Annual Report and Accounts for the year ended 30 December 2017
Stock Code: CAL
Communities
&
Retailers
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WELCOME TO THE
CAPITAL & REGIONAL
ANNUAL REPORT 2017
Capital & Regional is a UK focused retail property REIT
specialising in community shopping centres that dominate
their catchment, serving the non-discretionary and value
orientated needs of their local communities.
It has a strong track record of delivering value enhancing retail and leisure asset management
opportunities across a c.£1 billion portfolio of tailored in-town community shopping centres.
Capital & Regional is listed on the main market of the London Stock Exchange
and has a secondary listing on the Johannesburg Stock Exchange.
Capital & Regional owns seven shopping centres in Blackburn, Hemel Hempstead, Ilford,
Luton, Maidstone, Walthamstow and Wood Green. It also has a 20% joint venture interest
in the Kingfisher Centre in Redditch. Capital & Regional manages these assets through
its in-house expert property and asset management platform.
Capital & Regional strategy
Redefine
community
shopping
centres
Reposition
assets and
retail mix
Refocus
Enhance
management
team
shareholder
value
Redefine – Redefine and own
the Community shopping
centre category in the UK,
consistent with global best
practice
Reposition – Actively
remerchandise centres
to increase exposure to
growth and online resilient
categories and differentiate
from competition. Tailored
to community requirements
with focus on local, value,
relevance, quality and total
experience
Refocus – Agile management,
data driven, decentralised to
accelerate decision making
and delivery
Enhance – Right offer driving
footfall, dwell time and
ultimately retailer sales, C&R
income and shareholder
returns
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Table plain text
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1
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2
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Highlights
Net Rental Income
Adjusted Profit1
+£1.2m
+2.4%
+£2.3m
2017
2016
£51.6m
£50.4m
2017
2016
+8.6%
£29.1m
£26.8m
Adjusted Earnings per share1
IFRS Profit/(Loss) for the period
+0.28
2017
2016
+7.3%
4.10p
3.82p
2017
£22.4m
£(4.4m)
2016
Total dividend per share
Net Asset Value (NAV) per share
+0.25p
2017
2016
+7.4%
3.64p
3.39p
-1p
2017
2016
EPRA NAV per share
Group net debt2
-1p
2017
2016
Net debt to property value2
2017
2016
-1.5%
+5.9m
2017
2016
67p
68p
46%
46%
-1.5%
67p
68p
+1.5%
£404.0m
£398.1m
All metrics are for wholly-owned portfolio unless otherwise stated.
1. Adjusted Profit and Adjusted Earnings per share are as defined in the Glossary. Adjusted Profit
incorporates profits from operating activities and excludes revaluation of properties and financial
instruments, gains or losses on disposal, exceptional items and other defined terms. A reconciliation
to the equivalent EPRA and statutory measures is provided in Note 9 to the financial statements.
2. December 2016 figures are proforma, adjusted for the refinancing of Mall assets completed on
4 January 2017, Ipswich disposal completed on 17 February 2017 and Ilford acquisition completed
on 8 March 2017.
Contents
STRATEGIC REPORT
Our Portfolio
Chairman’s Statement
The Retail Backdrop
Our Strategy
Our Business Model
Pilot Projects
Key Performance Indicators
Chief Executive’s Statement
Operating Review
Financial Review
Managing Risk
Responsible Business
GOVERNANCE
Directors
Corporate Governance Report
Audit Committee Report
Directors’ Remuneration Report
Policy
2017 Remuneration Report
Directors’ Report
Directors’ Responsibilities
Statement
Independent Auditor’s Report
FINANCIALS
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of
Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Glossary of Terms
Five Year Review (Unaudited)
Convenant Information (Unaudited)
Wholly-Owned Assets Portfolio
Information (Unaudited)
EPRA Performance Measures
(Unaudited)
Advisers and Corporate Information 122
121
120
02
04
06
08
10
12
14
16
18
22
26
32
36
38
43
45
47
54
61
65
66
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78
116
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For further information see
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
02
OUR PORTFOLIO
Wholly-owned assets
The Mall, Blackburn
• Leasehold covered shopping centre on three floors
• 600,000 sq ft
• 122 lettable units
Principal occupiers:
Primark, Debenhams, (cid:43)(cid:9)(cid:48), (cid:49)ext, (cid:58)ilko, Pure Gym
The Marlowes, Hemel Hempstead
• Freehold covered shopping centre and high
The Exchange, Ilford
• Predominantly freehold covered shopping
street parades
• 350,000 sq ft
• 109 lettable units
Principal occupiers:
Wilko, New Look, Sports Direct, River Island
centre on three floors
• 300,000 sq ft
• 79 lettable units
Principal occupiers:
Debenhams, Next, H&M, TK Maxx, M&S
The Mall, Luton
• Leasehold covered shopping centre on two
The Mall, Maidstone
• Freehold covered shopping centre on three
floors, with over 65,000 sq ft of offices
floors with over 40,000 sq ft of offices
• 900,000 sq ft
• 170 lettable units
Principal occupiers:
Primark, Debenhams, H&M, M&S, TK Maxx, Wilko
• 500,000 sq ft
• 107 lettable units
Principal occupiers:
TJ Hughes, Boots, Sports Direct, Wilko, Next,
Iceland, Maidstone Borough Council
The Mall, Walthamstow
• Leasehold covered shopping centre on two floors
• 260,000 sq ft
• 69 lettable units
Principal occupiers:
TK Maxx, Sports Direct, Lidl, Asda, Boots, The Gym
Joint venture assets
Snozone Leisure business
The Mall, Wood Green
• Freehold partially open shopping centre on two floors
• 540,000 sq ft
• 109 lettable units
Principal occupiers:
Primark, Wilko, H&M, Boots, TK Maxx, Travelodge,
Cineworld
Kingfisher Shopping Centre,
Redditch
• C&R owns 20% in JV with Oaktree Capital
Management
• Freehold covered shopping centre on two
principal trading levels
• 900,000 sq ft
• 174 lettable units
Principal occupiers:
Vue Cinema, H&M, The Range, Primark, Next,
Debenhams, TK Maxx
• 100% subsidiary
• Largest indoor ski slope operator in the UK
• Operating at Milton Keynes, Castleford and a
•
dry indoor slope in Basingstoke
In existence since 2000 and has taught over
2 million people to ski or snowboard
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OUR PORTFOLIO
The Exchange, Ilford
• Predominantly freehold covered shopping
centre on three floors
• 300,000 sq ft
• 79 lettable units
Principal occupiers:
Debenhams, Next, H&M, TK Maxx, M&S
The Mall, Walthamstow
• Leasehold covered shopping centre on two floors
• 260,000 sq ft
• 69 lettable units
Principal occupiers:
TK Maxx, Sports Direct, Lidl, Asda, Boots, The Gym
Snozone Leisure business
Key to Map
Wholly Owned Assets
JV Assets
Blackburn
Redditch
Luton
Hemel Hempstead
Walthamstow
Wood Green
Ilford
Maidstone
STRATEGIC REPORT
03
Key
Characteristics
about Our Malls
High Footfall -
78m Shopper visits
per year
Scale and dominance
of retail offer
Strong and improving
demographics
London/
South-East bias
Convenience –
town centre locations
Extensive accretive asset
management opportunities
(including leisure, residential and office)
Affordable rents
- Average rent c. £15 psf
- Occupancy Cost Ratio
of c. 12.6%
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
04
CHAIRMAN’S STATEMENT
Hugh Scott-Barrett
Chairman
“ C&R is reporting
another strong
set of results with
Adjusted Profit,
which reflects
the underlying
performance of
the business,
increasing by 8.6%
to £29.1 million.”
C&R is reporting another strong set of
results. Adjusted profit, which reflects the
underlying performance of the business,
has risen by 8.6% from £26.8 million to
£29.1 million. Given the very challenging
retail environment we have seen for much
of the year, this result is an endorsement
of the resilience of the existing portfolio
together with the impact of key asset
management initiatives at Walthamstow
and Wood Green, in particular, which
positively impacted income in 2017. Profit
for the period, at £22.4 million, compares
with a loss in 2016 of £4.4 million which
reflected a revaluation loss and an £11
million charge in relation to implementing
the new debt structure.
Both Net Asset Value per share and
EPRA Net Asset Value per share of 67
pence compare with 68 pence as at
30 December 2016. This modest decline
reflects the strong performance of our
assets based in and around London offset
by some yield expansion in those outside
of the Greater London area.
Strategy
The appointment of a new Chief Executive
has afforded the opportunity for a root
and branch review of strategy. Lawrence
Hutchings has provided the Board with
recommendations on how this should
evolve and on how execution can be
enhanced in light of the fast changing
and challenging retail landscape. This has
been debated extensively and endorsed
by the Board. The management team
subsequently communicated the strategy
to investors in December 2017.
C&R is well placed to benefit from
increasing polarisation within the
shopping centre market which is driving
consumers to separate visits to premium
destinations for their “wants”, and to
convenient local venues, which focus
on their regular value and essential
non-discretionary spending, for their
“needs”. The Group’s community malls
have benefitted from the rebasing of
rents since the global financial crisis.
This makes them appealing to retailers,
who can generate a high proportion of
their profits from this segment due to
the attractive dynamic between rental
levels and sales performance. To be
successful, community malls still need
to deliver a quality product tailored to
the needs of the individual communities
that they serve. Furthermore, creativity
and investment are required to deliver
a superior experience as the occupier
mix continues to evolve, to further
reflect categories which perform best
in physical stores in an increasingly
omnichannel environment. C&R’s
management platform remains a source
of real differentiation given the ever more
critical need for intensive management
of these community malls to continually
renew, adapt and implement changes.
The success of pilot projects in Ilford and
Maidstone demonstrates how responsive
consumers can be to this approach and
the disproportionately large impact even
quite minor changes can have.
Responsible Business
We continued our record of year-on-year
energy improvements reducing our total
consumption by more than 10% in 2017.
Our expertise not only helps to reduce
our environmental impact but also helps
us lower our own costs and maintain a
very competitive service charge for our
retailer customers.
We have also stepped up the training
of our operational teams to ensure that
they remain as prepared as possible for
any potential threat. Our “go to critical
plans” were successfully implemented
for periods during the year in response
to national security concerns, with our
centre teams working closely with local
emergency services.
The award of an 11th consecutive Royal
Society for the Prevention of Accidents
(“ROSPA”) Gold award again underlines
our focus on health and occupational
safety standards across our shopping
centres.
Community engagement remains at
the heart of our business and our
commitment was demonstrated through
a number of initiatives during the year,
including the launch of a new dedicated
community hub at Maidstone as part of
the pilot project.
Dividend
The Board is recommending a final
dividend of 1.91 pence per share taking
the full year dividend to 3.64 pence per
share. This represents an increase of
7.4% over the 2016 full year dividend
of 3.39 pence per share, in line with
previous guidance. The dividend is
comfortably covered by underlying
earnings with a pay-out ratio of 88.8%
compared to 88.7% in 2016. Our strategic
asset management masterplans, now
implemented across our portfolio
following our successes at Ilford and
Maidstone, underpin our objective of
delivering annual dividend growth in a
range of 5–8% over the medium term.
People
I would like to thank all our staff for
their hard work during what has been
an exciting but challenging year for the
business while managing the evolution in
strategy. I would also like to congratulate
the Snozone team who were awarded
the Best Sporting Venue at the UK School
Travel awards, beating Manchester United’s
museum and stadium tours, Twickenham
Stadium, Wimbledon Lawn Tennis
Association and the National Football
Museum to this prestigious award.
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STRATEGIC REPORT
05
reflect categories which perform best
in physical stores in an increasingly
omnichannel environment. C&R’s
management platform remains a source
of real differentiation given the ever more
critical need for intensive management
of these community malls to continually
renew, adapt and implement changes.
The success of pilot projects in Ilford and
Maidstone demonstrates how responsive
consumers can be to this approach and
the disproportionately large impact even
quite minor changes can have.
Responsible Business
We continued our record of year-on-year
energy improvements reducing our total
consumption by more than 10% in 2017.
Our expertise not only helps to reduce
our environmental impact but also helps
us lower our own costs and maintain a
very competitive service charge for our
retailer customers.
We have also stepped up the training
of our operational teams to ensure that
they remain as prepared as possible for
any potential threat. Our “go to critical
plans” were successfully implemented
for periods during the year in response
to national security concerns, with our
centre teams working closely with local
emergency services.
The award of an 11th consecutive Royal
Society for the Prevention of Accidents
(“ROSPA”) Gold award again underlines
our focus on health and occupational
safety standards across our shopping
centres.
Community engagement remains at
the heart of our business and our
commitment was demonstrated through
a number of initiatives during the year,
including the launch of a new dedicated
community hub at Maidstone as part of
the pilot project.
Dividend
The Board is recommending a final
dividend of 1.91 pence per share taking
the full year dividend to 3.64 pence per
share. This represents an increase of
7.4% over the 2016 full year dividend
of 3.39 pence per share, in line with
previous guidance. The dividend is
comfortably covered by underlying
earnings with a pay-out ratio of 88.8%
compared to 88.7% in 2016. Our strategic
asset management masterplans, now
implemented across our portfolio
following our successes at Ilford and
Maidstone, underpin our objective of
delivering annual dividend growth in a
range of 5–8% over the medium term.
People
I would like to thank all our staff for
their hard work during what has been
an exciting but challenging year for the
business while managing the evolution in
strategy. I would also like to congratulate
the Snozone team who were awarded
the Best Sporting Venue at the UK School
Travel awards, beating Manchester United’s
museum and stadium tours, Twickenham
Stadium, Wimbledon Lawn Tennis
Association and the National Football
Museum to this prestigious award.
Board
There have been a number of changes
in the composition of the Board during
the year, reflecting the significant
amount of time the Board had devoted
in the previous 12 months to ensuring
a successful senior management
succession plan was in place. John
Clare stepped down as chairman on
13 June 2017 after seven years on the
Board. John played a key role in leading
C&R through a series of changes that
were transformational for the Group’s
prospects. Ken Ford stepped down as an
Executive Director on 9 May 2017 and left
the Group on 31 December 2017 after
over 20 years of committed service. Ken
was one of the architects of C&R and the
Group’s position as a leading owner of
community shopping centres. I would
like to thank both John and Ken on behalf
of the Board for their contribution over
many years.
We were very pleased to welcome
Lawrence Hutchings to the Board as
Chief Executive on 13 June 2017.
Lawrence brings extensive retail property
expertise from his time at Hammerson
and, more recently, Blackstone in
Australia. He has quickly made a
very positive impact in terms of the
repositioning of the business, facilitating
in the process my transition to Non-
executive Chairman.
Hugh Scott-Barrett
Chairman
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
06
THE RETAIL BACKDROP
Polarisation of the
retail sector
Polarisation is a structural trend affecting
many industries. In retail this is reflected
in consumers separating their visits
between premium destinations for their
“wants”, and to convenient local venues,
which focus on their regular value and
essential non-discretionary spending, for
their “needs”.
NEEDS
Squeezed
middle
Squeezed
middle
The critical role of Community shopping centres
Our “Community” shopping centres, which are positioned in highly convenient
and accessible locations and characterised by a high conversion and frequency
of visits, are focused on this “needs” based end of the spectrum.
Smaller
convenience
destinations
Larger
destination
venues
Functional
(366 assets)
Neighbourhood
(888 assets)
Community
(254 assets)
Community Plus
(226 assets)
Regional Mall
(33 assets)
Major Mall
(18 assets)
Uber Centre
(7 assets)
Source: Javelin Group/SHOPSCORE
The following graph highlights the critical role played by Community centres
for occupiers as their mix of affordable occupancy costs (illustrated by Zone
A rents) and high footfall traffic driving sales enable them to act as the
engine room for retailers’ profits.
WANTS
Uber Centre
Major Mall
Regional Mall
Community
Plus
Community
Neighbourhood
Functional
)
f
s
p
/
£
(
t
n
e
r
A
e
n
o
Z
e
n
i
l
d
a
e
H
350
300
250
200
150
100
50
0
Mall
Centre
Mall
Centre
Mall
Centre
Retail
Park
Outlet
Headline Zone A rent (£/psf)
SHOPSCORE sales productivity index
Source: Javelin Group/SHOPSCORE
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
08
OUR STRATEGY
Redefine
community shopping centres
Reposition
assets and retail mix
Refocus
management team
Enhance
shareholder value
Redefine
Our objective is to redefine and own the community shopping centre category in the UK consistent with global best practice.
We define and assess our community shopping centre offer across three key aspects:
• Physical attributes – including the location, size and dominance of the centre and its accessibility in terms of local transport links
and parking provision
• Products and services – including the retail mix, the provision of grocery, leisure and services offerings and the quality of facilities
• Differentiation – being the ways in which a centre stands out as more than just a retail destination including the strength of
community links, how well tailored the offer is to the locality, how it contributes and measures on sustainability and in being a
local employer of choice.
Reposition
Central to our strategy is repositioning our centres. We believe
retailers and communities are clear in their expectations for
what they want to see from their Community Centres with a
strong mix of everyday essentials including:
Non-Retail
Variety Stores
Home & Gifts
Services (Personal)
Services (Professional)
Footwear
Department Stores
Fashion
Casual Dining
Express Food
Leisure
Fresh Food
Supermarkets
Health & Beauty
• Grocery, pharmacy and general merchandise;
• Catering options covering express food, great coffee and
casual dining;
• Personal services including health, beauty, dry cleaners,
shoe repairs; and
• Everyday value fashion, leisure and children’s wear.
All need to be tailored to the specific community’s needs and
aspirations.
This needs to be supported with exceptional centre services, for
example parents’ parking, change facilities and kids’ play. We are
competing for our guests’ time against other physical destinations
and online options so making the experience as convenient and
pleasurable as possible is critical. We believe when we get this
proposition right, when it is highly relevant to the community, then
we drive footfall and dwell time, which drives retailers’ sales.
Refocus
We have refocused our business and resources with a revised
business structure that puts our centres at the heart of what
we do facilitating accelerated responsiveness and optimal
decision making.
Enhance
As has been evidenced from our Pilot Projects (see Case Studies)
the right offer drives footfall and dwell time, boosting retailer sales
and ultimately letting tension, improving rental income, property
values and consequently, C&R revenue and shareholder returns.
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Illustrative tenant mix for Community Shopping Centres
Investment
OUR PEOPLE
Asset Portfolio
Finance
Guest Experience
Development
General Managers
Proposition
Relevance
Footfall & dwell
Sales
Income
Rebecca is entering her sixth year working at The Mall,
Walthamstow having previously held senior retail positions
for Toys R Us, Gap and Specsavers. Whilst holding the role of
local Marketing Manager Rebecca attended the prestigious
Oxford Summer School and on her return a succession plan was
implemented. This has supported her ambitions of progression
within C&R, culminating in her recent promotion to General
Manager. Rebecca is a Walthamstow resident and is embedded
in the town’s vibrant and rapidly evolving community, priding
herself on her local connections and positioning the centre as a
key community hub.
Rebecca Bird
General Manager, The Mall, Walthamstow
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OUR PEOPLE
Rebecca is entering her sixth year working at The Mall,
Walthamstow having previously held senior retail positions
for Toys R Us, Gap and Specsavers. Whilst holding the role of
local Marketing Manager Rebecca attended the prestigious
Oxford Summer School and on her return a succession plan was
implemented. This has supported her ambitions of progression
within C&R, culminating in her recent promotion to General
Manager. Rebecca is a Walthamstow resident and is embedded
in the town’s vibrant and rapidly evolving community, priding
herself on her local connections and positioning the centre as a
key community hub.
Rebecca Bird
General Manager, The Mall, Walthamstow
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
10
OUR
BUSINESS MODEL
Our core strength is acquiring, enhancing and managing community shopping centres.
With our expert team, our strong retailer relationships and our extensive community connections, we seek to generate sustainable
income and capital value growth by combining active asset management with operational excellence.
RELATIONSHIPS AND RESOURCES
Expert
Team
Strong Relationships
with Retailers
Our Extensive Community
Connections
IDENTIFY ASSETS
There are a number of assets that meet our potential investment criteria. Typically these will be assets
that are underperforming in their catchment but have significant asset management opportunities.
Wherever possible we will leverage our deep industry relationships to secure off-market transactions.
REPOSITION & REMERCHANDISE
Our approach to managing centres is summarised as follows:
• Understand full catchment potential – research/
benchmarking, input from Centre teams, engagement with
retailers and local communities
• Assess product offering against local community needs and
expectations – identify any gaps in offer or amenities
• Execution – engage specialist teams to ensure accelerated
delivery with focus on optimal performance
• Establish strategic asset masterplans – comprehensive 3–5
year repositioning plans for each centre profiling Capex
spend and evolution of tenant mix. Regularly reviewed in
a continual process to ensure ongoing relevance and that
assets continue to meet guests’ expectations as they evolve
over time
• Review and refine – post implementation reviews to inform
future decision making, respond quickly to changes
THE RESULT
Attractive retail and
leisure environment
Improved guest
experience
Increased footfall
and spend
OUR PEOPLE
Driving Retailer sales, letting tension and Income and Capital Value Growth
Each asset is held in order to generate sustainable income growth supporting our
progressive dividend policy. When asset masterplans have been successfully executed and
future returns are expected to become less accretive we actively seek opportunities to
recycle capital to allow us to reinvest into assets with greater growth potential.
Stewart has been with C&R for over 17 years. He is currently
part of the team responsible for financial and management
reporting but has previously worked in property management
finance within the Group’s previous fund investments. As a
qualified accountant with an MSc in Surveying, Stewart brings
a strong mix of financial and property expertise. Stewart has a
particular focus on analytics, providing and interpreting research
to support the business in driving improved and accelerated
data driven decision making.
Stewart McKellar
Financial Controller
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There are a number of assets that meet our potential investment criteria. Typically these will be assets
that are underperforming in their catchment but have significant asset management opportunities.
Wherever possible we will leverage our deep industry relationships to secure off-market transactions.
• Establish strategic asset masterplans – comprehensive 3–5
year repositioning plans for each centre profiling Capex
spend and evolution of tenant mix. Regularly reviewed in
a continual process to ensure ongoing relevance and that
assets continue to meet guests’ expectations as they evolve
over time
• Review and refine – post implementation reviews to inform
future decision making, respond quickly to changes
OUR PEOPLE
Stewart has been with C&R for over 17 years. He is currently
part of the team responsible for financial and management
reporting but has previously worked in property management
finance within the Group’s previous fund investments. As a
qualified accountant with an MSc in Surveying, Stewart brings
a strong mix of financial and property expertise. Stewart has a
particular focus on analytics, providing and interpreting research
to support the business in driving improved and accelerated
data driven decision making.
Stewart McKellar
Financial Controller
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
12
PILOT PROJECTS
In Q4 of 2017 we initiated pilot projects to evidence our assertion that better meeting the
local community’s needs will drive increased footfall.
Joe
Swindells
Head of Asset Development
Joe joined C&R in August 2017 and brings to the business expertise and
experience in successfully leading significant development and asset
management projects in retail, residential and commercial markets.
Joe leads the development and project team responsible for delivery
of the business’s capital expenditure across the portfolio and strategic
development opportunities in line with the strategy to redefine and own
the Community shopping centre category in the UK. Joe played a leading
role in the Ilford pilot project and is looking forward to working on the
further development of the family zone and enhancement of the rest of
the scheme as part of the asset masterplan.
The
Exchange,
Ilford
In October 2017 we commenced a programme of
improvements at the Exchange Ilford, designed to help
position the centre to best serve the local community, and to
raise standards throughout the scheme after we acquired it
in March 2017. Works began with the internal refurbishment
and a de-cluttering exercise, improving the environmental
and operational standards across all areas including front and
back of house.
Guest surveys, focus groups and mystery shopper research
helped us identify what the local guests wanted from
their shopping experience. Our data-driven approach was
supported by consultation with our retailer customers and
external data suppliers such as CACI to verify our approach.
Research showed that the family shopper group were
under provided for at the centre and represented a large
growth potential. A spacious, free to use, kids’ play area was
introduced which has proved to be hugely popular. Existing
toilets and baby-change facilities have been refurbished while
the creation of larger parent and child facilities is currently
under way. A dedicated parents parking zone was created,
giving direct access to the Kids’ Freeplay and family-focused
lower shopping level and improving the overall guest journey
and experience.
A host of other improvements were rapidly put in place
including guest pause points which include new seating,
mobile charge points and improved way finding throughout
the centre, repositioned grab and go food offers, as well as
extended opening hours which have been hugely popular.
The work was supported by a focused marketing campaign
designed to generate high reach within the local community
using new digital channels.
The changes have had a dramatic effect, with Q4 year on
year footfall growing by 5.5%, far outperforming the national
average fall of 3.3%. This has continued into 2018 with footfall
increasing by 7.7% for the first two months of the year. Guest
Net Promotor Score, a key measure of customer satisfaction,
grew by 63 points while mystery shopper scores improved
from 76% to 92%.
The Mall,
Maidstone
The Mall, Maidstone was selected to be part of
our strategic pilot programme in Q4 2017. Based
on in-depth research and guest feedback, a host
of changes and improvements were rapidly
implemented, designed to add new facilities
to better serve the local community, provide
great entertainment and an improved shopping
experience for our key target guest groups.
Works included the transformation of unused
retail space to create a dedicated parent and
child facility which has had a dramatic effect on guest satisfaction levels, generating
one of the largest positive social media reactions we’ve seen. The family-focused
improvements also included the installation of interactive game units and a large
format “Selfie-zone” to provide theatre within the centre.
A new guest lounge and information point was created along with a “Community
Hub” which provides free social space within the centre for local groups and
organisations, giving them a platform within the community to increase their
awareness of the services they offer.
Q4 footfall at Maidstone was up by +1.1% year on year, versus the national retail
index which was down 3.3% for the same period. Guest satisfaction levels improved
hugely as a result of the works with the Net Promotor Score increasing by 66 points
and mystery shopper scores increasing from 84% to 98%.
Digital
Connections
In 2017, we expanded our use of digital thinking and explored new channels beyond
our typical range of activity across our websites, social media channels, email
communications and online advertising.
We trialled the concept of digital interactive spaces within our centres utilising Play9
and NexusEngage installations. This proved to be a successful method of turning
empty retail space into interactive experiences for our guests. Play9 transformed
previously void space in Luton and Maidstone into a fantastic interactive area
for families, accumulating over 100,000 game plays in the first three months and
catering to our shoppers visiting with children. With the NexusEngage units installed
in Ilford and Maidstone, we received great feedback from our guests and saw an
impressive 70,000+ plays with 45,000+ gifts/vouchers distributed which had a direct
positive impact on our retail customers’ trade.
To complement our pilot activity at Maidstone and Ilford, we looked at new digital
advertising channels – Weve and Blis – to localise our marketing efforts. Weve and
Blis allowed us to connect with local members of our local community through SMS,
MMS messages and display advertising through geographical targeting techniques.
With footfall tracking analytics, we were then able to see if the audience we reached
then visited the centre as a result. In a four week period, this activity resulted in
more than 3.5 million impressions and approximately 8,000 additional shopper
visits.
Stock Code: CAL
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STRATEGIC REPORT
13
The Mall,
Maidstone
The Mall, Maidstone was selected to be part of
our strategic pilot programme in Q4 2017. Based
on in-depth research and guest feedback, a host
of changes and improvements were rapidly
implemented, designed to add new facilities
to better serve the local community, provide
great entertainment and an improved shopping
experience for our key target guest groups.
Works included the transformation of unused
retail space to create a dedicated parent and
child facility which has had a dramatic effect on guest satisfaction levels, generating
one of the largest positive social media reactions we’ve seen. The family-focused
improvements also included the installation of interactive game units and a large
format “Selfie-zone” to provide theatre within the centre.
A new guest lounge and information point was created along with a “Community
Hub” which provides free social space within the centre for local groups and
organisations, giving them a platform within the community to increase their
awareness of the services they offer.
Q4 footfall at Maidstone was up by +1.1% year on year, versus the national retail
index which was down 3.3% for the same period. Guest satisfaction levels improved
hugely as a result of the works with the Net Promotor Score increasing by 66 points
and mystery shopper scores increasing from 84% to 98%.
Digital
Connections
In 2017, we expanded our use of digital thinking and explored new channels beyond
our typical range of activity across our websites, social media channels, email
communications and online advertising.
We trialled the concept of digital interactive spaces within our centres utilising Play9
and NexusEngage installations. This proved to be a successful method of turning
empty retail space into interactive experiences for our guests. Play9 transformed
previously void space in Luton and Maidstone into a fantastic interactive area
for families, accumulating over 100,000 game plays in the first three months and
catering to our shoppers visiting with children. With the NexusEngage units installed
in Ilford and Maidstone, we received great feedback from our guests and saw an
impressive 70,000+ plays with 45,000+ gifts/vouchers distributed which had a direct
positive impact on our retail customers’ trade.
To complement our pilot activity at Maidstone and Ilford, we looked at new digital
advertising channels – Weve and Blis – to localise our marketing efforts. Weve and
Blis allowed us to connect with local members of our local community through SMS,
MMS messages and display advertising through geographical targeting techniques.
With footfall tracking analytics, we were then able to see if the audience we reached
then visited the centre as a result. In a four week period, this activity resulted in
more than 3.5 million impressions and approximately 8,000 additional shopper
visits.
Gareth
Holland
Retail Asset Manager
Gareth has been with
C&R for over 12 years,
having previously been
a leasing consultant
with a national agency
working on shopping
centres across the UK.
He has the responsibility
to drive specific asset
management initiatives across three centres,
including Maidstone, to implement the renewed
focus on delivering community malls that serve
their local catchment and beyond. Gareth is excited
about the future and the drive to establish each
mall as a local town hub and delivering a bespoke
centre tailored to its community needs. It is apparent
from the success of our pilot projects that our retail
customers are already seeing the benefits
of this approach.
Grace
Azcarate
Digital Marketing Executive
With four years of digital marketing experience,
Grace joined C&R in 2016 to oversee digital
campaigns and initiatives across the portfolio. She
is enthusiastic and eager to trial new technologies
and advertising channels. To complement her
background, she analyses customer and guest
research to create a tailored digital experience for
our local communities. Grace belongs to the Revo
NextGen committee and is also an active member of
the C&R Wellbeing Committee which is dedicated to
promoting the health and wellness of staff through
education, support and initiatives.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
14
KEY PERFORMANCE INDICATORS
KPI
Adjusted Profit1
Why we use this as an indicator
Adjusted Profit seeks to track the recurring
profits of the business which is the key driver for
dividend payments.
Adjusted Earnings1 per share
Dividend per share
This is the cash return to be delivered to investors
in respect of the year under review.
EPRA net assets per share
This is a measure of the movement in the
underlying value of assets and liabilities
underpinning the value of a share.
Net debt to property value2
We aim to manage our balance sheet effectively
with the appropriate level of gearing.
Net Rental Income
This is the key driver of Adjusted Profit.
Footfall (wholly-owned)
Footfall is an important measure of a centre’s
popularity with customers. Occupiers use this
measure as a key part of their decision-making
process.
Occupancy (wholly-owned)
We aim to optimise the occupancy of our centres
as attracting and retaining the right mix of
occupiers will enhance the trading environment.
Performance
How this links to our strategy
Progress during the year
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
C&R
Index
2017
2016
£29.1m
£26.8m
4.1p
3.8p
3.64p
3.39p
67p
68p
46%
46%
£51.6m
£50.4m
+0.1%
-2.8%
97.3%
95.4%
We target delivering underlying profits to support dividend
An increase of 8.6% in Adjusted Profit or 7.3% on a per share
per share growth of between 5% and 8% per annum in the
basis reflected growth in Net Rental Income, lower interest
medium-term.
costs following the refinancing of the Mall assets and a
£1.0 million reduction in net central operating costs.
We target delivering dividend per share growth of between 5%
3.64p represented an increase of 7.4% over 2016 and
and 8% per annum in the medium-term.
therefore at the top end of our target range. Over the last two
years we have averaged 8% dividend growth per annum.
We aim to maximise the value of our assets. Our Capital
EPRA NAV fell by 1p due to a small revaluation loss and the
expenditure investment programme is planned to deliver a
slightly higher number of shares in issue as a result of the
capital return over and above the income enhancement.
Scrip dividend and vesting of the Company’s Long Term
Incentive Plan.
Having the appropriate level of gearing is important to
Net debt to property value remained stable at 46%.
effectively manage our business through the property cycle.
Our target range is 40%–50% with the objective of reducing to
the lower end in the medium-term.
We target delivering dividend per share growth of between 5%
The increase in Net Rental Income reflected underlying
and 8% per annum in the medium-term.
growth of 1.9% on the wholly-owned portfolio together
with the Ilford acquisition and full year impact of Hemel
Hempstead, net of Camberley, sold in 2016.
Footfall performance provides an indication of the relevance
Footfall at the Group’s UK shopping centres significantly
and attractiveness of our centres, influencing occupier demand
outperformed the national ShopperTrak index by 2.9%.
and future letting performance.
Occupancy has a direct impact on the profitability of our
Strong letting activity during the year resulted in an
schemes and also influences footfall and occupier demand.
improvement in occupancy to 97.3%.
Notes
1.
Adjusted Profit and Adjusted Earnings per share are as defined in the Glossary and Note 1 to the Financial Statements. Adjusted Profit
incorporates profits from operating activities and excludes revaluation of properties and financial instruments, gains or losses on disposal,
exceptional items and other defined terms. A reconciliation to the equivalent EPRA and statutory measures is provided in Note 9
to the financial statements.
2. Net debt divided by property valuation. 2016 is adjusted for refinancing of Mall assets on 4 January 2017, Ipswich disposal on
17 February 2017 and Ilford acquisition on 8 March 2017.
Stock Code: CAL
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STRATEGIC REPORT
15
KPI
Adjusted Profit1
Why we use this as an indicator
Performance
Adjusted Profit seeks to track the recurring
profits of the business which is the key driver for
2017
dividend payments.
How this links to our strategy
We target delivering underlying profits to support dividend
per share growth of between 5% and 8% per annum in the
medium-term.
Progress during the year
An increase of 8.6% in Adjusted Profit or 7.3% on a per share
basis reflected growth in Net Rental Income, lower interest
costs following the refinancing of the Mall assets and a
£1.0 million reduction in net central operating costs.
Adjusted Earnings1 per share
Dividend per share
This is the cash return to be delivered to investors
in respect of the year under review.
We target delivering dividend per share growth of between 5%
and 8% per annum in the medium-term.
3.64p represented an increase of 7.4% over 2016 and
therefore at the top end of our target range. Over the last two
years we have averaged 8% dividend growth per annum.
EPRA net assets per share
This is a measure of the movement in the
underlying value of assets and liabilities
underpinning the value of a share.
Net debt to property value2
We aim to manage our balance sheet effectively
with the appropriate level of gearing.
Net Rental Income
This is the key driver of Adjusted Profit.
We aim to maximise the value of our assets. Our Capital
expenditure investment programme is planned to deliver a
capital return over and above the income enhancement.
EPRA NAV fell by 1p due to a small revaluation loss and the
slightly higher number of shares in issue as a result of the
Scrip dividend and vesting of the Company’s Long Term
Incentive Plan.
Having the appropriate level of gearing is important to
effectively manage our business through the property cycle.
Our target range is 40%–50% with the objective of reducing to
the lower end in the medium-term.
We target delivering dividend per share growth of between 5%
and 8% per annum in the medium-term.
Net debt to property value remained stable at 46%.
The increase in Net Rental Income reflected underlying
growth of 1.9% on the wholly-owned portfolio together
with the Ilford acquisition and full year impact of Hemel
Hempstead, net of Camberley, sold in 2016.
Footfall (wholly-owned)
Footfall is an important measure of a centre’s
popularity with customers. Occupiers use this
C&R
+0.1%
measure as a key part of their decision-making
process.
Index
-2.8%
Footfall performance provides an indication of the relevance
and attractiveness of our centres, influencing occupier demand
and future letting performance.
Footfall at the Group’s UK shopping centres significantly
outperformed the national ShopperTrak index by 2.9%.
Occupancy (wholly-owned)
We aim to optimise the occupancy of our centres
as attracting and retaining the right mix of
occupiers will enhance the trading environment.
Occupancy has a direct impact on the profitability of our
schemes and also influences footfall and occupier demand.
Strong letting activity during the year resulted in an
improvement in occupancy to 97.3%.
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
£29.1m
£26.8m
4.1p
3.8p
3.64p
3.39p
67p
68p
46%
46%
£51.6m
£50.4m
97.3%
95.4%
Notes
1.
Adjusted Profit and Adjusted Earnings per share are as defined in the Glossary and Note 1 to the Financial Statements. Adjusted Profit
incorporates profits from operating activities and excludes revaluation of properties and financial instruments, gains or losses on disposal,
exceptional items and other defined terms. A reconciliation to the equivalent EPRA and statutory measures is provided in Note 9
to the financial statements.
2. Net debt divided by property valuation. 2016 is adjusted for refinancing of Mall assets on 4 January 2017, Ipswich disposal on
17 February 2017 and Ilford acquisition on 8 March 2017.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
16
CHIEF EXECUTIVE’S
STATEMENT
Lawrence Hutchings
Chief Executive
“While retailing
continues to evolve
and is undoubtedly
facing cyclical
and structural
headwinds, we have
full confidence that
our repositioning
programme and
rebased affordable
occupancy costs will
continue to allow our
retailer customers to
trade profitably in high
footfall locations that
are the engine room
for their profits.”
It is a pleasure to be writing this
statement, my first as Chief Executive
of C&R after taking up the role in June
2017. I would like to take this opportunity
to thank our former CEO, Hugh Scott-
Barrett, for all his support and guidance
during my transition into the role. Hugh’s
continued involvement as chairman is
welcome from my perspective.
We have been busy delivering on our
2017 business plans, where we have
seen strong momentum in income and
leasing with our accretive Capex projects,
and implementing our new strategy. This
was launched successfully in December
2017 and is designed to ensure that we
capitalise fully on the continued evolution
in physical retailing.
We believe that our centres are well
placed to take advantage of important
and ongoing changes in how we live,
work, socialise and access goods and
services, be it through the physical, online
or combined “omnichannel” platforms.
Our renewed focus on better tailoring and
aligning our retail and services to the local
communities which we serve, coupled
with ensuring that our centres are easier
and more pleasurable to access and visit,
will deliver continued income growth
through improved footfall, sales, tenant
demand and rents.
The success of the pilot projects
completed in Q4 last year reinforces
our confidence in our ability to redefine
the community shopping centre in the
UK, through our asset management
masterplans which are fundamental
to our ability to continue delivering
underlying recurring income growth.
Income growth continues to
deliver performance
Net rental income within the wholly-owned
portfolio grew 2.4% from £50.4 million
to £51.6 million, or 1.9% on a like-for-like
basis. Delivery of our capital expenditure
(“Capex”) programme, which includes
unlocking the potential of the former BHS
stores, saw the Group invest £17.5 million
of Capex during the year which helped
drive income growth, and included:
• Travelodge at Wood Green – £6.4
million total project spend (£4.2
million in 2017);
• Conversion of the former BHS unit at
Walthamstow into units for Lidl, The
Gym and further leisure and retail
space – £4.3 million total project
investment (£3.9 million in 2017); and
• A new Wilko store in Blackburn
formed from the former BHS – £1.0
million total project spend, all of which
was undertaken in the year under
review.
With average rents currently at c. £15
psf, we will see further growth in income
as the repositioning Capex is deployed
during 2018 and 2019 to improve the
productivity of our floor space while
maintaining the rental affordability
that makes our centres so attractive
to retailers. We continue to adopt a
conservative approach in assessing the
return from our Capex projects and in
the majority of cases exclude any “halo”
impact across other parts of the centres
from the works. These often involve new
anchor retailers and significant changes
to customer proposition which further
increase the appeal of the centres to their
communities.
Cost management and
operating efficiencies
This focus on income is supported by a
renewed approach to cost management
as announced at our half year results.
We are targeting efficiency savings of at
least £1.8 million from our central cost
base by the end of 2018, representing
a saving of approximately 20% of the
total 2016 central overhead. Pleasingly
we have delivered over 60% of these
savings as of year end, with the balance in
varying stages of realisation. We believe
that there are further efficiencies in our
overhead as the operational restructuring
is implemented and with decentralisation
empowering the centre teams.
Leasing demand supports
our strategy
Leasing activity has continued apace
in 2017, with 79 new leases and
renewals and 32 rent reviews together
totalling £9.6 million in annual income,
underlining demand for our centres
from non-discretionary and value
orientated retailers, service providers,
hotels, cinemas, supermarkets and food
catering. Importantly, our new leasing
and renewals were completed at an
average spread of 10.3%1 over previous
passing rent and 8.4%1 over valuation
ERVs. Occupancy improved to 97.3% from
95.4% at December 2016.
Stock Code: CAL
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Asset recycling
We remain committed to recycling where
we believe that we have optimised the asset
through active repositioning and are able
to generate more accretive returns from
either new acquisitions or additional capital
investment in the rest of the portfolio.
As planned, the pace of asset recycling
was slower in the second half of the year,
after the successful sales of Camberley in
late 2016 and the Buttermarket in Ipswich
in February 2017. The proceeds of these
sales supported the acquisition of The
Marlowes, Hemel Hempstead in early 2016
and the Exchange, Ilford in (cid:48)arch 2017.
We believe that there will be increased
potential for investment opportunities and
that pricing may become more attractive
to acquire assets as the importance of
active, income driven, strategic, long-term
management becomes more critical to the
success of our type of assets. Our internal
management structure and dedicated
team of retail professionals provide us
with a real competitive advantage, allowing
us to unlock income growth from well-
located community shopping centres that
meet our criteria.
Balance sheet strength
The Group continues to benefit from the
balance sheet restructuring and refinancing
undertaken in January 2017, which covers
five of the Group’s seven wholly-owned
centres, as well as the subsequent new
debt facility for Ilford and the renewal of
the Group’s Revolving Credit Facility. The
1.
For lettings and renewals (excluding development deals) with a term
of five years or longer and which did not include a turnover element.
CHIEF EXECUTIVE’S
STATEMENT
STRATEGIC REPORT
17
• Conversion of the former BHS unit at
Walthamstow into units for Lidl, The
Gym and further leisure and retail
space – £4.3 million total project
investment (£3.9 million in 2017); and
• A new Wilko store in Blackburn
formed from the former BHS – £1.0
million total project spend, all of which
was undertaken in the year under
review.
With average rents currently at c. £15
psf, we will see further growth in income
as the repositioning Capex is deployed
during 2018 and 2019 to improve the
productivity of our floor space while
maintaining the rental affordability
that makes our centres so attractive
to retailers. We continue to adopt a
conservative approach in assessing the
return from our Capex projects and in
the majority of cases exclude any “halo”
impact across other parts of the centres
from the works. These often involve new
anchor retailers and significant changes
to customer proposition which further
increase the appeal of the centres to their
communities.
Cost management and
operating efficiencies
This focus on income is supported by a
renewed approach to cost management
as announced at our half year results.
We are targeting efficiency savings of at
least £1.8 million from our central cost
base by the end of 2018, representing
a saving of approximately 20% of the
total 2016 central overhead. Pleasingly
we have delivered over 60% of these
savings as of year end, with the balance in
varying stages of realisation. We believe
that there are further efficiencies in our
overhead as the operational restructuring
is implemented and with decentralisation
empowering the centre teams.
Leasing demand supports
our strategy
Leasing activity has continued apace
in 2017, with 79 new leases and
renewals and 32 rent reviews together
totalling £9.6 million in annual income,
underlining demand for our centres
from non-discretionary and value
orientated retailers, service providers,
hotels, cinemas, supermarkets and food
catering. Importantly, our new leasing
and renewals were completed at an
average spread of 10.3%1 over previous
passing rent and 8.4%1 over valuation
ERVs. Occupancy improved to 97.3% from
95.4% at December 2016.
Asset recycling
We remain committed to recycling where
we believe that we have optimised the asset
through active repositioning and are able
to generate more accretive returns from
either new acquisitions or additional capital
investment in the rest of the portfolio.
As planned, the pace of asset recycling
was slower in the second half of the year,
after the successful sales of Camberley in
late 2016 and the Buttermarket in Ipswich
in February 2017. The proceeds of these
sales supported the acquisition of The
Marlowes, Hemel Hempstead in early 2016
and the Exchange, Ilford in (cid:48)arch 2017.
We believe that there will be increased
potential for investment opportunities and
that pricing may become more attractive
to acquire assets as the importance of
active, income driven, strategic, long-term
management becomes more critical to the
success of our type of assets. Our internal
management structure and dedicated
team of retail professionals provide us
with a real competitive advantage, allowing
us to unlock income growth from well-
located community shopping centres that
meet our criteria.
Balance sheet strength
The Group continues to benefit from the
balance sheet restructuring and refinancing
undertaken in January 2017, which covers
five of the Group’s seven wholly-owned
centres, as well as the subsequent new
debt facility for Ilford and the renewal of
the Group’s Revolving Credit Facility. The
Group’s all-in cost of debt is now just 3.25%,
allowing us to benefit from historically low
interest rates, which have subsequently
increased. It also provides us with the
stability of a 6.7 year term increasing to 7.3
if all options are exercised.
Our capital expenditure programme
is unique amongst our peers in that it
comprises a majority of smaller projects,
which are often capable of being
completed within a 12–18 month period.
This provides us with maximum flexibility
to dynamically manage the balance sheet
to react quickly to changes in market
conditions and to new opportunities.
Outlook
While retailing continues to evolve and is
undoubtedly facing cyclical and structural
headwinds, we have full confidence that
our repositioning programme and rebased
affordable occupancy costs will continue
to allow our retailer customers to trade
profitably in high footfall locations that are
the engine room for their profits.
Our weighting to the London and
Greater London economy, with its
strong population growth and density,
is creating demand from non-retail
uses including residential, hotel and
leisure with on flow benefits to our core
retail business and customers. We are
committed to maximising the value of the
Group’s assets through strategic asset
masterplans and delivering on behalf of
our shareholders.
We are steadfast in our endeavours to
improve the lives of the communities
that we serve, through providing best
in class environments for retail goods,
leisure services, social interaction and
facilitating click and collect fulfilment. In
short we believe that the intersection of
where product and services meet people
remains very important.
The Board has announced a 7.4%
increase in total dividend for 2017 and,
while fully aware that recent occupier
failures present some challenges to
short-term results, believes that both the
momentum we have carried through into
2018 and our strategic asset management
masterplans, now established across our
entire portfolio following the initial results
seen at Ilford and Maidstone, underpin
our objective of delivering annual
dividend growth in a range of 5% to 8%
over the medium term.
Finally, I would like to reinforce Hugh’s
thanks and appreciation to all our staff
both at the support office in London
and in our centres. A significant amount
has been achieved during the past nine
months in delivering these results whilst
creating and implementing our new
strategy. These are the first exciting steps
on our journey to be the best in class
owner managers of community shopping
centres.
Lawrence Hutchings
Chief Executive
1.
For lettings and renewals (excluding development deals) with a term
of five years or longer and which did not include a turnover element.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
18
OPERATING REVIEW
Highlights of letting activity across
the portfolio in 2017 include:
• At Walthamstow, lettings were
made to Smiggle, Gökyüzü
Turkish restaurant and Lidl, which
opened very successfully just after
the year end, in January 2018. At
Wood Green, new lettings were
completed to River Island, Blue
Inc, Five Guys and Pak cosmetics,
while Aldo and Superdrug
renewed.
• At Blackburn, Specsavers took a
new unit and River Island, Scotts,
Superdrug, The Perfume Shop
and Thorntons renewed. Genus
and Superdrug took new leases
at Maidstone and Card Factory
signed a five year term at Ilford.
At Luton, Kiko and Scotts opened
new units from a split of the
former USC unit, while KFC took
a 10 year lease in the new food
court and FootLocker renewed
for a further five year term.
• The outperformance of new
lettings and renewals versus ERV
demonstrates the continued
affordability and attractiveness of
our schemes and this evidence
will be supportive of rental tones
in the future.
• Since 30 December 2017, the
positive letting momentum
has continued with 19 new
lettings and renewals in the
first two months of the year.
This includes new lettings to
Smiggle at Blackburn and 3G at
Walthamstow, together with the
leasing of four floors of a vacant
office block in Luton, where
£5 million of refurbishment
expenditure will deliver an
income return in excess of 9%.
The core strength and expertise of C&R lies in its ability to create and deliver specialist
asset management improvements across its c.£1.0 billion portfolio of UK community
shopping centres, which is underpinned by a strong London and South East bias. Key
characteristics of our assets are their dominance in their locality, coupled with their
ability to offer occupiers attractive, affordable and high footfall space which caters for
the non-discretionary and value-orientated needs of the local community.
New lettings, renewals and rent reviews
There were 79 new lettings and renewals in the period at a combined average premium
of 10.3%1 to previous passing rent and an 8.4%1 premium to ERV.
Future Capex plans
As part of our strategic asset masterplans we have reviewed our planned Capex investment and assessed additional opportunities
across our portfolio. In total we have identified more than 50 individual projects totalling over £100 million which we believe will deliver
in aggregate an income return of at least 9%.
We expect to deploy Capex at a typical rate of approximately £15-25 million per annum. The depth of opportunities across the
portfolio enables us to focus investment on those with the strongest impact and thereby provides flexibility, allowing us to respond
dynamically to any changes in occupier demand or further evolution of shopper dynamics. Key projects in 2018 include the new
office letting at Luton, the leisure hub at Hemel Hempstead and further improvement of the family zone in Ilford.
New Lettings
Number of new lettings
Rent from new lettings (£m)
Comparison to ERV1 (%)
Renewals settled
Renewals settled
Revised rent (£m)
Comparison to ERV1 (%)
Combined new lettings and renewals
Comparison to previous rent1
Comparison to ERV1
Rent reviews
Reviews settled
Revised passing rent (£m)
Uplift to previous rent (%)
Year ended
30 Dec
2017
47
£2.7m
+8.7%
32
£1.7m
+8.1%
+10.3%
+8.4%
32
£5.2m
+1.2%
Rental income and occupancy
Contracted rent (£m)
Passing rent (£m)
Occupancy (%)
30 Dec
30 Dec
2017
64.1
61.0
97.3
2016
55.8
53.0
95.4
The increase in contracted and passing rent reflects the acquisition of the Exchange Centre, Ilford in March 2017 and like-for-like
growth of 3.1% and 3.0% respectively. At 30 December 2017 there was £3.1 million of contracted rent where the tenant is in a rent
free period, of which £3.0 million will convert to passing rent in 2018. The strong letting activity during the year has resulted in an
improvement in occupancy to 97.3% at the year end.
Insolvencies
Insolvencies (units)
Passing rent of insolvencies (£m)
Year ended
Year ended
December
December
2017
15
0.7
20162
18
2.4
2.
Comparatives exclude the impact of The Mall, Camberley which was disposed of in November 2016.
1.
For lettings and renewals (excluding development deals) with a term of five years or longer which do
not include a turnover rent element.
The number of insolvencies in 2017 was similar to 2016, but the value was much reduced owing to the impact of BHS last year. The
most significant insolvency was Blue Inc, involving five units with a total rent of £0.3 million. As at 30 December 2017 five of the 15
units affected by insolvency had been re-let and eight were continuing to trade as usual.
Delivery of specialist asset management initiatives
During 2017 we invested £17.5 million of capital expenditure. A number of major
projects were concluded over the period including:
• At Wood Green, the new 78 bedroom Travelodge opened in October 2017 following
a £6.4 million investment project with early trading very encouraging.
• At Walthamstow, Lidl and The Gym both launched successfully around the turn of 2018.
Gökyüzü, a new Turkish restaurant for a local operator which has traded very successfully
at our Wood Green centre for a number of years, opened in February 2018 and two
further retail units totalling 5,000 sq ft have also been created. All of the above have been
formed out of the former BHS store.
• At Blackburn, Wilko opened in September 2017 at the refurbished former BHS unit.
Sports Direct also continues to trade from the unit, now via a direct lease.
The above units will deliver a combined annual rent of £1.6 million from a total Capex
spend of approximately £12 million. 2018 NRI will benefit by approximately £0.8 million
from the full year impact of these lettings.
In December 2017 we received a resolution to grant planning consent subject to
satisfactory s106 agreement for the proposed extension at Walthamstow. Our plans
include the addition of 80,000 sq ft of new retail and leisure space and approximately
500 new homes, as well as improved public spaces and community facilities. A
development agreement is in place with the London Borough of Waltham Forest and
we anticipate progressing to full planning consent in the first half of 2018.
In Hemel Hempstead we received planning consent in October 2017 for our transformational
plans to create a leisure hub with up to six new restaurant units, anchored by a cinema for
which terms have been agreed with a leading operator. Work is well advanced on renewing
the atrium roof, the cost of which is being met by the previous owner.
To 8 March 2018 there were three national occupier insolvencies or restructurings that impact upon the portfolio since the year
end. Based on information available to date it is expected that their combined impact on 2018 Adjusted Profit will be approximately
£0.7 million.
Operational performance
There were 76 million visits to our centres during 20173. For the second half of 2017, our seven wholly-owned shopping centres
achieved a 0.5%4 increase in footfall compared to a National Index figure of -2.9%. Footfall for the year as a whole increased by
0.1%4, again significantly ahead of the National Index which showed a decline of 2.8%.
In the second half of 2017, we undertook repositioning pilot projects at Maidstone and Ilford and these two assets recorded particularly
strong performances, with Maidstone increasing by 2% in the fourth quarter of 2017, versus 2016, and Ilford increasing by 5.5%.
The positive momentum has continued into the start of 2018 with footfall for the wholly-owned portfolio up 3.1% in the two months
to the end of February 2018, compared to the National Index which was -2.9%.
Car park usage has been stable and car park income was £10.2 million, an increase of 7.2% on a like-for-like basis. Our Collect+
service continues to expand with in excess of 42,000 packages handled in the year, an increase of 24% year on year.
78 million on an annualised basis allowing for a full 12 months of the Exchange Centre, Ilford.
3.
4.
Excluding entrances impacted by development work.
Stock Code: CAL
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STRATEGIC REPORT
19
The core strength and expertise of C&R lies in its ability to create and deliver specialist
asset management improvements across its c.£1.0 billion portfolio of UK community
shopping centres, which is underpinned by a strong London and South East bias. Key
characteristics of our assets are their dominance in their locality, coupled with their
ability to offer occupiers attractive, affordable and high footfall space which caters for
the non-discretionary and value-orientated needs of the local community.
New lettings, renewals and rent reviews
There were 79 new lettings and renewals in the period at a combined average premium
of 10.3%1 to previous passing rent and an 8.4%1 premium to ERV.
Future Capex plans
As part of our strategic asset masterplans we have reviewed our planned Capex investment and assessed additional opportunities
across our portfolio. In total we have identified more than 50 individual projects totalling over £100 million which we believe will deliver
in aggregate an income return of at least 9%.
We expect to deploy Capex at a typical rate of approximately £15-25 million per annum. The depth of opportunities across the
portfolio enables us to focus investment on those with the strongest impact and thereby provides flexibility, allowing us to respond
dynamically to any changes in occupier demand or further evolution of shopper dynamics. Key projects in 2018 include the new
office letting at Luton, the leisure hub at Hemel Hempstead and further improvement of the family zone in Ilford.
New Lettings
Number of new lettings
Rent from new lettings (£m)
Comparison to ERV1 (%)
Renewals settled
Renewals settled
Revised rent (£m)
Comparison to ERV1 (%)
Comparison to ERV1
Rent reviews
Reviews settled
Revised passing rent (£m)
Uplift to previous rent (%)
Combined new lettings and renewals
Comparison to previous rent1
Year ended
30 Dec
2017
47
£2.7m
+8.7%
32
£1.7m
+8.1%
+10.3%
+8.4%
32
£5.2m
+1.2%
1.
For lettings and renewals (excluding development deals) with a term of five years or longer which do
not include a turnover rent element.
Delivery of specialist asset management initiatives
During 2017 we invested £17.5 million of capital expenditure. A number of major
projects were concluded over the period including:
• At Wood Green, the new 78 bedroom Travelodge opened in October 2017 following
a £6.4 million investment project with early trading very encouraging.
• At Walthamstow, Lidl and The Gym both launched successfully around the turn of 2018.
Gökyüzü, a new Turkish restaurant for a local operator which has traded very successfully
at our Wood Green centre for a number of years, opened in February 2018 and two
further retail units totalling 5,000 sq ft have also been created. All of the above have been
formed out of the former BHS store.
• At Blackburn, Wilko opened in September 2017 at the refurbished former BHS unit.
Sports Direct also continues to trade from the unit, now via a direct lease.
The above units will deliver a combined annual rent of £1.6 million from a total Capex
spend of approximately £12 million. 2018 NRI will benefit by approximately £0.8 million
from the full year impact of these lettings.
In December 2017 we received a resolution to grant planning consent subject to
satisfactory s106 agreement for the proposed extension at Walthamstow. Our plans
include the addition of 80,000 sq ft of new retail and leisure space and approximately
500 new homes, as well as improved public spaces and community facilities. A
development agreement is in place with the London Borough of Waltham Forest and
we anticipate progressing to full planning consent in the first half of 2018.
Rental income and occupancy
Contracted rent (£m)
Passing rent (£m)
Occupancy (%)
30 Dec
2017
64.1
61.0
97.3
30 Dec
2016
55.8
53.0
95.4
The increase in contracted and passing rent reflects the acquisition of the Exchange Centre, Ilford in March 2017 and like-for-like
growth of 3.1% and 3.0% respectively. At 30 December 2017 there was £3.1 million of contracted rent where the tenant is in a rent
free period, of which £3.0 million will convert to passing rent in 2018. The strong letting activity during the year has resulted in an
improvement in occupancy to 97.3% at the year end.
Insolvencies
Insolvencies (units)
Passing rent of insolvencies (£m)
Year ended
December
2017
15
0.7
Year ended
December
20162
18
2.4
2.
Comparatives exclude the impact of The Mall, Camberley which was disposed of in November 2016.
The number of insolvencies in 2017 was similar to 2016, but the value was much reduced owing to the impact of BHS last year. The
most significant insolvency was Blue Inc, involving five units with a total rent of £0.3 million. As at 30 December 2017 five of the 15
units affected by insolvency had been re-let and eight were continuing to trade as usual.
To 8 March 2018 there were three national occupier insolvencies or restructurings that impact upon the portfolio since the year
end. Based on information available to date it is expected that their combined impact on 2018 Adjusted Profit will be approximately
£0.7 million.
Operational performance
There were 76 million visits to our centres during 20173. For the second half of 2017, our seven wholly-owned shopping centres
achieved a 0.5%4 increase in footfall compared to a National Index figure of -2.9%. Footfall for the year as a whole increased by
0.1%4, again significantly ahead of the National Index which showed a decline of 2.8%.
In the second half of 2017, we undertook repositioning pilot projects at Maidstone and Ilford and these two assets recorded particularly
strong performances, with Maidstone increasing by 2% in the fourth quarter of 2017, versus 2016, and Ilford increasing by 5.5%.
The positive momentum has continued into the start of 2018 with footfall for the wholly-owned portfolio up 3.1% in the two months
to the end of February 2018, compared to the National Index which was -2.9%.
Car park usage has been stable and car park income was £10.2 million, an increase of 7.2% on a like-for-like basis. Our Collect+
service continues to expand with in excess of 42,000 packages handled in the year, an increase of 24% year on year.
In Hemel Hempstead we received planning consent in October 2017 for our transformational
plans to create a leisure hub with up to six new restaurant units, anchored by a cinema for
which terms have been agreed with a leading operator. Work is well advanced on renewing
the atrium roof, the cost of which is being met by the previous owner.
3.
4.
78 million on an annualised basis allowing for a full 12 months of the Exchange Centre, Ilford.
Excluding entrances impacted by development work.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
20
OPERATING REVIEW
CONTINUED
Other assets and operations
The Kingfisher Centre, Redditch (C&R ownership
20%, net investment of £7.4 million at 30 December
2017)
The Range successfully opened in July 2017 in the former BHS
unit. Other significant lettings during the year included Smiggle,
HMV and Trespass, although the scheme was impacted by the
insolvency of Linens Direct as well as the closure of Argos. The
property was valued at £142.9 million at 30 December 2017,
reflecting a net initial yield of 6.75%.
Snozone
Snozone enjoyed another strong trading year with revenue
increasing 2% to £10.4 million (2016: £10.2 million) and profit up
10% to just over £1.5 million (2016: £1.4 million).
During 2017 Snozone won Best Sporting Venue at the UK
School Travel awards, beating Manchester United’s museum
and stadium tours, Twickenham Stadium, Wimbledon Lawn
Tennis Association and the National Football Museum to this
prestigious award.
In September 2017, Snozone purchased the former “Skiplex”
business at Basingstoke for less than £0.1 million, comprising
two indoor slopes inside the iFLY indoor skydiving centre.
Rebranded as “Skizone” this gives Snozone a foothold south
of the M25 from which to grow its data base and auxiliary
revenue, as well as creating a hub from which to open similar
sized businesses across the south, should opportunities present
themselves.
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10/04/2018 16:03:57
OUR PEOPLE
Sarah started as General Manager of the Exchange Centre,
Ilford in June 2017, having been appointed following the Group’s
acquisition of the scheme in March 2017. The move represented
a return to C&R having previously worked in marketing roles
at Wood Green and then Romford, whilst in the Group’s
ownership, and where Sarah joined from having been General
Manager since being promoted from the Deputy Manager
position in February 2013. Managing the Ilford pilot projects
proved a challenging but hugely rewarding reintroduction to
C&R and Sarah and her team are looking forward to further
transforming the centre in 2018 with the roll-out of the asset
masterplan.
Sarah deCourcy Rolls
General Manager, the Exchange Centre, Ilford
Snozone
Snozone enjoyed another strong trading year with revenue
increasing 2% to £10.4 million (2016: £10.2 million) and profit up
10% to just over £1.5 million (2016: £1.4 million).
During 2017 Snozone won Best Sporting Venue at the UK
School Travel awards, beating Manchester United’s museum
and stadium tours, Twickenham Stadium, Wimbledon Lawn
Tennis Association and the National Football Museum to this
prestigious award.
In September 2017, Snozone purchased the former “Skiplex”
business at Basingstoke for less than £0.1 million, comprising
two indoor slopes inside the iFLY indoor skydiving centre.
Rebranded as “Skizone” this gives Snozone a foothold south
of the M25 from which to grow its data base and auxiliary
revenue, as well as creating a hub from which to open similar
sized businesses across the south, should opportunities present
themselves.
OUR PEOPLE
Sarah started as General Manager of the Exchange Centre,
Ilford in June 2017, having been appointed following the Group’s
acquisition of the scheme in March 2017. The move represented
a return to C&R having previously worked in marketing roles
at Wood Green and then Romford, whilst in the Group’s
ownership, and where Sarah joined from having been General
Manager since being promoted from the Deputy Manager
position in February 2013. Managing the Ilford pilot projects
proved a challenging but hugely rewarding reintroduction to
C&R and Sarah and her team are looking forward to further
transforming the centre in 2018 with the roll-out of the asset
masterplan.
Sarah deCourcy Rolls
General Manager, the Exchange Centre, Ilford
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
22
FINANCIAL REVIEW
Profitability
Net Rental Income1
Adjusted Profit2
Adjusted Earnings per share2
IFRS Profit/(loss) for the period
EPRA cost ratio (excluding vacancy costs)
Net Administrative Expenses to Gross Rent
Investment returns
Net Asset Value (NAV) per share
EPRA NAV per share
Dividend per share
Dividend pay-out
Return on equity
Financing3
Group net debt
Group net debt to property value
Average debt maturity4
Cost of debt5
1. Wholly-owned assets.
2017
2016
Change
Profitability
Components of Adjusted Profit and reconciliation to IFRS Profit
£51.6m
£29.1m
4.10p
£22.4m
25.9%
12.7%
67p
67p
3.64p
88.8%
4.7%
£50.4m
£26.8m
3.82p
£(4.4)m
27.4%
13.6%
68p
68p
3.39p
88.7%
(0.9)%
+2.4%
+8.6%
+7.3%
-150bps
-90bps
-1p
-1p
+7.4%
£404.0m
46%
7.3 years
3.25%
£398.1m
46%
8.0 years
3.25%
+£5.9m
–
-0.7 years
–
2.
3.
4.
5.
Adjusted Profit and Adjusted Earnings per share are defined in the Glossary and Note 1 to the Financial Statements. A reconciliation to the statutory result is
provided further below. EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the Financial Statements.
December 2016 comparative figures in this section are adjusted for the refinancing of Mall assets completed on 4 January 2017, Ipswich disposal completed
on 17 February 2017 and Ilford acquisition completed on 8 March 2017.
IFRS Profit/(loss) for the period
Assuming exercise of all extension options.
Assuming all loans fully drawn.
The above results are discussed more fully in the following pages.
Use of Alternative Performance Measures (APMs)
Throughout the results statement we use a range of financial and non-financial measures to assess our performance. The significant
measures are as follows:
Alternative performance measure used
Like-for-like amounts
Adjusted Profit
Rationale
Like-for-like amounts are presented as they measure operating performance as
distinct from the impact of acquisitions or disposals. In respect of property, the like-
for-like measures, unless otherwise stated, relate to property which has been owned
throughout both periods so that income can be compared on a like-for-like basis. For
the purposes of comparison of capital values, this will also include assets owned at the
previous period end but not throughout the prior period.
Adjusted Profit is presented as it is considered by Management to provide the best
indication of the extent to which dividend payments are supported by underlying
profits.
Adjusted Profit excludes revaluation of properties, profit or loss on disposal of
properties or investments, gains or losses on financial instruments, non-cash charges in
respect of share-based payments and exceptional one-off items.
The key differences from EPRA earnings, an industry standard comparable measure,
relates to the exclusion of non-cash charges in respect of share-based payments and
adjustments in respect of exceptional items where EPRA is prescriptive.
A reconciliation of Adjusted Profit to the equivalent EPRA and statutory measures is
provided in Note 9 to the financial statements.
Stock Code: CAL
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Amounts in £m
Net rental income
(cid:58)holly-owned assets
(cid:46)ingfisher, Redditch1
Buttermarket, Ipswich2
Net interest
Snozone profit (indoor ski operation)
Central operating costs net of external fees
Adjusted Earnings per share (pence)3
Reconciliation of Adjusted Profit to statutory result
Property revaluation (including Deferred Tax)
Gain/(Loss) on financial instruments
Tax charge
Adjusted Profit
Adjusted Profit
Loss on disposals
Refinancing costs
Other items4
Year to
Year to
30 December 2017
30 December 2016
4.10p
3.82p
51.6
1.6
–
53.2
(19.6)
1.5
(5.9)
(0.1)
29.1
29.1
(6.3)
–
1.1
(0.5)
(1.0)
22.4
50.4
1.7
0.5
52.6
(20.3)
1.4
(6.9)
–
26.8
26.8
(14.5)
(2.6)
(2.5)
(11.0)
(0.6)
(4.4)
See note 14d to the Financial Statements.
See note 14e to the Financial Statements.
EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the Financial Statements.
Includes £0.9 million for the non-cash accounting charge in respect of share-based payments (2016: £0.5 million).
Adjusted Profit and Adjusted Earnings per share showed strong increases of 8.6% and 7.3% respectively, reflecting growth in NRI
(see breakdown below), lower interest costs following the refinancing of the Mall assets and a £1.0 million reduction in net central
operating costs, reflecting the benefit of completed and ongoing cost initiatives. Gross central costs fell from £9.6 million in 2016 to
£8.4 million in 2017, a reduction of £1.2 million. A further reduction of at least a further £0.6 million of costs per annum is targeted
1.
2.
3.
4.
for 2018.
Wholly-owned assets Net rental income
Amounts in £m
Like-for-like (Blackburn, Luton, Maidstone, Walthamstow, Wood Green)
Hemel Hempstead – acquired February/March 2016
Camberley (sold November 2016) and other disposals
Ilford – acquired 8 March 2017
Net rental income (NRI)
Year to
30 Dec
2017
43.5
3.7
–
4.4
51.6
Year to
30 Dec
2016
42.7
3.5
4.2
–
50.4
+1.9%
+2.4%
Profitability
Net Rental Income1
Adjusted Profit2
Adjusted Earnings per share2
IFRS Profit/(loss) for the period
EPRA cost ratio (excluding vacancy costs)
Net Administrative Expenses to Gross Rent
Investment returns
Net Asset Value (NAV) per share
EPRA NAV per share
Dividend per share
Dividend pay-out
Return on equity
Financing3
Group net debt
Group net debt to property value
Average debt maturity4
Cost of debt5
1. Wholly-owned assets.
2017
2016
Change
Profitability
Components of Adjusted Profit and reconciliation to IFRS Profit
£51.6m
£29.1m
4.10p
£22.4m
25.9%
12.7%
67p
67p
3.64p
88.8%
4.7%
£50.4m
£26.8m
3.82p
£(4.4)m
27.4%
13.6%
68p
68p
3.39p
88.7%
(0.9)%
+2.4%
+8.6%
+7.3%
-150bps
-90bps
-1p
-1p
+7.4%
£404.0m
£398.1m
+£5.9m
46%
46%
7.3 years
8.0 years
-0.7 years
3.25%
3.25%
–
–
Amounts in £m
Net rental income
(cid:58)holly-owned assets
(cid:46)ingfisher, Redditch1
Buttermarket, Ipswich2
Net interest
Snozone profit (indoor ski operation)
Central operating costs net of external fees
Tax charge
Adjusted Profit
Adjusted Earnings per share (pence)3
Reconciliation of Adjusted Profit to statutory result
Adjusted Profit
Property revaluation (including Deferred Tax)
Loss on disposals
Gain/(Loss) on financial instruments
Refinancing costs
Other items4
December 2016 comparative figures in this section are adjusted for the refinancing of Mall assets completed on 4 January 2017, Ipswich disposal completed
IFRS Profit/(loss) for the period
STRATEGIC REPORT
23
Year to
30 December 2017
Year to
30 December 2016
51.6
1.6
–
53.2
(19.6)
1.5
(5.9)
(0.1)
29.1
4.10p
3.82p
29.1
(6.3)
–
1.1
(0.5)
(1.0)
22.4
50.4
1.7
0.5
52.6
(20.3)
1.4
(6.9)
–
26.8
26.8
(14.5)
(2.6)
(2.5)
(11.0)
(0.6)
(4.4)
1.
2.
3.
4.
See note 14d to the Financial Statements.
See note 14e to the Financial Statements.
EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the Financial Statements.
Includes £0.9 million for the non-cash accounting charge in respect of share-based payments (2016: £0.5 million).
Adjusted Profit and Adjusted Earnings per share showed strong increases of 8.6% and 7.3% respectively, reflecting growth in NRI
(see breakdown below), lower interest costs following the refinancing of the Mall assets and a £1.0 million reduction in net central
operating costs, reflecting the benefit of completed and ongoing cost initiatives. Gross central costs fell from £9.6 million in 2016 to
£8.4 million in 2017, a reduction of £1.2 million. A further reduction of at least a further £0.6 million of costs per annum is targeted
for 2018.
Wholly-owned assets Net rental income
Amounts in £m
Like-for-like (Blackburn, Luton, Maidstone, Walthamstow, Wood Green)
Hemel Hempstead – acquired February/March 2016
Camberley (sold November 2016) and other disposals
Ilford – acquired 8 March 2017
Net rental income (NRI)
Year to
30 Dec
2017
43.5
3.7
–
4.4
51.6
Year to
30 Dec
2016
42.7
3.5
4.2
–
50.4
+1.9%
+2.4%
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Adjusted Profit and Adjusted Earnings per share are defined in the Glossary and Note 1 to the Financial Statements. A reconciliation to the statutory result is
provided further below. EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the Financial Statements.
2.
3.
4.
5.
on 17 February 2017 and Ilford acquisition completed on 8 March 2017.
Assuming exercise of all extension options.
Assuming all loans fully drawn.
The above results are discussed more fully in the following pages.
Use of Alternative Performance Measures (APMs)
Throughout the results statement we use a range of financial and non-financial measures to assess our performance. The significant
measures are as follows:
Alternative performance measure used
Rationale
Like-for-like amounts
Like-for-like amounts are presented as they measure operating performance as
distinct from the impact of acquisitions or disposals. In respect of property, the like-
for-like measures, unless otherwise stated, relate to property which has been owned
throughout both periods so that income can be compared on a like-for-like basis. For
the purposes of comparison of capital values, this will also include assets owned at the
previous period end but not throughout the prior period.
Adjusted Profit
Adjusted Profit is presented as it is considered by Management to provide the best
indication of the extent to which dividend payments are supported by underlying
profits.
Adjusted Profit excludes revaluation of properties, profit or loss on disposal of
properties or investments, gains or losses on financial instruments, non-cash charges in
respect of share-based payments and exceptional one-off items.
The key differences from EPRA earnings, an industry standard comparable measure,
relates to the exclusion of non-cash charges in respect of share-based payments and
adjustments in respect of exceptional items where EPRA is prescriptive.
A reconciliation of Adjusted Profit to the equivalent EPRA and statutory measures is
provided in Note 9 to the financial statements.
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
24
FINANCIAL REVIEW
CONTINUED
Net Asset Value
NAV at £481.4 million and EPRA NAV at £482.6 million increased marginally (December 2016: £477.6 million and £481.5 million
respectively) with retained profit offsetting the small fall in valuations net of Capex (see below). On a per share basis Basic NAV and
EPRA NAV fell by 1p to 67p due to a slightly higher number of shares in issue as a result of the Scrip dividend and vesting of the
Company’s Long Term Incentive Plan.
Property portfolio valuation
Property at independent valuation
Blackburn
Hemel Hempstead
Ilford
Luton
Maidstone
Walthamstow
Wood Green
Wholly-owned portfolio
1.
Ilford at acquisition price on 8 March 2017.
30 December 2017
30 December 2016
£m
121.3
54.0
82.4
214.0
76.0
107.7
231.2
886.6
NIY %
6.65%
6.88%
6.54%
6.35%
6.70%
5.25%
5.25%
6.06%
£m
124.1
54.6
78.01
207.0
80.0
103.3
225.1
872.1
NIY %
6.53%
7.07%
6.70%1
6.35%
6.78%
5.25%
5.25%
6.08%
The valuation of the wholly-owned portfolio at 30 December 2017 was £886.6 million, reflecting a net initial yield of 6.06%.
Covenants
This is marginally below the 30 December 2016 valuation of £794.1 million after allowing for capital expenditure in the period of
£17.5 million and the £78.0 million acquisition of The Exchange Centre, Ilford in March 2017 (excluding acquisition costs of c.£1.0
million). Yields on the Group’s London and South East assets proved resilient and were largely unchanged over the period, with the
decline in Maidstone reflecting the unlet BHS unit. Blackburn saw a small fall in valuation due to outward market yield shift partially
offset by an increase in valued income.
The Group was compliant with its banking and debt covenants at 30 December 2017 and throughout the year. Further details are
disclosed in the “covenant information” section on page 119.
South African secondary listing
The Company maintains a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock
Exchange (JSE) in South Africa. At 30 December 2017, 60,477,452 of the Company’s shares were held on the JSE register representing
Financing
Net interest
Amounts in £m
Wholly-owned assets
(cid:49)et Interest on loans
Amortisation of refinancing costs
(cid:49)otional interest charge on head leases2
Kingfisher, Redditch (Group share)
Buttermarket, Ipswich (Group share)
Central
Net Group interest
Year to
30 Dec
2017
Year to
30 Dec
2016
14.0
1.0
3.4
18.4
0.9
–
0.3
19.6
14.0
1.4
3.6
19.0
0.8
0.1
0.4
20.3
2.
Notional interest charge with offsetting opposite and materially equal credit within other property operating expenses.
The decrease in interest reflects the lower interest cost and amortisation charge following the refinancing of the Mall assets that
completed on 4 January 2017 and the acquisition of Ilford in March 2017.
Stock Code: CAL
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Group debt
30 December 2017
Four Mall assets
Luton
Ilford
Hemel Hempstead
Group RCF
On balance
sheet debt
Loan to
Net debt
value3
to value3
Average
interest
Duration
Duration
to loan
with
Fixed
expiry
extensions
Years
Years
Debt1
£m
255.0
107.5
26.9
39.0
–
Cash2
£m
(8.4)
(5.8)
(1.1)
(2.4)
(6.7)
Net
debt
£m
246.6
101.7
25.8
36.6
(6.7)
%
48%
50%
50%
47%
–
%
46%
48%
48%
44%
–
rate
%
3.36
3.14
3.32
2.76
3.40
428.4
(24.4)
404.0
48%
46%
3.25
%
100
100
100
100
–
94
7.6
6.0
4.1
6.2
4.1
6.7
8.6
6.0
5.1
6.2
4.1
7.3
1.
2.
3.
Excluding unamortised issue costs.
Excluding cash beneficially owned by tenants.
Debt and net debt divided by investment property at valuation.
The refinancing activity completed in the early part of 2017 has delivered an attractive funding cost of 3.25% that is fixed and
secured over a weighted average 6.7 year maturity, extending to 7.3 years if all extensions are exercised. Our target range for net
debt to property value remains 40%–50% with an intention to reduce it to the lower end of that range in the medium term.
8.4% of the total shares in issue.
Dividend
The Board is proposing a final dividend of 1.91 pence per share, taking the full-year dividend to 3.64 pence per share, representing
a 7.4% increase from 2016. The Board has reaffirmed its guidance that the Company will target year on year dividend growth in the
range of 5% to 8% per annum over the medium term.
The key dates proposed in relation to the payment of the 2017 final dividend are:
• Confirmation of ZAR equivalent dividend and PID percentage
• Last day to trade on Johannesburg Stock Exchange (JSE)
• Shares trade ex-dividend on the JSE
• Shares trade ex-dividend on the London Stock Exchange (LSE)
• Record date for LSE and JSE
• Annual General Meeting
• Dividend payment date
10 April 2018
17 April 2018
18 April 2018
19 April 2018
20 April 2018
9 May 2018
16 May 2018
The amount to be paid as a PID will be confirmed in the announcement on 10 April 2018. If a Scrip dividend alternative is offered,
subject to the requisite regulatory approvals, the deadline for submission of valid election forms will be 20 April 2018. South African
shareholders are advised that the final dividend will be regarded as a foreign dividend. Further details relating to Withholding Tax
for shareholders on the South African register will be provided within the announcement detailing the currency conversion rate on
10 April 2018. Share certificates on the South African register may not be dematerialised or rematerialised between 18 April 2018
and 20 April 2018, both dates inclusive. Transfers between the UK and South African registers may not take place between 10 April
2018 and 20 April 2018, both dates inclusive.
Charles Staveley
Group Finance Director
NAV at £481.4 million and EPRA NAV at £482.6 million increased marginally (December 2016: £477.6 million and £481.5 million
respectively) with retained profit offsetting the small fall in valuations net of Capex (see below). On a per share basis Basic NAV and
EPRA NAV fell by 1p to 67p due to a slightly higher number of shares in issue as a result of the Scrip dividend and vesting of the
Net Asset Value
Company’s Long Term Incentive Plan.
Property portfolio valuation
Property at independent valuation
Blackburn
Hemel Hempstead
Ilford
Luton
Maidstone
Walthamstow
Wood Green
Wholly-owned portfolio
1.
Ilford at acquisition price on 8 March 2017.
Financing
Net interest
Amounts in £m
Wholly-owned assets
(cid:49)et Interest on loans
Amortisation of refinancing costs
(cid:49)otional interest charge on head leases2
Kingfisher, Redditch (Group share)
Buttermarket, Ipswich (Group share)
Central
Net Group interest
30 December 2017
30 December 2016
£m
121.3
54.0
82.4
214.0
76.0
107.7
231.2
886.6
NIY %
6.65%
6.88%
6.54%
6.35%
6.70%
5.25%
5.25%
6.06%
£m
124.1
54.6
78.01
207.0
80.0
103.3
225.1
872.1
NIY %
6.53%
7.07%
6.70%1
6.35%
6.78%
5.25%
5.25%
6.08%
Year to
30 Dec
2017
Year to
30 Dec
2016
14.0
1.0
3.4
18.4
0.9
–
0.3
19.6
14.0
1.4
3.6
19.0
0.8
0.1
0.4
20.3
The valuation of the wholly-owned portfolio at 30 December 2017 was £886.6 million, reflecting a net initial yield of 6.06%.
This is marginally below the 30 December 2016 valuation of £794.1 million after allowing for capital expenditure in the period of
£17.5 million and the £78.0 million acquisition of The Exchange Centre, Ilford in March 2017 (excluding acquisition costs of c.£1.0
million). Yields on the Group’s London and South East assets proved resilient and were largely unchanged over the period, with the
decline in Maidstone reflecting the unlet BHS unit. Blackburn saw a small fall in valuation due to outward market yield shift partially
offset by an increase in valued income.
2.
Notional interest charge with offsetting opposite and materially equal credit within other property operating expenses.
The decrease in interest reflects the lower interest cost and amortisation charge following the refinancing of the Mall assets that
completed on 4 January 2017 and the acquisition of Ilford in March 2017.
STRATEGIC REPORT
25
Group debt
30 December 2017
Four Mall assets
Luton
Hemel Hempstead
Ilford
Group RCF
On balance
sheet debt
Debt1
£m
255.0
107.5
26.9
39.0
–
Cash2
£m
(8.4)
(5.8)
(1.1)
(2.4)
(6.7)
Net
debt
£m
246.6
101.7
25.8
36.6
(6.7)
Loan to
value3
%
48%
50%
50%
47%
–
Net debt
to value3
%
46%
48%
48%
44%
–
Average
interest
rate
%
3.36
3.14
3.32
2.76
3.40
Duration
to loan
expiry
Years
7.6
6.0
4.1
6.2
4.1
Duration
with
extensions
Years
8.6
6.0
5.1
6.2
4.1
Fixed
%
100
100
100
100
–
428.4
(24.4)
404.0
48%
46%
3.25
94
6.7
7.3
1.
2.
3.
Excluding unamortised issue costs.
Excluding cash beneficially owned by tenants.
Debt and net debt divided by investment property at valuation.
The refinancing activity completed in the early part of 2017 has delivered an attractive funding cost of 3.25% that is fixed and
secured over a weighted average 6.7 year maturity, extending to 7.3 years if all extensions are exercised. Our target range for net
debt to property value remains 40%–50% with an intention to reduce it to the lower end of that range in the medium term.
Covenants
The Group was compliant with its banking and debt covenants at 30 December 2017 and throughout the year. Further details are
disclosed in the “covenant information” section on page 119.
South African secondary listing
The Company maintains a primary listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock
Exchange (JSE) in South Africa. At 30 December 2017, 60,477,452 of the Company’s shares were held on the JSE register representing
8.4% of the total shares in issue.
Dividend
The Board is proposing a final dividend of 1.91 pence per share, taking the full-year dividend to 3.64 pence per share, representing
a 7.4% increase from 2016. The Board has reaffirmed its guidance that the Company will target year on year dividend growth in the
range of 5% to 8% per annum over the medium term.
The key dates proposed in relation to the payment of the 2017 final dividend are:
• Confirmation of ZAR equivalent dividend and PID percentage
• Last day to trade on Johannesburg Stock Exchange (JSE)
• Shares trade ex-dividend on the JSE
• Shares trade ex-dividend on the London Stock Exchange (LSE)
• Record date for LSE and JSE
• Annual General Meeting
• Dividend payment date
10 April 2018
17 April 2018
18 April 2018
19 April 2018
20 April 2018
9 May 2018
16 May 2018
The amount to be paid as a PID will be confirmed in the announcement on 10 April 2018. If a Scrip dividend alternative is offered,
subject to the requisite regulatory approvals, the deadline for submission of valid election forms will be 20 April 2018. South African
shareholders are advised that the final dividend will be regarded as a foreign dividend. Further details relating to Withholding Tax
for shareholders on the South African register will be provided within the announcement detailing the currency conversion rate on
10 April 2018. Share certificates on the South African register may not be dematerialised or rematerialised between 18 April 2018
and 20 April 2018, both dates inclusive. Transfers between the UK and South African registers may not take place between 10 April
2018 and 20 April 2018, both dates inclusive.
Charles Staveley
Group Finance Director
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
26
MANAGING RISK
Risk management process
There are a number of risks and uncertainties which could have
a material impact on the Group’s future performance and could
cause results to differ significantly from expectations.
Ahead of every half year and year end the Group undertakes
a comprehensive risk and controls review involving interviews
with relevant management teams. The output of this process
is an updated risk map and internal control matrix for each
component of the business which is then aggregated into a
Group risk map and matrix which is reviewed by executive
management, the Audit Committee and the Board and forms
the basis for the disclosures made below. This process clearly
outlines the principal risks, considers their potential impact on
the business, the likelihood of them occurring and the actions
being taken to manage, and the individual(s) responsible for
managing, those risks to the desired level.
This risk matrix is also used in performing our annual
assessment of the material financial, operational and
compliance controls that mitigate the key risks identified. Each
control is assessed or tested for evidence of its effectiveness.
The review concluded that all such material controls were
operating effectively during 2017.
Principal risks at 30 December 2017
Following the risk reviews carried out at 30 June 2017 and
30 December 2017, one further risk has been added to the list
of principal Group risks as disclosed in the 2016 Annual Report,
being Reputational Risk. Reputational Risk is defined as the
potential impact on the Group’s reputation from adverse events
or publicity, and has been added reflecting a general business
environment in which corporates are under increasing and
magnified focus from both mainstream and social media.
Otherwise it was concluded that the nature of the Group’s risks
had not significantly changed, although the ongoing economic
and political uncertainty in the UK, most prominently due to the
result of the EU referendum, continues to impact some of the
wider market risks that the Group is subject to.
The risks noted 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.
Risk
Property risks
Property investment market risks
Impact
Mitigation
• Weakening economic conditions and
• Small changes in property market
• Monitoring of indicators of market
poor sentiment in commercial real
estate markets could lead to low
investor demand and an adverse
movement in valuation
yields can have a significant effect on
direction and forward planning of
valuation
investment decisions
•
Impact of leverage could magnify the
• Review of debt levels and
effect on the Group’s net assets
consideration of strategies to reduce if
relevant
Impact of the economic environment
• 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, lease incentive, void costs,
cash and ultimately property valuation
Valuation risk
• Lack of relevant transactional evidence
• Property valuations increasingly
• Use of experienced, external
subjective and open to a wider range
valuers who understand the specific
of possible outcomes
properties
Threat from the internet
• The trend towards online shopping may
• A change in consumer shopping
• Strong location and dominance of
adversely impact consumer footfall in
habits towards online purchasing
shopping centres (portfolio is weighted
shopping centres
and delivery may reduce footfall and
to London and South East England)
therefore potentially reduce tenant
demand and the levels of rents which
can be achieved
• 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
• Use of more than one valuer
• Valuations reviewed by internal
valuation experts and key assumptions
challenged
• Strength of the community shopping
experience with tailored relevance to
the local community
• Concentration on convenience and
value offer which is less impacted by
online presence
•
Increasing provision of “Click & Collect”
within our centres
• Digital marketing initiatives
• Monitoring of footfall for evidence of
negative trends
• Monitoring of retail trends and
shopping behaviour
Stock Code: CAL
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STRATEGIC REPORT
27
Risk
Impact
Mitigation
Property risks
Property investment market risks
• Weakening economic conditions and
poor sentiment in commercial real
estate markets could lead to low
investor demand and an adverse
movement in valuation
Impact of the economic environment
• Tenant insolvency or distress
• Prolonged downturn in tenant demand
and pressure on rent levels
• Small changes in property market
yields can have a significant effect on
valuation
• Monitoring of indicators of market
direction and forward planning of
investment decisions
•
Impact of leverage could magnify the
effect on the Group’s net assets
• Review of debt levels and
consideration of strategies to reduce if
relevant
• Tenant failures and reduced tenant
• Large, diversified tenant base
demand could adversely affect rental
income, lease incentive, void costs,
cash and ultimately property valuation
• 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
Valuation risk
• Lack of relevant transactional evidence
• Property valuations increasingly
• Use of experienced, external
subjective and open to a wider range
of possible outcomes
valuers who understand the specific
properties
Threat from the internet
• The trend towards online shopping may
adversely impact consumer footfall in
shopping centres
• Use of more than one valuer
• Valuations reviewed by internal
valuation experts and key assumptions
challenged
• A change in consumer shopping
• Strong location and dominance of
habits towards online purchasing
and delivery may reduce footfall and
therefore potentially reduce tenant
demand and the levels of rents which
can be achieved
shopping centres (portfolio is weighted
to London and South East England)
• Strength of the community shopping
experience with tailored relevance to
the local community
• Concentration on convenience and
value offer which is less impacted by
online presence
•
Increasing provision of “Click & Collect”
within our centres
• Digital marketing initiatives
• Monitoring of footfall for evidence of
negative trends
• Monitoring of retail trends and
shopping behaviour
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
28
MANAGING RISK
CONTINUED
Risk
Concentration and scale risk
• By having a less diversified portfolio the
business is more exposed to specific
tenants or types of tenant
Competition risk
• The threat to the Group’s property
assets of competing in town and out of
town retail and leisure schemes
Impact
Mitigation
Impact
Mitigation
Risk
Covenant compliance risks
• Tenant failures could have a greater
• Regular monitoring of retail
• Breach of any loan covenants
• Unremedied breaches can trigger
• Regular monitoring and projections
impact on rental income
• Reduced purchasing power could
impact the ability to drive economies
of scale and the feasibility of certain
investment decisions regarding the
operating platform
environment and performance of key
tenants
• Maintaining flexibility in operating
platform
• Further diversification considered
through acquisitions or joint ventures
• Competing schemes may reduce
• Monitoring of new planning proposals
footfall and reduce tenant demand for
space and the levels of rents which can
be achieved
• Close relationships with local councils
and willingness to support town
centres
Business disruption from a major incident
• Major incident takes place
• Financial loss if unable to trade or
impacts upon shopper footfall
• Continued investment in schemes
to ensure relevance to the local
community
•
Investment in traditional and digital
marketing
• Trained operational personnel at all
sites and documented major incident
procedures
• Updated operational procedures
reflecting current threats and major
incident testing run
• Regular liaison with the police
• Key IT applications hosted offsite
•
Insurance maintained
Development risk
• Delays or other issues may occur to
capital expenditure and development
projects
Funding and treasury risks
Liquidity and funding
•
Inability to fund the business or to
refinance existing debt on economic
terms when needed
• May lead to increased cost and
• Approval process for new
reputational damage
• Planned value may not be realised
developments and staged execution to
key milestones
• Use of experienced project co-
ordinators and external consultants
with regular monitoring and Executive
Committee oversight
time
Reputational risk
damage
•
Inability to meet financial obligations
when due
• Limitation on financial and operational
flexibility
• Refinancing of debt on the Mall assets
in early 2017 improved liquidity and
long-term security
• Ensuring that there are significant
• Cost of financing could be prohibitive
undrawn facilities
• Efficient treasury management and
forecasting with regular reporting to
the Board
• Option of asset sales if necessary
Stock Code: CAL
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causing default on debt and possible
demand for immediate repayment of
of liquidity, gearing and covenant
accelerated maturity
loan
compliance
• Review of future cash flows and
predicted valuations to ensure
sufficient headroom
• Exposure to rising or falling interest
•
If interest rates rise and are unhedged,
• Regular monitoring of the
the cost of debt facilities can rise and
performance of derivative contracts
ICR covenants could be broken
and corrective action taken where
• Hedging transactions used by the
necessary
Group to minimise interest rate risk
• Use of alternative hedges such as caps
may limit gains, result in losses or have
other adverse consequences
Interest rate exposure risks
rates
Other risks
Execution of business plan
• Failure to execute business plan in line
• Potential loss of income or value
• Management of projects and the
with internal and external expectations
resulting in lower cash flow and
individual shopping centres by
property valuation
experienced and skilled professionals
• Reputational damage negatively
• Strong relationships with retailers and
impacting investor market perception
contractors/suppliers
• Ongoing monitoring of performance
against plan and key milestones
Property acquisition/disposal strategy
• Exposure to risks around overpayment
• Overpayment may result in
• Regular monitoring of the property
for acquisitions
acquisitions not delivering forecast
market and the use of professional
• Portfolio not effectively managed
returns
advisers
through the investment cycle, with sales
• The Group may not be able to take
•
Impact of cycle reflected in business
and de-leveraging at the appropriate
advantage of investment opportunities
planning
• Covenants may move adversely when
as they arise
cycle changes
• Adverse events or publicity, including
• Negatively impact investor market
• Close Board/Management oversight of
social media, may lead to reputational
perception
major issues and decision making
• May reduce shopper footfall and
• Effective pre-planning of
demand from tenants for space
announcements and applications
• Monitoring of public opinion through
focus groups and review of press and
• Use of PR advisers and Media training
social media
for Management
Risk
Concentration and scale risk
Impact
Mitigation
• By having a less diversified portfolio the
• Tenant failures could have a greater
• Regular monitoring of retail
business is more exposed to specific
impact on rental income
environment and performance of key
tenants or types of tenant
• Reduced purchasing power could
impact the ability to drive economies
• Maintaining flexibility in operating
of scale and the feasibility of certain
investment decisions regarding the
operating platform
• Further diversification considered
through acquisitions or joint ventures
tenants
platform
Competition risk
• The threat to the Group’s property
• Competing schemes may reduce
• Monitoring of new planning proposals
assets of competing in town and out of
footfall and reduce tenant demand for
town retail and leisure schemes
space and the levels of rents which can
• Close relationships with local councils
and willingness to support town
be achieved
Business disruption from a major incident
• Major incident takes place
• Financial loss if unable to trade or
• Trained operational personnel at all
impacts upon shopper footfall
sites and documented major incident
Development risk
• Delays or other issues may occur to
• May lead to increased cost and
• Approval process for new
capital expenditure and development
reputational damage
developments and staged execution to
projects
• Planned value may not be realised
key milestones
Funding and treasury risks
Liquidity and funding
•
Inability to fund the business or to
•
Inability to meet financial obligations
• Refinancing of debt on the Mall assets
refinance existing debt on economic
when due
terms when needed
• Limitation on financial and operational
flexibility
• Cost of financing could be prohibitive
in early 2017 improved liquidity and
long-term security
• Ensuring that there are significant
undrawn facilities
• Efficient treasury management and
forecasting with regular reporting to
the Board
• Option of asset sales if necessary
STRATEGIC REPORT
29
Impact
Mitigation
Risk
Covenant compliance risks
• Breach of any loan covenants
causing default on debt and possible
accelerated maturity
demand for immediate repayment of
loan
• Unremedied breaches can trigger
• Regular monitoring and projections
of liquidity, gearing and covenant
compliance
• Review of future cash flows and
predicted valuations to ensure
sufficient headroom
• Continued investment in schemes
to ensure relevance to the local
•
Investment in traditional and digital
centres
community
marketing
procedures
• Updated operational procedures
reflecting current threats and major
incident testing run
• Regular liaison with the police
• Key IT applications hosted offsite
•
Insurance maintained
Interest rate exposure risks
• Exposure to rising or falling interest
rates
Other risks
Execution of business plan
• Failure to execute business plan in line
with internal and external expectations
•
If interest rates rise and are 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
• Regular monitoring of the
performance of derivative contracts
and corrective action taken where
necessary
• Use of alternative hedges such as caps
• Potential loss of income or value
resulting in lower cash flow and
property valuation
• Management of projects and the
individual shopping centres by
experienced and skilled professionals
• Reputational damage negatively
• Strong relationships with retailers and
impacting investor market perception
contractors/suppliers
• Ongoing monitoring of performance
against plan and key milestones
Property acquisition/disposal strategy
• Exposure to risks around overpayment
for acquisitions
• Portfolio not effectively managed
• Overpayment may result in
acquisitions not delivering forecast
returns
• Regular monitoring of the property
market and the use of professional
advisers
through the investment cycle, with sales
and de-leveraging at the appropriate
time
• The Group may not be able to take
•
advantage of investment opportunities
as they arise
Impact of cycle reflected in business
planning
• Use of experienced project co-
ordinators and external consultants
with regular monitoring and Executive
Committee oversight
Reputational risk
• Adverse events or publicity, including
social media, may lead to reputational
damage
• Covenants may move adversely when
cycle changes
• Negatively impact investor market
perception
• Close Board/Management oversight of
major issues and decision making
• May reduce shopper footfall and
demand from tenants for space
• Effective pre-planning of
announcements and applications
• Monitoring of public opinion through
focus groups and review of press and
social media
• Use of PR advisers and Media training
for Management
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30
MANAGING RISK
CONTINUED
Risk
Tax risks
• Exposure to non-compliance with the
REIT regime and changes in the form or
interpretation of tax legislation
• Potential exposure to tax liabilities
in respect of historic transactions
undertaken
Regulation risks
• Exposure to changes in existing or
forthcoming property or corporate
regulation
Loss of key management
• Dependence of the business on
the skills of a small number of key
individuals
Impact
Mitigation
• Tax related liabilities and other losses
• Monitoring of REIT compliance
could arise
• Expert advice taken on tax positions
and other regulations
• Maintenance of a regular dialogue
with the tax authorities
• Failure to comply could result in
• Training to keep Management 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
effectiveness
• Key management are paid market
salaries and competitive incentive
packages
• New LTIP awards made in 2017
Historic transactions
• Historic sales have included vendor
warranties and indemnities and as such,
the Group has potential exposure to
future claims from the purchaser
• Warranty and indemnity related
liabilities and other losses could arise
• Succession planning for key positions
is undertaken as evidenced by CEO
transition in 2017
• Use of professional advisers to achieve
properly negotiated agreements in
terms of scope, extent of financial
liability and time frame
• Monitoring of ongoing exposure
Viability statement
In accordance with the 2014 revision of the Code, the Directors have assessed the prospect of the Company over a longer period
than the 12 months required by the “Going Concern” provision. The Board conducted this review for a three year period to
December 2020. This was selected reflecting that the Group’s annual budget and business planning process covers a three year
period and all of the Group’s debt financing is secured and fully available for the duration of the period.
The three year budget and business plan review considers the Group’s cash flows, dividend cover and other key financial ratios over
the period. It includes sensitivity analysis to consider adverse scenarios, that could be caused by the principal risks and uncertainties
outlined on pages 26 to 30. This incorporated the impact on covenant compliance of a significant fall in property valuations
or property income. The three-year review also makes certain assumptions about funding acquisitions, or additional capital
expenditure initiatives through capital recycling or raising funding through other means.
Based on the results of this analysis, the Directors have a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period to December 2020.
Going Concern
Under the UK Corporate Governance Code, the Board needs to report whether the business is a going concern. In considering this
requirement, the Directors have taken into account the following:
•
•
the Group’s latest rolling forecast, in particular the cash flows, borrowings and undrawn facilities;
the headroom under the Group’s financial covenants;
• options for recycling capital and or alternative means of additional financing for funding new investments; and
•
the principal Group risks that could impact on the Group’s liquidity and solvency over the next 12 months and/or threaten the
Group’s business model and capital adequacy.
The Group’s risks and risk management processes are set out on pages 26 to 30.
Having due regard to these matters and after making appropriate enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the foreseeable future. Therefore, the Board continues to
adopt the going concern basis in preparing the financial statements.
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Risk
Tax risks
Impact
Mitigation
• Exposure to non-compliance with the
• Tax related liabilities and other losses
• Monitoring of REIT compliance
REIT regime and changes in the form or
could arise
• Expert advice taken on tax positions
and other regulations
• Maintenance of a regular dialogue
with the tax authorities
interpretation of tax legislation
• Potential exposure to tax liabilities
in respect of historic transactions
undertaken
Regulation risks
• Exposure to changes in existing or
• Failure to comply could result in
• Training to keep Management aware
forthcoming property or corporate
financial penalties, loss of business or
of regulatory changes
regulation
credibility
• Expert advice taken on complex
regulatory matters
Loss of key management
• Dependence of the business on
• Loss of key individuals or an inability
• Key management are paid market
the skills of a small number of key
individuals
to attract new employees with the
appropriate expertise could reduce
effectiveness
salaries and competitive incentive
packages
• New LTIP awards made in 2017
• Succession planning for key positions
is undertaken as evidenced by CEO
transition in 2017
terms of scope, extent of financial
liability and time frame
• Monitoring of ongoing exposure
• Historic sales have included vendor
• Warranty and indemnity related
• Use of professional advisers to achieve
warranties and indemnities and as such,
liabilities and other losses could arise
properly negotiated agreements in
Historic transactions
the Group has potential exposure to
future claims from the purchaser
Viability statement
In accordance with the 2014 revision of the Code, the Directors have assessed the prospect of the Company over a longer period
than the 12 months required by the “Going Concern” provision. The Board conducted this review for a three year period to
December 2020. This was selected reflecting that the Group’s annual budget and business planning process covers a three year
period and all of the Group’s debt financing is secured and fully available for the duration of the period.
The three year budget and business plan review considers the Group’s cash flows, dividend cover and other key financial ratios over
the period. It includes sensitivity analysis to consider adverse scenarios, that could be caused by the principal risks and uncertainties
outlined on pages 26 to 30. This incorporated the impact on covenant compliance of a significant fall in property valuations
or property income. The three-year review also makes certain assumptions about funding acquisitions, or additional capital
expenditure initiatives through capital recycling or raising funding through other means.
Based on the results of this analysis, the Directors have a reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period to December 2020.
Going Concern
Under the UK Corporate Governance Code, the Board needs to report whether the business is a going concern. In considering this
requirement, the Directors have taken into account the following:
the Group’s latest rolling forecast, in particular the cash flows, borrowings and undrawn facilities;
•
•
the headroom under the Group’s financial covenants;
• options for recycling capital and or alternative means of additional financing for funding new investments; and
•
the principal Group risks that could impact on the Group’s liquidity and solvency over the next 12 months and/or threaten the
Group’s business model and capital adequacy.
The Group’s risks and risk management processes are set out on pages 26 to 30.
Having due regard to these matters and after making appropriate enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the foreseeable future. Therefore, the Board continues to
adopt the going concern basis in preparing the financial statements.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
32
RESPONSIBLE BUSINESS
CHRISTMAS WASTE NOT
WANT NOT WORKSHOP –
THE MARLOWES, HEMEL
For Christmas 2017 The Marlowes went green with Santa’s Waste-not
workshop. Teaming up with local schools, retailers and suppliers they
created a workshop made fully of reused and recycled elements for a unique
and creative Santa experience. As part of the setup they reached out to two
local schools to collect bottles and cans which were then used to create their
displays. In total over 70 bags of recycling were collected with additional
collections encouraged from our retailer customers.
Launched as part of Hemel’s Light Switch On, Santa’s Waste-not workshop
ran every weekend up to Christmas with children able to meet Santa and
make recycled decorations as well as test out their pedal power on our 8m
Christmas tree, powered entirely by a set of bikes. In total just under 2,000
children visited Santa in his workshop with many guests commenting it was
the “best Santa they had seen”.
Environmental Sustainability
We work hard to ensure that our local
communities which we serve are better
places to be for all. Our commitment is
to reduce our impact on the environment
in the three key areas of waste, water
and energy. In addition, we continue the
focus on reducing the carbon footprint of
our properties. We have long recognised
that any development activity should
mirror this and have proactively ensured
we minimise energy consumption and
mitigate the effects of climate change
throughout the design and refurbishment
of our centres.
Highlights from 2017
• Retained the Global Real Estate
Benchmark (GRESB) Green Star Status
• Reduced CO2 emissions by 12% and
water consumption by 6%
• Retained the Best in Carbon
Management Award in October 2017
• Diverted 98% of waste from landfill
and 96% recycled back to the supply
chain
• Launched Evora environmental
reporting platform across all centres
to assist in monitoring, reporting and
targeting usage reductions
Priorities for 2018
• Reduce CO2 by 4%
• Reduce our water consumption by 1%
• Retain GRESB Green Star rating
• Establish a robust strategy across
the car parks for electrical vehicle
charging using smart technologies
Introduction
Our commitment to running our business
responsibly is important to C&R; it
underpins the way we operate and is
an integral part of who we are and what
we do.
Our aim is to be socially responsible
so that C&R is not only a great place
to work but it has a positive impact on
our guests, retailer customers and the
wider community while minimising our
environmental impact.
Our Responsible Business strategy is
supported by explicit targets and remains
focused on four key areas:
The Marketplace
Our aim is to engage with our local guests,
customers, suppliers and stakeholders, to
understand their needs and identify ways
of improving our collective responsible
business performance. We recognise the
positive impact our retail customers and
suppliers can have on our sustainability
efforts and continue to work in
partnership to deliver our goals to create
vibrant retail spaces.
Highlights from 2017
• Retained the ROSPA Gold Award for
11th consecutive year
• Our Mallmaintain contract achieved
an average Brand Standard
Performance Management score
of 97%
• All welfare facilities at the centres
have been enhanced for our soft
service teams
Priorities for 2018
• Retain ROSPA Gold Award
• Deliver the development of a new
challenging Compliance and Facilities
Management audit, which will be topic
based, and achieve an average score
great than 95%
• To ensure that the biannual
Operational Standards assessment
demonstrate continuous
improvement at each centre by
improving the overall guest and
customer experience
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STRATEGIC REPORT
33
Environmental Sustainability
We work hard to ensure that our local
communities which we serve are better
places to be for all. Our commitment is
to reduce our impact on the environment
in the three key areas of waste, water
and energy. In addition, we continue the
focus on reducing the carbon footprint of
our properties. We have long recognised
that any development activity should
mirror this and have proactively ensured
we minimise energy consumption and
mitigate the effects of climate change
throughout the design and refurbishment
of our centres.
Highlights from 2017
• Retained the Global Real Estate
Benchmark (GRESB) Green Star Status
• Reduced CO2 emissions by 12% and
water consumption by 6%
• Retained the Best in Carbon
Management Award in October 2017
• Diverted 98% of waste from landfill
and 96% recycled back to the supply
chain
• Launched Evora environmental
reporting platform across all centres
to assist in monitoring, reporting and
targeting usage reductions
Priorities for 2018
• Reduce CO2 by 4%
• Reduce our water consumption by 1%
• Retain GRESB Green Star rating
• Establish a robust strategy across
the car parks for electrical vehicle
charging using smart technologies
Report on Greenhouse Gas Emissions
We have followed the Greenhouse Gas Protocol for reporting CO2 emissions for the
2017 calendar year. The reporting boundary has been defined using the operational
control approach, reporting emissions for operations in which Capital & Regional have
control. It does not account for GHG emissions from operations in which it owns an
interest but has no operational control. Energy use from metered sources identified as
fully controlled by third parties (e.g. tenants) have also been excluded.
Scope 1 emissions account for total gas consumption. Emissions from emergency equipment
(e.g. standby generators) have been deemed de minimis and therefore are not included in
the reported figures. Scope 2 emissions account for the total electricity purchased.
Actual invoice data has been used for reporting wherever possible, however some
estimated data has been used where required. It should be noted that the Scope 1 and
Scope 2 reporting figures are absolute values. The information in this report represents
the best information available at the time of issue.
The data presented below has been independently verified by Hurley Palmer Flatt
who are satisfied, based on the information provided, that the reported figures are
representative of performance.
Scope 1 & 2 Mandatory Reporting*
Emissions
Scope 1 tCO2e
Scope 2 tCO2e
Intensity
Scope 1 and 2 kgCO2e/sqft
2017
2016**
1,161
8,833
1,201
10,985
2.05
2.48
* Scope 1: Direct GHG emissions from controlled operations (natural gas consumption)
Scope 2: Indirect GHG emissions from the use of purchased electricity, heat or steam (electricity
consumption).
** 2016 figures have been restated where material changes were subsequently identified.
The five centres we have had since 2012 now
use 43% less electricity. The 4.5 million kWh
saved over five years is enough to provide
free power at our Maidstone and Wood Green
Centres and the cost saving over five years
is in excess of £1,250,000.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
34
RESPONSIBLE BUSINESS
CONTINUED
Continuous Improvement
Our Continuous Improvement (Ci) initiative has empowered our
teams to challenge how we do things and to review and improve
the way we work leading to service excellence for our guests,
customers and internal teams.
Example projects delivered:
• Batch processing of supplier invoices: streamlined more
efficient scanning and automated matching of invoices.
• Purchase order system: removed silo management of data,
automation of processes leading to scalable business benefits
and enhanced cost monitoring visibility.
• Electronic tenant invoicing: improved communication with our
customers, reduced cost and paper, improved efficiency and
enhanced revenue management.
The Community
Fundamental to our strategy is the key
role our centres play in the ongoing
development of the communities and
environments in which we operate.
We work closely with key stakeholders
to ensure that we listen, engage and
use feedback to develop or refine our
approach. We aim to provide safe,
welcoming, clean and attractive shopping
and leisure venues where our guests
choose to shop, work and socialise. We
seek to make a positive contribution
to each local community by being
a responsible, socially aware and a
proactive partner.
Highlights from 2017
• Through Mall Cares we raised over
£312k for our local charities in 2017,
+11% on 2016
• The Mall Luton launched the Strategic
Community Safety Group together
with the town centre partners to
enable improved focus on business
related crime
• The launch of the Community Hub in
The Mall, Maidstone
• Launch of The Mall Monster Friends
Club
• We handled 42,000 Collect+ parcels in
2017, a 24% increase on 2016
Priorities for 2018
• To create as part of the roll-out of
asset masterplans an inclusive and
accessible shopping experience to
enhance social connections and
support the wider community
• To continue to work with our local
Mall Cares charities and at least match
2017 fundraising
•
Implement the Net Promotor Surveys
across all centres on a quarterly basis
People
Being a responsible business cannot be achieved
without the support and active engagement of our
colleagues. They are fundamental to the delivery
of our business vision which is to define and lead
Community Shopping, through our passionate
creation of vibrant retail spaces and exceptional
customer and guest experience. Our aim is to
ensure that we promote a progressive company
culture which is a combination of who we are, how
we work together and the pride we generate. Our
aim is to engage, develop and reward our people,
retaining our reputation as an employer of choice
within the sectors in which we operate. We want
to provide relevant, engaging training for all our
employees in order that they can make their fullest
contribution to our success and deliver exceptional
customer service. 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.
Highlights from 2017
• Retained our focus on Continuous
Improvement as part of the Working Smarter
initiative which has driven efficiencies across
the business
• Successfully launched the new Management
Training programme achieving an average
positive evaluation of 90%
• All centres participated in the Revo
Achievement in Customer Excellence Awards
(ACE) and achieved an average Mystery Shopper
rating of 81%, +4% improvement on last year
and compared to the industry average of 77%
• Achieved 89% return rate on C&R Pulse, our in-
house Staff Engagement Survey
• Launched our advanced Customer Service
Training Programme including our 10 Golden
Rules of guest engagement
• Launched our Wellbeing Committee across the
business
Priorities for 2018
• Launch a new Guest Experience Training
Programme which will be evaluated by the
mystery shopper results and the Guest Net
Promoter scores
• To deliver a revised policy and audit procedures
compliant with GDPR legislation
• To launch our new training and development
training programme to assist our teams in
delivering our refreshed business strategy
• All centres to enter the Revo Achievement in
Customer Excellence Awards (ACE) and achieve
an average rating of at least 77%
• To launch our new communication platform
CARTER (Capital & Regional Team Engagement
Resource)
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STRATEGIC REPORT
35
The Community
Fundamental to our strategy is the key
role our centres play in the ongoing
development of the communities and
environments in which we operate.
We work closely with key stakeholders
to ensure that we listen, engage and
use feedback to develop or refine our
approach. We aim to provide safe,
welcoming, clean and attractive shopping
and leisure venues where our guests
choose to shop, work and socialise. We
seek to make a positive contribution
to each local community by being
a responsible, socially aware and a
proactive partner.
Highlights from 2017
• Through Mall Cares we raised over
£312k for our local charities in 2017,
+11% on 2016
• The Mall Luton launched the Strategic
Community Safety Group together
with the town centre partners to
enable improved focus on business
related crime
• The launch of the Community Hub in
The Mall, Maidstone
• Launch of The Mall Monster Friends
Club
• We handled 42,000 Collect+ parcels in
2017, a 24% increase on 2016
Priorities for 2018
• To create as part of the roll-out of
asset masterplans an inclusive and
accessible shopping experience to
enhance social connections and
support the wider community
• To continue to work with our local
Mall Cares charities and at least match
2017 fundraising
•
Implement the Net Promotor Surveys
across all centres on a quarterly basis
Blackburn sleep out
Jason Cothliff and Carley McKenna
from The Mall, Blackburn took part in
the Nightsafe charity sleep out in early
December 2017. They joined other
fundraisers in sleeping on King William
Street, outside the Mall, to raise
money for Nightsafe and highlight
the plight of homeless people during
the harsh winter months. The pair
only had a cardboard box, sleeping
bag and warm clothing to protect
them from the elements during a cold
December night.
Nightsafe supports homeless
youngsters and ongoing projects
such as an emergency night shelter,
housing projects, outreach flats, an
activity day centre, a volunteer mentor
project and an outreach support
service, which all support young
people within the local community to
set up a home.
The Mall Luton Volunteers
The Mall Luton Team helped to clean,
paint and set up a new store called
Level Trust before it opened on
7 August 2017. The store supports
school aged children who are
suffering from poverty and allows
families to bring in second-hand
uniforms and swap them for the
uniform they need for the return to
school after the summer holidays.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
36
DIRECTORS
Executive Directors
Non-Executive Directors
Lawrence Hutchings
Chief Executive appointed 2017
Chairman of Disclosure Committee and member of Responsible Business Committees
Lawrence joined the Group in 2017 following four years at Blackstone in Australia,
two as Managing Director, and has over 20 years’ experience in the property industry.
Prior to Blackstone, Lawrence was at Hammerson PLC for four years, the last three as
Managing Director – UK Retail, before which he spent almost seven years at Henderson
Global Investors, latterly as Director (Property) European Retail.
Charles Staveley
Group Finance Director appointed 2008
Member of Disclosure Committee
Charles joined the Group in 2007 and was appointed Group Finance Director in 2008.
He qualified as a Chartered Accountant with Arthur Andersen and previously held
senior finance roles with Colt Telecommunications, Novar plc, and Textron Inc. He also
has Board responsibility for the Snozone business.
Non-Executive Directors
Hugh Scott-Barrett
Chairman appointed 2008
Chairman of Nominations Committee, Member of Disclosure Committee
Before moving to become Non-Executive Chairman, Hugh was Chief Executive of
Capital (cid:9) Regional from 200(cid:27) to 2017. (cid:43)e was previously a member of AB(cid:49) A(cid:48)RO’s
managing board serving as Chief Operating Officer and Chief Financial Officer and
before that worked at SBC Warburg and Kleinwort Benson. He was educated both in
Paris and at Oxford (cid:56)niversity. (cid:43)ugh is the Chairman of GA(cid:48) (cid:43)olding AG, a Swiss asset
management company, and a non-executive director of RBR Group Limited, a privately
owned leisure group.
Stock Code: CAL
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DIRECTORS
Executive Directors
Non-Executive Directors
Non-Executive Directors
Tony Hales CBE
Non-Executive* appointed 2011
Senior Independent Director,
Chairman of Remuneration
Committee, member of Audit and
Nomination Committees
Tony is currently Chairman of
the Greenwich Foundation,
Senior Independent Director of
International Personal Finance plc
and chairs NAAFI Pension Fund
Trustees. Tony was previously
Chief Executive of Allied Domecq
plc, a Non-Executive Director of
HSBC Bank plc and Chairman of
Workspace Group plc and British
Waterways.
Ian Krieger
Non-Executive* appointed 2014
Chairman of Audit Committee,
member of Nomination and
Remuneration Committees
Ian is the Audit Committee
Chairman and Senior
Independent Director at both
Premier Foods plc and Safestore
Holdings plc and a Non-Executive
Director of Primary Health
Properties PLC where he is due
to be appointed chair of the Audit
Committee from 18 April 2018. He
is also a Trustee and Chairman of
the Finance Committee at Nuffield
Trust and Chair of Anthony
Nolan. Ian was previously a senior
partner and vice-chairman at
Deloitte.
Guillaume Poitrinal
Non-Executive appointed 2016
Guillaume served as Chief
Executive of Unibail-Rodamco,
one of Europe’s largest
commercial property companies,
from 2005 until 2013 having
joined in 1995. Guillaume is the
founder and Chairman of ICA(cid:48)AP
Investments S.àr.l, a specialised
investment fund focusing on
property stocks.
* Independent (as per the UK Corporate Governance Code).
GOVERNANCE
37
Wessel Hamman
Non-Executive appointed 2015
Wessel is Chief Executive of
Clearance Capital Limited, a Real
Estate investment management
firm which he co-founded in 2008.
Wessel also serves as a Non-
Executive Director of Sirius Real
Estate Limited. Wessel qualified as
a Chartered Accountant at KPMG
in South Africa.
Louis Norval
Non-Executive appointed 2009
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 sold to Hyprop
Investments Limited (a REIT
listed on the Johannesburg Stock
Exchange) in 2011. Louis is also
Managing Director of the Parkdev
Group of Companies, Executive
Chairman of Homestead Group
Holdings Limited and serves
on the board of a number of
other companies including
Hyprop Investments Limited.
He graduated in BSc (QS) (with
distinction) from the University of
Pretoria.
Laura Whyte
Non-Executive* appointed 2015
Chairman of Responsible
Business Committee, member
of Audit, Nomination and
Remuneration Committees
Laura had a long and successful
career with John Lewis
Partnership where she served on
the Management Board for over
ten years, firstly as Registrar and
latterly as HR Director. Laura is
also a Non-Executive Director of
the Defence People and Training
Board of the Ministry of Defence,
where she is also a member of
the People Committee, a Non-
Executive Director of the British
Horseracing Authority and an
Executive Trustee of Women in
Retail.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
38
CORPORATE GOVERNANCE REPORT
CHAIRMAN’S INTRODUCTION
I am pleased to present Capital & Regional’s corporate governance report for 2017.
The primary operational focus of C&R in 2017 has been on the continued delivery of
the capital investment plan across our portfolio of assets to drive our income focus and
underpin our targeted dividend growth of 5% to 8% per annum. The Board’s activities
during the year have reflected this with a number of visits to sites and review of
investment initiatives and business plans for all our centres.
The Board has also managed a significant amount of personnel changes over the last
18 months with both Mark Bourgeois and Ken Ford resigning as Executive Directors,
John Clare retiring as the Group’s Non-executive Chairman and Lawrence Hutchings
taking over from myself as Chief Executive. The appointment of a new Chief Executive
has provided an opportunity for a root and branch review of strategy. Lawrence
Hutchings has provided the Board with recommendations on how strategy should
evolve and on how execution of strategy can be enhanced in light of the fast changing
retail landscape. The strategy was debated extensively and endorsed by the Board
and subsequently communicated to investors at the Capital Markets Day in December
2017.
The Board is mindful of the revisions to the UK Corporate Governance proposed by the
Financial Reporting Council and have commenced the process of assessing the impact
and how the Company will respond once the final legislation has been agreed.
Hugh Scott-Barrett
Chairman
Hugh Scott-Barrett
Chairman
Compliance statement
Compliance with the UK Corporate
Governance Code
The Company has throughout the year ended 30 December
2017, complied with the provisions of the 2014 UK Corporate
Governance Code (“the Code”) as they apply to smaller (i.e.
non FTSE 350) companies with the exception that Hugh Scott-
Barrett was not considered independent on his appointment as
Chairman of the Company on 13 June 2017, having previously
served as Chief Executive. The rationale for the decision is
explained in the Nomination Committee section of this report.
Compliance with the Disclosure
and Transparency Rules
The disclosures required under DTR 7.2 of the Disclosure and
Transparency Rules are contained in this report, except for those
required under DTR 7.2.6 which are contained in the Directors’
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,
particularly in relation to 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’s agenda is managed to ensure that shareholder
value and governance issues play a key part in its decision
making and there is a schedule of key matters that are not
delegated.
Board Committees
Audit Committee
Meets at least three times per year
Further information on pages 43 to 44
Disclosure Committee
Meets as required
Nomination Committee
Meets at least once a year
Further information on page 42
Remuneration Committee
Meets at least twice per year
Further information on pages 45 to 60
Responsible Business Committee
Meets at least twice per year
Further information on pages 32 to 35
Chairman – Ian Krieger
Members – Tony Hales, Laura Whyte
Chairman – Lawrence Hutchings
Members – Hugh Scott-Barrett, Charles Staveley
Chairman – Hugh Scott-Barrett
Members – Tony Hales, Ian Krieger, Laura Whyte
Chairman – Tony Hales
Members – Ian Krieger, Laura Whyte
Chairman – Laura Whyte
Members – Lawrence Hutchings
Terms of reference for all Committees are available on the Company’s website.
Stock Code: CAL
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Stock Code: CAL
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CORPORATE GOVERNANCE REPORT
CHAIRMAN’S INTRODUCTION
I am pleased to present Capital & Regional’s corporate governance report for 2017.
The primary operational focus of C&R in 2017 has been on the continued delivery of
the capital investment plan across our portfolio of assets to drive our income focus and
underpin our targeted dividend growth of 5% to 8% per annum. The Board’s activities
during the year have reflected this with a number of visits to sites and review of
investment initiatives and business plans for all our centres.
The Board has also managed a significant amount of personnel changes over the last
18 months with both Mark Bourgeois and Ken Ford resigning as Executive Directors,
John Clare retiring as the Group’s Non-executive Chairman and Lawrence Hutchings
taking over from myself as Chief Executive. The appointment of a new Chief Executive
has provided an opportunity for a root and branch review of strategy. Lawrence
Hutchings has provided the Board with recommendations on how strategy should
evolve and on how execution of strategy can be enhanced in light of the fast changing
retail landscape. The strategy was debated extensively and endorsed by the Board
and subsequently communicated to investors at the Capital Markets Day in December
2017.
The Board is mindful of the revisions to the UK Corporate Governance proposed by the
Financial Reporting Council and have commenced the process of assessing the impact
and how the Company will respond once the final legislation has been agreed.
Hugh Scott-Barrett
Chairman
GOVERNANCE
39
Compliance statement
Compliance with the UK Corporate
Governance Code
The Company has throughout the year ended 30 December
2017, complied with the provisions of the 2014 UK Corporate
Governance Code (“the Code”) as they apply to smaller (i.e.
non FTSE 350) companies with the exception that Hugh Scott-
Barrett was not considered independent on his appointment as
Chairman of the Company on 13 June 2017, having previously
served as Chief Executive. The rationale for the decision is
explained in the Nomination Committee section of this report.
Compliance with the Disclosure
and Transparency Rules
The disclosures required under DTR 7.2 of the Disclosure and
Transparency Rules are contained in this report, except for those
required under DTR 7.2.6 which are contained in the Directors’
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,
particularly in relation to 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’s agenda is managed to ensure that shareholder
value and governance issues play a key part in its decision
making and there is a schedule of key matters that are not
delegated.
The responsibilities, which the Board does delegate, are given
to committees that operate within specified terms of reference.
The Executive Directors take operational decisions and also
approve certain transactions within defined parameters. An
Executive Committee, formed of the Executive Directors and
other members of senior management as required on specific
issues, meets on a regular basis and deals with all major
decisions not requiring full Board approval or authorisation
by other Board committees. Minutes of these meetings are
circulated to the Board. If decisions are not unanimous the
matter is referred to the Board for approval.
The Company also maintains a Disclosure Committee, formed
of the Chairman, Chief Executive and Group Finance Director,
to which it has delegated responsibility for monitoring the
Company’s requirements for disclosure of Inside Information.
The Committee meets as and when required by specific events.
The Committee is quorate with two members. Where the
Committee concludes that specific restrictions on share dealings
need to be enforced this is immediately communicated to the
Board and other relevant individuals. Minutes of all Disclosure
Committee meetings are also circulated to the Board.
Board meetings are scheduled to coincide with key events in
the Company’s financial calendar, including interim and final
results and the AG(cid:48). Other meetings during the year will review
the Company’s strategy and budgets for the next financial
year and the Company’s key risks and financial and operating
performance.
Board Committees
Audit Committee
Meets at least three times per year
Further information on pages 43 to 44
Disclosure Committee
Meets as required
Nomination Committee
Meets at least once a year
Further information on page 42
Remuneration Committee
Meets at least twice per year
Further information on pages 45 to 60
Responsible Business Committee
Meets at least twice per year
Further information on pages 32 to 35
Chairman – Ian Krieger
Members – Tony Hales, Laura Whyte
Chairman – Lawrence Hutchings
Members – Hugh Scott-Barrett, Charles Staveley
Chairman – Hugh Scott-Barrett
Members – Tony Hales, Ian Krieger, Laura Whyte
Chairman – Tony Hales
Members – Ian Krieger, Laura Whyte
Chairman – Laura Whyte
Members – Lawrence Hutchings
Terms of reference for all Committees are available on the Company’s website.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
40
CORPORATE GOVERNANCE REPORT
CONTINUED
Board balance and independence
Details of the directors including their qualifications, experience
and other commitments are set out on pages 36 to 37. The
Board currently comprises of the Chairman, two Executive
Directors and six Non-Executive Directors.
Induction training is given to new directors and consists of an
introduction to the Board and senior management, visits to our
shopping centres, an induction pack, a briefing on governance
re(cid:84)uirements and access to independent advisers. Ongoing
training requirements are reviewed on a regular basis and
undertaken individually, as necessary.
Board and committee meetings
The number of meetings of the Board and its Committees during
2017, and individual attendance by Directors, is set out below.
Board meeting attendance in 2017
Number of meetings
J Clare (resigned 13 June 2017)
H Scott-Barrett
L Hutchings (appointed 13 June 2017)
K Ford (resigned 9 May 2017)
C Staveley
T Hales
W Hamman
I Krieger
L Norval
G Poitrinal
L Whyte
Scheduled
Total
•
strategy; and
6
3/3
6/6
3/3
2/2
6/6
6/6
6/6
6/6
6/6
5/6
6/6
6
3/3
6/6
3/3
2/2
6/6
6/6
6/6
6/6
6/6
5/6
6/6
The Board reviews the independence of its Non-Executive
Directors on an annual basis. Louis Norval and Wessel Hamman
are not considered independent as they act as representatives
of the Parkdev Group of companies, a significant shareholder
of the Company. Guillaume Poitrinal is not considered
independent as while his appointment is in a personal capacity
he is the Chairman of ICAMAP Investments S.àr.l, a significant
shareholder in the Company. The Board has concluded that all
other Non-Executive Directors continue to demonstrate their
independence.
The Company has well established differentiation between
the roles of Chairman and Chief Executive and written terms
of reference are available on the Group’s website. As further
detailed in the Nominations Committee section, following
Hugh Scott-Barrett’s move to Chairman, Tony Hales, as Senior
Independent Director, has undertaken regular reviews to ensure
the distinction of roles and responsibilities remains appropriate.
In the Company’s view, the breadth of experience and
knowledge of the Chairman and the Non-Executive Directors
and their detachment from the day-to-day issues within the
Company provide a sufficiently strong and experienced balance
with the executive members of the Board.
Information and professional development
The Board schedules five 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
potential or proposed acquisitions and disposals, cash flow
forecasts and details of funding availability
Other committee meeting attendance
Number of meetings
J Clare
H Scott-Barrett
L Hutchings
I Krieger
T Hales
L Whyte
Audit
Committee
Remuneration
Committee
Nomination
Committee
Responsible
Business
Committee
3
3
3
3
3
3
3
3
2
1/1
1/1
1
2
2
4
2/2
2/2
4
Hugh Scott-Barrett was a member of the Responsible Business Committee until 13 June 2017 when he was replaced by Lawrence Hutchings.
Board evaluation
A formal process is undertaken for the annual evaluation of the
performance of the Board, its Committees and each Director.
This process is led by the Chairman and each Director completes
a detailed questionnaire covering:
• performance of themselves as an individual and of the Board
together as a unit;
• performance of the Chairman;
• processes which underpin the Board’s effectiveness
(including consideration of the balance of skills, experience,
independence and knowledge of the persons on the Board);
• performance of the Board’s subcommittees.
The completed questionnaires are collated by the Company
Secretary and presented to the Board for a subsequent
discussion. 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.
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 without
the Chairman in order to appraise his performance on an
annual basis. This meeting is chaired by the Senior Independent
Director. The Chairman evaluates the performance of the
Chief Executive having received input from the other Directors.
The Chief Executive evaluates the performance of the other
Executive Directors. Subsequently, the results are discussed
by the Remuneration Committee and relevant consequential
changes are made if required.
Shareholder relations
The Company encourages regular dialogue with its shareholders
at the AGM, corporate functions and property visits. The
Company also attends road shows, participates in sector
conferences and, following the announcement of final and
interim results, and throughout the year, as requested, holds
update meetings with institutional investors. All the Directors
are accessible to all shareholders, and queries received verbally
or in writing are addressed as soon as possible.
Announcements are made to the London Stock Exchange,
the Johannesburg Stock Exchange and the business media
concerning business developments to provide wider
dissemination of information. Registered shareholders are sent
copies of the annual report and relevant circulars. The Group’s
website (capreg.com) is kept up to date with all announcements,
reports and shareholder circulars.
Stock Code: CAL
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CORPORATE GOVERNANCE REPORT
CONTINUED
Induction training is given to new directors and consists of an
introduction to the Board and senior management, visits to our
shopping centres, an induction pack, a briefing on governance
re(cid:84)uirements and access to independent advisers. Ongoing
training requirements are reviewed on a regular basis and
undertaken individually, as necessary.
Board and committee meetings
The number of meetings of the Board and its Committees during
2017, and individual attendance by Directors, is set out below.
Board meeting attendance in 2017
Number of meetings
J Clare (resigned 13 June 2017)
H Scott-Barrett
L Hutchings (appointed 13 June 2017)
K Ford (resigned 9 May 2017)
C Staveley
T Hales
W Hamman
I Krieger
L Norval
G Poitrinal
L Whyte
6
3/3
6/6
3/3
2/2
6/6
6/6
6/6
6/6
6/6
5/6
6/6
Board evaluation
A formal process is undertaken for the annual evaluation of the
performance of the Board, its Committees and each Director.
This process is led by the Chairman and each Director completes
a detailed questionnaire covering:
• performance of themselves as an individual and of the Board
together as a unit;
• performance of the Chairman;
• processes which underpin the Board’s effectiveness
(including consideration of the balance of skills, experience,
independence and knowledge of the persons on the Board);
Scheduled
Total
•
strategy; and
6
3/3
6/6
3/3
2/2
6/6
6/6
6/6
6/6
6/6
5/6
6/6
4
2/2
2/2
4
• performance of the Board’s subcommittees.
The completed questionnaires are collated by the Company
Secretary and presented to the Board for a subsequent
discussion. 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.
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 without
the Chairman in order to appraise his performance on an
annual basis. This meeting is chaired by the Senior Independent
Director. The Chairman evaluates the performance of the
Chief Executive having received input from the other Directors.
The Chief Executive evaluates the performance of the other
Executive Directors. Subsequently, the results are discussed
by the Remuneration Committee and relevant consequential
changes are made if required.
Shareholder relations
The Company encourages regular dialogue with its shareholders
at the AGM, corporate functions and property visits. The
Company also attends road shows, participates in sector
conferences and, following the announcement of final and
interim results, and throughout the year, as requested, holds
update meetings with institutional investors. All the Directors
are accessible to all shareholders, and queries received verbally
or in writing are addressed as soon as possible.
Announcements are made to the London Stock Exchange,
the Johannesburg Stock Exchange and the business media
concerning business developments to provide wider
dissemination of information. Registered shareholders are sent
copies of the annual report and relevant circulars. The Group’s
website (capreg.com) is kept up to date with all announcements,
reports and shareholder circulars.
Other committee meeting attendance
Number of meetings
J Clare
H Scott-Barrett
L Hutchings
I Krieger
T Hales
L Whyte
Audit
Committee
Remuneration
Committee
Nomination
Committee
Responsible
Business
Committee
3
3
3
3
3
3
3
3
2
1/1
1/1
1
2
2
Hugh Scott-Barrett was a member of the Responsible Business Committee until 13 June 2017 when he was replaced by Lawrence Hutchings.
GOVERNANCE
41
Financial and Business reporting
Please refer to:
• page 65 for the Board’s statement on the Annual report and
accounts being fair, balanced and understandable;
• page 30 for the statement on the status of the Company and
the Group as a going concern; and
•
the Strategic report on pages 2 to 35 for an explanation
of the Company’s business model and the strategy for
delivering the objectives of the Company.
Risk management and internal control
The Board is responsible for maintaining a sound system
of internal control and risk management. 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.
An ongoing process is in place for identifying, evaluating and
managing risk and the Board is satisfied that this accords with
relevant corporate governance guidance. Key features of the
Group’s system of internal control are as follows:
• Defined organisational responsibilities and authority limits.
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 and operating reporting to the Board including the
preparation of budgets and forecasts, cash management,
variance analysis, property, taxation and treasury reports
and a report on financing. Year end and Interim financial
statements are reviewed by the Audit Committee and
discussed with the Group’s Auditor, Deloitte, before being
submitted to the Board for approval;
• Review and approval of the Group’s risk matrix twice a year
by senior management, the Audit Committee and the Board
as detailed in the Managing Risk section of the Strategic
Report;
• Anti-bribery and Corruption policies which are
communicated to all staff and for which compliance reviews
are conducted on an annual basis; and
• The Group’s whistleblowing policy – see the Audit Committee
report for further details.
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.
During the year the Board through the Audit Committee
reviewed the effectiveness of the material financial, operational
and compliance controls that mitigate the key risks (as disclosed
in the Managing Risk section). This review concluded that all
such material controls were operating effectively. A statement of
the Directors’ responsibilities regarding the financial statements
is on page 65.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
42
CORPORATE GOVERNANCE REPORT
CONTINUED
AUDIT COMMITTEE REPORT
Diversity
The Nomination Committee, and the Board, recognises the
importance of diversity, is supportive of the Davies Report
recommendations and seeks to ensure that all available suitable
candidates are taken into account when drawing up shortlists
of candidates for possible appointments. The priority of the
Committee and the Board is to ensure that the Group continues
to have the strongest and most effective Board possible, and
therefore all appointments to the Board are made on merit
against objective criteria.
Whilst the Group falls below the current threshold for reporting
under the Gender Pay Gap Regulations a review is in process to
understand the Group’s position and, if any issues are identified,
to determine the actions required to appropriately address
them.
Nomination Committee
The Nomination Committee meets as required to select and
recommend to the Board suitable candidates for both Executive
and (cid:49)on-Executive appointments. On an at least annual basis,
the Nomination Committee also considers succession planning
for the Board.
In the second half of 2016 the Committee, arising from
its annual review of succession planning, commenced the
search for a new Chief Executive and Chairman. This process
culminated in the announcement on 8 February 2017 that,
effective from 13 June 2017, Lawrence Hutchings would be
appointed as Chief Executive with Hugh Scott-Barrett taking
over as Non-Executive Chairman from John Clare who would
retire from the Board. The appointment of Lawrence Hutchings
followed an extensive and competitive process, which was
supported by a leading independent executive search firm which
is not connected with the Company in any other way.
While fully cognisant of the UK Code of Corporate Governance
recommendations, it was the unanimous conclusion of the
Committee that in the specific circumstances, Hugh Scott-
Barrett was the most appropriate candidate for the role of
Non-Executive Chairman. The Committee and wider Board
considered that the need for experience and continuity at
the current stage of the Company’s development was critical
given the retirement of John Clare, the loss of Mark Bourgeois
and the planned stepping down of Ken Ford in relatively quick
succession. This, combined with Hugh’s important relationships
and excellent attributes for the position, meant the Board
concluded that Hugh’s appointment would be strongly in the
interests of the Company and its shareholders.
Tony Hales, who led the process as Senior Independent
Director (SID), also conducted a consultation with major
shareholders prior to the Board approving the appointments
and this continued subsequent to the announcement. From
this process the Board noted the governance points raised by
some shareholders and the requirement for the SID to ensure,
on behalf of the Board, the constructive and appropriate
relationship between Chairman and CEO. Reflecting this during
the first year of the new arrangements the SID has been meeting
at least quarterly with both individuals. Tony Hales and the rest
of the Board, to whom Tony has reported on the process, are
satisfied the relationship is working appropriately and effectively
for the benefit of the Company and its shareholders. Tony has
also maintained a dialogue with major shareholders to update
them on the processes and reviews that have been undertaken.
Stock Code: CAL
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CORPORATE GOVERNANCE REPORT
AUDIT COMMITTEE REPORT
43
GOVERNANCE
CONTINUED
Diversity
The Nomination Committee, and the Board, recognises the
importance of diversity, is supportive of the Davies Report
recommendations and seeks to ensure that all available suitable
candidates are taken into account when drawing up shortlists
of candidates for possible appointments. The priority of the
Committee and the Board is to ensure that the Group continues
to have the strongest and most effective Board possible, and
therefore all appointments to the Board are made on merit
against objective criteria.
Whilst the Group falls below the current threshold for reporting
under the Gender Pay Gap Regulations a review is in process to
understand the Group’s position and, if any issues are identified,
to determine the actions required to appropriately address
them.
Ian Krieger
Chairman of Audit Committee
The Audit Committee is chaired by Ian Krieger, a Chartered Accountant who has
recent and relevant financial experience as required by the Code. The other members
of the Committee are Tony Hales and Laura Whyte. Charles Staveley, the Group
Finance Director, attended each of the three Audit Committee meetings by invitation
as did other senior members of Finance and representatives from Deloitte LLP, the
Company’s external Auditor. The Company’s Chairman and Chief Executive also
attended meetings during the year by invitation.
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, the independence and objectivity of
the Auditor and the Group’s arrangements on whistleblowing.
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 met three times and discharged its responsibilities by:
a. reviewing the Group’s draft annual report and financial statements and its interim
results statement prior to discussion and approval by the Board;
b. reviewing the continuing appropriateness of the Group’s accounting policies;
c. reviewing Deloitte LLP’s plan for the 2017 Group audit and approving their terms of
engagement and proposed fees;
d. reviewing reports on internal control matters prepared by management;
e. considering the effectiveness and independence of Deloitte LLP as external Auditor
and recommending to the Board their reappointment;
f. reviewing management’s biannual Risk Review report and the effectiveness of
the material financial, operational and compliance controls that help mitigate the
key risks;
g. reviewing the effectiveness of the Group’s whistleblowing policy;
h. reviewing and updating the Group’s policy for the award of non-audit work to its
external Auditor;
i. considering management’s approach to the viability statement in the 2017 Annual
Report;
j. meeting with the responsible individuals from the Group’s independent valuers,
CBRE Limited and Knight Frank LLP to review and challenge their valuations of the
Group’s investment properties; and
k. carrying out an annual performance evaluation exercise and noting the satisfactory
operation of the Committee.
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.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
44
AUDIT COMMITTEE REPORT
CONTINUED
DIRECTORS’ REMUNERATION REPORT
INTRODUCTION
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:
The only fees paid to Deloitte LLP during 2016, other than for
their year-end audit, was £40,528 for their review of the Group’s
interim statements for the six months to June 2017 and £2,000
for an agreed upon procedures report to verify information
relating to the vesting of the Company’s 2014 LTIP scheme
award.
Auditor rotation and tender process
In accordance with best practice and professional standards,
the external Auditor is required to adhere to a rotation policy
whereby the audit engagement partner is rotated at least
every five years. The 2017 audit was the fifth and final year of
Georgina Robb’s tenure as lead audit engagement partner.
Matthew Hall has been selected to take over from Georgina
Robb as the lead audit engagement partner for Deloitte.
Deloitte LLP have been Auditor of Capital & Regional plc
since 1998 and the audit was last put out to tender in 2009
where Deloitte were reappointed. Considering this and the
Committee’s commitment to put the audit out to tender at least
every 10 years, a tender process will commence during 2018 for
the audit of the year ending 30 December 2018. It is planned
that Deloitte LLP, who under EU guidance for mandatory Auditor
rotation can serve as Auditor until the year ending 30 December
2023, will be invited to tender along with two further firms.
Internal Audit
The Group does not have a dedicated stand-alone 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 Payroll, adherence to the Group’s Travel and Expenses policy,
Cyber Security, Fire Risk and the Group’s policies to manage
compliance with the Market Abuse Regulation.
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 a stand-
alone internal audit function.
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. The
policy provides a mechanism to report any ethical wrongdoing
or malpractice or suspicion thereof.
Ian Krieger
Chairman of Audit Committee
•
Investment property valuation – At 30 December 2017
the value of the Group’s investment property assets was
£915.2 million including its 20% share of the Kingfisher
Centre, Redditch (see Note 10b of the financial statements
for further details). The valuation of investment property
is inherently judgemental and involves a reliance on the
work of independent professional qualified valuers. During
2017 the Audit Committee met with the valuers, considered
their independence and qualifications and reviewed and
challenged the valuations for both the year end and interim
results dates 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.
• Going concern and covenant compliance – The Committee
reviewed, challenged and concluded upon the Group’s going
concern review and consideration of its viability statement
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.
•
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
considered 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 the external Auditor
The Committee carried out a review of the effectiveness of the
external audit process and considered the reappointment 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
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 Auditor. The Group does not impose an
automatic ban on the Group’s external Auditor undertaking non-
audit work, other than for those services that are prohibited by
regulatory guidance. Instead the Group’s aim is always to have any
non-audit work involving the Group’s external Auditor carried out in
a manner that affords value for money and ensures independence
is maintained by monitoring this on a case by case basis.
The Group’s policy on the use of its external Auditor for non-
audit services, which was reviewed during the year, precludes
the external Auditor from being engaged to perform valuation
work, accounting services or any recruitment services or
secondments. The policy also stipulates that for any piece of
work likely to exceed £20,000 at least one other alternative firm
provide a proposal for consideration.
Stock Code: CAL
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AUDIT COMMITTEE REPORT
CONTINUED
DIRECTORS’ REMUNERATION REPORT
INTRODUCTION
45
GOVERNANCE
The only fees paid to Deloitte LLP during 2016, other than for
their year-end audit, was £40,528 for their review of the Group’s
interim statements for the six months to June 2017 and £2,000
for an agreed upon procedures report to verify information
relating to the vesting of the Company’s 2014 LTIP scheme
award.
Auditor rotation and tender process
In accordance with best practice and professional standards,
the external Auditor is required to adhere to a rotation policy
whereby the audit engagement partner is rotated at least
every five years. The 2017 audit was the fifth and final year of
Georgina Robb’s tenure as lead audit engagement partner.
Matthew Hall has been selected to take over from Georgina
Robb as the lead audit engagement partner for Deloitte.
Deloitte LLP have been Auditor of Capital & Regional plc
since 1998 and the audit was last put out to tender in 2009
where Deloitte were reappointed. Considering this and the
Committee’s commitment to put the audit out to tender at least
every 10 years, a tender process will commence during 2018 for
the audit of the year ending 30 December 2018. It is planned
that Deloitte LLP, who under EU guidance for mandatory Auditor
rotation can serve as Auditor until the year ending 30 December
2023, will be invited to tender along with two further firms.
Internal Audit
The Group does not have a dedicated stand-alone 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 Payroll, adherence to the Group’s Travel and Expenses policy,
Cyber Security, Fire Risk and the Group’s policies to manage
compliance with the Market Abuse Regulation.
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 a stand-
alone internal audit function.
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. The
policy provides a mechanism to report any ethical wrongdoing
or malpractice or suspicion thereof.
Ian Krieger
Chairman of Audit Committee
Tony Hales CBE
Chairman of Remuneration Committee
Information not subject to audit:
Annual Statement
Dear Shareholder
On behalf of the Board I am pleased to present the Directors’ Remuneration Report for
the year ended 30 December 2017.
We last presented our remuneration policy to shareholders at our Annual General
Meeting in 2016 when we received strong support with a vote in favour of 89.5%. This
policy covers the three year period until the AGM in 2019 and we applied it consistently
during 2017.
Board Changes
As shareholders will be aware, there were significant Board changes during the year.
Ken Ford stepped down from the Board as an Executive Director on 9 May 2017 and on
13 June 2017, John Clare stepped down from his position of Non-Executive Chairman.
Also on 13 June 2017, Hugh Scott-Barrett ceased to be the Chief Executive and took
on the role as Non-Executive Chairman. Hugh was succeeded as Chief Executive by
Lawrence Hutchings. These changes obviously impacted the remuneration of the
individuals concerned, however, the Committee ensured that remuneration packages
were in line with the policy agreed by shareholders.
No exit payments were made to any of the individuals. Ken Ford continued to be
employed by the Company on a full-time basis until 31 December 2017 on the
same terms as he was employed as a Director. Hugh Scott-Barrett’s appointment as
Chairman was on a fixed fee of £135,000 per annum. Hugh did not receive a bonus or
LTIP award for 2017, for the period he was Chief Executive. For the purposes of the LTIP
Hugh Scott-Barrett and Ken Ford were treated as good leavers with their awards pro-
rated relevant to the date of change of role and ceasing to be employed respectively.
The committee was pleased to welcome Lawrence as Chief Executive. His remuneration
terms are in line with our policy and are fully disclosed in the report.
Company Performance and Bonus Targets
2017 was another good year of operational performance by the business with the
Company recording Adjusted Profit growth of 8.6%, an increase of 7.3% on a per
share basis. The Company’s strategy continues to focus on strong earnings driving
a sustainable and growing dividend for shareholders, and this goal also drives the
remuneration policy. For the full year for 2017 shareholders will benefit from an
increase in dividend of 7.4%, subject to approval at the AGM.
In setting annual bonus targets the Committee puts a weighting of 80% on Company
financial and operating targets with the emphasis on metrics that support dividend
growth including Adjusted Profit, Net Rental Income and cost control. 20% of bonus
reflects personal objectives. Further detail is provided in the report.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
46
DIRECTORS’ REMUNERATION REPORT
CONTINUED
DIRECTORS’ REMUNERATION REPORT
POLICY
Long Term Incentive Plan (LTIP)
During the year the performance period for the 2014 LTIP award
ended and 35.26% of the awards have qualified for vesting and
will be able to be exercised at the end of the holding period.
This is the second LTIP award to have qualified since the scheme
was introduced in 2008 and the result reflects a strong period
of performance where Total Shareholder Return was 37.61%,
significantly outperforming the FTSE 350 Real Estate and FTSE All
Share Indices. We intend to make a further LTIP award in 2018
using the same structure as previous awards. Full details are
provided within the report.
During 2018 we plan to perform a review of all of our incentive
arrangements to ensure alignment with the Group’s strategy
and that, as a package, they continue to provide the appropriate
balance of incentivisation and challenge. The results of this will
help inform the process for renewing our Remuneration Policy
ahead of the 2019 AGM for which we will conduct a shareholder
consultation in advance of publishing any changes to policy.
Executive Director Salary Increases
Executive Director salary increases, applied from 1 January 2018,
were 2%, in line with the increase awarded to all employees. The
same 2% increase has been applied to the base fees paid to the
Chairman and Non-Executive Directors.
Committee Aims
Our aim as a Committee continues to be to ensure we recruit
and retain talented individuals who are motivated to deliver
outperformance for shareholders receiving a fair base pay
with potential for significant rewards on delivering strong
shareholder returns.
Tony Hales CBE
Chairman of Remuneration Committee
Directors’ Remuneration Policy
This part of the 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) (Amendment) Regulations 2013 (“the Act”).
The Remuneration Committee
The Committee met three times during 2017 as well as holding informal meetings and other correspondence to discuss wider
remuneration issues. In addition to the Committee members (see page 39), 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. The
Committee approves salaries and sets the levels, conditions and performance objectives for the annual bonus and share awards for
Executive Directors. It also makes recommendations to the Board on matters which require shareholder approval.
The Committee use independent remuneration consultants PwC to provide advice on an ad hoc basis although no fees were
charged for 2017.
The terms of reference of the Committee are available at www.capreg.com/about-us/people/board-committees
Summary of performance and remuneration year ended 30 December 2017
Net Rental Income1
Adjusted Profit2
Adjusted Earnings per share2
IFRS Profit/(loss) for the period
Total dividend per share
Net Asset Value (NAV) per share
EPRA NAV per share
Group net debt3
Net debt to property value3
1. Wholly-owned assets.
2017
£51.6m
£29.1m
4.10p
£22.4m
3.64p
67p
67p
2016
£50.4m
£26.8m
3.82p
£(4.4)m
3.39p
68p
68p
£404.0m
£398.1m
46%
46%
2. Adjusted Profit is as defined in the Glossary. It incorporates profits from operating activities and excludes revaluation of properties and financial instruments,
gains or losses on disposal, exceptional items and other defined terms. A reconciliation of this, and Adjusted Earnings per share, to the statutory result is
provided in the Financial Review. EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the Financial Statements. The EPRA measures used
throughout this report are industry best practice performance measures established by the European Public Real Estate Association. They are defined in the
3. 2016 figures are proforma, adjusted for the refinancing of Mall assets completed on 4 January 2017, Ipswich disposal completed on 17 February 2017 and
Glossary to the Financial Statements.
Ilford acquisition completed on 8 March 2017.
Stock Code: CAL
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
DIRECTORS’ REMUNERATION REPORT
POLICY
47
GOVERNANCE
Directors’ Remuneration Policy
This part of the 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) (Amendment) Regulations 2013 (“the Act”).
The Remuneration Committee
The Committee met three times during 2017 as well as holding informal meetings and other correspondence to discuss wider
remuneration issues. In addition to the Committee members (see page 39), 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. The
Committee approves salaries and sets the levels, conditions and performance objectives for the annual bonus and share awards for
Executive Directors. It also makes recommendations to the Board on matters which require shareholder approval.
The Committee use independent remuneration consultants PwC to provide advice on an ad hoc basis although no fees were
charged for 2017.
The terms of reference of the Committee are available at www.capreg.com/about-us/people/board-committees
Summary of performance and remuneration year ended 30 December 2017
Net Rental Income1
Adjusted Profit2
Adjusted Earnings per share2
IFRS Profit/(loss) for the period
Total dividend per share
Net Asset Value (NAV) per share
EPRA NAV per share
Group net debt3
Net debt to property value3
1. Wholly-owned assets.
2017
£51.6m
£29.1m
4.10p
£22.4m
3.64p
67p
67p
2016
£50.4m
£26.8m
3.82p
£(4.4)m
3.39p
68p
68p
£404.0m
46%
£398.1m
46%
2. Adjusted Profit is as defined in the Glossary. It incorporates profits from operating activities and excludes revaluation of properties and financial instruments,
gains or losses on disposal, exceptional items and other defined terms. A reconciliation of this, and Adjusted Earnings per share, to the statutory result is
provided in the Financial Review. EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the Financial Statements. The EPRA measures used
throughout this report are industry best practice performance measures established by the European Public Real Estate Association. They are defined in the
Glossary to the Financial Statements.
3. 2016 figures are proforma, adjusted for the refinancing of Mall assets completed on 4 January 2017, Ipswich disposal completed on 17 February 2017 and
Ilford acquisition completed on 8 March 2017.
capreg.com
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
48
DIRECTORS’ REMUNERATION REPORT
POLICY
Remuneration philosophy and principles
Our principles continue to be to maintain a competitive remuneration package that will attract, retain and motivate a high (cid:84)uality 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 and long-term 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 that a large part of potential remuneration is delivered in shares in order that executives are expected 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 also that of the
Audit Committee; and
• 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
Performance based
compensation
Median or above for
above Median
performance
Total = Median or above
for above Median
performance
The Committee benchmarks remuneration against our selected comparator group companies (see page 51) and seeks to ensure
that Directors’ fixed compensation is around the median in the comparator group.
The Committee view is 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, for above median
performance, within the comparator group to ensure that outstanding relative performance is appropriately rewarded. The overall
effect is that our total compensation is at median or above, for above median performance.
Purpose & link to
strategy
Operation
Opportunity
Performance metrics
Base salary
Reviewed annually effective 1 January
n/a
n/a
Median
• To aid
recruitment,
retention and
to reflect:
• general increases throughout the
Company or changes in responsibility
or role; and
motivation of high
• benchmarking against comparator
quality people
group to ensure salaries are about
the median level and market
competitive.
The Company does not operate a
n/a
n/a
pension scheme, all pension benefits
are paid either to defined contribution
pensions schemes of each Executive
Director’s choice or as a cash
supplement.
From appointment in June 2017,
Lawrence Hutchings received an
allowance of 15% of basic salary, in line
with other Executive Directors.
The Company offers a package to
n/a
n/a
Executive Directors including:
• private medical insurance;
• To aid recruitment
and retention
• critical illness cover;
• To provide market
• life insurance;
competitive
benefits
• permanent health insurance; and
• holiday and sick pay.
Benefits are brokered and reviewed
annually.
Annual bonus
The bonus plan is reviewed annually to
Maximum bonus is
Measures and weightings may vary
ensure bonus opportunity,
125% of basic
from year to year depending on
performance measures and weightings
salary for Executive
strategic priorities.
are appropriate and support the stated
Directors/150% for
Company strategy.
Chief Executive
Deferral applies such that bonus in
excess of 60% of maximum for
Targets calibrated
so maximum pay-
Executive Directors (50% for the Chief
out would represent
Executive) will be deferred for two years
exceptional
and then converted into shares. At the
performance
2017 objectives were weighted at 80%
on Group Objectives and 20(cid:8) on
Individual objectives. 2018 objectives
will have the same split.
• To reflect
experience and
importance of role
Pension
Median
• To help recruit
and retain high
quality people
• To provide an
appropriate
market
competitive
retirement benefit
Benefits
Median
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
end of the deferral period an additional
payment equivalent to the dividends
that would have been earned on the
shares will be made.
Malus applies to any bonus award up to
the date of determination. Clawback
provisions apply to the element of any
bonus that is deferred into shares for
two years from the date of award.
Stock Code: CAL
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DIRECTORS’ REMUNERATION REPORT
POLICY
Remuneration philosophy and principles
Our principles continue to be to maintain a competitive remuneration package that will attract, retain and motivate a high (cid:84)uality team,
avoid excessive or inappropriate risk taking and align their interests with those of shareholders. These principles are designed to:
• Drive accountability and responsibility;
to shareholders;
• Provide a balanced range of incentives which align both short-term and long-term performance with the value/returns delivered
• 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 that a large part of potential remuneration is delivered in shares in order that executives are expected 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;
Audit Committee; and
• Keep under review the relationship of remuneration to risk, the members of the Remuneration Committee are also that of the
• 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
Fixed compensation
Median
Salary
Pension
Benefits
Bonus
Share Awards
Performance based
compensation
Median or above for
above Median
performance
Total = Median or above
for above Median
performance
The Committee benchmarks remuneration against our selected comparator group companies (see page 51) and seeks to ensure
that Directors’ fixed compensation is around the median in the comparator group.
The Committee view is 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, for above median
performance, within the comparator group to ensure that outstanding relative performance is appropriately rewarded. The overall
effect is that our total compensation is at median or above, for above median performance.
GOVERNANCE
49
Purpose & link to
strategy
Operation
Opportunity
Performance metrics
Base salary
Median
• To aid
recruitment,
retention and
motivation of high
quality people
• To reflect
experience and
importance of role
Pension
Median
• To help recruit
and retain high
quality people
• To provide an
appropriate
market
competitive
retirement benefit
Benefits
Median
• To aid recruitment
Reviewed annually effective 1 January
to reflect:
n/a
n/a
• general increases throughout the
Company or changes in responsibility
or role; and
• benchmarking against comparator
group to ensure salaries are about
the median level and market
competitive.
The Company does not operate a
pension scheme, all pension benefits
are paid either to defined contribution
pensions schemes of each Executive
Director’s choice or as a cash
supplement.
From appointment in June 2017,
Lawrence Hutchings received an
allowance of 15% of basic salary, in line
with other Executive Directors.
n/a
n/a
The Company offers a package to
Executive Directors including:
• private medical insurance;
n/a
n/a
and retention
• critical illness cover;
• To provide market
• life insurance;
competitive
benefits
• permanent health insurance; and
• holiday and sick pay.
Benefits are brokered and reviewed
annually.
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
The bonus plan is reviewed annually to
ensure bonus opportunity,
performance measures and weightings
are appropriate and support the stated
Company strategy.
Maximum bonus is
125% of basic
salary for Executive
Directors/150% for
Chief Executive
Targets calibrated
so maximum pay-
out would represent
exceptional
performance
Deferral applies such that bonus in
excess of 60% of maximum for
Executive Directors (50% for the Chief
Executive) will be deferred for two years
and then converted into shares. At the
end of the deferral period an additional
payment equivalent to the dividends
that would have been earned on the
shares will be made.
Malus applies to any bonus award up to
the date of determination. Clawback
provisions apply to the element of any
bonus that is deferred into shares for
two years from the date of award.
Measures and weightings may vary
from year to year depending on
strategic priorities.
2017 objectives were weighted at 80%
on Group Objectives and 20(cid:8) on
Individual objectives. 2018 objectives
will have the same split.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
50
DIRECTORS’ REMUNERATION REPORT
POLICY
Purpose & link
to strategy
Operation
Opportunity
Performance metrics
LTIP
Median or above
• 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
Executive
shareholding
• To support
alignment
of Executive
Directors with
shareholders
Non-Executive
Director fees
Median
• To reflect
experience and
importance of
role
Awards are based on achieving
specified targets over a three year
performance period.
An adjustment of the awards may be
made in the event of a capital raising
or any other event that would have a
dilutory impact.
The plan provides
annual awards
of shares of up
to 150% of salary
for Executive
Directors/200% for
the Chief Executive.
Performance measures apply over a three
year period from the date of grant.
Details of the performance conditions on
existing awards and those proposed for
an issue in 2018 are on pages 56-57.
In the event of a liquidity event the
Committee will pro-rate awards for
performance and will normally pro-rate
for time although it has the discretion
not to.
A holding period applies after the end
of the performance period. On exercise,
individuals will receive an additional
payment equivalent to dividends paid
on shares that have qualified for vesting
during the holding period.
Malus and Clawback provisions apply
such that the Committee have the
discretion to reduce or cancel any
awards that have not been exercised, in
any of the following situations:
• C&R’s financial statements 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; or
• A participant’s actions amounting to
serious / gross misconduct.
All Executive Directors are expected to
build a shareholding to at least 1 ×
basic annual salary value (2 × for Chief
Executive) based on current market
value or the aggregate purchase price
of the shares.
Deferred or other unvested share awards
not subject to performance conditions
can count towards the guideline.
The Chairman and Non-Executive
Director fees are set by the Board
taking into account the time
commitment, responsibilities, skills
and experience and roles on Board
Committees.
Details of the fees can be found on
page 54. Individuals who are members
of both the Audit and Remuneration
Committees receive an additional
fee of £5,000 per annum. The Senior
Independent Director receives an
additional fee of £5,000 per annum.
n/a
n/a
n/a
n/a
Stock Code: CAL
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Employee Context
Comparator group
Small Cap.
The Committee ensures that employees’ 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 staff
remuneration and is satisfied that the level is appropriate.
In the review of Remuneration Policy that the Company undertook with assistance from PwC in 2016 the below comparator group
was used. The relative size of Capital & Regional in comparison to the constituents was factored into the benchmarking exercise
performed. In addition to the Companies listed below consideration was also given to the upper quartile benchmarks for the FTSE
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.
• A & J Mucklow Group Plc
• Hammerson Plc
Safestore Holdings Plc
• Assura plc
• Big Yellow Group Plc
• Capital & Counties Properties Plc
• Hansteen Holdings Plc
• Helical Bar Plc
Intu Properties Plc
Landsec Group Plc
•
•
•
•
•
LondonMetric Property Plc
LSL Property Services Plc
• Countrywide Plc
• Derwent London Plc
• Foxtons Group Plc
• Grainger Plc
• Great Portland Estates Plc
• McKay Securities Plc
Directors’ service agreements and letters of appointment
•
•
•
•
•
Savills Plc
Segro Plc
Shaftesbury Plc
St. Modwen Properties Plc
• U and I Group PLC
• Unite Group Plc
• Workspace Group Plc
London & Associated Properties Plc
• The British Land Company Plc
Name
Executive Directors
L Hutchings
C Staveley
Non-Executive Directors
H Scott-Barrett
L Norval
T Hales
I Krieger
W Hamman
L Whyte
G Poitrinal
Unexpired term of
Potential termination
appointment
Date of service agreement
Notice period
payment
Rolling contract
13 June 2017
12 months
12 months’ salary and
Rolling contract
1 October 200(cid:27)
12 months
12 months’ salary and
benefits value
benefits value
Date of initial appointment
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
9 March 20081
15 September 2009
1 August 2011
1 December 2014
2 June 2015
1 December 2015
1 November 2016
6 months
No notice
No notice
No notice
No notice
No notice
No Notice
None
None
None
None
None
None
None
1. Hugh Scott-Barrett’s contract was amended on 13 June 2017 when he ceased to be Chief Executive and became the Non-Executive Chairman.
Non-Executive Directors are all appointed on rolling contracts with no notice period save for Hugh Scott-Barrett who as Chairman
has a six month notice period. All Directors stand for re-election annually and Board appointments automatically terminate in the
event of a Director not being re-elected by shareholders. Copies of the Directors’ service agreements are available to view, upon
appointment, at the Company’s registered office.
DIRECTORS’ REMUNERATION REPORT
POLICY
Opportunity
Performance metrics
The plan provides
Performance measures apply over a three
annual awards
of shares of up
to 150% of salary
for Executive
Directors/200% for
the Chief Executive.
year period from the date of grant.
Details of the performance conditions on
existing awards and those proposed for
an issue in 2018 are on pages 56-57.
Purpose & link
to strategy
Operation
LTIP
Median or above
• 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 are based on achieving
specified targets over a three year
performance period.
An adjustment of the awards may be
made in the event of a capital raising
or any other event that would have a
dilutory impact.
In the event of a liquidity event the
Committee will pro-rate awards for
performance and will normally pro-rate
for time although it has the discretion
not to.
A holding period applies after the end
of the performance period. On exercise,
individuals will receive an additional
payment equivalent to dividends paid
on shares that have qualified for vesting
during the holding period.
Malus and Clawback provisions apply
such that the Committee have the
discretion to reduce or cancel any
awards that have not been exercised, in
any of the following situations:
• C&R’s financial statements 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; or
• A participant’s actions amounting to
serious / gross misconduct.
build a shareholding to at least 1 ×
basic annual salary value (2 × for Chief
Executive) based on current market
value or the aggregate purchase price
of the shares.
Deferred or other unvested share awards
not subject to performance conditions
can count towards the guideline.
The Chairman and Non-Executive
Director fees are set by the Board
taking into account the time
commitment, responsibilities, skills
and experience and roles on Board
Committees.
Details of the fees can be found on
page 54. Individuals who are members
of both the Audit and Remuneration
Committees receive an additional
fee of £5,000 per annum. The Senior
Independent Director receives an
additional fee of £5,000 per annum.
All Executive Directors are expected to
n/a
n/a
n/a
n/a
Executive
shareholding
• To support
alignment
of Executive
Directors with
shareholders
Non-Executive
Director fees
Median
• To reflect
experience and
importance of
role
GOVERNANCE
51
Employee Context
The Committee ensures that employees’ 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 staff
remuneration and is satisfied that the level is appropriate.
Comparator group
In the review of Remuneration Policy that the Company undertook with assistance from PwC in 2016 the below comparator group
was used. The relative size of Capital & Regional in comparison to the constituents was factored into the benchmarking exercise
performed. In addition to the Companies listed below consideration was also given to the upper quartile benchmarks for the FTSE
Small Cap.
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.
• A & J Mucklow Group Plc
• Assura plc
• Big Yellow Group Plc
• Capital & Counties Properties Plc
• Countrywide Plc
• Derwent London Plc
• Foxtons Group Plc
• Grainger Plc
• Great Portland Estates Plc
• Hammerson Plc
• Hansteen Holdings Plc
• Helical Bar Plc
•
•
•
•
•
• McKay Securities Plc
Intu Properties Plc
Landsec Group Plc
London & Associated Properties Plc
LondonMetric Property Plc
LSL Property Services Plc
Safestore Holdings Plc
•
Savills Plc
•
Segro Plc
•
Shaftesbury Plc
•
St. Modwen Properties Plc
•
• The British Land Company Plc
• U and I Group PLC
• Unite Group Plc
• Workspace Group Plc
Directors’ service agreements and letters of appointment
Name
Executive Directors
L Hutchings
C Staveley
Non-Executive Directors
H Scott-Barrett
L Norval
T Hales
I Krieger
W Hamman
L Whyte
G Poitrinal
Unexpired term of
appointment
Date of service agreement
Notice period
Rolling contract
13 June 2017
Rolling contract
1 October 200(cid:27)
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Date of initial appointment
9 March 20081
15 September 2009
1 August 2011
1 December 2014
2 June 2015
1 December 2015
1 November 2016
12 months
12 months
6 months
No notice
No notice
No notice
No notice
No notice
No Notice
Potential termination
payment
12 months’ salary and
benefits value
12 months’ salary and
benefits value
None
None
None
None
None
None
None
1. Hugh Scott-Barrett’s contract was amended on 13 June 2017 when he ceased to be Chief Executive and became the Non-Executive Chairman.
Non-Executive Directors are all appointed on rolling contracts with no notice period save for Hugh Scott-Barrett who as Chairman
has a six month notice period. All Directors stand for re-election annually and Board appointments automatically terminate in the
event of a Director not being re-elected by shareholders. Copies of the Directors’ service agreements are available to view, upon
appointment, at the Company’s registered office.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
52
DIRECTORS’ REMUNERATION REPORT
POLICY
Recruitment of Executives
New Executive Directors will receive a remuneration package that will reflect the Company’s remuneration policy within the
parameters outlined. In certain circumstances, such as an internal promotion, an 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 sign on awards paid to new joiners will be 100% of salary. This excludes amounts paid to buy out individuals
from existing performance awards. In the event that the Committee proposes to make a significant payment to buy out an individual
from their existing awards they will first consult with major shareholders. In addition new Directors may receive share awards on
joining although these 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 individual’s
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 Director’s 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.
• 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 an 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 neither notice nor payment in lieu of notice will be given and the Executive will
cease to perform their services with immediate effect.
The Committee will seek to mitigate the cost to the Company. In the event that the Committee exercises the discretion detailed
above to treat an individual as a Good Leaver and/or to make a performance related bonus payment, the Committee will provide an
explanation in the next remuneration report.
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. Hugh Scott-Barrett served as a Non-Executive Director of GAM Holding AG and The Goodwood Estate Company
Ltd while he was Chief Executive. No other Executive Directors held external positions during the year.
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 division.
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 2018 dependent on performance scenarios:
• The low scenario is based on nil bonus;
• The mid scenario is based on bonus at 50% of maximum; and
• The max scenario is based on bonus at 125% salary for Executive Directors/150% for Chief Executive.
No LTIP awards are expected to vest during the year as the March 2015 LTIP issue did not qualify for vesting as the performance
criteria, which were assessed over the three year period ending 6 March 2018, were not met.
Stock Code: CAL
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Stock Code: CAL
Capital & Regional AR2017 Governance.indd 52
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All figures in £’000
£2,000
Salary
Bonus
LTIP
Benefits
Pension
£1,500
£1,000
£0
£1,032
£745
£739
£500
£458
£549
£358
Low
Mid
Max
Low
Max
L Hutchings
Mid
C Staveley
Consultation and shareholders’ views
Shareholder voting on the Directors’ remuneration report, which was tabled at the 9 May 2017 AGM, was as follows:
Shareholder voting on the remuneration policy, which was tabled at the 10 May 2016 AGM, was as follows:
For
Against Discretionary
Voted
% of Total Shares Voted
Total Shares
For/Discretionary as
460,364,341
6,479,856
8,218
466,852,415
98.61%
For
Against Discretionary
Voted
% of Total Shares Voted
Total Shares
For/Discretionary as
415,895,797
48,741,878
28,702
464,666,377
89.51%
Where requested, further clarification and discussion can be provided to all shareholders to assist them in making an informed
voting decision. If any major concerns are raised by shareholders these can be discussed with the Committee Chairman in the first
instance and the rest of the Committee as appropriate.
The Committee reviews its performance with Board members and other participants, including through the annual Board
Resolution
To approve the Directors’
remuneration report for 2016
Resolution
To approve the Directors’
remuneration policy
Committee evaluation
evaluation.
DIRECTORS’ REMUNERATION REPORT
POLICY
Recruitment of Executives
New Executive Directors will receive a remuneration package that will reflect the Company’s remuneration policy within the
parameters outlined. In certain circumstances, such as an internal promotion, an 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 sign on awards paid to new joiners will be 100% of salary. This excludes amounts paid to buy out individuals
from existing performance awards. In the event that the Committee proposes to make a significant payment to buy out an individual
from their existing awards they will first consult with major shareholders. In addition new Directors may receive share awards on
joining although these 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 individual’s
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 Director’s 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.
• 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 an 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 neither notice nor payment in lieu of notice will be given and the Executive will
cease to perform their services with immediate effect.
The Committee will seek to mitigate the cost to the Company. In the event that the Committee exercises the discretion detailed
above to treat an individual as a Good Leaver and/or to make a performance related bonus payment, the Committee will provide an
explanation in the next remuneration report.
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. Hugh Scott-Barrett served as a Non-Executive Director of GAM Holding AG and The Goodwood Estate Company
Ltd while he was Chief Executive. No other Executive Directors held external positions during the year.
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
Senior Management
individual or division.
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 2018 dependent on performance scenarios:
• The low scenario is based on nil bonus;
• The mid scenario is based on bonus at 50% of maximum; and
• The max scenario is based on bonus at 125% salary for Executive Directors/150% for Chief Executive.
No LTIP awards are expected to vest during the year as the March 2015 LTIP issue did not qualify for vesting as the performance
criteria, which were assessed over the three year period ending 6 March 2018, were not met.
GOVERNANCE
53
All figures in £’000
£2,000
Salary
Bonus
LTIP
Benefits
Pension
£1,500
£1,000
£500
£458
£0
£1,032
£745
£739
£549
£358
Low
Mid
Max
Low
L Hutchings
Mid
C Staveley
Max
Consultation and shareholders’ views
Shareholder voting on the Directors’ remuneration report, which was tabled at the 9 May 2017 AGM, was as follows:
Resolution
To approve the Directors’
remuneration report for 2016
For
Against Discretionary
Total Shares
Voted
For/Discretionary as
% of Total Shares Voted
460,364,341
6,479,856
8,218
466,852,415
98.61%
Shareholder voting on the remuneration policy, which was tabled at the 10 May 2016 AGM, was as follows:
Resolution
To approve the Directors’
remuneration policy
For
Against Discretionary
Total Shares
Voted
For/Discretionary as
% of Total Shares Voted
415,895,797
48,741,878
28,702
464,666,377
89.51%
Where requested, further clarification and discussion can be provided to all shareholders to assist them in making an informed
voting decision. If any major concerns are raised by shareholders these can be discussed with the Committee Chairman in the first
instance and the rest of the Committee as appropriate.
Committee evaluation
The Committee reviews its performance with Board members and other participants, including through the annual Board
evaluation.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
54
DIRECTORS’ REMUNERATION REPORT
2017 REMUNERATION REPORT
Audited information:
Single total figure of remuneration for Directors:
The table below sets out the remuneration received/receivable in relation to the year ended 30 December 2017.
Salary/Fees
Taxable
benefits (i)
Other
benefits
Total
Bonus (xi)
Pension
Total
emoluments
LTIP
vesting (xii)
Total
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
-
393
393
148
212
28
4
–
1
-
-
-
-
-
-
-
£’000
Executive
Director
L Hutchings (ii)
H Scott-Barrett
(Chief Executive) (iii)
C Staveley
K Ford (iv)
M Bourgeois (v)
195
299
113
–
418
292
308
201
3
2
2
–
8
819 1,219
TOTAL
Chairman and Non-Executive Directors
H Scott-Barrett (iii)
(Chairman)
J Clare (ix)
T Hales (vii)
W Hamman
I Krieger (vi)
P Newton (viii)
L Norval
G Poitrinal (x)
L Whyte (vi)
TOTAL
75
56
51
41
46
–
41
–
46
356
–
125
45
40
45
16
40
–
45
356
–
–
–
–
–
–
–
–
–
–
4
2
4
2
12
–
–
–
–
–
–
–
–
–
–
10
6
3
–
23
–
–
–
–
–
–
–
–
–
–
14
6
8
4
32
-
149
46
–
343
439
238
241
–
918
38
45
17
–
84
44
46
30
246
501
181
–
959
582
607
237
318 1,153
606
152
638
160
–
–
564 2,112
653 1,188
341 1,245
237
–
128
204 1,321 2,385
630 2,397 1,951 4,782
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75
56
51
41
46
–
41
–
46
356
–
125
45
40
45
16
40
–
45
356
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75
56
51
41
46
–
41
–
46
356
–
125
45
40
45
16
40
–
45
356
Basic salary increases for Executive Directors:
L Hutchings
C Staveley
H Scott-Barrett
K Ford
M Bourgeois
383
305
n/a
n/a
n/a
2018
£’000
2017
£’000
2016
£’000
2015
£’000
2014
£’000
%
2.0
2.0
n/a
n/a
n/a
375
299
427
315
n/a
%
n/a
2.0
2.0
2.0
n/a
n/a
293
418
308
241
%
n/a
2.0
2.0
2.0
4.3
n/a
287
410
302
231
%
n/a
2.5
2.5
2.5
2.5
n/a
280
400
295
225
%
n/a
–
–
–
–
With effect from his start date of 13 June 2017, Lawrence Hutchings’ salary was £375,000 per annum. All other benefits are as per
the Remuneration Policy. In addition he was reimbursed for relocation costs of £8,090. Lawrence’s bonus for 2017 was pro-rated
reflecting his start date part way through the year.
Non-Executive Director fees
The same 2% increase awarded to staff members and Executive Directors has been applied to Non-Executive base fees of £40,800
per annum with effect from 1 January 2018. No increase will be applied to the additional £5,000 per annum for being a member of
the Audit and Remuneration Committees or the additional £5,000 fee per annum paid to the Senior Independent Director.
With effect from his start date of 13 June 2017, Hugh Scott-Barrett’s fixed fee as Chairman was £135,000 per annum. This has also
been increased by 2% effective from 1 January 2018.
2017 bonuses and achievement of objectives:
L Hutchings
C Staveley
K Ford
Total % of maximum
bonus awarded for
Bonus paid 2017
Maximum achievable
2017
45%
40%
32.5%
£’000
1481
149
128
£’000
3281
393
373
TOTAL ALL
1,175 1,575
8
12
23
32
343
918
128
204 1,677 2,741
630 2,397 2,307 5,138
1. The Bonus paid and maximum bonus achievable amounts were both pro-rated from June 2017.
(i) Private medical care and critical illness cover.
(ii) L Hutchings was appointed a Director on 13 June 2017.
The annual bonus criteria for 2017 were determined with a weighting of (cid:27)0(cid:8) for Group Objectives (of which 65(cid:8) related to financial
targets and 15% on business development) and 20% on personal objectives.
(iii) H Scott-Barrett stepped down as Chief Executive on 13 June 2017 and became Non-Executive Chairman on the same date.
(iv) K Ford stepped down as a Director on 9 May 2017 but continued to be a full-time employee until 31 December 2017. All remuneration figures shown are up
Group Objectives: Financial Targets (65%)
to 9 May 2017 with the total bonus paid of £127,803 pro-rated in the above table.
(v) M Bourgeois resigned from the Board on 1 November 2016, all remuneration figures shown up to that date.
(vi) T Hales, I Krieger and L Whyte receive an additional fee of £5,000 per annum as members of the Audit and Remuneration Committees.
(vii) T Hales receives a further fee of £5,000 as Senior Independent Director.
(viii) P Newton resigned on 10 May 2016.
(ix) J Clare resigned on 13 June 2017.
(x) G Poitrinal does not receive a fee or any remuneration.
(xi) In line with policy, bonus payments above 60% of maximum (50% for the Chief Executive) are deferred into shares for two years. There was no deferral in
2017. The split of the 2016 bonus was as follows:
£’000
H Scott-Barrett
C Staveley
K Ford
Cash
314
220
231
Deferred into
shares
125
18
10
Total
439
238
241
(xii) LTIP Vesting – The LTIP award is calculated with reference to the value of the August 2014 issue at the end of the performance period, at which point it was
confirmed how many options would qualify for vesting. The awards will be available for individuals to exercise from 14 August 2018 (50% and 50% from
14 August 2019) and are conditional on them remaining in employment (or being deemed a good leaver). The numbers quoted also include payments made
to individuals on exercise of options in lieu of dividends paid during the holding period.
Performance
Measure
Adjusted Profit1
Adjusted Earnings per share2
Property Level Net Rental Income3
Growth in Net Rental Income3
Cost Management (Central Costs)
Notes:
Threshold
Required
performance
(£m) % of bonus
Maximum
Required
Actual
performance
achieved
% of
bonus
10
10
15
5
5
30.4
4.20
55.0
+2.5%
8.4
15
15
20
10
5
(£m)
31.9
4.41
56.4
(£m)
29.9
4.21
53.7
+5.0%
+2.5%
8.4
8.4
Payout
as % of
max.
–
10
–
5
5
2. The Adjusted Profit and Adjusted Earnings per share targets are adjusted for one-off restructuring/redundancy costs and Directors’ bonuses (including NIC).
3. Property Level NRI is before management fees and on a see-through basis including the Group’s proportional share of joint venture assets.
Stock Code: CAL
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DIRECTORS’ REMUNERATION REPORT
2017 REMUNERATION REPORT
Audited information:
Single total figure of remuneration for Directors:
The table below sets out the remuneration received/receivable in relation to the year ended 30 December 2017.
Salary/Fees
benefits (i)
Bonus (xi)
Pension
emoluments
vesting (xii)
Total
Taxable
Total
Total
LTIP
Other
benefits
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
L Hutchings (ii)
212
–
-
148
-
28
-
393
-
-
-
393
-
10
14
149
46
-
–
439
238
241
–
38
45
17
–
84
44
46
30
246
501
181
–
959
582
607
237
318 1,153
564 2,112
152
160
–
606
638
–
653 1,188
341 1,245
–
237
TOTAL
819 1,219
12
23
32
343
918
128
204 1,321 2,385
630 2,397 1,951 4,782
Chairman and Non-Executive Directors
H Scott-Barrett (iii)
£’000
Executive
Director
H Scott-Barrett
(Chief Executive) (iii)
C Staveley
K Ford (iv)
M Bourgeois (v)
195
299
113
–
(Chairman)
J Clare (ix)
T Hales (vii)
W Hamman
I Krieger (vi)
P Newton (viii)
L Norval
G Poitrinal (x)
L Whyte (vi)
TOTAL
75
56
51
41
46
41
–
–
46
356
418
292
308
201
–
125
45
40
45
16
40
–
45
356
-
4
2
4
2
–
–
–
–
–
–
–
–
–
–
4
6
3
–
–
–
–
–
–
–
–
–
–
–
6
8
4
–
–
–
–
–
–
–
–
–
–
1
3
2
2
–
8
–
–
–
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75
56
51
41
46
41
–
–
46
356
–
125
45
40
45
16
40
–
45
356
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75
56
51
41
46
41
–
–
46
356
–
125
45
40
45
16
40
–
45
356
GOVERNANCE
55
Basic salary increases for Executive Directors:
L Hutchings
C Staveley
H Scott-Barrett
K Ford
M Bourgeois
2018
2017
2016
2015
2014
£’000
383
305
n/a
n/a
n/a
%
2.0
2.0
n/a
n/a
n/a
£’000
375
299
427
315
n/a
%
n/a
2.0
2.0
2.0
n/a
£’000
n/a
293
418
308
241
%
n/a
2.0
2.0
2.0
4.3
£’000
n/a
287
410
302
231
%
n/a
2.5
2.5
2.5
2.5
£’000
n/a
280
400
295
225
%
n/a
–
–
–
–
With effect from his start date of 13 June 2017, Lawrence Hutchings’ salary was £375,000 per annum. All other benefits are as per
the Remuneration Policy. In addition he was reimbursed for relocation costs of £8,090. Lawrence’s bonus for 2017 was pro-rated
reflecting his start date part way through the year.
Non-Executive Director fees
The same 2% increase awarded to staff members and Executive Directors has been applied to Non-Executive base fees of £40,800
per annum with effect from 1 January 2018. No increase will be applied to the additional £5,000 per annum for being a member of
the Audit and Remuneration Committees or the additional £5,000 fee per annum paid to the Senior Independent Director.
With effect from his start date of 13 June 2017, Hugh Scott-Barrett’s fixed fee as Chairman was £135,000 per annum. This has also
been increased by 2% effective from 1 January 2018.
2017 bonuses and achievement of objectives:
L Hutchings
C Staveley
K Ford
Total % of maximum
bonus awarded for
2017
45%
40%
32.5%
Bonus paid 2017
£’000
1481
149
128
Maximum achievable
£’000
3281
393
373
TOTAL ALL
1,175 1,575
12
23
32
343
918
128
204 1,677 2,741
630 2,397 2,307 5,138
1. The Bonus paid and maximum bonus achievable amounts were both pro-rated from June 2017.
(i) Private medical care and critical illness cover.
(ii) L Hutchings was appointed a Director on 13 June 2017.
The annual bonus criteria for 2017 were determined with a weighting of (cid:27)0(cid:8) for Group Objectives (of which 65(cid:8) related to financial
targets and 15% on business development) and 20% on personal objectives.
(iii) H Scott-Barrett stepped down as Chief Executive on 13 June 2017 and became Non-Executive Chairman on the same date.
(iv) K Ford stepped down as a Director on 9 May 2017 but continued to be a full-time employee until 31 December 2017. All remuneration figures shown are up
Group Objectives: Financial Targets (65%)
to 9 May 2017 with the total bonus paid of £127,803 pro-rated in the above table.
(v) M Bourgeois resigned from the Board on 1 November 2016, all remuneration figures shown up to that date.
(vi) T Hales, I Krieger and L Whyte receive an additional fee of £5,000 per annum as members of the Audit and Remuneration Committees.
(vii) T Hales receives a further fee of £5,000 as Senior Independent Director.
(viii) P Newton resigned on 10 May 2016.
(ix) J Clare resigned on 13 June 2017.
(x) G Poitrinal does not receive a fee or any remuneration.
(xi) In line with policy, bonus payments above 60% of maximum (50% for the Chief Executive) are deferred into shares for two years. There was no deferral in
2017. The split of the 2016 bonus was as follows:
£’000
H Scott-Barrett
C Staveley
K Ford
Cash
314
220
231
Deferred into
shares
125
18
10
Total
439
238
241
(xii) LTIP Vesting – The LTIP award is calculated with reference to the value of the August 2014 issue at the end of the performance period, at which point it was
confirmed how many options would qualify for vesting. The awards will be available for individuals to exercise from 14 August 2018 (50% and 50% from
14 August 2019) and are conditional on them remaining in employment (or being deemed a good leaver). The numbers quoted also include payments made
to individuals on exercise of options in lieu of dividends paid during the holding period.
Performance
Measure
Adjusted Profit1
Adjusted Earnings per share2
Property Level Net Rental Income3
Growth in Net Rental Income3
Cost Management (Central Costs)
Notes:
Threshold
Required
performance
(£m) % of bonus
Maximum
Required
performance
(£m)
Actual
achieved
(£m)
Payout
as % of
max.
30.4
4.20
55.0
+2.5%
8.4
15
15
20
10
5
31.9
4.41
56.4
29.9
4.21
53.7
+5.0%
+2.5%
8.4
8.4
–
10
–
5
5
% of
bonus
10
10
15
5
5
2. The Adjusted Profit and Adjusted Earnings per share targets are adjusted for one-off restructuring/redundancy costs and Directors’ bonuses (including NIC).
3. Property Level NRI is before management fees and on a see-through basis including the Group’s proportional share of joint venture assets.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
56
DIRECTORS’ REMUNERATION REPORT
2017 REMUNERATION REPORT
Group Objectives: Business development (15%)
The Remuneration Committee determined that management’s objectives should also include a focus on the delivery of accretive
property acquisitions or investments with the aim of growing the business. In considering performance for the year the Committee
took into account the completion of the disposal of the Buttermarket Ipswich joint venture in February 2017 and the successful
integration of the Exchange Centre, Ilford which was acquired in March 2017 and concluded that an award of 5% of bonus was
appropriate.
Personal Objectives (20%)
Each of the Executive Directors is given a number of personal objectives which account for a maximum of 20% of the overall target
set. These objectives are specific to the individual responsibilities and in 2017 covered implementation of the new business strategy,
transition and development of the management team, stakeholder engagement, cost management, the integration of the Ilford
acquisition, the exit plan for the Buttermarket Ipswich joint venture and advancing strategic plans for the Group’s major assets. The
Committee determined that against these objectives the following awards, relative to maximum payout, be made: 20% to Lawrence
Hutchings, 15% to Charles Staveley and 7.5% to Ken Ford.
2018 bonus objectives:
Consistent with 2017 Group objectives will account for 80% of the maximum payout, with the primary focus on measures that
support delivery of dividend growth given its critical importance to the Group’s strategy. A full split of the relative weighting is
provided below. Given their commercial sensitivity, we do not publish specific targets but will report on achievements in the 2018
Annual Report.
Adjusted Profit
Property Net Rental Income
Underlying growth in Net Rental Income
Cost Management
Operating metrics
Implementation of strategy
Personal Objectives
% of max.
20%
10%
15%
5%
10%
20%
20%
Long-Term Incentive Plan (LTIP):
The number of awards and the performance periods for all outstanding LTIP awards are summarised in the table below. The
Company’s Clawback provisions apply during the holding period where the level of vesting may be reduced, including to nil.
Name
L Hutchings
C Staveley
H Scott-Barrett
Date of
Award
8.9.172
14.08.14
06.03.15
23.08.16
19.04.17
14.08.14
06.03.15
23.08.16
No. of
awards % of salary
200
100
100
125
125
150
150
150
1,260,504
598,930
496,969
615,000
627,300
1,283,422
806,4743
283,0683
Threshold/
Maximum vesting
share price3
see note 1 below
60p/85p
65p/90p
see note 1 below
see note 1 below
60p/85p
65p/90p
see note 1 below
Qualified
for vesting
in the year
–
211,182
–
–
–
452,534
–
–
End of
Performance
Holding period
Period
19.04.20
2 years
14.08.17 50% 1 yr/50% 2 yrs
06.03.184 50% 1 yr/50% 2 yrs
2 years
23.08.19
19.04.20
2 years
14.08.17 50% 1 yr/50% 2 yrs3
06.03.184 50% 1 yr/50% 2 yrs3
2 years3
23.08.19
Notes:
1.
The performance conditions for the August 2016 and April 2017 issues are:
Performance condition
Weighting
Time frame
Nil
Total Shareholder Return relative to
the FTSE 350 Real Estate Index
Average Annual Growth in Adjusted
Profit Per Share
Total Property Return relative to the
IPD UK Retail Quarterly Property Index
1/3
1/3
1/3
3 years from date of grant
3 financial years from start of
year of grant
3 years from year end or half
year end immediately preceding
grant
Below
index
Below
5%
Below
index
Threshold
(25%)
Maximum
(100%)
Above index
Index + 12%
5% 9% (August 2016)
10% (April 2017)
Above index Index + 1.5% p.a.
Stock Code: CAL
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Stock Code: CAL
Capital & Regional AR2017 Governance.indd 56
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2.
3.
4.
5.
L Hutchings’ award was granted on 8 September 2017 which was as soon as was practicable following his joining the Company.
As a condition of Hugh Scott-Barrett’s Good Leaver status he is able to exercise his LTIP awards during the Holding period but is not able to sell the shares,
other than to meet tax liabilities on exercise, without the prior agreement of the Remuneration Committee. Hugh Scott-Barrett’s awards under the March
2015 and August 2016 issues were reduced pro-rata to 13 June 2017, being the date that he ceased being an Executive Director.
The performance period for the March 2015 issue ended on 6 March 2018. Nil awards qualified for vesting as the share price (adjusted for cumulative
dividends and distributions paid in the performance period) was below the 65p threshold.
Straight-line vesting applies for all LTIP issues in between threshold and maximum vesting.
Vesting of August 2014 LTIP issue
The performance period for the August 2014 LTIP issue ended during the year as noted above 35.26% of the awards qualified for
vesting. This is the second LTIP award to qualify for vesting since the scheme was introduced in 2008. In approving the final result
the Committee engaged Deloitte LLP, the Company’s Auditor, to confirm the relevant inputs and mechanics of the calculation.
The Committee also reviewed the relative TSR performance of the Company against three industry peers and the FTSE All Share,
FTSE 350 Real Estate and FTSE All Share Real Estate Investment Services. Noting that the Company had significantly outperformed
all comparatives, other than one peer, the Committee concluded that the result was a fair reflection of the performance of
management and therefore there was no need to utilise its discretionary override. The awards are available for individuals to
exercise from 14 August 2018 (50% – 50% from 14 August 2019) and are conditional on them remaining in employment (or being
deemed a good leaver).
Early vesting of awards
LTIP issue in 2018
Total Shareholder Return
relative to the FTSE 350 Real
Estate Index
Average Annual Growth in
Adjusted Profit Per Share
Total Property Return
relative to the IPD UK Retail
Quarterly Property Index
a straight-line basis.
financial stability.
Where a liquidity event triggers early vesting the Committee will pro rate awards for performance and, other than in exceptional
circumstances, for time. In the event of a capital raising or any other such event that would have a dilutive impact upon the awards
the Remuneration Committee may, in line with the scheme rules, adjust the awards granted to take account of this.
The Committee intends to make a new LTIP issue in 2018. The award will be made to the Chief Executive at a level equivalent to
200% of salary and to Charles Staveley at a level equivalent to 150% of salary. The Committee intend to use the same weighting and
structure of award as for the 2017 issue:
Performance condition
Weighting
Time frame
Nil
Threshold
(25%)
Maximum
(100%)
1/3
3 years from effective date
Below index
Above index
Index + 12%
1/3
3 financial years from start
Below 5%
5%
10%
1/3
3 years from year end or
Below index
Above index
Index + 1.5% p.a.
of grant
of year of grant
half year end preceding
effective date of grant
In the case of each measure if performance is between the Threshold (25%) and Maximum (100%) levels vesting will be calculated on
In line with all LTIP awards the Remuneration Committee retains discretion to adjust payout if it concludes that performance
measures have only been achieved due to actions that deliver short-term benefit at the cost of longer term performance and
GOVERNANCE
57
2.
3.
4.
5.
L Hutchings’ award was granted on 8 September 2017 which was as soon as was practicable following his joining the Company.
As a condition of Hugh Scott-Barrett’s Good Leaver status he is able to exercise his LTIP awards during the Holding period but is not able to sell the shares,
other than to meet tax liabilities on exercise, without the prior agreement of the Remuneration Committee. Hugh Scott-Barrett’s awards under the March
2015 and August 2016 issues were reduced pro-rata to 13 June 2017, being the date that he ceased being an Executive Director.
The performance period for the March 2015 issue ended on 6 March 2018. Nil awards qualified for vesting as the share price (adjusted for cumulative
dividends and distributions paid in the performance period) was below the 65p threshold.
Straight-line vesting applies for all LTIP issues in between threshold and maximum vesting.
Vesting of August 2014 LTIP issue
The performance period for the August 2014 LTIP issue ended during the year as noted above 35.26% of the awards qualified for
vesting. This is the second LTIP award to qualify for vesting since the scheme was introduced in 2008. In approving the final result
the Committee engaged Deloitte LLP, the Company’s Auditor, to confirm the relevant inputs and mechanics of the calculation.
The Committee also reviewed the relative TSR performance of the Company against three industry peers and the FTSE All Share,
FTSE 350 Real Estate and FTSE All Share Real Estate Investment Services. Noting that the Company had significantly outperformed
all comparatives, other than one peer, the Committee concluded that the result was a fair reflection of the performance of
management and therefore there was no need to utilise its discretionary override. The awards are available for individuals to
exercise from 14 August 2018 (50% – 50% from 14 August 2019) and are conditional on them remaining in employment (or being
deemed a good leaver).
Early vesting of awards
Where a liquidity event triggers early vesting the Committee will pro rate awards for performance and, other than in exceptional
circumstances, for time. In the event of a capital raising or any other such event that would have a dilutive impact upon the awards
the Remuneration Committee may, in line with the scheme rules, adjust the awards granted to take account of this.
LTIP issue in 2018
The Committee intends to make a new LTIP issue in 2018. The award will be made to the Chief Executive at a level equivalent to
200% of salary and to Charles Staveley at a level equivalent to 150% of salary. The Committee intend to use the same weighting and
structure of award as for the 2017 issue:
Performance condition
Weighting
Time frame
Nil
Threshold
(25%)
Maximum
(100%)
Total Shareholder Return
relative to the FTSE 350 Real
Estate Index
Average Annual Growth in
Adjusted Profit Per Share
Total Property Return
relative to the IPD UK Retail
Quarterly Property Index
1/3
3 years from effective date
of grant
Below index
Above index
Index + 12%
1/3
1/3
3 financial years from start
of year of grant
3 years from year end or
half year end preceding
effective date of grant
Below 5%
5%
10%
Below index
Above index
Index + 1.5% p.a.
211,182
14.08.17 50% 1 yr/50% 2 yrs
In the case of each measure if performance is between the Threshold (25%) and Maximum (100%) levels vesting will be calculated on
a straight-line basis.
In line with all LTIP awards the Remuneration Committee retains discretion to adjust payout if it concludes that performance
measures have only been achieved due to actions that deliver short-term benefit at the cost of longer term performance and
financial stability.
DIRECTORS’ REMUNERATION REPORT
2017 REMUNERATION REPORT
Group Objectives: Business development (15%)
The Remuneration Committee determined that management’s objectives should also include a focus on the delivery of accretive
property acquisitions or investments with the aim of growing the business. In considering performance for the year the Committee
took into account the completion of the disposal of the Buttermarket Ipswich joint venture in February 2017 and the successful
integration of the Exchange Centre, Ilford which was acquired in March 2017 and concluded that an award of 5% of bonus was
appropriate.
Personal Objectives (20%)
Each of the Executive Directors is given a number of personal objectives which account for a maximum of 20% of the overall target
set. These objectives are specific to the individual responsibilities and in 2017 covered implementation of the new business strategy,
transition and development of the management team, stakeholder engagement, cost management, the integration of the Ilford
acquisition, the exit plan for the Buttermarket Ipswich joint venture and advancing strategic plans for the Group’s major assets. The
Committee determined that against these objectives the following awards, relative to maximum payout, be made: 20% to Lawrence
Hutchings, 15% to Charles Staveley and 7.5% to Ken Ford.
Consistent with 2017 Group objectives will account for 80% of the maximum payout, with the primary focus on measures that
support delivery of dividend growth given its critical importance to the Group’s strategy. A full split of the relative weighting is
provided below. Given their commercial sensitivity, we do not publish specific targets but will report on achievements in the 2018
2018 bonus objectives:
Annual Report.
Adjusted Profit
Property Net Rental Income
Underlying growth in Net Rental Income
Cost Management
Operating metrics
Implementation of strategy
Personal Objectives
% of max.
20%
10%
15%
5%
10%
20%
20%
Long-Term Incentive Plan (LTIP):
The number of awards and the performance periods for all outstanding LTIP awards are summarised in the table below. The
Company’s Clawback provisions apply during the holding period where the level of vesting may be reduced, including to nil.
No. of
Maximum vesting
for vesting
Performance
awards % of salary
share price3
in the year
Period
Holding period
Threshold/
Qualified
End of
8.9.172
1,260,504
see note 1 below
19.04.20
2 years
Name
L Hutchings
C Staveley
H Scott-Barrett
Notes:
Date of
Award
14.08.14
06.03.15
23.08.16
19.04.17
14.08.14
06.03.15
23.08.16
598,930
496,969
615,000
627,300
1,283,422
806,4743
283,0683
200
100
100
125
125
150
150
150
see note 1 below
see note 1 below
60p/85p
65p/90p
60p/85p
65p/90p
see note 1 below
1.
The performance conditions for the August 2016 and April 2017 issues are:
452,534
14.08.17 50% 1 yr/50% 2 yrs3
06.03.184 50% 1 yr/50% 2 yrs
23.08.19
19.04.20
2 years
2 years
06.03.184 50% 1 yr/50% 2 yrs3
23.08.19
2 years3
Threshold
(25%)
Maximum
(100%)
–
–
–
–
–
–
Below
index
Performance condition
Weighting
Time frame
Nil
Total Shareholder Return relative to
1/3
3 years from date of grant
Above index
Index + 12%
the FTSE 350 Real Estate Index
Average Annual Growth in Adjusted
1/3
3 financial years from start of
Below
Profit Per Share
year of grant
5%
5% 9% (August 2016)
10% (April 2017)
Total Property Return relative to the
IPD UK Retail Quarterly Property Index
1/3
3 years from year end or half
year end immediately preceding
Below
index
Above index Index + 1.5% p.a.
grant
capreg.com
Stock Code: CAL
capreg.com
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10/04/2018 16:05:28
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
58
DIRECTORS’ REMUNERATION REPORT
2017 REMUNERATION REPORT
Exit payments
No discretionary payments were made to Hugh Scott-Barrett on his change of role from Chief Executive to Chairman on 13 June
2017. Hugh did not receive a bonus or LTIP award for 2017 in light of his impending move. For the purposes of the LTIP Hugh was
regarded as a good leaver and can exercise awards when they qualify for vesting but any sale of shares before the end of the
Holding Period, other than to cover tax liabilities on exercise, is subject to Remuneration Committee agreement. Pro-rating for time
was applied to the March 2015 and August 2016 awards such that the proportion of his awards that will be available for potential
vesting will only relate to the proportion of the performance period for which he was Chief Executive.
Ken Ford stepped down as an Executive Director of Capital & Regional plc on 9 May 2017. Ken remained an employee of the
Group until 31 December 2017 during which time his remuneration arrangements were unchanged. No additional remuneration
or payment was made in connection with Ken ceasing to be a Director of the Company. Ken will retain his awards received under
the Company’s 2008 Long Term Incentive Plan (“LTIP”). For those LTIP awards with a performance period extending beyond
31 December 2017 a pro-rating adjustment will be made to that date. The Holding Periods applicable to the respective LTIP awards,
and to options under the Company’s Deferred Bonus Share Plan, will be varied such that they will no longer apply from after the first
anniversary of Ken leaving full-time employment (i.e. 31 December 2018).
Performance graph
The graph below illustrates the Company’s Total Shareholder Return (i.e. share price growth plus dividends paid) performance
compared to the FTSE All Share and FTSE 350 Real Estate indices. The graph shows how the total return on a £100 investment in the
Company made on 31 December 2008 would have changed over the nine year period measured, compared with the total return on
a £100 investment in the comparable indices.
350
300
250
200
150
100
50
0
CAL
FTSE 350 Real Estate
FTSE All Share
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
The table below sets out the total remuneration of the Chief Executive, over the same period as the Total Shareholder Return graph.
The quantum of Annual Incentive awards granted each year and long-term incentive vesting rates are given as a percentage of the
maximum opportunity available.
Total remuneration (L Hutchings)
Total remuneration (H Scott-Barrett)
Annual bonus (% of max) (L Hutchings)
Annual bonus (% of max) (H Scott-
Barrett)
Barrett)
LTIP vesting (% of max) (L Hutchings)
LTIP vesting (% of max) (H Scott-
2017
£’000
393
564
45%
–
n/a
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
2010
£’000
2009
£’000
n/a
2,112
n/a
70%
n/a
n/a
796
n/a
70%
n/a
n/a
833
n/a
85%
n/a
n/a
651
n/a
40%
n/a
n/a
765
n/a
69%
n/a
n/a
536
n/a
71%
n/a
n/a
302
n/a
n/a
402
n/a
n/a
n/a
–
–
–
–
Percentage increase in Chief Executive remuneration versus the wider workforce
35.26% 91.85%
–
–
–
–
–
CEO
-3%
Employee
group1
2%
No change
No change
-42%
-5%
Salary
All taxable benefits
Annual bonuses
The CEO comparison is (cid:43)ugh Scott-Barrett for 2016 to a combined figure for 2017 comprising (cid:43)ugh Scott-Barrett’s remuneration for
the period 1 January 2017 to 12 June 2017 and Lawrence Hutchings’ remuneration for the period 13 June 2017 to 31 December 2017.
The ratio of the salary of the Chief Executive to the average employee salary1 (excluding Directors) was 5.6:1 (£407,000:£72,550).
1. Calculated on a like-for-like basis with reference to employees of Capital & Regional plc and Capital & Regional Property Management.
Relative importance of spend on pay compared to distributions to shareholders
Employee costs (per Note 7 of the financial statements)
Dividends paid (Total of Interim and Final Dividend for the respective year)
Executive share ownership
The minimum shareholding guidelines require Executive Directors to hold ordinary shares with a value equal to a set percentage of
salary based on current market value or aggregate purchase price. These guidelines are set at one year’s basic salary for Executive
Directors and two years for the Chief Executive.
There is no set timescale for Executive Director to reach the prescribed target but they are expected to retain net shares received on
the vesting of long-term incentive awards until the target is achieved. Shares that count towards the holding guideline are unfettered
and beneficially owned by the Executive Directors and their connected persons.
2017
£m
13.1
26.1
2016
£m
13.7
23.8
%
-4.4%
9.7%
Executive Directors
L Hutchings
C Staveley
Time from
appointment as
Target % of
Executive Director
6 months
9 years 3 months
salary
200
100
Target
currently
met?
No
Yes
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Governance.indd 58
10/04/2018 16:05:29
DIRECTORS’ REMUNERATION REPORT
2017 REMUNERATION REPORT
Exit payments
No discretionary payments were made to Hugh Scott-Barrett on his change of role from Chief Executive to Chairman on 13 June
2017. Hugh did not receive a bonus or LTIP award for 2017 in light of his impending move. For the purposes of the LTIP Hugh was
regarded as a good leaver and can exercise awards when they qualify for vesting but any sale of shares before the end of the
Holding Period, other than to cover tax liabilities on exercise, is subject to Remuneration Committee agreement. Pro-rating for time
was applied to the March 2015 and August 2016 awards such that the proportion of his awards that will be available for potential
vesting will only relate to the proportion of the performance period for which he was Chief Executive.
Ken Ford stepped down as an Executive Director of Capital & Regional plc on 9 May 2017. Ken remained an employee of the
Group until 31 December 2017 during which time his remuneration arrangements were unchanged. No additional remuneration
or payment was made in connection with Ken ceasing to be a Director of the Company. Ken will retain his awards received under
the Company’s 2008 Long Term Incentive Plan (“LTIP”). For those LTIP awards with a performance period extending beyond
31 December 2017 a pro-rating adjustment will be made to that date. The Holding Periods applicable to the respective LTIP awards,
and to options under the Company’s Deferred Bonus Share Plan, will be varied such that they will no longer apply from after the first
anniversary of Ken leaving full-time employment (i.e. 31 December 2018).
Performance graph
The graph below illustrates the Company’s Total Shareholder Return (i.e. share price growth plus dividends paid) performance
compared to the FTSE All Share and FTSE 350 Real Estate indices. The graph shows how the total return on a £100 investment in the
Company made on 31 December 2008 would have changed over the nine year period measured, compared with the total return on
a £100 investment in the comparable indices.
CAL
FTSE 350 Real Estate
FTSE All Share
350
300
250
200
150
100
50
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
GOVERNANCE
59
The table below sets out the total remuneration of the Chief Executive, over the same period as the Total Shareholder Return graph.
The quantum of Annual Incentive awards granted each year and long-term incentive vesting rates are given as a percentage of the
maximum opportunity available.
Total remuneration (L Hutchings)
Total remuneration (H Scott-Barrett)
Annual bonus (% of max) (L Hutchings)
Annual bonus (% of max) (H Scott-
Barrett)
LTIP vesting (% of max) (L Hutchings)
LTIP vesting (% of max) (H Scott-
Barrett)
2017
£’000
393
564
45%
–
n/a
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
2010
£’000
2009
£’000
n/a
2,112
n/a
70%
n/a
n/a
796
n/a
70%
n/a
n/a
833
n/a
85%
n/a
n/a
651
n/a
40%
n/a
n/a
765
n/a
69%
n/a
n/a
536
n/a
71%
n/a
n/a
302
n/a
–
n/a
n/a
402
n/a
–
n/a
35.26% 91.85%
–
–
–
–
–
–
–
Percentage increase in Chief Executive remuneration versus the wider workforce
Salary
All taxable benefits
Annual bonuses
CEO
-3%
No change
-42%
Employee
group1
2%
No change
-5%
The CEO comparison is (cid:43)ugh Scott-Barrett for 2016 to a combined figure for 2017 comprising (cid:43)ugh Scott-Barrett’s remuneration for
the period 1 January 2017 to 12 June 2017 and Lawrence Hutchings’ remuneration for the period 13 June 2017 to 31 December 2017.
The ratio of the salary of the Chief Executive to the average employee salary1 (excluding Directors) was 5.6:1 (£407,000:£72,550).
1. Calculated on a like-for-like basis with reference to employees of Capital & Regional plc and Capital & Regional Property Management.
Relative importance of spend on pay compared to distributions to shareholders
Employee costs (per Note 7 of the financial statements)
Dividends paid (Total of Interim and Final Dividend for the respective year)
2017
£m
13.1
26.1
2016
£m
13.7
23.8
%
-4.4%
9.7%
Executive share ownership
The minimum shareholding guidelines require Executive Directors to hold ordinary shares with a value equal to a set percentage of
salary based on current market value or aggregate purchase price. These guidelines are set at one year’s basic salary for Executive
Directors and two years for the Chief Executive.
There is no set timescale for Executive Director to reach the prescribed target but they are expected to retain net shares received on
the vesting of long-term incentive awards until the target is achieved. Shares that count towards the holding guideline are unfettered
and beneficially owned by the Executive Directors and their connected persons.
Executive Directors
L Hutchings
C Staveley
Time from
appointment as
Executive Director
6 months
9 years 3 months
Target % of
salary
200
100
Target
currently
met?
No
Yes
capreg.com
Stock Code: CAL
capreg.com
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
60
DIRECTORS’ REMUNERATION REPORT
2017 REMUNERATION REPORT
DIRECTORS’ REPORT
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. This excludes unvested LTIP
share awards, these are disclosed separately on page 56.
Business review
H Scott-Barrett
L Hutchings
C Staveley
T Hales
W Hamman
I Krieger
L Norval
G Poitrinal
L Whyte
30 December
2017
Shares
30 December
2016
Shares
3,489,676
38,710
1,090,860
600,000
–
103,133
135,899,287
53,147,931
2,206,826
n/a
540,475
500,000
–
100,000
137,102,157
51,532,964
73,929
57,000
forecast.
Dividends
Louis Norval is beneficially interested in the shares registered in the name of MStead Limited and PDI Investment Holdings Limited.
Wessel Hamman, by virtue of being the other nominated representative Director of the Parkdev Group of companies, is connected
to the MStead Limited, PDI Investment Holdings Limited and other related shareholdings but does not personally have a beneficial
interest in any of these holdings.
The 53,147,931 shares in which Guillaume Poitrinal is noted as having a beneficial interest in at 30 December 2017 were held by
ICAMAP Investments S.àr.l, of whom he is the Chairman.
The following were the only transactions impacting the above shareholdings from 30 December 2017 to 4 April 2018, being the latest
practicable date prior to the issue of this report:
• Hugh Scott-Barrett completed transactions on 9 March 2018 that added a net 25,000 shares to his holding.
Tony Hales CBE
Chairman of Remuneration Committee
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 35 which is incorporated into this report by reference. This includes our statutory reporting on greenhouse
gas emissions. A report on corporate governance and compliance with the provisions of the UK Corporate Governance Code and
Disclosure and Transparency Rules, which forms part of this Directors’ Report, is set out on pages 38 to 42.
The results for the year are shown in the Group income statement on page 74. There were no reportable events after the balance
sheet date. The use of financial derivatives is set out in Note 18 to the financial statements.
The purpose of this annual report is to provide information to the members of the Company. The annual report contains certain
forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these
statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from
those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this
annual report and the Group undertakes no obligation to update them. Nothing in this annual report should be construed as a profit
An interim dividend of 1.73 pence per share (2016: 1.62 pence per share) was paid on 26 October 2017, all as a Property Income
Distribution (PID). The Directors recommend a final dividend of 1.91 pence per share, making a total distribution for the year ended
30 December 2017 of 3.64 pence per share (2016: 3.39 pence per share).
Subject to approval of shareholders at the Annual General Meeting (“AGM”) on 9 May 2018, the final dividend will be paid on 16 May
2018. The key dates are set out as below:
• Confirmation of ZAR equivalent dividend and PID percentage
• Last day to trade on Johannesburg Stock Exchange (JSE)
• Shares trade ex-dividend on the JSE
• Shares trade ex-dividend on the London Stock Exchange (LSE)
• Record date for LSE and JSE
• AGM
• Dividend payment date
10 April 2018
17 April 2018
18 April 2018
19 April 2018
20 April 2018
9 May 2018
16 May 2018
The amount to be paid as a PID will be confirmed in the announcement on 10 April 2018. If a Scrip dividend alternative is offered
the deadline for submission of valid election forms will be 20 April 2018. South African shareholders are advised that the final
dividend will be regarded as a foreign dividend. Further details relating to Withholding Tax for shareholders on the South African
register will be provided within the announcement detailing the currency conversion rate on 10 April 2018. Share certificates on the
South African register may not be dematerialised or rematerialised between 18 April 2018 and 20 April 2018, both dates inclusive.
Transfers between the UK and South African registers may not take place between 10 April 2018 and 20 April 2018, both dates
inclusive.
Property Income Distributions (PIDs)
As a UK REIT, Capital & Regional plc is exempt from corporation tax on rental income and gains on UK investment properties but is
required to pay Property Income Distributions (PIDs). UK shareholders will be taxed on PIDs received at their full marginal tax rates.
A REIT may in addition pay normal dividends.
For most shareholders, PIDs will be paid after deducting withholding tax at the basic rate. However, certain categories of UK
shareholder are entitled to receive PIDs without withholding tax, principally UK resident companies, UK public bodies, UK pension
funds and managers of ISAs, PEPs and Child Trust Funds. Further information on UK REITs is available on the Company’s website,
including a form to be used by shareholders to certify if they qualify to receive PIDs without withholding tax.
PIDs paid to shareholders on the South African share registrar are subject to UK withholding tax at 20%. South African shareholders
may apply to Her Majesty’s Revenue and Customs after payment of the PID for a refund of the difference between the 20%
withholding tax and the prevailing (cid:56)(cid:46)(cid:18)South African double tax treaty rate. Other overseas shareholders may be eligible to apply for
similar refunds of UK withholding tax under the terms of the relevant tax treaties.
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Governance.indd 60
10/04/2018 16:05:29
DIRECTORS’ REMUNERATION REPORT
2017 REMUNERATION REPORT
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. This excludes unvested LTIP
share awards, these are disclosed separately on page 56.
H Scott-Barrett
L Hutchings
C Staveley
T Hales
W Hamman
I Krieger
L Norval
G Poitrinal
L Whyte
30 December
30 December
2017
Shares
2016
Shares
3,489,676
2,206,826
38,710
1,090,860
600,000
–
103,133
135,899,287
53,147,931
n/a
540,475
500,000
–
100,000
137,102,157
51,532,964
73,929
57,000
Louis Norval is beneficially interested in the shares registered in the name of MStead Limited and PDI Investment Holdings Limited.
Wessel Hamman, by virtue of being the other nominated representative Director of the Parkdev Group of companies, is connected
to the MStead Limited, PDI Investment Holdings Limited and other related shareholdings but does not personally have a beneficial
interest in any of these holdings.
The 53,147,931 shares in which Guillaume Poitrinal is noted as having a beneficial interest in at 30 December 2017 were held by
ICAMAP Investments S.àr.l, of whom he is the Chairman.
The following were the only transactions impacting the above shareholdings from 30 December 2017 to 4 April 2018, being the latest
practicable date prior to the issue of this report:
• Hugh Scott-Barrett completed transactions on 9 March 2018 that added a net 25,000 shares to his holding.
Tony Hales CBE
Chairman of Remuneration Committee
GOVERNANCE
DIRECTORS’ REPORT
61
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 35 which is incorporated into this report by reference. This includes our statutory reporting on greenhouse
gas emissions. A report on corporate governance and compliance with the provisions of the UK Corporate Governance Code and
Disclosure and Transparency Rules, which forms part of this Directors’ Report, is set out on pages 38 to 42.
The results for the year are shown in the Group income statement on page 74. There were no reportable events after the balance
sheet date. The use of financial derivatives is set out in Note 18 to the financial statements.
The purpose of this annual report is to provide information to the members of the Company. The annual report contains certain
forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these
statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from
those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this
annual report and the Group undertakes no obligation to update them. Nothing in this annual report should be construed as a profit
forecast.
Dividends
An interim dividend of 1.73 pence per share (2016: 1.62 pence per share) was paid on 26 October 2017, all as a Property Income
Distribution (PID). The Directors recommend a final dividend of 1.91 pence per share, making a total distribution for the year ended
30 December 2017 of 3.64 pence per share (2016: 3.39 pence per share).
Subject to approval of shareholders at the Annual General Meeting (“AGM”) on 9 May 2018, the final dividend will be paid on 16 May
2018. The key dates are set out as below:
• Confirmation of ZAR equivalent dividend and PID percentage
• Last day to trade on Johannesburg Stock Exchange (JSE)
• Shares trade ex-dividend on the JSE
• Shares trade ex-dividend on the London Stock Exchange (LSE)
• Record date for LSE and JSE
• AGM
• Dividend payment date
10 April 2018
17 April 2018
18 April 2018
19 April 2018
20 April 2018
9 May 2018
16 May 2018
The amount to be paid as a PID will be confirmed in the announcement on 10 April 2018. If a Scrip dividend alternative is offered
the deadline for submission of valid election forms will be 20 April 2018. South African shareholders are advised that the final
dividend will be regarded as a foreign dividend. Further details relating to Withholding Tax for shareholders on the South African
register will be provided within the announcement detailing the currency conversion rate on 10 April 2018. Share certificates on the
South African register may not be dematerialised or rematerialised between 18 April 2018 and 20 April 2018, both dates inclusive.
Transfers between the UK and South African registers may not take place between 10 April 2018 and 20 April 2018, both dates
inclusive.
Property Income Distributions (PIDs)
As a UK REIT, Capital & Regional plc is exempt from corporation tax on rental income and gains on UK investment properties but is
required to pay Property Income Distributions (PIDs). UK shareholders will be taxed on PIDs received at their full marginal tax rates.
A REIT may in addition pay normal dividends.
For most shareholders, PIDs will be paid after deducting withholding tax at the basic rate. However, certain categories of UK
shareholder are entitled to receive PIDs without withholding tax, principally UK resident companies, UK public bodies, UK pension
funds and managers of ISAs, PEPs and Child Trust Funds. Further information on UK REITs is available on the Company’s website,
including a form to be used by shareholders to certify if they qualify to receive PIDs without withholding tax.
PIDs paid to shareholders on the South African share registrar are subject to UK withholding tax at 20%. South African shareholders
may apply to Her Majesty’s Revenue and Customs after payment of the PID for a refund of the difference between the 20%
withholding tax and the prevailing (cid:56)(cid:46)(cid:18)South African double tax treaty rate. Other overseas shareholders may be eligible to apply for
similar refunds of UK withholding tax under the terms of the relevant tax treaties.
capreg.com
Stock Code: CAL
capreg.com
Capital & Regional AR2017 Governance.indd 61
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
62
DIRECTORS’ REPORT
CONTINUED
Directors
The names and biographical details of the present Directors of the Company are given on pages 36 to 37. Lawrence Hutchings was
appointed on 13 June 2017. Ken Ford and John Clare’s resignations were effective from 9 May 2017 and 13 June 2017, respectively.
All other Directors served for the full year.
Share capital
As at 30 December 2017 the Company’s total issued share capital was 718,275,760 ordinary shares of one pence each, all with equal
voting rights. The changes in the Company’s Issued share capital during 2017 are detailed in Note 19 to the financial statements.
The Company has a Secondary Listing of shares on the Johannesburg Stock Exchange (JSE). At 30 December 2017, 60,477,452 of the
All current Directors will retire and, being eligible, offer themselves for re-election at the 2018 Annual General Meeting.
Company’s shares were held on the JSE register representing 8.42% of the total shares in issue.
Directors’ interests in the share capital and equity of the Company at the year-end are contained in the Directors’ Remuneration
Report on page 60. There were no contracts of significance subsisting during or at the end of the year in which a Director of the
Company was materially interested. No Director had a material interest in the share capital of other Group companies during
the year.
In connection with the Parkdev Group of Investors (“Parkdev”) acquisition of shares in the Company in 2009 and pursuant to the
Relationship Agreement that Parkdev 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 they own 20% or more of the issued ordinary share
capital in the Company and one Non-Executive Director to the Board if they own less than 20%, but not less than 15%. Louis Norval
and Wessel Hamman are the Parkdev nominated non-executive directors. All other Directors are appointed in a personal capacity.
The Company maintains insurance for the Directors in respect of liabilities arising from the performance of their duties.
Listing Rule 9.8.4R disclosures
The following table sets out where disclosures required in compliance with Listing Rule 9.8.4R are located.
Interest capitalised and tax relief
Details of long-term incentive schemes
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Non pre-emptive issues of equity for cash by major subsidiary undertakings
Parent company participation in a placing by a listed subsidiary
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
n/a
Pages 56 to 57
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Shares held by Employee Share Ownership
Trust – see section below
Shares held by Employee Share Ownership
Trust – see section below
n/a
Substantial shareholdings
As at 26 March 2018 (the latest practicable date prior to the issue of this report) the Company has been notified of the following
interests in its issued ordinary share capital:
MStead Limited
PDI Investment Holdings
ICAMAP Investments
BlackRock
Peens Family Holdings
Hargreave Hale
New Fortress Finance Holdings
Thames River Capital
Aberforth Partners
MStead Limited and PDI Investment Holdings are part of the Parkdev Group of investors.
No. of shares
69,978,847
65,462,806
53,147,931
41,778,069
32,440,000
32,300,000
27,535,263
24,768,962
23,640,935
%
9.74
9.11
7.40
5.82
4.52
4.50
3.83
3.45
3.29
Change in control
The Group’s core £30 million revolving credit facility can be called in if there is a change in direct control of the borrower, Capital &
Regional Holdings, of 50% or more of its issued share capital. The Group’s £39 million debt facility in respect of The Exchange Centre,
Ilford allows the lender to demand repayment of the facility with 120 days’ notice following an individual or entity taking control of
50% or more of Capital & Regional Plc’s shares.
In addition, certain potential tax liabilities could be crystallised in some circumstances where there are varying degrees of change of
ownership of the Group’s shares.
Furthermore, the Group could lose its status as a REIT as a result of the actions of third parties (for example, in the event of a
successful takeover by a company that is not a REIT and which does not qualify as an “institutional investor” for REIT purposes) or
due to a breach of the close company condition if it is unable to remedy the breach within a specified period.
The Company did not make any purchases of its own shares during 2016 or in 2017 up to 4 April 2018 being the latest practicable
The Company was authorised by shareholders at the 2017 AGM held on 9 May 2017 to purchase up to a maximum of 10.0% of
its ordinary shares in the market. This authority will expire at the 2018 AGM and the directors will be seeking a new authority for
the Company to purchase its ordinary shares. This will only be exercised if market and financial conditions make it advantageous
Purchase of own shares
date prior to the issue of this report.
to do so.
Articles of Association
The rules governing the appointment and replacement of Directors are contained in the Company’s Articles of Association. Changes
to the Articles of Association must be approved by shareholders in accordance with the legislation in force from time to time.
Shares held by Employee Share Ownership Trust
The Capital (cid:9) Regional Employee Share Ownership Trust did not ac(cid:84)uire any shares in 2017. At 30 December 2017 the Trust held
182,699 shares in the Company. The shares held by the Trust are registered in the nominee name, Forest Nominees Limited, and a
dividend waiver is in place to cover the entire holding.
Human rights
Rights Act 1998.
The Group operates in the UK and Jersey and, as such, is subject to the European Convention on Human Rights and the UK Human
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 has 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.
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Governance.indd 62
10/04/2018 16:05:29
DIRECTORS’ REPORT
CONTINUED
Directors
The names and biographical details of the present Directors of the Company are given on pages 36 to 37. Lawrence Hutchings was
appointed on 13 June 2017. Ken Ford and John Clare’s resignations were effective from 9 May 2017 and 13 June 2017, respectively.
All other Directors served for the full year.
All current Directors will retire and, being eligible, offer themselves for re-election at the 2018 Annual General Meeting.
Directors’ interests in the share capital and equity of the Company at the year-end are contained in the Directors’ Remuneration
Report on page 60. There were no contracts of significance subsisting during or at the end of the year in which a Director of the
Company was materially interested. No Director had a material interest in the share capital of other Group companies during
the year.
In connection with the Parkdev Group of Investors (“Parkdev”) acquisition of shares in the Company in 2009 and pursuant to the
Relationship Agreement that Parkdev 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 they own 20% or more of the issued ordinary share
capital in the Company and one Non-Executive Director to the Board if they own less than 20%, but not less than 15%. Louis Norval
and Wessel Hamman are the Parkdev nominated non-executive directors. All other Directors are appointed in a personal capacity.
The Company maintains insurance for the Directors in respect of liabilities arising from the performance of their duties.
Listing Rule 9.8.4R disclosures
The following table sets out where disclosures required in compliance with Listing Rule 9.8.4R are located.
Interest capitalised and tax relief
Details of long-term incentive schemes
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Non pre-emptive issues of equity for cash by major subsidiary undertakings
Parent company participation in a placing by a listed subsidiary
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Pages 56 to 57
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
As at 26 March 2018 (the latest practicable date prior to the issue of this report) the Company has been notified of the following
Shareholder waivers of future dividends
Agreements with controlling shareholders
Substantial shareholdings
interests in its issued ordinary share capital:
MStead Limited
PDI Investment Holdings
ICAMAP Investments
BlackRock
Peens Family Holdings
Hargreave Hale
New Fortress Finance Holdings
Thames River Capital
Aberforth Partners
MStead Limited and PDI Investment Holdings are part of the Parkdev Group of investors.
No. of shares
69,978,847
65,462,806
53,147,931
41,778,069
32,440,000
32,300,000
27,535,263
24,768,962
23,640,935
%
9.74
9.11
7.40
5.82
4.52
4.50
3.83
3.45
3.29
GOVERNANCE
63
Share capital
As at 30 December 2017 the Company’s total issued share capital was 718,275,760 ordinary shares of one pence each, all with equal
voting rights. The changes in the Company’s Issued share capital during 2017 are detailed in Note 19 to the financial statements.
The Company has a Secondary Listing of shares on the Johannesburg Stock Exchange (JSE). At 30 December 2017, 60,477,452 of the
Company’s shares were held on the JSE register representing 8.42% of the total shares in issue.
Change in control
The Group’s core £30 million revolving credit facility can be called in if there is a change in direct control of the borrower, Capital &
Regional Holdings, of 50% or more of its issued share capital. The Group’s £39 million debt facility in respect of The Exchange Centre,
Ilford allows the lender to demand repayment of the facility with 120 days’ notice following an individual or entity taking control of
50% or more of Capital & Regional Plc’s shares.
In addition, certain potential tax liabilities could be crystallised in some circumstances where there are varying degrees of change of
ownership of the Group’s shares.
Furthermore, the Group could lose its status as a REIT as a result of the actions of third parties (for example, in the event of a
successful takeover by a company that is not a REIT and which does not qualify as an “institutional investor” for REIT purposes) or
due to a breach of the close company condition if it is unable to remedy the breach within a specified period.
Purchase of own shares
The Company did not make any purchases of its own shares during 2016 or in 2017 up to 4 April 2018 being the latest practicable
date prior to the issue of this report.
The Company was authorised by shareholders at the 2017 AGM held on 9 May 2017 to purchase up to a maximum of 10.0% of
its ordinary shares in the market. This authority will expire at the 2018 AGM and the directors will be seeking a new authority for
the Company to purchase its ordinary shares. This will only be exercised if market and financial conditions make it advantageous
to do so.
Articles of Association
The rules governing the appointment and replacement of Directors are contained in the Company’s Articles of Association. Changes
to the Articles of Association must be approved by shareholders in accordance with the legislation in force from time to time.
Shares held by Employee Share Ownership
Trust – see section below
Shares held by Employee Share Ownership
Trust – see section below
Shares held by Employee Share Ownership Trust
The Capital (cid:9) Regional Employee Share Ownership Trust did not ac(cid:84)uire any shares in 2017. At 30 December 2017 the Trust held
182,699 shares in the Company. The shares held by the Trust are registered in the nominee name, Forest Nominees Limited, and a
dividend waiver is in place to cover the entire holding.
Human rights
The Group operates in the UK and Jersey 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 has 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.
capreg.com
Stock Code: CAL
capreg.com
Capital & Regional AR2017 Governance.indd 63
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
64
DIRECTORS’ REPORT
CONTINUED
DIRECTORS’ RESPONSIBILITIES STATEMENT
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.
At 30 December 2017 the total number of employees was as follows:
Employees
Directors1
Employees – Group
Employees – Wholly-owned assets
Employees – Snozone
Male
8
22
63
160
Female
1
23
21
97
Total
9
45
84
257
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 FRS 101, as published by the Financial Reporting Council, and applicable law in the United Kingdom.
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 year.
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
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
explained in the financial statements; and
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
1. The Group defines its senior management as the members of the Executive Committee which at 30 December 2017 consisted of the Executive Directors and
the Group’s Investment Director, James Ryman.
• 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
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.
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 reappoint Deloitte LLP as the Company’s Auditor will be proposed at the forthcoming AGM.
Annual General Meeting
A separate document, the Notice of Annual General Meeting 2017, accompanies this report and accounts and explains the business
to be covered at the Annual General Meeting of the Company to be held on 9 May 2018.
By order of the Board
Stuart Wetherly
Company Secretary
5 April 2018
Registered Company name: Capital & Regional plc
Registered Company number: 01399411
Registered office: 22 Chapter Street, London SW1P 4NP
Stock Code: CAL
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• 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
transactions and disclose with reasonable accuracy at any time the financial position of the Company, and to enable them to
ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ responsibilities 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
•
the Strategic Report includes a fair review of the development and performance of the business and the position of the Company
and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties
•
the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company’s performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 5 April 2018 and is signed on its behalf by:
information;
performance; and
a whole;
that they face; and
Lawrence Hutchings
Chief Executive
Charles Staveley
Group Finance Director
DIRECTORS’ REPORT
CONTINUED
DIRECTORS’ RESPONSIBILITIES STATEMENT
65
GOVERNANCE
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.
At 30 December 2017 the total number of employees was as follows:
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 FRS 101, as published by the Financial Reporting Council, and applicable law in the United Kingdom.
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 year.
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
Male
Female
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
transactions and disclose with reasonable accuracy at any time the financial position of the Company, and to enable them to
ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Annual General Meeting
A separate document, the Notice of Annual General Meeting 2017, accompanies this report and accounts and explains the business
to be covered at the Annual General Meeting of the Company to be held on 9 May 2018.
Directors’ responsibilities 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;
the Strategic Report includes a fair review of the development and performance of the business and the position of the Company
and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties
that they face; and
the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company’s performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 5 April 2018 and is signed on its behalf by:
Lawrence Hutchings
Chief Executive
Charles Staveley
Group Finance Director
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8
22
63
160
1
23
21
97
Total
9
45
84
257
Employees
Directors1
Employees – Group
Employees – Wholly-owned assets
Employees – Snozone
Political donations
foreseeable future.
Auditor’s information
1. The Group defines its senior management as the members of the Executive Committee which at 30 December 2017 consisted of the Executive Directors and
the Group’s Investment Director, James Ryman.
The Group has not made any political donations during the year and intends to continue its policy of not doing so for the
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 reappoint Deloitte LLP as the Company’s Auditor will be proposed at the forthcoming AGM.
By order of the Board
Stuart Wetherly
Company Secretary
5 April 2018
Registered Company name: Capital & Regional plc
Registered Company number: 01399411
Registered office: 22 Chapter Street, London SW1P 4NP
Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the Directors’ statement in note 1 to the financial statements about whether they
We confirm that we
considered it appropriate to adopt the going concern basis of accounting in preparing them and their
have nothing material
identification of any material uncertainties to the Group’s and Company’s ability to continue to do so over
to report, add or draw
a period of at least twelve months from the date of approval of the financial statements.
attention to in respect of
these matters.
We are required to state whether we have anything material to add or draw attention to in relation to
that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent
with our knowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were consistent with the
We confirm that we
knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of
have nothing material
the Directors’ assessment of the Group’s and the Company’s ability to continue as a going concern, we
to report, add or draw
are required to state whether we have anything material to add or draw attention to in relation to:
attention to in respect of
•
the disclosures on pages 26 to 30 that describe the principal risks and explain how they are being
these matters.
•
the Directors’ confirmation on page 26 that they have carried out a robust assessment of the principal
risks facing the Group, including those that would threaten its business model, future performance,
managed or mitigated;
solvency or liquidity; or
•
the Directors’ explanation on page 30 as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to report whether the Directors’ statement relating to the prospects of the Group
required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
66
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
Report on the audit of the financial statements
Opinion
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 2017 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 and IFRSs as issued by the International Accounting Standards Board (IASB);
the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including FRS 101 “Reduced Disclosure Framework”; 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.
We have audited the financial statements of Capital and Regional plc (the “parent Company”) and its subsidiaries (the “Group”) which
comprise:
•
•
•
•
•
•
the consolidated income statement;
the consolidated statement of comprehensive income;
the consolidated and parent Company balance sheets;
the consolidated and parent Company statements of changes in equity;
the consolidated cash flow statement; and
the related notes 1 to 29.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent
Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework”.
Basis for opinion
(cid:58)e conducted our audit in accordance with International Standards on Auditing ((cid:56)(cid:46)) (ISAs ((cid:56)(cid:46))) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report.
We are independent of the Group and the parent Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services
prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key Audit Matters
The key audit matters that we identified in the current year were:
•
Property valuations
• Going concern and covenant compliance
•
Impairment of Company only investments
Materiality
Scoping
The materiality that we used in the current year was £9.5 million which was determined on the basis of
2% of net assets.
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 and
component levels. Our audit scoping provides full scope audit coverage of 93(cid:8) (2017: 90(cid:8)) of net
assets and 96% (2017: 90%) of Adjusted Profit.
Significant changes in our
approach
In the prior year we reported on the risk of fraud in revenue recognition as a key audit matter. In the
current year we reassessed our identification of the risks of material misstatement due to fraud and
considered this to relate to the valuation of the property portfolio, as discussed below.
Stock Code: CAL
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Report on the audit of the financial statements
Conclusions relating to going concern, principal risks and viability statement
GOVERNANCE
67
Going concern
We have reviewed the Directors’ statement in note 1 to the financial statements about whether they
considered it appropriate to adopt the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s and Company’s ability to continue to do so over
a period of at least twelve months from the date of approval of the financial statements.
We are required to state whether we have anything material to add or draw attention to in relation to
that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent
with our knowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the Directors’ statements and considering whether they were consistent with the
knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of
the Directors’ assessment of the Group’s and the Company’s ability to continue as a going concern, we
are required to state whether we have anything material to add or draw attention to in relation to:
•
•
•
the disclosures on pages 26 to 30 that describe the principal risks and explain how they are being
managed or mitigated;
the Directors’ confirmation on page 26 that they have carried out a robust assessment of the principal
risks facing the Group, including those that would threaten its business model, future performance,
solvency or liquidity; or
the Directors’ explanation on page 30 as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to report whether the Directors’ statement relating to the prospects of the Group
required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
We confirm that we
have nothing material
to report, add or draw
attention to in respect of
these matters.
We confirm that we
have nothing material
to report, add or draw
attention to in respect of
these matters.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
Opinion
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 2017 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 and IFRSs as issued by the International Accounting Standards Board (IASB);
•
the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including FRS 101 “Reduced Disclosure Framework”; 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.
We have audited the financial statements of Capital and Regional plc (the “parent Company”) and its subsidiaries (the “Group”) which
comprise:
•
•
•
•
•
•
the consolidated income statement;
the consolidated statement of comprehensive income;
the consolidated and parent Company balance sheets;
the consolidated and parent Company statements of changes in equity;
the consolidated cash flow statement; and
the related notes 1 to 29.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
IFRSs as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent
Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework”.
Basis for opinion
section of our report.
(cid:58)e conducted our audit in accordance with International Standards on Auditing ((cid:56)(cid:46)) (ISAs ((cid:56)(cid:46))) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
We are independent of the Group and the parent Company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We confirm that the non-audit services
prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key Audit Matters
The key audit matters that we identified in the current year were:
Property valuations
• Going concern and covenant compliance
Impairment of Company only investments
•
•
Materiality
The materiality that we used in the current year was £9.5 million which was determined on the basis of
Scoping
2% of net assets.
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 and
component levels. Our audit scoping provides full scope audit coverage of 93(cid:8) (2017: 90(cid:8)) of net
assets and 96% (2017: 90%) of Adjusted Profit.
Significant changes in our
In the prior year we reported on the risk of fraud in revenue recognition as a key audit matter. In the
approach
current year we reassessed our identification of the risks of material misstatement due to fraud and
considered this to relate to the valuation of the property portfolio, as discussed below.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
68
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Property valuations
Risk description
How the scope of our
audit responded to
the risk
Investment property has a carrying value of £930.6 million at 30 December 2017 (30 December 2016:
£838.5 million), comprising 92% (30 December 2016: 89%) of the Group’s assets. The portfolio consists of
seven shopping centres within the Group. The Group has a further interest in investment properties held
by an associate entity, valued at £138.4 million (100%) (30 December 2016: £150.0 million (100%)) within
the associate. These are disclosed in note 10b to the Group financial statements.
We deem the fair value of the Group’s property portfolio to be a significant area of focus due to the
level and nature of the judgements and estimates from Management that form inputs into the valuation
process performed by the Group’s independent valuers, such as occupancy rates, lease incentives, break
clauses and yields. Changes in these assumptions and judgements could lead to significant movements in
property values and consequently unrealised gains or losses in the consolidated income statement.
There is also a risk of fraud risk in relation to the valuation of the property portfolio, where the use of
assumptions and judgements is more critical and could lead to material misstatement.
The accounting policy for investment property is set out in note 1 to the Group financial statements
including management’s assessment of this as a critical accounting judgement.
The Audit Committee’s discussion of this key audit matter is set out on page 44.
• We tested the appropriateness of the design and implementation of the Group’s key controls to
address the risk over property valuations.
• We met with the third party valuers appointed by management to value the property portfolio and
challenged the significant judgements and assumptions applied in their valuation model. We verified
movements in the key judgements and assumptions and benchmarked the inputs against market data
with the assistance of our internal valuation specialists.
• We analysed the individual property valuations to understand significant movements against prior year
and comparative market evidence considered by the valuers.
• We tested the integrity of the information provided to the valuers by management pertaining to rental
income, purchasers’ costs and occupancy.
• We considered the competence and independence of the external valuers.
Key observations
We found that management’s judgements and assumptions fell within the reasonable range which is
based on third party market commentator reports on market movements, and are satisfied that the value
of investment properties is reasonably stated.
Going concern and covenant compliance
Risk description
As at 30 December 2017, external borrowings had a carrying value of £422.2 million at 30 December 2017
(30 December 2016: £360.8 million). This includes the Group’s £30 million central revolving credit facility,
which matures in January 2022.
We identified a key audit matter relating to the ability of the Group to meet the external loan covenant
requirements during the year and for a period of one year from the date of this Auditor’s Report. Whilst
there is headroom in the borrowing to property valuation ratio compared to the covenant requirement
over this period, a significant downwards movement in property valuations could impact on this
headroom. In the unlikely event of a significant fall in property valuations or rental income, the Group may
not meet its covenant requirements.
Management’s consideration of the going concern basis of preparation is set out in note 1 to the Group
financial statements. Management have adopted the going concern basis of accounting for the Group and
parent Company; they have concluded that there are no material uncertainties that may cast significant
doubt over the Group’s and parent Company’s ability to adopt this basis for a period of at least twelve
months from the date when the financial statements are authorised for issue.
The Audit Committee’s discussion of this key audit matter is set out on page 44.
How the scope of our
• We critically assessed the appropriateness of the design and implementation of the Group’s key
audit responded to
controls to address the risk of non-compliance with covenants and the going concern status of the
the risk
Group.
• We challenged the judgements and assumptions applied by management in their going concern
assessment and associated forecasts of financial performance and financial position. These included
modelling alternative scenarios taking consideration of projected capital expenditure, assumptions around
asset sales and purchases, discount rates applied to future cash flows, current business and economic
trends and significant developments during and subsequent to the year ended 30 December 2017.
Key observations
From the results of our work we concur with management’s conclusions on going concern.
Impairment of company only investments
Risk description
There is a risk that the carrying value of the investments and intercompany debtors cannot be supported.
The accuracy of forecast future cash flows to support the carrying values of the investments is a key area
of judgement and is identified as a significant risk. In particular, this relates to the reasonableness of
cash flow forecasts, long-term growth rates and the discount rates applied in the discounted cash flow
calculations used to support investments held at above net asset value of the subsidiaries.
Investments had a carrying value of £453.7 million at 30 December 2017 (30 December 2016: £330.0
million), comprising 96% (30 December 2016: 72%) of the parent company’s assets. Intercompany debtors
had a carrying value of £18.6 million at 30 December 2017 (30 December 2016: £125.2 million), comprising
3.92% (30 December 2015: 28%) of the parent Company’s assets.
Investments are subject to an impairment review using discount rates between the range of 7.4% and
9.5%. The investment in the year reflects a reorganisation of the Group completed in parallel with and
following the completion of the purchase of Ilford Shopping centre and refinancing of the five Mall
shopping centre assets that completed on 4 January 2017.
The accounting policies for both investments and intercompany debtors are set out in note A to the parent
Company financial statements.
How the scope of our
• We tested the appropriateness of the design and implementation of the company’s key controls to
audit responded to
address the risk of impairment of investments and debtor balances.
the risk
• We challenged management’s investment impairment model and the cash flow forecasts employed
therein, including comparison of the input assumptions to externally and internally derived data with
the assistance of our internal valuations specialists. The inputs considered included the cash flow
• We also assessed whether the forecasts employed are consistent with those used to support other
projections and discount rates.
judgements in the financial statements.
Key observations
We concur with the level of impairment recognised by management for all investments. We consider that
the carrying value of investment and intercompany debtor balances is appropriate.
Stock Code: CAL
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Property valuations
Risk description
Investment property has a carrying value of £930.6 million at 30 December 2017 (30 December 2016:
£838.5 million), comprising 92% (30 December 2016: 89%) of the Group’s assets. The portfolio consists of
seven shopping centres within the Group. The Group has a further interest in investment properties held
by an associate entity, valued at £138.4 million (100%) (30 December 2016: £150.0 million (100%)) within
the associate. These are disclosed in note 10b to the Group financial statements.
We deem the fair value of the Group’s property portfolio to be a significant area of focus due to the
level and nature of the judgements and estimates from Management that form inputs into the valuation
process performed by the Group’s independent valuers, such as occupancy rates, lease incentives, break
clauses and yields. Changes in these assumptions and judgements could lead to significant movements in
property values and consequently unrealised gains or losses in the consolidated income statement.
There is also a risk of fraud risk in relation to the valuation of the property portfolio, where the use of
assumptions and judgements is more critical and could lead to material misstatement.
The accounting policy for investment property is set out in note 1 to the Group financial statements
including management’s assessment of this as a critical accounting judgement.
The Audit Committee’s discussion of this key audit matter is set out on page 44.
How the scope of our
• We tested the appropriateness of the design and implementation of the Group’s key controls to
audit responded to
address the risk over property valuations.
the risk
• We met with the third party valuers appointed by management to value the property portfolio and
challenged the significant judgements and assumptions applied in their valuation model. We verified
movements in the key judgements and assumptions and benchmarked the inputs against market data
with the assistance of our internal valuation specialists.
• We analysed the individual property valuations to understand significant movements against prior year
and comparative market evidence considered by the valuers.
• We tested the integrity of the information provided to the valuers by management pertaining to rental
income, purchasers’ costs and occupancy.
• We considered the competence and independence of the external valuers.
Key observations
We found that management’s judgements and assumptions fell within the reasonable range which is
based on third party market commentator reports on market movements, and are satisfied that the value
of investment properties is reasonably stated.
GOVERNANCE
69
Going concern and covenant compliance
Risk description
As at 30 December 2017, external borrowings had a carrying value of £422.2 million at 30 December 2017
(30 December 2016: £360.8 million). This includes the Group’s £30 million central revolving credit facility,
which matures in January 2022.
We identified a key audit matter relating to the ability of the Group to meet the external loan covenant
requirements during the year and for a period of one year from the date of this Auditor’s Report. Whilst
there is headroom in the borrowing to property valuation ratio compared to the covenant requirement
over this period, a significant downwards movement in property valuations could impact on this
headroom. In the unlikely event of a significant fall in property valuations or rental income, the Group may
not meet its covenant requirements.
Management’s consideration of the going concern basis of preparation is set out in note 1 to the Group
financial statements. Management have adopted the going concern basis of accounting for the Group and
parent Company; they have concluded that there are no material uncertainties that may cast significant
doubt over the Group’s and parent Company’s ability to adopt this basis for a period of at least twelve
months from the date when the financial statements are authorised for issue.
The Audit Committee’s discussion of this key audit matter is set out on page 44.
How the scope of our
audit responded to
the risk
• We critically assessed the appropriateness of the design and implementation of the Group’s key
controls to address the risk of non-compliance with covenants and the going concern status of the
Group.
• We challenged the judgements and assumptions applied by management in their going concern
assessment and associated forecasts of financial performance and financial position. These included
modelling alternative scenarios taking consideration of projected capital expenditure, assumptions around
asset sales and purchases, discount rates applied to future cash flows, current business and economic
trends and significant developments during and subsequent to the year ended 30 December 2017.
Key observations
From the results of our work we concur with management’s conclusions on going concern.
Impairment of company only investments
Risk description
There is a risk that the carrying value of the investments and intercompany debtors cannot be supported.
The accuracy of forecast future cash flows to support the carrying values of the investments is a key area
of judgement and is identified as a significant risk. In particular, this relates to the reasonableness of
cash flow forecasts, long-term growth rates and the discount rates applied in the discounted cash flow
calculations used to support investments held at above net asset value of the subsidiaries.
Investments had a carrying value of £453.7 million at 30 December 2017 (30 December 2016: £330.0
million), comprising 96% (30 December 2016: 72%) of the parent company’s assets. Intercompany debtors
had a carrying value of £18.6 million at 30 December 2017 (30 December 2016: £125.2 million), comprising
3.92% (30 December 2015: 28%) of the parent Company’s assets.
Investments are subject to an impairment review using discount rates between the range of 7.4% and
9.5%. The investment in the year reflects a reorganisation of the Group completed in parallel with and
following the completion of the purchase of Ilford Shopping centre and refinancing of the five Mall
shopping centre assets that completed on 4 January 2017.
The accounting policies for both investments and intercompany debtors are set out in note A to the parent
Company financial statements.
• We tested the appropriateness of the design and implementation of the company’s key controls to
address the risk of impairment of investments and debtor balances.
• We challenged management’s investment impairment model and the cash flow forecasts employed
therein, including comparison of the input assumptions to externally and internally derived data with
the assistance of our internal valuations specialists. The inputs considered included the cash flow
projections and discount rates.
• We also assessed whether the forecasts employed are consistent with those used to support other
judgements in the financial statements.
How the scope of our
audit responded to
the risk
Key observations
We concur with the level of impairment recognised by management for all investments. We consider that
the carrying value of investment and intercompany debtor balances is appropriate.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
70
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
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.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent financial statements
Materiality
£9.5 million (2016: £7.0 million)
£9.15 million (2016: £3.5 million)
Other information
report thereon.
thereon.
Basis for
determining
materiality
We determined materiality to be 2% of net assets
(2016: 1.5% of net assets).
We determined materiality to be 2% of net assets
(2016: 1.5% of net assets).
materially misstated.
We applied a lower threshold of £1.4 million (2016:
£1.2 million) for testing of all balances impacting
Adjusted Profit (as defined in Note 1 to the Group
financial statements), which is less than 5% of
Adjusted Profit (2016: less than 5% of Adjusted
Profit).
Rationale for
the benchmark
applied
We used net assets as benchmark when determining
materiality as it is considered to be the most critical
financial performance measure for the Group.
We used net assets as benchmark when determining
materiality as it is considered to be the most critical
financial performance measure for the Company as a
holding company.
We applied a lower threshold of £1.4 million (2016:
£1.2 million) for testing of all balances impacting
Adjusted Profit on the basis that it is a key metric
used by management, is the basis of the discussion
of the financial performance in the strategic report
and is a metric used by analysts.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £280,000 (2016:
£140,000), 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.
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 and component levels.
Our group audit scope focused primarily on the audit work on the major lines of business. These major lines of business are (cid:58)holly-
owned assets, Other (cid:56)(cid:46) Shopping Centres, Sno(cid:93)one and Group(cid:18)Central. These are included within individual IFRS (cid:27) segments as
disclosed in note 2 to the Group financial statements. Other major lines of business for scoping purposes include the (cid:46)ingfisher
Limited Partnership, incorporated into the Other Shopping Centre segment and Capital (cid:9) Regional Property (cid:48)anagement Limited,
which is incorporated into the Group / Central segment in note 2 to the Group financial statements.
All of the above were subject to a full scope audit with the exception of the Kingfisher Limited Partnership which was subject to
specific audit procedures around significant audit risks and key balances including investment property and loans payable. This is
consistent with the prior year.
The businesses subject to a full scope audit or specific audit procedures account for 95% (2016: 95%) of the Group’s net assets,
100% (2016: 100%) of the Group’s revenue and 99% (2016: 99%) of the Group’s Adjusted Profit. All investment properties have
been included within the scope of our work. They were also selected to provide an appropriate basis for undertaking audit work to
address the risks of material misstatement identified above. All components are audited directly by the Group audit team. Our audit
work at each component was executed at levels of materiality applicable to each individual entity which were between 2% and 90%
(2016: 2% and 90%) of 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 full scope audit or specific audit procedures.
Stock Code: CAL
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Stock Code: CAL
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The Directors are responsible for the other information. The other information comprises the
We have nothing to report in
information included in the annual report, other than the financial statements and our Auditor’s
respect of these matters.
Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to be
If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material
misstatements of the other information include where we conclude that:
•
Fair, balanced and understandable – the statement given by the Directors that they consider the
annual report and financial statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess the Group’s position and
performance, business model and strategy, is materially inconsistent with our knowledge
obtained in the audit; or
•
Audit committee reporting – the section describing the work of the audit committee does not
appropriately address matters communicated by us to the audit committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the
Directors’ statement required under the Listing Rules relating to the Company’s compliance with
the UK Corporate Governance Code containing provisions specified for review by the Auditor
in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant
provision of the UK Corporate Governance Code.
Responsibilities of Directors
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, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent Company’s ability
to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
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.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent financial statements
Materiality
£9.5 million (2016: £7.0 million)
£9.15 million (2016: £3.5 million)
Basis for
determining
materiality
We determined materiality to be 2% of net assets
We determined materiality to be 2% of net assets
(2016: 1.5% of net assets).
(2016: 1.5% of net assets).
Rationale for
the benchmark
applied
We used net assets as benchmark when determining
We used net assets as benchmark when determining
materiality as it is considered to be the most critical
materiality as it is considered to be the most critical
financial performance measure for the Group.
financial performance measure for the Company as a
holding company.
We applied a lower threshold of £1.4 million (2016:
£1.2 million) for testing of all balances impacting
Adjusted Profit (as defined in Note 1 to the Group
financial statements), which is less than 5% of
Adjusted Profit (2016: less than 5% of Adjusted
Profit).
We applied a lower threshold of £1.4 million (2016:
£1.2 million) for testing of all balances impacting
Adjusted Profit on the basis that it is a key metric
used by management, is the basis of the discussion
of the financial performance in the strategic report
and is a metric used by analysts.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £280,000 (2016:
£140,000), 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.
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 and component levels.
Our group audit scope focused primarily on the audit work on the major lines of business. These major lines of business are (cid:58)holly-
owned assets, Other (cid:56)(cid:46) Shopping Centres, Sno(cid:93)one and Group(cid:18)Central. These are included within individual IFRS (cid:27) segments as
disclosed in note 2 to the Group financial statements. Other major lines of business for scoping purposes include the (cid:46)ingfisher
Limited Partnership, incorporated into the Other Shopping Centre segment and Capital (cid:9) Regional Property (cid:48)anagement Limited,
which is incorporated into the Group / Central segment in note 2 to the Group financial statements.
All of the above were subject to a full scope audit with the exception of the Kingfisher Limited Partnership which was subject to
specific audit procedures around significant audit risks and key balances including investment property and loans payable. This is
consistent with the prior year.
The businesses subject to a full scope audit or specific audit procedures account for 95% (2016: 95%) of the Group’s net assets,
100% (2016: 100%) of the Group’s revenue and 99% (2016: 99%) of the Group’s Adjusted Profit. All investment properties have
been included within the scope of our work. They were also selected to provide an appropriate basis for undertaking audit work to
address the risks of material misstatement identified above. All components are audited directly by the Group audit team. Our audit
work at each component was executed at levels of materiality applicable to each individual entity which were between 2% and 90%
(2016: 2% and 90%) of 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 full scope audit or specific audit procedures.
GOVERNANCE
71
Other information
The Directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our Auditor’s
report thereon.
We have nothing to report in
respect of these matters.
Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material
misstatements of the other information include where we conclude that:
•
•
Fair, balanced and understandable – the statement given by the Directors that they consider the
annual report and financial statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess the Group’s position and
performance, business model and strategy, is materially inconsistent with our knowledge
obtained in the audit; or
Audit committee reporting – the section describing the work of the audit committee does not
appropriately address matters communicated by us to the audit committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the
Directors’ statement required under the Listing Rules relating to the Company’s compliance with
the UK Corporate Governance Code containing provisions specified for review by the Auditor
in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant
provision of the UK Corporate Governance Code.
Responsibilities of Directors
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, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent Company’s ability
to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
capreg.com
Stock Code: CAL
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Following the recommendation of the audit committee, we were appointed by those charged with governance on 19 January 1998
to audit the financial statements for the year ending 31 December 1998 and subsequent financial periods. The period of total
uninterrupted engagement including previous renewals and reappointments of the firm is 20 years, covering the years ending
31 December 1998 to 31 December 2017.
Other matters
Auditor tenure
(UK).
Georgina Robb FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
5 April 2018
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
72
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an Auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s report.
Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are re(cid:84)uired to provide in accordance with ISAs
Use of our report
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 re(cid:84)uired 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.
Report on other legal and regulatory requirements
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
•
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; and
•
the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the strategic report or the Directors’ report.
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 in respect of
these matters.
Stock Code: CAL
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GOVERNANCE
73
Other matters
Auditor tenure
Following the recommendation of the audit committee, we were appointed by those charged with governance on 19 January 1998
to audit the financial statements for the year ending 31 December 1998 and subsequent financial periods. The period of total
uninterrupted engagement including previous renewals and reappointments of the firm is 20 years, covering the years ending
31 December 1998 to 31 December 2017.
Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are re(cid:84)uired to provide in accordance with ISAs
(UK).
Georgina Robb FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
5 April 2018
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an Auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s report.
statements.
Use of our report
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 re(cid:84)uired 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.
Report on other legal and regulatory requirements
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
•
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; and
•
the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the strategic report or the Directors’ report.
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
these matters.
is not in agreement with the accounting records and returns.
We have nothing to
report in respect of
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
74
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR TO 30 DECEMBER 2017
CONSOLIDATED BALANCE SHEET
AT 30 DECEMBER 2017
Revenue
Cost of sales
Gross profit
Administrative costs
Share of (loss)/profit in associates and joint ventures
Loss on revaluation of investment properties
Other gains and losses
Profit on ordinary activities before financing
Finance income
Finance costs
Profit/(loss) before tax
Tax credit
Profit/(loss) for the year
All results derive from continuing operations.
Basic earnings per share
Diluted earnings per share
EPRA basic earnings per share
EPRA diluted earnings per share
Notes
3
4
14a
10a
6
5
5
6
8a
2a
9a
9a
9a
9a
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR TO 30 DECEMBER 2017
Notes
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
Gain on a hedge of a net investment taken to equity
Total items that may be reclassified subsequently to profit or loss
Total comprehensive income for the year
2017
£m
89.2
(33.5)
55.7
(10.2)
(2.0)
(3.8)
0.3
40.0
1.2
(18.8)
22.4
–
22.4
3.2p
3.1p
3.9p
3.9p
2017
£m
22.4
–
–
–
22.4
2016
£m
87.2
(32.5)
54.7
(10.9)
0.3
(14.2)
(1.8)
28.1
0.4
(33.0)
(4.5)
0.1
(4.4)
(0.6)p
(0.6)p
3.7p
3.7p
2016
£m
(4.4)
–
–
–
(4.4)
There are no items in other comprehensive income that may not be reclassified to income statement.
Profit for the year and total comprehensive income is all attributable to equity holders of the parent.
The EPRA measures used throughout this report are industry best practice performance measures established by the European
Public Real Estate Association. They are defined in the Glossary to the Financial Statements. EPRA Earnings and EPRA EPS are shown
in Note 9 to the Financial Statements. EPRA net assets and EPRA triple net assets are shown in Note 23 to the Financial Statements.
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on 5 April 2018
Stock Code: CAL
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Liabilities directly associated with assets held for sale
Non-current assets
Investment properties
Plant and equipment
Fixed asset investments
Receivables
Investment in associates
Total non-current assets
Current assets
Receivables
Cash and cash equivalents
Assets classified as held for sale
Total current assets
Total assets
Current liabilities
Bank loans
Trade and other payables
Total current liabilities
Net current assets/(liabilities)
Non-current liabilities
Bank loans
Other payables
Obligations under finance leases
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Capital redemption reserve
Own shares reserve
Retained earnings
Equity shareholders’ funds
Basic net assets per share
EPRA triple net assets per share
EPRA net assets per share
by:
Charles Staveley
Group Finance Director
Notes
10
11
13
14b
13
15
14c
2b
17a
16
14c
17a
16
25
2b
19
21
23
23
23
2017
£m
930.6
1.8
2.1
14.2
7.4
956.1
21.6
30.2
–
51.8
1,007.9
–
–
(39.0)
(39.0)
12.8
(422.2)
(4.0)
(61.3)
(487.5)
(526.5)
481.4
7.2
163.3
60.3
4.4
(0.1)
246.3
481.4
£0.67
£0.66
£0.67
2016
£m
838.5
0.9
1.9
14.3
13.9
869.5
13.4
49.1
13.9
76.4
945.9
(334.6)
(41.3)
(0.4)
(376.3)
(299.9)
(26.2)
(4.4)
(61.4)
(92.0)
(468.3)
477.6
7.0
158.2
60.3
4.4
(0.4)
248.1
477.6
£0.68
£0.67
£0.68
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR TO 30 DECEMBER 2017
CONSOLIDATED BALANCE SHEET
AT 30 DECEMBER 2017
75
FINANCIALS
Revenue
Cost of sales
Gross profit
Administrative costs
Share of (loss)/profit in associates and joint ventures
Loss on revaluation of investment properties
Other gains and losses
Profit on ordinary activities before financing
Finance income
Finance costs
Profit/(loss) before tax
Tax credit
Profit/(loss) for the year
All results derive from continuing operations.
Basic earnings per share
Diluted earnings per share
EPRA basic earnings per share
EPRA diluted earnings per share
Notes
14a
10a
3
4
6
5
5
6
8a
2a
9a
9a
9a
9a
Notes
2017
£m
89.2
(33.5)
55.7
(10.2)
(2.0)
(3.8)
0.3
40.0
1.2
(18.8)
22.4
–
22.4
3.2p
3.1p
3.9p
3.9p
2017
£m
22.4
–
–
–
2016
£m
87.2
(32.5)
54.7
(10.9)
0.3
(14.2)
(1.8)
28.1
0.4
(33.0)
(4.5)
0.1
(4.4)
(0.6)p
(0.6)p
3.7p
3.7p
2016
£m
(4.4)
–
–
–
Non-current assets
Investment properties
Plant and equipment
Fixed asset investments
Receivables
Investment in associates
Total non-current assets
Current assets
Receivables
Cash and cash equivalents
Assets classified as held for sale
Total current assets
Total assets
Current liabilities
Bank loans
Trade and other payables
Liabilities directly associated with assets held for sale
Total current liabilities
Net current assets/(liabilities)
Non-current liabilities
Bank loans
Other payables
Obligations under finance leases
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Capital redemption reserve
Own shares reserve
Retained earnings
Equity shareholders’ funds
Basic net assets per share
EPRA triple net assets per share
EPRA net assets per share
Notes
10
11
13
14b
13
15
14c
2b
17a
16
14c
17a
16
25
2b
19
21
23
23
23
2017
£m
930.6
1.8
2.1
14.2
7.4
956.1
21.6
30.2
–
51.8
1,007.9
–
(39.0)
–
(39.0)
12.8
(422.2)
(4.0)
(61.3)
(487.5)
(526.5)
481.4
7.2
163.3
60.3
4.4
(0.1)
246.3
481.4
£0.67
£0.66
£0.67
2016
£m
838.5
0.9
1.9
14.3
13.9
869.5
13.4
49.1
13.9
76.4
945.9
(334.6)
(41.3)
(0.4)
(376.3)
(299.9)
(26.2)
(4.4)
(61.4)
(92.0)
(468.3)
477.6
7.0
158.2
60.3
4.4
(0.4)
248.1
477.6
£0.68
£0.67
£0.68
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on 5 April 2018
by:
Charles Staveley
Group Finance Director
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR TO 30 DECEMBER 2017
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
Gain on a hedge of a net investment taken to equity
Total items that may be reclassified subsequently to profit or loss
Total comprehensive income for the year
There are no items in other comprehensive income that may not be reclassified to income statement.
Profit for the year and total comprehensive income is all attributable to equity holders of the parent.
The EPRA measures used throughout this report are industry best practice performance measures established by the European
Public Real Estate Association. They are defined in the Glossary to the Financial Statements. EPRA Earnings and EPRA EPS are shown
in Note 9 to the Financial Statements. EPRA net assets and EPRA triple net assets are shown in Note 23 to the Financial Statements.
22.4
(4.4)
capreg.com
Stock Code: CAL
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Capital & Regional AR2017 Financials.indd 75
10/04/2018 16:05:59
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
76
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR TO 30 DECEMBER 2017
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR TO 30 DECEMBER 2017
Distributions received from fixed asset investments including German B-note
Operating activities
Net cash from operations
Distributions received from associates
Interest paid
Interest received
Cash flows from operating activities
Investing activities
Acquisition of The Exchange, Ilford
Disposal of The Mall, Camberley
Disposal of Buttermarket, Ipswich
Other disposals
Acquisitions in Hemel Hempstead
Purchase of plant and equipment
Capital expenditure on investment properties
Cash flows from investing activities
Financing activities
Dividends paid, net of Scrip
Bank loans drawn down
Bank loans repaid
Loan arrangement costs
Cash flows from financing activities
Net (decrease)/increase 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
Notes
22
14b
10a
14c
15
2017
£m
43.0
4.5
0.7
(14.6)
0.1
33.7
(79.0)
9.8
–
–
–
(0.6)
(16.9)
(86.7)
(19.1)
401.5
(334.6)
(13.7)
34.1
(18.9)
49.1
30.2
2016
£m
41.1
0.5
4.2
(14.6)
0.1
31.3
85.7
–
–
0.7
(56.6)
(0.5)
(20.6)
8.7
(21.7)
26.9
(45.4)
(0.6)
(40.8)
(0.8)
49.9
49.1
Share
capital
£m
Share
premium1
£m
Merger
reserve2
Capital
redemption
reserve1
Own
shares
reserve3
Retained
earnings4
157.2
–
–
–
–
–
1.0
–
£m
60.3
–
–
–
–
–
–
–
158.2
–
60.3
–
–
–
–
–
5.1
–
–
–
–
–
–
–
£m
4.4
–
–
–
–
–
–
–
4.4
–
–
–
–
–
–
–
163.3
60.3
4.4
Total
equity
£m
503.2
(4.4)
–
£m
274.9
(4.4)
–
(4.4)
(4.4)
0.5
(21.7)
(1.0)
(0.2)
248.1
22.4
0.5
(21.7)
–
–
477.6
22.4
–
–
22.4
22.4
0.9
(19.5)
(5.3)
(0.3)
246.3
0.9
(19.5)
–
–
481.4
£m
(0.6)
–
–
–
–
–
–
0.2
(0.4)
–
–
–
–
–
–
0.3
(0.1)
Balance at 30 December 2015
Loss for the year
Other comprehensive loss for the year
Total comprehensive income
for the year
Credit to equity for equity-settled share-
based payments (Note 20)
Dividends paid (Note 29), net of Scrip
Shares issued, net of costs (Note 19)
Other movements
Balance at 30 December 2016
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 (Note 20)
Dividends paid (Note 29), net of Scrip
Shares issued, net of costs (Note 19)
Other movements
Balance at 30 December 2017
Notes:
7.0
–
–
–
–
–
–
–
7.0
–
–
–
–
–
0.2
–
7.2
1.
2.
These reserves are not distributable.
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.
3. Own shares relate to shares purchased out of distributable profits and therefore reduce reserves available for distribution.
4.
The Company has determined what is realised and unrealised in accordance with the guidance provided by ICAEW TECH 2/17 and the requirements of
UK law. In accordance with UK Companies Act 2006 s831(2), a public company may make a distribution only if, after giving effect to such distribution, the
amount of its net assets is not less than the aggregate of its called up share capital and non-distributable reserves as shown in the relevant accounts.
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Financials.indd 76
10/04/2018 16:06:00
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR TO 30 DECEMBER 2017
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR TO 30 DECEMBER 2017
77
FINANCIALS
Share
capital
£m
7.0
Share
Merger
redemption
premium1
reserve2
reserve1
reserve3
Retained
earnings4
Capital
£m
157.2
£m
60.3
£m
4.4
Balance at 30 December 2016
7.0
158.2
60.3
4.4
Balance at 30 December 2015
Loss for the year
Other comprehensive loss for the year
Total comprehensive income
for the year
Credit to equity for equity-settled share-
based payments (Note 20)
Dividends paid (Note 29), net of Scrip
Shares issued, net of costs (Note 19)
Other movements
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 (Note 20)
Dividends paid (Note 29), net of Scrip
Shares issued, net of costs (Note 19)
Other movements
Notes:
1.
2.
These reserves are not distributable.
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
7.2
–
–
–
–
–
–
–
–
–
–
–
–
1.0
5.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 30 December 2017
163.3
60.3
4.4
Own
shares
£m
(0.6)
–
–
–
–
–
–
–
–
–
–
–
–
0.2
(0.4)
0.3
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
equity
£m
503.2
(4.4)
–
(4.4)
0.5
(21.7)
477.6
22.4
–
–
–
–
–
0.9
(19.5)
481.4
£m
274.9
(4.4)
–
(4.4)
0.5
(21.7)
(1.0)
(0.2)
248.1
22.4
–
0.9
(19.5)
(5.3)
(0.3)
246.3
22.4
22.4
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.
3. Own shares relate to shares purchased out of distributable profits and therefore reduce reserves available for distribution.
4.
The Company has determined what is realised and unrealised in accordance with the guidance provided by ICAEW TECH 2/17 and the requirements of
UK law. In accordance with UK Companies Act 2006 s831(2), a public company may make a distribution only if, after giving effect to such distribution, the
amount of its net assets is not less than the aggregate of its called up share capital and non-distributable reserves as shown in the relevant accounts.
Operating activities
Net cash from operations
Distributions received from associates
Distributions received from fixed asset investments including German B-note
Interest paid
Interest received
Cash flows from operating activities
Investing activities
Acquisition of The Exchange, Ilford
Disposal of The Mall, Camberley
Disposal of Buttermarket, Ipswich
Other disposals
Acquisitions in Hemel Hempstead
Purchase of plant and equipment
Capital expenditure on investment properties
Cash flows from investing activities
Financing activities
Dividends paid, net of Scrip
Bank loans drawn down
Bank loans repaid
Loan arrangement costs
Cash flows from financing activities
Net (decrease)/increase 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
Notes
22
14b
10a
14c
15
2017
£m
43.0
4.5
0.7
(14.6)
0.1
33.7
(79.0)
–
9.8
–
–
(0.6)
(16.9)
(86.7)
(19.1)
401.5
(334.6)
(13.7)
34.1
(18.9)
49.1
30.2
2016
£m
41.1
0.5
4.2
(14.6)
0.1
31.3
–
85.7
–
0.7
(56.6)
(0.5)
(20.6)
8.7
(21.7)
26.9
(45.4)
(0.6)
(40.8)
(0.8)
49.9
49.1
capreg.com
Stock Code: CAL
capreg.com
Capital & Regional AR2017 Financials.indd 77
10/04/2018 16:06:00
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
78
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 DECEMBER 2017
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 became 22 Chapter Street, London, SW1P 4NP on 5 February 2018 but was 52 Grosvenor Gardens, London,
SW1W 0AU as at 30 December 2017. 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
29. They are prepared on the historical cost basis except for the revaluation of certain properties and financial instruments that are
measured at revalued amounts or fair values at the end of the reporting year, as explained in the accounting policies below. 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.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability
if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair
value for measurement and/or disclosure purposes in these financial statements is determined on such basis, except for share-
based payments that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that
have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to
which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in
its entirety, which are described as follows:
April 2015).
•
•
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are 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 inputs are unobservable inputs for the asset or liability.
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.
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
The accounting policies used in these financial statements are consistent with those applied in the last annual financial statements,
as amended where relevant to reflect the adoption of new standards, amendments and interpretations which became effective in
the year. These amendments have not had an impact on the financial statements.
to varying extents.
Basis of consolidation
A number of new standards and amendments to standards have been issued but are not yet effective for the Group. The most
significant of these are set out below:
its activities.
•
•
•
IFRS 15 Revenue from Contracts with Customers – does not apply to gross rental income, but does apply to service charge
income, other fees and trading property disposals and is effective for the Group’s year ending 30 December 2019. The Group
does not expect adoption of IFRS 15 to have a material impact on the measurement of revenue recognition, but additional
disclosures will be required with regards to the above sources of income.
IFRS 9 Financial Instruments – will impact both the measurement and disclosures of financial instruments and is effective for the
Group’s year ending 30 December 2019. The Group does not expect adoption to have a material impact on the measurement of
Financial Instruments, but additional disclosures may be required.
IFRS 16 Leases – will result in the Group recognising on balance sheet assets it leases along with a corresponding liability and is
effective for the Group’s year ending 30 December 2019. The primary lease contracts that this will impact are the lease on the
Group’s head offices and the leases of the Snozone business on its Basingstoke, Castleford and Milton Keynes sites. The total of
the future minimum lease payments under these leases is disclosed in Note 25 to the financial statements.
In addition, IFRS 16 could have an indirect impact on the Group’s business if it leads to a change in occupier behaviour. Examples
of this would be if its adoption results in tenants or potential tenants typically seeking shorter lease terms and/or more prevalent
use of turnover-related, as opposed to fixed, rents.
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Financials.indd 78
10/04/2018 16:06:00
1 Significant Accounting Policies continued
Going concern
provided on page 30.
The financial statements have been prepared on a going concern basis. Details on going concern and the viability statement are
Critical accounting judgements and key sources of estimation uncertainty
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 accounting judgements and/or key sources of estimation uncertainty 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:
Property valuation
The valuation of the Group’s property portfolio is inherently subjective due to, among other factors, the individual nature of each
property, its location and the expected future rental revenues from that particular property. As a result, the valuations the Group
places on its property portfolio are subject to a degree of uncertainty and are made on the basis of assumptions which may not
prove to be accurate, particularly in periods of volatility or low transaction flow in the property market.
The investment property valuation contains a number of assumptions upon which the Group’s valuer has based its valuation of the
Group’s properties as at 30 December 2017. The assumptions on which the property valuation reports have been based include,
but are not limited to, matters such as the tenure and tenancy details for the properties, ground conditions at the properties, the
structural condition of the properties, prevailing market yields and comparable market transactions. These assumptions are market
standard and accord with the Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards UK 2014 (revised
If the assumptions upon which the external valuer has based its valuations prove to be inaccurate, this may have an impact on the
value of the Group’s investment properties, which could in turn have an effect on the Group’s financial position and results. Note 10c
provides sensitivity analysis estimating the impact that changes in the estimated rental values or equivalent yields would have on
the Group’s property valuations.
Derivative financial instruments
Reliance upon the work undertaken at 30 December 2017 by independent third party experts in assessing the fair values of the
Group’s derivative financial instruments, which are disclosed in Notes 13 and 18e. Note 18b provides figures showing the Group’s
sensitivity to a 100bps increase or decrease in interest rate expectations.
Carrying value of investments and intercompany debtor balances
Management perform an annual review of intercompany investments and receivables to determine the values to be maintained
in the Plc Company only and individual subsidiary balance sheets. The carrying values are in part supported by forecast future
cashflows and an assessment of long-term growth rates and the Group’s discount rate all of which require Management judgment
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
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 year for all material 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.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 DECEMBER 2017
Capital & Regional plc is a company domiciled and incorporated in the United Kingdom under the Companies Act 2006. The address
of the registered office became 22 Chapter Street, London, SW1P 4NP on 5 February 2018 but was 52 Grosvenor Gardens, London,
SW1W 0AU as at 30 December 2017. The nature of the Group’s operations and its principal activities are disclosed in Note 2a and in
1 Significant Accounting Policies
General information
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
29. They are prepared on the historical cost basis except for the revaluation of certain properties and financial instruments that are
measured at revalued amounts or fair values at the end of the reporting year, as explained in the accounting policies below. 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.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or liability, the Group takes into account the characteristics of the asset or liability
if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair
value for measurement and/or disclosure purposes in these financial statements is determined on such basis, except for share-
based payments that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that
have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to
which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in
its entirety, which are described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are 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 inputs are unobservable inputs for the asset or liability.
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.
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
The accounting policies used in these financial statements are consistent with those applied in the last annual financial statements,
as amended where relevant to reflect the adoption of new standards, amendments and interpretations which became effective in
the year. These amendments have not had an impact on the financial statements.
A number of new standards and amendments to standards have been issued but are not yet effective for the Group. The most
significant of these are set out below:
IFRS 9 Financial Instruments – will impact both the measurement and disclosures of financial instruments and is effective for the
Group’s year ending 30 December 2019. The Group does not expect adoption to have a material impact on the measurement of
Financial Instruments, but additional disclosures may be required.
IFRS 16 Leases – will result in the Group recognising on balance sheet assets it leases along with a corresponding liability and is
effective for the Group’s year ending 30 December 2019. The primary lease contracts that this will impact are the lease on the
Group’s head offices and the leases of the Snozone business on its Basingstoke, Castleford and Milton Keynes sites. The total of
the future minimum lease payments under these leases is disclosed in Note 25 to the financial statements.
In addition, IFRS 16 could have an indirect impact on the Group’s business if it leads to a change in occupier behaviour. Examples
of this would be if its adoption results in tenants or potential tenants typically seeking shorter lease terms and/or more prevalent
use of turnover-related, as opposed to fixed, rents.
•
•
•
•
•
FINANCIALS
79
1 Significant Accounting Policies continued
Going concern
The financial statements have been prepared on a going concern basis. Details on going concern and the viability statement are
provided on page 30.
Critical accounting judgements and key sources of estimation uncertainty
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 accounting judgements and/or key sources of estimation uncertainty 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:
Property valuation
The valuation of the Group’s property portfolio is inherently subjective due to, among other factors, the individual nature of each
property, its location and the expected future rental revenues from that particular property. As a result, the valuations the Group
places on its property portfolio are subject to a degree of uncertainty and are made on the basis of assumptions which may not
prove to be accurate, particularly in periods of volatility or low transaction flow in the property market.
The investment property valuation contains a number of assumptions upon which the Group’s valuer has based its valuation of the
Group’s properties as at 30 December 2017. The assumptions on which the property valuation reports have been based include,
but are not limited to, matters such as the tenure and tenancy details for the properties, ground conditions at the properties, the
structural condition of the properties, prevailing market yields and comparable market transactions. These assumptions are market
standard and accord with the Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards UK 2014 (revised
April 2015).
If the assumptions upon which the external valuer has based its valuations prove to be inaccurate, this may have an impact on the
value of the Group’s investment properties, which could in turn have an effect on the Group’s financial position and results. Note 10c
provides sensitivity analysis estimating the impact that changes in the estimated rental values or equivalent yields would have on
the Group’s property valuations.
Derivative financial instruments
Reliance upon the work undertaken at 30 December 2017 by independent third party experts in assessing the fair values of the
Group’s derivative financial instruments, which are disclosed in Notes 13 and 18e. Note 18b provides figures showing the Group’s
sensitivity to a 100bps increase or decrease in interest rate expectations.
Carrying value of investments and intercompany debtor balances
Management perform an annual review of intercompany investments and receivables to determine the values to be maintained
in the Plc Company only and individual subsidiary balance sheets. The carrying values are in part supported by forecast future
cashflows and an assessment of long-term growth rates and the Group’s discount rate all of which require Management judgment
to varying extents.
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.
•
IFRS 15 Revenue from Contracts with Customers – does not apply to gross rental income, but does apply to service charge
income, other fees and trading property disposals and is effective for the Group’s year ending 30 December 2019. The Group
does not expect adoption of IFRS 15 to have a material impact on the measurement of revenue recognition, but additional
disclosures will be required with regards to the above sources of income.
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 year for all material 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.
capreg.com
Stock Code: CAL
capreg.com
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
80
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1 Significant Accounting Policies continued
Business combinations
1 Significant Accounting Policies continued
Net investment in foreign operations
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 year 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. The Group considered that its assets held for sale at
30 December 2016 fell within “Level 2”, as defined in Note 1.
Subsidiaries, joint ventures and associates
The consolidated financial statements incorporate the financial statements of Capital & Regional plc and all subsidiaries and entities
controlled by Capital & Regional plc. Control is assumed where the Group has the power and the ability to affect the financial and
operating policies of an investee entity so as to gain benefits from its activities.
The results of subsidiaries, joint ventures or associates acquired or disposed of during the year are included from the effective date
of acquisition or up to the effective date of disposal. Accounting practices of subsidiaries, joint ventures or associates which differ
from Group accounting policies are adjusted on consolidation.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation. The Group has assessed the nature of
its joint arrangements under IFRS 11 “Joint arrangements” and determined them to be joint ventures. This assessment required the
exercise of judgement as set out in Note 14c.
Joint ventures and associates are accounted for under the equity method, whereby the consolidated balance sheet incorporates
the Group’s share (investor’s share) of the net assets of its joint ventures and associates. The consolidated income statement
incorporates the Group’s share of joint venture and associate profits after tax, upon elimination of upstream and downstream
transactions. Their profits include revaluation movements on investment properties. Interest income, management fees and
performance fees are proportionately eliminated.
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 year. 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 = €1.127 (2016: £1 = €1.168). The principal exchange
rate used for the income statement is the average rate for the year: £1 = €1.141 (2016: £1 = €1.224).
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
Plant and equipment is stated at cost, 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:
operation.
Property, plant and equipment
•
•
Leasehold improvements – over the term of the lease
Fixtures and fittings – over three to five years
• Motor vehicles – 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 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.
Leasehold properties
Capital expenditure
Property transactions
Leases
The Group as lessor
Refurbishment expenditure in respect of major works is capitalised. Renovation and refurbishment expenditure of a revenue nature
is expensed as incurred. Our business model for developments is to use a combination of in-house staff and external advisers. The
cost of external advisers is capitalised to the cost of developments. The cost of staff working on developments is capitalised subject
to meeting certain criteria related to the degree of time spent on and the nature of specific projects.
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.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a
straight-line basis over the lease term. Incentives and costs associated with entering into tenant leases are amortised on a straight-
line basis over the term of the lease.
The Group as lessee
a finance lease obligation.
Assets held under finance leases are recognised as assets at their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they
are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on
borrowing costs. Contingent rentals are recognised as expenses in the years in which they are incurred.
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Financials.indd 80
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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. The Group considered that its assets held for sale at
30 December 2016 fell within “Level 2”, as defined in Note 1.
Subsidiaries, joint ventures and associates
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
FINANCIALS
81
1 Significant Accounting Policies continued
Business combinations
1 Significant Accounting Policies continued
Net investment in foreign operations
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.
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.
If the initial accounting for a business combination is incomplete by the end of the reporting year in which the combination occurs,
Property, plant and equipment
Plant and equipment is stated at cost, net of depreciation and any provision for impairment. Depreciation is provided on all tangible
fixed assets, other than investment properties and land, on a straight-line basis over their expected useful lives:
•
•
Leasehold improvements – over the term of the lease
Fixtures and fittings – over three to five years
• Motor vehicles – over four years
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.
The consolidated financial statements incorporate the financial statements of Capital & Regional plc and all subsidiaries and entities
controlled by Capital & Regional plc. Control is assumed where the Group has the power and the ability to affect the financial and
Leasehold properties
operating policies of an investee entity so as to gain benefits from its activities.
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.
The results of subsidiaries, joint ventures or associates acquired or disposed of during the year are included from the effective date
of acquisition or up to the effective date of disposal. Accounting practices of subsidiaries, joint ventures or associates which differ
Capital expenditure
from Group accounting policies are adjusted on consolidation.
All intra-Group transactions, balances, income and expenses are eliminated on consolidation. The Group has assessed the nature of
its joint arrangements under IFRS 11 “Joint arrangements” and determined them to be joint ventures. This assessment required the
exercise of judgement as set out in Note 14c.
Joint ventures and associates are accounted for under the equity method, whereby the consolidated balance sheet incorporates
the Group’s share (investor’s share) of the net assets of its joint ventures and associates. The consolidated income statement
incorporates the Group’s share of joint venture and associate profits after tax, upon elimination of upstream and downstream
transactions. Their profits include revaluation movements on investment properties. Interest income, management fees and
performance fees are proportionately eliminated.
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 year. 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 = €1.127 (2016: £1 = €1.168). The principal exchange
rate used for the income statement is the average rate for the year: £1 = €1.141 (2016: £1 = €1.224).
Refurbishment expenditure in respect of major works is capitalised. Renovation and refurbishment expenditure of a revenue nature
is expensed as incurred. Our business model for developments is to use a combination of in-house staff and external advisers. The
cost of external advisers is capitalised to the cost of developments. The cost of staff working on developments is capitalised subject
to meeting certain criteria related to the degree of time spent on and the nature of specific projects.
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.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a
straight-line basis over the lease term. Incentives and costs associated with entering into tenant leases are amortised on a straight-
line basis over the term of the lease.
The Group as lessee
Assets held under finance leases are recognised as assets at their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as
a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they
are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on
borrowing costs. Contingent rentals are recognised as expenses in the years in which they are incurred.
capreg.com
Stock Code: CAL
capreg.com
Capital & Regional AR2017 Financials.indd 81
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
82
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1 Significant Accounting Policies continued
Head leases
1 Significant Accounting Policies continued
Derivative financial instruments
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.
Fixed asset investments
Fixed asset investments are stated at cost, together with subsequent capital contributions, less provisions for any impairment
in value.
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.
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.
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
Taxation
Trade payables are carried at fair value, with any gains or losses arising on remeasurement recognised in the income statement.
Income tax on the profit for the year comprises current and deferred tax. Current tax is the tax payable on the taxable income for
the year and any adjustment in respect of previous years. Deferred tax is provided in full using the balance sheet liability method on
timing differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the reporting date
and are expected to apply when the asset is realised or the liability is settled.
No provision is made for timing differences (i) arising on the initial recognition of assets or liabilities, other than on a business
combination, that affect neither accounting nor taxable profit and (ii) relating to investments in subsidiaries to the extent that they
will not reverse in the foreseeable future.
Pension liabilities, all of which relate to defined contribution schemes, are charged to the income statement as incurred.
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 and 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
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
Employee benefits
Pension costs
Share-based payments
expensed immediately.
Own shares
Share Ownership Trust.
Revenue
The Group recognises revenue on an accruals basis, when the amount of revenue can be reliably measured and it is probable that
future economic benefits will flow to the Group.
Gross rental income – Gross rental income is rental income adjusted for tenant incentives, recognised on a straight-line basis over
the term of the underlying lease. Contingent rents, being lease payments that are not fixed at the inception of a lease, for example
turnover rents, are recorded as income in the periods in which they are earned.
Ancillary income – Ancillary income comprises rent and other income from short term tenancies of mobile units, car park income
and other sundry income and is recognised over the period of the lettings and contracts.
Service charge – Service charge income represents recharges of the running costs of the shopping centres made to tenants.
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Financials.indd 82
10/04/2018 16:06:00
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
sheet as a finance lease obligation.
Fixed asset investments
in value.
Financial instruments
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.
Loans and receivables
recognition of interest would be immaterial.
Trade 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
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 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.
Cash and cash equivalents
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.
1 Significant Accounting Policies continued
Head leases
1 Significant Accounting Policies continued
Derivative financial instruments
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
Fixed asset investments are stated at cost, together with subsequent capital contributions, less provisions for any impairment
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.
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes party to the
Trade payables
FINANCIALS
83
Trade payables are carried at fair value, with any gains or losses arising on remeasurement recognised in the income statement.
Taxation
Income tax on the profit for the year comprises current and deferred tax. Current tax is the tax payable on the taxable income for
the year and any adjustment in respect of previous years. Deferred tax is provided in full using the balance sheet liability method on
timing differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the reporting date
and are expected to apply when the asset is realised or the liability is settled.
No provision is made for timing differences (i) arising on the initial recognition of assets or liabilities, other than on a business
combination, that affect neither accounting nor taxable profit and (ii) relating to investments in subsidiaries to the extent that they
will not reverse in the foreseeable future.
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 and 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.
Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial liabilities”.
Revenue
The Group recognises revenue on an accruals basis, when the amount of revenue can be reliably measured and it is probable that
future economic benefits will flow to the Group.
Gross rental income – Gross rental income is rental income adjusted for tenant incentives, recognised on a straight-line basis over
the term of the underlying lease. Contingent rents, being lease payments that are not fixed at the inception of a lease, for example
turnover rents, are recorded as income in the periods in which they are earned.
Ancillary income – Ancillary income comprises rent and other income from short term tenancies of mobile units, car park income
and other sundry income and is recognised over the period of the lettings and contracts.
Service charge – Service charge income represents recharges of the running costs of the shopping centres made to tenants.
capreg.com
Stock Code: CAL
capreg.com
Capital & Regional AR2017 Financials.indd 83
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2a Operating segments
Year to 30 December 2017
Rental income from external sources
Notes
2b
Snozone income/Management fees2
2b
Variable overhead (excluding non-cash items)
Property and void costs
Net rental income
Net interest expense
Management expenses
Investment income
Depreciation
Tax charge
Adjusted Profit
Revaluation of properties
Income from Euro B-Note3
Gain on financial instruments
Refinancing costs
Share-based payments
Other items
Profit/(loss)
Total assets
Total liabilities
Net assets
1.
2.
3.
UK Shopping Centres
Wholly-
owned
assets
Other UK
Shopping
Centres1
Snozone
£m
Group
Central
£m
£m
63.9
(12.3)
51.6
(18.4)
–
–
–
–
–
–
–
–
–
–
33.2
(3.8)
0.7
30.1
984.1
(518.7)
465.4
£m
2.3
(0.7)
1.6
(0.9)
–
–
–
–
–
–
–
(0.1)
0.6
(2.5)
–
0.4
(0.5)
(2.0)
30.9
(23.5)
7.4
10.4
(8.8)
(0.1)
1.5
–
–
–
–
–
–
–
–
–
–
–
–
–
1.5
4.4
(2.2)
2.2
2b
2b
Total
£m
66.2
(13.0)
53.2
(19.6)
12.6
(15.6)
0.4
(0.2)
(1.6)
(0.1)
29.1
(6.3)
0.3
1.1
(0.5)
(0.9)
(0.4)
22.4
1,031.4
(550.0)
481.4
–
–
–
–
–
–
–
(0.3)
2.2
(6.8)
0.4
(0.1)
(1.6)
(6.2)
0.3
(0.9)
(0.4)
(7.2)
12.0
(5.6)
6.4
Comprises Kingfisher Redditch. For further information see Note 14.
Asset management fees of £3.6 million charged from the Group’s Capital & Regional Property Management entity to Wholly-owned assets have been
excluded from the table above.
£0.3 million of monies were received in the year through the holding of a share in the German Euro B-Note junior loan instrument which had previously
been fully impaired. The monies were distributed following the sale of properties by the liquidator of the underlying German entities.
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
84
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1 Significant Accounting Policies continued
Management fees – Management fees are recognised, in line with the property management contracts, in the year 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.
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. No performance fees were recognised in the current or prior year.
Provisions for performance fees payable by the underlying subsidiary, 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 28. No performance fees were recognised in the current or prior year.
Snozone income - Revenue arises from the operation of indoor ski operations. Revenue represents the amounts received from
customers (excluding VAT) for admissions tickets, membership, retail, food and beverage sales and sponsorship. Ticket revenue
is recognised at point of entry. Revenue from the sale of memberships is deferred and then recognised over the period that the
membership is valid. Retail and food and beverage sales revenues are recognised at the point of sale. Sponsorship revenue is
recognised over the relevant contract term.
Finance costs
All borrowing costs are recognised under Finance costs in the income statement in the year 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 reportable segments under IFRS 8 are Wholly-owned assets, Other UK Shopping Centres, Snozone and Group/Central.
Wholly-owned assets consists of the shopping centres at Blackburn, Hemel Hempstead, Ilford (from acquisition on 8 March 2017),
Luton, Maidstone, Walthamstow and Wood Green and, in the prior year, Camberley, until its disposal on 11 November 2016. Other
UK Shopping Centres consists of the Group’s interests in Kingfisher Limited Partnership (Redditch) and, in the prior year, until its
reclassification as held for sale on 30 December 2016, Buttermarket Ipswich Limited. Group/Central includes management fee
income, Group overheads incurred by Capital & Regional Property Management, Capital & Regional plc and other subsidiaries and
the interest expense on the Group’s central borrowing facility.
Wholly-owned assets and Other UK Shopping Centres derive their revenue from the rental of investment properties. The Snozone
and Group/Central segments derive their revenue from the operation of indoor ski slopes and the management of property funds
or schemes respectively. The split of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues
from different products and services. Depreciation and charges in respect of share-based payments 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.
Adjusted Profit
Adjusted Profit is the total of Contribution from Wholly-owned assets and the Group’s joint ventures and associates, the profit from
Snozone and property management fees less central costs (including interest, excluding non-cash charges in respect of share-based
payments) after tax. Adjusted Profit excludes revaluation of properties, profit or loss on disposal of properties or investments, gains
or losses on financial instruments and exceptional one-off items. Results from Discontinued Operations are included up until the
point of disposal or reclassification as held for sale. Further detail on the use of Adjusted Profit and other Alternative Performance
Measures is provided within the Financial Review.
A reconciliation of Adjusted Profit to the statutory result is provided in Note 2a and, on a per share basis, in Note 9, where EPRA
earnings figures are also provided.
Stock Code: CAL
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Stock Code: CAL
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1 Significant Accounting Policies continued
2a Operating segments
FINANCIALS
85
Year to 30 December 2017
Rental income from external sources
Property and void costs
Net rental income
Net interest expense
Snozone income/Management fees2
Management expenses
Investment income
Depreciation
Variable overhead (excluding non-cash items)
Tax charge
Adjusted Profit
Revaluation of properties
Income from Euro B-Note3
Gain on financial instruments
Refinancing costs
Share-based payments
Other items
Profit/(loss)
Total assets
Total liabilities
Net assets
UK Shopping Centres
Wholly-
owned
assets
£m
Other UK
Shopping
Centres1
£m
Snozone
£m
Group
Central
£m
63.9
(12.3)
51.6
(18.4)
–
–
–
–
–
–
33.2
(3.8)
–
0.7
–
–
–
30.1
984.1
(518.7)
465.4
2.3
(0.7)
1.6
(0.9)
–
–
–
–
–
(0.1)
0.6
(2.5)
–
0.4
(0.5)
–
–
(2.0)
30.9
(23.5)
7.4
–
–
–
–
10.4
(8.8)
–
(0.1)
–
–
1.5
–
–
–
–
–
–
1.5
4.4
(2.2)
2.2
–
–
–
(0.3)
2.2
(6.8)
0.4
(0.1)
(1.6)
–
(6.2)
–
0.3
–
–
(0.9)
(0.4)
(7.2)
12.0
(5.6)
6.4
Notes
2b
2b
2b
2b
Total
£m
66.2
(13.0)
53.2
(19.6)
12.6
(15.6)
0.4
(0.2)
(1.6)
(0.1)
29.1
(6.3)
0.3
1.1
(0.5)
(0.9)
(0.4)
22.4
1,031.4
(550.0)
481.4
1.
2.
3.
Comprises Kingfisher Redditch. For further information see Note 14.
Asset management fees of £3.6 million charged from the Group’s Capital & Regional Property Management entity to Wholly-owned assets have been
excluded from the table above.
£0.3 million of monies were received in the year through the holding of a share in the German Euro B-Note junior loan instrument which had previously
been fully impaired. The monies were distributed following the sale of properties by the liquidator of the underlying German entities.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Management fees – Management fees are recognised, in line with the property management contracts, in the year 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.
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. No performance fees were recognised in the current or prior year.
Provisions for performance fees payable by the underlying subsidiary, 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 28. No performance fees were recognised in the current or prior year.
Snozone income - Revenue arises from the operation of indoor ski operations. Revenue represents the amounts received from
customers (excluding VAT) for admissions tickets, membership, retail, food and beverage sales and sponsorship. Ticket revenue
is recognised at point of entry. Revenue from the sale of memberships is deferred and then recognised over the period that the
membership is valid. Retail and food and beverage sales revenues are recognised at the point of sale. Sponsorship revenue is
recognised over the relevant contract term.
Finance costs
All borrowing costs are recognised under Finance costs in the income statement in the year 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 reportable segments under IFRS 8 are Wholly-owned assets, Other UK Shopping Centres, Snozone and Group/Central.
Wholly-owned assets consists of the shopping centres at Blackburn, Hemel Hempstead, Ilford (from acquisition on 8 March 2017),
Luton, Maidstone, Walthamstow and Wood Green and, in the prior year, Camberley, until its disposal on 11 November 2016. Other
UK Shopping Centres consists of the Group’s interests in Kingfisher Limited Partnership (Redditch) and, in the prior year, until its
reclassification as held for sale on 30 December 2016, Buttermarket Ipswich Limited. Group/Central includes management fee
income, Group overheads incurred by Capital & Regional Property Management, Capital & Regional plc and other subsidiaries and
the interest expense on the Group’s central borrowing facility.
Wholly-owned assets and Other UK Shopping Centres derive their revenue from the rental of investment properties. The Snozone
and Group/Central segments derive their revenue from the operation of indoor ski slopes and the management of property funds
or schemes respectively. The split of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues
from different products and services. Depreciation and charges in respect of share-based payments 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.
Adjusted Profit
Adjusted Profit is the total of Contribution from Wholly-owned assets and the Group’s joint ventures and associates, the profit from
Snozone and property management fees less central costs (including interest, excluding non-cash charges in respect of share-based
payments) after tax. Adjusted Profit excludes revaluation of properties, profit or loss on disposal of properties or investments, gains
or losses on financial instruments and exceptional one-off items. Results from Discontinued Operations are included up until the
point of disposal or reclassification as held for sale. Further detail on the use of Adjusted Profit and other Alternative Performance
Measures is provided within the Financial Review.
A reconciliation of Adjusted Profit to the statutory result is provided in Note 2a and, on a per share basis, in Note 9, where EPRA
earnings figures are also provided.
capreg.com
Stock Code: CAL
capreg.com
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
86
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2a Operating segments continued
2b Reconciliations of reportable revenue, assets and liabilities
Year to 30 December 2016
Rental income from external sources
Property and void costs
Net rental income
Net interest expense
Snozone income/Management fees2
Management expenses
Investment income
Depreciation
Variable overhead (excluding non-cash items)
Tax (charge)/credit
Adjusted Profit
Revaluation of properties
Deferred tax on revaluation of properties
Loss on disposal3
Income from Euro B-Note4
Loss on financial instruments
Refinancing costs5
Share-based payments
Other items
(Loss)/profit
Total assets
Total liabilities
Net assets
UK Shopping Centres
Wholly-
owned
assets
£m
Other UK
Shopping
Centres1
£m
Snozone
£m
Group
Central
£m
62.0
(11.6)
50.4
(19.0)
–
–
–
–
–
–
31.4
(14.2)
–
(5.9)
–
(2.5)
(11.0)
–
–
(2.2)
885.9
(460.9)
425.0
3.4
(1.2)
2.2
(0.9)
–
–
–
–
–
(0.1)
1.2
1.2
(1.5)
(0.6)
–
–
–
–
–
0.3
32.1
(18.2)
13.96
–
–
–
–
10.2
(8.7)
–
(0.1)
–
–
1.4
–
–
–
–
–
–
–
–
1.4
4.0
(2.1)
1.9
–
–
–
(0.4)
2.4
(7.8)
0.3
–
(1.8)
0.1
(7.2)
–
–
–
3.9
–
–
(0.5)
(0.1)
(3.9)
42.1
(5.3)
36.86
Notes
2b
2b
2b
2b
Total
£m
65.4
(12.8)
52.6
(20.3)
12.6
(16.5)
0.3
(0.1)
(1.8)
–
26.8
(13.0)
(1.5)
(6.5)
3.9
(2.5)
(11.0)
(0.5)
(0.1)
(4.4)
964.1
(486.5)
477.6
Revenue
Rental income from external sources
Service charge income
Management fees
Snozone income
Revenue for reportable segments
Elimination of inter-segment revenue
Rental income earned by associates and joint ventures
Revenue per consolidated income statement
Total assets of reportable segments
Adjustment for associates and joint ventures
Assets
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
1.
2.
3.
4.
5.
Includes Buttermarket Ipswich and Kingfisher Redditch. For further information see Note 14.
Asset management fees of £3.6 million charged from the Group’s Capital & Regional Property Management entity to Wholly-owned assets have been
excluded from the table above.
3 Revenue
Includes £0.6 million impairment of Ipswich trading property recognised on reclassification as held for sale.
£3.9 million of monies were received in the year through the holding of a share in the German Euro B-Note junior loan instrument which had previously
been fully impaired. The monies were distributed following the sale of properties by the liquidator of the underlying German entities.
Refinancing costs consist of those triggered by serving notice on the existing debt facility on five Mall assets on 28 December 2016 (see Note 9 for further
details). They comprise £7.6 million of fixed rate loan redemption costs and the write-off of the £3.4 million of financing costs that were unamortised at 30
December 2016.
Gross rental income
Ancillary income
6. Net assets of the Buttermarket Ipswich joint venture have been included within Group following its reclassification as held for sale on 30 December 2016.
The results for the year were reflected in the Other UK Shopping Centres column.
All revenue in the current and prior years was attributable to activities within the UK.
Year to
Year to
30 December
30 December
Notes
2a
2a
2a
2a
3
2a
Notes
2a
Notes
2a
2b
2a
2b
2017
£m
66.2
14.1
2.2
10.4
92.9
(1.4)
(2.3)
89.2
2017
£m
1,031.4
(23.5)
1,007.9
(550.0)
23.5
(526.5)
481.3
0.1
481.4
2017
£m
51.2
12.7
63.9
14.1
0.8
10.4
89.2
2016
£m
65.4
14.0
2.4
10.2
92.0
(1.4)
(3.4)
87.2
2016
£m
964.1
(18.2)
945.9
(486.5)
18.2
(468.3)
477.5
0.1
477.6
2016
£m
51.0
11.0
62.0
14.0
1.0
10.2
87.2
Year to
Year to
30 December
30 December
Service charge income
External management fees
Snozone income
Revenue per consolidated income statement
External management fees represent revenue earned by the Group’s wholly-owned Capital Regional Property Management Limited
subsidiary.
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Financials.indd 86
10/04/2018 16:06:01
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
UK Shopping Centres
Wholly-
owned
assets
Other UK
Shopping
Centres1
Snozone
£m
Group
Central
£m
Year to 30 December 2016
Rental income from external sources
Notes
2b
Snozone income/Management fees2
2b
Variable overhead (excluding non-cash items)
Property and void costs
Net rental income
Net interest expense
Management expenses
Investment income
Depreciation
Tax (charge)/credit
Adjusted Profit
Revaluation of properties
Deferred tax on revaluation of properties
Loss on disposal3
Income from Euro B-Note4
Loss on financial instruments
Refinancing costs5
Share-based payments
Other items
(Loss)/profit
Total assets
Total liabilities
Net assets
2b
2b
£m
62.0
(11.6)
50.4
(19.0)
–
–
–
–
–
–
–
–
–
–
31.4
(14.2)
(5.9)
(2.5)
(11.0)
(2.2)
885.9
(460.9)
425.0
£m
3.4
(1.2)
2.2
(0.9)
(0.1)
1.2
1.2
(1.5)
(0.6)
–
–
–
–
–
–
–
–
–
–
0.3
32.1
(18.2)
13.96
10.2
(8.7)
(0.1)
1.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.4
4.0
(2.1)
1.9
Total
£m
65.4
(12.8)
52.6
(20.3)
12.6
(16.5)
0.3
(0.1)
(1.8)
–
26.8
(13.0)
(1.5)
(6.5)
3.9
(2.5)
(11.0)
(0.5)
(0.1)
(4.4)
964.1
(486.5)
477.6
(0.4)
2.4
(7.8)
0.3
–
(1.8)
0.1
(7.2)
–
–
–
–
–
–
–
–
3.9
(0.5)
(0.1)
(3.9)
42.1
(5.3)
36.86
1.
2.
3.
4.
5.
Includes Buttermarket Ipswich and Kingfisher Redditch. For further information see Note 14.
Asset management fees of £3.6 million charged from the Group’s Capital & Regional Property Management entity to Wholly-owned assets have been
excluded from the table above.
Includes £0.6 million impairment of Ipswich trading property recognised on reclassification as held for sale.
£3.9 million of monies were received in the year through the holding of a share in the German Euro B-Note junior loan instrument which had previously
been fully impaired. The monies were distributed following the sale of properties by the liquidator of the underlying German entities.
Refinancing costs consist of those triggered by serving notice on the existing debt facility on five Mall assets on 28 December 2016 (see Note 9 for further
details). They comprise £7.6 million of fixed rate loan redemption costs and the write-off of the £3.4 million of financing costs that were unamortised at 30
December 2016.
6. Net assets of the Buttermarket Ipswich joint venture have been included within Group following its reclassification as held for sale on 30 December 2016.
The results for the year were reflected in the Other UK Shopping Centres column.
2a Operating segments continued
2b Reconciliations of reportable revenue, assets and liabilities
Revenue
Rental income from external sources
Service charge income
Management fees
Snozone income
Revenue for reportable segments
Elimination of inter-segment revenue
Rental income earned by associates and joint ventures
Revenue per consolidated income statement
All revenue in the current and prior years was attributable to activities within the UK.
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
3 Revenue
Gross rental income
Ancillary income
Service charge income
External management fees
Snozone income
Revenue per consolidated income statement
FINANCIALS
87
Year to
30 December
2017
£m
Year to
30 December
2016
£m
Notes
2a
2a
2a
2a
3
Notes
2a
2a
66.2
14.1
2.2
10.4
92.9
(1.4)
(2.3)
89.2
2017
£m
1,031.4
(23.5)
1,007.9
(550.0)
23.5
(526.5)
481.3
0.1
481.4
65.4
14.0
2.4
10.2
92.0
(1.4)
(3.4)
87.2
2016
£m
964.1
(18.2)
945.9
(486.5)
18.2
(468.3)
477.5
0.1
477.6
Year to
30 December
2017
£m
Year to
30 December
2016
£m
Notes
51.2
12.7
63.9
14.1
0.8
10.4
89.2
51.0
11.0
62.0
14.0
1.0
10.2
87.2
2a
2b
2a
2b
External management fees represent revenue earned by the Group’s wholly-owned Capital Regional Property Management Limited
subsidiary.
capreg.com
Stock Code: CAL
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Capital & Regional AR2017 Financials.indd 87
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
88
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
4 Cost of sales
Property and void costs
Service charge costs
Snozone expenses
Total cost of sales
5 Finance income and costs
Finance income
Interest receivable
Income from fixed asset investments
Gain in fair value of financial instruments:
Interest rate swaps
Total finance income
Finance costs
Amortisation of deferred loan arrangement fees
Interest payable on bank loans and overdrafts
Other interest payable
Finance lease costs (head lease)
Loss in fair value of financial instruments:
Interest rate swaps
Interest rate caps
Refinancing costs1
Total finance costs
6 Profit/loss before tax continued
Auditor’s remuneration
The analysis of the Auditor’s remuneration is as follows:
Fees payable to the Company’s Auditor and its associates for the audit of the Company’s annual financial
Fees payable to the Company’s Auditor and its associates for other services to the Group – the audit of the
statements
Company’s subsidiaries
Total audit fees for the Company and its subsidiaries
Audit related assurance services – Review of Interim Report
Audit related assurance services – Agreed upon procedures review
Total non-audit fees
Total fees paid to Auditor and their associates
Year to
30 December
2017
£m
Year to
30 December
2016
£m
(11.9)
(12.7)
(8.9)
(33.5)
(11.2)
(12.5)
(8.8)
(32.5)
Year to
30 December
2017
£m
Year to
30 December
2016
£m
0.1
0.4
0.7
1.2
(1.0)
(13.9)
(0.5)
(3.4)
–
–
–
(18.8)
0.1
0.3
–
0.4
(1.6)
(14.0)
(0.2)
(3.6)
(2.1)
(0.5)
(11.0)
(33.0)
7 Staff costs
Salaries
Discretionary bonuses
Share-based payments
Social security
Other pension costs
Staff costs amounting to £0.4 million (2016: nil) have been capitalised as development costs during the year.
1 Refinancing costs in 2016 consisted of those triggered by serving notice on the existing debt facility on five Mall assets on 28 December 2016 (see Note 17a for
further details). They comprised £7.6 million of fixed rate loan redemption costs and the write-off of the £3.4 million of financing costs that were unamortised
at 30 December 2016.
Staff numbers
during the year was as follows:
The monthly average number of employees (including Executive Directors), being full-time equivalents, employed by the Group
6 Profit/loss before tax
The profit/loss before tax has been arrived at after charging/(crediting) the following items:
Operating lease charge
Other gains and losses
Depreciation of plant and equipment
Staff costs
Auditor’s remuneration for audit services (see below)
Year to
30 December
2017
£m
Year to
30 December
2016
£m
1.9
(0.3)
0.2
13.1
0.2
1.9
1.8
0.1
13.7
0.2
Notes
11
7
CRPM/PLC
Shopping centres
Snozone
Total staff numbers
In the current year other gains and losses relate primarily to £0.3 million recovered through the holding of a share in the German
Euro B-Note junior loan instrument which had previously been fully impaired. In the prior year other gains and losses related
primarily to losses on the sale of The Mall, Camberley of £6.3 million, partially offset by £3.9 million recovered through the German
Euro B-Note, a £0.4 million profit on the sale of a unit in Maidstone and a £0.2 million receipt related to a property disposed of in a
prior year.
Stock Code: CAL
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Stock Code: CAL
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The monthly average number of total employees (including Executive Directors) employed within the Group during the year was 355
(CRPM – 49, Shopping centres – 81, Snozone – 225) compared to 367 in 2016 (CRPM – 52, Shopping centres – 86, Snozone – 229).
Year to
Year to
30 December
30 December
2017
£m
83
74
157
41
2
43
200
2017
£m
9.5
1.4
0.9
11.8
1.2
0.1
13.1
2016
£m
80
60
140
40
2
42
182
2016
£m
10.1
1.7
0.5
12.3
1.3
0.1
13.7
Year to
Year to
30 December
30 December
Notes
20
Year to
Year to
30 December
30 December
2017
Number
2016
Number
46
60
132
238
51
67
142
260
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
4 Cost of sales
Property and void costs
Service charge costs
Snozone expenses
Total cost of sales
5 Finance income and costs
Finance income
Interest receivable
Income from fixed asset investments
Gain in fair value of financial instruments:
Interest rate swaps
Total finance income
Finance costs
Amortisation of deferred loan arrangement fees
Interest payable on bank loans and overdrafts
Other interest payable
Finance lease costs (head lease)
Loss in fair value of financial instruments:
Interest rate swaps
Interest rate caps
Refinancing costs1
Total finance costs
at 30 December 2016.
6 Profit/loss before tax
2017
£m
(11.9)
(12.7)
(8.9)
(33.5)
2017
£m
0.1
0.4
0.7
1.2
(1.0)
(13.9)
(0.5)
(3.4)
–
–
–
(18.8)
2017
£m
1.9
(0.3)
0.2
13.1
0.2
2016
£m
(11.2)
(12.5)
(8.8)
(32.5)
2016
£m
0.1
0.3
–
0.4
(1.6)
(14.0)
(0.2)
(3.6)
(2.1)
(0.5)
(11.0)
(33.0)
2016
£m
1.9
1.8
0.1
13.7
0.2
Year to
Year to
30 December
30 December
6 Profit/loss before tax continued
Auditor’s remuneration
The analysis of the Auditor’s remuneration is as follows:
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
Year to
Year to
30 December
30 December
Total audit fees for the Company and its subsidiaries
Audit related assurance services – Review of Interim Report
Audit related assurance services – Agreed upon procedures review
Total non-audit fees
Total fees paid to Auditor and their associates
FINANCIALS
89
Year to
30 December
2017
£m
Year to
30 December
2016
£m
83
74
157
41
2
43
200
80
60
140
40
2
42
182
7 Staff costs
Salaries
Discretionary bonuses
Share-based payments
Social security
Other pension costs
Notes
20
Year to
30 December
2017
£m
Year to
30 December
2016
£m
9.5
1.4
0.9
11.8
1.2
0.1
13.1
10.1
1.7
0.5
12.3
1.3
0.1
13.7
1 Refinancing costs in 2016 consisted of those triggered by serving notice on the existing debt facility on five Mall assets on 28 December 2016 (see Note 17a for
further details). They comprised £7.6 million of fixed rate loan redemption costs and the write-off of the £3.4 million of financing costs that were unamortised
Staff costs amounting to £0.4 million (2016: nil) have been capitalised as development costs during the year.
Staff numbers
The monthly average number of employees (including Executive Directors), being full-time equivalents, employed by the Group
during the year was as follows:
The profit/loss before tax has been arrived at after charging/(crediting) the following items:
Operating lease charge
Other gains and losses
Depreciation of plant and equipment
Staff costs
Auditor’s remuneration for audit services (see below)
Notes
11
7
In the current year other gains and losses relate primarily to £0.3 million recovered through the holding of a share in the German
Euro B-Note junior loan instrument which had previously been fully impaired. In the prior year other gains and losses related
primarily to losses on the sale of The Mall, Camberley of £6.3 million, partially offset by £3.9 million recovered through the German
Euro B-Note, a £0.4 million profit on the sale of a unit in Maidstone and a £0.2 million receipt related to a property disposed of in a
prior year.
Year to
Year to
30 December
30 December
CRPM/PLC
Shopping centres
Snozone
Total staff numbers
Year to
30 December
2017
Number
Year to
30 December
2016
Number
46
60
132
238
51
67
142
260
The monthly average number of total employees (including Executive Directors) employed within the Group during the year was 355
(CRPM – 49, Shopping centres – 81, Snozone – 225) compared to 367 in 2016 (CRPM – 52, Shopping centres – 86, Snozone – 229).
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
90
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8 Tax
8a Tax credit
8 Tax continued
8d REIT compliance
Current tax
UK corporation tax
Adjustments in respect of prior years
Total current tax credit
Deferred tax
Origination and reversal of temporary timing differences
Total deferred tax
Total tax credit
Year to
30 December
2017
£m
Year to
30 December
2016
£m
The Group converted to a group REIT on 31 December 2014. As a result, the Group no longer pays UK corporation tax on the profits
and gains from qualifying rental business in the UK provided it meets certain conditions. Non-qualifying profits and gains of the
Group continue to be subject to corporation tax as normal. In order to achieve and retain group REIT status, several entrance tests
had to be met and certain ongoing criteria must be maintained. The main criteria are as follows:
–
–
–
–
–
–
–
(0.1)
(0.1)
–
–
(0.1)
•
•
•
at the start of each accounting year, the value of the assets of the property rental business plus cash must be at least 75% of the
total value of the Group’s assets;
at least 75% of the Group’s total profits must arise from the property rental business; and
at least 90% of the Group’s UK property rental profits as calculated under tax rules must be distributed.
The Directors intend that the Group should continue as a group REIT for the foreseeable future, with the result that deferred tax is
no longer recognised on temporary differences relating to the property rental business.
£nil (2016: £nil) of the tax charge relates to items included in other comprehensive income.
The European Public Real Estate Association (“EPRA”) has issued recommendations for the calculation of earnings per share
8b Tax charge reconciliation
Profit/(loss) before tax on continuing operations
Profit/(loss) multiplied by the UK corporation tax rate of 19.25% (2016: 20%)
REIT exempt income and gains
Non-allowable expenses and non-taxable items
Excess tax losses
Unrealised losses/(gains) on investment properties not taxable
Temporary timing and controlled foreign companies income
Adjustments in respect of prior years
Total tax credit
8c Deferred tax
Year to
30 December
2017
£m
Year to
30 December
2016
£m
Notes
22.4
4.3
(4.0)
(0.4)
0.1
–
–
–
–
(4.5)
(0.9)
(1.5)
(0.5)
0.4
2.6
(0.1)
(0.1)
(0.1)
8a
The UK corporation tax main rate was reduced to 19% with effect from 1 April 2017. A further reduction in the rate of corporation
tax to 17% from 1 April 2020 was substantively enacted in Finance Act 2016. Consequently the UK corporation tax rate at which the
deferred tax is booked in the financial statements is 17% (2016: 17%).
The Group has recognised a deferred tax asset of £0.1 million (2016: £0.1 million). No deferred tax asset has been recognised in
respect of temporary differences arising from investments or investments in associates or in joint ventures in the current or prior
years as it is not certain that a deduction will be available when the asset crystallises.
The Group has £12.3 million (2016: £13.9 million) of unused revenue tax losses, all of which are in the UK. No deferred tax asset
has been recognised in respect of these losses due to the unpredictability of future profit streams and other reasons which may
restrict the utilisation of the losses (2016: £nil). The Group has unused capital losses of £25.1 million (2016: £30.5 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.
Stock Code: CAL
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Stock Code: CAL
Capital & Regional AR2017 Financials.indd 90
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9 Earnings per share
information as shown in the following tables:
9a Earnings per share calculation
Year to 30 December 2017
Year to 30 December 2016
Notes
Profit
EPRA
Profit
EPRA
Adjusted
Profit
Adjusted
Profit
Profit (£m)
Profit/(loss) for the year
Revaluation loss on investment
properties (net of tax)
Loss on disposal of properties
(net of tax)
Income from German B-Note
Changes in fair value of financial
instruments
Refinancing costs
Share-based payments
Other items
Profit (£m)
9b
9b
2a
9b
2a
2a
2a
Earnings per share (pence)
Diluted earnings per share (pence)
22.4
–
–
–
–
–
–
–
22.4
3.2
3.1
22.4
6.3
–
(0.3)
(1.1)
0.5
–
–
27.8
3.9
3.9
22.4
6.3
–
(0.3)
(1.1)
0.5
0.9
0.4
29.1
4.1
4.1
None of the current or prior year earnings related to discontinued operations (2016: none).
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Dilutive contingently issuable shares and share options
Basic
Diluted
(4.4)
–
–
–
–
–
–
–
(4.4)
(0.6)p
(0.6)p
Notes
21
(4.4)
14.5
6.5
(3.9)
2.5
11.0
–
–
26.2
3.7p
3.7p
2017
709.2
(0.2)
709.0
6.8
715.8
(4.4)
14.5
6.5
(3.9)
2.5
11.0
0.5
0.1
26.8
3.8p
3.8p
2016
701.0
(0.6)
700.4
10.0
710.4
Year to
Year to
30 December
30 December
At the end of the year, the Group had 12,128,362 (2016: 11,929,797) share options and contingently issuable shares granted under
share-based payment schemes that could potentially dilute 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.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
8 Tax
8a Tax credit
8 Tax continued
8d REIT compliance
FINANCIALS
91
Origination and reversal of temporary timing differences
Adjustments in respect of prior years
Current tax
UK corporation tax
Total current tax credit
Deferred tax
Total deferred tax
Total tax credit
8b Tax charge reconciliation
£nil (2016: £nil) of the tax charge relates to items included in other comprehensive income.
Profit/(loss) before tax on continuing operations
Profit/(loss) multiplied by the UK corporation tax rate of 19.25% (2016: 20%)
REIT exempt income and gains
Non-allowable expenses and non-taxable items
Excess tax losses
Unrealised losses/(gains) on investment properties not taxable
Temporary timing and controlled foreign companies income
Adjustments in respect of prior years
Total tax credit
8c Deferred tax
Notes
8a
2016
£m
–
(0.1)
(0.1)
–
–
(0.1)
2016
£m
(4.5)
(0.9)
(1.5)
(0.5)
0.4
2.6
(0.1)
(0.1)
(0.1)
–
–
–
–
–
–
–
–
–
–
2017
£m
22.4
4.3
(4.0)
(0.4)
0.1
The UK corporation tax main rate was reduced to 19% with effect from 1 April 2017. A further reduction in the rate of corporation
tax to 17% from 1 April 2020 was substantively enacted in Finance Act 2016. Consequently the UK corporation tax rate at which the
deferred tax is booked in the financial statements is 17% (2016: 17%).
The Group has recognised a deferred tax asset of £0.1 million (2016: £0.1 million). No deferred tax asset has been recognised in
respect of temporary differences arising from investments or investments in associates or in joint ventures in the current or prior
years as it is not certain that a deduction will be available when the asset crystallises.
The Group has £12.3 million (2016: £13.9 million) of unused revenue tax losses, all of which are in the UK. No deferred tax asset
has been recognised in respect of these losses due to the unpredictability of future profit streams and other reasons which may
restrict the utilisation of the losses (2016: £nil). The Group has unused capital losses of £25.1 million (2016: £30.5 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.
Year to
Year to
30 December
30 December
2017
£m
The Group converted to a group REIT on 31 December 2014. As a result, the Group no longer pays UK corporation tax on the profits
and gains from qualifying rental business in the UK provided it meets certain conditions. Non-qualifying profits and gains of the
Group continue to be subject to corporation tax as normal. In order to achieve and retain group REIT status, several entrance tests
had to be met and certain ongoing criteria must be maintained. The main criteria are as follows:
•
•
•
at the start of each accounting year, the value of the assets of the property rental business plus cash must be at least 75% of the
total value of the Group’s assets;
at least 75% of the Group’s total profits must arise from the property rental business; and
at least 90% of the Group’s UK property rental profits as calculated under tax rules must be distributed.
The Directors intend that the Group should continue as a group REIT for the foreseeable future, with the result that deferred tax is
no longer recognised on temporary differences relating to the property rental business.
9 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:
Year to
Year to
30 December
30 December
9a Earnings per share calculation
Year to 30 December 2017
Year to 30 December 2016
Notes
Profit
EPRA
Adjusted
Profit
Profit
EPRA
Adjusted
Profit
Profit (£m)
Profit/(loss) for the year
Revaluation loss on investment
properties (net of tax)
Loss on disposal of properties
(net of tax)
Income from German B-Note
Changes in fair value of financial
instruments
Refinancing costs
Share-based payments
Other items
Profit (£m)
9b
9b
2a
9b
2a
2a
2a
Earnings per share (pence)
Diluted earnings per share (pence)
22.4
–
–
–
–
–
–
–
22.4
3.2
3.1
22.4
6.3
–
(0.3)
(1.1)
0.5
–
–
27.8
3.9
3.9
22.4
6.3
–
(0.3)
(1.1)
0.5
0.9
0.4
29.1
4.1
4.1
None of the current or prior year earnings related to discontinued operations (2016: none).
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Basic
Dilutive contingently issuable shares and share options
Diluted
(4.4)
–
–
–
–
–
–
–
(4.4)
(0.6)p
(0.6)p
(4.4)
14.5
6.5
(3.9)
2.5
11.0
–
–
26.2
3.7p
3.7p
(4.4)
14.5
6.5
(3.9)
2.5
11.0
0.5
0.1
26.8
3.8p
3.8p
Notes
21
Year to
30 December
2017
Year to
30 December
2016
709.2
(0.2)
709.0
6.8
715.8
701.0
(0.6)
700.4
10.0
710.4
At the end of the year, the Group had 12,128,362 (2016: 11,929,797) share options and contingently issuable shares granted under
share-based payment schemes that could potentially dilute 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.
capreg.com
Stock Code: CAL
capreg.com
Capital & Regional AR2017 Financials.indd 91
10/04/2018 16:06:02
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
92
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
9 Earnings per share continued
9b Reconciliation of earnings figures included in earnings per share calculations
10 Investment properties continued
10b Property assets summary
Year to 30 December 2017
Year to 30 December 2016
Revaluation
movements
£m
Profit on
disposal of
investment
properties
£m
Movement
in fair value
of financial
instruments
£m
Revaluation
movements
£m
Loss on
disposal of
investment
properties
£m
Movement
in fair value
of financial
instruments
£m
(3.8)
(2.5)
–
–
(6.3)
–
–
–
–
–
0.7
0.4
–
–
1.1
(14.2)
(2.3)
3.5
(1.5)
(14.5)
(5.9)
–
(0.6)
–
(6.5)
(2.5)
–
–
–
(2.5)
Notes
14d
14e
9a
Wholly-owned
Associates
Joint ventures
Tax effect
Total
9c Headline earnings per share
Headline earnings per share has been calculated and presented as required by the Johannesburg Stock Exchange listing
requirements.
Profit (£m)
Profit/(loss) for the year
Revaluation loss on investment properties (including tax)
Loss on disposal of properties (net of tax)
Income from Euro B-Note (Note 6)
Headline earnings
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Dilutive contingently issuable shares and share options
Headline Earnings per share (pence) – Basic/Diluted
10 Investment properties
10a Wholly-owned properties
Cost or valuation
At 30 December 2015
Acquired (The Marlowes, Hemel Hempstead)
Disposals (The Mall, Camberley)
Capital expenditure (excluding capital contributions)
Valuation deficit
At 30 December 2016
Acquired (The Exchange, Ilford)
Capital expenditure (excluding capital contributions)
Valuation surplus1
At 30 December 2017
Year to 30 December 2017
Year to 30 December 2016
Basic
Diluted
Basic
Diluted
External valuations at 30 December 2017 were carried out on all of the gross property assets detailed in the table above. The
Group’s share of the total investment properties at fair value was £915.2 million of £1,029.5 million (2016: £824.9 million of £948.2
22.4
6.3
–
(0.3)
28.4
709.2
(0.2)
–
709.0
4.0p
22.4
6.3
–
(0.3)
28.4
709.2
(0.2)
6.8
715.8
4.0p
(4.4)
14.5
6.5
(3.9)
12.7
701.0
(0.6)
–
700.4
1.8p
(4.4)
14.5
6.5
(3.9)
12.7
701.0
(0.6)
10.0
710.4
1.8p
The valuations were carried out by independent qualified professional valuers from CBRE Limited and Knight Frank LLP (2016: CBRE
Limited, Cushman & Wakefield LLP and Knight Frank LLP) in accordance with RICS standards. 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 Group considers all of its investment properties to fall within “Level 3”, as defined in Note 1. The table below summarises the key
unobservable inputs used in the valuation of the Group’s wholly-owned investment properties at 30 December 2017:
Market Value
£m
886.6
Estimated rental value £ per sq ft
Equivalent yield %
Low
13.72
Portfolio
19.61
High
24.96
Low
5.09
Portfolio
6.40
High
8.25
The following table illustrates the impact of changes in key unobservable inputs (in isolation) on the fair value of the Group’s
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Total
property
assets
£m
292.7
56.6
–
13.5
(4.9)
357.9
79.0
4.3
(3.8)
437.4
577.3
–
(93.9)
5.9
(8.7)
480.6
–
12.3
0.3
493.2
870.0
56.6
(93.9)
19.4
(13.6)
838.5
79.0
16.6
(3.5)
930.6
1.
£3.8 million per Note 2a includes letting fee amortisation adjustment of £0.3 million (2016: £0.6 million).
Stock Code: CAL
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Stock Code: CAL
Capital & Regional AR2017 Financials.indd 92
10/04/2018 16:06:03
Wholly-owned
Investment properties at fair value
Head leases treated as finance leases on investment properties
Unamortised tenant incentives on investment properties
IFRS Property Value
Associates
Investment properties at fair value
Unamortised tenant incentives on investment properties
IFRS Property Value
Total at property valuation
Total IFRS Property Value
10c Valuations
million).
30 December 2017
30 December 2016
100%
Group share
£m
£m
100%
Group share
£m
£m
886.6
61.3
(17.3)
930.6
142.9
(4.5)
138.4
1,029.5
1,069.0
886.6
61.3
(17.3)
930.6
28.6
(0.9)
27.7
915.2
958.3
794.1
61.3
(16.9)
838.5
154.1
(4.1)
150.0
948.2
988.5
794.1
61.3
(16.9)
838.5
30.8
(0.8)
30.0
824.9
868.5
Wholly-owned assets
Sensitivities
properties:
Wholly-owned assets
Impact on valuations of 5%
Impact on valuations of 25bps
change in estimated rental value
change in equivalent yield
Increase
Decrease
Increase
Decrease
£m
38.5
£m
(36.7)
£m
(37.5)
£m
40.6
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
9 Earnings per share continued
9b Reconciliation of earnings figures included in earnings per share calculations
10 Investment properties continued
10b Property assets summary
FINANCIALS
93
Wholly-owned
Investment properties at fair value
Head leases treated as finance leases on investment properties
Unamortised tenant incentives on investment properties
IFRS Property Value
Associates
Investment properties at fair value
Unamortised tenant incentives on investment properties
IFRS Property Value
Total at property valuation
Total IFRS Property Value
10c Valuations
30 December 2017
30 December 2016
100%
£m
Group share
£m
100%
£m
Group share
£m
886.6
61.3
(17.3)
930.6
142.9
(4.5)
138.4
1,029.5
1,069.0
886.6
61.3
(17.3)
930.6
28.6
(0.9)
27.7
915.2
958.3
794.1
61.3
(16.9)
838.5
154.1
(4.1)
150.0
948.2
988.5
794.1
61.3
(16.9)
838.5
30.8
(0.8)
30.0
824.9
868.5
External valuations at 30 December 2017 were carried out on all of the gross property assets detailed in the table above. The
Group’s share of the total investment properties at fair value was £915.2 million of £1,029.5 million (2016: £824.9 million of £948.2
million).
The valuations were carried out by independent qualified professional valuers from CBRE Limited and Knight Frank LLP (2016: CBRE
Limited, Cushman & Wakefield LLP and Knight Frank LLP) in accordance with RICS standards. 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 Group considers all of its investment properties to fall within “Level 3”, as defined in Note 1. The table below summarises the key
unobservable inputs used in the valuation of the Group’s wholly-owned investment properties at 30 December 2017:
Market Value
£m
Wholly-owned assets
886.6
Estimated rental value £ per sq ft
Equivalent yield %
Low
13.72
Portfolio
19.61
High
24.96
Low
5.09
Portfolio
6.40
High
8.25
Sensitivities
The following table illustrates the impact of changes in key unobservable inputs (in isolation) on the fair value of the Group’s
properties:
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Total
property
assets
£m
Wholly-owned assets
Impact on valuations of 5%
change in estimated rental value
Impact on valuations of 25bps
change in equivalent yield
Increase
£m
38.5
Decrease
£m
(36.7)
Increase
£m
(37.5)
Decrease
£m
40.6
Year to 30 December 2017
Year to 30 December 2016
Revaluation
movements
Profit on
disposal of
investment
Movement
in fair value
of financial
properties
instruments
Revaluation
movements
Loss on
disposal of
investment
Movement
in fair value
of financial
properties
instruments
Notes
14d
14e
9a
£m
(3.8)
(2.5)
–
–
(6.3)
£m
–
–
–
–
–
Wholly-owned
Associates
Joint ventures
Tax effect
Total
requirements.
9c Headline earnings per share
Headline earnings per share has been calculated and presented as required by the Johannesburg Stock Exchange listing
Year to 30 December 2017
Year to 30 December 2016
Basic
Diluted
Basic
Diluted
£m
0.7
0.4
–
–
1.1
22.4
6.3
–
(0.3)
28.4
709.2
(0.2)
–
709.0
4.0p
£m
(14.2)
(2.3)
3.5
(1.5)
(14.5)
22.4
6.3
–
(0.3)
28.4
709.2
(0.2)
6.8
715.8
4.0p
292.7
56.6
–
13.5
(4.9)
357.9
79.0
4.3
(3.8)
437.4
£m
(5.9)
(0.6)
–
–
(6.5)
(4.4)
14.5
6.5
(3.9)
12.7
701.0
(0.6)
–
700.4
1.8p
577.3
–
(93.9)
5.9
(8.7)
480.6
–
12.3
0.3
493.2
£m
(2.5)
–
–
–
(2.5)
(4.4)
14.5
6.5
(3.9)
12.7
701.0
(0.6)
10.0
710.4
1.8p
870.0
56.6
(93.9)
19.4
(13.6)
838.5
79.0
16.6
(3.5)
930.6
Profit (£m)
Profit/(loss) for the year
Revaluation loss on investment properties (including tax)
Loss on disposal of properties (net of tax)
Income from Euro B-Note (Note 6)
Headline earnings
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Dilutive contingently issuable shares and share options
Headline Earnings per share (pence) – Basic/Diluted
10 Investment properties
10a Wholly-owned properties
Cost or valuation
At 30 December 2015
Acquired (The Marlowes, Hemel Hempstead)
Disposals (The Mall, Camberley)
Capital expenditure (excluding capital contributions)
Valuation deficit
At 30 December 2016
Acquired (The Exchange, Ilford)
Valuation surplus1
At 30 December 2017
Capital expenditure (excluding capital contributions)
1.
£3.8 million per Note 2a includes letting fee amortisation adjustment of £0.3 million (2016: £0.6 million).
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
94
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
11 Plant and equipment
13 Receivables continued
Year to
30 December
2017
£m
Year to
30 December
2016
£m
Included in the non-derivative financial assets balance are trade receivables with a carrying amount of £1.7 million (2016: £1.9
million) which are past due at the reporting date for which the Group has not provided, as there has not been a significant change
in credit quality and the amounts are still considered recoverable. The Group holds collateral of £0.8 million (2016: £0.7 million) over
trade receivables as security deposits held in rent accounts. The average age of trade receivables is 30 days (2016: 26 days).
Cost or valuation
At the start of the year
Additions
Disposals
At the end of the year
Accumulated depreciation
At the start of the year
Charge for the year
At the end of the year
Carrying amount
At the end of the year
3.7
1.1
–
4.8
(2.8)
(0.2)
(3.0)
1.8
3.3
0.5
(0.1)
3.7
(2.7)
(0.1)
(2.8)
0.9
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
12 Subsidiaries
A list of the subsidiaries of the Group, including the name, country of incorporation, and proportion of ownership interest is given in
Note F to the Company financial statements.
13 Receivables
Amounts falling due after one year:
Financial assets
Deferred tax asset
Interest rate swaps
Non-financial assets
Unamortised tenant incentives
Unamortised rent free periods
Amounts falling due within one year:
Financial assets
Trade receivables (net of allowances)
Amounts owed by associates
Other receivables
Accrued income
Non-derivative financial assets
Financial assets carried at fair value through the profit or loss:
Interest rate caps
Non-financial assets
Prepayments
Unamortised tenant incentives
Unamortised rent free periods
Year to
30 December
2017
£m
Year to
30 December
2016
£m
0.1
0.1
0.2
4.6
9.4
14.2
8.0
0.2
6.1
1.0
15.3
–
15.3
3.0
1.2
2.1
21.6
0.1
–
0.1
5.3
8.9
14.3
5.2
0.1
2.1
0.5
7.9
0.1
8.0
2.7
1.1
1.6
13.4
Stock Code: CAL
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30 December
30 December
30 December
30 December
2017
£m
13.6
0.8
–
0.6
0.3
15.3
2017
£m
0.7
1.8
(1.5)
(0.3)
0.7
2017
£m
(2.0)
–
(2.0)
2016
£m
6.0
1.2
0.1
0.3
0.3
7.9
2016
£m
0.6
0.9
(0.2)
(0.6)
0.7
2016
£m
(1.5)
1.8
0.3
Year to
Year to
30 December
30 December
Notes
2a, 14d
14e
Allowances for doubtful receivables
At the start of the year
Additional allowances created
Utilised during the year
Unused amounts reversed
At the end of the year
14 Investment in associates and joint ventures
14a Share of results
Share of results of associates
Share of results of joint ventures
See Note F of the Company’s separate financial statements for further detail on our associate entities.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
FINANCIALS
95
A list of the subsidiaries of the Group, including the name, country of incorporation, and proportion of ownership interest is given in
11 Plant and equipment
Cost or valuation
At the start of the year
Additions
Disposals
At the end of the year
Accumulated depreciation
At the start of the year
Charge for the year
At the end of the year
Carrying amount
At the end of the year
12 Subsidiaries
Note F to the Company financial statements.
13 Receivables
Amounts falling due after one year:
Financial assets
Deferred tax asset
Interest rate swaps
Non-financial assets
Unamortised tenant incentives
Unamortised rent free periods
Amounts falling due within one year:
Financial assets
Trade receivables (net of allowances)
Amounts owed by associates
Other receivables
Accrued income
Non-derivative financial assets
Interest rate caps
Non-financial assets
Prepayments
Unamortised tenant incentives
Unamortised rent free periods
Financial assets carried at fair value through the profit or loss:
Year to
Year to
30 December
30 December
2017
£m
2016
£m
13 Receivables continued
Included in the non-derivative financial assets balance are trade receivables with a carrying amount of £1.7 million (2016: £1.9
million) which are past due at the reporting date for which the Group has not provided, as there has not been a significant change
in credit quality and the amounts are still considered recoverable. The Group holds collateral of £0.8 million (2016: £0.7 million) over
trade receivables as security deposits held in rent accounts. The average age of trade receivables is 30 days (2016: 26 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
Year to
Year to
30 December
30 December
2017
£m
2016
£m
Allowances for doubtful receivables
At the start of the year
Additional allowances created
Utilised during the year
Unused amounts reversed
At the end of the year
14 Investment in associates and joint ventures
14a Share of results
Share of results of associates
Share of results of joint ventures
30 December
2017
£m
30 December
2016
£m
13.6
0.8
–
0.6
0.3
15.3
6.0
1.2
0.1
0.3
0.3
7.9
30 December
2017
£m
30 December
2016
£m
0.7
1.8
(1.5)
(0.3)
0.7
0.6
0.9
(0.2)
(0.6)
0.7
Year to
30 December
2017
£m
Year to
30 December
2016
£m
(2.0)
–
(2.0)
(1.5)
1.8
0.3
Notes
2a, 14d
14e
See Note F of the Company’s separate financial statements for further detail on our associate entities.
3.7
1.1
–
4.8
(2.8)
(0.2)
(3.0)
1.8
0.1
0.1
0.2
4.6
9.4
14.2
8.0
0.2
6.1
1.0
15.3
–
15.3
3.0
1.2
2.1
21.6
3.3
0.5
(0.1)
3.7
(2.7)
(0.1)
(2.8)
0.9
0.1
–
0.1
5.3
8.9
14.3
5.2
0.1
2.1
0.5
7.9
0.1
8.0
2.7
1.1
1.6
13.4
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
96
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
14 Investment in associates and joint ventures continued
14b Investment in associates
14 Investment in associates and joint ventures continued
14d Analysis of investment in associates
At the start of the year
Share of results of associates
Dividends and capital distributions received
At the end of the year
30 December
2017
£m
30 December
2016
£m
13.9
(2.0)
(4.5)
7.4
15.9
(1.5)
(0.5)
13.9
Notes
14d
14d
The Group’s only significant associate during 2017 was the Kingfisher Limited Partnership in which the Group is in partnership with
funds under the management of Oaktree Capital Management LP. The Kingfisher Limited Partnership owns The Kingfisher Shopping
Centre in Redditch. The Group has a 20% share and exercises significant influence through its representation on the General Partner
board and through acting as the property and asset manager.
14c Investment in joint ventures
At the start of the year
Share of results of joint ventures
Reclassification of Buttermarket Centre, Ipswich as held for sale
At the end of the year
30 December
2017
£m
30 December
2016
£m
–
–
–
–
11.7
1.8
(13.5)
–
Notes
14e
14e
The Group’s only significant joint venture during 2016 was the Buttermarket Centre, Ipswich. Buttermarket Ipswich Limited was
reclassified as held for sale on 30 December 2016 as Management, and their joint venture partner, were committed to a plan to
sell and considered a disposal to be highly probable within the following 12 months. On 17 February 2017 the sale completed to
National Grid Pension Fund. The Group’s share of the initial proceeds was £9.8 million, with Management estimating the value of
deferred contingent consideration to be a further £4.1 million, with the Group’s share of estimated disposal costs of £0.4 million
resulting in a net carrying value of £3.7 million, which remained the position at 30 December 2017. £0.3 million of consideration has
been received since 30 December 2017 reducing the net carrying value accordingly.
Income statement (100%)
Revenue – gross rent
Property and management expenses
Revaluation of investment properties
Fair value of interest rate swaps
Void costs
Net rent
Net interest payable
Contribution
Loss before tax
Tax
Loss 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
Revaluation of investment properties
Fair value of interest rate swaps
Loss before tax
Tax
Loss after tax
Balance sheet (Group share)
Investment properties
Other assets
Current liabilities
Non-current liabilities
Net assets (Group share)
1 Comprises Kingfisher Redditch.
Year to
Year to
30 December
30 December
20171
Total
£m
11.3
(2.7)
(1.1)
7.5
(6.6)
0.9
(12.4)
1.9
(9.6)
(0.2)
(9.8)
138.4
16.1
(6.3)
(111.3)
36.9
2.3
(0.5)
(0.2)
1.6
(1.4)
0.2
(2.5)
0.4
(1.9)
(0.1)
(2.0)
27.7
3.3
(1.3)
(22.3)
7.4
20161
Total
£m
11.5
(2.0)
(1.0)
8.5
(3.8)
4.7
(11.8)
(0.2)
(7.3)
(0.7)
(8.0)
150.0
10.4
(6.5)
(84.0)
69.9
2.3
(0.4)
(0.2)
1.7
(0.8)
0.9
(2.3)
–
(1.4)
(0.1)
(1.5)
30.0
2.1
(1.4)
(16.8)
13.9
Stock Code: CAL
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
At the start of the year
Share of results of associates
Dividends and capital distributions received
At the end of the year
30 December
30 December
2017
£m
13.9
(2.0)
(4.5)
7.4
2017
£m
–
–
–
–
2016
£m
15.9
(1.5)
(0.5)
13.9
2016
£m
11.7
1.8
(13.5)
–
Notes
14d
14d
Notes
14e
14e
The Group’s only significant associate during 2017 was the Kingfisher Limited Partnership in which the Group is in partnership with
funds under the management of Oaktree Capital Management LP. The Kingfisher Limited Partnership owns The Kingfisher Shopping
Centre in Redditch. The Group has a 20% share and exercises significant influence through its representation on the General Partner
board and through acting as the property and asset manager.
14c Investment in joint ventures
30 December
30 December
At the start of the year
Share of results of joint ventures
Reclassification of Buttermarket Centre, Ipswich as held for sale
At the end of the year
The Group’s only significant joint venture during 2016 was the Buttermarket Centre, Ipswich. Buttermarket Ipswich Limited was
reclassified as held for sale on 30 December 2016 as Management, and their joint venture partner, were committed to a plan to
sell and considered a disposal to be highly probable within the following 12 months. On 17 February 2017 the sale completed to
National Grid Pension Fund. The Group’s share of the initial proceeds was £9.8 million, with Management estimating the value of
deferred contingent consideration to be a further £4.1 million, with the Group’s share of estimated disposal costs of £0.4 million
resulting in a net carrying value of £3.7 million, which remained the position at 30 December 2017. £0.3 million of consideration has
been received since 30 December 2017 reducing the net carrying value accordingly.
14 Investment in associates and joint ventures continued
14b Investment in associates
14 Investment in associates and joint ventures continued
14d Analysis of investment in associates
Income statement (100%)
Revenue – gross rent
Property and management expenses
Void costs
Net rent
Net interest payable
Contribution
Revaluation of investment properties
Fair value of interest rate swaps
Loss before tax
Tax
Loss 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
Revaluation of investment properties
Fair value of interest rate swaps
Loss before tax
Tax
Loss after tax
Balance sheet (Group share)
Investment properties
Other assets
Current liabilities
Non-current liabilities
Net assets (Group share)
1 Comprises Kingfisher Redditch.
FINANCIALS
97
Year to
30 December
20171
Total
£m
Year to
30 December
20161
Total
£m
11.3
(2.7)
(1.1)
7.5
(6.6)
0.9
(12.4)
1.9
(9.6)
(0.2)
(9.8)
138.4
16.1
(6.3)
(111.3)
36.9
2.3
(0.5)
(0.2)
1.6
(1.4)
0.2
(2.5)
0.4
(1.9)
(0.1)
(2.0)
27.7
3.3
(1.3)
(22.3)
7.4
11.5
(2.0)
(1.0)
8.5
(3.8)
4.7
(11.8)
(0.2)
(7.3)
(0.7)
(8.0)
150.0
10.4
(6.5)
(84.0)
69.9
2.3
(0.4)
(0.2)
1.7
(0.8)
0.9
(2.3)
–
(1.4)
(0.1)
(1.5)
30.0
2.1
(1.4)
(16.8)
13.9
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
98
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
14 Investment in associates and joint ventures continued
14e Analysis of investment in joint ventures
16 Trade and other payables
Income statement (100%)
Revenue – gross rent
Property and management expenses
Void costs
Net rent
Net interest payable
Contribution
Revaluation of investment properties
Deferred tax on revaluation
Impairment
Profit before tax
Tax
Profit after tax
Income statement (Group share)
Revenue – gross rent
Property and management expenses
Void costs
Net rent
Net interest payable
Contribution
Revaluation of investment properties
Deferred tax on revaluation
Impairment
Profit before tax
Tax
Profit after tax
1 Comprised Buttermarket Ipswich.
15 Cash and cash equivalents
Cash at bank and in hand
Security deposits held in rent accounts
Other restricted balances
Year to
30 December
2017
Total
£m
Year to
30 December
20161
Total
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.2
(0.7)
(0.6)
0.9
(0.3)
0.6
7.2
(2.9)
(1.2)
3.7
–
3.7
1.1
(0.3)
(0.3)
0.5
(0.1)
0.4
3.5
(1.5)
(0.6)
1.8
–
1.8
30 December
2017
£m
30 December
2016
£m
24.4
0.8
5.0
30.2
45.8
0.7
2.6
49.1
Cash at bank and in hand include amounts subject to a charge against various borrowings and may therefore not be immediately
available for general use by the Group. All of the above amounts at 30 December 2017 were held in Sterling other than £0.9 million
which was held in Euros (30 December 2016: £0.3 million).
The Group considers all of its borrowings to fall within “Level 2”, as defined in Note 1.
During the period £39.0 million of new debt was drawn in respect of the acquisition of The Exchange, Ilford, and £362.5 million in
respect of the refinancing of the Mall assets completed on 4 January 2017. The maturity of the Group’s £30 million revolving credit
facility was extended in the year to 22 January 2022.
Stock Code: CAL
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Financial liabilities carried as fair value through profit or loss
Amounts falling due after one year:
Financial liabilities
Accruals
Other creditors
Non-derivative financial liabilities
Amounts falling due within one year:
Interest rate swaps
Financial liabilities
Trade payables
Accruals
Other creditors
Non-derivative financial liabilities
Non-financial liabilities
Deferred income
Other taxation and social security
17 Bank loans
17a Summary of borrowings
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
Current
Non-current
Total borrowings after costs
30 December
30 December
2017
£m
2016
£m
0.3
2.2
2.5
1.5
4.0
2.3
21.1
4.6
28.0
10.4
0.6
39.0
2017
£m
428.4
–
428.4
(6.2)
422.2
–
422.2
422.2
0.5
1.8
2.3
2.1
4.4
0.8
23.2
8.0
32.0
8.3
1.0
41.3
2016
£m
260.2
101.3
361.5
(0.7)
360.8
334.6
26.2
360.8
30 December
30 December
Notes
17d
17d
The average age of trade payables is 36 days (2016: 14 days), no amounts incur interest (2016: £nil).
The Group’s borrowings are arranged to ensure an appropriate maturity profile and to maintain short-term liquidity. There were no
defaults or other breaches of financial covenants that were not waived under any of the Group borrowings during the current year
Income statement (100%)
Revenue – gross rent
Property and management expenses
Revaluation of investment properties
Deferred tax on revaluation
Void costs
Net rent
Net interest payable
Contribution
Impairment
Profit before tax
Tax
Profit after tax
Void costs
Net rent
Net interest payable
Contribution
Impairment
Profit before tax
Tax
Profit after tax
Income statement (Group share)
Revenue – gross rent
Property and management expenses
Revaluation of investment properties
Deferred tax on revaluation
1 Comprised Buttermarket Ipswich.
15 Cash and cash equivalents
Cash at bank and in hand
Security deposits held in rent accounts
Other restricted balances
Year to
Year to
30 December
30 December
2017
Total
£m
20161
Total
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2017
£m
24.4
0.8
5.0
30.2
2.2
(0.7)
(0.6)
0.9
(0.3)
0.6
7.2
(2.9)
(1.2)
3.7
–
3.7
1.1
(0.3)
(0.3)
0.5
(0.1)
0.4
3.5
(1.5)
(0.6)
1.8
–
1.8
2016
£m
45.8
0.7
2.6
49.1
30 December
30 December
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
14 Investment in associates and joint ventures continued
14e Analysis of investment in joint ventures
16 Trade and other payables
Amounts falling due after one year:
Financial liabilities
Accruals
Other creditors
Non-derivative financial liabilities
Financial liabilities carried as fair value through profit or loss
Interest rate swaps
Amounts falling due within one year:
Financial liabilities
Trade payables
Accruals
Other creditors
Non-derivative financial liabilities
Non-financial liabilities
Deferred income
Other taxation and social security
FINANCIALS
99
30 December
2017
£m
30 December
2016
£m
0.3
2.2
2.5
1.5
4.0
2.3
21.1
4.6
28.0
10.4
0.6
39.0
0.5
1.8
2.3
2.1
4.4
0.8
23.2
8.0
32.0
8.3
1.0
41.3
The average age of trade payables is 36 days (2016: 14 days), no amounts incur interest (2016: £nil).
17 Bank loans
17a Summary of borrowings
The Group’s borrowings are arranged to ensure an appropriate maturity profile and to maintain short-term liquidity. 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.
Cash at bank and in hand include amounts subject to a charge against various borrowings and may therefore not be immediately
Total borrowings after costs
available for general use by the Group. All of the above amounts at 30 December 2017 were held in Sterling other than £0.9 million
which was held in Euros (30 December 2016: £0.3 million).
The Group considers all of its borrowings to fall within “Level 2”, as defined in Note 1.
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
Current
Non-current
Notes
17d
17d
30 December
2017
£m
30 December
2016
£m
428.4
–
428.4
(6.2)
422.2
–
422.2
422.2
260.2
101.3
361.5
(0.7)
360.8
334.6
26.2
360.8
During the period £39.0 million of new debt was drawn in respect of the acquisition of The Exchange, Ilford, and £362.5 million in
respect of the refinancing of the Mall assets completed on 4 January 2017. The maturity of the Group’s £30 million revolving credit
facility was extended in the year to 22 January 2022.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
100
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
17 Bank loans continued
17b Maturity of borrowings
Greater than five years
From two to five years
Due after more than one year
Current
30 December
2017
£m
30 December
2016
£m
Notes
401.5
26.9
428.4
–
428.4
–
26.9
26.9
334.6
361.5
17a
The debt facility on the Mall assets was classified as a current liability at the end of 2016 as notice to repay had been served on
28 December 2016, ahead of the debt being refinanced on 4 January 2017.
30 December
30 December
17c Undrawn committed facilities
Expiring greater than five years
Expiring between two and five years
30 December
2017
£m
30 December
2016
£m
10.0
30.0
–
30.0
The Articles of the Company include some restrictions on borrowing but this did not limit the amount available for drawdown on the
above facility during the current year or the preceding year.
17d Interest rate and currency profile of borrowings
Fixed and swapped rate borrowings
Between 2% and 3%
Between 3% and 4%
Variable rate borrowings
30 December
2017
£m
30 December
2016
£m
Notes
17a
17a
39.0
389.4
428.4
–
428.4
–
260.2
260.2
101.3
361.5
18 Financial instruments and risk management
18a Overview
Capital risk management
The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 17a; cash and cash equivalents
as disclosed in Note 15; 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 and has set out a target range for net debt to property value of 40% to 50% in the medium term. 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.
Stock Code: CAL
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18 Financial instruments and risk management continued
Gearing ratios
30 December
30 December
Statutory
Debt before unamortised issue costs
Cash and cash equivalents
Group net debt
Equity
Net debt to equity ratio
See-through
Debt before unamortised issue costs
Cash and cash equivalents
See-through net debt
Equity
Net debt to equity ratio
Properties at valuation
Wholly-owned
Associates (Group share)
Total Group Property at valuation
Net debt to property value ratio
Categories of financial assets/(liabilities)
Notes
17a
15
Notes
18e
10b
10b
2017
£m
428.4
(24.4)
404.0
481.6
84%
2017
£m
451.0
(26.3)
424.7
481.6
88%
886.6
28.6
915.2
46%
–
–
–
–
–
–
–
(0.4)
(0.4)
(4.8)
(0.1)
(4.9)
(2.1)
(2.1)
(7.4)
2016
£m
361.5
(45.8)
315.7
477.6
66%
2016
£m
378.3
(46.6)
331.7
477.6
69%
794.1
30.8
824.9
40%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2017
2016
Carrying
Gain/(loss)
value
£m
to income
£m
Gain to
equity
£m
Carrying
Gain/(loss)
value
£m
to income
£m
Gain to
equity
£m
Notes
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Loans and receivables
Interest rate swaps
Interest rate caps
Assets at fair value held for
trading
Financial liabilities
Current payables
Current borrowings
Non-current payables
Non-current borrowings
Liabilities at amortised cost
Interest rate swaps
Liabilities at fair value held for
trading
Total financial (liabilities)/assets
13
15
13
13
13
16
17a
16
17a
16
15.3
30.2
0.1
45.6
0.1
–
0.1
(28.0)
–
(2.5)
(422.2)
(452.7)
(1.5)
(1.5)
(408.5)
0.1
0.1
–
–
–
–
–
–
–
–
(1.0)
(1.0)
0.6
0.6
(0.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7.9
49.1
0.1
57.1
–
0.1
0.1
(32.0)
(334.6)1
(2.3)
(26.2)
(395.1)
(2.1)
–
(340.0)
1.
As detailed in note 17a the debt facility on the Mall assets was classified as a current liability at the end of 2016 as notice to repay had been served on
28 December 2016 ahead of the debt being refinanced on 4 January 2017.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
17 Bank loans continued
17b Maturity of borrowings
Greater than five years
From two to five years
Due after more than one year
Current
17c Undrawn committed facilities
Expiring greater than five years
Expiring between two and five years
Fixed and swapped rate borrowings
Between 2% and 3%
Between 3% and 4%
Variable rate borrowings
The debt facility on the Mall assets was classified as a current liability at the end of 2016 as notice to repay had been served on
28 December 2016, ahead of the debt being refinanced on 4 January 2017.
The Articles of the Company include some restrictions on borrowing but this did not limit the amount available for drawdown on the
above facility during the current year or the preceding year.
17d Interest rate and currency profile of borrowings
30 December
30 December
Notes
17a
Notes
17a
17a
30 December
30 December
2017
£m
401.5
26.9
428.4
–
428.4
2017
£m
10.0
30.0
2017
£m
39.0
389.4
428.4
–
428.4
2016
£m
–
26.9
26.9
334.6
361.5
2016
£m
–
30.0
2016
£m
–
260.2
260.2
101.3
361.5
18 Financial instruments and risk management
18a Overview
Capital risk management
The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 17a; cash and cash equivalents
as disclosed in Note 15; 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 and has set out a target range for net debt to property value of 40% to 50% in the medium term. 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.
30 December
30 December
18 Financial instruments and risk management continued
Gearing ratios
Statutory
Debt before unamortised issue costs
Cash and cash equivalents
Group net debt
Equity
Net debt to equity ratio
See-through
Debt before unamortised issue costs
Cash and cash equivalents
See-through net debt
Equity
Net debt to equity ratio
Properties at valuation
Wholly-owned
Associates (Group share)
Total Group Property at valuation
Net debt to property value ratio
Categories of financial assets/(liabilities)
FINANCIALS
101
Notes
17a
15
Notes
18e
10b
10b
30 December
2017
£m
30 December
2016
£m
428.4
(24.4)
404.0
481.6
84%
361.5
(45.8)
315.7
477.6
66%
30 December
2017
£m
30 December
2016
£m
451.0
(26.3)
424.7
481.6
88%
886.6
28.6
915.2
46%
378.3
(46.6)
331.7
477.6
69%
794.1
30.8
824.9
40%
2017
2016
Carrying
value
£m
Gain/(loss)
to income
£m
Gain to
equity
£m
Carrying
value
£m
Gain/(loss)
to income
£m
Gain to
equity
£m
Notes
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Loans and receivables
Interest rate swaps
Interest rate caps
Assets at fair value held for
trading
Financial liabilities
Current payables
Current borrowings
Non-current payables
Non-current borrowings
Liabilities at amortised cost
Interest rate swaps
Liabilities at fair value held for
trading
Total financial (liabilities)/assets
13
15
13
13
13
16
17a
16
17a
16
15.3
30.2
0.1
45.6
0.1
–
0.1
(28.0)
–
(2.5)
(422.2)
(452.7)
(1.5)
(1.5)
(408.5)
–
–
–
–
0.1
–
0.1
–
–
–
(1.0)
(1.0)
0.6
0.6
(0.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7.9
49.1
0.1
57.1
–
0.1
0.1
(32.0)
(334.6)1
(2.3)
(26.2)
(395.1)
(2.1)
–
(340.0)
–
–
–
–
–
(0.4)
(0.4)
–
(4.8)
–
(0.1)
(4.9)
(2.1)
(2.1)
(7.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.
As detailed in note 17a the debt facility on the Mall assets was classified as a current liability at the end of 2016 as notice to repay had been served on
28 December 2016 ahead of the debt being refinanced on 4 January 2017.
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
102
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
18 Financial instruments and risk management continued
Significant accounting policies
18 Financial instruments and risk management continued
18d Liquidity risk
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 significant 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.
18b Interest rate risk
The Group manages its interest rate risk through a combination of fixed rate loans and interest rate derivatives, typically interest
rate swaps or caps. 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 does not hedge account its interest rate derivatives and states them at fair value with changes in fair
value included in the income statement.
The following table shows a summary of the Group’s interest rate cap and swap contracts and their maturity dates:
Loan facility
Maturity date
Hemel Hempstead
Hemel Hempstead
The Mall, Luton
Four Mall assets
The Exchange, Ilford
6 February 2023
6 February 2023
30 December 2023
22 January 2024
8 March 2024
Notional
principal
£18,650,000
£8,237,000
£107,500,000
£100,000,000
£39,000,000
Contract
fixed rate
30 December 2017
fair value £m
asset/(liability)
1.33%
1.30%
1.14%
1.13%
1.00%
(0.3)
(0.1)
(0.6)
(0.5)
0.1
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Sensitivity analysis
The following table shows the Group’s sensitivity to a 100bps increase or decrease in 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 100bps. The
income statement impact includes the estimated effect of a 100bps decrease or increase in interest rates on the market values of
interest rate derivatives.
Floating rate loans and cash – (loss)/gain
Interest rate derivatives – gain/(loss)
Impact on the income statement – (loss)/gain
Impact on equity – (loss)/gain
18c Credit risk
100bps increase in
interest rates
100bps decrease in
interest rates
Year to
30 December
2017
£m
Year to
30 December
2016
£m
Year to
30 December
2017
£m
Year to
30 December
2016
£m
(0.1)
15.8
15.7
15.7
(1.1)
9.3
8.2
8.2
0.1
(15.8)
(15.7)
(15.7)
1.1
(9.3)
(8.2)
(8.2)
The Group’s principal financial assets are 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 and trade and other receivables, which are principally amounts due from tenants. Credit risk arising
from tenants is mitigated as the Group receives most rents in advance, monitors credit ratings for significant tenants and makes
an allowance for doubtful receivables that represents the estimate of potential losses in respect of trade receivables. The Group’s
allowance for doubtful receivables disclosed in Note 13 to the financial statements is considered to represent the Group’s best
estimate of the exposure to credit risk associated to 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.
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 Adjusted Profit included in Note
2a. The majority of income within Adjusted 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 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
18 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 are its long-term debt
facilities and its core revolving credit facility, expiring in January 2022, which had £30.0 million fully available at 30 December 2017
as disclosed in Note 17c.
applicable, their effective interest rates1.
The following table shows the maturity analysis of non-derivative financial assets/(liabilities) at the balance sheet date and, where
Effective
Less than
interest rate
Note
%
1 year
£m
1–2 years
2–5 years
£m
£m
More than
5 years
£m
2017
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Financial liabilities
Borrowings – bank loans
Borrowings – other loans
Current payables
Non-current payables
2016
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Financial liabilities
Borrowings – bank loans
Borrowings – other loans
Current payables
Non-current payables
13
15
13
17a
16
16
16
13
15
13
17a
16
16
16
0.2%
3.3%
3.4%
0.3%
3.5%
2.3%
15.3
30.2
45.5
–
–
–
–
(28.0)
(28.0)
7.9
49.1
–
57.0
(334.6)1
(32.0)
–
–
(366.6)
–
–
–
–
–
–
–
(0.3)
(0.3)
–
–
–
–
–
–
–
(0.5)
(0.5)
–
–
–
–
–
–
(27.4)
(2.2)
(394.8)
(29.6)
(394.8)
Total
£m
15.3
30.2
0.1
45.6
(422.2)
(2.2)
(28.0)
(0.3)
(452.7)
Total
£m
7.9
49.1
0.1
57.1
(360.8)
(1.8)
(32.0)
(0.5)
(395.1)
–
–
0.1
0.1
–
–
–
–
–
0.1
0.1
–
–
–
–
–
–
–
–
–
–
–
(26.2)
(1.8)
(28.0)
Effective
Less than
interest rate
Note
%
1 year
£m
1–2 years
2–5 years
£m
£m
More than
5 years
£m
1.
As detailed in note 17a the debt facility on the five Mall assets was classified as a current liability as notice to repay had been served on 28 December 2016
ahead of the debt being refinanced on 4 January 2017.
Stock Code: CAL
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Stock Code: CAL
Capital & Regional AR2017 Financials.indd 102
10/04/2018 16:06:05
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
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 significant 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.
18b Interest rate risk
The Group manages its interest rate risk through a combination of fixed rate loans and interest rate derivatives, typically interest
rate swaps or caps. 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 does not hedge account its interest rate derivatives and states them at fair value with changes in fair
value included in the income statement.
The following table shows a summary of the Group’s interest rate cap and swap contracts and their maturity dates:
Loan facility
Maturity date
Interest rate swap
Hemel Hempstead
6 February 2023
Interest rate swap
Hemel Hempstead
6 February 2023
Interest rate swap
The Mall, Luton
30 December 2023
Interest rate swap
Four Mall assets
22 January 2024
Interest rate swap
The Exchange, Ilford
8 March 2024
Sensitivity analysis
Notional
principal
£18,650,000
£8,237,000
£107,500,000
£100,000,000
£39,000,000
30 December 2017
Contract
fixed rate
fair value £m
asset/(liability)
1.33%
1.30%
1.14%
1.13%
1.00%
(0.3)
(0.1)
(0.6)
(0.5)
0.1
The following table shows the Group’s sensitivity to a 100bps increase or decrease in 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 100bps. The
income statement impact includes the estimated effect of a 100bps decrease or increase in interest rates on the market values of
interest rate derivatives.
100bps increase in
100bps decrease in
interest rates
interest rates
Year to
Year to
Year to
Year to
30 December
30 December
30 December
30 December
2017
£m
(0.1)
15.8
15.7
15.7
2016
£m
(1.1)
9.3
8.2
8.2
2017
£m
0.1
(15.8)
(15.7)
(15.7)
2016
£m
1.1
(9.3)
(8.2)
(8.2)
Floating rate loans and cash – (loss)/gain
Interest rate derivatives – gain/(loss)
Impact on the income statement – (loss)/gain
Impact on equity – (loss)/gain
18c Credit risk
The Group’s principal financial assets are 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 and trade and other receivables, which are principally amounts due from tenants. Credit risk arising
from tenants is mitigated as the Group receives most rents in advance, monitors credit ratings for significant tenants and makes
an allowance for doubtful receivables that represents the estimate of potential losses in respect of trade receivables. The Group’s
allowance for doubtful receivables disclosed in Note 13 to the financial statements is considered to represent the Group’s best
estimate of the exposure to credit risk associated to 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.
18 Financial instruments and risk management continued
Significant accounting policies
18 Financial instruments and risk management continued
18d Liquidity risk
FINANCIALS
103
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 Adjusted Profit included in Note
2a. The majority of income within Adjusted 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 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
18 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 are its long-term debt
facilities and its core revolving credit facility, expiring in January 2022, which had £30.0 million fully available at 30 December 2017
as disclosed in Note 17c.
The following table shows the maturity analysis of non-derivative financial assets/(liabilities) at the balance sheet date and, where
applicable, their effective interest rates1.
2017
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Financial liabilities
Borrowings – bank loans
Borrowings – other loans
Current payables
Non-current payables
2016
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Financial liabilities
Borrowings – bank loans
Borrowings – other 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
13
15
13
17a
16
16
16
0.2%
3.3%
3.4%
15.3
30.2
–
45.5
–
–
(28.0)
–
(28.0)
–
–
–
–
–
–
–
(0.3)
(0.3)
–
–
–
–
(27.4)
(2.2)
–
–
–
–
0.1
0.1
(394.8)
–
–
–
(29.6)
(394.8)
Effective
interest rate
%
Less than
1 year
£m
Note
1–2 years
£m
2–5 years
£m
More than
5 years
£m
13
15
13
17a
16
16
16
0.3%
3.5%
2.3%
7.9
49.1
–
57.0
(334.6)1
–
(32.0)
–
(366.6)
–
–
–
–
–
–
–
(0.5)
(0.5)
–
–
–
–
(26.2)
(1.8)
–
–
(28.0)
–
–
0.1
0.1
–
–
–
–
–
Total
£m
15.3
30.2
0.1
45.6
(422.2)
(2.2)
(28.0)
(0.3)
(452.7)
Total
£m
7.9
49.1
0.1
57.1
(360.8)
(1.8)
(32.0)
(0.5)
(395.1)
1.
As detailed in note 17a the debt facility on the five Mall assets was classified as a current liability as notice to repay had been served on 28 December 2016
ahead of the debt being refinanced on 4 January 2017.
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Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
104
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
18 Financial instruments and risk management continued
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.
18 Financial instruments and risk management continued
18e Fair values of financial instruments
The fair values of financial instruments together with their carrying amounts in the balance sheet are as follows:
2017
Borrowings – fixed bank loans
Borrowings – other fixed loans
Non-interest bearing
2016
Less than
1 year
£m
(14.0)
–
(28.0)
(42.0)
Less than
1 year
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
(14.0)
–
(0.3)
(14.3)
(14.0)
(2.3)
–
(16.3)
(14.0)
–
–
(14.0)
(40.1)
–
–
(40.1)
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
Borrowings – fixed bank loans
(234.3)
(0.9)
(0.9)
Borrowings – other fixed loans
–
Borrowings – floating bank
loans
Non-interest bearing
(101.3)
(32.0)
(367.6)
–
–
(0.5)
(1.4)
–
–
–
(0.9)
(1.8)
–
–
(26.9)
–
–
–
(0.9)
(2.7)
(26.9)
More than
5 years
£m
(429.4)
–
–
(429.4)
More than
5 years
£m
–
–
–
–
–
Total
£m
(525.5)
(2.3)
(28.3)
(556.1)
Total
£m
(263.9)
(1.8)
(101.3)
(32.5)
(399.5)
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 rates as illustrated by the yield curves existing at the reporting date.
2017
Net settled
Interest rate caps
2016
Net settled
Interest rate caps
Interest rate swaps
Less than
1 year
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
–
–
–
–
–
–
–
–
–
–
(1.4)
(1.4)
Less than
1 year
£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
–
–
–
–
–
–
–
–
–
–
–
–
–
(2.1)
(2.1)
Total
£m
(1.4)
(1.4)
Total
£m
0.1
(2.1)
(2.0)
transfers between Levels in the year.
19 Share capital
Ordinary shares of 1p each
At the start of the year
Shares issued
Total called-up share capital
Stock Code: CAL
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Stock Code: CAL
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Notes
18a
18a
13
Financial liabilities not at fair value through
income statement
Sterling denominated loans
Total on balance sheet borrowings
Group share of associate borrowings
Total see-through borrowings
Derivative assets/(liabilities) at fair value
through income statement
Interest rate caps
Interest rate swaps
Total on balance sheet derivatives
Group share of Sterling interest rate caps in
associates and joint ventures
Group share of Sterling interest rate swaps in
associates and joint ventures
Total see-through derivatives
Notional
principal
£m
438.4
17.1
Book value
Fair value
Book value
Fair value
2017
£m
(428.4)
(428.4)
(22.6)
(451.0)
–
(1.4)
(1.4)
0.1
–
(1.3)
2017
£m
(430.0)
(430.0)
(22.6)
(452.6)
–
(1.4)
(1.4)
0.1
–
(1.3)
2016
£m
(361.5)
(361.5)
(16.8)
(378.3)
0.1
(2.1)
(2.0)
–
(0.5)
(2.5)
2016
£m
(363.9)
(363.9)
(16.8)
(380.7)
0.1
(2.1)
(2.0)
–
(0.5)
(2.5)
The fair value of borrowings has been estimated on the basis of quoted market prices. Details of the Group’s cash and deposits
are disclosed in Note 15 and their fair values are equal to their book values. All of the above financial instruments are measured,
subsequent to initial recognition, at fair value. All instruments were considered to be Level 2, as defined in Note 1. There were no
Number of shares issued
Nominal value of shares
and fully paid
issued and fully paid
2017
Number
2016
Number
702,342,500
700,752,626
15,933,260
1,589,874
718,275,760
702,342,500
2017
£m
7.0
0.2
7.2
2016
£m
7.0
–
7.0
The Company has one class of Ordinary shares which carry voting rights but no right to fixed income. The Company maintains a
Secondary Listing on the Johannesburg Stock Exchange (JSE) in South Africa. At 30 December 2017 60,477,452 (2016: 58,253,524) of
the Company’s shares were held on the JSE register.
The table below outlines the movements of shares in the year:
Brought forward at 31 December 2016
May 2017 – Final 2016 Scrip Dividend
August 2017 – to satisfy Long Term Incentive awards
October 2017 – Interim 2017 Scrip Dividend
Carried forward at 30 December 2017
Price per
share
(Pence) No. of shares
No. of shares
Total
702,342,500
56.48
0.01
55.07
6,135,235
708,477,735
6,300,000
714,777,735
3,498,025
718,275,760
718,275,760
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2017
Borrowings – fixed bank loans
Borrowings – other fixed loans
Non-interest bearing
2016
loans
Borrowings – fixed bank loans
Borrowings – other fixed loans
Borrowings – floating bank
Non-interest bearing
1 year
1–2 years
2–3 years
3–4 years
4–5 years
£m
(14.0)
–
(0.3)
(14.3)
£m
(14.0)
(2.3)
–
(16.3)
£m
(14.0)
£m
(40.1)
More than
5 years
£m
(429.4)
(14.0)
(40.1)
(429.4)
1–2 years
2–3 years
3–4 years
4–5 years
£m
(0.9)
£m
(0.9)
£m
(0.9)
(1.8)
£m
(26.9)
More than
5 years
£m
(0.5)
(1.4)
(0.9)
(2.7)
(26.9)
Less than
Less than
£m
(14.0)
–
(28.0)
(42.0)
1 year
£m
(234.3)
–
(101.3)
(32.0)
(367.6)
Less than
Less than
1 year
£m
–
–
0.1
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£m
(525.5)
(2.3)
(28.3)
(556.1)
Total
£m
(263.9)
(1.8)
(101.3)
(32.5)
(399.5)
Total
£m
(1.4)
(1.4)
Total
£m
0.1
(2.1)
(2.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
More than
5 years
More than
5 years
£m
(1.4)
(1.4)
£m
–
(2.1)
(2.1)
–
–
–
–
–
–
–
–
–
2017
Net settled
Interest rate caps
2016
Net settled
Interest rate caps
Interest rate swaps
1–2 years
2–3 years
3–4 years
4–5 years
£m
£m
£m
£m
FINANCIALS
105
18 Financial instruments and risk management continued
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.
18 Financial instruments and risk management continued
18e Fair values of financial instruments
The fair values of financial instruments together with their carrying amounts in the balance sheet are as follows:
Notes
18a
18a
13
Financial liabilities not at fair value through
income statement
Sterling denominated loans
Total on balance sheet borrowings
Group share of associate borrowings
Total see-through borrowings
Derivative assets/(liabilities) at fair value
through income statement
Interest rate caps
Interest rate swaps
Total on balance sheet derivatives
Group share of Sterling interest rate caps in
associates and joint ventures
Group share of Sterling interest rate swaps in
associates and joint ventures
The following tables detail the Group’s remaining contractual maturity for its derivative financial assets/(liabilities), all of which are
Total see-through derivatives
Notional
principal
£m
2017
Book value
£m
2017
Fair value
£m
2016
Book value
£m
2016
Fair value
£m
(428.4)
(428.4)
(22.6)
(451.0)
–
(1.4)
(1.4)
0.1
–
(1.3)
(430.0)
(430.0)
(22.6)
(452.6)
–
(1.4)
(1.4)
0.1
–
(1.3)
(361.5)
(361.5)
(16.8)
(378.3)
0.1
(2.1)
(2.0)
–
(0.5)
(2.5)
(363.9)
(363.9)
(16.8)
(380.7)
0.1
(2.1)
(2.0)
–
(0.5)
(2.5)
438.4
17.1
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 rates as illustrated by the yield curves existing at the reporting date.
1 year
1–2 years
2–3 years
3–4 years
4–5 years
£m
£m
£m
£m
£m
The fair value of borrowings has been estimated on the basis of quoted market prices. Details of the Group’s cash and deposits
are disclosed in Note 15 and their fair values are equal to their book values. All of the above financial instruments are measured,
subsequent to initial recognition, at fair value. All instruments were considered to be Level 2, as defined in Note 1. There were no
transfers between Levels in the year.
19 Share capital
Ordinary shares of 1p each
At the start of the year
Shares issued
Total called-up share capital
Number of shares issued
and fully paid
Nominal value of shares
issued and fully paid
2017
Number
2016
Number
702,342,500
15,933,260
700,752,626
1,589,874
718,275,760
702,342,500
2017
£m
7.0
0.2
7.2
2016
£m
7.0
–
7.0
The Company has one class of Ordinary shares which carry voting rights but no right to fixed income. The Company maintains a
Secondary Listing on the Johannesburg Stock Exchange (JSE) in South Africa. At 30 December 2017 60,477,452 (2016: 58,253,524) of
the Company’s shares were held on the JSE register.
The table below outlines the movements of shares in the year:
Brought forward at 31 December 2016
May 2017 – Final 2016 Scrip Dividend
August 2017 – to satisfy Long Term Incentive awards
October 2017 – Interim 2017 Scrip Dividend
Carried forward at 30 December 2017
Price per
share
(Pence) No. of shares
56.48
0.01
55.07
6,135,235
6,300,000
3,498,025
Total
No. of shares
702,342,500
708,477,735
714,777,735
718,275,760
718,275,760
capreg.com
Stock Code: CAL
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Capital & Regional AR2017 Financials.indd 105
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
106
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
20 Share-based payments
The Group’s share-based payments comprise the 2008 LTIP and the Executive Directors deferred bonus. Further details are
disclosed in the Directors’ Remuneration Report.
21 Own shares held
In accordance with IFRS 2, the fair value of equity-settled share-based payments to employees is determined at the date of grant.
For options with market based conditions these are calculated using either a Black–Scholes option pricing model or a Monte Carlo
simulation. For the elements of options that include non-market based conditions an initial estimate is made of the likely qualifying
percentage, this is subsequently updated at each reporting date.
At the start of the year
Disposed of
At the end of the year
Income statement charge
Equity-settled share-based payments – 2008 LTIP
The figures above exclude a National Insurance charge in the year of £0.2 million (2016: £0.2 million).
Year to
30 December
2017
£m
Year to
30 December
2016
£m
0.9
0.5
The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2017, the Capital
& Regional plc 2002 Employee Share Trust (the “ESOT”) held 182,699 (2016: 642,387) 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 2017 was £0.1 million (2016: £0.4 million).
22 Reconciliation of net cash from operations
Profit/(loss) for the year
Adjusted for:
Income tax credit
Finance income
Finance expense
Loss on revaluation of wholly-owned properties
Share of loss/(profit) in associates and joint ventures
Depreciation of other fixed assets
Other gains and losses
Increase in receivables
Increase/(decrease) in payables
Non-cash movement relating to share-based payments
Movements during the year
Outstanding at 30 December 2015
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 30 December 2016
Granted during the year
Exercised during the year1
Forfeited during the year
Outstanding at 30 December 2017
Exercisable at the end of the year
Number of
Options
18,825,226
6,159,764
(376,165)
(2,870,109)
21,738,716
6,367,945
(6,759,688)
(6,643,491)
14,703,482
–
1. The weighted average share price of options exercised during the year was 54.8p.
2008 LTIP
Net cash from operations
Assumptions
Share price at grant date
Exercise price
Expected volatility
Expected life including holding period (years)
Average life remaining including holding period (years)
Risk free rate
Expected dividend yield
Lapse rate
Fair value of award at grant date per share
August
2014
46.8p
0.0p
36%
4.50
1.12
0.96%
4.53%
0%
13p
March
2015
57.8p
0.0p
34%
4.50
1.68
0.96%
5.00%
0%
23p
August
2016
59.5p
0.0p
27%
5.00
3.65
0.56%
5.00%
0%
26p
April
2017
59.5p
0.0p
19%
5.00
4.33
0.53%
5.70%
0%
25p
Expected volatility is based on the historical volatility of the Group’s share price over the three years to the date of grant. The 10 year
UK Gilt rate at time of grant is used for estimating the risk free rate. Options are assumed to be exercised at the earliest possible date.
23 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:
30 December 2017
30 December
2016
Net assets
Number of
Net assets
Net assets
shares (m)
per share (£)
per share (£)
0.67
0.68
Note
21
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
18e
Exclude deferred tax on unrealised gains and capital
allowances
EPRA net assets
£m
481.4
(1.6)
479.8
1.6
1.3
(0.1)
482.6
724.9
0.66
0.67
724.9
0.67
0.68
Own shares
held
£m
0.4
(0.3)
0.1
Year to
Year to
30 December
30 December
2017
£m
22.4
–
(1.2)
18.8
3.8
2.0
0.2
(0.3)
(7.3)
3.7
0.9
43.0
2016
£m
(4.4)
(0.1)
(0.4)
33.0
14.2
(0.3)
0.1
1.8
(0.1)
(3.2)
0.5
41.1
Notes
8a
14a
11
718.3
(0.2)
6.8
Stock Code: CAL
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Stock Code: CAL
Capital & Regional AR2017 Financials.indd 106
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
20 Share-based payments
disclosed in the Directors’ Remuneration Report.
The Group’s share-based payments comprise the 2008 LTIP and the Executive Directors deferred bonus. Further details are
21 Own shares held
In accordance with IFRS 2, the fair value of equity-settled share-based payments to employees is determined at the date of grant.
For options with market based conditions these are calculated using either a Black–Scholes option pricing model or a Monte Carlo
simulation. For the elements of options that include non-market based conditions an initial estimate is made of the likely qualifying
percentage, this is subsequently updated at each reporting date.
At the start of the year
Disposed of
At the end of the year
FINANCIALS
107
Own shares
held
£m
0.4
(0.3)
0.1
Income statement charge
Equity-settled share-based payments – 2008 LTIP
The figures above exclude a National Insurance charge in the year of £0.2 million (2016: £0.2 million).
Movements during the year
Outstanding at 30 December 2015
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 30 December 2016
Granted during the year
Exercised during the year1
Forfeited during the year
Outstanding at 30 December 2017
Exercisable at the end of the year
1. The weighted average share price of options exercised during the year was 54.8p.
Assumptions
Share price at grant date
Exercise price
Expected volatility
Risk free rate
Expected dividend yield
Lapse rate
Expected life including holding period (years)
Average life remaining including holding period (years)
Fair value of award at grant date per share
August
2014
46.8p
0.0p
36%
4.50
1.12
0.96%
4.53%
0%
13p
March
2015
57.8p
0.0p
34%
4.50
1.68
0.96%
5.00%
0%
23p
August
2016
59.5p
0.0p
27%
5.00
3.65
0.56%
5.00%
0%
26p
Expected volatility is based on the historical volatility of the Group’s share price over the three years to the date of grant. The 10 year
UK Gilt rate at time of grant is used for estimating the risk free rate. Options are assumed to be exercised at the earliest possible date.
Number of
Options
18,825,226
6,159,764
(376,165)
(2,870,109)
21,738,716
6,367,945
(6,759,688)
(6,643,491)
14,703,482
–
April
2017
59.5p
0.0p
19%
5.00
4.33
0.53%
5.70%
0%
25p
Year to
Year to
30 December
30 December
2017
£m
0.9
2016
£m
0.5
The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2017, the Capital
& Regional plc 2002 Employee Share Trust (the “ESOT”) held 182,699 (2016: 642,387) 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 2017 was £0.1 million (2016: £0.4 million).
22 Reconciliation of net cash from operations
Profit/(loss) for the year
Adjusted for:
Income tax credit
Finance income
Finance expense
Loss on revaluation of wholly-owned properties
Share of loss/(profit) in associates and joint ventures
Depreciation of other fixed assets
Other gains and losses
Increase in receivables
Increase/(decrease) in payables
Non-cash movement relating to share-based payments
2008 LTIP
Net cash from operations
Year to
30 December
2017
£m
Year to
30 December
2016
£m
Notes
8a
14a
11
22.4
–
(1.2)
18.8
3.8
2.0
0.2
(0.3)
(7.3)
3.7
0.9
43.0
(4.4)
(0.1)
(0.4)
33.0
14.2
(0.3)
0.1
1.8
(0.1)
(3.2)
0.5
41.1
23 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
Note
21
18e
30 December 2017
Net assets
£m
Number of
shares (m)
Net assets
per share (£)
30 December
2016
Net assets
per share (£)
481.4
(1.6)
479.8
1.6
1.3
(0.1)
482.6
0.67
0.68
718.3
(0.2)
6.8
724.9
0.66
0.67
724.9
0.67
0.68
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
108
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
24 Return on equity
Total comprehensive income attributable to equity shareholders
Opening equity shareholders’ funds plus time weighted additions
Return on equity
25 Lease arrangements
The Group as lessee – operating leases
30 December
2017
£m
30 December
2016
£m
22.4
480.1
4.7%
(4.4)
503.4
(0.9)%
26 Capital commitments
27 Contingent liabilities
German joint venture
At 30 December 2017, the Group’s share of the capital commitments of its associates, joint ventures and wholly-owned properties
was £4.7 million (2016: £7.7 million) relating to capital expenditure projects.
At the balance sheet date, the Group’s future minimum lease payments under non-cancellable operating leases related to land and
buildings were as follows:
X-Leisure
Lease payments
Within one year
Between one and five years
After five years
2017
£m
(2.1)
(9.1)
(9.7)
(20.9)
2016
£m
(1.9)
(7.9)
(11.8)
(21.6)
Operating lease payments are denominated in Sterling and have an average remaining lease length of 9 years (2016: 10 years) and
rentals are fixed for an average of 2 years (2016: 2 years). During the year there were no contingent rents (2016: £nil) and the Group
incurred lease payments recognised as an expense of £1.9 million (2016: £1.9 million).
The Group as lessee – finance leases
At the balance sheet date, the Group’s future minimum lease payments under finance leases were as follows:
Lease payments
Within one year
Between one and five years
After five years
Future finance charges on finance leases
Present value of finance lease liabilities
2017
£m
3.4
13.5
361.7
378.6
(317.3)
61.3
2016
£m
3.4
13.6
365.1
382.1
(320.7)
61.4
Finance lease liabilities are in respect of head leases on investment property. These leases provide for payment of contingent rent,
usually a proportion of net rental income, in addition to the rents above.
The Group as lessor
The Group leases out all of its investment properties under operating leases for average lease terms of 7 years (2016: 7 years) to
expiry. The leasing arrangements are summarised in the portfolio information on page 120. The future aggregate minimum rentals
receivable under non-cancellable operating leases are as follows:
Unexpired
average
lease
term
Years
7.8
5.9
–
100% figures
Wholly-owned
Redditch
Ipswich
Total
Less
than 1
year
£m
44.7
8.1
–
52.8
2 – 5
years
£m
123.9
19.1
–
143.0
6 – 10
years
£m
63.4
8.5
–
71.9
11 – 15
years
£m
16 – 20
years
£m
More
than 20
years
£m
30 December
2017
Total
£m
30 December
2016
Total
£m
29.4
2.0
–
31.4
17.4
0.2
–
17.6
82.8
–
–
82.8
361.6
37.9
–
399.5
327.6
41.7
31.0
400.3
Stock Code: CAL
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Stock Code: CAL
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Under the terms of the German joint venture disposal, completed on 10 February 2015, the Group gave certain customary
warranties as to their title to the relevant shares and certain warranties in relation to the German joint venture generally. In addition,
Capital & Regional plc have provided an indemnity to the purchaser for potential German Real Estate Transfer Tax (RETT) liabilities if
they arise out of actions undertaken by the Group post completion. All such actions covered by the indemnity are within the Group’s
control. The maximum RETT liability based on the property valuation at the time of sale was approximately €20 million.
Under the terms of the X-Leisure disposal agreements, the Group 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.
Any claims in respect of the warranties must be brought within 21 months of completion, being 16 January 2013, or five years in
respect of the tax warranties. These warranties have expired post 30 December 2017 with no claim having been made.
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. Any claims in respect of the
warranties must be brought 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 brought within either 24 months or six years from the date of agreement.
The relevant warranties were given on a several basis and the maximum liability of Capital & Regional Units LLP in respect of
the outstanding warranties is £3.5 million and the maximum liability of Capital & Regional (Junction GP) Limited in respect of the
outstanding warranties is £3.5 million. The obligations of Capital & Regional Units LLP under the agreement were guaranteed by
Capital & Regional Holdings Limited.
FINANCIALS
109
30 December
30 December
26 Capital commitments
At 30 December 2017, the Group’s share of the capital commitments of its associates, joint ventures and wholly-owned properties
was £4.7 million (2016: £7.7 million) relating to capital expenditure projects.
27 Contingent liabilities
German joint venture
Under the terms of the German joint venture disposal, completed on 10 February 2015, the Group gave certain customary
warranties as to their title to the relevant shares and certain warranties in relation to the German joint venture generally. In addition,
Capital & Regional plc have provided an indemnity to the purchaser for potential German Real Estate Transfer Tax (RETT) liabilities if
they arise out of actions undertaken by the Group post completion. All such actions covered by the indemnity are within the Group’s
control. The maximum RETT liability based on the property valuation at the time of sale was approximately €20 million.
X-Leisure
Under the terms of the X-Leisure disposal agreements, the Group 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.
Any claims in respect of the warranties must be brought within 21 months of completion, being 16 January 2013, or five years in
respect of the tax warranties. These warranties have expired post 30 December 2017 with no claim having been made.
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. Any claims in respect of the
warranties must be brought 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 brought within either 24 months or six years from the date of agreement.
The relevant warranties were given on a several basis and the maximum liability of Capital & Regional Units LLP in respect of
the outstanding warranties is £3.5 million and the maximum liability of Capital & Regional (Junction GP) Limited in respect of the
outstanding warranties is £3.5 million. The obligations of Capital & Regional Units LLP under the agreement were guaranteed by
Capital & Regional Holdings Limited.
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
24 Return on equity
Total comprehensive income attributable to equity shareholders
Opening equity shareholders’ funds plus time weighted additions
Return on equity
25 Lease arrangements
The Group as lessee – operating leases
buildings were as follows:
Lease payments
Within one year
Between one and five years
After five years
Lease payments
Within one year
Between one and five years
After five years
Future finance charges on finance leases
Present value of finance lease liabilities
At the balance sheet date, the Group’s future minimum lease payments under non-cancellable operating leases related to land and
Operating lease payments are denominated in Sterling and have an average remaining lease length of 9 years (2016: 10 years) and
rentals are fixed for an average of 2 years (2016: 2 years). During the year there were no contingent rents (2016: £nil) and the Group
incurred lease payments recognised as an expense of £1.9 million (2016: £1.9 million).
The Group as lessee – finance leases
At the balance sheet date, the Group’s future minimum lease payments under finance leases were as follows:
Finance lease liabilities are in respect of head leases on investment property. These leases provide for payment of contingent rent,
usually a proportion of net rental income, in addition to the rents above.
The Group as lessor
The Group leases out all of its investment properties under operating leases for average lease terms of 7 years (2016: 7 years) to
expiry. The leasing arrangements are summarised in the portfolio information on page 120. The future aggregate minimum rentals
receivable under non-cancellable operating leases are as follows:
Unexpired
average
lease
term
Years
7.8
5.9
–
Less
than 1
year
£m
44.7
8.1
–
52.8
100% figures
Wholly-owned
Redditch
Ipswich
Total
More
30 December
30 December
2 – 5
years
£m
123.9
19.1
–
143.0
6 – 10
years
11 – 15
years
16 – 20
years
than 20
years
£m
63.4
8.5
–
71.9
£m
29.4
2.0
–
31.4
£m
17.4
0.2
–
17.6
£m
82.8
–
–
82.8
2017
Total
£m
361.6
37.9
–
399.5
2017
£m
22.4
480.1
4.7%
2017
£m
(2.1)
(9.1)
(9.7)
(20.9)
2017
£m
3.4
13.5
361.7
378.6
(317.3)
61.3
2016
£m
(4.4)
503.4
(0.9)%
2016
£m
(1.9)
(7.9)
(11.8)
(21.6)
2016
£m
3.4
13.6
365.1
382.1
(320.7)
61.4
2016
Total
£m
327.6
41.7
31.0
400.3
capreg.com
Stock Code: CAL
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Notes
2017
£m
2016
£m
457.0
330.0
C
D
E
18.7
1.4
20.1
(15.6)
(15.6)
4.5
461.5
7.2
163.3
60.3
4.4
226.3
461.5
125.5
–
125.5
(15.3)
(15.3)
110.2
440.2
7.0
158.2
60.3
4.4
210.3
440.2
The profit for the year attributable to equity shareholders was £40.8 million (2016: £30.2 million).
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on 5 April 2018
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
110
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
COMPANY BALANCE SHEET
AS AT 30 DECEMBER 2017
28 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.
Registered number: 01399411
Prepared in accordance with FRS 101
Receivables – amounts falling due within one year
Non-current assets
Investments
Current assets
Cash and deposits
Total current assets
Current liabilities
Trade and other payables
Total current liabilities
Net current assets
Net assets
Equity
Share capital
Share premium
Merger reserve
Capital redemption reserve
Retained earnings
Shareholders’ funds
by:
Charles Staveley
Group Finance Director
Associates
Kingfisher Limited Partnership (Redditch)
Joint ventures
Buttermarket Ipswich Limited
Fee income and rent
income
Net amounts receivables
from
Year to
30 December
2017
£m
Year to
30 December
2016
£m
As at
30 December
2017
£m
As at
30 December
2016
£m
0.7
–
0.7
0.2
0.2
n/a
0.1
0.1
Amounts receivable from associates and joint ventures are unsecured and do not incur interest and they are payable on demand
and settled in cash. Management fees are received by Capital & Regional Property Management Limited (CRPM) and are payable on
demand. They are unsecured, do not incur interest and are settled in cash.
Property Management incentive arrangements
CRPM will earn an additional equity return from Kingfisher Limited Partnership if distributions result in a geared return in excess
of a 15% IRR. The Group will bear 20.00% of the cost by virtue of its investment in the Partnership. No performance fee has been
recognised during the year (2016: none) as the criteria have currently not been met.
Transactions with key management personnel
In accordance with IAS 24, key personnel are considered to be the Executive Directors and Non-Executive Directors and members
of the Executive Committee as they have the authority and responsibility for planning, directing and controlling the activities of the
Group. Their remuneration in the income statement is as follows:
Short-term employment benefits
Post-employment benefits
Share-based payments
Year to
30 December
2017
£m
Year to
30 December
2016
£m
1.8
0.1
0.6
2.5
2.5
0.2
0.3
3.0
In both years the highest paid Director was the Chief Executive whose remuneration is disclosed in the Directors’ Remuneration
Report on page 54.
29 Dividends
The dividends shown below are gross of any take-up of Scrip offer.
Final dividend per share paid for year ended 30 December 2015 of 1.62p
Interim dividend per share paid for year ended 30 December 2016 of 1.62p
Final dividend per share paid for year ended 30 December 2016 of 1.77p
Interim dividend per share paid for year ended 30 December 2017 of 1.73p
Amounts recognised as distributions to equity holders in the year
Proposed final dividend per share for year ended 30 December 2017 of 1.91p1
Year to
30 December
2017
£m
Year to
30 December
2016
£m
–
–
12.4
12.4
24.8
13.7
11.3
11.4
–
–
22.7
–
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.
Stock Code: CAL
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Stock Code: CAL
Capital & Regional AR2017 Financials.indd 110
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
COMPANY BALANCE SHEET
AS AT 30 DECEMBER 2017
FINANCIALS
111
Registered number: 01399411
Prepared in accordance with FRS 101
Non-current assets
Investments
Current assets
Receivables – amounts falling due within one year
Cash and deposits
Total current assets
Current liabilities
Trade and other payables
Total current liabilities
Net current assets
Net assets
Equity
Share capital
Share premium
Merger reserve
Capital redemption reserve
Retained earnings
Shareholders’ funds
Notes
2017
£m
2016
£m
C
D
E
457.0
330.0
18.7
1.4
20.1
(15.6)
(15.6)
4.5
461.5
7.2
163.3
60.3
4.4
226.3
461.5
125.5
–
125.5
(15.3)
(15.3)
110.2
440.2
7.0
158.2
60.3
4.4
210.3
440.2
Year to
Year to
30 December
30 December
The profit for the year attributable to equity shareholders was £40.8 million (2016: £30.2 million).
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on 5 April 2018
by:
Charles Staveley
Group Finance Director
28 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
Kingfisher Limited Partnership (Redditch)
Joint ventures
Buttermarket Ipswich Limited
Fee income and rent
Net amounts receivables
income
Year to
Year to
from
As at
30 December
30 December
30 December
30 December
2017
£m
0.7
–
2016
£m
0.7
0.2
2017
£m
0.2
n/a
Amounts receivable from associates and joint ventures are unsecured and do not incur interest and they are payable on demand
and settled in cash. Management fees are received by Capital & Regional Property Management Limited (CRPM) and are payable on
demand. They are unsecured, do not incur interest and are settled in cash.
Property Management incentive arrangements
CRPM will earn an additional equity return from Kingfisher Limited Partnership if distributions result in a geared return in excess
of a 15% IRR. The Group will bear 20.00% of the cost by virtue of its investment in the Partnership. No performance fee has been
recognised during the year (2016: none) as the criteria have currently not been met.
Transactions with key management personnel
In accordance with IAS 24, key personnel are considered to be the Executive Directors and Non-Executive Directors and members
of the Executive Committee as they have the authority and responsibility for planning, directing and controlling the activities of the
Group. Their remuneration in the income statement is as follows:
Short-term employment benefits
Post-employment benefits
Share-based payments
Report on page 54.
29 Dividends
In both years the highest paid Director was the Chief Executive whose remuneration is disclosed in the Directors’ Remuneration
The dividends shown below are gross of any take-up of Scrip offer.
Year to
Year to
30 December
30 December
Final dividend per share paid for year ended 30 December 2015 of 1.62p
Interim dividend per share paid for year ended 30 December 2016 of 1.62p
Final dividend per share paid for year ended 30 December 2016 of 1.77p
Interim dividend per share paid for year ended 30 December 2017 of 1.73p
Amounts recognised as distributions to equity holders in the year
Proposed final dividend per share for year ended 30 December 2017 of 1.91p1
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.
2017
£m
1.8
0.1
0.6
2.5
2017
£m
–
–
12.4
12.4
24.8
13.7
As at
2016
£m
0.1
0.1
2016
£m
2.5
0.2
0.3
3.0
2016
£m
11.3
11.4
–
–
–
22.7
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
112
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR TO 30 DECEMBER 2017
NOTES TO THE COMPANY’S SEPARATE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 DECEMBER 2017
Non-distributable
Distributable
A Accounting policies
Balance at 30 December 2015
Retained profit for the year
Total comprehensive income for the year
Dividends paid, net of Scrip
Shares issued, net of costs
Balance at 30 December 2016
Retained profit for the year
Total comprehensive income for the year
Dividends paid, net of Scrip
Shares issued, net of costs
Balance at 30 December 2017
Share
capital
£m
Share
Premium
£m
Capital
redemption
reserve
£m
7.0
157.2
4.4
–
–
–
–
7.0
–
–
–
0.2
7.2
–
–
–
1.0
158.2
–
–
–
5.1
163.3
–
–
–
–
4.4
–
–
–
–
4.4
Retained
earnings
£m
Retained
earnings
£m
–
–
–
–
–
–
–
–
–
–
–
202.8
30.2
30.2
(21.7)
(1.0)
210.3
40.8
40.8
(19.5)
(5.3)
226.3
Merger
reserve
£m
60.3
–
–
–
–
60.3
–
–
–
–
60.3
Total
£m
431.7
30.2
30.2
(21.7)
–
440.2
40.8
40.8
(19.5)
–
461.5
The Company’s authorised, issued and fully paid-up share capital is described in Note 19 to the Group financial statements. The
Company’s dividends are as described in Note 29 to the Group financial statements. The other reserves are described in the
consolidated statement of changes in equity in the Group financial statements.
The Company’s separate financial statements for the year ended 30 December 2017 are prepared in accordance with Financial
Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards. The main
accounting policies have been applied consistently in the current year and the preceding year.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation
to business combinations, share-based payments, non-current assets held for sale, financial instruments, capital management,
presentation of comparative information in respect of certain assets, presentation of a cash-flow statement, standards not yet
effective, impairment of assets and related party transactions.
The Company’s financial statements are presented in Pounds Sterling, generally rounded to the nearest million.
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 28 to the Group financial statements. Except for the Directors, the
Company had no direct employees during the year (2016: none). Information on the Directors’ emoluments, share options, long-term
incentive schemes and pension contributions is shown in the Directors’ Remuneration Report. Further disclosures regarding the
nature of the share-based payment schemes operated by the Group are included in Note 20 to the Group’s financial statements.
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
The fees payable to the Company’s Auditor for the audit of the Company and Group financial statements are disclosed in Note 6 to
B Profit for the year
financial statements.
the Group financial statements.
C Fixed asset investments
At the start of the year
Investment
Impairment of investments
At the end of the year
D Receivables
Amounts falling due within one year
Amounts owed by subsidiaries
Other receivables
Investments are subject to an impairment review using discount rates between the range of 7.4% and 9.5%. The investment in the
year reflects a reorganisation of the Group completed in parallel with and following the completion of the refinancing of the five Mall
assets that completed on 4 January 2017.
Note F shows the subsidiaries, associates and joint ventures held by the Group and the Company.
Subsidiaries
investments
Other
£m
329.0
235.2
(108.2)
456.0
£m
1.0
–
–
1.0
2017
£m
18.5
0.2
18.7
Total
£m
330.0
235.2
(108.2)
457.0
2016
£m
125.2
0.3
125.5
Stock Code: CAL
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR TO 30 DECEMBER 2017
Non-distributable
Capital
Share
capital
Share
redemption
Premium
reserve
Retained
earnings
£m
Retained
earnings
Balance at 30 December 2015
Retained profit for the year
Total comprehensive income for the year
Dividends paid, net of Scrip
Shares issued, net of costs
Balance at 30 December 2016
Retained profit for the year
Total comprehensive income for the year
Dividends paid, net of Scrip
Shares issued, net of costs
Balance at 30 December 2017
£m
7.0
–
–
–
–
–
–
–
7.0
0.2
7.2
£m
157.2
1.0
158.2
–
–
–
–
–
–
5.1
163.3
£m
4.4
–
–
–
–
–
–
–
–
4.4
4.4
–
–
–
–
–
–
–
–
–
–
–
Distributable
Merger
reserve
£m
60.3
60.3
–
–
–
–
–
–
–
–
£m
202.8
30.2
30.2
(21.7)
(1.0)
210.3
40.8
40.8
(19.5)
(5.3)
226.3
Total
£m
431.7
30.2
30.2
(21.7)
440.2
40.8
40.8
(19.5)
–
–
The Company’s authorised, issued and fully paid-up share capital is described in Note 19 to the Group financial statements. The
Company’s dividends are as described in Note 29 to the Group financial statements. The other reserves are described in the
consolidated statement of changes in equity in the Group financial statements.
NOTES TO THE COMPANY’S SEPARATE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 DECEMBER 2017
113
FINANCIALS
A Accounting policies
The Company’s separate financial statements for the year ended 30 December 2017 are prepared in accordance with Financial
Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards. The main
accounting policies have been applied consistently in the current year and the preceding year.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation
to business combinations, share-based payments, non-current assets held for sale, financial instruments, capital management,
presentation of comparative information in respect of certain assets, presentation of a cash-flow statement, standards not yet
effective, impairment of assets and related party transactions.
The Company’s financial statements are presented in Pounds Sterling, generally rounded to the nearest million.
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.
60.3
461.5
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 28 to the Group financial statements. Except for the Directors, the
Company had no direct employees during the year (2016: none). Information on the Directors’ emoluments, share options, long-term
incentive schemes and pension contributions is shown in the Directors’ Remuneration Report. Further disclosures regarding the
nature of the share-based payment schemes operated by the Group are included in Note 20 to the Group’s financial statements.
B Profit 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 fees payable to the Company’s Auditor for the audit of the Company and Group financial statements are disclosed in Note 6 to
the Group financial statements.
C Fixed asset investments
At the start of the year
Investment
Impairment of investments
At the end of the year
Subsidiaries
£m
Other
investments
£m
329.0
235.2
(108.2)
456.0
1.0
–
–
1.0
Total
£m
330.0
235.2
(108.2)
457.0
Investments are subject to an impairment review using discount rates between the range of 7.4% and 9.5%. The investment in the
year reflects a reorganisation of the Group completed in parallel with and following the completion of the refinancing of the five Mall
assets that completed on 4 January 2017.
Note F shows the subsidiaries, associates and joint ventures held by the Group and the Company.
D Receivables
Amounts falling due within one year
Amounts owed by subsidiaries
Other receivables
2017
£m
18.5
0.2
18.7
2016
£m
125.2
0.3
125.5
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
114
NOTES TO THE COMPANY’S SEPARATE
FINANCIAL STATEMENTS
CONTINUED
E Trade and other payables
Amounts falling due within one year
Amounts owed to subsidiaries
Accruals and deferred income
F Subsidiaries at 30 December 2017
Subsidiaries
Ashley Centre One Limited
Ashley Centre Two Limited
Ashley Epsom Limited 2
Capital & Regional (Europe Holding 5) Limited 3
Capital & Regional (Jersey) Limited 3
Capital & Regional (Mall GP) Limited
Capital & Regional (Projects) Limited
Capital & Regional (Shopping Centres) Limited 3
Capital & Regional Abertawe Limited 1
Capital & Regional Earnings Limited
Capital & Regional Estates Limited 1,4
Capital & Regional Holdings Limited
Capital & Regional Ilford Limited 3
C&R Ilford Limited Partnership
C&R Ilford Nominee 1 Limited
C&R Ilford Nominee 2 Limited
C&R Ilford (General Partner) Limited
Capital & Regional Income Limited1,4
Capital & Regional Property Management Limited
Green-Sinfield Limited
Lancaster Court (Hove) Limited
Lower Grosvenor Place London One Limited
Mall Developments Limited 1
Mall Messages Limited 1
2017
£m
12.7
2.9
15.6
Nature of
business
Country of
incorporation
Dormant
Dormant
Dormant
Property investment
Property investment
Property investment
Property investment
Property investment
Dormant
Property investment
Dormant
Property investment
Property investment
Property investment
Dormant
Dormant
Property investment
Property investment
Property management
Dormant
Dormant
Dormant
Dormant
Dormant
Great Britain
Great Britain
Jersey
Jersey
Jersey
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
2016
£m
12.1
3.2
15.3
Share of
voting
rights
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1.
2.
3.
4.
In liquidation/being dissolved.
Registered office at 1 The Esplanade, St Helier, Jersey, JE2 3QA.
Registered office at 47 The Esplanade, St Helier, Jersey, JE1 0BD.
Registered office at Griffins, Tavistock House South, Tavistock Square, London, WC1H 9LG.
F Subsidiaries continued
Subsidiaries (continued)
Mall Nominee One Limited
Mall Nominee Two Limited
Mall Nominee Three Limited
Mall Nominee Four Limited
Mall Shopping Limited 1
Mallspace Limited 1
Mall Ventures Limited
Marlowes Hemel Limited 3
MB Roding (Guernsey) Limited
R Green Properties (Holdings) 1
Selborne One Limited
Selborne Two Limited
Selborne Walthamstow Limited 2
Snozone Holdings Limited
Snozone Leisure Limited
Snozone Limited
The Mall (General Partner) Limited
The Mall (Luton) (General Partner) Limited
The Mall Company Limited 1
The Mall Facilities Management Limited 1
The Mall Limited Partnership
The Mall People Management Limited 1
The Mall REIT Limited
The Mall Shopping Centres Limited
The Mall Unit Trust 3
The Mall Walthamstow One Limited
The Mall Walthamstow Two Limited
Wood Green London Limited 2
Wood Green One Limited
Wood Green Two Limited
Principal associate entities
Euro B-Note Holding Limited 3
Kingfisher Limited Partnership
Kingfisher Topco S.a.r.l 5
In liquidation/being dissolved.
Nature of
business
Country of
incorporation
Share of
voting
rights
Property investment
Operator of indoor ski slopes
Operator of indoor ski slopes
Operator of indoor ski slopes
Property investment
Property investment
Property investment
Property investment
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Jersey
Guernsey
Great Britain
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
20%
20%
Finance
Jersey
39.90%
Property investment
Property investment
Great Britain
Luxembourg
1.
2.
3.
4.
5.
Registered office at 1 The Esplanade, St Helier, Jersey, JE2 3QA.
Registered office at 47 The Esplanade, St Helier, Jersey, JE1 0BD.
Registered office at Griffins, Tavistock House South, Tavistock Square, London, WC1H 9LG.
Registered office at 26A Boulevard Royal, L–2449, Luxembourg.
The registered office of all subsidiaries, unless otherwise noted, is 22 Chapter Street, London, SW1P 4NP although was 52 Grosvenor
Gardens, London, SW1W 0AU as of 30 December 2017 and until 5 February 2018.
The shares of voting rights are equivalent to the percentages of ordinary shares or units held directly or indirectly by the Group.
Stock Code: CAL
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Stock Code: CAL
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NOTES TO THE COMPANY’S SEPARATE
FINANCIAL STATEMENTS
CONTINUED
E Trade and other payables
Amounts falling due within one year
Amounts owed to subsidiaries
Accruals and deferred income
F Subsidiaries at 30 December 2017
Subsidiaries
Ashley Centre One Limited
Ashley Centre Two Limited
Ashley Epsom Limited 2
Capital & Regional (Europe Holding 5) Limited 3
Capital & Regional (Jersey) Limited 3
Capital & Regional (Mall GP) Limited
Capital & Regional (Projects) Limited
Capital & Regional (Shopping Centres) Limited 3
Capital & Regional Abertawe Limited 1
Capital & Regional Earnings Limited
Capital & Regional Estates Limited 1,4
Capital & Regional Holdings Limited
Capital & Regional Ilford Limited 3
C&R Ilford Limited Partnership
C&R Ilford Nominee 1 Limited
C&R Ilford Nominee 2 Limited
C&R Ilford (General Partner) Limited
Capital & Regional Income Limited1,4
Capital & Regional Property Management Limited
Green-Sinfield Limited
Lancaster Court (Hove) Limited
Lower Grosvenor Place London One Limited
Mall Developments Limited 1
Mall Messages Limited 1
In liquidation/being dissolved.
1.
2.
3.
4.
Registered office at 1 The Esplanade, St Helier, Jersey, JE2 3QA.
Registered office at 47 The Esplanade, St Helier, Jersey, JE1 0BD.
Registered office at Griffins, Tavistock House South, Tavistock Square, London, WC1H 9LG.
Nature of
business
Country of
incorporation
Share of
voting
rights
2017
£m
12.7
2.9
15.6
Great Britain
Great Britain
Jersey
Jersey
Jersey
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
2016
£m
12.1
3.2
15.3
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Dormant
Dormant
Dormant
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Dormant
Dormant
Property investment
Property investment
Property investment
Dormant
Dormant
Property investment
Property investment
Property management
Dormant
Dormant
Dormant
Dormant
Dormant
F Subsidiaries continued
Subsidiaries (continued)
Mall Nominee One Limited
Mall Nominee Two Limited
Mall Nominee Three Limited
Mall Nominee Four Limited
Mall Shopping Limited 1
Mallspace Limited 1
Mall Ventures Limited
Marlowes Hemel Limited 3
MB Roding (Guernsey) Limited
R Green Properties (Holdings) 1
Selborne One Limited
Selborne Two Limited
Selborne Walthamstow Limited 2
Snozone Holdings Limited
Snozone Leisure Limited
Snozone Limited
The Mall (General Partner) Limited
The Mall (Luton) (General Partner) Limited
The Mall Company Limited 1
The Mall Facilities Management Limited 1
The Mall Limited Partnership
The Mall People Management Limited 1
The Mall REIT Limited
The Mall Shopping Centres Limited
The Mall Unit Trust 3
The Mall Walthamstow One Limited
The Mall Walthamstow Two Limited
Wood Green London Limited 2
Wood Green One Limited
Wood Green Two Limited
Principal associate entities
Euro B-Note Holding Limited 3
Kingfisher Limited Partnership
Kingfisher Topco S.a.r.l 5
FINANCIALS
115
Nature of
business
Country of
incorporation
Share of
voting
rights
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Property investment
Dormant
Dormant
Dormant
Dormant
Dormant
Operator of indoor ski slopes
Operator of indoor ski slopes
Operator of indoor ski slopes
Property investment
Property investment
Dormant
Dormant
Property investment
Dormant
Dormant
Dormant
Property investment
Dormant
Dormant
Dormant
Dormant
Dormant
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Jersey
Guernsey
Great Britain
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Finance
Property investment
Property investment
Jersey
Great Britain
Luxembourg
39.90%
20%
20%
1.
2.
3.
4.
5.
In liquidation/being dissolved.
Registered office at 1 The Esplanade, St Helier, Jersey, JE2 3QA.
Registered office at 47 The Esplanade, St Helier, Jersey, JE1 0BD.
Registered office at Griffins, Tavistock House South, Tavistock Square, London, WC1H 9LG.
Registered office at 26A Boulevard Royal, L–2449, Luxembourg.
The registered office of all subsidiaries, unless otherwise noted, is 22 Chapter Street, London, SW1P 4NP although was 52 Grosvenor
Gardens, London, SW1W 0AU as of 30 December 2017 and until 5 February 2018.
The shares of voting rights are equivalent to the percentages of ordinary shares or units held directly or indirectly by the Group.
capreg.com
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
116
GLOSSARY OF TERMS
Adjusted Profit is the total of Contribution from wholly-owned
assets and the Group’s joint ventures and associates, the profit
from Snozone and property management fees less central
costs (including interest excluding non-cash charges in respect
of share-based payments) after tax. Adjusted Profit excludes
revaluation of properties, profit or loss on disposal of properties
or investments, gains or losses on financial instruments and
exceptional one-off items. Results from Discontinued Operations
are included up until the point of disposal or reclassification as
held for sale.
C&R is Capital & Regional plc, also referred to as the Group or
the Company.
C&R Trade index is an internal retail tracker using data from
approximately 300 retail units across C&R’s shopping centre
portfolio.
CRPM is Capital & Regional Property Management Limited, a
subsidiary of Capital & Regional plc, which earns management
and performance fees from the Mall assets and certain
associates and joint ventures of the Group.
Contracted rent is passing rent and the first rent reserved
under a lease or unconditional agreement for lease but which is
not yet payable by a tenant.
Contribution is net rent less net interest, including unhedged
foreign exchange movements.
Capital return is the change in market value during the year for
properties held at the balance sheet date, after taking account of
capital expenditure 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 IAS 12 “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.
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.
Occupancy rate is the ERV of occupied properties expressed
as a percentage of the total ERV of the portfolio, excluding
development voids.
Interest cover is the ratio of Adjusted Profit (before interest,
tax, depreciation and amortisation) to the interest charge
(excluding notional amortisation of finance costs and interest on
head leases).
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.
Like-for-like figures, unless otherwise stated, exclude the
impact of property purchases and sales on year to year
comparatives.
Rent to sales ratio is Contracted rent excluding car park
income, ancillary income and anchor stores expressed as a
percentage of net sales.
Loan to value (LTV) is the ratio of debt excluding fair value
adjustments for debt and derivatives, to the Market value of
properties.
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 year end,
excluding own shares held.
Net initial yield (NIY) is the annualised current rent, net of
revenue costs, topped-up for contractual uplifts, expressed
as a percentage of the capital valuation, after adding notional
purchaser’s costs.
Net debt to property value is debt less cash and cash
equivalents divided by the property value.
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.
Occupancy cost ratio is the proportion of a retailer’s sales
compared with the total cost of occupation being: rent, business
rates, service charge and insurance. Retailer sales are based
on estimates by third party consultants which are periodically
updated and indexed using relevant data from the C&R Trade
Index.
REIT – Real Estate Investment Trust.
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.
Temporary lettings are those lettings for one year or less.
Total property return incorporates net rental income and
capital return expressed as a percentage of the capital value
employed (opening market value plus capital expenditure)
calculated on a time weighted basis.
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 year to the end of the
year plus dividends paid, divided by share price at the beginning
of the year.
Variable overhead includes discretionary bonuses and the
costs of awards to Directors and employees made under the
2008 LTIP and other share schemes which are spread over the
performance period.
Stock Code: CAL
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GLOSSARY OF TERMS
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.
Occupancy rate is the ERV of occupied properties expressed
as a percentage of the total ERV of the portfolio, excluding
development voids.
Interest cover is the ratio of Adjusted Profit (before interest,
tax, depreciation and amortisation) to the interest charge
(excluding notional amortisation of finance costs and interest on
Like-for-like figures, unless otherwise stated, exclude the
impact of property purchases and sales on year to year
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.
Rent to sales ratio is Contracted rent excluding car park
income, ancillary income and anchor stores expressed as a
percentage of net sales.
Loan to value (LTV) is the ratio of debt excluding fair value
adjustments for debt and derivatives, to the Market value of
REIT – Real Estate Investment Trust.
FINANCIALS
117
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.
Temporary lettings are those lettings for one year or less.
Total property return incorporates net rental income and
capital return expressed as a percentage of the capital value
employed (opening market value plus capital expenditure)
calculated on a time weighted basis.
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 year to the end of the
year plus dividends paid, divided by share price at the beginning
of the year.
Variable overhead includes discretionary bonuses and the
costs of awards to Directors and employees made under the
2008 LTIP and other share schemes which are spread over the
performance period.
head leases).
comparatives.
properties.
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 year end,
excluding own shares held.
Net initial yield (NIY) is the annualised current rent, net of
revenue costs, topped-up for contractual uplifts, expressed
as a percentage of the capital valuation, after adding notional
purchaser’s costs.
Net debt to property value is debt less cash and cash
equivalents divided by the property value.
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.
Occupancy cost ratio is the proportion of a retailer’s sales
compared with the total cost of occupation being: rent, business
rates, service charge and insurance. Retailer sales are based
on estimates by third party consultants which are periodically
updated and indexed using relevant data from the C&R Trade
Index.
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Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
118
FIVE YEAR REVIEW (UNAUDITED)
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)/assets
Bank loans greater than one year
Other non-current liabilities
Net assets
Financed by
Called-up share capital
Share premium account
Other reserves
Retained earnings
Capital employed
Return on equity
Return on equity
Increase/(decrease) in NAV per share + dividend
Total shareholder return
Year end share price
Total return
Total comprehensive income/(expense)
Net assets per share
Basic net assets per share
EPRA triple net assets per share
EPRA net assets per share
Gearing
Income statement2
Group revenue
Gross profit
Profit on ordinary activities before financing
Net interest payable
Profit/(loss) before tax
Tax credit
Profit/(loss) after tax
Adjusted Profit
Adjusted Earnings per Share
Interest cover
Earnings per share
Basic4
Diluted4
EPRA4
Dividends per share
2017
£m
930.6
18.1
–
–
7.4
30.2
–
(17.4)
(422.2)
(65.3)
481.4
7.2
163.3
64.6
246.3
481.4
4.7%
3.7%
12.7%
59p
22.4
67p
66p
67p
89%
89.2
55.7
40.0
(17.6)
22.4
–
22.4
29.1
4.1p
3.2
3.2p
3.1p
3.9p
3.64p
2016
£m
838.5
17.1
–
–
13.9
49.1
13.9
(362.9)1
(26.2)
(65.8)
477.6
7.0
158.2
64.3
248.1
477.6
(0.9)%
(0.8)%
(12.3)%
55p
(4.4)
68p
67p
68p
76%
87.2
54.7
28.1
(32.6)3
(4.5)
0.1
(4.4)
26.8
3.8p
3.1
(1)p
(1)p
4p
3.39p
2015
£m
870.0
18.1
–
11.7
15.9
49.9
–
(20.0)
(374.9)
(67.5)
503.2
7.0
157.2
64.1
274.9
503.2
23.5%
23.2%
29.8%
66p
98.4
72p
70p
71p
76%
80.7
51.6
116.8
(19.2)
97.6
–
97.6
24.0
3.4p
3.0
14p
14p
3p
3.12p
2014
£m
790.8
21.3
–
–
13.6
42.6
39.5
(26.5)
(396.8)
(65.5)
419.0
7.0
157.2
65.3
189.5
419.0
28.1%
12.1%
24.7%
53p
74.1
60p
59p
59p
96%
46.6
28.4
77.0
(9.8)
67.2
2.5
69.7
21.8
4.2p
2.7
15p
15p
3p
0.95p
20131
£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
9.2
54p
54p
56p
–
17.6
9.6
7.4
(0.1)
7.3
0.2
7.5
13.4
3.8p
2.8
3p
3p
2p
0.65p
1.
2.
3.
4.
The debt facility on The Mall was classified as a current liability at 30 December 2016 as notice to repay had been served on 28 December 2016 ahead of the
debt being refinanced on 4 January 2017.
2013 results have been restated from those originally presented in those respective years to separate discontinued operations.
Includes £11.0 million of costs in respect of the debt refinancing of the Mall assets (see note 17a for further details).
Continuing and discontinued operations.
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Financials.indd 118
10/04/2018 16:06:08
FIVE YEAR REVIEW (UNAUDITED)
COVENANT INFORMATION (UNAUDITED)
WHOLLY-OWNED ASSETS
119
FINANCIALS
Borrowings
£m
Covenant1
30 December
2017
Future changes
Core revolving credit facility (100%)
Net Assets
Gearing
Historic interest cover
4 Mall assets (100%)
Loan to value2
Historic interest cover
–
No less than £350m
No greater than 1.5:1
No less than 200%
£481.6m
0.87:1
374%
255.0
No greater than 70%
No less than 175%
48%
291%
A projected interest cover test also applies at a covenant level of no less than 150%
Luton (100%)
Loan to value2
Debt yield
Historic interest cover
107.5
No greater than 70%
No less than 8%
No less than 250%
A projected interest cover test also applies at a covenant level of no less than 200%
Hemel Hempstead (100%)
Loan to value2
Debt to net rent
Historic interest cover
26.9
No greater than 60%
No greater than 10:1
No less than 200%
A projected interest cover test also applies at a covenant level of no less than 200%
Ilford (100%)
Loan to value2
Historic interest cover
39.0
No greater than 70%
No less than 225%
A projected interest cover test also applies at a covenant level of no less than 225%
55% Covenant 65% from January 2022
10.2%
350%
50%
7.1:1
435%
47%
515%
Covenant 9:1 from April 2019
1.
2.
Covenants quoted are the default covenant levels. The facilities typically also have cash trap mechanisms.
Calculated as specified in loan agreement based on 30 December 2017 valuation. Actual bank covenant based on bank valuation updated annually.
Increase/(decrease) in NAV per share + dividend
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)/assets
Bank loans greater than one year
Other non-current liabilities
Net assets
Financed by
Called-up share capital
Share premium account
Other reserves
Retained earnings
Capital employed
Return on equity
Return on equity
Total shareholder return
Year end share price
Total return
Total comprehensive income/(expense)
Net assets per share
Basic net assets per share
EPRA triple net assets per share
EPRA net assets per share
Gearing
Income statement2
Group revenue
Gross profit
Net interest payable
Profit/(loss) before tax
Tax credit
Profit/(loss) after tax
Adjusted Profit
Adjusted Earnings per Share
Interest cover
Earnings per share
Basic4
Diluted4
EPRA4
Dividends per share
Profit on ordinary activities before financing
2017
£m
930.6
18.1
–
–
–
7.4
30.2
(17.4)
(422.2)
(65.3)
481.4
7.2
163.3
64.6
246.3
481.4
4.7%
3.7%
12.7%
59p
22.4
67p
66p
67p
89%
89.2
55.7
40.0
(17.6)
22.4
–
22.4
29.1
4.1p
3.2
3.2p
3.1p
3.9p
3.64p
2016
£m
838.5
17.1
–
–
13.9
49.1
13.9
(362.9)1
(26.2)
(65.8)
477.6
7.0
158.2
64.3
248.1
477.6
(0.9)%
(0.8)%
(12.3)%
55p
(4.4)
68p
67p
68p
76%
87.2
54.7
28.1
(32.6)3
(4.5)
0.1
(4.4)
26.8
3.8p
3.1
(1)p
(1)p
4p
3.39p
2015
£m
870.0
18.1
–
11.7
15.9
49.9
–
(20.0)
(374.9)
(67.5)
503.2
7.0
157.2
64.1
274.9
503.2
23.5%
23.2%
29.8%
66p
98.4
72p
70p
71p
76%
80.7
51.6
116.8
(19.2)
97.6
–
97.6
24.0
3.4p
3.0
14p
14p
3p
3.12p
2014
£m
790.8
21.3
–
–
13.6
42.6
39.5
(26.5)
(396.8)
(65.5)
419.0
7.0
157.2
65.3
189.5
419.0
28.1%
12.1%
24.7%
53p
74.1
60p
59p
59p
96%
46.6
28.4
77.0
(9.8)
67.2
2.5
69.7
21.8
4.2p
2.7
15p
15p
3p
0.95p
20131
£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
9.2
54p
54p
56p
–
17.6
9.6
7.4
(0.1)
7.3
0.2
7.5
13.4
3.8p
2.8
3p
3p
2p
0.65p
1.
2.
3.
4.
The debt facility on The Mall was classified as a current liability at 30 December 2016 as notice to repay had been served on 28 December 2016 ahead of the
debt being refinanced on 4 January 2017.
2013 results have been restated from those originally presented in those respective years to separate discontinued operations.
Includes £11.0 million of costs in respect of the debt refinancing of the Mall assets (see note 17a for further details).
Continuing and discontinued operations.
capreg.com
Stock Code: CAL
capreg.com
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
120
WHOLLY-OWNED ASSETS PORTFOLIO
INFORMATION (UNAUDITED)
AT 30 DECEMBER 2017
Physical data
Number of properties
Number of lettable units
Size (sq ft – million)
Valuation data
Properties at independent valuation (£m)
Adjustments for head leases and tenant incentives (£m)
Properties as shown in the financial statements (£m)
Revaluation loss in the year (£m)
Initial yield
Equivalent yield
Reversion
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:
2018
2019
2020–2022
ERV (£m) of leases expiring in:
2018
2019
2020–2022
Passing rent (£m) subject to review in:
2018
2019
2020–2022
ERV (£m) of passing rent subject to review in:
2018
2019
2020–2022
Rental Data
Contracted rent at year end (£m)
Passing rent at year end (£m)
ERV at year end (£m per annum)
ERV movement (like-for-like)
Occupancy
7
765
3.5
886.6
44.0
930.6
3.8
6.1%
6.4%
12.3%
48%
46%
6.5
7.8
9.0
3.1
17.1
10.9
4.5
17.8
3.0
3.4
9.3
3.0
3.3
12.0
64.1
61.0
68.5
+0.3%
97.3
Stock Code: CAL
capreg.com
Stock Code: CAL
Capital & Regional AR2017 Financials.indd 120
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Physical data
Number of properties
Number of lettable units
Size (sq ft – million)
Valuation data
Initial yield
Equivalent yield
Reversion
Loan to value ratio
Net debt to value ratio
Properties at independent valuation (£m)
Adjustments for head leases and tenant incentives (£m)
Properties as shown in the financial statements (£m)
Revaluation loss in the year (£m)
Lease length (years)
Weighted average lease length to break
Weighted average lease length to expiry
Passing rent (£m) of leases expiring in:
ERV (£m) of leases expiring in:
Passing rent (£m) subject to review in:
2018
2019
2020–2022
2018
2019
2020–2022
2018
2019
2020–2022
2018
2019
2020–2022
Rental Data
Contracted rent at year end (£m)
Passing rent at year end (£m)
ERV at year end (£m per annum)
ERV movement (like-for-like)
Occupancy
ERV (£m) of passing rent subject to review in:
EPRA PERFORMANCE MEASURES (UNAUDITED)
AS AT 30 DECEMBER 2017
121
FINANCIALS
7
765
3.5
886.6
44.0
930.6
3.8
6.1%
6.4%
12.3%
48%
46%
6.5
7.8
9.0
3.1
17.1
10.9
4.5
17.8
3.0
3.4
9.3
3.0
3.3
12.0
64.1
61.0
68.5
+0.3%
97.3
EPRA earnings (£m)
EPRA earnings per share (diluted)
EPRA net assets (£m)
EPRA net assets per share
EPRA triple net assets (£m)
EPRA triple net assets per share
EPRA vacancy rate (UK portfolio only)
EPRA net initial yield and EPRA topped-up net initial yield
Investment property – wholly-owned
Investment property – share of joint ventures and associates
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
1.
Excludes Buttermarket Centre, Ipswich.
EPRA Cost ratios
Cost of sales (adjusted for IFRS head lease differential)
Administrative costs
Service charge income
Management fees
Snozone (indoor ski operation) costs
Share of joint venture & associate expenses
Less inclusive lease costs recovered through rent
EPRA costs (including direct vacancy costs)
Direct vacancy costs
EPRA costs (excluding direct vacancy costs)
Gross rental income
Less ground rent costs
Share of joint venture & associate gross rental income less ground rent costs
Less inclusive lease costs recovered through rent
Gross rental income
EPRA cost ratio (including direct vacancy costs)
EPRA cost ratio (excluding vacancy costs)
Notes
9a
9a
23
23
23
23
2017
27.8
3.9p
482.6
67p
479.8
66p
2.8%
2017
£m
886.6
28.6
–
915.2
8.0
60.2
983.4
67.0
(13.1)
53.9
3.6
57.5
5.5%
5.8%
2017
£m
33.9
10.2
(14.1)
(0.8)
(8.9)
0.7
(2.1)
18.9
(3.1)
15.8
63.9
(3.0)
2.3
(2.1)
61.1
2016
26.2
3.7p
481.5
68p
475.2
67p
3.7%
20161
£m
794.1
30.8
–
824.9
15.0
56.3
896.2
58.8
(11.4)
47.4
4.4
51.8
5.3%
5.8%
2016
£m
33.0
10.9
(14.0)
(1.0)
(8.8)
1.2
(1.9)
19.4
(2.9)
16.5
62.0
(3.1)
3.4
(1.9)
60.4
30.9%
25.9%
32.2%
27.4%
capreg.com
Stock Code: CAL
capreg.com
Capital & Regional AR2017 Financials.indd 121
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2017
122
ADVISERS AND CORPORATE INFORMATION
Auditor
Deloitte LLP
Statutory Auditor
2 New Street Square
London EC4A 3BZ
Investment bankers/brokers
JP Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Java Capital Trustees and Sponsors
Proprietary Limited (JSE sponsor)
6A Sandown Valley Crescent
Sandown
Sandton 2196
South Africa
Principal lending bankers
Royal Bank of Scotland plc
250 Bishopsgate
London EC2M 4AA
Registered office
22 Chapter Street
London SW1P 4NP
Telephone: +44 (0)20 7932 8000
capreg.com
Principal valuers
CBRE Limited
Kingsley House
1a Wimpole Street
London W1G 0RE
Knight Frank LLP
55 Baker Street
London W1U 8AN
Principal legal advisers
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London EC4N 6AF
Registered number
01399411
SHAREHOLDER INFORMATION
Registrars
Equiniti Limited (LSE)
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone: 0371 384 2438*
International dialling: +44 (0)121 415 7047
Link Market Services South Africa Proprietary Limited
(South African Transfer Secretaries)
PO Box 4844
Johannesburg, 2000
South Africa
Helpline Number:
011 713 0800 (SA callers)
+27 11 713 0800 (if calling from outside South Africa)
info@linkmarketservices.co.za
* Lines open 08:30 – 17:30, Monday to Friday, excluding bank holidays in England and Wales.
Stock Code: CAL
Capital & Regional AR2017 Financials.indd 122
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10/04/2018 16:06:09
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CAPITAL & REGIONAL PLC
22 Chapter Street
London SW1P 4NP
Tel: +44 (0)20 7932 8000
CAPREG.COM
Capital & Regional AR2017.indd 1
25707.04
25707.04
9 April 2018 10:09 AM
9 April 2018 10:09 AM
proof 6
proof 6
25707.04
9 April 2018 10:09 AM
proof 6
10/04/2018 16:03:02
25707.04
25707.04
9 April 2018 10:09 AM
9 April 2018 10:09 AM
proof 6
proof 6