrowings – variable rate bank loans
Current payables
Non-current payables
Effective
interest
rate
%
Less than
1 year
£m
1-2 years
£m
2-5 years
£m
More than
5 years
£m
4.2
0.5
6.30
3.49
0.3
–
3.7
20.0
24.0
–
(5.3)
(6.9)
–
(12.2)
–
10.6
–
–
10.6
(59.6)
(2.3)
–
(0.5)
(62.4)
–
21.5
–
–
21.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Note
14
15
18
19
22a
22a
20
21
Total
£m
0.3
32.1
3.7
20.0
56.1
(59.6)
(7.6)
(6.9)
(0.5)
(74.6)
1 The maturity is the same as the contractual repricing of the Group’s fixed and swapped bank loans
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been
drawn up based on the undiscounted cash inflows/(outflows) of financial liabilities based on the earliest date on which the Group
can be required to pay, including both interest and principal cash flows.
2012
Non-interest bearing
Fixed and swapped bank loans
Variable interest rate instruments
2011
Non-interest bearing
Fixed and swapped bank loans
Variable interest rate instruments
Less than
1 year
£m
(6.8)
–
–
(6.8)
Less than
1 year
£m
(6.9)
–
(7.5)
(14.4)
1-2 years
£m
(0.7)
(57.6)
–
(58.3)
2-3 years
£m
–
–
(1.0)
(1.0)
3-4 years
£m
–
–
–
–
4-5 years
£m
–
–
–
–
1-2 years
£m
(0.5)
(59.6)
(3.8)
(63.9)
2-3 years
£m
–
–
–
–
3-4 years
£m
–
–
–
–
4-5 years
£m
–
–
–
–
More than
5 years
£m
–
–
–
–
More than
5 years
£m
–
–
–
–
Total
£m
(7.5)
(57.6)
(1.0)
(66.1)
Total
£m
(7.4)
(59.6)
(11.3)
(78.3)
The following tables detail the Group’s remaining contractual maturity for its derivative financial assets/(liabilities), all of which are
net settled, based on the undiscounted net cash inflows/(outflows). When the amount payable or receivable is not fixed, it has
been determined by reference to the projected interest and foreign currency rates as illustrated by the yield curves existing at the
reporting date.
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 23e Liquidity risk continued
2012
Net settled
Interest rate swaps
Foreign exchange forward contract
2011
Net settled
Interest rate swaps
Interest rate swaption
Foreign exchange forward contract
Less than
1 year
£m
(1.8)
1.4
(0.4)
Less than
1 year
£m
1-2 years
£m
2-3 years
£m
3-4 years
£m
4-5 years
£m
More than
5 years
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1-2 years
£m
2-3 years
£m
3-4 years
£m
4-5 years
£m
More than
5 years
£m
(2.0)
–
–
(2.0)
(1.5)
–
0.6
(0.9)
–
0.1
–
0.1
–
0.1
–
0.1
–
–
–
–
–
–
–
–
Total
£m
(1.8)
1.4
(0.4)
Total
£m
(3.5)
0.2
0.6
(2.7)
23f Fair values of financial instruments
The fair values of financial instruments together with their carrying amounts in the balance sheet are as follows:
Financial liabilities not at fair value through
income statement
Sterling denominated loans
Total on balance sheet borrowings
Group share of associate borrowings
Group share of joint venture borrowings
Total see-through borrowings
Derivative assets/(liabilities) at fair value
through income statement
Sterling interest rate swaps
Sterling interest rate swaption
Foreign exchange forward contracts
Total on balance sheet derivatives
Group share of Sterling interest rate swaps in
associates and joint ventures
Group share of Euro interest rate swaps in joint
ventures
Total see-through derivatives
Less foreign exchange forward contracts
Total see-through interest rate derivatives
Note
22a
23a
20
15
15,18
28
Notional
principal
£m
2012
Book value
£m
2012
Fair value
£m
2011
Book value
£m
2011
Fair value
£m
(58.6)
(58.6)
(115.0)
(148.3)
(321.9)
(1.8)
–
1.4
(0.4)
(8.4)
(2.7)
(11.5)
(1.4)
(12.9)
(58.6)
(58.6)
(115.0)
(149.0)
(322.6)
(1.8)
–
1.4
(0.4)
(8.4)
(2.7)
(11.5)
(1.4)
(12.9)
(67.2)
(67.2)
(202.7)
(227.1)
(497.0)
(3.5)
0.2
0.6
(2.7)
(67.2)
(67.2)
(202.7)
(228.2)
(498.1)
(3.5)
0.2
0.6
(2.7)
(13.1)
(13.1)
(2.4)
(18.2)
(0.6)
(18.8)
(2.4)
(18.2)
(0.6)
(18.8)
58.9
50.0
39.4
139.0
143.3
22158.04
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Proof 7
93
www.capreg.comStock Code: CALFinancial Statements Notes to the financial statements continued
For the year to 30 December 2012
23f Fair values of financial instruments continued
The fair value of borrowings has been estimated on the basis of quoted market prices. The fair value of the interest rate swaps and
interest rate swaption have been estimated by calculating the present value of future cash flows, using market discount rates. The
fair value of the forward foreign exchange contract has been estimated by applying the quoted forward foreign exchange rate to the
undiscounted cash flows at maturity.
Details of the Group’s cash and deposits are disclosed in note 19 and their fair values and those of all other financial assets and
liabilities are equal to their book values.
Fair value measurements recognised in the consolidated balance sheet
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value,
grouped into Levels 1 to 3 based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
Financial assets
Interest rate swaption
Foreign exchange forward contracts
Financial liabilities
Interest rate swaps
Financial assets
Available for sale investments
Interest rate swaption
Foreign exchange forward contracts
Financial liabilities
Interest rate swaps
Note
15
15,18
20
Note
14
15
15,18
21
Level 2
£m
2012
Level 3
£m
–
1.4
1.4
(1.8)
(1.8)
–
–
–
–
–
Level 2
£m
2011
Level 3
£m
–
0.2
0.6
0.8
(3.5)
(3.5)
0.3
–
–
0.3
–
–
Total
£m
–
1.4
1.4
(1.8)
(1.8)
Total
£m
0.3
0.2
0.6
1.1
(3.5)
(3.5)
There were no transfers between Level 1 and Level 2 in the year. Since the only Level 3 fair value measurements in the year related
to available for sale investments, the reconciliation of the movement in these measurements is disclosed in note 14.
94
22158.04
18 April 2013 4:26 PM
Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 24 Share capital
Number of authorised shares
2011
Number
2012
Number
Number of shares issued and
fully paid
Nominal value of shares
issued and fully paid
2012
Number
2011
Number
Ordinary shares of 1p each
At the start and end of the year
Deferred shares of 9p each
At the start and end of the year
Total called-up share capital
857,589,603 857,589,603 350,612,754 350,612,754
71,348,933
71,348,933
71,348,933
71,348,933
421,961,687 421,961,687
2012
£m
3.5
6.4
9.9
2011
£m
3.5
6.4
9.9
The Company has one class of Ordinary shares which carry voting rights but no right to fixed income. Deferred shares carry neither
voting nor dividend rights.
25 Share-based payments
The Group’s share-based payments comprise the SAYE scheme, the 2008 LTIP, the Matching Share Agreement and the COIP.
Full details of each of the schemes are disclosed in the directors’ remuneration report. In accordance with IFRS2, the fair value
of equity-settled share-based payments to employees is determined at the date of grant, calculated using either a Black-Scholes
option pricing model or a Monte Carlo simulation.
Analysis of income statement charge
2008 LTIP
Equity-settled share-based payments
Movements during the year
Outstanding at 30 December 2010
Granted during the year
Exercised during the year
Forfeited/lapsed/expired during the year
Outstanding at 30 December 2011
Granted during the year
Exercised during the year
Forfeited/lapsed/expired during the year
Outstanding at 30 December 2012
Exercisable at the end of the year
Fair value of award at grant date
Weighted average exercise price
Weighted average remaining contractual life
Year to
30 December
2012
£m
0.8
0.8
Year to
30 December
2011
£m
0.8
0.8
SAYE scheme
Invitation I
Invitation II
2008 LTIP
691,326
–
(22,984)
(66,437)
601,905
–
(521,901)
(80,004)
–
–
£0.15
22.8p
n/a
–
499,567
–
(12,261)
487,306
–
–
(90,929)
396,377
–
£0.05
36.7p
2.33 years
13,000,000
500,000
–
–
13,500,000
–
–
–
13,500,000
–
£0.20
0.0p
n/a
Matching
share
agreement
302,055
–
(302,055)
–
–
–
–
–
–
–
£4.76
0.0p
n/a
COIP
1,202,080
–
–
–
1,202,080
–
–
(1,202,080)
–
–
£0.14
0.0p
n/a
On 1 November 2011 a new invitation (‘Invitation II’) to participate in the SAYE scheme was made to employees.
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Notes to the financial statements continued
For the year to 30 December 2012
25 Share-based payments continued
The 2008 LTIP awards are subject to a performance condition based on growth of total shareholder return (TSR) as disclosed in the
Directors’ remuneration report.
On 31 December 2011 all of the COIP lapsed as the performance criteria were not met.
On 1 February 2012, the first SAYE scheme invitation (‘Invitation I’) matured and participants were eligible to exercise their options
for up to six months from this date.
Assumptions
The key assumptions and inputs used in the fair value models were:
Share price at grant date
Exercise price
Expected volatility
Expected life (years)
Risk free rate
Expected dividend yield
Lapse rate
Correlation
SAYE scheme
Invitation I
Invitation II
2008 LTIP
45.5p
46.0p
84%
3.12
2.28%
11.0%
40%
n/a
34.0p
36.7p
56%
3.00
3.51%
14.7%
2%
n/a
31.9p
0.0p
83%
3.00
1.58%
0%
0%
n/a
Matching
share
agreement
553.0p
0.0p
37%
2.99
3.78%
4.9%
0%
30%
COIP
44.75p
0.0p
84%
3.04
2.58%
11.2%
0%
29%
Expected volatility is based on the historic volatility of the Group’s share price over the three years to the date of grant. The risk free
rate is the yield at the date of grant on a gilt-edged stock with a redemption date equivalent to the expected life of the option or the
performance period of the relevant scheme. Options are assumed to be exercised at the earliest possible date.
26 Own shares
At the start of the year
Disposed of on exercise of options
At the end of the year
Own shares
£m
6.8
(6.1)
0.7
The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2012, the Capital
& Regional plc 2002 Employee Share Trust (the “ESOT”) held 1,319,201 (2011: 1,841,102) shares to assist the Group in meeting the
outstanding share awards under the schemes described above. The right to receive dividends on these shares has been waived.
The market value of these shares at 30 December 2012 was £0.4 million (2011: £0.6 million).
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012
27 Reconciliation of net cash from operations
(Loss)/profit on ordinary activities before financing
(Loss)/profit from discontinued operations
Adjusted for:
Income tax expense – discontinued operations
Loss on disposal of JV & Associates – discontinued operations
Impairment of goodwill – discontinued operations
Share of loss/(profit) in associates and joint ventures
Loss on revaluation of wholly-owned properties
Loss on disposal of other assets
Depreciation of other fixed assets
(Increase)/decrease in receivables
Decrease in payables
Non-cash movement relating to share-based payments
Net cash from operations
28 Net assets per share
Year to
30 December
2012
£m
(9.0)
(5.2)
(14.2)
Year to
30 December
2011
£m
16.2
10.6
26.8
2.0
4.0
1.8
10.3
1.7
0.1
0.3
(2.4)
(0.1)
0.8
4.3
–
–
0.1
(22.3)
0.8
–
0.4
2.3
(0.7)
0.8
8.2
Note
30
30
12
17a
11a
13
25
EPRA has issued recommended bases for the calculation of certain net assets per share information as shown in the following table:
30 December 2012
30 December
2011
Note
26
23f
Net assets
£m
179.6
–
–
(0.5)
179.1
0.5
12.9
0.9
193.4
Net assets
per share (£)
0.51
Net assets
per share (£)
0.56
Number of
shares (m)
350.6
(1.3)
–
349.3
0.51
0.56
349.3
0.55
0.63
Basic net assets
Own shares held
Dilutive contingently issuable shares and share options
Fair value of fixed rate loans (net of tax)
EPRA triple net assets
Exclude fair value of fixed rate loans (net of tax)
Exclude fair value of see-through interest rate derivatives
Exclude deferred tax on unrealised gains and capital
allowances
EPRA net assets
29 Return on equity
Total comprehensive (loss)/income attributable to equity shareholders
Opening equity shareholders’ funds
Return on equity
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Proof 7
30 December
2012
£m
(16.6)
196.0
(8.5)%
30 December
2011
£m
20.7
174.5
11.9%
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Notes to the financial statements continued
For the year to 30 December 2012
30 Discontinued operations
On 19 October 2012 subsidiaries of Hammerson plc acquired The Junction Fund, a specialist retail park fund, for a total of
£259.5 million of which Capital & Regional plc had a 13.43% interest resulting in net cash consideration attributable to the Group of
£11.4 million, excluding performance fee income of £2.6 million. A loss on disposal after tax of £1.2 million was recognised.
On 24 December 2012 the Group sold Capital & Regional (Braehead) Limited to its joint venture partner Capital Shopping Centres
for cash consideration of £4 million. Capital & Regional (Braehead) Limited held a 50% stake in Xscape Braehead Partnership, the
entity that owns the Xscape Braehead, Glasgow property. A profit on disposal after tax of £1.2 million was recognised. At the date
of disposal the net assets of Capital & Regional (Braehead) Limited were £4.8 million consisting of a receivable due from the Xscape
Braehead Partnership of that amount.
On 4 December 2012 the Group entered into a conditional binding agreement for the sale of its 11.9% stake in the X-Leisure Fund
and its 50% interest in X-Leisure Limited to a subsidiary of Land Securities Group plc. The X-Leisure Fund is the largest specialist
fund investing in UK leisure property, X-Leisure Limited is the property and asset manager for the Fund. The approval of X-Leisure
Fund unit holders not involved in the transaction was obtained on 21 December 2012 and on that date Management, considering
the disposal to be highly probable, reclassified the investments to assets held for sale at the consideration expected to be received
of £32.2 million, with associated liabilities of £1.6 million in respect of outstanding transaction costs recognised as a separate liability
on the balance sheet. A loss on disposal after tax of £4.0 million was recognised.
At 30 December 2012 the principal conditions that needed to be met for the sale to complete were the approval of Capital &
Regional plc shareholders and the consent of the X-Leisure Fund’s banks. These conditions were satisfied after the year end and as
disclosed in note 34 the sale completed on 16 January 2013.
The disposals formed part of the strategy to exit non-core operations to generate cash to further de-leverage and to concentrate on
the Group’s core UK shopping centre activities.
The results of these discontinued operations, which have been included in the consolidated income statement, were as follows:
Share of profit in associates and joint ventures before attributable tax
Attributable current tax charge
Share of loss in associates and joint ventures after attributable tax
Loss on disposal of discontinued operations
(Loss)/profit from discontinued operations
Year ended
30 December
2012
£m
0.8
(2.0)
(1.2)
(4.0)
(5.2)
Year ended
30 December
2011
£m
10.6
(0.3)
10.3
–
10.3
Note
2a, 17d, 17e
The loss on disposal of discontinued operations of £4.0 million is stated after Deferred Tax credits of £3.5 million relating to Deferred
Tax liabilities extinguished on disposal.
During the year, discontinued operations contributed £1.5 million (2011: £11.9 million) to the Group’s net operating cash flows,
contributed £15.0 million (2011: £nil million) in respect of investing activities (disposal proceeds) and paid £nil million (2012: £nil
million) in respect of financing activities.
Assets held for sale comprise:
Investment in associate – X-Leisure Limited Partnership
Investment in joint venture – X-Leisure Limited
Note
30 December
2012
£m
31.7
0.5
32.2
30 December
2011
£m
–
–
–
£1.6 million of balance sheet liabilities associated with these assets have been recognised at 30 December 2012 representing
transaction costs outstanding at that date.
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 31 Lease arrangements
The Group as lessee – operating leases
At the balance sheet date, the Group’s future minimum lease payments and sublease receipts under non-cancellable operating
leases related to land and buildings were as follows:
Lease payments
Within one year
Between one and five years
After five years
2012
£m
(2.0)
(8.2)
(19.9)
(30.1)
2011
£m
(2.2)
(7.4)
(21.7)
(31.3)
Operating lease payments are denominated in Sterling and have an average remaining lease length of 14 years (2011: 15 years) and
rentals are fixed for an average of two years (2011: three years). During the year there were no contingent rents (2011: £nil) and the
Group incurred lease payments recognised as an expense of £2.0 million (2011: £2.2 million).
The Group as lessor
The Group leases out all of its investment properties under operating leases for average lease terms of eight years (2011: ten
years) to expiry. The most significant leasing arrangements are summarised in the fund portfolio information. The future aggregate
minimum rentals receivable under non-cancellable operating leases are as follows:
Unexpired
average
lease
term
Years
8.2
7.8
–
–
–
7.8
5.4
10.6
100% figures
The Mall
Redditch
The Junction
X-Leisure1
FIX UK1
Total associates
German portfolio1
Other joint ventures
Total joint ventures
Wholly owned
Total
Less
than 1
year
£m
62.9
8.5
–
–
–
71.4
24.7
1.7
26.4
6.9
104.7
2–5
years
£m
189.4
27.0
–
–
–
216.4
81.1
5.2
86.3
26.8
329.5
6–10
years
£m
124.7
16.4
–
–
–
141.1
55.0
3.6
58.6
27.4
227.1
11–15
years
£m
48.5
6.8
–
–
–
55.3
19.3
0.6
19.9
7.6
82.8
16–20
years
£m
29.5
2.8
–
–
–
32.3
3.1
–
3.1
3.6
39.0
More
than 20
years
£m
130.9
17.9
–
–
–
148.8
–
–
–
1.3
150.1
30
December
2012
Total
£m
585.9
79.4
–
–
–
665.3
183.2
11.1
194.3
73.6
933.2
30
December
2011
Total
£m
701.4
–
225.9
530.7
73.3
1,531.3
243.8
71.5
315.3
76.7
1,923.3
1 Values for 2012 do not include German portfolio 4 and FIX UK following the loss of joint control/significant influence during the year (see notes 17b and 17c). The
X-Leisure Fund has also been excluded following its reclassification as an asset held for sale and subsequent disposal post year end (see note 30).
There was no contingent rent (2011: £nil) recognised in income from wholly-owned properties during the year.
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For the year to 30 December 2012
32 Capital commitments
At 30 December 2012 the Group’s share of the capital commitments of its associates, joint ventures and wholly-owned properties
was £2.5 million (2011: £0.5 million). This comprised £2.5 million (2011: £0.4 million) relating to The Mall and £nil million (2011: £0.1
million) relating to other assets.
33 Contingent liabilities
Under the terms of the Group’s disposal of its interest in The Junction Fund, Capital & Regional Units LLP and Capital & Regional
(Junction GP) Limited gave certain customary warranties as to their title to the relevant units and shares and certain warranties in
relation to the Junction Fund generally and the GP sellers gave warranties in relation to the Junction GP. The relevant warranties
were given on a several basis and the maximum liability of Capital & Regional Units LLP in respect of the title and capacity
warranties is £34,843,065 and the maximum liability of Capital & Regional (Junction GP) Limited in respect of the title and capacity
warranties is £35,356,875. The maximum liability of Capital & Regional Units LLP in respect of the other warranties is £3,484,306.50
and the maximum liability of Capital & Regional (Junction GP) Limited in respect of the other warranties is £3,535,688. Any claims
in respect of the warranties must be bought within 12 months of the date of the agreement, being 19 October 2012, other than in
respect of certain claims relating to taxation, where the claims must be bought within either 24 months or six years from the date of
agreement.
The obligations of Capital & Regional Units LLP under the agreement were guaranteed by Capital & Regional Holdings Limited.
34 Events after the balance sheet date
X-Leisure disposal
The Group’s proposed disposal of its 11.9% stake in the X-Leisure Fund and its 50% interest in X-Leisure Limited as detailed in note
32 completed on 16 January 2013 with gross cash consideration of £32.2 million being received.
Mall unit purchase
On 4 January 2013, the Group purchased 1.6 million units in The Mall Fund at £0.25 per unit for a total consideration of £0.4 million.
This increased the holding in The Mall Fund from 20.15% to 20.33%.
FIX UK disposal
On 8 February 2013 Legal & General Property acquired the FIX UK Portfolio. The Group will receive up to £0.5 million of
consideration in respect of their 20% interest held, since 30 June 2012, as a fixed asset investment at an impaired value of £nil. The
level of consideration is contingent on the final total consideration on the transaction.
Share buy-back
Subsequent to 30 December 2012 and up to and including 11 March 2013 (the last practical date prior to the publication of this
report) the Group had purchased for cancellation a total of 698,958 of its own shares at a price of 28 pence per share.
Covenant waiver
The German joint venture obtained a one year bank waiver for two loans in one portfolio which had marginally breached their
individual LTV covenant. In January 2013 this waiver was extended to the maturity of the loan in December 2013.
100
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 35 Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this note. Transactions between the Group and its associates and joint ventures, all of which occurred at normal
market rates, are disclosed below.
Associates
The Junction Limited Partnership
Garigal
The Mall Limited Partnership
X-Leisure Limited Partnership
Joint ventures
Xscape Braehead Partnership
The Auchinlea Partnership
X-Leisure Limited
German joint venture companies
Interest received
Year to
30 December
2012
£m
Year to
30 December
2011
£m
Distributions received
Year to
30 December
2012
£m
Year to
30 December
2011
£m
–
–
–
–
–
0.5
–
–
0.5
1.0
–
–
–
–
–
0.6
–
–
0.7
1.3
–
0.2
0.9
1.1
2.2
–
–
0.3
0.3
0.6
9.9
–
–
1.3
11.2
–
0.3
0.5
3.7
4.5
The borrowing arrangements of The Mall restrict the ability to make cash distributions of profit to the Group as long as its LTV is
above 60% and its debt above £600 million. The £0.9 million received during the year relates to a distribution to cover tax to be paid
on share of profits for the period; such distributions are excluded from the restriction. It is anticipated that normal distributions from
the Mall will resume by the end of 2013 as the relevant debt tests are met.
Associates
The Mall Limited Partnership
The Junction Limited Partnership
X-Leisure Limited Partnership
Redditch Limited Partnership
The FIX UK Limited Partnership
Joint ventures
Xscape Braehead Partnership
X-Leisure Limited
German joint venture companies
Waterside Lincoln Limited Partnership
Fee income and rent
income/(expense)
Year to
30 December
2012
£m
Year to
30 December
2011
£m
Net amounts
receivable from
As at
30 December
2012
£m
As at
30 December
2011
£m
6.7
3.4
(1.6)
0.4
0.1
9.0
–
0.3
–
0.2
0.5
7.1
1.1
(1.6)
–
0.1
6.7
0.1
0.1
–
0.1
0.3
1.9
0.1
(0.1)
0.1
–
2.0
–
–
14.8
6.4
21.2
0.7
0.1
–
–
–
0.8
10.7
0.1
15.0
6.4
32.2
Amounts receivable from associates are unsecured and do not incur interest and they are payable on demand and settled in cash.
Amounts receivable from the German joint venture incur interest at commercial rates which is payable on demand. The balances are
unsecured and settled in cash. Amounts receivable from the Waterside Lincoln Limited Partnership are interest free and repayable
on demand.
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Notes to the financial statements continued
For the year to 30 December 2012
35 Related party transactions continued
Management fees are received by Capital & Regional Property Management Limited and are payable on demand, unsecured, do
not incur interest and are settled in cash.
All rents payable by SNO!zone companies are due to the relevant Xscape Partnerships. SNO!zone Limited (operator of the ski
slopes at Milton Keynes and Castleford) paid rent of £1.6 million (2011: £1.6 million) to the X-Leisure Limited Partnership. SNO!zone
(Braehead) Limited was sold on 16 December 2011, it paid rent of £0.1 million in 2011 to the Xscape Braehead Partnership.
Waterside Lincoln Limited Partnership
During 2011 the Group formed a joint venture with Karoo Investment Fund II S.C.A SICAV-SIF (“Karoo”) by selling 50% of the
Group’s interest in The Waterside Shopping Centre in Lincoln. As the Group and Karoo have common significant shareholders the
formation of the joint venture was conditional upon shareholder approval which was granted on 1 April 2011. Included within loans
to joint ventures is an amount of £6.4 million related to the Waterside Lincoln Limited Partnership. The details of this transaction are
disclosed in note 17c.
Performance fees
Certain entities in the Group may receive performance fees when investors realise their interests in the underlying funds or joint
ventures, either at the end of the life of the fund, on the sale of some or all of the underlying properties, or through another
realisation mechanism such as a listing. Except where stated below no performance fees were received from or paid in either the
current or preceding year.
The Mall Fund
CRPM will earn a performance fee if the property level return is positive and is more than 50 basis points above the index when
measured from July 2010 to the realisation of the fund, which is due to expire in April 2017. Part of any performance fee earned may
be payable to certain key CRPM management and staff as part of their incentive plans. The Group will also bear 20.33% (our unit
holding as of 4 January 2013) of the cost of this performance fee and that payable to the fund manager as an investor in The Mall
fund.
Kingfisher Limited Partnership
CRPM will earn an additional equity return if distributions result in a geared return in excess of a 15% IRR. Part of any receipt may
be payable to certain key CRPM management and staff as part of their incentive plans. The Group will bear 20.00% of the cost by
virtue of their investment in the Partnership.
Waterside Lincoln Limited Partnership
CRPM will earn a performance fee on sale of the Property or sale of all of the Partners interests in the Partnership if distributions
have resulted in a geared return in excess of a 15% IRR. Part of any performance fee earned may be payable to certain key CRPM
management and staff as part of their incentive plans. The Group will bear 50.00% of the cost of any performance fee by virtue of
their investment in the Partnership.
The Junction Fund
A performance fee of £2.6 million was recognised within CRPM during the year following the acquisition of the fund by Hammerson
plc. A further amount of up to £0.2 million may potentially be received subject to the successful resolution of various outstanding
matters. The Group also bore 13.29% of the cost of the performance fee paid in the year through its share of The Junction Fund
prior to disposal.
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Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 35 Related party transactions continued
X-Leisure Fund
As part of the transaction in which the Group and other investors agreed the sale of their investments in The X-Leisure Fund and
X-Leisure Limited to a subsidiary of Land Securities Group plc it was agreed that a performance fee of £7.5 million would be paid
by The X-Leisure Fund to X-Leisure Limited post sale. 50% of this amount received in X-Leisure Limited was paid to certain key
X-Leisure Limited management and staff as part of their incentive plans. The agreement effectively provided that the Group would
neither bear any of the cost of the performance fee as investor in the fund, nor receive any of the fees as shareholder of X-Leisure
Limited. Based on amounts accrued in the accounts of the X-Leisure entities the Group have recognised their 50% share of the
remainder within their share of X-Leisure Limited’s results for the period up to reclassification as an asset held for sale. Similarly the
Group have borne 11.93% of the cost within their share of results of X-Leisure Fund up to the date of reclassification as an asset
held for sale. This has then been effectively reversed out of the carrying value of the asset at year end.
German joint venture
Garigal will earn a performance fee if the internal rate of return is over 12% when measured from August 2010 to the realisation
of the joint venture, whose current business plan runs to June 2013. Up to 80% of any performance fee earned may be payable
to certain key Garigal management and staff as part of their incentive plans. The Group will also bear 49.60% of the cost of this
performance fee as an investor in the German joint venture.
Transactions with key personnel
In accordance with IAS24, key personnel are considered to be the executive and non-executive directors as they have the authority
and responsibility for planning, directing and controlling the activities of the Group. Their remuneration in the income statement is
as follows:
Short term employment benefits
Post-employment benefits
Share-based payments*
* Share-based payments relate to amounts awarded under the 2008 LTIP, the COIP and the Matching Share Agreement.
Year to
30 December
2012
£m
2.4
0.2
0.5
3.1
Year to
30 December
2011
£m
2.0
0.1
0.6
2.7
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103
www.capreg.comStock Code: CALFinancial Statements Independent auditor’s report
to the members of Capital & Regional plc
We have audited the financial statements of Capital & Regional plc for the year ended 30 December 2012 which comprise the
Group Income Statement, the Group Statement of Comprehensive Income, the Group Balance Sheet, the Group Statement of
Changes in Equity, the Group Cash Flow Statement, the related notes 1 to 35, the Parent Company Balance Sheet and the related
notes A to G. The financial reporting framework that has been applied in the preparation of the Group financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting
framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the
annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
30 December 2012 and of the Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act
2006; and
• the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with
the financial statements.
104
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company financial statements and the part of the directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
• the directors’ statement, contained within the Corporate Governance Report, in relation to going concern;
• the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK
Corporate Governance Code specified for our review; and
• certain elements of the report to shareholders by the Board on directors’ remuneration.
Andrew Clark, FCA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom
12 March 2013
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Proof 7
105
www.capreg.comStock Code: CALFinancial Statements Company balance sheet
At 30 December 2012
Registered number: 1399411
Prepared in accordance with UK GAAP
Fixed assets
Investments
Current assets
Debtors – amounts falling due within one year
Debtors – amounts falling due after more than one year
Cash and deposits
Creditors – amounts falling due within one year
Trade and other creditors
Net current assets
Creditors – amounts falling due after more than one year
Loan guarantees
Corporation tax payable
Net assets
Capital and reserves
Called-up share capital
Merger reserve
Capital redemption reserve
Retained earnings
Shareholders’ funds
Note
2012
£m
2011
£m
C
D
D
E
E
F
F
F
F
79.8
145.1
145.8
14.2
0.3
160.3
142.4
18.5
1.4
162.3
(61.3)
(61.3)
(97.5)
(97.5)
99.0
64.8
(0.2)
–
(0.2)
(0.3)
(5.0)
(5.3)
178.6
204.6
9.9
60.3
4.4
104.0
178.6
9.9
60.3
4.4
130.0
204.6
These financial statements were approved by the Board of directors, authorised for issue and signed on their behalf on 12 March
2013 by:
Charles Staveley
Group Finance Director
106
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012
Notes to the Company financial statements
For the year ended 30 December 2012
A Accounting policies
Although the Group consolidated financial statements are prepared under IFRS, the Company financial statements for Capital &
Regional plc presented in this section are prepared under UK GAAP. The main accounting policies have been applied consistently in
the current year and the preceding year.
Investments, amounts owed by subsidiaries and amounts owed by associates and joint ventures are stated at cost less provision
for impairment. Where there is an indication that an investment is impaired, an impairment review is carried out by comparing the
carrying value of the investment against its recoverable amount, which is the higher of its estimated value in use and fair value. This
review involves accounting judgements about the future cash flows from the underlying associates and joint ventures and, in the
case of CRPM, estimated asset management fee income less estimated fixed and variable expenses.
Transactions in foreign currencies are translated into Sterling at exchange rates approximating to the exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to
Sterling at the exchange rate ruling at that date and differences arising on translation are recognised in the income statement.
The Company’s related party transactions are described in note 35 to the Group financial statements. The Company had no direct
employees during the year (2011: none). Information on the directors’ emoluments, share options, long-term incentive schemes and
pension contributions is shown in the directors’ remuneration report.
B Profit/(Loss) for the year
As permitted by section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of
these financial statements. The loss for the year attributable to equity shareholders was £26.0 million (2011: profit of £34.9 million).
C Fixed asset investments
At the start of the year
Investment
Disposals
Impairment of investments
At the end of the year
Subsidiaries
£m
Joint
ventures
£m
Other
investments
£m
130.9
4.8
–
(56.9)
78.8
13.9
–
–
(12.9)
1.0
0.3
–
(0.3)
–
–
Total
£m
145.1
4.8
(0.3)
(69.8)
79.8
During the year several of the Company’s subsidiaries converted intercompany balances payable to the Company to equity resulting
in a £4.8 million increase in the Company’s investment in subsidiaries balance.
Note G shows the principal subsidiaries, associates and joint ventures held by the Group and the Company.
22158.04
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Proof 7
107
www.capreg.comStock Code: CALFinancial Statements Notes to the Company financial statements continued
For the year to 30 December 2012
D Debtors
Amounts falling due within one year
Amounts owed by subsidiaries
Other receivables
Amounts falling due after more than one year
Amounts owed by joint ventures
E Creditors
Amounts falling due within one year
Amounts owed to subsidiaries
Current tax payable
Accruals and deferred income
Amounts falling due after more than one year
Corporation tax payable
From one to two years
F Share capital and reserves
2012
£m
145.8
–
145.8
2012
£m
14.2
14.2
2012
£m
58.8
0.7
1.8
61.3
2012
£m
–
–
2011
£m
142.3
0.1
142.4
2011
£m
18.5
18.5
2011
£m
95.6
0.7
1.2
97.5
2011
£m
5.0
5.0
At the start of the year
Retained profit for the year
Transfer between reserves
At the end of the year
Non-distributable
Distributable
Share
capital
£m
9.9
–
–
9.9
Capital
redemption
reserve
£m
4.4
–
–
4.4
Retained
earnings
£m
3.5
(0.5)
–
3.0
Retained
earnings
£m
126.5
(25.5)
–
101.0
Merger
reserve
£m
60.3
–
–
60.3
Total
£m
204.6
(26.0)
–
178.6
The Company’s authorised, issued and fully paid-up share capital is described in note 24 to the Group financial statements. The
other reserves are described in the consolidated statement of changes in equity in the Group financial statements.
108
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012
G Principal subsidiaries, associates and joint ventures
Incorporated/registered and operating in Great Britain
Capital & Regional Earnings Limited
Capital & Regional Income Limited
Capital & Regional Holdings Limited
Capital & Regional Property Management Limited
Capital & Regional Units LLP
Morrison Merlin Limited
Snozone Limited
The Auchinlea Partnership
X-Leisure Limited
The FIX UK Limited Partnership
Waterside Lincoln Limited Partnership
Kingfisher Limited Partnership
Incorporated/registered and operating in Germany
Garigal Asset Management GmbH
Incorporated/registered and operating in Jersey
Capital & Regional Capital Partner Limited
Capital & Regional (Europe Holding 5) Limited
Capital & Regional (Europe LP) Limited
Capital & Regional (Europe LP 2) Limited
Capital & Regional (Europe LP 3) Limited
Capital & Regional (Europe LP 4) Limited
Capital & Regional (Europe LP 5) Limited
Capital & Regional (Europe LP 6) Limited
Euro B-Note Holding Limited
The Mall Unit Trust
The X-Leisure Unit Trust
Incorporated/registered in Jersey and operating in Great Britain
Capital & Regional (Jersey) Limited
Capital & Regional Hemel Hempstead (Jersey) Limited
Capital & Regional Overseas Holdings Limited
Nature of
business
Share of
voting
rights
Property management
Property investment
Property investment and management
Property management
Property investment
Property trading
Operator of indoor ski slopes
Property investment
Property management
Property investment
Property investment
Property investment
100%
100%
100% *
100%
100%
100% *
100%
50%
50%
20%
50%
20%
Property management
30.06%
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Finance
Property investment
Property investment
Property investment
Property investment
Property investment
100%
100%
50% *
50% *
50% *
50% *
50% *
50% *
49.90% *
20.15%
11.93%
100%
100% *
100%
* Held directly by the Company or, in the case of the Europe LPs, part-held directly by the Company and part-held through a subsidiary and in the case of Euro B-Note
Holding Limited, part-held through a subsidiary and part-held through the ESOT.
The shares of voting rights are equivalent to the percentages of Ordinary shares or units held by the Group.
To avoid a statement of excessive length, details of investments which are not significant have been omitted. All of the above
principal subsidiaries, associates and joint ventures have been consolidated in the Group financial statements. Investments in
associates and joint ventures are analysed in notes 17d and 17e to the Group financial statements.
22158.04
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Proof 7
109
www.capreg.comStock Code: CALFinancial Statements
Glossary of terms
CRPM is Capital & Regional Property Management Limited, a subsidiary
of Capital & Regional plc, which earns management and performance
fees from The Mall and certain other associates and joint ventures of
the Group. It also earned management and performance fees from The
Junction until the Group disposed of its interest on 19 October 2012.
It also owned the Group’s 50% share in X-Leisure Limited prior to its
disposal on 16 January 2013.
Contracted rent is passing rent and the first rent reserved under a lease
or unconditional agreement for lease but which is not yet payable by a
tenant.
Contribution is net rent less net interest, including unhedged foreign
exchange movements.
Net assets per share (NAV) are shareholders’ funds divided by the
number of shares held by shareholders at the period end, excluding own
shares held.
Net initial yield (NIY) is the annualised net rent generated by the portfolio
expressed as a percentage of the portfolio valuation, excluding development
properties, which is in line with EPRA’s best practice recommendations.
Net debt to property value is debt less cash and cash equivalents
divided by the property value (including adjustments tenant incentives and
head leases).
Net interest is the Group’s share, on a see-through basis, of the interest
payable less interest receivable of the Group and its associates and joint
ventures.
Capital return is the change in value during the period for properties held
at the balance sheet date, after taking account of capital expenditure and
exchange translation movements, calculated on a time weighted basis.
Net rent is the Group’s share, on a see-through basis, of the rental
income, less property and management costs (excluding performance
fees) of the Group and its associates and joint ventures.
Debt is borrowings, excluding unamortised issue costs.
EPRA earnings per share (EPS) is the profit/(loss) after tax excluding
gains on asset disposals and revaluations, movements in the fair value
of financial instruments, intangible asset movements and the capital
allowance effects of IAS12 “Income Taxes” where applicable, less tax
arising on these items, divided by the weighted average number of
shares in issue during the year excluding own shares held.
EPRA net assets per share include the dilutive effect of share-based
payments but ignore the fair value of derivatives, any deferred tax
provisions on unrealised gains and capital allowances, any adjustment to
the fair value of borrowings net of tax and any surplus on the fair value of
trading properties.
EPRA triple net assets per share include the dilutive effect of share-
based payments and adjust all items to market value, including trading
properties and fixed rate debt.
Estimated rental value (ERV) is the Group’s external valuers’ opinion
as to the open market rent which, on the date of valuation, could
reasonably be expected to be obtained on a new letting or rent review of
a unit or property.
Nominal equivalent yield is a weighted average of the net initial yield
and reversionary yield and represents the return a property will produce
based upon the timing of the income received, assuming rent is received
annually in arrears on gross values including the prospective purchaser’s
costs.
Passing rent is gross rent currently payable by tenants including car
park profit but excluding income from non-trading administrations and
any assumed uplift from outstanding rent reviews.
Property under management (PUM) is the valuation of properties for
which CRPM, X-Leisure Limited or Garigal is the asset manager.
Recurring pre-tax profit is the total of Contribution, the Group’s share
of management fees less fixed management expenses earned by
CRPM, X-Leisure Limited and Garigal, the profit from SNO!zone and any
central costs and interest.
Return on equity is the total return, including revaluation gains and
losses, divided by opening equity plus time weighted additions to and
reductions in share capital, excluding share options exercised.
Reversionary percentage is the percentage by which the ERV exceeds
the passing rent.
ERV growth is the total growth in ERV on properties owned throughout
the year including growth due to development.
Reversionary yield is the anticipated yield to which the net initial yield
will rise once the rent reaches the ERV.
Garigal is Garigal Asset Management GmbH, an associate of the
Group, which earns management and performance fees from the
German joint venture.
Gearing is the Group’s debt as a percentage of net assets. See-through
gearing includes the Group’s share of non-recourse debt in associates
and joint ventures.
See-through balance sheet is the pro forma proportionately
consolidated balance sheet of the Group and its associates and joint
ventures.
See-through income statement is the pro forma proportionately
consolidated income statement of the Group and its associates and joint
ventures.
Interest rate cover (ICR) is the ratio of either (i) recurring profit (before
interest, tax, depreciation and amortisation); or (ii) net rental income to
the interest charge.
Temporary lettings are those lettings for one year or less.
Topped-up net initial yield is the net initial yield adjusted for the
expiration of rent-free periods or other unexpired lease incentives.
IPD is Independent Property Databank Limited, a company that
produces an independent benchmark of property returns.
Like for like figures exclude the impact of property purchases and sales
on year to year comparatives.
Loan to value (LTV) is the ratio of debt excluding fair value adjustments
for debt and derivatives, to the fair value of properties (excluding
adjustments for tenant incentives and head leases).
Market value is an opinion of the best price at which the sale of
an interest in a property would complete unconditionally for cash
consideration on the date of valuation as determined by the Group’s
external or internal valuers. In accordance with usual practice, the
valuers report valuations net, after the deduction of the prospective
purchaser’s costs, including stamp duty, agent and legal fees.
Total return is the Group’s total recognised income or expense for the
year as set out in the consolidated statement of comprehensive income
expressed as a percentage of opening equity shareholders’ funds.
Total shareholder return (TSR) is a performance measure of the
Group’s share price over time. It is calculated as the share price
movement from the beginning of the period to the end of the period plus
dividends paid, divided by share price at the beginning of the period.
Vacancy rate is the ERV of vacant properties expressed as a
percentage of the total ERV of the portfolio, excluding development
properties, in line with EPRA’s best practice recommendations.
Variable overhead includes discretionary bonuses and the costs
of awards to directors and employees made under the 2008 LTIP,
Matching Share Agreement, COIP and SAYE Scheme, which are spread
over the performance period.
110
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Five year review
For the period 31 December 2007 to 30 December 2012
Balance sheet
Property assets
Other non-current assets
Intangible assets
Investment in joint ventures
Investment in associates
Cash at bank
Assets classified as held for sale
Other net current liabilities
Bank loans greater than one year
Other non-current liabilities
Net assets
Financed by
Called up share capital
Share premium account
Revaluation reserve
Other reserves
Retained earnings/(loss)
Capital employed
Return on equity
Return on equity (%)
Increase/(decrease) in net assets per share + dividend (%)
Total shareholder return
Period end share price (pence)
Total return
Total comprehensive income/(expense)
Net assets per share (pence)
Basic net assets per share
EPRA triple net assets per share
EPRA net assets per share
EPRA triple net assets per share growth (%)
Gearing (%)
Gearing (%) on a see-through basis
Income statement1
Group revenue
Gross profit
Profit/(loss) on ordinary activities before financing
Net interest payable
Profit/(loss) on ordinary activities before tax
Tax (charge)/credit
Profit/(loss) after tax
Recurring pre-tax profit
Fully taxed recurring dividend cover (x)
Interest cover (x)
Earnings per share (pence)
Basic
Diluted
EPRA
Dividends per share
2012
£m
78.4
24.4
–
25.7
80.7
5.3
32.2
(7.2)
(58.3)
(1.6)
179.6
9.9
–
–
75.2
94.5
179.6
(8.5)%
(8.4)%
(9.5)%
29p
20111
£m1
80.0
34.3
1.8
27.2
120.2
20.0
–
(13.0)
(61.6)
(12.9)
196.0
9.9
–
–
70.4
115.7
196.0
11.9%
11.8%
(3.8)%
32p
2010
£m
80.8
27.1
1.9
25.7
110.8
25.7
–
(10.2)
(68.8)
(18.5)
174.5
9.9
–
–
147.9
16.7
174.5
2009
£m
94.4
26.3
2.6
30.3
76.4
17.5
–
(25.7)
(78.6)
(13.4)
129.8
9.9
–
–
148.3
(28.4)
129.8
2008
£m
98.9
31.7
4.2
34.4
182.3
4.1
–
(72.9)
(93.8)
(2.8)
186.1
7.1
220.5
–
8.5
(50.0)
186.1
33.9%
35.1%
(2.2)%
33p
(64.3)%
(72.3)%
(24.7)%
34p
(71.5)%
(62.2)%
(77.4)%
45p
(16.6)
20.7
44.0
(119.7)
(502.7)
51p
51p
55p
(8.3)%
32.6%
179.2%
56p
56p
63p
11.9%
34.3%
253.6%
50p
50p
57p
35.1%
40.4%
305.0%
28.7
17.6
(9.0)
(2.7)
(11.7)
0.9
(10.8)
17.0
–
3.7
(5)p
(5)p
1p
–
28.9
17.2
16.2
(3.4)
12.8
(2.0)
10.8
16.4
–
5.5
6p
6p
5p
–
30.7
20.3
52.6
(6.2)
46.4
(2.0)
44.4
14.9
–
4.1
13p
13p
4p
–
37p
37p
47p
(72.3)%
61.9%
508.7%
37.8
21.8
(105.1)
(8.3)
(113.4)
(6.3)
(119.7)
17.5
–
2.8
(59)p
(59)p
1p
–
130p
133p
174p
(73.4)%
60.5%
449.2%
65.4
23.7
(478.5)
(37.8)
(516.3)
14.1
(502.2)
27.6
5.6
1.2
(355)p
(355)p
(39)p
5p
111
1 2011 results have been restated to separate discontinued operations as explained in note 30.
22158.04
18 April 2013 4:26 PM
Proof 7
www.capreg.comStock Code: CALFinancial Statements
Property under management information
At 30 December 2012
Property under management
Wholly-owned
Associates
Joint ventures
Other property
Total
30 December
2012
£m
30 December
2011
£m
30 December
2010
£m
30 December
2009
£m
81
983
365
–
1,429
81
1,824
576
–
2,481
82
2,132
547
71
2,832
84
2,408
648
–
3,140
30 December
2008
£m
88
3,147
750
–
3,985
Figures exclude adjustments to property valuations for tenant incentives and head leases treated as finance leases. Trading
properties are included at the lower of cost and net realisable value.
EPRA performance measures
At 30 December 2012
EPRA earnings (£m)
EPRA earnings per share
EPRA net assets (£m)
EPRA net assets per share
EPRA triple net assets (£m)
EPRA triple net assets per share
EPRA net initial yield
EPRA topped-up net initial yield
EPRA vacancy rate (UK portfolio only)
Reconciliation of EPRA net initial yield and EPRA topped-up net initial yield
Investment property – wholly-owned
Investment property – share of joint ventures and associates
Trading property
Less developments
Completed property portfolio
Allowance for capital costs
Allowance for estimated purchasers’ costs
Grossed up completed property portfolio valuation
Annualised cash passing rental income
Property outgoings
Annualised net rents
Add: notional rent expiration of rent free periods or other lease incentives
Topped up annualised rent
EPRA net initial yield
EPRA topped-up net initial yield
112
22158.04
18 April 2013 4:26 PM
Proof 7
2012
7.5
2p
193.4
55p
179.1
51p
6.5%
6.7%
4.0%
2012
£m
8.4
380.3
72.5
(8.4)
452.8
8.4
35.0
496.2
36.8
(4.4)
32.4
1.1
33.5
6.5%
6.7%
2011
18.0
5p
218.3
63p
195.2
56p
6.7%
6.9%
4.3%
2011
£m
8.3
596.4
72.0
(14.8)
661.9
6.2
40.0
708.1
51.4
(4.0)
47.4
1.5
48.9
6.7%
6.9%
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012
Covenant information
At 30 December 2012
See-through
borrowings
£m
30 December
Covenant
2012 Future changes
Core revolving credit facility
Asset cover
Gearing
ICR
The Great Northern facility
LTV
ICR
1.0 Greater than 200%
–
Less than 100%
– Greater than 150%
6,547%
2%
2,291%
57.6
80%
– Greater than 145%
79%
173%
The Mall
LTV
ICR
Germany
LTV
Portfolio 1
Portfolio 2
Portfolio 3
Portfolio 5
Portfolio 6
ICR
Portfolio 1
Portfolio 2
Portfolio 3
Portfolio 5
Portfolio 6
Waterside Lincoln
LTV
ICR
Redditch
LTV
ICR
115.0
83%
– Greater than 130%
67% Reducing in stages to 65% by December 2014
171%
15.8
26.8
40.9
18.7
22.1
75%
87%/93%
n/a
81%
n/a
72%
69%/74%
n/a
77%
n/a
– Greater than 150%
– Greater than 150%
– Greater than 160%
– Greater than 120%
– Greater than 140%
6.8
60%
– Greater than 175%
17.2
76%
– Greater than 125%
321.9
267%
222%
256%
186%
148%
52%
205%
65%
205%
22158.04
18 April 2013 4:26 PM
Proof 7
113
www.capreg.comStock Code: CALOther Information Fund portfolio information (100% figures)
At 30 December 2012
Physical data
Number of properties
Number of lettable units
Lettable space (sq feet – ‘000s)
Valuation data
Properties at independent valuation (£m)
Adjustments for head leases and tenant incentives (£m)
Properties as shown in the financial statements (£m)
Revaluation in the year (£m)
Initial yield
Equivalent yield
Property level return
Reversionary
Loan to value ratio
Net debt to value ratio
Lease length (years)
Weighted average lease length to break
Weighted average lease length to expiry
Passing rent (£m) of leases expiring in:
2013
2014
2015-2017
ERV (£m) of leases expiring in:
2013
2014
2015-2017
Passing rent (£m) subject to review in:
2013
2014
2015-2017
ERV (£m) of passing rent subject to review in:
2013
2014
2015-2017
Rental Data
Contracted rent at year end (£m)
Passing rent at year end (£m)
ERV at year end (£m per annum)
ERV movement (%)
Vacancy rate (%)
Like for like net rental income under UK GAAP (100%)
Current year net rental income (£m)
Properties owned throughout 2011/2012
Disposals
Net rental income
Prior year net rental income (£m)
Properties owned throughout 2011/2012
Disposals
Net rental income
Other Data
Unit Price (£1.00 at inception)
Group share
114
22158.04
18 April 2013 4:26 PM
Proof 7
The Mall
German
Portfolio
8
967
4,271
850.8
46.7
897.5
(38.7)
7.00%
7.49%
0.96%
15.7%
67%
55%
8.2
9.0
8.6
3.9
19.3
9.7
5.0
20.0
3.7
6.7
15.5
3.5
6.9
18.3
71.8
68.4
79.1
(3.2)%
3.0%
60.5
3.5
64.0
64.0
13.7
77.7
26
198
3,350
338.9
–
338.9
(3.1)
6.59%
6.12%
n/a
n/a
74%
71%
7.8
7.8
2.2
3.2
5.9
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
26.0
n/a
n/a
2.1%
25.3
1.6
26.9
23.9
–
23.9
£0.39
20.15%
n/a
49.60%
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012
Property information
At 30 December 2012
The Mall properties
Property
Valued at £125m plus
The Mall, Luton
The Mall, Wood Green
Leasehold covered shopping centre
on two floors, offices extending to
over 65,000 sq ft
Freehold, partially open shopping
centre, on two floors with nearly
40,000 sq ft of offices
Valued at £75m to £125m
The Mall, Blackburn
Leasehold partially covered
shopping centre on three floors
Description
Lettable space
(sq feet)
Car park
spaces Principal occupiers
994,000
558,000
575,000
2,300 Debenhams, Boots, Primark,
Next, Top Shop and Top Man,
Marks & Spencer, Wilkinsons,
River Island, Argos, TK Maxx
1,500 Primark, Cineworld, TK Maxx,
Wilkinson, H&M, Boots, Argos,
WH Smith, New Look
1,304 Primark, Debenhams, BHS,
Next, H&M, New Look, JD
Sports, Bank, Tesco, Boots,
Argos
The Mall, Sutton Coldfield Freehold partially open shopping
559,000
960 House of Fraser, BHS, Marks &
112
The Mall, Maidstone
The Mall, Uxbridge
The Mall, Camberley
centre on a single level with offices
extending to approximately 30,000
sq ft
Freehold covered shopping
centre on three floors with offices
extending to 40,000 sq ft
Leasehold single level covered
shopping centre with 40,000 sq ft
of offices
Part leasehold covered shopping
centre on one floor
Spencer, H&M, Boots, Argos,
WH Smith
538,000
1,050 Boots, BHS, Wilkinson, New
103
Look, Sportsworld
428,000
1,150 Marks & Spencer, Tesco, TK
121
Maxx, Wilkinsons, Argos,
Iceland
401,000
1,040 Argos, Boots, Sainsbury’s,
180
River Island, House of Fraser,
Primark
The Mall, Walthamstow
Freehold covered shopping centre
on two floors
250,000
870 Asda, BHS, Boots, Dixons, Top
Shop, Top Man, River Island
61
Other properties
Property
Valued at above £50m
Kingfisher Shopping
Centre, Redditch
Description
Lettable space
(sq feet) Principal occupiers
Freehold covered shopping centre on two
principal trading levels
914,000 Marks & Spencer, Primark,
Debenhams, BHS, Apollo,
Next, H&M, New Look, Boots,
Wilkinsons, TK Maxx
399,000 All Star Lanes, AMC Cinema,
Virgin Active, London Clubs
International
Great Northern
Warehouse, Manchester
Freehold leisure property with multiplex
cinema, casino and bars, health and fitness,
restaurants and shops
Valued at below £50m
Waterside Shopping
Centre, Lincoln (50%)
Leisure World, Hemel
Hempstead
Freehold covered shopping centre on three
floors
Redevelopment site
118,000 Primark, New Look, Top Shop,
Superdrug
160,000 –
22158.04
18 April 2013 4:26 PM
Proof 7
Number
of lettable
units
167
104
126
Number
of lettable
units
160
46
46
–
115
www.capreg.comStock Code: CALOther Information Property information continued
At 30 December 2012
German properties1
Description
Retail park
Retail park
Retail park
Retail park
Retail park
Hypermarket
Hypermarket
Retail park
Retail park
Retail park
Hypermarket
Hypermarket
Hypermarket
Hypermarket
Hypermarket
DIY
DIY
Property
Valued at €50 million to €100 million
Dortmund
Valued at €20 million to €50 million
Lübeck
Hameln
Moerfelden
Schwäbisch Hall
Trier – Kenn
Ingelheim
Valued at €10 million to €20 million
Lauchhammer
Oschersleben
Marl
Brühl
Sinzheim
Koln Gremberg
Herne
Bochum Langendreer
Stadthagen
Balingen
Valued at less than €10 million
Bochum – Wattenscheid
Sobernheim
Leverkusen
Kreuztal
Heide
Kirchheimbolanden
Taufkirchen2
Hosbach
Aachen
Kirchheim
Retail
Supermarket
Supermarket
Supermarket
Supermarket
Supermarket
Supermarket & Retail
DIY
DIY
Petrol station
Lettable space
(sq feet) Principal occupiers
JV share
33,800 Real
29,100 Coop/Plaza
16,800 Kaufland
12,200 Rewe
19,845 Hela
11,600 Real
10,200 Real
17,700 Marktkauf
10,500 Marktkauf & Toom
8,800 Kaufland
17,500 Real
16,500 Real
8,300 Real
7,400 Rewe & Toom
6,400 Kaufland
10,900 Hagebau
7,500 Toom
10,000 Gota Tapeten
7,400 Real
6,600 Edeka & Total
6,400 –
4,600 Aldi
2,500 HIT Handelsgruppe
5,000 Rewe & AWG
14,700 Globus Fachmarkte
2,800 Praktiker
2,400 Real
100%
100%
95%
100%
95%
100%
100%
95%
95%
100%
100%
100%
100%
100%
91.5%
100%
100%
100%
95%
100%
94%
100%
100%
95%
100%
100%
100%
1 Excluding German portfolio 4 (see note 17c of Group Financial statements).
2 Sold post year end.
116
22158.04
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Proof 7
Capital & Regional Annual Report and Accounts for the year ended 30 December 2012 Advisers and corporate information
Principal valuers
CB Richard Ellis Limited
Kingsley House
1a Wimpole Street
London W1G 0RE
Cushman & Wakefield LLP
43/45 Portman Square
London W1A 3BG
DTZ
48 Warwick Street
London W1B 5NL
Jones Lang LaSalle Limited
22 Hanover Square
London W1S 1JA
Registered number
1399411
Auditors
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Investment bankers/brokers
JP Morgan Cazenove
25 Bank Street, Canary Wharf
London E14 5JP
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Principal legal advisors
Olswang LLP
90 High Holborn
London WC1V 6XX
Principal lending bankers
Bank of Scotland Plc part of Lloyds Banking Group
25 Gresham Street
London EC2V 7HN
Registered office
52 Grosvenor Gardens
London SW1W 0AU
Telephone: +44 (0)20 7932 8000
Facsimile: +44 (0)20 7802 5600
www.capreg.com
Shareholder information
Registrars
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone: 0871 384 2438
Calls cost 8p per minute plus network extras. Lines open 8.30am to 5.30pm, Monday to Friday. Overseas shareholders should call +44 121 415 7047.
2013 Financial calendar
Annual General Meeting
2013 interim results
2013 annual results
June 2013
August 2013
March 2014
22158.04
18 April 2013 1:04 PM
Proof 7
06117
www.capreg.comStock Code: CALOther Information
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London
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Telephone: +44 (0) 20 7932 8000
www.capreg.com
22158.04
18 April 2013 1:04 PM
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