at the Heart of
the Community
Capital & Regional plc
Annual Report and Accounts
for the year ended 30 December 2013
Stock Code: CAL
23091-04 5 June 2014 12:21 PM Proof 10
Capital & Regional plc
Annual Report and Accounts for
the year ended 30 December 2013
About us
Capital & Regional is a specialist retail property
company with a track record of managing
assets and developing asset management
opportunities. We apply our dedicated asset
and property management teams to create
enhanced returns for our shareholders
and co-investors in the joint
ventures we manage.
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Contents
01
page
02
page
44
page
73
page
129
Strategic Report
02 Highlights
04 Chairman’s Statement
06 Chief Executive’s Statement
09 Overview of Strategic Report
10 Group at a Glance
12 Business Overview and Model
14 Our Marketplace
15 Our Assets and Operating Strategy
20 Operating Review
24 Financial Review
31 Responsible Business Review
40 Principal Risks and Uncertainties
43 Significant Contracts or Arrangements
Corporate Governance
44 Board of Directors
46 Directors’ Report
49 Statement of Directors’ Responsibilities
50 Directors’ Remuneration Report
66 Corporate Governance Report
Financial Statements
73 Independent Auditor’s Report
77 Consolidated Income Statement
78 Consolidated Statement of
Comprehensive Income
79 Consolidated Balance Sheet
80 Consolidated Statement of Changes in Equity
81 Consolidated Cash Flow Statement
82 Notes to the Financial Statements
125 Company Balance Sheet
126 Notes to the Company Financial Statements
i
S
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r
a
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g
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R
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p
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Other Information
129 Glossary of Terms
131 Five Year Review
132 Property Under Management Information
132 EPRA Performance Measures
133 Covenant Information
134 Fund Portfolio Information (100% figures)
135 Property Information
C&R at the Heart
of the Community
For more information
on our operations
within the Community
See Pages 31-39
Read more information online:
www.capreg.com
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02
Highlights
Highlights
NAV per share
EPRA NAV per share
Total Shareholder return3
54p 56p
(2012: 51p)
(2012: 55p)
53.9%
(2012: (9.5%))
60p
55p
50p
45p
40p
60p
55p
50p
45p
40p
60%
50%
40%
30%
20%
10%
0
-10%
2012
2013
2012
2013
2012
2013
Progress in execution of strategy
• Purchase of Mall Fund units during 2013,
increasing Group’s share from 20.15% to
29.26%
• Successful disposals of Jarman Fields, Hemel
Hempstead (£8.5 million) and the Great
Northern Warehouse in Manchester (£71.1
million), both non-core Leisure assets
• Sales completed of The Pavilions, Uxbridge and
the Gracechurch Centre, Sutton Coldfield by
The Mall Fund, reducing its 30 December 2013
LTV to 55% and thereby increasing options for
CMBS refinancing
Operational
• Combination of active asset management
programme and attractive and affordable space
led to:
— 56 new lettings, adding revenue of £5.0
million; and
— 31 lease renewals adding £1.5 million, at a
combined 0.7% above ERV
• Strong retail occupancy across our UK shopping
centres at 96.3% at 30 December 2013
• Footfall outperformed national benchmark by
1.2%
• Ongoing progress with redevelopment initiatives:
— Lincoln — phase two of £9 million
redevelopment on schedule with 65% of
redevelopment space by value already let
— Redditch — Hub leisure concept well
advanced with new gym open for trade
Financial
• Return to profitability with profit before tax of
£9.3 million (2012: loss of £12.7 million)
• Recurring pre-tax profit2 of £14.0 million (2012:
£17.0 million) reflecting impact of disposals
• Increase in NAV and EPRA NAV per share to
54p and 56p (2012: 51p and 55p, respectively)
• Repayment of Group’s on-balance sheet debt.
Proforma see-through net debt1 to property
value fell to 52% compared to 55% at 2012 year
end
• Refinancing of €141 million of German debt
completed with a new three year facility
• Resumption of dividend payments with total
2013 dividend of 0.65p per share
Future priorities
• Deliver value from agreed £40 million asset
management programme across core portfolio
of eight UK shopping centres
• Accelerate realisation of value from the German
portfolio and further disposals of other non-
core assets to create shareholder value by
strengthening our core UK Shopping Centre
business
• Conclude refinancing of The Mall Fund CMBS,
for which detailed negotiations are ongoing with
a number of interested parties
Total shareholder return3
Recurring pre-tax profit2
Profit/(loss) before tax
NAV per share
EPRA NAV per share
Proforma Group net debt1
Proforma see through net debt1
2013
2012
53.9% (9.5)%
£14.0m £17.0m
£9.3m £(12.7)m
51p
55p
13%
55%
54p
56p
—
52%
1 2013 adjusted for £8.4 million Hemel Hempstead net
proceeds received in February 2014, 2012 adjusted for
£30.6 million X-Leisure proceeds received in January 2013.
2 As defined in Note 1 to the financial statements.
3 Change in share price plus dividends paid in the year.
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Stock code: CAL
03
Commenting on the results, John Clare,
Chairman, said:
“During the course of the year, the Group
continued to make significant progress in the
execution of its strategy and I am pleased to
report that this was reflected by a 6% increase in
NAV per share from 2012, a return to profitability,
with profit before tax for the year of £9.3 million,
and the resumption of dividend payments. With
a much strengthened financial position, we will
now be focusing our financial resources and
management skills on investing in and actively
managing a portfolio of dominant UK community
shopping centres, building on our proven track
record of recycling capital to consolidate our
position as a leading UK retail property company.”
Hugh Scott-Barrett, Chief Executive, added:
“We are now seeing a clear uptick in economic
conditions which, in turn, has had a positive
impact on retailer and consumer confidence.
These factors, combined with a much improved
investment market, are providing a very supportive
background for our UK shopping centre business.
We have benefited from an active programme
of asset management during the year, which
has enhanced our operating performance and
valuations towards the end of 2013. We expect
this trend to continue in 2014 and therefore look
forward to making further progress in our drive to
grow the Company and enhance value
for investors.”
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Strategic Report 04
Chairman’s Statement
John Clare
Chairman
“During the course of the year, the
Group continued to make significant
progress in the execution of its strategy
and I am pleased to report that this
was reflected by a 6% increase in
NAV per share from 2012, a return to
profitability, with profit before tax
for the year of £9.3 million, and the
resumption of dividend payments.”
For more information on our properties
See Page 11
Strategy
The Group’s strategy is to focus its financial
resources and management skills on investing
in and actively managing a portfolio of dominant
community shopping centres in the UK. The
Group intends to build on its proven track record
of recycling capital from non-core assets to
strengthen its position as a leading UK retail
property investment company.
Performance Overview
I am pleased to report an increase in Net Asset
Value per share of 6% to 54p and a pre-tax profit
of £9.3 million compared to a prior year loss
of £12.7 million. The Group has also reported
recurring profits of £14.0 million compared to
£17.0 million in 2012. This is a robust performance
in light of the sale of The Junction and X-Leisure
businesses, which contributed recurring pre-tax
profits of £2.7 million in 2012, and the loss of
income resulting from the sale of three Mall assets
in 2012 and 2013.
The performance is all the more encouraging as
the operating environment remained challenging,
with property values remaining flat or falling
modestly across the shopping centre business, for
much of the year.
In the fourth quarter of 2013, however, we saw a
noticeable pick-up in investment market activity
with property valuations in The Mall rising by 1%.
This is a positive sign for our property values when
combined with improving economic conditions
and the resulting impact on consumer sentiment.
During the course of the year, the Group also made
further significant progress in the execution of its
strategy. The completion of the sale of the Great
Northern Warehouse in Manchester for a headline
price of £71.1 million and the agreement to sell
Jarman Fields, Hemel Hempstead for £8.5 million
enabled the Group to recycle the proceeds of these
non-core leisure assets to increase its stake in The
Mall in 2013 from 20.15% to 29.26%. The £29.3
million investment was made at an overall discount
of 5% to year-end values. UK shopping centre
activities in general and the Mall Fund in particular
now form the core of our business.
Dividend
Our dividend policy links future payments to
the Group’s cash generating ability. In view
of the Group’s significantly improved financial
position and in anticipation of The Mall’s ability
to recommence distributions, the Board took the
decision to resume dividend payments after five
years and pay an interim dividend of 0.25p per
share. The Board is now recommending a second
interim dividend of 0.40p per share making a
total dividend of 0.65p per share for 2013. The
Board expects to be able to adopt a progressive
approach to dividend payments as its ability to
generate cash further improves.
Responsible Business
The Group attaches great importance to
maintaining its commitment to responsible
business as it believes that by reducing the impact
we have on the environment, supporting our
employees and serving the communities around
us, we contribute to building a stronger and more
successful company.
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.
In a year of notable achievements, the Group’s
retention of the ROSPA Gold Award status for
a seventh consecutive year and the Mall Fund’s
rating as number one in the UK for retail in the
Global Real Estate Sustainability Benchmark stand
out. Targets for reduction in energy, have again
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Stock code: CAL
05
been exceeded. Our shopping centres are now
using at least 35% less energy than five years ago,
saving over £1.2 million in energy costs over that
time.
Further details are set out in the Responsible
Business review in the financial statements.
Our People
Improving the customer experience and making
the retail environment attractive are key ingredients
in attracting retailers to the Group’s shopping
centres thereby boosting footfall and spend. Our
management teams’ constant focus on operational
excellence and adopting an entrepreneurial
approach towards asset management and
development is one of the Group’s key
differentiators and I would like to thank all our
teams for their efforts in delivering these objectives.
This management platform remains critical to the
creation of value for our shareholders.
The Board
I would like to thank Xavier Pullen, who stepped
down from the Board as an Executive Director
after 35 years, for his very significant contribution
to the success of the Group. I am pleased that he
will continue to assist the Group in the execution
of its strategy for Germany as a senior adviser. At
the same time, I would like to congratulate Mark
Bourgeois on his promotion to the Board as an
Executive Director. With his operational and strategic
retail property experience, combined with his
extensive market knowledge and understanding of
advancing technology, Mark will undoubtedly make
an important contribution to the Board’s discussions.
We look forward to further progress in 2014.
John Clare CBE
Chairman
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Strategic Report 06
Chief Executive’s Statement
Hugh Scott-Barrett
Chief Executive
“We are now seeing a clear uptick
in economic conditions which, in
turn, has had a positive impact on
retailer and consumer confidence.
These factors, combined with a
much improved investment market,
are providing a very supportive
background for our UK shopping
centre business.”
For more information on our properties
See Page 11
Strategy
The Group made further significant progress in
2013 in focusing Capital & Regional on its core
UK shopping centres. Following the sales of The
Junction, X-Leisure and Braehead in 2012, the
sales of Great Northern and Hemel Hempstead
were respectively completed and agreed in 2013
with the result that we were able to recycle the
cash from these disposals into the acquisition of
Mall units at an attractive point in the investment
cycle. Adjusted for the sale of Hemel Hempstead
which completed after the year-end, UK shopping
centres and available cash account for 75% of the
Net Asset Value of Capital & Regional compared
to 47% at the beginning of 2012.
Moving forward our core objective is to increase
the focus on UK shopping centres with the
intention to continue to realise value over time
from our retail portfolio in Germany. We will take
advantage of any opportunities to increase further
our stake in the Mall which remains at the centre
of our strategy for UK shopping centres. The
anticipated refinancing of the CMBS later this
year will provide a sound platform from which
to execute our asset management plans.
Our portfolio of eight UK shopping centres
offers a range of investment opportunities
from incremental asset management initiatives
in Redditch and Lincoln to more significant
development opportunities in Camberley,
Maidstone and Walthamstow. We are convinced
that by continuing to invest in these schemes, we
can enhance their attractiveness to retailers and
their relevance to consumers thereby ensuring we
can create attractive returns for shareholders.
Whilst each of the shopping centres requires
significant focus to execute these plans, in the
longer term the current management platform
has the capacity and expertise to support a larger
portfolio of shopping centres which share similar
characteristics. Additional critical mass will create
further economies of scale and be supportive of
enhanced returns for shareholders.
Operations
We have seen a steady improvement in operating
conditions in our UK shopping centres as the year
progressed. Following a number of administrations
in the first half of the year (20 units representing
£1.4 million of income), occupancy levels
increased as administrations slowed and key
lettings were secured. As at 30 December 2013,
retail occupancy across our UK shopping
centres stood at 96.3% compared to 95.4% at
30 June 2013. Underlying income, as measured
by contracted rent, also stabilised in the second
half of the year. As at 30 December 2013 there
was £1.1 million more rent attributable to tenants
in a rent free period than there was at
30 December 2012. As these rent free periods
expire the passing rent will increase accordingly.
Footfall across our shopping centres continues
to out-perform the national benchmarks. For the
year, footfall fell by 2.5% compared to 3.7% for the
sector as a whole and the level of out-performance
increased as the year ended. Successful marketing
campaigns saw strong footfall over Christmas, a
trend which has continued into 2014, with both
an absolute increase and out-performance of the
national benchmark in the year to date.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 07
75%
UK Shopping Centres and
available cash as proportion
of Group NAV1
1 December 2013 adjusted for sale
of Hemel Hempstead)
96.3%
Retail occupancy in
UK Shopping Centres
Asset Management
The improvement in the operating environment
has lagged the pick-up in investment market
activity and retailers have therefore continued to
be well placed to negotiate competitive terms
for new space and lease renewals. There are,
however, a number of trends which bode well
for retailer demand across the Group’s shopping
centres:
a) It is encouraging to see that where the Group
is investing, such as the reconfiguration at
Waterside, Lincoln, or the creation of a leisure
hub at Redditch, occupiers are keen to
take space on accretive terms. The planned
refurbishments at Walthamstow and Maidstone
are expected to generate a similar response
from retailers. The Group’s track record in the
successful delivery of these asset management
initiatives, on budget and on time, is critical to
securing retailer support.
b) Success with the asset management initiatives
at Lincoln and Redditch confirms that there
is still untapped demand from fashion and
leisure operators which is crucial to increasing
occupancy levels.
c) The Group is able to respond to the multi-
channel strategies presented by our retailers
through consolidation of smaller units to create
larger space. Examples are River Island at
Luton, H&M and Next at Lincoln and TK Maxx
at Camberley. We see these larger stores as
particularly relevant to growing click and collect
trends.
d) In the absence of a significant flow of quality
new space across the UK, successful
retailers are looking to expand their presence
in schemes where they already have an
established and profitable presence. Examples
include Sports Direct in Walthamstow, Costa
Coffee in Redditch and New Look in Lincoln.
e) Our ability to grow income from car parks,
promotional activity, retail merchandising
units (“RMU’s”), media and web activity
is underpinned by the fully integrated
management platform operated across our
shopping centre activities.
Active asset management was also critical to
facilitating the disposals during the year of Sutton
Coldfield, Great Northern and a well-executed and
complex development at Hemel Hempstead. This
was vital in driving sale price and underpinning the
disposal process.
Germany
In our German portfolio we have continued to
concentrate on extending the length and quality of
income stream to support valuations and maintain
the marketability of the portfolio to the institutional
investment market. Our assets are managed
by Garigal Asset Management, a German retail
specialist asset manager in which the Group holds
a 30% interest. Garigal has identified a number of
asset management initiatives; opportunities either
to negotiate early lease extensions with key anchor
tenants or delivery and reconfiguration of additional
retail space. During 2013 we successfully
increased the weighted average lease length by
0.3 years to 8.1 years (2012: 7.8 years).
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Chief Executive’s Statement continued
Chief
Executive’s
Statement
Financial Position
De-gearing of the Group’s balance sheet has
been a key strategic objective in recent years and
our progress in this regard during 2013 was of
paramount strategic importance to the Group.
As a result of the disposals completed during the
year, there was no on balance sheet debt at the
year end, whilst see-through net debt to property
value, adjusted for the sale of Jarman Fields,
Hemel Hempstead, which completed in February
2014, fell from 55% to 52%.
The sale of Great Northern Warehouse in October
2013 resulted in the repayment of a £57.6 million
debt facility. This facility had full recourse to
the Group’s balance sheet and its repayment
considerably increased the Group’s financial
strength and flexibility. As at 30 December 2013,
the Group had a net cash position of £11.1 million,
increasing to £19.5 million adjusted for the sale
of Hemel Hempstead that completed in February
2014. The Group’s £25 million Revolving Credit
Facility which matures in July 2016 remains
undrawn.
The debt repayment of £168 million by the Mall
following the sales of the shopping centres
at Sutton Coldfield and Uxbridge reduced
outstanding debt from £547.5 million to £379.5
million. Gross gearing therefore fell to below 60%,
allowing the recommencement of distributions. As
at the end of 2013, gross debt to property value
stood at 55% whilst net debt to property value
was at 46% meaning the Fund is now in a strong
position to take advantage of the more favourable
conditions in the banking market in preparation
for the refinancing of the CMBS which matures in
April 2015.
The German Joint Venture has signed a three-year
€141 million financing which supports three of its
portfolios, representing 49% of the total German
portfolio and covering 12 properties.
The terms of the refinancing are, we believe, very
attractive with an all in cost below 3%. That the
market is prepared to fund these assets on very
competitive terms at LTVs above 70% is a vote of
confidence in this business.
Outlook
Improving economic conditions provide a very
supportive background for our UK shopping
centre business. In particular, rising employment
and the potential for real growth in average
earnings should provide a boost to consumer
sentiment. Footfall through our schemes in the first
two months of 2014 shows an absolute increase
and outperformance against the relevant index.
Whilst the strengthening investment markets have
been well documented, it is the improvement in
the underlying economy that is the necessary
pre-condition for increased retailer confidence,
higher occupancy and higher rental income.
The significant fall in the level of administrations
in 2014 to date compared to recent years also
provides a helpful backdrop for letting activity in
the rest of the year. Furthermore we have begun
to see that the hard work undertaken by our
specialist asset management teams has enhanced
operating performance and valuations towards the
end of 2013 and we expect this trend to continue
in 2014.
Recycling of capital remains an important priority.
Following on from the sale of the property at
Taufkirchen in May 2013 for €6.3 million and
exchange on the sale of the vacant Kreuztal
property post year end for €1.3 million, in line with
and ahead of valuation respectively, we intend to
accelerate the realisation of value from the portfolio
in 2014. We are currently in advanced talks to
dispose of one large property and intend to bring
a further tranche of assets to market during the
year. Proceeds will be used to reinvest in our UK
shopping centre business.
We expect the Mall to refinance its CMBS by the
time we announce our interim results. The current
attractive conditions in the banking market should
ensure that the Fund which has successfully
reduced gearing through a targeted programme
of disposals can achieve competitive terms having
received strong interest from debt providers in
the discussions that have taken place to date.
This should, in turn, ensure a stable background
for the implementation of the asset management
programme and that the Mall remains at the heart
of our growth strategy for our shopping centre
business.
We look forward to making continuing progress in
our drive to grow the Company and enhance value
for investors in 2014.
Hugh Scott-Barrett
Chief Executive
Read more information online:
www.capreg.com
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 Overview of Strategic Report
0909
Title
Content
Chairman’s Statement
Overview of Strategy and Performance.
Page no.
04–05
Chief Executive’s statement
Overview of Strategy, Operational Performance, Financial Position
and Outlook.
06–08
Business Overview and Model
This shows what we do and how we operate.
12–13
Our Marketplace
Background on key trends in the retail industry, with an explanation
of the key opportunities and challenges they present to our
business.
14
Our Assets and
Operating Strategy
This provides a summary of the key characteristics of our assets and
the primary asset management initiatives on an asset by asset basis.
15–19
Operating Review
A review of our performance including key operating metrics
covering Occupancy, Lettings, Income and Footfall.
20–23
Financial review
A summary of financial performance, including a review of
investment returns, Group debt (on and off balance sheet), Financing
Strategy and Dividend policy.
24–30
Responsible Business Review
This provides details of our performance against our objectives in
2013 and our targets for 2014 across the key areas of our marketplace,
the environment, our work place an the wider community
31–39
Principal Risks
and Uncertanties
A summary of the principal risks that we face and an overview of our
risk management processes.
40–43
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Group at a Glance
The Mall fund
6 centres
29.26%
Waterside
Lincoln JV
50%
20%
Kingfisher
Redditch JV
Group at
a Glance
UK SHOPPING CENTRES
Capital & Regional Property Management
- The Mall Fund
- Kingfisher Redditch
- Waterside Lincoln
Capital & Regional Plc
Snozone
Indoor Ski Operator
100%
50%
Germany JV
25 German Retail Properties
& Property Manager1
1 Group ownership of Garigal Asset Management GmbH, the German asset and property manager, is 30%.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 11
£851m
UK Shopping Centres
valuation at 30 December
2013 (100%)
€404m
German property valuation at
30 December 2013 (100%)
30 December
2013
8
£851m
£67.0m
6.8%
5.0%
96.3%
56%
47%
30 December
2013
25
€404.0m
€31.0m
6.8%
4.1%
97.5%
72%
69%
49.6%
UK Shopping Centres (100%)
Number of properties
Property value at independent valuation
Passing rent
Initial yield
Property level return
Retail occupancy
Loan to value ratio
Net debt to value ratio
Germany (100%)
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
Snozone
The Group owns 100% of Snozone, which is the largest indoor ski slope operator in the UK. Snozone
operates in the two Xscapes at Milton Keynes and Castleford which are owned by the X-Leisure Fund.
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Business Overview and Model
Business overview
Our core strength is owning and managing UK
dominant community shopping centres. The
C&R team has extensive experience in profitably
repositioning malls, applying our proven asset
management expertise to maximise value
throughout the investment life-cycle of the asset.
The team has bought and sold over 25 centres
over the past 10 years building up unparalleled
experience in that time. Our approach to
identifying and adding value to a scheme is
illustrated as follows:
Business
Overview
and Model
The C&R Way
Identify the opportunity
• Historic lack of investment
• Dominant town centre scheme (at least 50% of
town centre trade in top 100 location)
• Underperforming in catchment
•
Further development opportunities
n
o
i
t
s
i
u
q
c
a
e
r
P
Drive Asset Management/Development
Drive Operational Excellence
Develop a Business Plan
n
a
l
p
e
h
t
g
n
i
r
e
v
i
l
e
D
Improve Retail/Leisure mix
Build local authority partnerships
•
•
• Deliver improvements to retail environment/refurbishment
•
Identify and deliver development opportunities
• Develop excellent people
• Utilise scale in contract procurement
•
Implement Planned Preventative Maintenance
• Drive footfall throught creative marketing
•
• Optimise Car Park customer experience
Incorporate relevant technology
• Maximise commercial income opportunities
Reduce costs (sales and service charges)
•
Enhance website and build digital database
•
•
Introduce C&R Finance process
t
l
u
s
e
R
e
h
T
Improved customer experience
Attractive retail environment
•
•
• Relevant retailer space
•
Increased market share
•
Increased footfall and spend
Increased
Income
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013
13
• Through targeted marketing we continually
engage with our shoppers, encouraging repeat
visits and higher spend
• A track record of leveraging portfolio scale to
drive down cost of occupation whilst delivering
high quality mall facilities. Mall service charges
are on average 19% below the JLL benchmark
• We have developed market leading processes
that minimise our impact on the environment
though reduction in energy consumption, waste
and water usage. We have a track record of
strong results, for instance, over the past five
years, we have reduced like for like energy
consumption in excess of 35%.
The repositioning of a shopping centre requires a
range of skills and experience. Our people apply
those skills as illustrated below:
Our Team and approach
The elements which help to differentiate our
management platform include:
• A unique in-house platform combining property
and asset management driving market leading
operating standards (see illustration below)
• A track record of delivering profitable complex
asset management initiatives
• Excellent relationships with our retailers. We
think like retailers, creating environments
appealing to occupiers, assisting them in
delivering sustained profits and an outstanding
shopping experience for the communities which
we serve
• We have been at the forefront of the sector in
capitalising on the opportunities arising from
technological change. The Mall website was the
first UK branded website covering a portfolio of
shopping centres. All malls have free Wi-Fi, a
click & collect service and smartphone apps
• We drive income from many sources,
including advertising, promotional space, retail
merchandising units, digital commerce, gifts
cards and telecoms.
ns
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Facilities
Management
Regional
Operations
Property
Management
I n v e s t ment & Asset Manage
I nvestment and Asset M
Investment
Asset
Management
Managment
m
a
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n
nt
a
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Leasing
Project
Management
m
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t
A
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M all Teams
Development
Commercial
Income
Development
ASSET
OUTPERFORMANCE
Resource
Management
P
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o
p
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Learning
Financial
Accounting
Mall Teams
t
Brand
Management
A
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Fin
Commercial
Accounting
Marketing
Services
Technology
and Web
Design
M
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23091-04 5 June 2014 12:21 PM Proof 10
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14
Our Marketplace
The UK retail industry is a growing £321 billion
market, employing 3 million people representing
approximately 20% of UK GDP1. It is a dynamic
industry reacting to and shaping consumer
behaviours particularly in response to technological
advances. Retail expenditure is forecast to grow
by 16.5% over the next five years2, twice the rate
of the previous five years, being principally driven
by population growth, higher employment and an
improving economy. Over half of retail expenditure
is made in town and there is a public policy agenda
to reinvigorate town centres returning them to the
heart of the community.
The retail property landscape has changed
fundamentally over the past five years. The
significant supply of space on the high street has
meant that occupiers have become highly selective
on location. That trend has tended to benefit
shopping centres with well managed and controlled
environments, in contrast to the fragmented high
streets, which have borne the brunt of the retail
fallout. Indeed, shopping centre occupancy has
held firm against this backdrop of retail failures.
That is because strong retailers have continued
to expand. CBRE note that those with a national
presence have increased store numbers by a
cumulative 10% over the past five years, and with
improving demand for leisure space, leisure outlets
have increased by 41% in the same period.
As retailers evolve in a multichannel environment,
our challenge is to anticipate and respond to the
changing landscape by providing relevant and
attractive places in which retailers can profitably
operate. As shoppers continue to embrace these
changing habits, those retail centres providing
convenient, accessible and attractive destinations
will thrive. The managed shopping centre
environment, dominant in its location, delivers the
ideal platform.
Retailers that embrace a multichannel strategy
tend to be more profitable than pure play online
operators. As such, click & collect offers a growth
opportunity for UK shopping centres. According to
IMRG Cap Gemini e-Retail Sales Index, purchasing/
reserving on line and collecting in store now
account for 25% of multichannel retail sales. Within
our shopping centres, 58% of stores offer a click
and collect service, a trend that is set to grow.
In summary, favourable shopping trends, moving
towards click & collect, combined with healthy
retail spending forecasts and increased national
occupier requirements for quality comparison
and leisure space, point to a favourable retail
environment in the context of our business
strategy, outweighing the oversupply headwinds
that exist in the wider retail property market. It is
with this backdrop that we have embarked on a
significant investment programme.
1 British Retail Council
2 Verdict
Our
Marketplace
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Our Assets and Operating Strategy
15
£40m
agreed capex programmes
over next three years
£36m
of further identified initiatives
in Mall assets
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:
— Dominant community shopping malls —
healthy sale densities of £449psf across our
portfolio compares favourably to in-town
sales densities of £430psf (CBRE research)
— Strong footfall — outperformed the national
index by 1.2% in 2013
— Affordable rental levels with potential for
growth — rent to sales ratios are strong at
6.4% across The Mall portfolio and rents are
affordable at £22psf
— Attractive added value opportunities — see
asset by asset table below
— Ownership of car parking and availability of
good local transport facilities – our portfolio
has over 10,000 car parking spaces.
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.
Continuing investment is essential to maintain
and further enhance the relevance of our
assets. Across our portfolio of eight centres
we have agreed programmes of capex totalling
approximately £40 million over the next three years
from which we are targeting income returns of at
least 10% over the period.
Across the Mall properties we have identified
a further £36 million of value adding initiatives
and we are also working on exciting masterplan
developments for Camberley and Maidstone which
would deliver transformational improvements to
those towns.
Further details of our current year activities and
future plans and opportunities on an asset by
asset basis are detailed as follows:
Shopping
Centre
No. of Retailers
Anchors
Summary
Blackburn
101
Debenhams, Primark,
H&M, Next, Boots,
Argos, BHS
A 600,000 sq ft Mall, extended and refurbished in 2011, gaining
market share from neighbouring locations.
During 2013:
• Key lettings were achieved with Schuh, Card Factory, Shoe Zone,
Toymaster, Perfect Home and Waterstones
• We successfully defended an out of town retail park proposal
• Opportunity remains to increase income and value through
continued market share growth
• Inward yield shift expected in response to the proven robust income
stream as yield gap closes
• £5.0 million of capex projects identified including:
— Leasing of key voids
— Identified PPM
— Amalgamation of several units to form a gym
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Our Assets and Operating Strategy continued
Shopping
Centre
No. of Retailers
Anchors
Summary
Camberley
120
House of Fraser, Top
Shop, Boots, Primark,
Sainsbury’s, Argos,
River Island
A 390,000 sq ft Mall in a highly affluent South East catchment. Significant
development opportunity to reposition and create a 290,000 sq ft extension.
During 2013:
• 20,000 sq ft TK Maxx was successfully delivered following the
amalgamation and extension of four units
• Adjoining 6,000 sq ft unit in advanced legals with international footwear
operator
• Continued material progress made around development opportunities
— Development agreement Heads of Terms agreed with Local Authority
— Progressive discussions with major department store anchor
— Local Authority planning/decision making continues to support
regeneration
• £3.2 million capex1 identified including:
— Delivery of new lettings/amalgamations
— Reconfiguration of Main Square
1 Excluding London Road redevelopment
Lincoln
45
New Look, Top Shop,
Stormfront (Apple),
Food Court
A popular cathedral city with increasing demand for well configured retail
space.
During 2013:
• Major redevelopment of the centre commenced — 65% of redevelopment
space by value now let to H&M, Next and FABG restaurant
• Extended 15,000 sq ft New Look, which was delivered in December 2013
• Delivered the transformation of Mall public space to create spacious and
attractive retail destination
£6.8 million of capex projects identified including:
• Completion of development construction
• Leasing of remaining development units
• Reconfiguration/addition of kiosk income to entrances and common areas
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 17
Shopping
Centre
No. of Retailers
Anchors
Summary
Luton
135
Debenhams, Boots,
Primark, H&M, Next,
Top Shop, M&S,
Wilkinson, TK Maxx
Luton is a 900,000 sq ft scheme within a thriving London satellite town:
— Strong employment base
— Growing population
During 2013:
• Good asset management progress including:
— 7,000 sq ft River Island
— 6,000 sq ft Deichmann Shoes
— Newly filled/downsized Clintons
£13.8 million of capex projects identified including:
• 80,000 sq ft leisure/retail opportunity at existing Market Hall
• 60,000 sq ft office refurbishment & re-let
• Joint initiative being discussed with Local Authority on adjoining
land to north of shopping centre
• Leasing to key retailers to further build fashion mix
Maidstone
95
Boots, BHS, New
Look, Wilkinson, Next,
Sports Direct
A 500,000 sq ft scheme within a vibrant South East town:
— Strong population growth is forecast
— 300,000 sq ft of additional retail space required in town centre
During 2013:
• A five year lease extension exchanged with Next in anticipation of
scheme improvements
£7.7 million of capex projects identified including:
• Planned refurbishment and repositioning of Mall environment
targeted for H2 2014
• Reconfiguring space to secure transformational anchor
• In partnership with the Local Authority:
— Master plan under development
— 300,000 sq ft extension of retail/leisure/residential
— Public consultation on scheme ongoing
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Our Assets and Operating Strategy continued
Shopping
Centre
No. of Retailers
Anchors
Summary
Redditch
160
Debenhams, M&S,
Primark, Next,
Arcadia, TK Maxx
A 900,000 sq ft centre that sits within a prosperous catchment:
— Robust employment
— Increasing industrial prosperity
During 2013:
• Leisure Hub pre-lets to Nando’s and Real China
• Pure Gym opened November 2013
• Hub construction project progressing with opening of restaurants due
April 2014
• Positive discussions with fashion operators to improve mix on Evesham
Walk
Strategy to reposition centre through £9.9 million investment,
predominantly aimed at:
• Completion of branded leisure hub
• Improving Mall environment/customer experience
• Creating more cohesive fashion mix, thereby attracting the more affluent
shopper
Walthamstow 60
Asda, BHS, Boots,
New Look, River Island,
Top Shop
A 260,000 sq ft London centre strategically located to benefit from
changing demographic of area.
During 2013:
• Good progress being made on the investment targeted to radically
transform the retail and leisure mix
• Agreement for lease exchanged for reconfiguration/upsize of Sports
Direct
• Advanced legal negotiations with leading fashion operator for 26,000 sq ft
store, involving reconfiguration of existing units
£22.0 million of capex projects identified including:
• Refurbishment of Mall due to commence H1 2014
• Construction/delivery of upsized Sports Direct
• Delivery of 80,000 sq ft leisure/retail scheme extension
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 19
Shopping
Centre
No. of Retailers
Anchors
Summary
Wood Green
90
Primark, Wilkinson,
H&M, Boots, Argos,
TK Maxx, WH Smith,
New Look, Next
A vibrant 550,000 sq ft London shopping centre with 12 screen
cinema and leisure offer.
• Strategy to maintain strong income levels by targeted development
and further refinement of tenant mix.
During 2013:
• Morrisons took former HMV unit
• Completed lease to TK Maxx for extension into former Peacocks
• Under offer to two national retailers for upsized units
• £7.3 million of capex projects identified including:
— Reconfiguration of upper floor units/introduction of
fashion operators
— Introduction of supermarket on vacant former garage site
— Introduction of hotel operator to existing office accommodation
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Operating Review
The principal focus of management during 2013 has been
to continue to execute its strategy of disposing of non-core
assets in order to concentrate resources on its core UK
Shopping Centre business.
UK Shopping
Centres
New lettings, renewals and rent reviews
There has been good letting activity across the
portfolio.
UK Shopping Centres
Number of new lettings
Rent from new lettings (£m)
Comparison to ERV (%)1
Renewals settled
Revised rent (£m)
Comparison to ERV (%)
Rent reviews settled
Revised passing rent (£m)
Uplift to previous rent (%)
Comparison to ERV (%)
56
5.0
3.0
31
1.5
(3.6)
41
4.0
0.3
9.9
1 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 tenants such as
Nando’s taking space in our schemes and fashion
retailers such as River Island, H&M and Next
making significant commitments. The key lettings
on an asset by asset basis are as outlined above.
During the year the Group repaid £57.6 million
of recourse debt following the sale of the Great
Northern Warehouse. Subsequent to the year end
it also sold Hemel Hempstead, its last remaining
leisure property asset, realising £8.4 million.
In July 2013, The Mall sold Sutton Coldfield and
Uxbridge for a combined total of £152.5 million
which was used to reduce debt in The Mall. As a
consequence The Mall is no longer constrained
by its loan covenants from making distributions
of income to its unit holders and is well placed to
refinance the CMBS debt which matures in April
2015.
UK Shopping Centres
Retail Occupancy levels
Occupancy
(like for like)
UK Shopping
Centres
30 Dec
2013
%
30 June
2013
%
30 Dec
2012
%
96.3
95.4
97.5
1 Retail Occupancy excludes office or residential lettings.
December 2013 and December 2012 includes a seasonal
increase in temporary lettings.
We continue to focus on maintaining high
levels of occupancy in order to create shopping
destinations which are appealing to shoppers and
tenants and which act as a springboard for growth
in rental values. The decrease in year on year
occupancy is due primarily to a fall in the level of
temporary lettings of approximately 1.0% of total
occupancy.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 21
1.2%
outperformance of national
footfall index in 2013
Administrations
There were 32 units affected by administration during the year (2012: 48) with passing rent of
£2.0 million (2012: £4.3 million).
Year ended
30 December
2013
6 months ended
30 December
2013
6 months ended
30 June
2013
32
2.0
12
0.6
20
1.4
Rent collection rates in the UK Shopping Centres
(adjusted for tenants in administration) have
continued to be strong throughout the year, with
96.7% of rent being paid within 14 days of the due
date for December 2013.
Footfall
The UK Shopping Centres’ footfall (excluding
Lincoln, owing to its redevelopment) has
outperformed the national footfall index by 1.2%
during 2013. There was a fall in shopper numbers
over the year of 2.5% compared to a decline of
3.7% in the UK benchmark index (ShopperTrak),
demonstrating the relative strength of the
portfolio. In 2014 UK Shopping Centre footfall
has continued to outperform the benchmark,
registering an absolute year on year increase of
3.0% in the first seven weeks of 2014 which is
3.6% ahead of the benchmark.
Temporary lettings
At 30 December 2013, on a like for like basis,
there were 102 temporary lettings (2012: 106) for
a net rent of £0.8 million (2012: £1.3 million) as
compared to an ERV of £4.7 million (2012: £5.7
million).
UK Shopping Centres
Administrations (units)
Passing rent (£m)
At 30 December 2013, there were three units
where tenants were continuing to trade whilst in
administration with a passing rent of £0.2 million.
In the first two months of 2014 there have been
eight units affected by administration with a
passing rent of £0.3 million. This compares to
12 units with a passing rent of £1.0 million in the
equivalent period of 2013.
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 by actively seeking to
reduce exposure to known risks. The 10 largest
occupiers by rental income at 30 December 2013
were:
UK Shopping Centres
Alliance Boots Limited
Debenhams Properties Limited
Primark Stores Limited
Arcadia (excluding BHS)
H&M
New Look Retailers Limited
BHS
Wilkinson
Sports Direct
JD Sports
%
5.0
3.6
2.7
2.7
2.6
2.6
2.3
2.0
1.8
1.8
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Operating Review continued
Other
operations
Rental income
Contracted rent across our UK portfolio decreased marginally.
UK Shopping Centres (Like-for-like)
Contracted rent
Passing rent
December
2013
£m
70.7
67.0
June
2013
£m
70.8
67.4
December
2012
£m
71.1
68.5
As at 30 December 2013, there was £1.1 million more rent attributable to tenants in a rent free period
than there was at 30 December 2012. As these rent free periods expire the passing rent will increase
accordingly.
Investment portfolio performance
The property level total returns are set out below:
30 December 2013
UK Shopping Centres1
Property
valuation
£m
851
Capital
return
%
(1.8)
Total
return
%
4.9
Initial
yield
%
6.8
Equivalent
yield
%
7.3
1 Weighted average by year end property valuation
Other Operations
Snozone
Snozone delivered a contribution of £0.9 million in line with 2012. Further cost reductions offset the
impact of lower income due to the impact of snow during peak season trading, the good summer
weather and a leisure environment that remains highly competitive.
German portfolio
The Group’s commercial retail property portfolio in Germany is in a joint venture with Ares Management
(formerly AREA Property Partners) and is held in five joint venture portfolios.
The key portfolio property data at 30 December 2013 is as follows:
Portfolio
Occupancy
%
1
2
3
5
6
Total
94.4
96.9
100.0
99.8
93.7
97.5
Weighted
average
lease
length
Years
7.9
4.3
10.6
9.7
6.0
8.1
Property sizes
Total
#
>€50m
#
€50m–
€20m
#
€20m–
€10m
#
<€10m
#
Average
Property
value
€million
Rental
income
€million
6
2
9
4
4
25
—
1
—
—
—
1
—
1
3
1
2
7
3
—
3
1
1
8
3
—
3
2
1
9
9.2
41.3
16.0
13.5
17.1
16.2
4.0
6.1
11.0
4.2
5.6
30.9
The movement in German properties (on a like for like basis) is as follows:
Valuation
30 December
2013
€million
Valuation
30 December
2012
€million
Valuation
movement
€million
NIY
30 December
2013
%
NIY
30 December
2012
%
404.0
408.4
(4.4)
6.8
6.5
In our German portfolio we have continued to concentrate on extending the length of its income stream
to maintain and increase valuation.
We have successfully increased the weighted average lease length by 0.3 years to 8.1 years
(2012: 7.8 years).
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 23
€30.9m
German portfolio
rental income at
30 December 2013
There was a fall in contracted rent of €0.6 million in 2013 to €31.3 million (2012: €31.9 million). This was
principally as a result of the downsizing of the anchor tenant at their lease expiry at Oschersleben. This
however, was mitigated by active asset management activity to re-let the remaining space successfully
to a DIY operator. Excluding Oschersleben, contracted rent was in line with the prior year.
The key asset management initiatives undertaken in the year were:
Brühl (20,200 sq m)
Real has extended their lease to 2019 on their 17,525 sq m anchor unit.
Bochum-Wattenscheid (10,000 sq m)
Following on from the 2,500 sq m letting to FitX in 2012 further progress has been made in transforming
the location from a struggling 10,000 sq m retail property into a leisure destination. A Chinese restaurant
has signed a ten year lease of 1,600 sq m and an indoor children’s play area has taken 1,640 sq m.
These tenants will commence their fit-outs once the building permissions are granted. Additionally, we
are in advanced discussions with a sports bar to take 800 sq m of space, leaving only one 800 sq m
unit (8% by lettable area) left to let.
Heide (4,600 sq m)
We have made significant progress to replace the units that became vacant in 2012 and 2013 upon lease
expiry, as improved access to the property has helped the leasing process. Woolworths has taken a five
year lease on the 1,023 sq m anchor unit vacated by ALDI, and we have let a further 977 sq m to tenants
on permanent leases. Schupark Facscies, a shoe retailer, has taken a five year lease (441 sq m) having
been trading from this location on a temporary basis while Fressnapf, a pet food retailer, has signed a
10 year lease of the former 536 sq m unit that Schupark previously occupied. We are also in advanced
negotiations with a fashion retailer to take the 744 sq m vacated by EDEKA in November 2013.
Herne
This property has been extended with the food anchor Toom taking an extra 285 sq m of space on a
new 15 year lease. As part of this initiative four further units were created and let with a combined area
of 264 sq m.
Aachen
At Aachen, in advance of Praktiker’s lease expiry in July 2013, we agreed a back to back lease with
Hammer on a 10 year lease and avoided any impact from Praktiker’s administration.
Moerfelden-Walldorf
A small part of this property which comprises offices is covered by a rental guarantee that expires at the
end of 2014. We have recently let 100 sq m which should provide momentum to let the remaining 450
sq m. There were two lease extensions for a combined 1,843 sq m agreed with Penny-Markt, which has
extended its lease to 2023 and Dänisches Bettenlager, which has extended its lease to 2020.
Following on from the sale of the property at Taufkirchen in May 2013 for €6.3 million and the
notarisation of the vacant Kreuztal property disposal post year end for €1.3 million (ahead of the year
end valuation and expected to complete shortly), we intend to accelerate the realisation of value from the
portfolio in 2014. We are currently in advanced talks to dispose of one large property and intend to bring
a further tranche of assets to market during the year.
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Financial Review
Financial
Review
NAV per share
EPRA NAV per share
Total Shareholder return
54p 56p
(2012: 51p)
(2012: 55p)
53.9%
(2012: (9.5%))
60p
55p
50p
45p
40p
60p
55p
50p
45p
40p
60%
50%
40%
30%
20%
10%
0
-10%
2012
2013
2012
2013
2012
2013
Key performance indicators
The key performance indicators we use to measure our performance against our strategy and
objectives are:
Investment returns
Total shareholder return
Net assets per share
EPRA net assets per share
Return on equity
Financing
Group cash/(net debt)
Proforma Group net debt1
Proforma see-through net debt to property value1,2
Profitability
Recurring pre-tax profit
Pre-tax profit/(loss) for the year
Basic earnings per share — continuing and discontinued operations
2013
2012
53.9%
(9.5)%
54p
56p
5.1%
51p
55p
(8.5)%
£11.1m
£(53.3)m
—
52%
£14.0m
£9.3m
3p
13%
55%
£17.0m
£(12.7)m
(5)p
Property under management
£1.2 billion
£1.4 billion
1 2013 adjusted for £8.4 million Hemel Hempstead net proceeds, received in February 2014. 2012 figure adjusted for
£30.6 million X-Leisure proceeds received in January 2013.
2 See-through debt and see-through net debt divided by IFRS property value.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 25
Investment returns
Net assets per share increased in the year to 54p, up 3p or 6% since 30 December 2012, and EPRA net
assets per share increased to 56p, up 1p, or 2% since 30 December 2012. The change in net assets
resulted in a 5.1% return on equity for the year.
£188.7m
Net Asset Value
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 2013:
See-through
Property
£m
Debt
£m
Other
£m
Statutory
30 December
2013
£m
The Mall
Germany
X-Leisure1
Great Northern
Kingfisher
Redditch
Waterside
Lincoln
Hemel
Hempstead
Other net assets
Net assets
214.3
167.9
—
—
(111.1)
(119.6)
—
—
26.9
(17.1)
15.7
(6.8)
8.4
—
433.2
—
—
(254.6)
(2.8)
(3.5)
—
—
1.3
1.2
—
13.9
10.1
Property
£m
180.8
168.9
—
70.0
See-through
Debt
£m
(115.0)
(124.3)
—
(57.6)
100.4
44.8
—
—
11.1
26.3
(17.2)
10.1
13.0
(6.8)
8.4
13.9
188.7
8.4
—
467.4
—
(1.0)
(321.9)
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
1 For 2013 Hemel Hempstead shown at net realisable value of £8.4 million. For 2012, X-Leisure shown at net realisable value of
£32.2 million less related costs of £1.6 million. See note 29 for further details.
Financing
Following the disposal of the Great Northern Warehouse on 31 October 2013, the Group repaid all of
its on-balance sheet debt. At 30 December 2013, the Group had cash of £11.1 million (2012: net debt
outstanding of £53.3 million).
At 30 December 2012
Property acquisition
Repayments from disposals
Other repayments
Increased investment in The Mall
Foreign exchange
At 30 December 2013
Group debt
£m
58.6
—
(57.5)
(1.1)
—
—
—
Off balance
sheet debt
£m
263.3
(0.1)
—
(45.7)
34.6
2.5
See-through
debt
£m
321.9
(0.1)
(57.5)
(46.8)
34.6
2.5
254.6
254.6
Group debt
The Group maintains a £25 million core revolving credit facility. This was utilised during the year to
the extent that the maximum amount drawn down under it was £1.0 million (2012: £14.8 million).
At 30 December 2013, there were no drawings on the central facility. The forecast covenant tests
indicate that there is sufficient headroom for the full £25 million facility to be available.
At 30 December 2013, the Group had cash balances of £11.1 million (2012: £5.3 million).
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Financial Review continued
Financial
Review
Off balance sheet debt
Off balance sheet debt, which is non-recourse to the Group, fell by £8.7 million to £254.6 million at
30 December 2013 (2012: £263.3 million) as a consequence of asset disposals.
The proforma breakdown of the Group’s share of off balance sheet debt and net debt at 30 December
2013 was as follows:
Group share
30 December 2013
The Mall
Germany
Kingfisher Redditch
Waterside Lincoln
Off balance sheet
Debt1
£m
Cash2
£m
Net debt
£m
Loan to
Value3
%
Net debt
to value3
%
111.1
119.6
17.1
6.8
254.6
(18.8)
(3.9)
(2.0)
(0.7)
(25.4)
92.3
115.7
15.1
6.1
229.2
55
72
63
43
46
69
56
39
1 Excluding unamortised issue costs.
2 Excluding cash beneficially owned by tenants.
3 Debt and net debt divided by investment property at fair value.
Weighted
average
duration
to loan
expiry
Years
1.3
2.7
3.3
1.6
Fixed
%
100
63
100
100
Average
interest
rate
%
4.11
2.82
6.17
4.80
The Mall Fund’s debt was reduced by £191.4 million to £379.5 million at 30 December 2013 (2012:
£570.9 million). This decrease was due to debt repayments from the sale proceeds of Uxbridge and
Sutton Coldfield and from cash generated from operations. Following these debt repayments the
Mall’s gross LTV at the end of 2013 was 55% which is below the 60% threshold at which the Fund can
distribute.
On 5 February 2014, the Kingfisher Limited Partnership completed a refinancing of its loan facilities and
increased its senior facility. The additional funds raised were used to repay the partnership’s mezzanine
debt. The term of the facility was extended to April 2019. As a result the partnership’s cost of debt fell
from 6.2% to 4.6%.
The refinancing of €141 million of German debt, covering three of the five portfolios, was completed in
December 2013 on a new three year facility at an all in cost of below 3%. Total German debt decreased
by €17.4 million to €289.3 million at 30 December 2013 (2012: €306.7 million). At the applicable
exchange rates this was equivalent to £241.2 million (2012: £250.5 million).
Maturity analysis
The table below shows the maturity profile of the see-through debt and undrawn core credit facility at
30 December 2013:
Sterling debt drawn
Euro debt drawn
Undrawn core credit facility
As at 30 December 2013
2014
£m
—
—
—
—
2015
£m
117.9
32.7
—
150.6
2016
£m
—
72.1
25.0
97.1
2017
£m
17.1
14.8
—
31.9
2018
£m
—
—
—
—
Total
£m
135.0
119.6
25.0
279.6
Covenants
The Group and its associates and joint ventures were compliant with their banking and debt covenants
at 30 December 2013. Further details are disclosed in the ‘covenant information’ section at the end of
this report.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 27
£14.0m
recurring pre-tax profit
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 2013, the see-through valuation of the
Group’s swaps and caps was a liability of £5.6 million (2012: £14.4 million) which will not be crystallised
unless the underlying contracts are closed out before their expiry date. During the year, The Mall
terminated swaps at a total cash cost of £9.7 million, of which the Group’s share was £2.0 million.
Cash distributions
The Group received total cash distributions of £1.9 million during the year comprising a £1.2 million tax
distribution from The Mall Fund and £0.7 million from its German investments.
Profitability
Recurring pre-tax profit
The Group’s recurring pre-tax profit decreased by £3.0 million to £14.0 million for the year ended
30 December 2013 (2012: £17.0 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
Snozone
Group items
Discontinued Operations1
Recurring pre-tax profit
Year to
30 December
2013
£m
Year to
30 December
2012
£m
6.2
6.6
4.6
1.0
(4.4)
—
14.0
5.6
7.1
3.4
1.2
(4.0)
3.7
17.0
1 This includes the results of Great Northern Warehouse and Hemel Hempstead for 2013 and X-Leisure, Xscape Braehead and
The Junction Fund for 2012.
The increase in recurring pre-tax profit from UK Shopping Centres reflects the full year impact of the
acquisition of The Kingfisher Centre, Redditch and income from additional Mall units during the period.
The impact of this was reduced by the disposal by the Mall of the centres at Sutton Coldfield and
Uxbridge. The fall in recurring profitability in Germany principally reflects the loss of income from Portfolio
4 after 30 June 2012. Recurring profits within Property Management have increased due to the net
impact of the loss of fees in respect of Mall disposals being offset by cost reductions, the expiry and
write back of a provision of £1.4 million and the full year effect of fees arising from The Kingfisher Centre.
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Financial Review continued
Profit for the year
The profit for the year ended 30 December 2013 was £9.1 million (2012: loss of £16.0 million) and is
analysed below:
Year to
30 December
2013
£m
Year to
30 December
2012
£m
14.0
(1.8)
(4.5)
(1.1)
—
(2.4)
—
6.5
2.0
—
(3.9)
0.3
9.1
17.0
(20.8)
(1.6)
—
2.0
(6.5)
(3.1)
3.6
1.4
(4.0)
(2.9)
(1.1)
(16.0)
Tax
The tax credit for the year on continuing
operations was £0.2 million compared to £0.9
million in the prior year consisting of a current tax
credit of £0.5 million and a £0.3 million deferred
tax charge (2012: £1.4 million of current tax credit
and £0.5 million of deferred tax charge).
The current tax asset was £0.5 million at year end
(2012: liability of £1.3 million).
Recurring pre-tax profit
Property revaluation
(Loss)/profit on disposal of properties within funds
(Loss)/profit on disposal of Group properties
Performance fees – net of Group share of cost
Impairments in respect of German portfolio 4 (including Euro B Note)
Financial
Review
Other impairments
Financial instruments revaluation
Gain on investment in The Mall
Loss on disposal of JV and Associates
Other items
Tax
Profit/(loss) for the year
As well as the recurring pre-tax profit discussed
above, the other main factors behind the result for
the year were:
• Loss on disposal within funds — primarily
relating to the sale of Uxbridge and Sutton
Coldfield within The Mall.
• Loss on disposal of Group properties — relating
to the loss on sale of Great Northern Warehouse
partially offset by profit on the sale of land and
FIX UK.
• Impairments in respect of German portfolio 4 — the
remaining £2.4 million of the Group’s investment
in the Euro B-note was impaired to £nil at 30
June 2013 following one of the major tenants of
the underlying portfolio entering administration.
• Financial instruments revaluation — the
valuation of the Group’s financial instruments
improved as the time remaining on the out of the
money interest rate swaps has eroded.
• Gain on investment in The Mall related to the
Group’s purchase of 85.9 million units in The
Mall Fund as detailed below.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 29
Property under management
During the year, property under management fell due to the disposal of the wholly owned Great Northern
Warehouse and disposals by The Mall of Sutton Coldfield and Uxbridge. The overall impact on property
under management is set out below.
£1,188m
property under management
100%
UK Shopping Centres
German joint venture
Other properties2
Property under management
Valuation
30 December
20121
£m
1,008.9
338.9
80.9
1,428.7
Disposals/
additions
£m
(167.8)
(5.4)
(80.9)
(254.1)
Other
movements
£m
10.9
8.0
—
18.9
Valuation
30 December
20131
£m
851.4
336.8
—
1,188.2
Revaluation
£m
(0.6)
(4.7)
—
(5.3)
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 Hemel Hempstead has been excluded following classification as held for sale during the year. Sale was completed in
February 2014.
The split of property under management by sector has changed as a result of property disposals. The
sector analysis at 30 December 2013 and prior year end is as follows:
Shopping centres
Leisure
Germany
2013
%
71.6
—
28.4
100.0
2012
%
70.7
5.6
23.7
100.0
Disposals
On 12 July 2013, The Mall sold The Pavilions,
Uxbridge and The Gracechurch Centre, Sutton
Coldfield for a combined £152.5 million at a net
initial yield of 7.7%. The net sale proceeds were
used to repay debt within The Mall.
(2012: €47.0 million) at a fixed exchange rate of
1.19254 (2012: 1.1797) which hedges 65%
(2012: 97%) of the Group’s German investment.
At 30 December 2013, the value of the contract
was an asset of £0.1 million (2012: asset of £1.4
million).
In August 2013, the Group exchanged contracts
for the sale of Jarman Fields, Hemel Hempstead.
The disposal was completed in February 2014
with net proceeds of £8.4 million received.
On 31 October 2013, the Group disposed of
the Great Northern Warehouse, Manchester for
an initial consideration of £71.1 million. A debt
repayment of £57.5 million was made from these
proceeds.
Mall unit purchases
The Group acquired a total of 85.9 million units
in The Mall during 2013, representing 9.11% of
the Fund at an aggregate cost of £29.3 million.
As a result the Group’s interest in The Mall has
increased during the year to 29.26% at
30 December 2013 (2012: 20.15%).
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 2013, this
was achieved through a contract for €35 million
To the extent the hedge is effective under
accounting rules, valuation movements on the
forward contract are 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 has been achieved
through having cash of £11.1 million and a
central revolving credit facility of £25 million at
30 December 2013 which was undrawn at that
date. 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.
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Financial Review continued
Financial
Review
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
Read more information online:
www.capreg.com
Dividend
Our dividend policy links future payments to
the Group’s cash generating ability. In view
of the Group’s significantly improved financial
position and in anticipation of the Mall’s ability
to recommence distributions, the Board took
the decision to resume dividend payments after
five years and pay an interim dividend of 0.25p
per share in September 2013. The Board is now
recommending a second interim dividend of 0.40p
per share, in lieu of a final dividend, making a
total dividend of 0.65p per share for 2013. The
Board expects to be able to adopt a progressive
approach to dividend payments as its ability to
generate cash further improves.
The key dates in relation to the payment of the
dividend are:
12 March 2014
14 March 2014 Record date for the payment of
Ex-dividend date
second interim dividend
11 April 2014
Dividend payment date
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3131
£1.25m
saved in energy costs
since 2008
We have made good progress against our
environmental targets again this year; highlights
included achieving the Global Real Estate
Sustainability Benchmark in 2013 or GRESB.
The Mall Fund was ranked 1st in the UK for
retail, 6th in Europe and 12th globally out of
all participants covering 49,000 assets worth
$6 trillion. http://gresb.com/. Our energy
consumption reduced by 7.6 % saving £240,000.
For the last 10 years we have made year on year
savings and of 6,618 tonnes of waste generated
98% avoided going direct to landfill. Our shopping
centres use 35%–45% less energy than they
did 5 years ago. An example is The Kingfisher in
Redditch which we acquired in May 2012 and
now consumes 24% less energy. Since 2008 we
have saved over £1.25 million in energy costs and
the Royal Society for the Prevention of Accidents
or ROSPA Gold Award was awarded to us for the
7th year in a row reflecting our embedded positive
health, safety and wellbeing culture.
The following information reports our performance
against the 2013 objectives and details the targets
for 2014.
Introduction
The Responsible Business Committee is chaired
by Philip Newton and met three times in 2013.
This report provides an update on the progress
we have continued to make during 2013 in
implementing our Responsible Business strategy
and a summary of our activities.
The last decade has been one of rapid evolution
for the responsible business and sustainability
agenda. As a large UK property owner and
manager we very much welcome the increased
interest from investors, shareholders and
consumers in how we address sustainability and
evidence our approach to being a responsible
business.
People are at the heart of our business; our
responsible business projects and community
partnerships focus on them and are driven
by them. By reducing the impact we have on
the environment; our employees, suppliers,
stakeholders and the communities around reap
the benefits and further engage with us to maintain
momentum on this shared responsibility agenda.
Bringing people and communities together
we continue to have a practical, applied and
engaged approach to responsible business; it
is part of what we do every day. Our long term
success is linked to the vitality and wellbeing
of the communities in which we operate. Our
retailers and shoppers expectations are changing,
people expect us to manage our impact on the
environment carefully.
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Responsible Business Review continued
The Marketplace
Our aim is to engage with customers, retailers,
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.
Town centre regeneration and attracting and
supporting new retailers whilst utilising temporarily
void shop units has been a key focus for our
teams with a good deal of success. The new Pop
Up shop movement is a key initiative for us and an
example of how we are at the forefront of this was
in The Mall Camberley.
2013 Objectives
2013 Objectives
2013 target
2013 Performance
1
2
To ensure 100% of all site risk assessments
are integrated into our new online database
100% in new format and tested at 2013
audit
Achieved
To launch a new Compliance Structured site
visit with all sites achieving a rating of at
least 90%
All sites to score 90% or above
Completed — average score of 94%
3 To continue to be awarded the ROSPA Gold
award
Retention of award
Awarded in July 2013
4
5
To achieve an average score of over 92%
across the sites in the 2013 C&R Safe audit
Average score of over 92%
Average score of 95% achieved
To launch bespoke C&R Health and Safety
course externally accredited by IOSH
At least one day of this training course at
each site
Accredited Managing Risk in Shopping Centres course
launched and delivered at Redditch and Lincoln to date
6 To reduce costs through full re-tender of the
main security and cleaning contracts
Re-tender during 2013
Tender process completed with integrated security and
cleaning contract delivering significant savings awarded to
VSG commencing February 2014
7 To utilise Mall Maintain to further reduce our
vendor base and reliance on sub-contractors
Demonstrate in at least three centres,
through training matrix and reduction in
contract cost
Mall Maintain contract was awarded to Norland in
September 2013. Sub-contractors numbers reduced.
Structured online training system introduced
8 Successful annual technical Structured Site
Visit for each property
90% minimum score
Achieved
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2014 target
Retention of award
Case Study
PopUp Camberley
C&R has had a long-term commitment to supporting local and
independent businesses. PopUp Britain connects online start-up
businesses with vacant shops across the country, giving them low-
cost, short-term access to the high street. PopUp Camberley was
the first PopUp Britain pop up shop in a UK shopping centre.
Over six weeks 15 online companies were given an opportunity to
trial their businesses in the physical environment. Items ranged from
jewellery and homeware to handmade gifts and treats. One of the
tenants was the youngest entrepreneur in the country, nine year old
Henry Patterson. Four traders performed particularly well and were
offered the chance to trade for longer.
StartUp Britain co-founder Emma Jones said: “PopUp Britain
enables small businesses to make sales, meet customers, learn
from each other and test new markets in an affordable, flexible way.
PopUp Camberley was an excellent example of making the most of
the opportunity”.
2014 Objectives
Objectives
To retain the ROSPA Gold Award
1
2
To ensure average score of over 93% in the unannounced C&R Safe Audits
Average score of over 93%
3 For sites to achieve a rating of at least 92% in the Compliance Structured Site Visit
All sites to achieve a score of 92% or above
To ensure all Duty Managers have completed the 2014 C&R Safe Procedures
competency checks
100% compliance
To carry out 100% of the Joint Unit Inspections (JUI) on the new ipad app
100% compliance
4
5
6 To successfully implement the new integrated contract with VSG and explore further
cost saving opportunities
Average BSPM score for all sites >94%
7 To re-tender the waste and recycling contracts at each centre to ensure best practice
operations and best value for retailers/tenants
All contracts re-tendered and new contracts placed in 2014
8 To ensure all statutory and non-statutory records are up to date, PPM compliance is
greater than 95% at all times against year to date
Monthly and quarterly meetings recorded. Compliance >95%
9 Successful annual technical Structured Site Visit for each property
90% minimum score
10 Experiment in one centre with an innovative approach to a quality assessed initiative
that delivers cost savings while improving the quality of the environment and personal
development opportunities for our teams
Implement in one centre to standard suitable for entry to industry
award e.g. FM, BCSC
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Responsible Business Review continued
The Environment
Our aim is to continue to have a proactive
approach to tackling our impact on the
environment. For many years we have worked
hard to reduce our impact in the three key areas
of waste, water and energy and have made
significant progress in these areas.
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.
We will continue to improve our environmental
sustainability by focussing on the aspects over
which we have the most direct control whilst also
sharing our best practice and influencing our
partners, retailers and suppliers.
An example of how we strive to engage on
sustainability was the Enviromall initiative this year
with the environmental artist, Michelle Reader,
across all our Malls.
Case Study
Environmall
We commissioned environmentally conscious artist Michelle Reader
to undertake a unique recycling project.
Life sized sculptures, crafted from waste materials found at the
shopping centres, aimed to raise awareness amongst shoppers
and retailers of the importance of reusing and recycling waste
products.
2013 Objectives
2013 Objectives
2013 target
2013 Performance
1
Continue to reduce our environmental impact
and focus further on low carbon retrofit
projects
Reduce Energy Consumption by 4.5%
Energy reduced by 7.6%, a saving of over £240,000
Reduce Water Consumption by 2%
Water consumption increased by 3.5% costing £3,500 and
we are looking at ways to reduce this in 2014
Our shopping centres use 35%–45% less energy than they
did five years ago. Since 2008 we have saved over £1.25
million in energy cost
2
Continue to improve our waste handling and
management
Recycle 65% of waste material
82% of waste recycled
15% of our waste to energy
11% waste to energy
3 Meet all carbon reduction commitment
regulations
Retain The Carbon Trust Standard
Carbon Trust Standard retained through to 2015; CRC
allowances in place for 2013/14
95% of all waste diverted from landfill
98% was diverted from going direct to landfill
C&R has been an integral part of the BCSC (British Council
for Shopping Centres) Low Carbon working group for the
last eight years. We contributed to best practice examples
and advised on the publication of membership guidance in
2013
We have been active participants of the BCSC Sustainability
Charter and in 2013 joined the Better Buildings Partnership
Ensure readiness for mandatory GHG reporting Data fully prepared
Achieved
4
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19%-2005 to 2011
35%-2001 to 2011
37%-2001 to 2011
Group trend
(8 malls)
Wood Green
and Walthamstow
Wood Green
Indexed trend (energy - CO2/yr),
C&R group (8 malls), Wood Green and Walthamstow
100
80
60
40
20
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Wood Green and Walthamstow are shown separately to graph the trends of our most and least energy intensive assets respectively
2014 Objectives
Objectives
2014 target
1
2
Continue to reduce environmental impact through operational improvements, replace,
re-think projects, low carbon retrofit and renewable opportunities
Reduce energy by 3.5% and water consumption by 2%
Continue to improve our waste handling and management
Recycle 85% of waste back in to the supply chain and 95% of all
waste diverted from landfill
3 Satisfy all carbon management and legislative requirements and continue to reduce
carbon emissions
CRC & GHG reporting compliant
To retain Global Real Estate Sustainability Benchmark Green Star rating
Retention of rating
Contribute to the work of the Better Buildings Partnership
Feedback and involvement
4
5
6 Continue working with BCSC Low Carbon Working Group and contribute industry
guidance and promotion of best practice
Publications and strategy input continued
7 Review our processes to consider further sustainability within the acquisition due
diligence process
Improvements identified and implemented
8 Establish a framework for our sustainable development and refurbishment works with
project management
Design and implement by Q3 2014
9 Raise environmental performance and awareness of our centres with our top retailers
Meet and present to 15 retail partners
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Responsible Business Review continued
The Work Place
Our aim is to engage, develop and reward our
people, retaining our reputation as the employer of
choice within the sector in which we operate. Our
people are at the very heart of the business, they
are critical to our success. We want to provide a
challenging and stimulating working environment
in which people can flourish and grow.
We also aim to provide relevant, engaging training
for all in order that they can make their fullest
contribution to our success and their own.
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.
See Director’s Report for further disclosure on
Employees and the Nominations Committee
section of our Corporate Governance review for
our Diversity policy.
2013 Objectives
2013 Objectives
2013 target
2013 Performance
1
Design and deliver a motivational training and
development initiative for all central employees
and General Managers (GM’s)
Full attendance on programme over four
days
The C&R Olympic Experience programme was designed
and delivered in three one-day programmes.
>70% positive evaluation
86 people took part including all site GM’s.
2
Design and implementation of bespoke
Institute of Leadership and Management (ILM)
accredited Management Skills Programme
Six modules up to 60 delegate days
>70% positive evaluation
Feedback was 90% positive.
The C&R Management Skills Programme 2013 consisting
of six modules was delivered very successfully. Over 40
delegate days of training took place and feedback was
100% positive.
In addition, a total of 10 people across six different
shopping centres achieved ILM certification.
3 Communicate employee feedback from staff
survey and use to inform actions
Communication of the feedback to all
employees
The survey results were communicated to all team
members within weeks of the survey closing.
A full briefing was also given to the C&R board
A number of activities relating to the feedback received
took place in the second half of 2013 with an article in
C&R’s in-house magazine Arc communicating the specific
follow-on actions being undertaken.
The survey was repeated at centres in November 2013, initial
analysis of the feedback shows increased participation and
that 95% of respondents believe this is a good place to work
The full survey results will be communicated and a full
briefing conducted for senior management and the C&R
board. This will inform the planning of activities in 2014 and
going forward
Following the consultation it was decided instead to hold a
Team Conference in early 2014
Senior managers completed over 20 days of role specific
training, development or coaching throughout the year
4
Design and deliver a new Leadership
Experience Programme over two days for
managers and leaders in the business
All Manager level attendance
>70% positive evaluation
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Case Study
Chantelle Henderson
In 2013 Chantelle achieved the Institute of Leadership & Management (ILM)
Certificate in Management Skills, something that a couple of years before wouldn’t
have seemed possible.
After a number of years as a part time administration assistant at the Waterside
Centre, Lincoln, Chantelle was keen for personal development opportunities and as
soon as the centre was purchased by C&R in 2011 she started to look for them.
It was recommended that she consider the in-house ILM accredited training
course. Chantelle attended seven one-day workshops over two years with up to 10
colleagues each time.
Chantelle now works full time, is responsible for marketing, administration and
many other things at the Waterside and with the centre going through a £9 million
redevelopment Chantelle finds this gives her plenty of opportunities to bring her
management skills into play.
“I find I keep going back to what I learned and utilising it for all the things the
development throws up. Its been very relevant to this situation, and because we’re
such a small team and others have also done some of the training too, it really
works well.”
2014 Objectives
Objectives
2014 target
1
Design and delivery of a Team Conference in March 2014 with aim to inform, inspire
and equip everyone to achieve the corporate objectives in 2014 and move their
personal contribution forward
All GM’s and selected managers attend
> 70% positive evaluation
2
To achieve successful Investors in People (IIP) review and retain the IIP accreditation at
the centres
Retention of IIP accreditations
3 Design and implement a bespoke training programme for customer service personnel
as a follow up to the highly successful programme delivered in 2012
Participation of up to 60 people
>75% positive evaluation
4
5
Design and implement a bespoke Institute of Leadership and Management (ILM)
accredited Management Skills Programme for new and first line supervisors
All Manager level attendance >70% positive evaluation
Work closely with our new soft services partner, design and implement a new bespoke
staff training package and issue a detailed training matrix for all security and cleaning
staff
New staff training package launched
Training matrix in place and training delivered through on-going
programme
6 Through our new soft services partner implement bio-metric staff recording technology
at all shopping centres to ensure a fair and accurate system of recording staff
attendance and time worked on site
Installation and implementation of system
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Responsible Business Review continued
The Community
Our shopping centres have a key role in the
communities in which we operate. We have an
important economic contribution to make through
the regeneration of the local environment. Our
centres support local and national charities and
NGO’s and work closely with key stakeholders
to ensure we listen, engage and use feedback
(increasingly through social media) to develop our
impact.
We aim to provide safe, welcoming, clean and
attractive shopping and leisure venues where
people choose to shop, work and socialise and
aim to make a positive contribution to each local
community by being a responsible, socially aware
and proactive partner. Some examples of the great
initiatives delivered in 2013 are set out below.
2013 Objectives
2013 Objectives
2013 target
2013 Performance
1
To maintain involvement in local business
crime partnerships, supporting the police to
further reduce the levels of recorded crime
during 2013
5% reduction in recorded crime during
2013
The total number of security incidents recorded during 2013
was 11.6% lower than 2012, on a like for like basis.
Our security teams are actively involved in supporting
the local Crime Reduction Partnerships (CRP) across our
portfolio. The levels of crime reported in our Malls are
monitored and reported on monthly
A collaborative and targeted approach by the local CRP
resulted in a significant reduction in the levels of crime
and anti-social behaviour at the Blackburn Mall with the
Blackburn Security Manager also being shortlisted for
Security Manager of the Year
2
To trial and adopt 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 towns in
which we operate
Increase number by 10%
Security and Data Protection procedures have been
amended and Body worn CCTV technology was introduced
during 2013. Security control room audits were undertaken
during the year and procedures updated to ensure best
practice. The new contract with VSG will facilitate a new
approach to security control room and CCTV system
auditing during 2014
On site teams continue to focus on this and there are
an increasing number of community projects which pull
together many of the strands of our responsible business
approach. There are key links to regeneration which can
allow further investment through for example refurbishment
/ physical surroundings improvement
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 39
Case Study
Mum’s the Word
Mum’s the Word is a not for profit organisation offering a unique way communities can connect through recycling.
After seeing an article in the local paper about the high costs of uniforms and people struggling to meet the cost
Rachel Rhodes and Caroline Fotios decided to do something about it and Mum’s the Word was born.
Mum’s the Word has supplied families with school wear, Brownies, Rainbows,
Football, footwear and much more. The Mall Blackburn agreed to pledge its
support to Mum’s The Word ahead of the busy summer season and the First
Retail Outlet was born allowing Mum’s The Word to reach a wider audience of
circa 275,000 per week.
Caroline Fotios said:
“We launched Mum’s The Word as we are passionate about recycling and
helping the local community.
It has been a real whirlwind of activity since we launched and the chance to trade
in The Mall is more than we could have every hoped for — especially during the
school holidays, which is our busiest time!”
Case Study
Waterside Shopping Centre
In the middle of an 18 month £9 million redevelopment, The Waterside Shopping
Centre in Lincoln created a gigantic image of one of Europe’s most prestigious
gothic cathedrals and placed it at the centre of a campaign to celebrate the
development of the centre. Creative use of a construction hoarding achieved
excellent public relations, strengthened links with the local community and
maintained footfall.
Matt Corrigan, chief executive of Lincoln Business Improvement Group: “Bringing
the cathedral into the heart of The Waterside shopping centre has been a really
clever way of emphasising this connection. It’s a great example of not just
marketing but of place making!”
Lincoln Cathedral tweeted: “What an incredible image! We hope Waterside
shoppers go on to make their way up the hill to see the real thing!”
2014 Objectives
Objectives
2014 target
1
To maintain our involvement in the local Crime Reduction Partnerships supporting the
police to further reduce the levels of recorded crime in 2014
5% reduction in recorded crime at centres in 2014
2
To complete the implementation of body worn CCTV systems at centres to continue to
prevent crime and anti-social behaviour
Completion of security control room and CCTV system audits
and reports at all sites during 2014
To implement a new detailed audit process for CCTV systems installed at the shopping
centres
3 To review the role of first aid trained staff in responding to emergencies both within
centres and the town centres in which we operate and explore opportunities to train key
individuals as first responders
Completed review of first aid activities and provision at each
centre
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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” in this context 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. This is a bottom-up process starting with divisional management
and monitors and allocates responsibilities for the controls that have been put in place to mitigate the risks identified.
The two principal categories of risks are Property Risks and Funding and Treasury Risks. In addition to the specific mitigating
actions listed below we look to mitigate Property Risks by the nature of the assets we invest in. The characteristics of these assets
are outlined in the ‘Our Assets and Operating Strategy’ where we also outline the specific initiatives planned on an asset by asset
basis to protect and enhance value. The group’s key focus in managing Funding and Treasury risks is to seek to ensure that there
is appropriate headroom on credit facilities and that they are renewed well in advance of expiry. The key actons undertaken in this
regard during the year are detailed in the ‘ Group debt’ and ‘Off balance sheet debt’ sections of the Financial Review.
Risk
Property risks
Impact
Mitigation
Property investments market risks
• Weakening economic
• Small changes in property market
conditions and poor sentiment
in commercial real estate
markets could lead to low
investor demand and market
pricing adjustment
yields have a significant effect on the
value of the properties owned by the
Group
• Impact of leverage could magnify the
• Monitoring of indicators of market direction and
pursuit of opportunistic asset sales in those
schemes and locations most likely to suffer
adverse impact
effect on the Group’s net assets
• Review of debt levels and consideration of
strategies to reduce if relevant
Impact of the economic environment (tenant risks)
• Tenant insolvency or distress
• Tenant failures and reduced tenant
• Large, diversified tenant base
• 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
• 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 though temporary lettings
and other mitigation strategies
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
• Strong location and dominance of shopping
centres (predominantly South East England)
• Strength of the community shopping experience
• Increasing provision of ‘Click and Collect’
services by retailers within our shopping centres
• Monitoring of footfall for evidence of falling
visitors to shopping centres
• Monitoring of retail trends and shopping
behaviour
• Mobile smart phone marketing initiatives
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Risk
Property risks
Valuation risks
• In the absence of relevant
transactional evidence,
valuations can be inherently
subjective leading to a degree
of uncertainty
Impact
Mitigation
• Stated property valuations may not
reflect the price received on sale
• Use of experienced, external valuers
• Rotation of valuers
• Valuations reviewed by internal valuation experts
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
• 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
• Monitoring of compliance with terms of
contracts
• Close dialogue with other investors and
stakeholders
Nature of investments and relationships with key business partners
• 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
• The market for the Group’s
investments 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
• 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
• 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
• 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
flexibility
• Ensuring that there are significant undrawn
• Cost of financing could be prohibitive
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
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Principal Risks and Uncertainties continued
Risk
Impact
Mitigation
Funding and treasury risks (continued)
Covenant compliance risks
• Breach of any of loan
• Unremedied breaches can trigger
• Regular monitoring and projections of liquidity,
covenants causing default on
debt and possible accelerated
maturity
demand for immediate repayment of
loan
gearing and covenant compliance
• Review of future cash flows and predicted
valuations to ensure sufficient headroom
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
• 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
• Exposure to rising or falling
• If interest rates rise and are
• Regular monitoring of the performance of
interest rates
Other risks
Tax risks
unhedged, the cost of debt facilities
can rise and ICR covenants could be
broken
• Hedging transactions used by the
Group to minimise interest rate risk
may limit gains, result in losses or
have other adverse consequences
derivative contracts and corrective action taken
where necessary
• Use of alternative hedges such as caps
• Exposure to changes in tax
• Tax related liabilities and other losses
• Expert advice taken on tax positions and other
legislation or the interpretation
of tax legislation
could arise
• Potential exposure to
tax liabilities in respect of
transactions undertaken where
the tax authorities disagree
with the tax treatment adopted
regulations
• Maintenance of a regular dialogue with the tax
authorities
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 43
Risk
Impact
Mitigation
Other risks (continued)
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
• Failure to comply could result in
• Management undertake training to keep aware
financial penalties, loss of business or
credibility.
of regulatory changes
• Expert advice taken on complex regulatory
matters
• 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
• Key management are paid market salaries
and offered competitive incentive packages to
ensure their retention
• New LTIP awards made in 2013
• 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.
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 this central credit facility.
These agreements could potentially be terminated in the event of a change of control of the Company as disclosed in the Directors’
report.
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Board of Directors
Hugh Scott-Barrett
Chief Executive
Kenneth Ford
Executive Director
John Clare CBE
Chairman1,2,4
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 joint
ventures. Ken has a BSc in Land Economics and is a
Fellow of the Royal Institute of Chartered Surveyors.
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. He is also
Chairman of the Nomination Committee.
Charles Staveley
Group Finance Director
Mark Bourgeois
Executive Director 3
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.
Mark began his career in audit at KPMG; he then
qualified as a Chartered Surveyor with Donaldsons,
where he became partner in charge of the London
Shopping Centre Management team. In 1998 he
joined Capital & Regional, and has been responsible
for managing the shopping centre business since
2009. Mark was appointed to the Board in August
2013.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 45
Neno Haasbroek
Non-executive Director
Philip Newton
Senior Independent Non-executive Director 1,2,3,4
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.
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 and is Chairman of the
Remuneration and Responsible Business committees.
Louis Norval
Non-executive Director
Tony Hales CBE
Non-executive Director 1,2,4
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.
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
director of the Company in 2011 and is Chairman of
the Audit Committee.
1 Member of the Audit Committee
2 Member of the Remuneration Committee
3 Member of the Responsible Business Committee
4 Member of the Nomination Committee
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Directors’ Report
Introduction
The directors have pleasure in submitting their annual report and
financial statements for the year ended 30 December 2013.
Business review
Information on the Group’s business, which is required by
section 417 of the Companies Act 2006, can be found in the
Strategic Report on pages 2 to 43 which is incorporated in to
this report by reference.
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.
Financial
The results for the year are shown in the Group income
statement on page 77.
An interim ordinary dividend of 0.25p per share was paid on
27 September 2013. The directors recommend a second interim
ordinary dividend of 0.40p per share, making a total of 0.65p per
share for the year to 30 December 2013. The proposed second
interim dividend will be paid on 11 April 2014 to shareholders on
the register at the close of business on 14 March 2014.
Corporate governance
A report on corporate governance and compliance with the
provisions of the UK Corporate Governance Code, which forms
part of this Directors’ report, is set out on pages 66 to 72.
Report on Greenhouse gas emissions
Global Greenhouse Gas (GHG) emissions data
for period 1 January 2013 to 31 December 2013
Combustion of fuel and operation of facilities
(Scope 1 emissions)
Electricity, heat, steam and cooling purchased
for operational use at our facilities (Scope 2
emissions)
Emissions intensity based on tCO2e for every
1000 sqft of net lettable area
Tonnes of
carbon
dioxide
equivalent
(tCO2e)
2,437.56
12,854.61
2.955
We have followed the UK Government environmental reporting
guidance and GHG conversion and emission factors for
company reporting 2013. We have used the operation control
approach. We have not reported scope 3 emissions and
excluded our German interests.
Further details in respect of our commitments to sustainability
are contained in the responsible business report contained on
pages 31 to 39.
Directors
The names and biographical details of the present directors of
the Company are given on pages 44 to 45. Mark Bourgeois was
appointed on 14 August 2013.
Xavier Pullen resigned as a director on 30 December 2013.
All other directors, who served throughout the year, will retire
and, being eligible, offer themselves for re-election at the 2014
Annual General Meeting.
Directors’ interests in the share capital and equity of the
Company at the year end are contained in the remuneration
report on page 65. No director had a material interest in the
share capital of other Group companies during the year.
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. Louis Norval and Neno Haasbroek are Parkdev
nominated non-executive directors.
The Company maintains insurance for the directors in respect of
liabilities arising from the performance of their duties.
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 18 March 2014 (the latest
practicable date prior to the issue of this report):
PDI Investment Holdings
Henderson Global Investors
Standard Life Investments
Morgan Stanley Investment
Management
Pinelake International
APG Asset Management
Legal & General Investment
Management
Number of
shares
82,505,610
47,869,383
34,843,641
25,498,033
18,924,243
15,820,147
11,627,199
%
23.59
13.69
9.96
7.29
5.41
4.52
3.33
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 47
Capital structure
The Company has one class of ordinary shares of 1 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 23
and 24 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.
Purchase of own shares
Under authorisation from shareholders received at the 2012
AGM the Company bought back 923,958 shares between
23 January 2013 and 13 March 2013.
The Company was again authorised by shareholders at the
2013 AGM held on 5 June 2013 to purchase up to a maximum
of 10.0% of its ordinary shares in the market. This authority
will expire at the 2014 AGM and the directors will be seeking a
new authority for the Company to purchase its ordinary shares,
which will only be exercised if market and financial conditions
make it advantageous to do so.
On 5 June 2013, the Company also 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 32.5455%
of the issued share capital. This waiver will expire at the 2014
AGM. The directors do not plan to seek a further waiver at that
meeting.
Articles of association
The Company’s Articles of Association may only be amended by
special resolution at a general meeting of shareholders.
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
25 to the financial statements.
Use of financial derivatives
The use of financial derivatives is set out in note 22 to the
financial statements.
Political donations
The Group has not made any political donations during the
year and intends to continue its policy of not doing so for the
foreseeable future.
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.
We give full consideration to applications for employment from
disabled persons where the requirements of the job can be
adequately fulfilled by people with disabilities. We endeavour to
retain the employment of, and arrange suitable retraining for, any
employee who becomes disabled during their employment as
well as providing training, career development and promotion to
disabled employees wherever appropriate.
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.
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Directors’ Report continued
At 30 December 2013 the total number of employees was as
follows:
Employees
Directors1
Employees — CRPM
Employees — Snozone
Male
9
37
165
Female
—
28
77
Total
9
65
242
1 The Group defines its senior management as the members of the executive
committee which currently consists of the four executive directors.
Human rights
The Group operates exclusively in the UK and Germany and, as
such, is subject to the European Convention on Human Rights
and the UK Human Rights Act 1998.
The Group respects all human rights and in conducting its
business the Group regards those rights relating to non-
discrimination, fair treatment and respect for privacy to be the
most relevant and to have the greatest potential impact on its
key stakeholder groups of customers, employees and suppliers.
The Board have overall responsibility for ensuring the Group
upholds and promotes respect for human rights. The Group
seeks to anticipate, prevent and mitigate any potential negative
human rights impacts as well as enhance positive impacts
through its policies and procedures and, in particular, through
its policies regarding employment, equality and diversity, treating
its stakeholders and customers fairly and information security.
Group policies seek to ensure that employees comply with the
relevant legislation and regulations in place to promote good
practice. The Group’s policies are formulated and kept up to
date and communicated to all employees through the Staff
Policy Manual. The Group has not been made aware of any
incident in which the organisation’s activities have resulted in an
abuse of human rights.
Going concern
The strategic review discusses the Group’s business activities,
together with the factors likely to affect its future development,
performance and position and sets out the financial position
of the Group, its cash flows and liquidity. Note 22 of the
financial statements sets out the Group’s objectives, policies
and processes for managing capital and its financial risk
management objectives, together with details of financial
instruments and exposure to credit risk and liquidity risk.
The Group has available financial facilities and a positive cash
position. The Board has prepared forecasts, including sensitivity
analysis, which demonstrates that the Group will continue
to operate within its available resources. After reviewing this
analysis 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.
Auditor’s information
The directors who held office at the date of approval of this
Directors’ report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company’s
auditor is unaware; and each director has taken all the steps
that they ought to have taken as a director to make themselves
aware of any relevant audit information and to establish that
the Company’s auditor is 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 auditor
will be proposed at the forthcoming AGM.
By order of the Board
Stuart Wetherly
Company Secretary
20 March 2014
Registered Company name: Capital & Regional plc
Registered Company number: 1399411
Registered office: 52 Grosvenor Gardens, London SW1W 0AU
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 Statement of Directors’ Responsibilities
49
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 Company’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
and the Group’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and the Group and to enable them to ensure that the financial
statements and the Directors’ Remuneration Report comply with
the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Company and the
Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors are also responsible for preparing the Directors’
Report (including the Corporate Governance Report), and
the Directors’ Remuneration Report in accordance with the
Companies Act 2006 and applicable regulations, including the
Listing Rules and the Disclosure and Transparency Rules.
The directors are responsible for the maintenance and integrity
of the Group’s website. Legislation in the UK 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 Strategic Report includes a fair review of the development
and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that it faces.
The directors are responsible for preparing the annual report in
accordance with applicable law and regulations. Having taken
advice from the Audit Committee, the Board considers the
report and accounts, taken as a whole, to be fair, balanced and
understandable and that it provides the information necessary
for shareholders to assess the Company’s performance,
business model and strategy.
On behalf of the Board
Hugh Scott-Barrett
Chief Executive
Charles Staveley
Group Finance Director
20 March 2014
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Directors’ Remuneration Report
Information not subject to audit:
Annual Statement
Philip Newton
Chairman of the Remuneration Committee
Dear Shareholder
On behalf of the Board, I am pleased to introduce this report to
you on the Remuneration Committee’s activities and priorities
throughout the year ending 30 December 2013.
Executive remuneration remains a lively issue and the committee
has kept closely in touch with developments, recognising
that this is a key issue for investors, employees and other
stakeholders. The committee has always sought to provide
transparency in its reporting, we have updated this report in line
with the new Department for Business, Innovation and Skills
regulations and aim to continue to develop our processes for
linking reward and performance for executive directors.
2013 was another challenging year for the commercial property
market, notwithstanding this, the Company has made significant
progress in meeting its stated strategic objectives:
• Disposal of Great Northern and Hemel Hempstead to allow
the recycling of cash and repayment of all on-balance sheet
debt
• Strengthening our position within The Mall Fund through
purchase of units increasing Group Share from 20.15% to
29.26%
• Sale of two further Mall assets in preparation of the refinancing
of the CMBS
• Share price growth from 28.5p at 30 December 2012 to
43.6p at 30 December 2013
• Resumption of dividend payments to shareholders in
September 2013
The committee recognises that the business is continuing
through this transitional phase and that much has been
achieved in the execution of the growth strategy. The committee
is of the view that throughout this challenging period the
management team have continued to deliver a strong set of
operational results.
This report covers the remuneration policy employed in the
year ended 30 December 2013; the policy that will apply for
the forthcoming financial year; and how the policy has been
implemented over the past financial year.
Our policy is structured to balance driving our strategic
objectives; delivering increased shareholder returns and
providing sufficient levels of remuneration and reward to attract
and retain our executive directors. The committee believe that
this remuneration policy structure is appropriate for Capital &
Regional.
We have maintained our policy of total compensation for
executive directors at the median or above against our
comparator group, with appropriate upward and downward
variability based on performance. However, the committee
is mindful of the pay restraint that continues to be exercised
throughout the business and fully considers the pay and
conditions of all our employees when setting remuneration for
our most senior executives.
We continue to keep executive pay under review, to ensure it
remains aligned with the long term interests of shareholders.
A detailed review of our Executive Directors remuneration was
undertaken with benchmarking against a relevant comparator
group; we undertake this benchmarking review on an annual
basis and will alter or extend the comparator group in order that
it remains entirely suitable. Details of the comparator group are
on page 57.
Executive Directors basic salaries have again been held for 2014
and have been since 2012; more information on this is available
on page 62. LTIP awards were made to the Executive Directors
in 2013 to reflect the progress detailed above.
After over 25 years, Xavier Pullen resigned as a Director of
the business on 30 December 2013. A loss of office payment
was made within the remuneration policy. Mark Bourgeois was
appointed as an Executive Director with effect from 13 August
2013 following 15 years with the company, most recently as
Managing Director of Shopping centres. The new remuneration
package is fully in line with the policy.
The committee consulted with our key shareholders last year,
specifically, on the restructuring of the LTIP scheme and annual
bonus levels and will continue to consult as required.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 51
The committee met four times throughout the year and held
a number of informal meetings to discuss wider remuneration
issues. In addition to the committee members, the Chief
Executive and other non-executive directors are invited to attend
meetings as required, except in circumstances where their own
remuneration is being discussed.
The remuneration committee agrees the framework for the
remuneration of the Chairman and the Executive Directors. This
includes the policy for all cash remuneration, executive share
plans, service contracts and termination arrangements. The
committee approves salaries and sets performance objectives
and levels of award for annual cash bonuses. It sets the share
awards conditions for executive directors. It approves new share
plans and any changes to them and makes recommendations
to the Board on matters which require shareholders’ approval.
The committee also determines the basis on which awards are
granted under the share plans.
The committee engaged independent remuneration advisers
PricewaterhouseCoopers to provide advice specifically in
relation to the new LTIP issue, fees charged during 2013 were
£27,375.
You can view our terms of reference at www.capreg.com/about-
us/board-committees
Summary of performance and remuneration year ended
30 December 2013
Business performance components
NAV per share
EPRA NAV per share
Total shareholder return
Proforma Group net debt1
Proforma see-through net debt to
property value1,2
Recurring pre-tax profit
Profit/(loss) for the year
Share price at year end
2013
54p
56p
53.9%
—
52%
£14.0m
£9.1m
43.6p
2012
51p
55p
(9.5)%
13%
55%
£17.0m
£(16.0)m
28.5p
1 2013 adjusted for £8.4 million Hemel Hempstead net proceeds, received in
February 2014. 2012 figure adjusted for £30.6 million X-Leisure proceeds
received in January 2013. See Note 22a in the Financial Statements for figures
pre-adjustment.
2 See-through debt and see-though net debt divided by IFRS property value as
disclosed in Note 22a to the Financial Statements.
The policies set out in the 2012 Directors Remuneration Report
received a vote in favour of 76.8% of votes cast at the AGM and
I thank shareholders for their continued support.
As a business Capital & Regional is committed to clear and
open communication. I remain available to shareholders to raise
matters directly and the committee remains open to discussion
with shareholders should there be any concerns that they wish
to raise. In respect of executive remuneration there have been
no departures from normal policy.
Shareholders will be invited to approve this Report and vote on
the Policy at the Annual General Meeting of the Company on
14 May 2014 to apply until the 2015 AGM.
Philip Newton
Chairman of Remuneration Committee
Directors’ Remuneration Policy
In this section we explain our remuneration strategy and policy;
how our remuneration packages support this strategy; why we
have chosen the performance conditions we have and how they
align with shareholders’ interests.
This report has been prepared in accordance with the provisions
of the Companies Act 2006 and Schedule 8 of the Large
and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended). This report sets
out the Company’s current remuneration policy, as applied
in 2013 and to be applied for 2014 and beyond. A binding
resolution to approve this report will be put to shareholders at
the forthcoming AGM. In terms of an approved policy, it will take
effect from the date it is approved by shareholders until the
2015 AGM.
The committee reviewed the remuneration policy during the year
and concluded that the policy is appropriate for the business.
There may be further enhancements which could be made and
the committee will continue to review best practice which may
further inform the policy in future years.
The Remuneration Committee
Philip Newton Chairs the Remuneration Committee; he is the
Senior Independent Director. He was appointed Chairman on
5 June 2013 taking over from Tony Hales. Tony Hales remains a
member of the committee.
John Clare was appointed to the committee on 4 February 2013
and although not classified as an independent non-executive
director for the purposes of the UK Corporate Governance
Code, as he is the Chairman of the Board, he was independent
when he was appointed as Chairman. The other members were
and remain independent non-executive directors.
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Directors’ Remuneration Report continued
Remuneration philosophy and principles
Our principles are to maintain a competitive remuneration
package that will attract, retain and motivate a high quality top
team, avoid excessive or inappropriate risk taking and align
their interests with those of shareholders. These principles are
designed to:
• Drive accountability and responsibility
• Provide a balanced range of incentives which align both short
term (one year) and long term (three year) performance with
the value/returns delivered to shareholders
• Apply demanding performance conditions to deliver
sustainable high performance; setting these conditions with
due regard to actual and expected market conditions and
business context
• Ensure a large part of remuneration is delivered in shares in
order that executives are required to build up a shareholding
themselves and therefore they are directly exposed to the
same gains or losses as all other shareholders
• Take account of the remuneration of other comparator
companies of similar size, scope and complexity within our
industry sector
• Keep under review the relationship of remuneration to risk,
the members of the Remuneration Committee are that of the
Audit Committee
• Ensure that the incentive structure does not raise any
environmental, social or governance risks through compliance
with our Responsible Business ethics and standards of
operating
How the committee sets remuneration
Salary
Pension
Benefits
Bonus
Share
Awards
Fixed
compensation
Median
Total =
Median or
above
Performance based
compensation
Median or
above
The committee benchmarks remuneration against our selected
comparator group companies (See page 57) and ensures
that directors fixed compensation is around the median in the
comparator group.
The committee views that by putting an emphasis on
performance related compensation, executives are encouraged
to perform to the highest of their abilities. The performance
based compensation is targeted to be at median or above
within the comparator group. The overall effect is that our total
compensation is at median or above.
A summary of the individual elements that make up the
remuneration packages offered to our Executive Directors
follows:
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Purpose & link to
strategy
Operation
Opportunity
Performance
metrics
Changes in the year
n/a
n/a
• No changes to policy
• No increase for directors
in 2013
• Increase in wider
workforce of 2.7% overall
• Mark Bourgeois
appointed on
13 August 2013 at a
salary reflecting this
policy
Base salary
Median or above
Reviewed annually
1 January to reflect:
• To aid recruitment,
• general increases
retention and
motivation of high
quality people
• To reflect
experience and
importance of
role
throughout company or
changes in responsibility
• benchmarking against
comparator group to ensure
salaries are at the median
level and market competitive
• any new director
appointment may be at
a salary level discount to
reflect experience at that
point, the committee may
increase it over time on the
evidence of performance
achievement and market
conditions
• changes in a directors role
may require adjustment
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Directors’ Remuneration Report continued
Purpose & link to
strategy
Operation
Opportunity
Performance
metrics
Changes in the year
No change
CEO receives a
pension allowance of
20% of basic salary
n/a
All other directors
receive 15% of basic
salary
n/a
n/a
No change
Pension
Median
• To help recruit and
retain high quality
people
• To provide an
appropriate market
competitive
retirement benefit
The company does not
operate a pension scheme,
all pension benefits are paid
either to defined contribution
pensions schemes of
each directors choice or
a proportion as a cash
supplement
Benefits
Median
The company offers a
package including:
• To aid recruitment
• private medical insurance
and retention
• To provide market
competitive
benefits
• critical Illness cover
• life insurance
• permanent health insurance
• To provide
• holiday and sick pay
protection for the
company and
directors
Benefits are brokered and
reviewed annually
Annual bonus plan is reviewed
annually to ensure bonus
opportunity, performance
measures and weightings are
appropriate and support the
stated company strategy
The maximum cash
bonus is 100% of
basic salary
Targets calibrated
so that maximum
pay out would
represent exceptional
performance
Annual bonus
Median or above
• To incentivise
delivery of short
term business
targets and
individual
objectives based
on annual KPIs
• To recognise
performance whilst
controlling costs
in reaction to the
market context or
company events
2012 weightings were
75% group financial and
business targets and 25%
individual targets
This was changed to
80%:20% for 2013
No change for 2014
Measures and
weightings may
vary from year to
year depending on
strategic priorities
KPI’s for 2013 were:
80% on Group
objectives
• NAV & EPRA NAV
targets
• Recurring profit
• Sales of specific
assets at growth
target NAV
• Execution of Mall
Fund strategy
20% on Individual
objectives
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Purpose & link to
strategy
Operation
Opportunity
Performance
metrics
Changes in the year
SAYE
Median
All eligible employees including
executive directors, can:
n/a
n/a
No change
To encourage all
employees to make
a long term
investment in the
company’s shares
in a tax efficient way
• contribute up to £250
per month into a savings
contract for between 3 and
5 years
• at the end of the period
exercise their option to
buy ordinary shares, at
the exercise price as
determined at the point of
grant
• or may withdraw their
contributions with accrued
interest or any bonus
• the gain is free of income
tax
Executive
shareholding
guidelines
To support alignment
of Executive
Directors with
shareholders
Executive directors:
• are encouraged to own
shares with a value set at a
percentage of base salary
• deferred or other unvested
share awards not subject to
performance conditions can
count towards the guideline
All executive directors
encouraged to build
shareholding to 1 x
basic annual salary
value based on the
aggregate purchase
price of the shares
n/a
No change
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Directors’ Remuneration Report continued
Purpose & link to
strategy
Operation
Opportunity
Performance metrics
Changes in the year
Plan provides annual
awards of shares
of up to 150% of
salary and 200%
in exceptional
circumstances
LTIP
Median
• To reinforce delivery
of long-term
business strategy
and targets
• To align participants
with shareholders’
interests
• To retain directors
and senior team
over the longer
term
Awards levels and grant
conditions are reviewed in
advance to ensure appropriate
Awards are based on
achieving share price target
at end of three year period,
based on the average share
price (adjusted for distributions
paid) over the 30 day period
prior to the date of vesting
Shareholder consultation was
undertaken through 2012
ahead of the awards being
made in August 2013
An adjustment of the awards
may be made in line with the
scheme rules in the event of
a capital raising or any other
event that would have a
dilutory impact
Awards made in 2010
matured in June 2013
but did not meet
performance targets.
2013 awards granted:
CEO — 200% of salary
Other Executive
directors — 150%
2013 awards also made
to a group of senior
managers
2014 awards proposed:
CEO — 150%
Other Executive
directors — 100%
2014 awards also to
senior manager group
• Share price target
range
• 25% of award will vest
at threshold level set
and 100% will vest at
maximum level set
• Vesting between these
points is on a straight
line basis
Committee can exercise
discretion to allow full
vesting if:
• the performance
targets have been met
in advance of the full
performance period as
a result of a significant
liquidity event
• the liquidity event does
not give rise to early
vesting but instead
results in an executive
leaving employment
A deferral / holding
period applies:
• vested awards will not
be capable of exercise
for a period of at least
12 months following
vesting (with potential
exceptions in the case
of a liquidity event)
Claw back Policy applies
Details of the
performance conditions
are available on
pages 63–65
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Purpose & link to
strategy
Operation
Opportunity
Performance metrics
Changes in the year
Current fees are set
out in the table on
page 62
n/a
No change
Fees
Median
The Chairman and Non-
Executive Directors fees are
set by the Board taking into
account:
• the time commitment
responsibilities
• committee roles
• skills and experience
Employee Context
The committee ensures that employee’s remuneration across
the company is taken into consideration when reviewing
executive remuneration policy although no direct consultation
is performed. The committee reviews internal data in relation to
every level of job and performance and is satisfied that the level
of remuneration is appropriate.
Comparator group
The committee reviewed its comparator group in 2013 to ensure
that it remained appropriate for the company and is published
here for the first time. The majority of the companies represented
form part of the Numis UK Real Estate Valuation Sheet; factors
taken into account when selecting the comparator group
included:
• The nature of the real estate specialism
• The geographic spread of the business throughout the UK
• The nature of the executive team
• Market capitalisation and property valuation
• Number of employees
The committee recognises that too dedicated following of
comparators can lead to executive remuneration constantly
rising above the wider employee compensation levels. Therefore
the comparator group is used as a guide to set parameters
and in this context is only one of a number of factors taken
into account when determining the level and elements of
remuneration policy. The comparator group will be reviewed on
an annual basis.
The constituents of the Comparator Group for 2013 were:
• Capital & Counties
• Helical Bar
• Safestore
• CLS Holdings
• Intu Properties
• Savills
• Derwent London
• Land Securities
• UNITE Group
• Grainger
• Great Portland
Estates
Group
• Mucklow
• New River
• Hansteen
• Quintain
• Workspace Group
Claw back Policy
The committee has claw back arrangements in place for the
LTIP awards. The committee have the discretion to reduce
or cancel any outstanding awards that have matured but not
vested in any of the following situations:
C&R’s financial statement or results being negatively restated
due to the Executive’s behaviour
• A participant having deliberately misled management or the
market regarding company performance
• A participant causing significant damage to the company
• A participant’s actions amounting to serious/gross misconduct
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Directors’ Remuneration Report continued
Directors service agreements and letters of appointment
Details of the service contracts of the Executive Directors and the Non-Executive Directors are as follows:
Name
Unexpired term of
appointment
Executive Directors
H Scott-Barrett
K Ford
C Staveley
M Bourgeois
Non-Executive Directors
J Clare
N Haasbroek
L Norval
P Newton
T Hales
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Date of service agreement
Notice period
Potential termination payment
9 March 2008
17 May 1996
1 October 2008
13 August 2013
Date of initial appointment
29 June 2010
15 September 2009
15 September 2009
8 August 2006
1 August 2011
12 months
12 months
12 months
12 months
No notice
No notice
No notice
No notice
No notice
12 months salary and benefits value
12 months salary and benefits value
12 months salary and benefits value
12 months salary and benefits value
None
None
None
None
None
— The Executive Director may also be considered for a
performance related pay award upon termination. The
financial performance of the Company and meeting of KPIs
and targets is the prime driver for determining whether to
make and award and the quantum. The Remuneration
Committee can exercise discretion on the leaver being
treated as a good leaver for the purposes of a pro rata cash
bonus award.
— In the event of termination for gross misconduct,
misrepresentation of the business or restatement of the
financial statements of the company due to the Executive’s
behaviour neither notice nor payment in lieu of notice will be
given and the Executive will cease to perform their services
with immediate effect.
In the event that the committee exercises the discretion detailed
above in this section, the committee will provide an explanation
in the next remuneration report.
Executive Directors’ Contracts
The service agreements of Hugh Scott-Barrett, Ken Ford and
Charles Staveley entitle them, on termination of their contract by
C&R, to payment equal to basic salary and the value of benefits
for 12 months. Mark Bourgeois’ agreement entitles him to the
earlier of 12 months from notice of termination or him obtaining
full-time employment.
Recruitment of Executives
In normal circumstances, new Executive Directors will receive a
remuneration package in line with the Company’s remuneration
policy. Any new director appointment may be at a salary level
discount to reflect experience at that point; the committee
may increase it over time on the evidence of performance
achievement and market conditions. All new Executive Directors
service agreements will include mitigation of the payment of
notice as standard.
The maximum level of variable remuneration for new joiners in
year one of joining will be 150% of salary, excluding any share
awards that may be granted but will not vest in the first year of
joining.
Exit payment policy
When considering termination payments the committee takes into
account the best interests of the Company and the individuals’
circumstances including the reasons for termination, contractual
obligations, bonus and LTIP scheme rules. The remuneration
committee will ensure that there are no unjustified payments for
failure on an Executive Directors termination of employment. The
policy in relation to leavers is summarised as follows:
— In normal circumstances the Executive Director will work their
notice period and receive usual remuneration payments and
benefits during this time. The Remuneration Committee can
exercise discretion on the leaver being treated as a good
leaver for the purposes of the LTIP scheme.
— In the event of the termination of an Executive Director’s
contract and the Company requesting the executive cease
working immediately, either a compensation for loss of
office payment will be made or a payment in lieu of notice
plus benefits may be made. The value of the compensation
for loss of office will be equivalent to the contractual notice
period, pension and benefits value.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 59
— Performance of the executive director
— Performance and development of the business
— Directors experience and responsibilities
— Pay and condition throughout the business
— Pay and conditions throughout our sector and other relevant
recruitment sources
The above considerations were discussed and applied on the
appointment of M Bourgeois in August 2013.
The Remuneration Committee has access to information and
benchmarking research on the pay and conditions of other
employees in the Company when determining remuneration
for the Executive Directors. The Remuneration Committee
actively considers the relationship between general changes to
employees pay and conditions and any proposed changes to
Executive Directors remuneration. Employee pay levels were
reviewed and benchmarked and a total 2.7% increase was
awarded for 2014 with effect from 1 January 2014.
Annual bonus
The committee policy position on annual bonus is within the
range of median or above. The maximum bonus opportunity
for Executives directors is 100% of basic salary. This top level
of annual bonus is only payable if the Company’s financial
and business performance achieves the stretching objectives
set, which are designed to deliver exceptional results to
shareholders.
Within the objectives bandings the detailed targets are based
on benchmarks that reflect stretching internal and external
expectations. The benchmarks include:
— NAV;
— EPRA NAV;
— NRI;
— recurring profit growth;
— valuation metrics;
— valuations on disposal;
External Appointments
The Company 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 Company. These appointments can broaden
the experience and knowledge of the Director, from which
the Company can benefit. Executives are allowed to retain all
remuneration arising from any external position. During the year
under review the following external positions were held:
Appointment
Executive
H Scott- Barrett Non-Executive Director GAM Holding AG
Non-Executive Director The Goodwood
Estate Company Ltd
—
Non-Executive Director Brandeaux
—
—
K Ford
X Pullen
C Staveley
M Bourgeois
Non-executive Directors
Non-executive Directors have letters of appointment for a fixed
three year term. All Board appointments automatically terminate
in the event of a director not being re-elected by shareholders.
The appointment of a non-executive director is terminable (on
notice) by the Company without compensation. At the end of
the initial term, the appointment may be continued by mutual
agreement.
Details of the fees received by each non-executive director
can be found within the audited information on page 62. The
Senior Independent Director and Chairman of the Audit and
Remuneration Committees received an additional fee of £5,000
per annum.
Senior Management
The policy for senior management remuneration is set in line
with the policy for the executive directors, with a degree of
discretion for the committee to take into account specific issues
identified by the Chief Executive, such as the performance of a
specific individual or business unit.
Remuneration Policy in 2014
The committee is not proposing any changes to the
remuneration structure in 2014 however it does aim to further
develop the link between performance and reward in any way it
can and taking into account best practice as it evolves within the
field of executive remuneration. We will continue to consult with
key shareholders on these matters.
— returns from sales of assets;
— execution of strategic objectives;
— relationship management;
— leadership and management metrics;
— TSR/shareholder returns, budget; and
— strategic plan achievement.
Salary
A benchmarking exercise was completed against our updated
comparator group. Executive Directors’ salaries have been held
since 2012 and remain aligned at the median level.
When determining the base salary of the Executives, the main
points the Committee takes into consideration are as follows:
The committee set challenging targets within the objectives
bandings for 2013 which required stretching levels of
performance in order for any bonus to be earned. The
Committee has assessed performance against the bonus criteria
and determined that the thresholds detailed below have been
met in respect of on target performance.
— Salary levels of the comparator group
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Directors’ Remuneration Report continued
Benefits
The Company makes available the normal benefits in kind for Executives of their level such as private healthcare, permanent health
insurance, life insurance and critical illness cover. The benefits policy position is at the median range.
Pension
The Executive Directors received either cash in lieu of pension contributions or cash contributions directly to their own personal
pension scheme. The pension policy position is at the median range.
Performance graph
The graph below illustrates the Company’s TSR performance compared to a broad equity market index and to the FTSE 350 Super
Sector Real Estate Index (£) given it is a widely recognised sector index incorporating the majority of companies in our comparator
group. Performance is measured by total shareholder return (share price growth plus dividends paid). For comparison the single
figure remuneration for the CEO is provided further below.
200
150
100
50
0
2010
2009
Rebase CAPITAL & REGIONAL - RI to 100
Rebase FTSE ALL SHARE- RI to 100
Rebase FTSE 350 SS REAL ESTATE £ - RI to 100
2011
2012
2013
CEO remuneration
Total remuneration (£’000)
Annual Bonus (% of max)
LTIP (% of max)
2009
£’000
402
—
—
2010
£’000
302
—
—
2011
£’000
536
70%
—
Percentage increase in remuneration in 2013 compared with remuneration in 2012
Salary
All taxable benefits
Annual bonuses
Total
Average compensation per employee for 2013 was £75,649 compared to £68,417 in 2012.
2012
£’000
765
69%
—
CEO
0%
0%
(42)%
(15)%
2013
£’000
651
40%
—
Employee
group
2.7%
0%
16.0%
4.1%
23091-04 5 June 2014 12:21 PM Proof 10
Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 61
Total Compensation
The following chart shows the value of each of the main elements of the remuneration package for each of the executive directors
potentially available in 2014 dependant on performance scenarios.
— the low scenario is based on nil bonus
— the mid scenario is based on bonus at 50% salary
— the max scenario is based on bonus at 100% salary
There are no LTIP awards that are anticipated to vest in 2014.
All figures in £’000
£891
10%
45%
£691
13%
29%
£491
19%
£1,000
£900
£800
£700
£600
£500
£400
£300
£200
81%
58%
45%
£100
£0
£644
8%
46%
£609
8%
46%
£469
10%
30%
£329
15%
£497
11%
30%
£349
15%
£490
8%
46%
£378
10%
30%
£265
15%
85%
59%
46%
85%
60%
46%
85%
60%
46%
Low
Mid
Max
Low
Mid
Max
Low
Mid
Max
Low
Mid
Max
H Scott-Barrett
K Ford
C Staveley
M Bourgeois
■ Salary
■ Bonus
■ Other
The following table sets out the total remuneration receivable by directors and other employees and distributions to shareholders by
way of dividend and share buyback.
Total Directors remuneration
Total Directors remuneration excluding loss of office
Staff costs excluding Directors1
Dividends and share buybacks
2013
£m
2.8
2.4
7.5
2.5
2012
£m
2.6
2.6
9.2
—
%
7.7
(7.7)
(18.4)
n/a
1 Staff costs per Note 8 excluding Directors and social security costs and share based payments.
The reduction in staff costs reflects the reduction in staff numbers across the year as shown in Note 8 to the financial statements.
Consultation and shareholders views
As required in advance of the AGM, the Chairman of the Committee may arrange to consult with our key shareholders to provide
information on any changes to the remuneration structure. Where requested further clarification and discussion can be provided
to assist them in making an informed voting decision. If any major concerns are raised by shareholders these can be discussed
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Directors’ Remuneration Report continued
with the Committee Chairmen in the first instance and the rest of the committee as appropriate. Then at its first meeting following
the AGM, the committee will consider all shareholder feedback received in determining policy in the following year. This plus any
additional feedback received during any meetings or from correspondence from time to time, will then be considered as part of the
committee’s annual review of remuneration policy and structure.
Shareholder voting to approve the Directors’ Remuneration Report at 5 June 2013 AGM:
Votes for (including discretionary votes)
217,231,359
% of votes cast
76.78
Votes against
65,699,665
% votes cast
Total number of
votes cast
23.22 282,931,024
Number of votes
withheld
5,864,872
Committee evaluation
The committee reviews its performance with Board members and other participants, including through the annual Board evaluation.
Audited information:
Remuneration outcomes during 2013
The table below sets out the remuneration received/receivable in relation to the year ended 30 December 2013.
Salary/Fees
Taxable benefits (iii) Other benefits(iv)
Pension (vii)
Annual bonus
LTIP
Loss of office
Total
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
£’000
Executive
Director
H Scott-
Barrett
K Ford
C Staveley
M Bourgeois(i)
X Pullen(ii)
Total
400
295
280
86
295
400
295
280
—
295
1,356 1,270
4
6
3
1
5
19
Chairman and Non-Executive Directors
J Clare
(Chairman)
L Norval
N Haasbroek
P Newton(v)
T Hales(vi)
Total
125
40
40
45
45
295
125
40
40
45
43
293
—
—
—
—
—
—
4
4
3
n/a
3
14
—
—
—
—
—
—
8
4
4
1
4
21
—
—
—
—
—
—
7
5
4
n/a
6
22
—
—
—
—
—
—
79
44
42
9
52
226
—
—
—
—
—
—
78
44
42
n/a
52
216
—
—
—
—
—
—
160
118
112
34
118
542
—
—
—
—
—
—
276
155
165
n/a
148
744
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 357
— 357
765
— 651
503
— 467
494
— 441
n/a
— 131
— 831
504
— 2,521 2,266
—
—
—
—
—
—
—
—
—
—
—
—
— 125
—
40
—
40
—
45
—
45
— 295
125
40
40
45
43
293
— 357
— 2,816 2,559
Total
1,651 1,563
19
14
21
22
226
216
542
744
(i) Appointed 13 August 2013.
(iv)
Includes life insurance and permanent health insurance.
(ii)
Contract ended 30 December 2013, payment for loss
of office detailed on page 65.
(v) Receives an additional fee of £5,000 as Chair of the Remuneration Committee.
(vi) Receives an additional fee of £5,000 as Chair of the Audit Committee.
(iii)
Includes private medical insurance and critical illness cover.
(vii) Includes amounts paid in lieu of pension.
Basic Salary % level growth chart for all Executive Directors:
2014
2013
2012
2011
2010
2009
H Scott-Barrett
K Ford
C Staveley
M Bourgeois(i)
X Pullen(ii)
£’000
400
295
280
225
—
%
—
—
—
—
n/a
£’000
400
295
280
225
295
%
—
—
—
n/a
—
£’000
400
295
280
n/a
295
%
27.8
13.0
7.3
n/a
41.2
£’000
313
261
261
n/a
209
%
4.3
4.4
4.4
n/a
4.5
£’000
300
250
250
n/a
200
%
-11.8
-11.4
-3.9
n/a
-31.5
£’000
340
282
260
n/a
292
i. Appointed 13 August 2013, table for 2013 shows full basic annual salary.
ii. Resigned 30 December 2013.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 63
From 1 January 2010, the executive directors (CEO from 2009 – salary reduced from £360,000 in 2008) 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 an inflationary salary increase for the executive directors,
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.
There has been no increase to executive director’s salaries since 2012.
2013 bonuses and achievement of objectives:
H Scott-Barrett
C Staveley
K Ford
M Bourgeois(i)
X Pullen
Total %
awarded for
2013
40
40
40
40
40
Bonus paid
2013
£’000
160
112
118
34
118
Maximum
achievable
£’000
400
280
295
86
295
(i) Appointed 13 August 2013 — bonus and total amounts relate to time since appointment as a director.
In 2013, management’s financial objectives were structured around achievement of the following:
(i) Group financial objectives (Net Asset Value and recurring profit);
(ii) Realisation of value from German investments;
(iii) Sale of Non-Core assets; and
(iv) Execution of on-going and future strategy.
A pay-out ratio of 40% reflects a year of progress although the final value of asset sales have yet to be realised and as a
consequence were not recognised in this year’s Bonus consideration. We do not publish details of the thresholds and targets in
advance as these are commercially confidential.
The annual bonus structure for 2014 will be on the same 80%:20% structure of Financial and Business Objectives: Individual
Objectives as 2013.
Share Awards (LTIP)
The share award (LTIP) policy is at the median or above range.
The performance period for the LTIP awards made in 2010 ended on 14 June 2013. The award was subject to a minimum TSR
performance condition of 12% growth per annum. As this was not achieved the awards lapsed.
The remuneration Committee granted the following LTIP awards to Executive Directors on 16 August 2013. A small group of
management also received an award. The performance period for the awards is three years from the date of grant although there is
then a further one year deferral period before the awards can be exercised.
H Scott-Barrett
K Ford
C Staveley
M Bourgeois
Shares
2,038,216
1,127,388
1,070,063
859,872
% of salary
200
150
150
150
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Directors’ Remuneration Report continued
The table below shows the proportion of shares that will vest under the scenarios listed and the value of shares that will accrue to
each director in that scenario.
Performance Target
At 30 Dec 2013 share price1
At Maximum vesting (70p)
At threshold vesting (40p)
% vesting
34.7
100.0
25.0
H Scott-Barrett
£’000
308
1,427
204
K Ford
£’000
171
789
113
C Staveley
£’000
162
749
107
M Bourgeois
£’000
130
602
86
1 Share price of 43.6p plus cumulative dividend of 0.25p per share (paid in September 2013).
The committee engaged and consulted with key shareholders
and considered current market practice ahead of the above
award. This was the first of a rolling annual cycle of LTIP awards
linked to performance targets measured over a three year
period. The 2013 awards fell within the individual limits of the
rules of the scheme. Awards were also made to a small group of
senior managers.
The performance targets for the 2013 awards relate to
absolute TSR. The awards trigger if the share price at the end
of the vesting period (adjusted for cumulative dividends and
distributions paid in the performance) is within a range of 40p to
70p based on the average price for the 30 day period preceding
the date of vesting. 25% of the award will vest at threshold (40p)
with 100% vesting at 70p. Vesting between these two points will
be on a straight line basis.
The Company has made significant progress in the execution
of the transformation strategy to simplify and increase the focus
of the business through disposal of non-core assets and the
recycling of capital into its core shopping centre activities. The
committee concluded that absolute TSR was appropriate on the
basis that:
• Capital & Regional differed from almost all other quoted
companies in the sector during this transformation;
• The level of de-risking of the balance sheet meant that geared
growth potential would differ from other companies in the sector.
The key objective of the business strategy is to deliver value
to shareholders. Although this may be achieved 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. It is essential that management take the
right decisions for the future of the business and in the interests of
the shareholders. If this results in a liquidity event before the end
of the three year performance period, management will not be
penalised for early delivery of the strategic objectives.
If such 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 target has been met at that time of as a result of the
transaction, the level of the vesting will not reduce to take account
of the length of the performance period remaining. Although any
final decision will be taken based on the circumstances at the
time and the committee intends to exercise discretion to allow
full vesting if the performance target have been met in full. If the
performance target is met in part, the vesting schedule would
be followed through again and no proration of the awards would
apply.
The same approach will be adopted if the liquidity event does not
give rise to early vesting under the rules but instead results in an
executive leaving employment.
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 the event of a capital raising or any other such event
that would have a dilutory impact upon the awards the
Remuneration Committee may, in line with the scheme rules,
adjust the awards granted to take account of this.
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.)
The Company’s claw back provisions apply during the 12
month deferral/holding period where the level of vesting may be
reduced, including to nil.
It is planned that a further grant of the LTIP will be made in 2014
at the following levels:
H Scott-Barrett
K Ford
C Staveley
M Bourgeois
% of salary
150%
100%
100%
100%
It is planned that a small group of key management will also
receive an award.
The number of shares will be determined by the share price at
the date the grant is made.
The awards will be subject to similar absolute performance
targets as the 2013 award with a threshold of 60p and 100%
vesting at 85p over a three year period. A deferral/holding period
will apply such that 50% of vested awards will not be capable
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 65
of exercise for a period of 12 months following vesting with the
other 50% not being capable of exercise for a further 12 months
after that (this will not apply in the case of a liquidity event within
three years.)
payment of £356,845 and an annual bonus of £118,000. The
loss of office payment was equivalent to one year’s salary of
£295,000 and pension and other benefits of £61,845. X Pullen
has no ongoing entitlements under the company’s LTIP scheme.
The Company’s claw back provisions will apply during the
deferral/holding periods where the level of vesting may be
reduced, including to nil.
Payment for loss of office
Xavier Pullen’s contract ended on 30 December 2013. The
committee chose to exercise its right to make a loss of office
Executive Share Ownership Requirements
The committee believes that the interests of executives should
closely align with shareholders. Accordingly all executive
directors are encouraged to build up and maintain a minimum
shareholding equivalent to one year’s basic salary based on
aggregate purchase price.The table below demonstrates the
shareholding status as a percentage of salary or fee:
Executive Directors
H Scott-Barrett
C Staveley
K Ford
X Pullen (resigned 30 December 2013)
M Bourgeois (appointed 13 August 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.
Time from
appointment
5 years 9 months
5 years 2 months
17 years 7 months
21 years 2 months
4.5 months
Target %
of salary or
annual fee
100
100
100
100
100
Target
currently
met?
Yes
Yes
Yes
Yes
No
H Scott-Barrett
K Ford
C Staveley
M Bourgeois
X Pullen (resigned
30 December 2013)
J Clare
N Haasbroek
L Norval
P Newton
T Hales
30 December
2013
Shares
1,352,055
1,679,432
283,121
215,000
30 December
2012
Shares
1,202,055
1,851,710
283,121
n/a
1,914,854
296,300
1,914,854
224,350
102,042,913 102,042,913
102,427,163 102,427,163
163,800
50,000
163,800
150,000
L Norval and N Haasbroek are each beneficially interested in
the shares registered in the name of PDI Investment Holdings
Limited and Pinelake International Limited.
On 3 January 2014 Ken Ford sold 100,000 shares reducing the
number of shares he has a beneficial interest in to 1,579,432.
Philip Newton
Chairman of Remuneration Committee
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Corporate Governance Report
John Clare
Chairman
Chairman’s introduction
I am pleased to present the Board’s Annual Report on corporate
governance.
We know how important it is to maintain good corporate
governance standards which we see as a fundamental part
of the Board discharging its stewardship responsibilities. The
Board remains committed to high standards of corporate
governance which it considers to be central to the effective
management of the business and to maintaining the confidence
of investors.
The report which follows explains how we have applied the
principles of good corporate governance advocated by the UK
Corporate Governance Code 2012 (the Code) as they apply to
smaller (i.e. non FTSE 350) companies.
It is the view of the Board that the Company has been compliant
with the principles of the Code, as they apply to smaller
companies, during the past financial year.
John Clare CBE
Chairman
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.
Role of the Board
The Board has a collective responsibility to promote the long-
term success of the Company for its shareholders. Its role
includes reviewing and approving key policies and decisions
of the Company, particularly in relation to Group strategy and
operating plans, governance and compliance with laws and
regulations, business development including major investments
and disposals and, through its Committees, financial reporting
and risk management.
The Board has established a schedule of matters reserved for
Board decision. This schedule details key aspects of the affairs
of the Company which the Board does not delegate, including
key strategic, operational and financial issues.
The Board’s agenda is managed to ensure that shareholder
value and governance issues play an important part in its
decision making.
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 and Remuneration Committee
and Nomination Committee consist of the Chairman and
independent non-executive directors. The Audit Committee
and Remuneration Committee meet at least twice a year, the
Nominations Committee meets at least once a year and as
required. The terms of reference of the respective Committees
are available on the Group’s website.
Board meetings are scheduled to coincide with key events in the
Company’s financial calendar, including interim and final results
and the AGM. Other meetings during the year will review the
Company’s strategy and budgets for the next financial year and
the Company’s key risks as well as reviewing performance by
the Group’s operating segments.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 67
Board balance and independence
Details of the directors are set out before the Directors’
report. The Board comprised of the Chairman, four executive
directors and four non-executive directors except for the
transitional period between Mark Bourgeois’ appointment
on 14 August 2013 and Xavier Pullen’s resignation on
30 December 2013 where there were five executive directors.
The Board and Nomination Committee are satisfied that the
Board composition provides an appropriate balance of power
and authority within the Company. The Board believes that all
the non-executive directors, excluding Louis Norval and Neno
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.
Louis Norval and Neno Haasbroek as non-executive directors
are not considered independent for the purposes of the
Code, as they represent a significant shareholder of the
Company.
Philip 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.
Information and professional development
The Board schedules six meetings each year as a minimum,
and arranges further meetings as the business requires. Prior
to Board meetings, each member receives, as appropriate to
the agenda, up-to-date financial and commercial information,
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 mix of the Board members,
and their sharing of knowledge and experiences gained from
a range of commercial backgrounds.
Board evaluation
A formal process has been established, led by the Chairman,
for the annual evaluation of the performance of the Board,
its appointed committees and each director, to ensure that
they continue to act effectively and efficiently and to fulfil their
respective duties, and to identify any training requirements.
This process was led by the Chairman and each director
completed an in-depth questionnaire which covered:
• performance of the Board (including consideration of how
the Board works together as a unit);
• processes which underpin the Board’s effectiveness
(including consideration of the balance of skills,
• experience, independence and knowledge of the persons
on the Board);
• strategy;
• performance of the Audit, Nomination and Remuneration
Committees; and
• individual performance (giving consideration to whether
each director continues to contribute effectively and show
commitment).
The completed questionnaires were then collated by the
Chairman and considered in detail by the Board at the
subsequent Board meeting. This year’s review found that
the performance of the Board and its Committees continued
to be effective in dealing with both day-to-day and ongoing
strategic issues; and that the Board and Committee structure
ensured that the governance requirements of the business
were met.
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Corporate Governance Report continued
The Chairman also 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 Chief Executive having
received input from the non-executive directors.
The Chief Executive evaluates the performance of
the other Executive 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 if required.
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.
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 fair,
balanced and understandable assessment of the
Group’s position and prospects.
Board meeting attendance in 2013
Scheduled
6
Ad hoc
1
Total
7
Attended by:
J Clare
H Scott-Barrett
M Bourgeois(i)
K Ford
X Pullen
C Staveley
N Haasbroek
T Hales
L Norval
P Newton
6
6
1
6
6
6
6
6
6
6
1
1
1
-
6
6
1
1
1
1
1
7
7
2
6
7
7
7
7
7
1
7
(i) Mark Bourgeois was appointed on 14 August 2013. He was present at all of the meetings he
was entitled to attend after this date. He also attended by invitation three of the five meetings in
the year prior to his appointment.
Other meeting attendance
Audit
Committee
Remuneration
Committee
Nomination
Committee
3
4
1
Responsible
Business
Committee
3
Attended by:
J Clare
P Newton
T Hales
X Pullen
3
3
3
-
3
4
4
-
1
1
1
-
-
3
-
3
By invitation Charles Staveley attended the three Audit Committee meetings, Louis Norval and
Neno Haasbroek attended two of the Remuneration Committee meetings and Hugh Scott-Barrett
attended three of the Responsible Business Committee meetings, during the year.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 69
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.
Remuneration Committee
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 on pages 50
to 65.
Nomination Committee
The Committee comprises of John Clare (Chairman), Philip
Newton (appointed 4 February 2013) and Tony Hales. 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.
Diversity
Whilst we pursue diversity, including gender diversity, throughout
the business, and the Board endorses the aspirations of the
Davies Review on Women on Boards, we are not committing
to any specific targets. Instead, when relevant, we will seek to
use executive search firms who have signed up to the voluntary
code of conduct setting out the seven key principles of best
practice to abide by throughout the recruitment process and we
will continue to follow a policy of appointing talented people at
every level to deliver high performance. We will also ensure that
our development in this area is consistent with our own strategic
objectives and is enhancing in terms of Board effectiveness.
John Clare CBE
Chairman
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 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.
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Corporate Governance Report continued
Report on the Committee’s activities during the year
The committee has a schedule of events which detail the issues
to be discussed at each of the meetings of the committee in the
year. The schedule also allows for new items to be included into
the agenda of any of the meetings.
During the year, the committee discharged its responsibilities,
under its terms of reference, by:
a) reviewing the Group’s draft 2012 and 2013 financial
statements and 2013 interim results statement prior to
discussion and approval by the Board, and reviewing the
external auditor’s reports thereon;
b) reviewing the continuing appropriateness of the Group’s
accounting policies;
c) reviewing Deloitte LLP’s plan for the audit of the Group’s
2013 financial statements, receiving and reviewing
confirmations of their independence and approving the terms
of their engagement and proposed fees for the 2013 audit;
d) reviewing reports on internal control matters prepared by
Management and external consultants
e) considering the effectiveness and independence of the
external auditor and recommended to the Board the re-
appointment of Deloitte LLP as external auditor;
f) reviewing management’s biannual Risk Review report;
g) reviewing the effectiveness of the Group’s whistleblowing
policy;
h) receiving a presentation from Deloitte LLP on future
Corporate Governance developments, the content of which
was then shared with the full Board;
i) carrying out an annual performance evaluation exercise and
noting the satisfactory operation of the committee.
Tony Hales
Chairman of the Audit Committee
Audit Committee
The Audit Committee is chaired by Tony Hales, Tony was
appointed Chairman on 4 February 2013 having been acting
Chairman since 31 August 2012. He is supported by Philip
Newton and John Clare (appointed 4 February 2013). In line with
the provisions of the Code, as they apply to smaller companies,
the Committee included at least two independent non-executive
directors for the entire year.
The Board is satisfied that the committee’s members have
recent and relevant commercial and financial knowledge and
experience to satisfy the provisions of the Code, by virtue of
their holding or having held various executive and non-executive
roles in other listed companies.
Responsibilities
The Committee’s role is to assist the Board in discharging its
duties and responsibilities for financial reporting, internal control
and the appointment and remuneration of an independent
external auditor. The committee is responsible for reviewing the
scope and results of audit work and its cost effectiveness, and
the independence and objectivity of the auditor.
The Committee is also responsible for reviewing the Group’s
arrangements on whistle blowing, ensuring that appropriate
arrangements are in place for employees to be able to raise,
in confidence, matters of possible impropriety, with suitable
subsequent follow-up action.
The audit committee has reviewed the contents of this year’s
annual report and accounts and advised the Board that, in
its view, the report is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s performance, business model and strategy.
The terms of reference of the Audit Committee are available for
inspection on the Group’s website.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 71
• Impairment of inter-company investments and receivables
— Management perform an annual review of inter-company
investments and receivables to determine the values to be
maintained in the Plc Company only and individual subsidiary
balance sheets. The Committee reviewed the movement over
the year and the key assumptions particularly where balances
were held with reference to value in use as opposed to net
assets of the underlying entity.
Oversight of external auditors
The committee carried out a review of the effectiveness of the
external audit process and considered the re-appointment
of Deloitte LLP. The review covered amongst other factors,
the quality of the staff, the expertise, the resources, and the
independence of Deloitte LLP. The committee reviews the audit
plan for the year carefully and subsequently considers how
the auditor performed to the plan. They consider the quality of
written and oral presentations and the overall performance of
the lead audit partner.
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 committee refreshed its
policy on the use of its external auditor for non-audit services
to ensure complete clarity on the detail of services permitted
and not permitted and those which might require the explicit
prior approval of the committee. 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.
Finally, consideration was also given to the likelihood of a
withdrawal of the auditor from the market and, it was noted that
there were no contractual obligations which would restrict the
choice of an alternative auditor.
The committee agreed that it was appropriate to recommend
to the Board that Deloitte LLP be reappointed as auditor
for a further year and, accordingly a resolution will be put to
shareholders at the 2014 Annual General Meeting
Significant issues considered in relation to the financial
statements
During the year, the Committee considered key accounting
matters and judgements in respect of the financial statements
relating to:
• Investment property valuation — At 30 December 2013 the
Group’s share of property assets held by its associates and
joint ventures was £411.6 million (see Note 11b for further
details). The valuation of investment property is inherently
judgmental and involves a reliance on the work of independent
professional qualified valuers. The Audit Committee
considered the independence and qualifications of the valuers
engaged and reviewed and challenged the valuations at each
period end to understand the basis for them and the rationale
for movements in the context of both the individual properties
and the general property investment market.
• Valuation of loan receivable in Euro B-Note Holding Limited
— At 30 June 2013 the Committee reviewed Management’s
rationale for impairing the loan receivable from £2.3 million to
£nil (see note 16b for further details). This involved considering
the factors impacting the Group’s ability to recover value from
the loan most critically the trading performance and valuation
of the underlying portfolio of assets.
• Performance fee recognition — The Committee considered
the basis and rationale for Management’s conclusion that it
was not yet appropriate to recognise as income any amounts
potentially due from performance fee arrangements (see
note 34 for further details). This involved understanding
the conditions of the underlying agreements and the latest
assessment of the relevant metrics under the respective
agreements. (see note 34 for further details)
• Classification of operations as discontinued — In 2013 the
results of the Group’s Leisure segment, consisting of Great
Northern Warehouse and Hemel Hempstead, were classified
as Discontinued Operations (see Note 29 for further details).
The Audit Committee reviewed Management’s rationale
for concluding that these operations met the definition
as Discontinued Operations and in the case of Hemel
Hempstead the classification as an asset held for sale at
30 June 2013 and 30 December 2013.
• Going concern and covenant compliance — The Committee
reviewed, challenged and concluded upon the Group’s
going concern review including giving due consideration
to the appropriateness of key judgements, assumptions
and estimates underlying the budgets and projections that
underpin the review and a review of compliance with key
financial covenants.
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Corporate Governance Report continued
Whistleblowing
The Group has in place a whistleblowing policy which
encourages employees to report any malpractice or illegal acts
or omissions or matters of similar concern by other employees
or former employees, contractors, suppliers or advisers
using internal mechanisms for reporting. The policy acts as a
mechanism to report any ethical wrongdoing or malpractice
or suspicion which may amount to ethical wrongdoing or
malpractice. Examples of ethical wrongdoing or malpractice
include bribery, corruption, fraud, dishonesty and illegal
practices which may endanger employees or other parties.
There have been no instances of whistleblowing during the year
under review.
Tony Hales CBE
Chairman of Audit Committee
Independence safeguards
In accordance with best practice and professional standards,
external auditors are required to adhere to a rotation policy
whereby the audit engagement partner is rotated at least every
five years. The 2012 audit was the last year of Andrew Clark’s
tenure and he was replaced by Georgina Robb for 2013.
Deloitte LLP have been auditors of Capital & Regional plc
since 1998. The audit was last put out to tender in 2009 where
Deloitte were re-appointed. The Group intends to put the audit
out to tender at least every 10 years as recommended by the
UK Corporate Governance Code.
Internal Audit
The Group does not have an internal audit function but manages
an ongoing process of control reviews performed either by
staff, independent of the specific area being reviewed, or by
external consultants when deemed appropriate. During the year
the Committee reviewed reports on controls over the Group’s
supplier payments controls, IT and data security and compliance
with the Group’s gift and hospitality policy. The Committee also
reviewed and agreed a plan and schedule for reviews covering
the period to the end of 2014.
While the Committee will continue to review the position
at present it continues to believe that the current size and
complexity of the Group does not justify establishing an internal
audit function.
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73
Independent auditor’s report to the
members of Capital & Regional plc
At 30 December 2013
Opinion on financial
statements of Capital &
Regional plc
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 2013 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International
Financial Reporting Standards (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.
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 Statements, the related notes 1 to 35, the Company Balance
Sheet and the related notes A to G. The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European Union and, as regards the
parent company financial statements, as applied in accordance with the provisions of the Companies
Act 2006.
Going concern
As required by the Listing Rules we have reviewed the directors’ statement contained within the
Directors’ Report on page 48 that the Group is a going concern. We confirm that:
• we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate; and
• we have not identified any material uncertainties that may cast significant doubt on the Group’s
ability to continue as a going concern.
However, because not all future events or conditions can be predicted, this statement is not a
guarantee as to the Group’s ability to continue as a going concern.
Our assessment of risks
of material misstatement
The assessed risks of material misstatement described below are those that had the greatest
effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the
engagement team:
Risk
Our response
Property valuations
Investment property valuation, specifically the assumptions
and judgments used by management’s third party valuers in
deriving the property valuations. Changes in these assumptions
and judgments could lead to significant movements in property
values and consequently unrealised gains or losses in the
income statement.
Going Concern and covenant compliance
We consider the Group’s liquidity position and the ability
of its associates and joint ventures to meet their covenant
requirements both during the year and for a period of one year
from the date of signing.
• We met with the third party valuers appointed by management
for each component of the property portfolio and challenged
the significant judgements and assumptions applied in their
valuation model. We verified movements in occupancy rates,
lease incentives, break clauses and yields and benchmarked
the inputs against market data where available.
• We assessed the integrity of the information provided to
the valuers by management pertaining to rental income,
purchasers costs and occupancy.
• We challenged the judgements and assumptions applied
by management in their going concern assessment and
associated forecasts of financial performance, position and
covenant compliance including examining, where appropriate,
current business and economic trends and significant
developments during and subsequent to the year ended
30 December 2013.
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Auditor’s Report continued
At 30 December 2013
Risk
Our response
Revenue recognition
Revenue recognition, including the potential recognition and
provision of management performance fees in respect of the
property portfolios and accounting for lease incentives. The
calculation of lease incentives involve complex computation and
the recognition of performance fees requires judgement as to
when the recognition criteria are met.
• We challenged the appropriateness of the Group’s revenue
recognition in respect of performance fees. We have agreed
the required internal rate of return for the recognition of
a performance fee for each management contract to the
underlying agreement and compared it against the current
forecast investment return based on the property valuations at
30 December 2013 and forecast value movements.
• We have performed our audit testing for lease incentives by
verifying the mechanical accuracy of calculations and agreeing
inputs to the lease contacts.
Impairment of company only investments
There is a risk of impairment of the investments and
intercompany debtors in the Company balance sheet. There is a
particular risk around the reasonableness of cash flow forecasts
which support investments held at above net asset value in the
subsidiaries.
• We have challenged management’s investment impairment
model and the cash flow forecasts employed therein.
• We have ensured that forecasts employed are consistent
with those used to support other judgements in the financial
statements.
The Audit Committee’s consideration of these risks is set out on page 71.
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and
not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect
to any of the risks described above, and we do not express an opinion on these individual matters.
Our application of
materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of our audit work and in evaluating the
results of our work.
We determined materiality for the Group to be £3 million, which is below 18% of Recurring Pre-tax
Profit, and below 2% of equity. Recurring Pre-tax Profit is defined on page 89.
We agreed with the Audit Committee that we would report to the Committee all audit differences in
excess of £60,000, as well as differences below that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the Audit Committee on disclosure matters that we
identified when assessing the overall presentation of the financial statements.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013Financial Statements continued 75
An overview of the scope
of our audit
Our group audit was scoped by obtaining an understanding of the Group and its environment,
including group-wide controls, and assessing the risks of material misstatement at the group level.
• Our group audit scope focused primarily on the audit work on the major lines of business. These
major lines of business are The Mall Limited Partnership, the Germany joint venture and Snozone
Limited, which are individual IFRS 8 segments as disclosed in note 3. Other major lines of business
for scoping purposes include the Kingfisher Limited Partnership and Lincoln Waterside Limited
Partnership, which are incorporated into the Other Shopping Centres segment, and Capital
& Regional Property Management Limited and Garigal Asset Management GmbH, which are
incorporated into the Property Management segment in note 2. Following the agreed sale of
Hemel Hempstead and Morrison Merlin Limited during the year, there are no assets in the Leisure
segment that constitute a major line of business for scoping purposes.
• All of the above were subject to a full audit scope with the exception of the Germany joint venture,
Garigal Asset Management GmbH and the Kingfisher Limited Partnership, which were subject
to specific audit procedures around significant audit risks and key balances including investment
property and loans payable.
• The businesses subject to a full scope audit or specific audit procedures account for 100% of
the Group’s net assets, revenue and recurring pretax profit. All investment properties have been
included within the scope of our work. The Germany joint venture is audited by Deloitte Frankfurt
and is visited annually by a senior member of the Group audit team. The remaining components
are audited by the Group audit team. Our audit work at each component was executed at levels of
materiality applicable to each individual entity which were lower than group materiality.
• At the parent entity level we also tested the consolidation process and carried out analytical
procedures to confirm our conclusion that there were no significant risks of material misstatement
of the aggregated financial information of the remaining components not subject to audit or audit of
specified account balances.
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 Strategic Report and the Directors’ Report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations
received and accounting
records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• 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 are not in agreement with the accounting records and
returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
of directors’ remuneration have not been made or the part of the Directors’ Remuneration Report to
be audited is not in agreement with the accounting records and returns. We have nothing to report
arising from these matters.
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Auditor’s Report continued
At 30 December 2013
Corporate Governance
Statement
Under the Listing Rules we are also required to review the part of the Corporate Governance
Statement relating to the Company’s compliance with nine provisions of the UK Corporate
Governance Code. We have nothing to report arising from our review.
Our duty to read other
information in the Annual
Report
Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our
opinion, information in the annual report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the
Group acquired in the course of performing our audit; or
Respective
responsibilities of
directors and auditor
Scope of the audit of the
financial statements
• otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies between
our knowledge acquired during the audit and the directors’ statement that they consider the annual
report is fair, balanced and understandable and whether the annual report appropriately discloses
those matters that we communicated to the audit committee which we consider should have been
disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.
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.
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 auditor’s 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.
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 and to identify any information that is
apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. f we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Georgina Robb FCA (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
20 March, 2014
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013Financial Statements continued Consolidated Income Statement
At 30 December 2013
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative costs
Share of profit/(loss) in associates and joint ventures
Other gains and losses
Profit/(loss) on ordinary activities before financing
Finance income
Finance costs
Profit/(loss) before tax
Tax credit
Profit/(loss) for the year from continuing operations
Discontinued operations
Loss for the year from discontinued operations
Profit/(loss) for the year
Continuing operations
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Continuing and discontinued operations
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
77
Note
3
4
16a
5
6
7
9a
29
10a
10a
10a
10a
2013
£m
17.6
(8.0)
9.6
(11.5)
10.0
1.0
9.1
0.8
(0.6)
9.3
0.2
9.5
(0.4)
9.1
3p
3p
3p
3p
20121
£m
22.0
(8.9)
13.1
(13.6)
(12.8)
—
(13.3)
1.2
(0.6)
(12.7)
0.9
(11.8)
(4.2)
(16.0)
(3)p
(3)p
(5)p
(5)p
1 2012 results have been restated to separate discontinued operations as explained in Note 29.
The profit for the current year and the loss for the preceding year, including amounts from discontinued operations, are fully
attributable to equity shareholders.
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78
Consolidated Statement of Comprehensive Income
For the year to 30 December 2013
Profit/(loss) for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
(Loss)/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/(loss) for the year
2013
£m
9.1
0.8
(0.7)
0.1
9.2
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. There are no
items in other comprehensive income that may not be reclassified to profit or loss.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013Financial Statements continued
Consolidated Balance Sheet
At 30 December 2013
Non-current assets
Investment properties
Goodwill
Plant and equipment
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
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
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
79
Note
11a
12
13
14
16b
16c
11a
17
18
29
2b
19
29
21a
20
9d
2b
23
25
27
27
27
2013
£m
—
—
0.7
22.8
112.1
32.3
167.9
—
6.8
11.1
8.5
26.4
194.3
(4.3)
(0.2)
(0.1)
(4.6)
—
(0.1)
(0.9)
(1.0)
(5.6)
188.7
9.9
62.6
4.4
(0.7)
112.5
188.7
£0.54
£0.54
£0.56
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
These financial statements were approved by the Board of directors, authorised for issue and signed on their behalf on 20 March
2014 by:
Charles Staveley
Group Finance Director
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80
Consolidated Statement of Changes in Equity
For the year to 30 December 2013
Share
capital
£m
9.9
—
Merger
reserve
£m
60.3
—
Acquisition
reserve
£m
9.5
—
Other reserves
Foreign
currency
reserve
£m
5.6
—
Net
investment
hedging
reserve
£m
(2.6)
—
Capital
redemption
reserve
£m
4.4
—
Own
shares
held
£m
(6.8)
—
Retained
earnings
£m
115.7
(16.0)
Total
equity
£m
196.0
(16.0)
—
—
—
—
—
9.9
—
—
—
—
—
—
—
9.9
—
—
—
—
—
60.3
—
—
—
—
—
—
—
60.3
—
—
—
—
—
9.5
—
—
—
—
(9.5)
—
—
—
(1.3)
(1.3)
—
(0.7)
—
3.6
—
0.8
0.8
—
—
—
—
4.4
0.7
0.7
—
—
0.5
(1.4)
—
(0.7)
(0.7)
—
—
—
—
(2.1)
—
—
—
—
—
4.4
—
—
—
—
—
—
—
4.4
—
—
—
—
6.1
(0.7)
—
—
—
—
—
—
—
(0.7)
—
(0.6)
(16.0)
(16.6)
0.8
0.8
—
(6.5)
94.0
9.1
—
9.1
1.0
9.5
(0.9)
(0.2)
112.5
(0.7)
0.1
179.6
9.1
0.1
9.2
1.0
—
(0.9)
(0.2)
188.7
Balance at 30 December 2011
Loss for the year
Other comprehensive income for
the year
Total comprehensive loss for
the year
Credit to equity for equity-settled
share-based payments
Transfer to income statement for
German portfolio 4
Other movements
Balance at 30 December 2012
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
Dividends paid
Other movements
Balance at 30 December 2013
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 related 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 was
transferred to retained earnings on disposal of Morrison Merlin Limited in October 2013.
The foreign currency reserve of £4.4 million and the net investment hedging reserve deficit of £2.8 million respectively show foreign
exchange translation differences from the Group’s investment in its German joint venture and the net investment hedge of that
investment.
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Consolidated Cash Flow Statement
For the year to 30 December 2013
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
Disposal of Morrison Merlin Limited
Disposal of interests in joint ventures and associates
Other disposals
Purchase of plant and equipment
Investment in associates
Loans to joint ventures
Loans repaid by joint ventures
Cash flows from investing activities
Financing activities
Dividends paid
Bank loans drawn down
Bank loans repaid
Loan arrangement costs
Repurchase of own shares
Settlement of forward foreign exchange contract
Cash flows from financing activities
Net increase/(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
81
Note
26
16b
16c
29
29
13
16b
18
2013
£m
(1.4)
1.7
0.2
—
(4.2)
0.2
(1.2)
(4.7)
12.0
30.6
1.0
(0.2)
(29.3)
(1.0)
0.2
13.3
(0.9)
—
(1.0)
—
(0.3)
(0.6)
(2.8)
5.8
5.3
11.1
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
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82
Notes to the Financial Statements
For the year to 30 December 2013
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 2012 have been restated to show the results relating to the Group’s Leisure
segment within discontinued operations, as Great Northern Warehouse and Hemel Hempstead, which made up that segment, were
respectively sold and reclassified as an asset held for sale during the year. The results of discontinued operations, which for 2012
also include the Group’s interest in The Junction Fund, X-Leisure Fund, X-Leisure Limited and Xscape Braehead, are set out in
note 29.
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 2013
During the year ending 30 December 2013 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
The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been
published but are only effective for our accounting periods beginning on or after 31 December 2013. These new pronouncements
are listed below:
• IFRS10 “Consolidated Financial Statements” (effective periods beginning on or after 1 January 2014)
• IFRS11 “Joint Arrangements” (effective periods beginning on or after 1 January 2014)
• IFRS12 “Disclosure of Interests in Other Entities” (effective periods beginning on or after 1 January 2014)
• IFRS13 “Fair Value Measurement” (effective periods beginning on or after 1 January 2013)
• Amendments to IAS19 “Employee Benefits” (effective periods beginning on or after 1 January 2013)
• Amendments to IAS27 “Separate Financial Statements” (effective periods beginning on or after 1 January 2014)
• Amendments to IAS28 “Investments in Associates and Joint Ventures” (effective periods beginning on or after 1 January 2014)
• Amendments to IFRS7 “Financial Instruments: Disclosures — Offsetting Financial Assets and Financial Liabilities” (effective periods
beginning on or after 1 January 2013)
• Amendments to IFRS10, IFRS11 and IFRS12 “Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests
in Other Entities: Transition Guidance” (effective periods beginning on or after 1 January 2014)
• Amendments to IAS36 “Impairment of Assets” (effective periods beginning on or after 1 January 2014)
• Amendments to IAS32 “Financial Instruments: Presentation — Offsetting Financial Assets and Financial Liabilities” (effective
periods beginning on or after 1 January 2014)
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1 Significant Accounting Policies continued
• Amendments to IAS39 “Financial Instruments: Recognition and Measurement – Novation of Derivatives and Continuation of
Hedge Accounting” (effective periods beginning on or after 1 January 2014)
• IFRS9 “Financial Instruments” (effective periods beginning on or after 1 January 2015)
The Directors are currently evaluating the impact of the adoption of these standards, amendments and interpretations in future
periods.
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 21
and 22 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 2013 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.
Derivative financial instruments
Reliance upon the work undertaken at 30 December 2013 by independent third party experts in assessing the fair values of the
Group’s derivative financial instruments, which are disclosed in notes 14, 17 and 22f.
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 34.
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.
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Notes to the Financial Statements continued
for the year ended 30 December 2013
1 Significant Accounting Policies continued
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. Subsequent to the refinancing the loan receivable is held at
amortised cost and tested for impairment at each reporting date. At 30 June 2013 management performed an impairment review
which resulted in the Group’s share of the loan receivable being written down to £nil carrying value (2012: £2.3 million) reflecting
adverse developments in the six months most prominently the insolvency of one of the most significant tenants in the portfolio.
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 on-going 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.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company at 30 December. 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.
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 acquired, 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 realisable value with associated costs of sale shown
separately as liabilities. 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.
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1 Significant Accounting Policies continued
In accordance with IAS 28 Investments in Associates and IAS 31 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 IAS 39 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.
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 = €1.1995 (2012: £1 = €1.2241). The principal
exchange rate used for the income statement is the average rate for the year: £1 = €1.1775 (2012: £1 = €1.2333).
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:
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Notes to the Financial Statements continued
for the year ended 30 December 2013
1 Significant Accounting Policies continued
Leasehold improvements — over the term of the lease
Fixtures and fittings
Motor vehicles
— over three to five years
— over four years
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.
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.
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1 Significant Accounting Policies continued
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.
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.
23091-04 5 June 2014 12:21 PM Proof 10
www.capreg.com Stock code: CALFinancial Statements 88
Notes to the Financial Statements continued
for the year ended 30 December 2013
1 Significant Accounting Policies continued
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 IFRS 2 Share-based Payment. Equity settled share-based payments are measured
at fair value at the date of grant. The fair values of the LTIP 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.
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 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:
23091-04 5 June 2014 12:21 PM Proof 10
Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013Financial Statements continued 89
1 Significant Accounting Policies continued
• 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 amended provisions in the management agreements relating to
removal for underperformance mean that the GP board 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 34.
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 results for the year from its Leisure segment, consisting of Great Northern Warehouse and Hemel Hempstead, have
been classified as Discontinued Operations with the prior year comparatives restated. The results of Discontinued Operations in
the prior year also include the Group’s share of results from The Junction Fund, Xscape Braehead, X-Leisure Fund and X-Leisure
Limited all of which were included as such in the prior year financial statements. See Note 29 for further details.
Following the above changes the Group’s remaining reportable segments under IFRS8 are The Mall, ‘Other UK Shopping Centres’
consisting of The Waterside Lincoln Limited Partnership and Kingfisher Limited Partnership (Redditch), Germany, Property
Management (consisting of CRPM and Garigal Asset Management GmbH) and Snozone. Group items include Group overheads
incurred by Capital & Regional plc and other subsidiaries and the interest expense on the Group’s central borrowing facility. In the
prior year the results of FIX UK, until the loss of significant influence were included within ‘Other’.
The Mall, Other UK Shopping Centres and Germany derive their revenue from the rental of investment and trading properties. The
Property Management and Snozone 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 are 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 (in 2012 until reclassification as held for sale) and Garigal, the profit from Snozone and any fixed 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.
23091-04 5 June 2014 12:21 PM Proof 10
www.capreg.com Stock code: CALFinancial Statements 90
Notes to the Financial Statements continued
for the year ended 30 December 2013
2a Operating segments
UK Shopping Centres
Note
The Mall
£m
Other UK
Shopping
Centres
£m
Germany
£m
Property
management
£m
Snozone
£m
Total
Continuing
Operations
£m
Group
items
£m
Discontinued
Operations
£m
Total
£m
2b
13.6
4.5
13.3
Year to 30 December
2013
Rental income from
external sources
Property and void
costs
Net rental income
Interest income
Interest expense
Contribution
Management fees/
Snozone income
Management
expenses
Depreciation
Inter-segment
eliminations
Interest expense on
central facility
Recurring pre-tax
profit/(loss)
Variable overhead
Revaluation of
properties
(Loss)/profit on
disposal
Impairment of Euro
B-Note
Gain/(loss) on
financial instruments
Other items
Profit/(loss) before
tax
Tax credit
Profit after tax
Total assets
Total liabilities
Net assets
2b
2b
9a
2b
2b
(4.4)
9.2
—
(5.1)
4.1
—
—
—
—
—
4.1
—
(0.5)
(4.2)
—
2.9
2.0
4.3
(0.9)
3.6
—
(1.5)
2.1
—
—
—
—
—
2.1
—
1.2
—
—
0.6
—
3.9
(2.2)
11.1
0.6
(5.1)
6.6
—
—
—
—
—
6.6
—
(2.3)
(0.3)
(2.4)
1.2
(0.8)
2.0
—
—
—
—
—
—
—
—
—
—
—
—
9.9
9.0
—
—
—
—
—
—
—
(7.9)
(0.1)
(4.2)
—
31.4
5.2
36.6
(7.5)
23.9
0.6
(11.7)
12.8
18.9
(17.4)
(0.2)
(1.0)
4.2
—
(4.1)
0.1
—
—
—
(8.5)
28.1
0.6
(15.8)
12.9
18.9
(17.4)
(0.2)
—
0.1
(0.1)
—
(0.2)
(0.2)
(4.4)
(1.1)
14.0
(1.8)
—
—
—
(0.2)
14.0
(1.8)
—
(1.6)
(0.2)
(1.8)
1.01
(3.5)
(2.1)
(5.6)
(5.3)
(0.1)
0.1
—
4.6
(0.7)
—
—
—
—
—
1.0
—
—
—
—
—
(2.4)
—
(1.1)
—
(0.1)
—
(0.1)
4.7
(0.1)
2.8
0.9
(4.6)
—
1.8
—
(0.5)
0.1
(0.4)
8.5
0.1
8.6
(2.4)
6.5
(0.1)
8.8
0.3
9.1
515.6
(326.9)
188.7
9.3
0.2
9.5
507.1
(327.0)
180.1
243.7
(143.3)
100.4
54.6
(33.3)
21.3
189.5
(144.7)
44.8
3.1
(1.7)
1.4
2.5
(1.1)
1.4
13.7
(2.9)
10.8
1 Consisting of profit on sale of land of £0.5 million and profit on disposal of FIX UK of £0.5 million.
23091-04 5 June 2014 12:21 PM Proof 10
Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013Financial Statements continued 91
2a Operating segments continued
UK Shopping Centres
The Mall
£m
Note
Other UK
Shopping
Centres
£m
Germany
£m
Other
£m
Property
management
£m
Snozone
£m
Group
items
£m
Continuing
Operations
£m
Total
Discontinued
Operations
£m
Total
£m
Year to 30 December
20121
Rental income from
external sources
Property and void
costs
Net rental income
Interest income
Interest expense
Contribution
Management fees/
Snozone income
Management
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
JV’s and Associates
Profit/(loss) before tax
Tax credit/(charge)
Profit after tax
Total assets
Total liabilities
Net assets
2b
15.4
3.0
15.9
1.1
(4.3)
11.1
—
(6.6)
4.5
—
—
—
—
—
4.5
—
—
(0.8)
2.2
—
(1.1)
1.1
—
—
—
—
—
1.1
—
—
(3.0)
12.9
0.7
(6.5)
7.1
—
—
—
—
—
7.1
—
—
(0.1)
1.0
—
(0.4)
0.6
—
—
—
—
—
0.6
—
—
(7.6)
(1.3)
(10.0)
(0.1)
(1.6)
—
—
—
—
—
1.6
1.4
—
(1.7)
—
—
—
—
—
—
(0.6)
—
—
(0.8)
0.1
0.1
—
—
—
(1.3)
(3.3)
—
0.7
(3.2)
(0.1)
0.2
—
(8.5)
—
—
(0.1)
—
—
(0.8)
0.2
—
0.2
210.5
(142.5)
68.0
49.2
(32.9)
16.3
191.9
(149.8)
42.1
2b
2b
2b
12
9a
2b
2b
—
—
—
—
—
—
—
—
—
—
—
—
—
35.4
15.6
51.0
(8.2)
—
27.2
—
—
0.7
— (14.6)
13.3
—
(4.3)
11.3
—
(8.1)
3.2
(12.5)
38.5
0.7
(22.7)
16.5
10.4
10.1
—
20.5
2.3
22.8
(7.0)
(0.1)
0.1
—
3.4
2.6
(0.9)
—
—
—
—
—
—
—
—
(0.2)
—
4.9
4.8
(4.2)
0.6
(8.7)
(0.2)
(3.9)
—
(19.6)
(0.3)
(1.7)
—
(21.3)
(0.3)
—
—
1.2
—
(0.1)
—
—
—
—
—
—
—
—
(0.2)
—
0.9
2.5
(2.0)
0.5
—
0.1
(0.1)
—
(0.7)
(0.7)
—
(0.7)
(4.6)
—
(1.7)
13.3
2.6
(2.7)
3.7
(0.6)
—
17.0
2.0
(2.7)
— (19.0)
(1.8)
(20.8)
—
—
—
—
—
—
—
(0.4)
—
(6.7)
4.0
(4.6)
(0.6)
(1.4)
—
(1.3)
(3.3)
0.7
(3.2)
0.8
0.8
—
(12.7)
0.9
(11.8)
463.1
(336.0)
127.1
(0.2)
(1.6)
(1.8)
—
(1.8)
(1.3)
—
(3.3)
—
—
2.8
(0.3)
(4.0)
(2.2)
(2.0)
(4.2)
116.4
(63.9)
52.5
0.7
(3.2)
3.6
0.5
(4.0)
(14.9)
(1.1)
(16.0)
579.5
(399.9)
179.6
1 2012 results have been restated to separate discontinued operations as explained in Note 29.
23091-04 5 June 2014 12:21 PM Proof 10
www.capreg.com Stock code: CALFinancial Statements 92
Notes to the Financial Statements continued
for the year ended 30 December 2013
2b Reconciliations of reportable revenue, assets and liabilities
Revenue
Rental income from external sources
Inter-segment revenue
Management fees
Performance fees
Snozone 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
2013
£m
31.4
0.1
9.9
—
9.0
50.4
—
(31.4)
(1.4)
17.6
Year to
30 December
20121
£m
35.4
0.1
10.4
2.6
10.1
58.6
—
(35.4)
(1.2)
22.0
Note
2a
2a
2a
2a
2a
2a
3
35.7
14.7
50.4
41.5
17.1
58.6
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
£7.3 million (2012: £6.7 million) of the Group’s total revenue of £17.6 million (2012: £22.0 million). Further information on related
party transactions is disclosed in note 34 to the financial statements.
Assets
Total assets of reportable segments
Adjustment for associates and joint ventures
Group assets
Liabilities
Total liabilities of reportable segments
Adjustment for associates and joint ventures
Group liabilities
Net assets by country
UK
Germany
Group net assets
Note
2a
2a
2013
£m
515.6
(321.3)
194.3
(326.9)
321.3
(5.6)
143.3
45.4
188.7
2012
£m
579.5
(325.4)
254.1
(399.9)
325.4
(74.5)
136.5
43.1
179.6
23091-04 5 June 2014 12:21 PM Proof 10
Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013Financial Statements continued 93
3 Revenue
Statutory
Gross rent from wholly owned properties
Management fees
Snozone income
Revenue per consolidated income statement — continuing operations
1. 2012 results have been restated to separate discontinued operations as explained in Note 29.
Year to
30 December
2013
Total
£m
—
8.6
9.0
17.6
Year to
30 December
20121
Total
£m
—
11.9
10.1
22.0
Note
2a
2b
Management fees represent revenue earned by the Group’s wholly-owned CRPM subsidiary.
The fees earned by CRPM for asset and property management on The Mall are on the basis of 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
Snozone expenses
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
Total finance income
6 Finance costs
Interest payable on bank loans and overdrafts
Interest payable
Other interest payable
Total finance costs
1 2012 results have been restated to separate discontinued operations as explained in Note 29.
Year to
30 December
2013
£m
8.0
8.0
Year to
30 December
20121
£m
8.9
8.9
Year to
30 December
2013
£m
0.8
—
Year to
30 December
20121
£m
1.0
0.2
—
—
0.8
(0.2)
0.2
1.2
Year to
30 December
2013
£m
—
—
0.6
0.6
Year to
30 December
20121
£m
0.2
0.2
0.4
0.6
23091-04 5 June 2014 12:21 PM Proof 10
www.capreg.com Stock code: CALFinancial Statements
94
Notes to the Financial Statements continued
for the year ended 30 December 2013
7 Profit before tax
The profit before tax has been arrived at after charging the following items:
Depreciation of plant and equipment
Staff costs
Auditor’s remuneration for audit services (see below)
1. 2012 results have been restated to separate discontinued operations as explained in Note 29.
Auditor’s remuneration
The analysis of the auditor’s remuneration is as follows:
Year to
30 December
2013
£m
0.3
12.1
0.3
Year to
30 December
20121
£m
0.3
13.8
0.3
Note
13
8
Fees payable to the Company’s auditor and its associates for the audit of the Company’s annual
financial statements
Fees payable to the Company’s auditor and its 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 its 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
Year to
30 December
2013
£m
Year to
30 December
2012
£m
0.1
—
0.1
0.1
0.2
—
0.1
0.1
0.3
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 £40,225 (2012: £44,200) 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 (2012: £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.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013Financial Statements continued
95
8 Staff costs
All remuneration, including directors, is paid by either CRPM or the Snozone companies.
Salaries
Loss of office/redundancy payments
Discretionary bonuses
Share-based payments
Social security
Other pension costs
Note
24
Year to
30 December
2013
£m
8.6
0.6
0.9
0.8
10.9
1.0
0.2
12.1
Year to
30 December
2012
£m
9.5
0.1
2.0
0.8
12.4
1.2
0.2
13.8
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 employees (including directors), being full-time equivalents, employed by the Group during the year
was as follows:
CRPM
Snozone
Total staff numbers
Year to
30 December
2013
Number
68
151
219
Year to
30 December
2012
Number
77
165
242
The monthly average number of total employees (including directors) employed by the Group during the year was 351
(CRPM — 70, Snozone 281) compared to 429 in 2012 (CRPM — 79, Snozone — 350).
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 (credit)/charge
Deferred tax charge
Origination and reversal of temporary timing differences
Deferred tax credit – discontinued operations
Total deferred tax charge/(credit)
Total tax credit
Total tax credit — continuing operations
Total tax credit — discontinued operations
1 2012 results have been restated to separate discontinued operations as explained in Note 29.
£nil (2012: £nil) of the tax charge relates to items included in other comprehensive income.
Year to
30 December
2013
£m
Year to
30 December
20121
£m
Note
—
—
(0.9)
0.4
(0.5)
0.3
(0.1)
0.2
(0.3)
(0.2)
(0.1)
1.0
2.0
(2.6)
0.2
0.6
0.5
(3.5)
(3.0)
(2.4)
(0.9)
(1.5)
9d
9d
9c
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96
Notes to the Financial Statements continued
for the year ended 30 December 2013
9b Tax charge to equity
Current tax
Excess tax deductions related to share-based payments
on exercised options
Deferred tax
Arising on transactions with equity participants:
Change in estimated excess tax deductions related
to share-based payments
Total income tax recognised directly in equity
9c Tax charge reconciliation
Profit/(loss) before tax on continuing operations
Profit multiplied by the UK corporation tax rate of 23.25% (2012: 24.5%)
Non-allowable expenses and non-taxable items
Utilisation of tax losses
Tax on realised gains
Unrealised losses on investment properties not taxable
Temporary timing and controlled foreign companies income
Adjustments in respect of prior years
Total tax credit
1 2012 results have been restated to separate discontinued operations as explained in Note 29.
Year to
30 December
2013
£m
Year to
30 December
2012
£m
Note
—
(0.2)
(0.2)
—
—
—
Year to
30 December
2013
£m
9.3
2.2
(1.9)
—
0.5
0.4
(0.5)
(0.9)
(0.2)
Year to
30 December
20121
£m
(12.7)
(3.1)
(0.8)
(1.3)
0.5
4.7
1.7
(2.6)
(0.9)
9d
Note
9a
9d Deferred tax
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 2011
Deferred tax credit/(charge) — continuing operations
Deferred tax credit – discontinued operations
At 30 December 2012
Deferred tax credit/(charge) — continuing operations
Deferred tax charge to equity — continuing operations
Deferred tax credit — discontinued operations
At 30 December 2013
Capital
allowances
£m
(5.2)
0.1
3.3
(1.8)
0.4
—
—
(1.4)
Other timing
Differences
£m
1.3
(0.6)
0.2
0.9
(0.7)
0.2
0.1
0.5
Total
deferred tax
liability
£m
(3.9)
(0.5)
3.5
(0.9)
(0.3)
0.2
0.1
(0.9)
Note
9a
9a
9a
9b
9a
The reduction in the UK corporation tax rate at 1 April 2014 from 23% to 21% and from 21% to 20% at 1 April 2015 was
substantively enacted on 2 July 2013. Consequently, the UK corporation tax rate at which deferred tax is booked in the financial
statements is 20% (2012: 23%).
No deferred tax asset has been recognised in respect of temporary differences arising from investments in associates and interests
in joint ventures of £0.4 million (2012: £0.9 million) as it is not certain that a deduction will be available when the asset crystallises.
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97
9e Unused tax losses
The Group has £6.6 million (2012: £46.0 million) of unused revenue tax losses, all of which are in the UK. A deferred tax asset of
£0.2 million (2012: £0.5 million) has been recognised in respect of £0.8 million (2012: £2.0 million) of these losses, based on future
profit forecasts and expectations of recoverability. 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 £26.4 million (2012: £20.6 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.
9f Factors affecting tax
The Budget on 20 March 2013 revised the previously announced phased reduction in the UK main corporation tax rate. The rate is
now proposed to reduce to 20% (previously 21%) by 1 April 2015 (previously 1 April 2014). The reduction in the UK corporation tax
rate at 1 April 2013 to 23% was substantively enacted on 2 July 2013. The changes will not have a significant impact on the Group.
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
Profit/(loss) (£m)
Profit/(loss) 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
Profit/(loss) from continuing operations
Discontinued operations
Profit/(loss)
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Dilutive contingently issuable shares and share options
Year to 30 December 2013
Year to 30 December 20121
Note
Basic
Diluted
EPRA
diluted
Basic
Diluted
10b
10b
10b
9d
23
9.5
—
—
—
—
9.5
(0.4)
9.1
9.5
—
—
—
—
9.5
(0.4)
9.1
9.5
1.6
2.7
(4.2)
(0.4)
9.2
(0.7)
8.5
349.8
(1.3)
—
348.5
349.8
(1.3)
2.8
351.3
349.8
(1.3)
2.8
351.3
(11.8)
—
—
—
—
(11.8)
(4.2)
(16.0)
350.6
(1.3)
—
349.3
(11.8)
—
—
—
—
(11.8)
(4.2)
(16.0)
350.6
(1.3)
—
349.3
EPRA
diluted
(11.8)
19.1
1.1
(0.2)
(0.1)
8.1
(5.2)
2.9
350.6
(1.3)
—
349.3
Earnings/(loss) per share (pence)
Earnings/(loss) per share (pence) — continuing
operations
3p
3p
3p
3p
2p
3p
(5)p
(3)p
(5)p
(3)p
1p
2p
1 2012 results have been restated to separate discontinued operations as explained in Note 29.
At the end of the year, the Group had 5,358,855 (2012: 13,896,377) 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.
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Notes to the Financial Statements continued
for the year ended 30 December 2013
10b Reconciliation of earnings figures included in earnings per share calculations
Associates
Joint ventures
Wholly owned
Tax effect
Total
Year to 30 December 2013
Year to 30 December 20121
Profit/
(loss) on
disposal of
investment
properties
£m
(4.2)
(0.3)
1.0
0.8
(2.7)
Movement
in fair value
of financial
instruments
£m
3.4
1.3
—
(0.5)
4.2
Revaluation
movements
£m
(8.9)
(10.2)
—
—
(19.1)
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)
0.2
(0.6)
0.2
Revaluation
movements
£m
(0.2)
(1.4)
—
—
(1.6)
Note
16d
10a
1 2012 results have been restated to separate discontinued operations as explained in Note 29.
11 Property assets
11a Wholly-owned properties
Cost or valuation
At 30 December 2011
Capital expenditure
Disposal of freehold investment properties
Impairment of trading properties
Revaluation movement
At 30 December 2012
Capital expenditure
Disposal of freehold trading properties
Impairment of trading properties
Transfer to held for sale (Note 29)
At 30 December 2013
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Sub-total
investment
properties
£m
Freehold
trading
properties
£m
Total
property
assets
£m
0.2
—
(0.2)
—
—
—
—
—
—
—
—
8.3
0.3
—
—
(0.2)
8.4
—
—
—
(8.4)
—
8.5
0.3
(0.2)
—
(0.2)
8.4
—
—
—
(8.4)
—
71.5
—
—
(1.5)
—
70.0
0.5
(70.2)
(0.3)
—
—
80.0
0.3
(0.2)
(1.5)
(0.2)
78.4
0.5
(70.2)
(0.3)
(8.4)
—
The Group did not have any wholly owned development property in either the current year or the preceding year. Having disposed
of Great Northern Warehouse, its remaining freehold trading property, and reclassified its leasehold property, Leisure World, Hemel
Hempstead as held for sale during the year the Group no longer classifies any property assets as investment or trading property
on its balance sheet. Prior to its disposal Great Northern Warehouse had been pledged to secure banking facilities granted to the
Group (2012: value of £70.0 million). The historical cost of wholly owned property at 30 December 2012 was £92.2 million.
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99
30 December
2013
Valuation
£m
30 December
2012
Valuation
£m
Note
—
—
—
—
368.5
(1.3)
367.2
819.7
65.5
(18.4)
866.8
8.4
72.5
(2.5)
78.4
364.1
(0.2)
363.9
982.6
65.5
(19.1)
1,029.0
16e
16d
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
Valuations
In addition to the property assets classified as held for sale as shown on the balance sheet, the Group’s property assets include its
share in the investment properties held by its associates and joint ventures. External valuations at 30 December 2013 were carried
out on £1,188.2 million (2012: £1,428.7 million) of the gross property assets held by the Group and its associates and joint ventures,
of which the Group’s share was £411.6 million (2012: £461.3 million).
The valuations were carried out by independent qualified professional valuers from CB Richard Ellis Limited, Cushman & Wakefield
LLP and DTZ Debenham Tie Leung 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.
12 Goodwill
At the start of the year
Impairment losses for the year
At the end of the year
30 December
2013
£m
—
—
—
30 December
2012
£m
1.8
(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 2012 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.
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100
Notes to the Financial Statements continued
for the year ended 30 December 2013
13 Plant and equipment
Cost or valuation
At the start of the year
Additions
At the end of the year
Accumulated depreciation
At the start of the year
Charge for the year
At the end of the year
Carrying amount
At the end of the year
14 Non-current receivables
Financial assets
Loans to joint ventures
Non-derivative financial assets
Non-financial assets
Prepayments — tenant incentives
30 December
2013
£m
30 December
2012
£m
2.7
0.2
2.9
(1.9)
(0.3)
(2.2)
0.7
2.3
0.4
2.7
(1.6)
(0.3)
(1.9)
0.8
30 December
2013
£m
30 December
2012
£m
22.8
22.8
—
22.8
21.2
21.2
2.4
23.6
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 £15.5 million (2012: £15.0 million) to secure banking facilities granted to the Group.
15 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.
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101
Year to
30 December
2013
£m
3.6
—
6.4
—
—
10.0
30 December
2013
£m
80.7
29.3
3.6
—
(1.7)
—
0.2
—
—
112.1
Group interest
Average during
the year/until
disposal
%
20.84
20.00
30.06
49.90
Year to
30 December
2012
£m
(5.6)
(1.3)
(3.3)
(3.3)
0.7
(12.8)
30 December
2012
£m
120.2
16.2
(5.6)
0.5
(2.2)
(33.9)
—
(1.3)
(13.2)
80.7
At the end
of the year
%
29.26
20.00
30.06
49.90
Note
16d
16e
Note
16d
16d
16d
At the start
of the year
%
20.15
20.00
30.06
49.90
16 Investment in associates and joint ventures
16a 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
16b 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
The Group’s associates at 30 December 2013 were:
The Mall Limited Partnership
Kingfisher Limited Partnership
Garigal Asset Management GmbH (“Garigal”)
Euro B-Note Holding Limited
The Group holds 20% or more of The Mall Limited Partnership, Garigal Asset Management GmbH and Kingfisher Limited
Partnership and exercises significant influence through its representation on the General Partner or advisory boards. The Group’s
interest in The Junction Fund and X-Leisure Limited Partnership were disposed of and reclassified as held for sale respectively
during 2012.
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Notes to the Financial Statements continued
for the year ended 30 December 2013
16b Investment in associates continued
The Mall Limited Partnership
During the year the Group made acquisitions of units in The Mall Fund as summarised in the table below:
Date
4 January 2013
29 November 2013
23 December 2013
30 December 2013
Units purchased
million
1.6
53.5
5.7
25.0
Price
per unit
£
0.25
0.34
0.34
0.35
Consideration
£m
0.4
18.2
1.9
8.8
C&R holding on
completion
%
20.33
26.00
26.61
29.26
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 LP. The Kingfisher Centre was
purchased for £130.0 million at an 8% net initial yield.
The FIX UK Limited Partnership
In the prior year 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. 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 share of results of FIX UK that was
included within note 16d for the year to 30 December 2012 of £0.3 million related purely to the period to 30 June 2012. On
8 February 2013, Legal & General Property acquired the FIX UK Portfolio, the Group received £0.5 million of consideration in respect
of its 20% interest.
Euro B-Note Holding Limited
During the year at 30 June 2013 management performed an impairment review over the loan receivable due from German Portfolio
4 that was held at 30 December 2012 at a carrying value of £2.3 million. This impairment assessment resulted in the Group’s share
of the loan receivable being written down to £nil carrying value reflecting adverse developments in the six months most prominently
the insolvency of one of the most significant tenants in the portfolio.
16c Investment in joint ventures
At the start of the year
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
30 December
2013
£m
25.7
6.4
—
(0.2)
—
—
—
0.4
32.3
Note
16e
16e
34
16e
30 December
2012
£m
27.2
(3.3)
2.0
(0.6)
(0.8)
(3.3)
5.4
(0.9)
25.7
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103
16c Investment in joint ventures continued
The Group’s joint ventures at 30 December 2013 were:
German portfolio
The Auchinlea Partnership
Waterside Lincoln Limited Partnership
Group interest
Average during
the year/ until
disposal/ since
acquisition
%
50.00
50.00
50.00
At the start
of the year
%
50.00
50.00
50.00
At the end
of the year
%
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%). The Group’s interest in X-Leisure Limited (50%) was reclassified as held for sale during 2012
while the interest in Xscape Braehead Partnership (50%) was disposed of on 24 December 2012 (See Note 29 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
In the prior year 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. 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 its share of
results of German Portfolio 4 of a loss after tax of £6.6 million that was included within note 16d for 2012 relates purely to the period
to 30 June 2012.
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 16e:
Investment properties
Other assets
Current liabilities
Non-current liabilities
Net assets
£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.
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.
Cash distributions
Distributions received from Joint Ventures and Associates are disclosed in Note 34.
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Notes to the Financial Statements continued
for the year ended 30 December 2013
16d Analysis of investment in associates
Note
The Mall
£m
Other UK
Shopping
Centres
£m
Year to
30 December
Other
£m
Year to
30 December
2013
Total
£m
Year to
30 December
2012
Total
£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 on sale of investment properties
Fair value of interest rate swaps
Impairment of Euro B-Note
(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
Loss on sale of investment properties
Fair value of interest rate swaps
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
Other assets
Current liabilities
Non-current liabilities
Net assets (Group share)
65.2
(16.6)
(4.2)
44.4
(24.7)
19.7
—
—
(2.4)
(19.9)
13.9
—
11.3
—
11.3
732.3
100.3
(32.0)
(457.5)
343.1
13.6
(3.5)
(0.9)
9.2
(5.1)
4.1
—
—
(0.5)
(4.2)
2.9
—
2.0
4.3
—
4.3
214.3
29.4
(9.4)
(133.9)
100.4
12.7
(2.6)
(0.2)
9.9
(5.6)
4.3
—
—
1.6
—
2.5
—
8.4
—
8.4
134.5
13.6
(7.0)
(85.3)
55.8
2.6
(0.6)
—
2.0
(1.1)
0.9
—
—
0.3
—
0.5
—
—
1.7
—
1.7
26.9
2.7
(1.4)
(17.1)
11.1
—
—
—
—
(0.1)
(0.1)
4.6
(2.6)
—
—
—
(4.7)
(2.8)
(0.6)
(3.4)
—
2.7
(0.7)
—
2.0
—
—
—
—
(0.1)
(0.1)
1.4
(1.1)
—
—
—
(2.4)
—
(2.2)
(0.2)
(2.4)
—
0.8
(0.2)
—
0.6
77.9
(19.2)
(4.4)
54.3
(30.4)
23.9
4.6
(2.6)
(0.8)
(19.9)
16.4
(4.7)
16.9
(0.6)
16.3
866.8
116.6
(39.7)
(542.8)
400.9
16.2
(4.1)
(0.9)
11.2
(6.3)
4.9
1.4
(1.1)
(0.2)
(4.2)
3.4
(2.4)
2.0
3.8
(0.2)
3.6
241.2
32.9
(11.0)
(151.0)
112.1
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)
1,029.0
167.7
(45.2)
(759.1)
392.4
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
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105
16e Analysis of investment in joint ventures
German
portfolio
£m
Other UK
Shopping
Centres
£m
Year to
30 December
2013
Total
£m
Year to
30 December
2012
Total
£m
Other
£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
Profit/(loss) before tax
Tax
Profit/(loss) 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
Profit/(loss) before tax
Tax
Profit/(loss) after tax
Balance sheet (Group share)
Investment properties
Investment properties held for sale
Other assets
Current liabilities
Non-current liabilities
Net assets (Group share)
26.7
(4.0)
(0.3)
22.4
(10.1)
12.3
—
—
(4.7)
(0.5)
2.8
9.9
(1.6)
8.3
295.9
39.9
12.2
(32.6)
(256.6)
58.8
13.3
(2.0)
(0.2)
11.1
(5.0)
6.1
—
—
(2.3)
(0.3)
1.4
4.9
(0.8)
4.1
148.0
19.9
6.1
(16.3)
(128.3)
29.4
3.8
(0.2)
(0.5)
3.1
(0.8)
2.3
—
—
1.8
—
0.3
4.4
—
4.4
31.4
—
3.8
(1.5)
(28.2)
5.5
1.9
—
(0.2)
1.7
(0.4)
1.3
—
—
0.9
—
0.1
2.3
—
2.3
15.7
—
2.0
(0.8)
(14.1)
2.8
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.3
—
—
0.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.1
—
—
0.1
30.5
(4.2)
(0.8)
25.5
(10.9)
14.6
—
—
(2.9)
(0.5)
3.1
14.3
(1.6)
12.7
327.3
39.9
16.3
(34.1)
(284.8)
64.6
15.2
(2.0)
(0.4)
12.8
(5.4)
7.4
—
—
(1.4)
(0.3)
1.5
7.2
(0.8)
6.4
163.7
19.9
8.2
(17.1)
(142.4)
32.3
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)
363.9
—
14.7
(32.0)
(295.3)
51.3
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)
181.9
—
7.4
(16.0)
(147.6)
25.7
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106
Notes to the Financial Statements continued
for the year ended 30 December 2013
17 Current receivables
Financial assets
Trade receivables
Amounts owed by associates
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
2013
£m
30 December
2012
£m
0.3
1.3
3.6
0.7
5.9
0.1
6.0
0.8
6.8
0.7
2.0
1.7
0.3
4.7
1.4
6.1
1.3
7.4
Included in the non-derivative financial assets balance are receivables with a carrying amount of £0.2 million (2012: £0.5 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 £nil million (2012: £0.1 million) over trade
receivables as security deposits held in rent accounts. The average age of trade receivables is 35 days (2012: 35 days).
Analysis of non-derivative current financial assets
Not past due
Past due but not individually impaired:
Less than 1 month
1 to 3 months
3 to 6 months
Over 6 months
Allowances for doubtful receivables
At the start of the year
Additional allowances created
Utilised during the year
At the end of the year
30 December
2013
£m
30 December
2012
£m
5.5
0.1
0.3
—
—
5.9
4.2
—
0.4
—
0.1
4.7
30 December
2013
£m
30 December
2012
£m
0.2
0.9
(0.7)
0.4
0.2
0.2
(0.2)
0.2
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107
30 December
2013
£m
10.8
—
0.3
11.1
30 December
2012
£m
2.9
0.1
2.3
5.3
18 Cash and cash equivalents
Cash at bank
Security deposits held in rent accounts
Other restricted balances
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
19 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
2013
£m
10.4
0.7
11.1
30 December
2012
£m
4.7
0.6
5.3
30 December
2013
£m
30 December
2012
£m
0.3
2.3
0.7
0.3
3.6
—
3.6
0.3
0.4
4.3
0.6
4.6
0.8
0.8
6.8
1.8
8.6
1.9
1.2
11.7
The average age of trade payables is 11 days (2012: 20 days) and no amounts incur interest (2012: £nil).
20 Non-current payables
Financial liabilities
Accruals
Non-derivative financial liabilities
30 December
2013
£m
30 December
2012
£m
0.1
0.1
0.7
0.7
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108
Notes to the Financial Statements continued
for the year ended 30 December 2013
21 Borrowings
21a Summary of borrowings
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
21d
21d
30 December
2013
£m
30 December
2012
£m
—
—
—
—
—
—
—
—
—
57.6
1.0
58.6
(0.6)
58.0
(0.3)
—
58.3
58.0
The Group has a revolving credit facility of £25 million available until July 2016. This facility is secured by charges over the units the
Group holds in The Mall carried at £100.4 million at 30 December 2013 (2012: £68.0 million), charges over certain holdings in and
loans to the German joint venture carried at £39.6 million (2012: £35.5 million) and guarantees by the Company.
The core revolving credit facility was undrawn at 30 December 2013 (30 December 2012: £1.0 million drawn).
On disposal of the Great Northern Warehouse the Group repaid the loan that was secured on that property.
21b Maturity of borrowings
From two to five years
From one to two years
Due after more than one year
Current
21c Undrawn committed facilities
Expiring between one and two years
Expiring between two and five years
Note
21a
30 December
2013
£m
—
—
—
—
—
30 December
2013
£m
—
25.0
30 December
2012
£m
1.0
57.6
58.6
—
58.6
30 December
2012
£m
—
24.0
Under the terms of the loan covenants, as disclosed in note 22e, a total of £25 million (2012: £24.0 million) 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.
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109
21d Interest rate and currency profile of borrowings
Fixed and swapped rate borrowings
6% to 7%
Floating rate borrowings
Note
21a
21a
30 December
2013
£m
30 December
2012
£m
—
—
—
—
57.6
57.6
1.0
58.6
Floating rate borrowings bear interest based on three month LIBOR. The loan in respect of Great Northern Warehouse was sterling
denominated and at 30 December 2012 had a weighted average length of fix of 1.8 years.
22 Financial instruments and risk management
22a 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 2012.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 21a; cash and cash equivalents
as disclosed in note 18; 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 2013, 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
Note
21a
18
30 December
2013
£m
—
(11.1)
(11.1)
188.7
—
—
30 December
2012
£m
58.6
(5.3)
53.3
179.6
33%
30%
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110
Notes to the Financial Statements continued
for the year ended 30 December 2013
22 Financial instruments and risk management continued
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
22f
11a
16d
16e
30 December
2013
£m
254.6
(36.5)
218.1
188.7
135%
116%
—
241.2
163.7
404.9
63%
54%
30 December
20121
£m
321.9
(33.4)
288.5
179.6
179%
161%
78.4
207.1
181.9
467.4
69%
62%
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 16b and 16c). The X-Leisure Fund was also excluded following its reclassification as an asset held for sale (See
Note 29).
Categories of financial assets/(liabilities)
Financial assets
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
Non-current borrowings
Liabilities at amortised cost
Interest rate swaps
Liabilities at fair value held for
trading
Total financial assets/(liabilities)
Note
14
17
18
17
19
20
21a
19
Carrying
value
£m
2013
Gain/(loss) to
income
£m
Gain/(loss) to
equity
£m
Carrying value
£m
2012
Gain/(loss) to
income
£m
(Loss)/gain to
equity
£m
22.8
6.0
11.1
39.9
0.1
0.1
—
—
(3.6)
(0.1)
—
(3.7)
—
—
36.3
0.6
—
(0.3)
0.3
(0.2)
(0.2)
—
—
—
—
—
—
1.8
—
1.9
0.2
—
—
0.2
(0.7)
(0.7)
—
—
—
—
—
—
—
—
(0.5)
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
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111
22 Financial instruments and risk management continued
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.
22b 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 Group’s interest rate swap contracts expired during the year. The fair value of the interest rate swap at 30 December 2012 was
a liability of £1.8 million.
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)
1% increase in interest rates
Year to
30 December
2012
£m
0.2
5.4
5.6
5.6
Year to
30 December
2013
£m
—
3.5
3.5
3.5
1% decrease in interest rates
Year to
30 December
2012
£m
(0.2)
(5.4)
(5.6)
(5.6)
Year to
30 December
2013
£m
—
(3.5)
(3.5)
(3.5)
22c Credit risk
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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www.capreg.com Stock code: CALFinancial Statements 112
Notes to the Financial Statements continued
for the year ended 30 December 2013
22d 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
2013, this was achieved through a contract for €35 million (2012: €47.0 million) at a fixed exchange rate of 1.19254 (2012: 1.1797)
which hedges 65% (2012: 97%) of the Group’s German investment until 31 December 2014.
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 £nil (2012: £nil) as disclosed in note 5. During the year, the
ineffective portion of the hedge resulted in a charge of £0.5 million (2012: 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
Year to
30 December
2012
£m
0.2
(0.4)
Year to
30 December
2013
£m
(0.5)
(1.2)
10% weakening in sterling
Year to
30 December
2013
£m
0.3
2.2
Year to
30 December
2012
£m
(0.4)
1.2
22e 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.
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, which was fully available at 30 December 2013 as disclosed in note 21c.
23091-04 5 June 2014 12:21 PM Proof 10
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22e Liquidity risk continued
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.
2013
Financial assets
Non-current receivables
Current receivables
Cash and cash equivalents
Financial liabilities
Current payables
Non-current payables
2012
Financial assets
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
Note
1–2 years
£m
2–5 years
£m
More than
5 years
£m
14
17
18
19
20
Note
14
17
18
21a
21a
19
20
3.5
0.8
—
6.0
11.1
17.1
(3.6)
—
(3.6)
—
—
—
—
—
(0.1)
(0.1)
22.8
—
—
22.8
—
—
—
—
—
—
—
—
—
—
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)
—
—
—
—
—
—
—
—
—
Total
£m
22.8
6.0
11.1
39.9
(3.6)
(0.1)
(3.7)
Total
£m
21.2
4.7
5.3
31.2
(57.6)
(1.0)
(6.8)
(0.7)
(66.1)
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.
2013
Non-interest bearing
2012
Non-interest bearing
Fixed and swapped bank
loans
Variable interest rate
instruments
Less than
1 year
£m
(3.6)
(3.6)
Less than
1 year
£m
(6.8)
—
—
(6.8)
1–2 years
£m
(0.1)
(0.1)
1–2 years
£m
(0.7)
(57.6)
—
(58.3)
2–3 years
£m
—
—
2–3 years
£m
—
—
(1.0)
(1.0)
3–4 years
£m
—
—
3–4 years
£m
—
—
—
—
4–5 years
£m
—
—
4–5 years
£m
—
—
—
—
More than
5 years
£m
—
—
More than
5 years
£m
—
—
—
—
Total
£m
(3.7)
(3.7)
Total
£m
(7.5)
(57.6)
(1.0)
(66.1)
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114
Notes to the Financial Statements continued
for the year ended 30 December 2013
22e Liquidity risk continued
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.
2013
Net settled
Foreign exchange forward
contract
2012
Net settled
Interest rate swaps
Foreign exchange forward
contract
Less than
1 year
£m
—
—
Less than
1 year
£m
(1.8)
1.4
(0.4)
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
0.1
0.1
—
—
—
—
—
—
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
—
—
—
—
—
—
—
—
—
—
—
—
More than
5 years
£m
—
—
More than
5 years
£m
—
—
—
Total
£m
0.1
0.1
Total
£m
(1.8)
1.4
(0.4)
22f 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
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
Notional
principal
£m
2013
Book value
£m
2013
Fair value
£m
2012
Book value
£m
2012
Fair value
£m
—
—
(128.1)
(126.5)
(254.6)
—
—
(128.1)
(127.2)
(255.3)
—
0.1
0.1
(4.2)
(1.4)
(5.5)
(0.1)
(5.6)
—
0.1
0.1
(4.2)
(1.4)
(5.5)
(0.1)
(5.6)
(58.6)
(58.6)
(115.0)
(148.3)
(321.9)
(1.8)
1.4
(0.4)
(8.4)
(2.7)
(11.5)
(1.4)
(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)
(12.9)
—
29.2
135.0
112.6
Note
21a
22a
19
17
27
The fair value of borrowings has been estimated on the basis of quoted market prices. The fair value of the interest rate swaps has
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.
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115
22f Fair values of financial instruments continued
Details of the Group’s cash and deposits are disclosed in note 18 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
Foreign exchange forward contracts
Financial assets
Foreign exchange forward contracts
Financial liabilities
Interest rate swaps
There were no transfers between Level 1 and Level 2 in the year.
23 Share capital
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
Note
17
Note
17
19
Level 2
£m
0.1
0.1
Level 2
£m
1.4
1.4
(1.8)
(1.8)
2013
Level 3
£m
—
—
2012
Level 3
£m
—
—
—
Total
£m
0.1
0.1
Total
£m
1.4
1.4
(1.8)
(1.8)
Number of shares issued
and fully paid
2013
Number
2012
Number
Nominal value of shares
2013
£m
2012
£m
349,688,796 350,612,754
71,348,933
71,348,933
421,037,729 421,961,687
3.5
6.4
9.9
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.
During the year the Company bought back and cancelled 923,958 ordinary shares.
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116
Notes to the Financial Statements continued
for the year ended 30 December 2013
24 Share-based payments
The Group’s share-based payments comprise the SAYE scheme and the 2008 LTIP. Full details of the schemes are disclosed in the
Directors’ remuneration report. In accordance with IFRS 2, 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 2011
Granted during the year
Exercised during the year
Forfeited/lapsed/expired during the year
Outstanding at 30 December 2012
Granted during the year
Exercised during the year
Forfeited/lapsed/expired during the year
Outstanding at 30 December 2013
Exercisable at the end of the year
Fair value of award at grant date per share
Weighted average exercise price
Year to
30 December
2013
£m
0.8
0.8
Year to
30 December
2012
£m
0.8
0.8
SAYE scheme
Invitation I
601,905
—
(521,901)
(80,004)
—
—
—
—
—
—
£0.15
22.8p
Invitation II
487,306
—
—
(90,929)
396,377
COIP
2008 LTIP
1,202,080
13,500,000
—
—
—
—
— (1,202,080)
—
—
—
—
—
—
£0.14
0.0p
13,500,000
— 7,789,101
—
—
(13,500,000)
(72,881)
7,789,101
323,496
—
—
£0.15
£0.05
0.0p
36.7p
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.
On 8 June 2013 all of the 2008 LTIP awards issued on 8 June 2010 lapsed as the performance criteria were not met. On 16 August
2013 a new award was made under the 2008 LTIP the assumptions of which are shown below. Further details are disclosed in the
Directors’ remuneration report.
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117
24 Share-based payments continued
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 II
34.0p
36.7p
56%
3.00
3.51%
14.7%
2%
n/a
2008 LTIP
August 2013
issue
39.0p
0.0p
35%
3.00
0.86%
2.44%
0%
n/a
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.
25 Own shares
At the start of the year
Disposed of on exercise of options
At the end of the year
Own shares
£m
0.7
—
0.7
The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2013, the Capital
& Regional plc 2002 Employee Share Trust (the “ESOT”) held 1,314,024 (2012: 1,319,201) 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 2013 was £0.6 million (2012: £0.4 million).
26 Reconciliation of net cash from operations
Profit/(loss) for the year
Adjusted for:
Finance income — continuing and discontinued operations
Finance expense — continuing and discontinued operations
Income tax expense
Income tax expense — discontinued operations
Loss on disposal of JV & Associates — discontinued operations
Loss on disposal of wholly owned properties — discontinued operations
Loss on revaluation of wholly owned properties
Share of (profit)/loss in associates and joint ventures
(Profit)/loss on disposal of other assets
Depreciation of other fixed assets
Decrease/(increase in receivables)
Decrease in payables
Non-cash movement relating to share-based payments
Net cash from operations
1 Restated to reflect changes in Discontinued Operations.
Year to
30 December
2013
£m
9.1
Year to
30 December
20121
£m
(16.0)
(2.6)
4.7
(0.2)
(0.1)
—
2.1
0.2
(10.0)
(1.0)
0.3
0.2
(4.9)
0.8
(1.4)
(2.9)
5.6
(0.9)
2.0
4.0
—
1.7
12.0
0.1
0.3
(2.3)
(0.1)
0.8
4.3
Note
9b
29
29
29
16a, 29
13
24
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118
Notes to the Financial Statements continued
for the year ended 30 December 2013
27 Net assets per share
EPRA has issued recommended bases for the calculation of certain net assets per share information as shown in the following table:
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
28 Return on equity
Note
25
22f
Net assets
£m
188.7
—
—
—
188.7
—
5.6
1.0
195.3
Total comprehensive income/(loss) attributable to equity shareholders
Opening equity shareholders’ funds
Return on equity
Net assets
per share
(£)
0.54
30 December
2012
Net assets
per share (£)
0.51
30 December 2013
Number of
shares
(m)
349.7
(1.3)
2.8
351.2
0.54
0.51
351.2
0.56
0.55
30 December
2013
£m
9.2
179.6
5.1%
30 December
2012
£m
(16.6)
196.0
(8.5)%
29 Discontinued Operations
Year ending 30 December 2013
Morrison Merlin (Great Northern Warehouse)
On 31 October 2013, the Group completed the sale of Morrison Merlin Limited, the Group company that owned the Great Northern
Warehouse, to Resolution IV Holdings s.à.r.l. for a headline price of £71.1 million. At the date of disposal the net assets of Morrison
Merlin Limited were £14.1 million. The net cash consideration received after transaction costs of £0.1 million was £12.0 million
resulting in a loss on disposal after tax of £2.1 million.
Leisure World, Hemel Hempstead
On 20 August 2013, the Group announced the conditional exchange of contracts for the sale of the Leisure World property, Hemel
Hempstead for consideration that is expected, subject to guarantees and top up arrangements, to exceed the 30 June 2013 and
30 December 2012 valuation of £8.4 million. On the basis that at 30 June 2013 the sale was highly probable the property was
reclassified as an asset held for sale at that date. While the sale had not completed at 30 December 2013 in the opinion of the
Directors it remained highly probable at that date and as such classification as an asset held for sale has been maintained at the
expected net consideration of £8.4 million (£8.5 million of consideration less £0.1 million of associated costs).
On 14 February 2014, the sale was completed with cash consideration of £8.5 million received.
Given the disposal of Morrison Merlin and Leisure World, Hemel Hempstead form part of the Group’s strategic plan to exit the
Leisure market, the results for the year (up to the date of disposal and reclassification as held for sale respectively) and the
comparative period in 2012 have been presented as discontinued operations. Also included in discontinued operations in 2012,
consistent with the treatment in the 2012 annual accounts, are the Group’s share of results from their investments in The Junction
Fund, X-Leisure Limited and the X-Leisure Fund and Xscape Braehead.
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29 Discontinued Operations (continued)
Year ending 30 December 2012
Xscape Braehead, Glasgow
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.
X-Leisure
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
the sale completed on 16 January 2013 with net proceeds of £30.6 million received.
The Junction Fund
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.
The results of these discontinued operations, which have been included in the consolidated income statement, were as follows:
Revenue
Cost of sales
Loss on revaluation of investment properties
Share of profit in associates and joint ventures
Finance income
Finance costs
Attributable current tax credit/(charge)
Share of profit after attributable tax
Loss on disposal of discontinued operations
Loss from discontinued operations
Year ended
30 December
2013
£m
5.1
(1.2)
—
—
1.8
(4.1)
0.1
1.7
(2.1)
(0.4)
Year ended
30 December
2012
£m
6.7
(2.2)
(0.2)
0.8
1.7
(5.0)
(2.0)
(0.2)
(4.0)
(4.2)
Note
2a
The loss on disposal of discontinued operations of £2.1 million (2012: loss of £4.0 million) is stated after Deferred Tax credits of £0.1
million (2012: credits of £3.5 million) relating to Deferred Tax liabilities extinguished on disposal.
During the year, discontinued operations contributed £4.0 million (2012: £6.0 million) to the Group’s net operating cash flows,
contributed £42.6 million (2012: £15.0 million) in respect of investing activities (disposal proceeds) and paid £nil million (2012: £nil)
in respect of financing activities.
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120
Notes to the Financial Statements continued
for the year ended 30 December 2013
29 Discontinued Operations continued
Assets held for sale comprise:
Investment in associate — X-Leisure Limited Partnership
Investment in joint venture — X-Leisure Limited
Investment property — Leisure World, Hemel Hempstead
Note
30 December
2013
£m
—
—
8.5
8.5
30 December
2012
£m
31.7
0.5
—
32.2
£0.1 million (2012: £1.6 million) of balance sheet liabilities associated with these assets have been recognised at 30 December 2013
representing transaction costs outstanding at that date.
30 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
2013
£m
(2.0)
(7.5)
(17.9)
(27.4)
2012
£m
(2.0)
(8.2)
(19.9)
(30.1)
Operating lease payments are denominated in Sterling or Euros and have an average remaining lease length of 13 years (2012: 14
years) and rentals are fixed for an average of 2 years (2012: 2 years). During the year there were no contingent rents (2012: £nil) and
the Group incurred lease payments recognised as an expense of £1.9 million (2012: £2.0 million).
The Group as lessor
The Group leases out all of its investment properties under operating leases for average lease terms of 8 years (2012: 8 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:
100% figures
The Mall
Redditch
Total associates1
German portfolio1
Other joint ventures
Total joint ventures
Wholly owned1
Total
Unexpired
average
lease
term
Years
8.3
8.1
7.1
5.8
Less
than 1
year
£m
50.2
8.5
58.7
25.9
1.3
27.2
—
85.9
2–5
years
£m
148.3
26.5
174.8
83.7
3.8
87.5
—
262.3
6–10
years
£m
103.6
14.4
118.0
55.9
3.3
59.2
—
177.2
11–15
years
£m
38.2
7.3
45.5
15.7
0.4
16.1
—
61.6
16–20
years
£m
24.4
2.6
27.0
2.4
—
2.4
—
29.4
More
than 20
years
£m
104.6
17.5
122.1
—
—
—
—
122.1
30
December
2013
Total
£m
469.3
76.8
546.1
183.6
8.8
192.4
—
738.5
30
December
2012
Total
£m
585.9
79.4
665.3
183.2
11.1
194.3
73.6
933.2
1 Values for 2012 did not include German Portfolio 4 and FIX UK following the loss of joint control/significant influence during the year (see Notes 16b and 16c). The
X-Leisure Fund was excluded in 2012 following its reclassification as an asset held for sale and subsequent disposal post year end (See Note 29). Hemel Hempstead
has been excluded in 2013 following its reclassification as an asset held for sale and subsequent disposal post year end (See Note 29).
There was no contingent rent (2012: £nil) recognised in income from wholly owned properties during the year.
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121
31 Capital commitments
At 30 December 2013, the Group’s share of the capital commitments of its associates, joint ventures and wholly owned properties
was £2.6 million (2012: £2.5 million). This comprised £0.5 million (2012: £2.5 million) relating to The Mall and £2.1 million (2012: £nil)
relating to other assets.
32 Contingent liabilities
Morrison Merlin
Under the terms of the Morrison Merlin Limited disposal, Capital & Regional plc gave certain customary warranties as to their title to
the relevant shares and certain warranties in relation to Morrison Merlin Limited generally. The maximum liability of Capital & Regional
plc in respect of the warranties is £7,000,000. Any claims in respect of the warranties must be brought within 24 months of the
completion date.
X-Leisure
Under the terms of the X-Leisure disposal agreements, Capital & Regional gave certain customary warranties as to capacity, title
to the disposed assets, solvency, accounting and financial matters, litigation, compliance with laws and regulatory consents and
taxation.
The aggregate liability of the sellers in respect of breaches of certain warranties including those relating to title and capacity
and authority shall not exceed an amount equal to the consideration received by that seller. Other than in the case of fraud, the
aggregate liability of the Sellers and the Manager in respect of claims under the disposal agreements shall not exceed £30 million.
The Junction Fund
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 £34.8 million and the maximum liability of Capital & Regional (Junction GP) Limited in respect of the title and capacity
warranties is £35.4 million. The maximum liability of Capital & Regional Units LLP in respect of the other warranties is £3.5 million
and the maximum liability of Capital & Regional (Junction GP) Limited in respect of the other warranties is £3.5 million. 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.
33 Events after the balance sheet date
Leisure World, Hemel Hempstead
On 14 February 2014, the sale of Leisure World, Hemel Hempstead to Tesco Pension Fund was completed and cash consideration
of £8.5 million received.
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Notes to the Financial Statements continued
for the year ended 30 December 2013
34 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
2013
£m
Year to
30 December
2012
£m
Distributions received
Year to
30 December
2013
£m
Year to
30 December
2012
£m
—
—
—
—
—
—
—
—
0.6
0.6
—
—
—
—
—
0.5
—
—
0.5
1.0
—
0.5
1.2
—
1.7
—
—
—
0.2
0.2
—
0.2
0.9
1.1
2.2
—
—
0.3
0.3
0.6
The borrowing arrangements of The Mall restrict the ability to make cash distributions of profit to the Group while its LTV is above
60% and its debt above £600 million. Following the sale of Sutton Coldfield and Uxbridge in July 2013 the Mall’s LTV and debt levels
fell below these levels and remained so for the remainder of the year.
The £1.2 million received during the year relates to a distribution to cover tax to be paid on the share of profits for the period.
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)
Net amounts
Receivable from
Year to
30 December
2013
£m
Year to
30 December
2012
£m
As at
30 December
2013
£m
As at
30 December
2012
£m
7.3
—
—
0.7
—
8.0
—
—
—
0.2
0.2
6.7
3.4
(1.6)
0.4
0.1
9.0
—
0.3
—
0.2
0.5
1.2
—
—
0.1
—
1.3
—
—
15.5
7.4
22.9
1.9
0.1
(0.1)
0.1
—
2.0
—
—
14.8
6.4
21.2
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34 Related party transactions continued
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.
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.
The rents payable by Snozone companies are due to the relevant Xscape Partnerships. Snozone Limited (operator of the ski slopes
at Milton Keynes and Castleford) paid rent of £1.6 million (2012: £1.6 million) to the X-Leisure Limited Partnership which was a
related party prior to the Group’s disposal of its interest in January 2013.
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 £7.4 million related to the Waterside Lincoln Limited Partnership. The details of this transaction are
disclosed in note 16c.
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. 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 29.26% (our unit holding as of 30 December 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 its 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 its
investment in the Partnership.
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.
The Junction Fund
A performance fee of £2.6 million was recognised within CRPM during 2012 following the acquisition of the fund by Hammerson
plc. A further amount of £0.2 million was recognised and received in 2013 following the resolution of various matters upon which its
payment was contingent. The Group also bore 13.29% of the cost of the performance fee through its share of The Junction Fund
prior to disposal.
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Notes to the Financial Statements continued
for the year ended 30 December 2013
34 Related party transactions continued
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
Payment for loss of office
Share-based payments*
* Share-based payments relate to amounts awarded under the 2008 LTIP.
35 Dividends
Interim dividend per share paid for the year ended 30 December 2013 of 0.25p
Amounts recognised as distributions to equity holders in the year
Proposed second interim dividend per share for the year ended 30 December 2013 of 0.40p1
Year to
30 December
2013
£m
2.3
0.3
0.4
0.5
3.5
Year to
30 December
2012
£m
2.4
0.2
—
0.5
3.1
Year to
30 December
2013
£m
0.9
0.9
1.4
Year to
30 December
2012
£m
—
—
—
1. In line with the requirements of IAS 10 – ‘Events after the Reporting Period’, this dividend has not been included as a liability in these financial statements.
23091-04 5 June 2014 12:21 PM Proof 10
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Company Balance Sheet
At 30 December 2013
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
125
Note
C
D
D
E
E
F
F
F
F
2013
£m
77.8
160.2
14.8
—
175.0
(65.2)
(65.2)
109.8
—
—
—
187.6
9.9
60.3
4.4
113.0
187.6
2012
£m
79.8
145.8
14.2
0.3
160.3
(61.3)
(61.3)
99.0
(0.2)
—
(0.2)
178.6
9.9
60.3
4.4
104.0
178.6
These financial statements were approved by the Board of directors, authorised for issue and signed on their behalf on
20 March 2014 by:
Charles Staveley
Group Finance Director
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126
Notes to the Company Financial Statements
For the year ended 30 December 2013
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 34 to the Group financial statements. The Company had no direct
employees during the year (2012: 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 profit for the year attributable to equity shareholders was £16.5 million (2012: loss of £26.0 million).
C Fixed asset investments
At the start of the year
Investment
Disposals
Impairment of investments
At the end of the year
Subsidiaries
£m
78.8
10.2
(1.5)
(10.7)
76.8
Joint
ventures
£m
1.0
—
—
—
1.0
Other
investments
£m
—
—
—
—
—
Total
£m
79.8
10.2
(1.5)
(10.7)
77.8
During the year several of the Company’s subsidiaries converted intercompany balances payable to the Company to equity resulting
in a £9.0 million (2012: £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.
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
2013
£m
159.1
1.1
160.2
2013
£m
14.8
14.8
2012
£m
145.8
—
145.8
2012
£m
14.2
14.2
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127
2013
£m
64.4
0.1
—
0.7
65.2
2013
£m
—
—
Merger
reserve
£m
60.3
—
—
—
60.3
2012
£m
58.8
0.7
1.8
61.3
2012
£m
—
—
Total
£m
178.6
10.1
(0.9)
(0.2)
187.6
E Creditors
Amounts falling due within one year
Amounts owed to subsidiaries
Trade payables
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
At the start of the year
Retained profit for the year
Dividends paid
Other movements
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
3.0
(0.4)
—
—
2.6
Retained
earnings
£m
101.0
10.5
(0.9)
(0.2)
110.4
The Company’s authorised, issued and fully paid-up share capital is described in note 23 to the Group financial statements. The
other reserves are described in the consolidated statement of changes in equity in the Group financial statements.
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128
Notes to the Company Financial Statements
For the year ended 30 December 2013
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
Snozone Limited
The Auchinlea 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 5) Limited
Capital & Regional (Europe LP 6) Limited
Euro B-Note Holding Limited
The Mall Unit Trust
Incorporated/registered in Jersey and operating in Great
Britain
Capital & Regional (Jersey) Limited
Capital & Regional Hemel Hempstead (Jersey) Limited
Nature of
business
Property management
Property investment
Property investment and management
Property management
Property investment
Operator of indoor ski slopes
Property investment
Property investment
Property investment
Property management
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Finance
Property investment
Property investment
Property investment
Share of
voting
rights
100%
100%
100%*
100%
100%
100%
50%
50%
20%
30.06%
100%
100%
50%*
50%*
50%*
50%*
50%*
49.90%*
29.26%
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 16d and 16e to the Group financial statements.
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Other Information
129
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 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.
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.
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.
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.
Contribution is net rent less net interest, including unhedged
foreign exchange movements.
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.
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.
ERV growth is the total growth in ERV on properties owned
throughout the year including growth due to development.
Garigal is Garigal Asset Management GmbH, an associate of
the Group, which earns management and performance fees
from the German joint venture.
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.
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
for 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.
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.
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.
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Other Information continued
Glossary of Terms continued
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 (until disposal on
16 January 2013) 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 (in 2012 until
reclassification as held for sale) and Garigal, the profit from
Snozone and any fixed central costs and interest. Recurring pre-
tax profit includes results from Discontinued Operations up until
the point of disposal or reclassification as held for sale.
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.
Reversionary yield is the anticipated yield to which the net
initial yield will rise once the rent reaches the ERV.
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.
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.
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, COIP and SAYE Scheme, which are spread over the
performance period.
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Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 131
Five Year Review
for the year 30 December 2012 to 30 December 2013
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
2013
£m
—
23.5
—
32.3
112.1
11.1
8.5
2.2
—
(1.0)
188.7
9.9
—
—
66.3
112.5
188.7
5.1%
5.8%
53.9%
44p
20121
£m
20111
£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
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
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
(8.5)%
(8.4)%
(9.5)%
29p
11.9%
11.8%
(3.8)%
32p
33.9%
35.1%
(2.2)%
33p
(64.3)%
(72.3)%
(24.7)%
34p
9.2
(16.6)
20.7
44.0
(119.7)
54p
54p
56p
4.8%
—
134.9%
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%
17.6
9.6
9.1
0.2
9.3
0.2
9.5
14.0
4.7
3.9
3p
3p
2p
0.65p
22.0
13.1
(13.3)
0.6
(12.7)
0.9
(11.8)
13.3
—
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
—
1 2012 and 2011 results have been restated from those originally presented in those respective years to separate discontinued operations as explained in Note 29.
23091-04 5 June 2014 12:21 PM Proof 10
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132
Other Information continued
Property Under Management Information
At 30 December 2013
Property under management
Wholly owned
Associates
Joint ventures
Other property
Total
30 December
2013
£m
8
820
369
—
1,197
30 December
2012
£m
81
983
365
—
1,429
30 December
2011
£m
81
1,824
576
—
2,481
30 December
2010
£m
82
2,132
547
71
2,832
30 December
2009
£m
84
2,408
648
—
3,140
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 2013
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
2013
9.2
3p
195.3
56p
188.7
54p
6.3%
6.7%
4.4%
2013
£m
8.5
411.5
—
(8.4)
411.6
8.2
14.3
434.1
31.5
(4.0)
27.5
1.5
29.0
6.3%
6.7%
2012
8.1
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%
23091-04 5 June 2014 12:21 PM Proof 10
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Covenant Information
At 30 December 2013
See-through
borrowings
£m
Covenant
30 December
2013
Future changes
Core revolving credit facility
Asset cover
Gearing
ICR
— Greater than 200%
—
Less than 100%
— Greater than 150%
n/a
n/a
n/a
The Mall
LTV
ICR
Germany
LTV
Portfolios 1,2 and 5
Portfolio 3
Portfolio 6
ICR
Portfolio 3
Portfolio 6
DSCR
Portfolios 1, 2 and 5
Portfolio 3
Portfolio 6
Waterside Lincoln
LTV
ICR
Redditch1
LTV
ICR
Debt to rent
111.1
71%
— Greater than 130%
58.3
39.5
21.8
85%
n/a
n/a
— Greater than 160%
— Greater than 140%
— Greater than 120%
Greater than 110%
Greater than 110%
60%
6.8
— Greater than 175%
55% Reducing to 65% by December 2014
216%
79%
n/a
n/a
294%
596%
168%
156%
253%
43%
242%
17.1
73%
— Greater than 175%
< 1000%
—
254.6
63% Reducing to 69% in May 2015
219% Increasing to 200% in May 2015
854% Reducing to 900% in May 2015
1 Reflects revised terms following re-financing completed in February 2014.
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Other Information continued
Fund Portfolio Information (100% figures)
At 30 December 2013
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:
2014
2015
2016-2018
ERV (£m) of leases expiring in:
2014
2015
2016-2018
Passing rent (£m) subject to review in:
2014
2015
2016-2018
ERV (£m) of passing rent subject to review in:
2014
2015
2016-2018
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 (100%)
Current year net rental income (£m)
Properties owned throughout 2012/2013
Disposals
Net rental income
Prior year net rental income (£m)
Properties owned throughout 2012/2013
Disposals
Net rental income
Other Data
Unit Price (£1.00 at inception)
Group share
23091-04 5 June 2014 12:21 PM Proof 10
The Mall
German
Portfolio
6
716
3,245
684.7
47.7
732.3
(2.4)
6.8%
7.2%
3.6%
15.0%
55.4%
46.0%
8.3
9.2
6.8
4.2
12.1
8.0
4.5
11.9
4.7
7.6
9.6
5.0
7.6
9.3
56.9
53.8
61.9
(1.3)%
4.7%
48.0
4.7
52.7
49.2
14.8
64.0
25
200
3,322
336.8
(1.0)
335.8
(4.7)
6.8%
n/a
4.1%
n/a
71.5%
69.2%
8.1
8.1
0.5
2.5
8.1
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
25.2
n/a
n/a
2.5%
22.6
0.1
22.7
24.9
2.0
26.9
£0.37
29.26%
n/a
49.60%
Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013
135
Property Information
At 30 December 2013
The Mall properties
Property
Valued at £125m plus
The Mall, Luton
Description
Lettable space
(sq feet)
Car park
spaces Principal occupiers
Number of
lettable units
Leasehold covered shopping centre
900,000
1,706 Debenhams, Boots, Primark,
163
on two floors, offices extending to over
65,000 sq ft
H&M, Next, Top Shop, Marks
& Spencer, Wilkinson, TK
Maxx
The Mall, Wood Green
Freehold, partially open shopping
550,000
1,500 Primark, Wilkinson, H&M,
104
centre, on two floors with nearly
40,000 sq ft of offices
Boots, Argos, TK Maxx, WH
Smith, New Look, Next
Valued at £70m to £125m
The Mall, Blackburn
Leasehold partially covered shopping
600,000
1,304 Debenhams, Primark, H&M,
127
centre on three floors
Next, Boots, Argos, BHS
The Mall, Maidstone
Freehold covered shopping centre on
500,000
1,050 Boots, BHS, New Look,
103
three floors with offices extending to
40,000 sq ft
Wilkinson, Next, Sports
Direct
The Mall, Camberley
Part leasehold covered shopping
390,000
1,049 House of Fraser, Top Shop,
154
centre on one floor
The Mall, Walthamstow
Freehold covered shopping centre on
260,000
Boots, Primark, Sainsburys,
Argos, River Island
850 Asda, BHS, Boots, New
Look, River Island, Top Shop
64
two floors
Description
Other properties
Property
Valued at above £50m
Kingfisher Shopping Centre,
Lettable space
(sq feet)
Principal occupiers
Number of
lettable units
Freehold covered shopping centre on two
900,000
Debenhams, Marks &
165
Redditch (20%)
principal trading levels
Spencer, Primark, Next,
Arcadia, TK Maxx
Valued at below £50m
Waterside Shopping Centre,
Lincoln (50%)
Freehold covered shopping centre on three floors
120,000
New Look, Top Shop,
38
Stormfront, Food Court
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Other Information continued
Property Information continued
At 30 December 2013
German properties1
Description
Retail park
Retail park
Retail park
Hypermarket
Retail park
Retail park
Hypermarket
Hypermarket
Property
Valued at €50 million to €100 million
Dortmund
Valued at €20 million to €50 million
Lübeck
Hameln
Trier – Kenn
Walldorf
Schwäbisch Hall
Ingelheim
Sinzheim
Valued at €10 million to €20 million
Brühl
Marl
Lauchhammer
Köln
Herne
Stadthagen
Bochum Langendreer
Balingen
Valued at less than €10 million
Oschersleben
Bad Sobernheim
Hösbach
Heide
Bochum — Wattenscheid
Leverkusen
Kirchheimbolanden
Aachen
Kreuztal
Hypermarket
Retail park
Hypermarket/DIY
Hypermarket
Hypermarket
DIY
Hypermarket
DIY
Hypermarket/DIY
Hypermarket
DIY
Retail Park
Retail/Leisure
Hypermarket
Supermarket
DIY
N/A
Lettable space
(sq m)
Principal occupier
JV share
33,900
Real
29,100
16,900
11,600
12,200
22,400
10,200
16,500
Coop
Kaufland
Real
Rewe
Kaufland/Hela
Real
Real
20,200
8,800
Real
Kaufland
17,200 Marktkauf
9,000
8,000
10,900
6,400
7,500
Real
Rewe & Toom
Hagebau
Kaufland
Toom
10,500
7,400
Toom/Marktkauf
Real
14,900 Globus Fachmarkte
4,600 Woolworths
Fit X
Edeka
HIT Handelsgruppe
Hammer
N/A
10,000
6,600
2,600
2,800
6,400
100%
100%
100%
100%
100%
95%
100%
100%
100%
100%
100%
100%
100%
100%
91.5%
100%
95%
95%
100%
100%
100%
100%
100%
100%
100%
1 Excluding German Portfolio 4 (see Note 16c of Group Financial statements).
23091-04 5 June 2014 12:21 PM Proof 10
Capital & Regional plcAnnual Report and Accounts for the year ended 30 December 2013 137
www.capreg.com
Stock code: CAL
Advisers and Corporate Information
At 30 December 2013
Auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Investment bankers/brokers
JP Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Principal valuers
CB Richard Ellis Limited
Kingsley House
1a Wimpole Street
London W1G 0RE
Cushman & Wakefield LLP
43/45 Portman Square
London W1A 3BG
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
DTZ
48 Warwick Street
London W1B 5NL
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
Registered number
1399411
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.
2014 financial calendar
Annual General Meeting
2014 interim results
2014 annual results
June 2014
August 2014
March 2015
23091-04 5 June 2014 12:21 PM Proof 10
www.capreg.com Stock code: CALOther InformationOther Information
52 Grosvenor Gardens
London
SW1W 0AU
Telephone: +44 (0)20 7932 8000
www.capreg.com
23091-04 5 June 2014 12:21 PM Proof 10