Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2018Stock Code: CALANNUAL REPORT AND ACCOUNTS for the year ended 30 De cember 2018Capital & Regional AR 2018 Strategic proof 6.indd 304/04/2019 18:32:28 26298 4 April 2019 4:35 pm Proof 6Redefine and own the Community shopping centre category in the UK, consistent with global best practice 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 experienceAgile management, data driven, decentralised to accelerate decision making and deliveryRight offer driving footfall, dwell time and ultimately retailer sales, C&R income and shareholder returnsOUR STRATEGYWELCOME TO THE CAPITAL & REGIONAL ANNUAL REPORT 2018Capital & Regional is a UK focused retail property REIT specialising in 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. £0.9 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. Capital & Regional manages these assets through its in-house expert property and asset management platform. For further information see www.capreg.com.OUR VALUES INSPIRING CREATIVE THINKINGENCOURAGING COLLABORATIVE ENGAGEMENTACTING WITH INTEGRITYDELIVERING DYNAMIC SOLUTIONSREDEFINECOMMUNITY SHOPPING CENTRESREPOSITIONASSETS AND RETAIL MIXREFOCUSMANAGEMENT TEAMENHANCESHAREHOLDER VALUECapital & Regional AR 2018 Strategic proof 6.indd 404/04/2019 18:32:28 HEADING-LEVEL-
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STRAPLINE
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HIGHLIGHTS
NET RENTAL INCOME
ADJUSTED PROFIT1
+£0.3m
2018
2017
+0.6%
+£1.4m
£51.9m
2018
+4.8%
£30.5m
£51.6m
2017
£29.1m
ADJUSTED EARNINGS
PER SHARE1
IFRS PROFIT/(LOSS)
FOR THE PERIOD
+0.13
2018
2017
+3.2%
4.23p
4.10p
£(25.6)m 2018
2017
£22.4m
TOTAL DIVIDEND
PER SHARE
NET ASSET VALUE
(NAV) PER SHARE
-7p
-33.5%
-1.22p
2018
2017
2.42p
2018
3.64p
2017
-11%
60p
67p
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EPRA NAV PER SHARE
GROUP NET DEBT
-8p
2018
2017
-12%
+£7.1m
59p
2018
+1.8%
£411.1m
67p
2017
£404.0m
NET DEBT TO
PROPERTY VALUE
+2 pps
2018
2017
48%
46%
Notes
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.
CONTENTS
STRATEGIC REPORT
Our Portfolio
Chairman’s Statement
The Retail Backdrop
Our Strategy
Our Business Model
Key Performance Indicators
Chief Executive’s Statement
Operating Review
Financial Review
Managing Risk
Responsible Business
GOVERNANCE
Directors
Senior Leadership Team
Corporate Governance Report
Audit Committee Report
Directors’ Remuneration Report
Policy
2018 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
Company Balance Sheet
Statement of Changes in Equity
Notes to the Company’s Financial
Statements
Glossary of Terms
Five Year Review (Unaudited)
Covenant Information (Unaudited)
Wholly-Owned Assets Portfolio
Information (Unaudited)
EPRA Performance Measures
(Unaudited)
Advisers and Corporate Information
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For further information see
CAPREG.COM
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OUR PORTFOLIO
WHOLLY OWNED ASSETS
The Mall, Blackburn
Leasehold covered shopping centre
The Marlowes, Hemel Hempstead
Freehold covered shopping centre
on three floors
600,000 sq ft
122 lettable units
Principal occupiers:
Primark, Debenhams, H&M, Next,
Wilko, Pure Gym
and high street parades
350,000 sq ft
109 lettable units
Principal occupiers:
Wilko, New Look, Sports Direct,
River Island
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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, Luton
Leasehold covered shopping centre
on two floors, with over 65,000 sq ft
of offices
The Mall, Maidstone
Freehold covered shopping centre
on three floors with over 40,000 sq ft
of offices
900,000 sq ft
170 lettable units
500,000 sq ft
107 lettable units
Principal occupiers:
Primark, Debenhams, H&M,
TK Maxx, Wilko, Luton Borough Council
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
OTHER INTERESTS
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 12% in JV and acts as
Property & Asset Manager
Snozone Leisure Business
100% subsidiary
Largest indoor ski slope operator in
the UK
Freehold covered shopping centre on
Operating at Milton Keynes,
two principal trading levels
900,000 sq ft
174 lettable units
Principal occupiers:
Vue Cinema, H&M, The Range, Primark,
Next, Debenhams, TK Maxx
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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Key to Map
Wholly Owned Assets
Blackburn
Luton
Hemel Hempstead
Walthamstow
Wood Green
Ilford
Maidstone
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KEY
CHARACTERISTICS
ABOUT OUR MALLS
High footfall -
78.8m 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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26298 4 April 2019 4:35 pm Proof 6STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2018Stock Code: CAL04I am pleased to report an increase of 4.8 per cent in Adjusted Profit to £30.5 million from £29.1 million. This increase in underlying profitability has been achieved notwithstanding the headwinds from both structural change in the retail sector and weakening consumer sentiment. It is a strong endorsement of the strategy that the Company has been pursuing and is underpinned by robust operating and financial key performance indicators. Footfall continues to grow, outperforming the relevant national index, while net rental income has proven to be very resilient, in spite of a steady flow of retailer failures, reflecting the affordability and appeal of our assets to retailers and our team’s asset management expertise.While our operating metrics were positive, the impact of lower property valuations largely driven by negative sentiment towards regional retail assets, partially offset by positive valuation gains achieved across our London portfolio, led to a loss for the year of £25.6 million (December 2017: profit of £22.4 million). STRATEGYMarket conditions in the retail sector have provided a uniquely challenging backdrop to the implementation of group strategy. The asset management team has energetically focused on the repositioning of the Company’s convenience-based community shopping centre portfolio, leading to tangible improvements in performance at those centres where the process is most advanced. Considerable progress has been made on the remerchandising of schemes with a focus on those occupiers which directly respond to the needs of the local community, embrace omni-channel retailing, or those that are most resilient to the continuing growth in online shopping. The Group has not been immune to CVAs and retailer restructurings with 20 of these impacting NRI by approximately £1.5 million (2.9%) over the whole year. However, our rebased rents, which average £15 per sq ft, in combination with capital values below replacement cost, do give us flexibility in diversifying our tenant base. Our ability to invest in accretive capital expenditure initiatives has been critical to achieving these outcomes. During the course of the year we have invested £18.5 million in asset management initiatives, including the refurbishment of the previously vacant Arndale House office space in Luton; the delivery of the new Family Zone in Ilford; providing a new façade at the Fareham House high street block in Hemel Hempstead and upgrading guest facilities at Hemel Hempstead, Ilford and Wood Green. There is a pipeline of very exciting initiatives across the portfolio but with particular focus on Hemel Hempstead; Ilford and Walthamstow. The Board takes a very active role in reviewing these projects. Its aim is to ensure that the Company engages openly and transparently with all stakeholders in the development and roll-out of the plans. It also aims to ensure that the speed of investment is carefully balanced with the need for prudent balance sheet management.RESPONSIBLE BUSINESS Our commitment to running our business responsibly underpins the way we operate and is an integral part of “ I AM PLEASED TO REPORT AN INCREASE OF 4.8 PERCENT IN ADJUSTED PROFIT TO £30.5 MILLION FROM £29.1 MILLION. IT IS A STRONG ENDORSEMENT OF THE STRATEGY.”HUGH SCOTT-BARRETT CHAIRMANCHAIRMAN’S STATEMENTCapital & Regional AR 2018 Strategic proof 6.indd 404/04/2019 18:32:34 I
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loan, to support the cinema development, along with
increased headroom on the rebased Revolving Credit
Facility is the best option for the Company at this point
in time given current uncertainties in occupational and
investment markets. The cash preserved will assist in
mitigating leverage and maintain investment in the
Company’s capital expenditure initiatives, which in the
longer term are expected to support earnings growth.
The proposed dividend, together with the interim
dividend paid in October 2018, substantially fulfils the
Group’s UK REIT obligations for the 2018 financial year.
Dividends for the short to medium term are expected to
be set at around the same level (2.42 pence per share
per annum), subject to material retailer administrations
and the Board’s intention to meet its minimum REIT
distribution requirements.
PEOPLE
Ensuring our people are supported, motivated and
engaged is key to our success. In 2018, we achieved a
93 per cent participation rate in our C&R Pulse Staff
Engagement survey and the feedback received scored
strongly against external benchmarks and previous
survey responses. During visits to our centres and
support office, C&R’s culture of innovation and agility,
where we act as one team and are held accountable, is
clearly evident in the way the teams work and support
each other. I would like to thank all our staff for their
hard work and dedication during what has been an
exciting but demanding year for the business.
BOARD
Guillaume Poitrinal stepped down as a Non-Executive
Director in October 2018. His knowledge of the retail
sector has been hugely valuable in shaping the Board’s
discussions over the last two years and I would like to
thank him for his contribution.
I would also like to thank Charles Staveley, who stepped
down as an Executive Director in August 2018 after ten
years as Group Finance Director. Charles played a key
role in the restructuring and reshaping of C&R over
this period.
Stuart Wetherly was appointed as Group Finance
Director on 11 March 2019. Having spent much of
his career at Capital & Regional, Stuart is more than
qualified for this role and is deeply familiar with our
operations and strategy. He is uniquely placed to help
the Board and management carry the Company forward
and we are pleased to be able to formalise his role.
I agreed to take on the role of Non-Executive Chairman
from June 2017 to ensure continuity at a time of
significant change for the Board and the transition to
Lawrence Hutchings as Chief Executive. Now that this
transition is complete, I have decided it is time to seek
my successor. A recruitment process, led by our Senior
Independent Director Tony Hales, will begin following
the Annual General Meeting in May 2019 and I will step
down in due course, once my successor is appointed.
HUGH SCOTT-BARRETT
CHAIRMAN
who we are and what we do. In 2018, we retained our
ROSPA Gold Award for the 12th consecutive year and
continue to focus efforts to reduce energy and water
consumption and increase waste diversion to recycling
across our centres.
Community engagement remains at the heart of our
business. In 2018, through C&R Cares, £340,000 was
raised for local charities chosen by our staff and our
centres supported events throughout the year that
encouraged inclusivity and openness, including Purple
Tuesday, a national campaign to provide an accessible
shopping day, established to recognise the importance
and needs of disabled consumers and promote
inclusive shopping.
C&R is one of the headline sponsors for London’s
Borough of Culture in 2019. Waltham Forest is the
first ever London Borough of Culture, giving the local
community the chance to experience world-class
cultural experiences on their doorstep.
DIVIDEND
The Board is recommending a final dividend of 0.60
pence per share, taking the full-year dividend to 2.42
pence per share. This represents a decrease of 33.5 per
cent over the 2017 full-year dividend of 3.64 per share.
The Company has been actively exploring financing
options to underpin its capex plans. The Board is
conscious of the guidance it had previously given to
grow dividend by between 5 and 8 per cent per annum
but has concluded that adjusting the dividend and
agreeing a new capex facility for the Hemel Hempstead
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THE RETAIL BACKDROP
THE CONTINUING EVOLUTION OF RETAIL
FURTHER GROWTH
OF ONLINE AND
OMNI-CHANNEL
RETAILING
CLICK AND
COLLECT DRIVES
CENTRE FOOTFALL
AND SPEND
EVOLVING
ROLE OF THE STORE
DIVERSIFICATION
OF RETAIL SPACE
POLARISATION
OMNI-CHANNEL EVOLUTION
Traditional retail has evolved from simple bricks and
clicks to deeper and more co-ordinated cross-channel
integration. Shoppers increasingly demand speed and
optionality in how and where they purchase and expect
limited friction in purchase and returns fulfilment.
Physical stores continue to provide a central role in
the omni-channel retailing environment, providing
a crucial intersection between products and people.
Our community centres, in well connected, easily
accessed town centre locations, are ideally positioned
to meet the modern consumers’ needs.
OPEN
Retail continues to polarise between discretionary “wants” and non-
discretionary everyday essential “needs”. Consumers differentiate their
shopping trips accordingly, with retailing destinations needing to align
clearly to these distinct shopping trips. Our community centres provide a
clearly defined focus in satisfying the everyday needs of our communities,
in engaging and stimulating environments
Non-Retail
Variety Stores
Home &
Gifts
Service (Pers.)
Services (Prof.)
Footwear
Health & Beauty
Department
stores
Fashion &
Footwear
Speciality Fashion
Department Stores
Fashion
Casual Dining
Express Food
Leisure
Fresh Food
Supermarkets
Health & Beauty
NEEDS
NEEDS:
Community
shopping
centres
Squeezed
middle
Squeezed
middle
WANTS:
Super
regional
malls
WANTS
Variety Stores
Jewellery
Mobile and Consumer
Electronics
Home & Gifts
Variety Stores
Services (Prof.)
Services (Pers.)
Leisure
Casual Dining
Express Food
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26298 4 April 2019 4:35 pm Proof 6RETAILER EVOLUTIONOnline penetration is continuing to influence tenant mix with the impact felt most clearly by discretionary “wants” based retailers, whose store portfolios are rationalising, particularly across the fashion sector.Non-discretionary “needs-based” retailing remains more resilient to this change. Retailers at this end of the retail spectrum continue to predominantly fulfil their customers everyday needs directly from store, with limited online integration. Our convenient and strategically located community centres provide an essential platform in the fulfilment of these shoppers’ everyday needs.With growing trends in localism, our community assets provide wide-ranging opportunities to drive performance and growth.Community centres represent the engine room for retailer profitability, with the mix of affordable occupancy costs (illustrated by Zone A rents), attractive productivity levels and high footfall driving profitability.With rentals averaging £15 per sq ft, our centres offer flexibility to profitably remerchandise space, providing the opportunity in so doing to evolve and broaden our offer to our growing community populations. Source: Local Data CompanySource: Javelin Group/SHOPSCORE Net change in store number by retail and leisure business type in 2017COMMUNITY FUNDAMENTALSYOUR LOCAL MALL35030025020015010050MallHeadline Zone A rent (£/psf)CentreHeadline Zone A rent (£/psf)SHOPSCORE sales productivity indexMallRetail ParkOutlet0FunctionalRegional MallMajor MallUberCentreNeighbour-hoodCommunityCommunity PlusCentreMallCentre800600400200ResidentialvalueHotelvalue0C&R valuationReplacementcostIce creamparloursTop ‘Risers’Top ‘Fallers’-314-86-69-66-59+30+30+27+25+20CoffeeshopsBook-shopsConveniencestoresPubs &InnsCharityshopsShoeshopsFashion &clothingCafés &TearoomsBeautyProductsOPENSTRATEGIC REPORTcapreg.com07Capital & Regional plcCapital & Regional AR 2018 Strategic proof 6.indd 704/04/2019 18:32:35 OUR STRATEGY
1. REDEFINE
Community shopping centres
Redefine and own the Community shopping centre category in the UK, consistent with global
best practice
OVERVIEW
We define and assess our community shopping centre offer
across three key aspects:
Following an extensive industry consultation, a new draft
categorisation was launched, split into three broad categories
and further subcategories:
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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.
PROGRESS
In 2018 REVO committed to reclassifying the UK Shopping Centre/
Retail Property classification to include the Community Shopping
Centre classification.
Regional
Local
Community centre
Neighbourhood centre
Convenience centre
Specialised
FUTURE FOCUS
Further refinement of the classification definitions is expected as
the new terminology becomes more widely utilised.
Encouraging the industry to then fully adopt and embed the new
categorisations will be an ongoing process requiring continued
focus to move away from outdated terminology.
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26298 4 April 2019 4:35 pm Proof 6Assets and retail mixActively re-merchandise 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 experienceOVERVIEWWe 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: 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.PROGRESSWe have established asset masterplans for every centre, informed by research and data insights. These masterplans provide the strategic direction for each asset, directing capital investment and leasing decisions in delivering the optimal community mix and offer. Throughout 2018, we have proactively remerchandised to a needs-based, non-discretionary offer that is most relevant to our communities’ needs and most resilient to structural changes in retail. Change of use over 24 months to 31 December 2018Change of use over 24 months to 31 December 2018-1-0.50.510Department StoresFashionCasual DiningExpress FoodLeisureSupermarketsHealth & BeautyServices - ProfessionalServices - PersonalHome & GiftsVariety StoresNon RetailIn 2018 we invested £18.5 million in capex across our portfolio. Our capex programme is helping to maintain leasing momentum, retain engagement with our core occupiers and help attract new occupiers and guests to our centres. We have seen the strongest operational results where our strategy is most advanced.Our capex projects are largely designed to enable swift delivery and maximise impact. Typically delivered over six - nine month programmes, we can deploy projects with agility to follow customer needs and trends. FUTURE FOCUSWe have identified over 30 potential projects representing around £80 million through our asset masterplans. Projects include cinemas, leisure, grab-and-go, amenities, family and ambiance, building on the successes and learnings of our investment to date.These are in addition to the residential, hotel and other development opportunities that exist above or adjacent to our centres, which we continue to progress in dialogue with local councils and potential specialist development partners. 2. REPOSITIONSTRATEGIC REPORTcapreg.com09Capital & Regional plcCapital & Regional AR 2018 Strategic proof 6.indd 904/04/2019 18:32:38 OUR STRATEGY
CONTINUED
3. REFOCUS
Management team
Agile management, data driven, decentralised to accelerate decision making and delivery
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OVERVIEW
We have refocused our business and resources with a revised
management platform and operational structure that puts
our centres at the heart of what we do, facilitating accelerated
responsiveness and optimal decision making in the delivery and
execution of our masterplan-led community strategy.
PROGRESS
In 2018 we completed the restructuring of our management
platform. We believe masterplanning is a collaborative process
and our decentralised management platform puts our General
Managers at the heart of our business where they live and
breathe our local communities every day. They are best placed to
drive the business forward, ensuring our decisions are tailored
to provide the right solutions for the community, with support
and professional advice from key functions within C&R‘s Support
Office.
We have invested in and repositioned our Support Office team
functions, to align the specialist skills most effective to delivering
our strategic aims at our centres. Our support structure is focused
on delivering at pace and with agility, capable of acting and
adapting swiftly to the opportunities and challenges that arise.
We have been flexible in our resourcing approach, matching talent
to specific requirements as and when required. In an environment
where the community centre is increasingly embracing a range of
different occupier uses, ensuring that our management platform
and skill base is tailored to deliver effectively is crucial.
FUTURE FOCUS
With the structural shifts we are seeing in retail and the diverse
changes and growth we are experiencing in our town centres, it is
essential our management platform retains agility and flexibility
to adapt.
Data insight and research will continue to inform strategy and
operational delivery decisions. Through that insight we will
continue to shape and evolve our management platform to
provide aligned and appropriately resourced expertise in the right
areas, at all times, to deliver strategy at pace.
Leasing & CML
Service
charge
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Health &
Saftey
ASSET
MANAGEMENT
Property
Management
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Marketing
Billing & Credit
control
H.R.
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4. ENHANCE
Shareholder value
Right offer driving footfall, dwell time and ultimately
retailer sales, C&R income and shareholder returns
OVERVIEW
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.
PROGRESS
The results we have seen in 2018 from our masterplan-led capex investment
reinforces our confidence in our strategy and the importance of continued
disciplined investment to drive performance.
FUTURE FOCUS
Continued capex investment is critical to the delivery of our community
shopping centre strategy and the acceleration of the programme is fundamental
to driving income growth. This will position C&R well to proactively respond as
markets stabilise.
Adjusting the dividend will assist in mitigating leverage and maintain capex
investment, which in the longer term is expected to support earnings growth.
Income
Sales
Footfall & dwell
Relevance
Proposition
See Managing Risks on page 26
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STRATEGY IN ACTION
LUTON
INCREASING COMMUNITY
CONNECTIONS
In February 2018 we announced the
leasing of 52,000 sq ft of previously
vacant office space above the centre
at The Mall, Luton to Luton Borough
Council. Three floors had been vacant
since 2008 and the final two since 2013.
A full refurbishment was undertaken,
including a new reception area directly
accessed from the shopping centre.
The letting enabled Luton Borough
Council to consolidate a number of
public sector uses into one location
under its One Public Estate strategy.
Floor one opened in May 2018 as an
NHS Community Hub employing 80
hospital staff. Floor two opened in
October 2018 as Luton Adult Learning
and floor three now provides office
space for the Care Quality Commission
(CQC) team alongside other Luton
Borough Council departments.
Since opening, visitor numbers to
Arndale House have steadily grown
as services have expanded and we
are currently averaging 850 visitors
per day. This is a clear example of our
strategy to introduce new uses into
the town centre to create a community
hub tailored for the people who live
and work in the town, while driving
footfall and new visitors to the centre.
The initiative also demonstrates
our collaborative working with the
council to cultivate Luton into a
thriving community.
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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.
Our approach is summarised below. 2018 saw subdued investment market activity, with transaction volumes at
record lows, with limited investment opportunities. Our focus has been on repositioning and remerchandising our
existing portfolio. Our scale has advantages as it enables us to be agile and respond more quickly to the changes
taking place in retail. Ownership of UK community retail is fragmented and we believe that there are opportunities
and benefits in the aggregation and consolidation of the ownership and management of these venues. As the
cyclical pressures abate coupled with an understanding of the continued critical role that physical stores have in
the sale and distribution of goods and services, our assets and management expertise will afford C&R an exciting
opportunity as a potential consolidator of UK community and mixed use retail assets in the UK.
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IDENTIFY ASSETS
Assets that typically meet our
potential investment criteria are
those 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.
THE RESULT
Attractive retail and leisure
environment
Improved guest experience
Increased footfall and spend
Driving retailer sales, letting
tension, and income and capital
value growth.
Each asset is held in order to
generate sustainable income
growth. 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.
REPOSITION AND
RE-MERCHANDISE
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 master plans
Comprehensive three to five 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 VALUES
INSPIRING
CREATIVE
THINKING
DELIVERING
DYNAMIC
SOLUTIONS
ACTING
WITH
INTEGRITY
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
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STRATEGY IN ACTION
ILFORD
A TAILORED APPROACH
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When C&R acquired the scheme in March
2017, there were long-term void units,
a confused merchandising mix, and an
environment that was cold and sterile.
Extensive research was carried out with
both shoppers and retailer tenants,
identifying a number of areas where the
centre could be developed to provide a
better experience.
The borough of Redbridge has 40%
more families than the UK average
and work was focused on improving
facilities and retail mix for this key guest
segment. Improved parent and baby
rooms, wayfinding, toilets, family parking
and pause points were introduced,
along with a temporary soft play area,
while the lower ground floor was being
reconfigured into a dedicated family zone.
The new family zone includes a 118 sq m
interactive ‘Wild Cubs’ kids play area - the
first of its kind in the UK - which provides
a safe and educational space for children
to slide, crawl and climb through, while
parents can take a break and look on
as their kids explore. An interactive LED
lighting system responds to human touch
with changing colour, brightness and
patterns, and an immersive art panel for
painting, drawing and puzzles, all of which
contribute to a state-of-the-art facility.
Ambience improvements were also
completed to create a warm, inviting and
stimulating zone to encourage our guests
to spend time and interact.
In September we launched the second set
of family facilities, including a gold-award
winning Changing Place Facility, enhanced
accessible toilets that meet the needs
of people with profound learning and
physical disabilities. A new Guest Lounge
has also been created providing Click and
Collect services together with changing
room facilities. The reconfigured family
zone area has allowed Costa Coffee to be
relocated next to the play area, we have
relocated independent retailer
Kidz Zone into an adjacent unit, and to
further enhance the family zone The
Entertainer will be opening a new store in
2019 from a unit that has previously been
vacant for a number of years.
Delivering results
Footfall increased +4.1% vs the
national index of -4.8%, in the 5 weeks
following the launch of new guest
facilities
Footfall +1.4% in 2018 vs 2017,
compared to national index of -3.5%
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ENCOURAGING
COLLABORATIVE
ENGAGEMENT
KEY PERFORMANCE INDICATORS
Why we use this as an indicator
Performance
How this links to our strategy
Progress during the year
KPI
Adjusted Profit¹
Adjusted Profit¹ per share
Adjusted Profit seeks to track the recurring
profits of the business which is the key driver
for dividend payments.
Dividend per share
This is the cash return to be delivered to investors
in respect of the year under review.
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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 value
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.
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
C&R
Index
2018
2017
£30.5m
£29.1m
4.2p
4.1p
2.42p
3.64p
mitigate the impact on leverage.
59p
67p
48%
46%
£51.9m
£51.6m
+1.2%
97.0%
97.3%
-3.5%
We target delivering a strong and sustainable income return.
An increase of 4.8% in Adjusted Profit or 3.1% on a per share basis
reflected growth in Net rental income, and a £1.6 million reduction
in net central operating costs.
Dividends are a key element of shareholder returns. We aim to
The Board is recommending a final dividend of 0.60 pence per
preserve a strong income return to shareholders and meet our
share taking the full-year dividend to 2.42 pence per share.
requirements under the REIT regime balanced with managing cash
The Company has been actively exploring financing options to
within the business to fund investment in capital expenditure and
underpin its capex plans. The Board has concluded that adjusting
the dividend, in combination with a restructuring of two of the
Group’s debt facilities is the best option at this point in time given
current market uncertainties. The cash preserved will assist in
mitigating leverage and maintain capex investment, which in the
longer term is expected to support earnings growth.
We aim to maximise the value of our assets. Our capital
EPRA NAV fell by 8 pence due to revaluation loss net of capital
expenditure investment programme is planned to deliver a capital
expenditure.
return over and above the income enhancement.
Having the appropriate level of gearing is important to effectively
Net debt to property value increased to 48% as a result of the fall
manage our business through the property cycle. Our target range
in property valuations.
is 40%-50%, with the objective of reducing to the lower end of this
in the medium term.
Net rental income is the most critical component of our Adjusted
The increase in Net rental income reflected the full-year impact of
Profit and the source for maintaining a strong and sustainable
the Ilford acquisition.
income return.
Footfall performance provides an indication of the relevance and
Footfall at the Group’s UK shopping centres significantly
attractiveness of our centres, influencing occupier demand and
outperformed the national ShopperTrak index by 4.7 percentage
future letting performance.
points.
Occupancy has a direct impact on the profitability of our schemes
Strong letting activity during the year resulted in stable occupancy
and also influences footfall and occupier demand.
rates of 97%.
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.
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Why we use this as an indicator
Performance
How this links to our strategy
Progress during the year
We target delivering a strong and sustainable income return.
An increase of 4.8% in Adjusted Profit or 3.1% on a per share basis
reflected growth in Net rental income, and a £1.6 million reduction
in net central operating costs.
KPI
Adjusted Profit¹
Adjusted Profit seeks to track the recurring
profits of the business which is the key driver
for dividend payments.
Adjusted Profit¹ per share
Dividend per share
This is the cash return to be delivered to investors
in respect of the year under review.
2.42p
Dividends are a key element of shareholder returns. We aim to
preserve a strong income return to shareholders and meet our
requirements under the REIT regime balanced with managing cash
within the business to fund investment in capital expenditure and
mitigate the impact on leverage.
The Board is recommending a final dividend of 0.60 pence per
share taking the full-year dividend to 2.42 pence per share.
The Company has been actively exploring financing options to
underpin its capex plans. The Board has concluded that adjusting
the dividend, in combination with a restructuring of two of the
Group’s debt facilities is the best option at this point in time given
current market uncertainties. The cash preserved will assist in
mitigating leverage and maintain capex investment, which in the
longer term is expected to support earnings growth.
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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.
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 8 pence due to revaluation loss net of capital
expenditure.
Net debt to property value
We aim to manage our balance sheet effectively
with the appropriate level of gearing.
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 of this
in the medium term.
Net debt to property value increased to 48% as a result of the fall
in property valuations.
Net rental income
This is the key driver of Adjusted Profit.
Net rental income is the most critical component of our Adjusted
Profit and the source for maintaining a strong and sustainable
income return.
The increase in Net rental income reflected the full-year impact of
the Ilford acquisition.
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.
-3.5%
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 4.7 percentage
points.
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 stable occupancy
rates of 97%.
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
C&R
Index
2018
2017
£30.5m
£29.1m
4.2p
4.1p
3.64p
59p
67p
48%
46%
£51.9m
£51.6m
+1.2%
97.0%
97.3%
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26298 4 April 2019 4:35 pm Proof 6LAWRENCE HUTCHINGS CHIEF EXECUTIVE2018 marked my first full year in the business and proved to be a challenging one for the global equities markets, the UK, and physical retailing, where we continue to see an unprecedented rate of change driven by both cyclical pressures and the ongoing evolution of retailing. Evolution in retailing isn’t a new phenomenon. In the 27 years that I have been in this industry it has never stood still. The growth, then decline, of the department store, the advent of out-of-town superstores or “category killers” and their impact on many high streets and town centres, the rise of speciality store retailing and now online shopping are just some of the changes that have impacted the industry during that time. Change is a constant and success is defined by those companies best able to decipher and/or predict then respond and adapt to these changes. Being able to separate hype from reality and focusing on what can be controlled is a key part of this process. One of the many things that attracted me to C&R, and back to the UK, is the belief that C&R is well positioned to capitalise on the changes taking place in our industry. These changes are not confined just to retailing and retail-led destinations. The UK is a world leader in the adoption of digital media and technology take-up, including online shopping. The vast majority of retailers who we meet reaffirm our view of the importance of store-based retailing, that the intersection of where product meets people is as important as it ever has been, and our communities speak of the role community retail has in positively changing people’s lives, from the everyday to their aspirations for the future.Ownership of UK community retail is fragmented and we continue to believe that there are opportunities and benefits in the aggregation and consolidation of the ownership and management of these venues. We start from a strong position as our community shopping centres are located in some of the highest growth areas in the UK, with over 50 percent of our gross asset value in greater London and with a focus on non-discretionary, needs-based retail and services where the nature of the goods or economics impede online penetration. The quality of our underlying real estate creates a platform for greater density through mixed-use developments, transforming these locations into exciting and compelling places where people live, work and stay.In a dynamic retailing environment our scale has advantages as it enables us to be agile and respond more quickly to the changes we see taking place around us. We are committed to our internal management platform and in investing in retaining, growing and recruiting specialist skills in all aspects of repositioning and operating our properties, which we believe drives future returns. We believe that, as the cyclical pressures abate coupled with an understanding of the continued critical role that physical stores have in the sale and distribution of goods and services, our assets and management expertise will afford C&R an exciting opportunity as a potential consolidator of UK community and mixed-use retail assets in the UK.Notwithstanding the opportunities that will arise from further changes in retailing, our immediate focus is on improving the relevance, performance and value of our “ OUR OPERATIONAL RESULTS CLEARLY SUPPORT OUR STRATEGY THAT IS FOCUSED ON RESPONDING TO THE STRUCTURAL CHANGES IN THE RETAIL SECTOR.”CHIEF EXECUTIVE’S STATEMENTSTRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2018Stock Code: CAL16Capital & Regional AR 2018 Strategic proof 6.indd 1604/04/2019 18:32:56 Our plans are consistent with central government
planning policy, which supports the town centre first
strategy, and councils’ local area strategic development
plans. We recognise the importance of being a good
neighbour and our responsibility to work in partnership
with the communities in which we operate. It is hugely
important to us that our local communities benefit from
our presence both economically and socially and we
strive to communicate effectively with local stakeholders
based on the specific needs of each community.
OUTLOOK
Our operational performance has remained robust
throughout a challenging year in the retail market which
has been driven predominantly by the accelerated
pace of structural change and exacerbated by Brexit
uncertainty. These headwinds present some constraints
and the need to be selective on the investment of
capex. We are also seeing the ongoing polarisation in
retail venues, and the need for retailers to improve
profitability and enable greater levels of investment in
their customer proposition, both physical and online.
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However, despite these headwinds, I remain confident
that our strategy will realise the potential of our existing
portfolio, which is underpinned by its bias towards high
population growth areas in London and proximity to
busy transport hubs. We continue to believe that the
intersection of where product meets people remains of
critical importance to brands and retailers and that our
centres have a vital role to play as distribution platforms
for goods and services.
Finally I would like to acknowledge the hard work and
dedication of our teams in each of our centres and at
our support office in London. Thank you for your hard
work, support, feedback and inspiration.
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
“ THE INTERSECTION OF WHERE PRODUCT
MEETS PEOPLE REMAINS OF CRITICAL
IMPORTANCE AND OUR CENTRES HAVE A VITAL
ROLE TO PLAY AS DISTRIBUTION PLATFORMS
FOR GOODS AND SERVICES.”
existing assets and this is where our comprehensive masterplan approach
to asset repositioning is delivering results. Our focus needs to be on the
continued delivery of these repositioning and remerchandising masterplans
through ongoing investment in our capex programme, to ensure that our
assets meet the expectations and needs of our communities.
2018 RESULTS
Our 2018 results illustrate the quality of our underlying real estate and the
skill and expertise of our dedicated team who are driven by our objective
to create vibrant trading and meeting places. Their success is evidenced
by the industry-leading growth in our footfall performance which supports
continued leasing momentum. We have also made positive progress in
redefining our culture and delivering operational efficiencies. A key part of
this has been our move to a decentralised structure designed to provide
greater levels of input and empowerment to our onsite teams who are
best placed to direct how we tailor our customer proposition for the local
communities that we serve.
The roll-out of our capex programme continued during 2018 with £18.5
million invested across our portfolio, including our flagship family precinct in
Ilford, which has delivered impressive footfall and leasing results. We have
identified over 30 potential projects representing around £80 million
through our asset masterplans. These are in addition to the residential,
hotel and other development opportunities that exist above or adjacent to
our centres, which we continue to progress in dialogue with local councils
and potential specialist development partners.
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OPERATING REVIEW
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Highlights of letting activity
across the portfolio in 2018
include:
At Luton, the Luton Borough
Council (LBC) has leased 52,000
sq ft of previously vacant office
space following a £5.2 million
refurbishment. The Council has
taken a ten year lease for four
out of the five floors located
above the shopping centre.
Superdry and Lovissa have also
taken new retail units.
At Blackburn, Smiggle opened
in the scheme while Holland &
Barratt and local independent
jeweller, Peter Jackson, upsized
their units. We have also
signed new lettings with KFC in
Maidstone, Blackburn and Luton,
with Muffin Break in Maidstone
and Bodycare in Blackburn.
At Walthamstow, lettings were
made to Pret and 3G, and River
Island renewed its lease.
In Ilford, Body Shop renewed its
lease and Costa Coffee and Kidz
Zone relocated their stores to
the new Family Zone / Kids Play
area.
In January 2019, M&S announced
the closure of its store in our
Luton Mall, the only full line
M&S store remaining in our
portfolio. While M&S has eight
years remaining on the lease, we
are advancing plans for the unit,
having previously demonstrated
our ability to remerchandise
former department store space
with the BHS units.
In February 2019 key new
lettings were secured with
Empire for a new nine-screen
cinema to anchor the leisure
hub at Hemel Hempstead and
The Entertainer, which has
exchanged on a new lease at
Ilford in the Family Zone area
for a unit that has been vacant
for a number of years, again
reflecting the positive impact
our investment in community
facilities is having at our centres.
Consistent with the community shopping centre strategy we launched in December
2017, our key focus remains the ongoing remerchandising and repositioning of our
centres to reflect the changing requirements our communities, guests and retail
customers have in relation to physical retail destinations. This includes increasing the
amount of floor space we have in non-discretionary, needs-based retail and services
where consumers prefer or need physical interaction with goods and services providers.
In addition, we are actively involved in unlocking the latent value of our real estate in
the middle of town centres, with access to transport connections and complementary
uses and, in the case of the London portfolio, are able to increase the density of our
sites through the addition of residential, hotel, offices and other uses that enhance our
communities and generate value for our stakeholders.
Key to this is our masterplanning and leasing activities which drive our remerchandising
and repositioning and generate improvements in our customer proposition and income.
AFFORDABILITY AND OCCUPANCY COST DRIVING SUCCESSFUL
NEW LETTINGS, RENEWALS AND RENT REVIEWS
There were 87 new lettings and renewals in the period at a combined average premium
of 3.1%1 to previous passing rent and a 1.5%1 premium to ERV.
New lettings
Number of new lettings
Rent from new lettings
Comparison to ERV1
Renewals settled
Renewals settled
Revised rent
Comparison to ERV1
Combined new lettings and renewals
Comparison to previous rent1
Comparison to ERV1
Rent reviews
Reviews settled
Revised passing rent
Uplift to previous rent
Year ended
30 December
2018
42
£2.9m
+0.9%
45
£2.6m
+2.0%
+3.1%
+1.5%
21
£2.7m
+0.7%
1 For lettings and renewals (excluding development deals and leases impacted by CVAs) with
a term of five years or longer and which did not include a turnover element.
Our affordable rents, which average £15 per sq ft across the portfolio, and lower
occupancy costs, mean our assets remain attractive to existing and new occupiers alike.
OPERATIONAL PERFORMANCE
There were 78.8 million visits to our centres during 2018.
Footfall in 2018 increased by 1.2% on a like-for-like basis across the wholly owned
portfolio, a significant outperformance of the national index which declined by 3.5%.
Footfall performance was strongest at centres where we are furthest advanced in
delivering our strategy, most notably in Ilford and Walthamstow.
Car park income increased to £10.7 million, an improvement of 2.3% on
a like-for-like basis.
Click and collect transaction volumes continued to grow, increasing by 29% on the prior
year, further reinforcing the strength of our locations in the omni-channel shopping
experience and cost effective last mile fulfilment.
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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 changes in circumstance.
The most significant investment for 2019 is planned for Hemel
Hempstead with the introduction of a new Family Zone and
general ambience improvements in the first half of 2019, as well as
a leisure hub anchored by a new Empire Cinema being developed
over 2019 and 2020. In total more than £15 million is scheduled to
be invested on the asset across the next two years.
OTHER ASSETS AND OPERATIONS
The Kingfisher Centre, Redditch
(C&R net investment £0.8 million at 30 December 2018)
The property was valued at £118.6 million at 30 December
2018. A restructuring of the debt on the asset was agreed in
December 2018 and completed in early March 2019, reducing
C&R’s percentage holding to 12%. The combined net impact of
this, distributions received and the revaluation loss for the year
reduced C&R’s net interest at 30 December 2018 to £0.8 million.
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Snozone
Snozone produced a robust trading performance in 2018 with
revenue up 1% (£10.4 million) and profit of £1.5 million in line
with the previously record levels of 2017, despite adverse weather
impacting the peak Q1 trading quarter.
The Snozone business provides C&R with in-house operational
leisure expertise. This is utilised across the shopping centre
portfolio to assist with ongoing leisure operations and new
opportunities. The Snozone management team also provide
a platform to grow revenues with possible consolidation
opportunities in the fragmented market for snow sports or other
similar leisure operations.
See Spotlight on page 20
INSOLVENCIES
There were 35 units impacted by administrations or Company
Voluntary Arrangements (CVAs) in 2018 resulting in a loss of
£1.5 million in NRI in 2018. The pro rata full year impact, prior to
mitigation or re-letting any closed units, would be approximately
double. Of the 18 units that closed in 2018, seven have
subsequently been re-let on a temporary or permanent basis.
RENTAL INCOME AND OCCUPANCY
Contracted rent (£m)
Passing rent (£m)
Occupancy (%)
30 Dec
2018
30 Dec
2017
63.4
60.7
97.0
64.1
61.0
97.3
Contracted and passing rent showed small declines of £0.7 million
(1.1%) and £0.3 million (0.5%) respectively demonstrating the
resilience of the portfolio in the face of CVAs and insolvencies.
At 30 December 2018, there was £2.7 million of contracted rent
where the tenant is in a rent-free period, of which £1.9 million will
convert to passing rent in 2019. Occupancy remained strong at
97.0%.
CAPITAL EXPENDITURE
During 2018, we invested £18.5 million of capital expenditure
across our portfolio, enabling us to progress our asset
masterplans and repositioning projects consistent with our
strategy. A number of major projects were progressed or
completed:
Completion of £5.2 million office fit-out at Arndale House, Luton
(£4.3 million spend in 2018)
Hemel Hempstead – obtaining planning permission for
the cinema development (£0.4 million) and completing the
installation of a new façade for the Fareham House high street
block (£0.6 million)
Delivery of new Family Zone at Ilford (£1.7 million in 2018)
Walthamstow planning consent obtained in July 2018 for
approximately 500 new homes and 80,000 sq ft of new retail
and leisure space incorporating a dedicated new tube entrance
within the scheme (£1.1 million spend in 2018)
New guest facilities at Hemel Hempstead, Ilford, Wood Green
(£2.1 million in total in 2018)
We maintain strategic masterplans for each asset which are
updated on an ongoing basis. In total we have over 30 individual
projects identified for potential implementation over the next
three to five years, totalling over £80 million which we believe will
deliver in aggregate an income return of at least 8%.
Our investment in new and additional team members in leasing
and development has improved our ability to deliver the
masterplans at a faster rate with greater efficiency while improving
the quality of product supported through the engagement of
best-in-class consultants.
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SPOTLIGHT
SNOZONE
Snozone is the largest indoor ski slope
operator in the UK with venues in Milton
Keynes and Castleford, both of which are
real snow slopes, and Basingstoke, which
operates on a special indoor dry surface.
Since opening in 2000, over two million
people have been taught to ski or
snowboard. Snozone also provides family
friendly activities, such as sledging, and is a
popular venue for family days out.
As well as providing ski and snowboard
lessons, Snozone delivers a unique
education programme, aimed at schools
and colleges, teaching and accessing the
snow sports components of A’Level and
GCSE PE and sport subjects. The venues
also run school holiday camp programmes
combining snow based activities with non-
slope activities such as first aid courses for
children.
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Snozone is a leading advocate of Sport
England’s ‘This Girl Can’ campaign,
promoting, supporting and enabling
women and girls to get into sport. In 2016
they also launched their Snozone Disability
Snow School. They are also fully accredited
as being Disability Confident. The venues
also provide coaching to high performance
race teams.
The venues have full conference and
banqueting facilities and operate their
own bar and restaurants and diversify
in the off-season with a range of events,
from product launches to corporate team
building activities and celebratory parties
and dinners. Castleford even has its own
wedding licence. In 2017, Disney hired the
slopes at Milton Keynes to film the re-boot
of Aladdin.
Whilst competition in the indoor snow
slope sector has been strong since 2009,
Snozone is the market leader and pre-
tax profits have risen each year from a
base of £0.5 million (2011) to £1.5 million
(2018) despite a highly competitive active-
leisure market. Revenues moved forward
1% in 2018 to over £10.4 million.
In October 2017, Snozone was voted
‘Best Sporting Venue’ at The School Travel
Awards UK, beating Manchester United,
Twickenham Stadium, The National
Football Museum and Wimbledon Lawn
tennis museum & tours. In 2018 Snozone
was runner up to Twickenham stadium.
Snozone was also voted best active venue
by Daysoutwiththekids.com in 2018.
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STRATEGY IN ACTION
HEMEL
HEMPSTED
NEW GUEST SERVICES LAUNCH
The Marlowes, Hemel Hempstead
represents the biggest investment
project across our portfolio in 2019-2021.
Adopting our masterplan approach, and
building on the success of Ilford, it will
deliver enhanced guest and community
experiences, with a focus on three
key initial zones – family, leisure and
amenities.
We launched the first phase with new
guest facilities in September 2018 which
included improved toilets, parent and
child facilities, a children’s play area
as well as a brand new look and feel
to the entire facility. Alongside the
launch, new guests were encouraged to
visit the centre through the successful
implementation of a locally tailored
marketing campaign comprising outreach
communications including radio, press
advertising and outdoor media as well as
in-centre promotions.
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“HUGE CONGRATS TO
MARLOWES FOR THEIR
NEW FAMILY ROOM…
VERY WELL THOUGHT
OUT… WELL DONE
MARLOWES FOR YOUR
FORWARD THINKING”
SOCIAL MEDIA FEEDBACK
FOLLOWING LAUNCH
The new facilities have been a resounding
success, reflected in the rise in footfall,
which increased by 4.5% vs the national
index in the five weeks following the
launch. We received fantastic feedback
regarding the new facilities and our
social media updates about the changes
reached 25,000 people and generated
over 1,000 engagements on Facebook
alone.
2019 will see the delivery of the Family
Zone, followed by the delivery of a new
leisure precinct and the arrival of Empire
Cinema in summer 2021.
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FINANCIAL REVIEW
Profitability
Statutory revenue
Net rental income1
Adjusted Profit2
Adjusted Earnings per share2
IFRS (loss)/profit for 2018
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
Financing
Group net debt
Group net debt to property value
Average debt maturity3
Cost of debt4
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2018
2017
Change
£91.0m
£51.9m
£30.5m
4.23p
£(25.6)m
25.1%
10.7%
60p
59p
2.42p
57.2%
(5.3)%
£89.2m
£51.6m
£29.1m
4.10p
£22.4m
25.9%
12.7%
67p
67p
3.64p
88.8%
4.7%
+2.0%
+0.6%
+4.8%
+3.2%
-80bps
-200bps
-7p
-8p
-33.5%
£411.1m
£404.0m
48%
46%
+£7.1m
+2pps
6.3 years
7.3 years
-1.0 years
3.27%
3.25%
+0.2bps
1 Wholly owned assets.
2 Adjusted Profit and Adjusted Earnings per share are as 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.
3 Assuming exercise of all extension options.
4 Assuming all loans fully drawn.
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
Adjusted Profit
Adjusted Profit is used as it is considered by management to provide the best indication
of the extent to which dividend payments are supported by underlying profits as it seeks
to exclude items that are either non-cash movements or items that are one-off or do not
relate to the Group’s recurring operating performance.
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 and/or 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 such as restructuring costs where EPRA is
prescriptive.
Adjusted Earnings per share is Adjusted Profit divided by the weighted average number
of shares in issue during the year excluding own shares held.
A reconciliation of Adjusted Profit to the equivalent EPRA and statutory measures is
provided in Note 9 to the consolidated Financial Statements.
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Alternative performance measure used
Like-for-like amounts
Rationale
Like-for-like amounts are presented as they measure operating performance adjusted to
remove the impact of properties that were only owned for part of the relevant periods.
For the purposes of comparison of capital values, this will also include assets owned at
the previous period end but not necessarily throughout the prior period.
Net rent or Net rental income (NRI)
Net rental income is rental income from properties, less property and management
costs (excluding performance fees). It is a standard industry measure. A reconciliation to
statutory turnover is provided in Note 3 to the consolidated Financial Statements.
PROFITABILITY
Amounts in £m
Net rental income (wholly owned assets)
Net interest
Central operating costs net of external fees
Kingfisher Redditch
Snozone profit (indoor ski operation)
Tax charge
Adjusted Profit
Adjusted Earnings per share (pence)¹
Reconciliation of Adjusted Profit to statutory result
Adjusted Profit
Property revaluation (including deferred tax)
Loss on disposal of Ipswich2
Gain on financial instruments
Refinancing costs
Other items3
IFRS (loss)/profit for 2018
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P
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Year to 30
December
2018
Year to 30
December
2017
51.9
(18.9)
(4.3)
0.4
1.5
(0.1)
30.5
4.23
30.5
(52.5)
(3.8)
2.6
–
(2.4)
(25.6)
51.6
(18.7)
(5.9)
0.7
1.5
(0.1)
29.1
4.10
29.1
(6.3)
–
1.1
(0.5)
(1.0)
22.4
1 EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the Financial Statements.
2 Represents a write down on the 2017 Ipswich disposal following the final true-up of deferred consideration after the end of the two-year
earn-out window.
3 Includes £0.7 million for the non-cash accounting charge in respect of share-based payments (2017: £0.9 million).
Adjusted Profit – 2018: £30.5 million (2017: £29.1 million)
Adjusted Profit and Adjusted Earnings per share showed increases of 4.8% and 3.2% respectively, reflecting growth in NRI and a
£1.6 million reduction in net central operating costs, driven by cost initiatives.
NRI from wholly owned assets increased by £0.3 million or 0.5%. This included the full period benefit of £4.7 million of NRI from The
Exchange, Ilford, which was acquired on 8 March 2017, without which NRI was the same as the prior year. Net interest (see table further
below) increased by £0.2 million compared to the prior year period due to the full-year impact of the Ilford acquisition.
Net central operating costs improved by £1.6 million compared to 2017 as a result of the Group’s cost improvement plan which has now
delivered a saving of £2.7 million since 2016, equivalent to approximately 25% of 2016 gross central costs.
The contribution from Redditch fell from £0.7 million to £0.4 million due to lower NRI and a higher interest charge following the
refinancing in July 2017. A restructuring of the joint venture was agreed in December 2018 and completed in early March 2019 that has
diluted the Group’s interest from 20% to 12%. As a result of this the Group’s share of profit will no longer be equity accounted for and
income only recognised as distributions are received.
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FINANCIAL REVIEW
CONTINUED
IFRS (loss)/profit for the period – 2018: loss of £25.6 million (2017: profit of £22.4 million).
Including the Group’s share of Redditch, the loss on revaluation of investment properties for the year was £52.5 million (2017:
£6.3 million) and this was the key component driving a loss for the period of £25.6 million. A breakdown of valuations by property is
provided in the Net Asset Value section below.
The loss on disposal of £3.8 million represents a write-down on the 2017 Ipswich disposal following the final true-up of deferred
consideration after the end of the two-year earn-out window.
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NET INTEREST
Amounts in £m
Net Interest on loans
Amortisation of refinancing costs
Notional interest charge on head leases1
Central
Net Group interest
Year to
30 Dec
2018
Year to
30 Dec
2017
14.4
0.9
3.4
18.7
0.2
18.9
14.0
1.0
3.4
18.4
0.3
18.7
1 National interest charge with offsetting opposite and materially equal credit within other property operating expenses.
NET ASSET VALUE
The valuation of the wholly owned portfolio at 30 December 2018 was £855.2 million, reflecting a net initial yield of 6.23%.
Values of the Group’s London assets increased over the year, driven primarily by income growth in Walthamstow following on from the
remerchandising of the previous BHS unit into a new Lidl, gym, restaurant and Pret store, supported by continued strong investment
demand and underpinned by alternative use values.
The Group’s assets outside of London were significantly impacted by negative sentiment towards retail assets with the headline valuation
of the Group’s three South East assets declining by 10.1% and Blackburn falling by over 20%.
As a result, NAV decreased to £433.0 million and EPRA NAV to £431.7 million (December 2017: £481.4 million and £482.6 million),
respectively, reflecting the net impact of the fall in valuations (in the table below) and capital expenditure of £18.5 million. On a per share
basis Basic NAV fell by 7p to 60p and EPRA NAV fell by 8p to 59p from the 2017 equivalents.
PROPERTY PORTFOLIO VALUATION
Property at independent valuation
London
Ilford
Walthamstow
Wood Green
South East
Hemel Hempstead
Luton
Maidstone
Regional
Blackburn
30 December 2018
30 December 2017
£m
NIY %
£m
NIY %
86.2
124.6
238.3
449.1
44.9
195.4
69.0
309.3
5.69%
5.01%
5.12%
5.20%
7.35%
7.01%
7.74%
7.23%
82.4
107.7
231.2
421.3
54.0
214.0
76.0
344.0
6.54%
5.25%
5.25%
5.51%
6.88%
6.35%
6.70%
6.51%
96.8
7.70%
121.3
6.65%
Wholly owned portfolio
855.2
6.23%
886.6
6.06%
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FINANCING
The Group’s debt facilities are outlined in the table below. The fall in valuations has resulted in net debt to value increasing to 48%.
Details on these covenants are provided in the “Covenant Information” section on page 121. The Group was compliant with them at
30 December 2018 and throughout the year.
30 December
2018
Four Mall assets
Hemel
Ilford
Luton
Group RCF
On balance
sheet debt
Debt¹
£m
265.0
26.9
39.0
107.5
–
Cash²
£m
(9.3)
(1.7)
(2.3)
(5.2)
(8.8)
Net
Debt
£m
255.7
25.2
36.7
102.3
(8.8)
438.4
(27.3)
411.1
Loan to
value3
%
Net debt
to value3
%
Average
interest
rate
%
50%
60%
45%
55%
–
51%
48%
56%
43%
52%
–
48%
3.33
3.32
2.76
3.14
3.87
3.27
Fixed
%
100
100
100
100
–
94
1 Excluding unamortised issue costs.
2 Excluding cash beneficially owned by tenants.
3 Debt and net debt divided by investment property at valuation.
Duration
to loan
expiry
Years
Duration
with
extensions
Years
6.9
4.1
5.2
5.0
3.1
5.9
7.6
4.1
5.2
5.0
3.1
6.3
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After C&R’s year end, in early March 2019, the Group agreed a combined restructuring of its Hemel Hempstead loan and revolving
credit facility (RCF). Part of the RCF has been replaced with a £7 million capex facility on Hemel Hempstead that will help to part fund
the development of the cinema and related leisure works. The facility has effectively been reset on a development basis with income
and loan to value (LTV) covenants relaxed or waived for the next two years. The RCF has rebased to a £15 million facility with improved
headroom on both Total net worth and LTV covenants.
SOUTH AFRICAN SECONDARY LISTING
The Company maintains a primary listing on the London Stock Exchange (LSE) and a secondary listing on the Johannesburg Stock
Exchange (JSE) in South Africa. At 30 December 2018, 64,420,122 of the Company’s shares were held on the JSE share register,
representing 8.87% of the total shares in issue.
DIVIDEND
The Board is proposing a final dividend of 0.60 pence per share, taking the full-year dividend to 2.42 pence per share, representing
a 33.5 per cent decrease from 2017. As noted, the Board has decided to reduce the final dividend from the 2017 equivalent in order
to preserve cash to assist with funding the Group’s ongoing capex programme.
The key dates proposed in relation to the payment of the 2018 final dividend are:
Confirmation of ZAR equivalent dividend and PID percentage
Last day to trade on the 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
Tuesday, 26 March 2019
Tuesday, 2 April 2019
Wednesday, 3 April 2019
Thursday, 4 April 2019
Friday, 5 April 2019
Thursday, 16 May 2019
Thursday, 23 May 2019
The amount to be paid as a property income distribution (PID) will be confirmed in the announcement to be released on Tuesday,
26 March 2019. 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 Tuesday, 26 March 2019. Share certificates on the South African register may not be dematerialised or
rematerialised between Wednesday, 3 April 2019 and Friday, 5 April 2019, both dates inclusive. Transfers between the UK and South
African registers may not take place between Tuesday, 26 March 2019 and Friday, 5 April 2019, both dates inclusive.
Stuart Wetherly
Group Finance Director
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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 2018.
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PRINCIPAL RISKS AT 30 DECEMBER 2018
Following the risk reviews carried out as at 30 June 2018 and
30 December 2018, the identified risk ‘Internet risk’ has been
broadened to ‘Structural changes in retail’ to reflect the full
range of challenges to the industry. It was concluded that this
risk has increased in both significance and likelihood, reflecting
the restructuring and CVA activity in the last 12 months and
continued pressure on retailers’ store portfolios and impact of
the internet and other changes. Management also concluded that
Property investment market risks and Valuation risks had likewise
increased, the latter reflecting the potential for a wider range of
valuation outcomes due to the continued low level of transactional
evidence.
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 ongoing
Brexit negotiations, 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
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
Impact of leverage could magnify the
Monitoring of indicators of market
direction and forward planning of
investment decisions
effect on the Group’s net assets
Review of debt levels and consideration
of strategies to reduce if relevant
Tenant failures and reduced tenant
demand could adversely affect rental
income, lease incentive, void costs, cash
and ultimately property valuation
Large, diversified tenant base
Review of tenant covenants before new
leases signed
Long-term leases and active credit
control process
Good relationships with, and active
management of, tenants
Void management though temporary
lettings and other mitigation strategies
Valuation risk
Lack of relevant transactional evidence
Property valuations increasingly
Use of experienced, external valuers
subjective and open to a wider range of
possible outcomes
who understand the specific properties
Use of more than one valuer
Valuations reviewed by internal
valuation experts and key assumptions
challenged
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Risk
Impact
Mitigation
Threat from structural changes in retail
The trend towards online shopping,
multi-channel retailing, and increased
spending on leisure may adversely impact
consumer footfall in shopping centres
Changes in consumer shopping habits
Strong location and dominance of
towards online purchasing and delivery
may reduce footfall and therefore
potentially reduce tenant demand and
the levels of rents which can be achieved
An increased use of CVAs by retailers
as a means of restructuring and cost
reduction
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
Concentration and scale risk
By having a less diversified portfolio the
business is more exposed to specific
tenants or types of tenant
Tenant failures could have a greater
Regular monitoring of retail environment
impact on rental income
and performance of key tenants
Reduced purchasing power could impact
the ability to drive economies of scale
and the feasibility of certain investment
decisions regarding the operating
platform
Maintaining flexibility in operating
platform
Further diversification considered
through acquisitions or joint ventures
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Competition risk
The threat to the Group’s property assets
of competing in town and out-of-town
retail and leisure schemes
Competing schemes may reduce footfall
and reduce tenant demand for space
and the levels of rents which can be
achieved
Business disruption from a major incident
Major incident takes place
Financial loss if unable to trade or
impacts upon shopper footfall
Development risk
Delays or other issues may occur to
capital expenditure and development
projects
May lead to increased cost and
reputational damage
Planned value may not be realised
Monitoring of new planning proposals
Close relationships with local councils
and willingness to support town centres
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
Approval process for new developments
and staged execution to key milestones
Use of experienced project co-ordinators
and external consultants with regular
monitoring and Executive Committee
oversight
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MANAGING RISK
CONTINUED
Risk
FUNDING AND TREASURY RISKS
Liquidity and funding
Inability to fund the business or to
refinance existing debt on economic terms
when needed
Impact
Mitigation
Inability to meet financial obligations
Ensuring that there are significant
when due
undrawn facilities
Limitation on financial and operational
Efficient treasury management and
Breach of any loan covenants causing
flexibility
default on debt and possible accelerated
maturity
Cost of financing could be prohibitive
Unremedied breaches can trigger
demand for immediate repayment
of loan
forecasting with regular reporting to the
Board
Option of asset sales if necessary
Regular monitoring and projections
of liquidity, gearing and covenant
compliance
Review of future cash flows and
predicted valuations to ensure sufficient
headroom
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Interest rate exposure risks
Exposure to rising or falling interest rates
If interest rates rise and are unhedged,
the cost of debt facilities can rise and ICR
covenants could be broken
Regular monitoring of the performance
of derivative contracts and corrective
action taken where necessary
Hedging transactions used by the Group
to minimise interest rate risk may limit
gains, result in losses or have other
adverse consequences
Use of alternative hedges such as caps
OTHER RISKS
Property acquisition/disposal strategy
Exposure to risks around overpayment for
acquisitions
Overpayment may result in acquisitions
not delivering forecast returns
Portfolio not effectively managed through
The Group may not be able to take
the investment cycle, with sales and
de-leveraging at the appropriate time
advantage of investment opportunities
as they arise
Regular monitoring of the property
market and the use of professional
advisers
Impact of cycle reflected in business
planning
Covenants may move adversely when
cycle changes
Reputational risk
Adverse events or publicity,
including social media, may lead to
reputational damage
Negatively impact investor market
Close Board/Management oversight of
perception
major issues and decision making
May reduce shopper footfall and
demand from tenants for space
Effective pre-planning of
announcements and applications
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
Tax-related liabilities and other losses
could arise
Monitoring of public opinion through
focus groups and review of press and
social media
Use of PR advisers and media training
for Management
Monitoring of REIT compliance
Expert advice taken on tax positions and
other regulations
Maintenance of a regular dialogue with
the tax authorities
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Risk
Impact
Mitigation
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
Historic transactions
Historic sales have included vendor
warranties and indemnities and as such,
the Group has potential exposure to
future claims from the purchaser
Failure to comply could result in financial
penalties, loss of business or credibility
Training to keep Management aware of
regulatory changes
Loss of key individuals or an inability
to attract new employees with the
appropriate expertise could reduce
effectiveness
Warranty and indemnity-related
liabilities and other losses could arise
Expert advice taken on complex
regulatory matters
Key management are paid market
salaries and competitive incentive
packages
New LTIP awards made in 2018
Succession planning for key positions
Use of professional advisers to achieve
properly negotiated agreements in
terms of scope, extent of financial
liability and time frame
Monitoring of ongoing exposure
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VIABILITY STATEMENT
In accordance with the 2016 revision of the UK Corporate Governance 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 2021. 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 29. This incorporated the impact on covenant compliance of a significant fall in property valuations or property
income and considered the mitigating actions that would be open to Management in such a scenario, including the ability to delay or
reduce capital expenditure, releasing equity 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 2021.
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 29.
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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RESPONSIBLE BUSINESS
OVERVIEW
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.
Highlights from 2018
Retained the ROSPA Gold Award for 12th consecutive year.
Our Operational Standards Assessments increased by 9%
achieving 91%.
Our aim is to be socially responsible so that C&R is not only a
great place to work but 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.
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Our Compliance and Facilities Management audit achieved an
average score across the portfolio of 95%.
The launch of the new GEM’s training programme (Going
the Extra Mile) which has enhanced the guest and customer
experience together with enhanced KPIs for our FM service
contractors to ensure a seamless journey for our guests.
Priorities for 2019
Retain the ROSPA Gold Award.
Ensure that the biannual Operational Standards assessment
demonstrates continuous improvement at each centre by
improving the overall guest and customer experience.
Implement a successful transition to the new supplier contracts
for cleaning, security and maintenance. A new brand standard
performance measurement will also be launched to accurately
reflect the guest and customer experience across all services.
Launch a revised health and safety audit based on guest and
customer experience while still ensuring compliance with
statutory legislation with an average score of 95% across the
portfolio.
collect
+
try on
+
return
+
send
COMMUNITY IN ACTION
GEMS GOING THE EXTRA MILE
TRAINING PROGRAMME
2018 saw the launch of our own bespoke team training
and recognition programme GEMs (Going the Extra
Mile) across all our centres, which aims to ensure that
our guests receive an exceptional experience when
visiting our centres and engaging with our teams.
GEMs is a way of recognising and rewarding individual
team members who have provided a consistent
exceptional guest experience. To complement GEMs,
we have also launched our Sparkler Awards for
those one-off acts which are deserving of special
recognition.
The whole programme has been welcomed by our
teams and has already had a demonstrable positive
impact on our mystery shopper scores recently
conducted through Revo ACE awards scheme and has
shown a huge improvement across all centres with an
industry leading average score of 86%.
COMMUNITY IN ACTION
collectplus.co.uk
COLLECT+ CHANGING AREAS
Guests are able to shop online and pick their goods
up when it is convenient for them, or return products
bought online using the Collect+ service at our guest
service points located in the centres. Our enhanced
Guest Lounges, now open in Maidstone and Ilford,
enable guests to pick up their orders, try them on
before taking them home, or return them, in one
convenient location. Further roll-out across our
centres is planned in 2019.
Guests can also order online at Amazon and collect
or return in the centre using our new Amazon Locker
service. Over 59,000 parcels were handled via Collect+
and Amazon Lockers in 2018, a 29% increase on 2017.
This added service has been very well received by
guests, with many noting their busy lifestyles mean
the traditional delivery system does not suit them, but
using their local community shopping centre to fulfil
this requirement is perfect. Our research shows guests
who use the service go on and spend further in the
shopping centre, supporting our retailers.
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26298 4 April 2019 4:35 pm Proof 6ENVIRONMENTAL SUSTAINABILITYWe work hard to ensure that the 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 to 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 2018 Retained the Global Real Estate Benchmark (GRESB) Green Star Status Reduced CO2 emissions by 18% and reduced gas and electricity consumption on a like-by-like basis by 4.9%. Of the 4,605 tonnes of waste treated 99% diverted from landfill of which 99% re-used with 77% recycled and 22% waste to energy.Priorities for 2019 Achieve GRESB Green Star 4 star rating and satisfy all carbon compliance reporting and legislative requirements. Reduce gas and electricity consumption by 2% and water consumption (normalised by footfall at landlord-controlled facilities) by 1%. Introduce increased recycling within the food services areas by engaging with food retail customers and key stakeholders within the centres. Divert at least 95% waste direct from landfill and 90% recycled back to the supply chain. In conjunction with our centres and engaging local groups and community users to introduce refillable water opportunities within the centres.Report on Greenhouse Gas EmissionsThe reported CO2 emissions for 2018 have been produced with reference to the Greenhouse Gas Protocol. The reporting boundary has been defined using the operational control approach, reporting emissions for operations in which Capital & Regional has 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 deminimis and therefore are not included in the reported figures. Scope 2 emissions account for the total electricity purchased.Actual invoice data and site consumption logs have been used for reporting wherever possible, however some data has been estimated where required. It should be noted that the Scope 1 and Scope 2 emissions (where stated in tCO2e) are absolute values. The 2017 and 2018 figures are not necessarily directly comparable due to changes in emission factors, and the Group’s property portfolio included in the boundary. Scope 1 and 2 Mandatory Reporting*20182017**EmissionsScope 1 tCO2e1,3711,184Scope 2 tCO2e6,7638,739IntensityScope 1 and 2 kgCO2e/sq ft1.551.89* The reported emissions represents the best information available at the time of issue (15/02/2019). 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).** 2017 figures have been restated where material changes were subsequently identifiedCapital & Regional plccapreg.comCapital & Regional plc31STRATEGIC REPORTCapital & Regional AR 2018 Strategic proof 6.indd 3104/04/2019 18:33:05 WE ARE
AGILE
TEAM
WE ARE
ONE TEAM
WE ARE
ACCOUNTABLE
WE ARE
INNOVATIVE
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OUR PEOPLE
APPRENTICE
APPOINTMENT
THE MALL, BLACKBURN
Sumaiya Patel joined The Mall,
Blackburn in October 2018 as one
of the businesses, first apprentices
in the position as Guest Experience
Assistant. Sumaiya will work with us
for 15 months while she completes
her NVQ via Training 2000 and will
split her time between the Ask Me
Point and the management office.
The training and qualification will
provide Sumaiya with the skills
needed to provide excellent guest/
customer service.
By the end of the course Sumaiya will
be able to interact with guests in a
positive, knowledgeable way. It will
increase her confidence, which we
can see is already growing, enhance
her communication skills and help
her understand the importance of
listening to guests/customers.
RESPONSIBLE
BUSINESS
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 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 2018
All centres participated in the Revo Achievement in Customer Excellence
Awards (ACE) and achieved an average Mystery Shopper rating of 90%,
+11% improvement on last year and compared to the industry average
of 81%
Achieved 93% return rate on C&R Pulse, our in-house Staff Engagement
Survey, +7% on LYR.
Launched our new GEM Customer Service training programme where service
achieved an average Mystery Shopper rating of 86%, +25% improvement on
last year.
Employee NPS (Net Promotor Score) achieved +35 average for the year
compared to industry average of +5.
Successful launch of CARTER (Capital & Regional Team Engagement
Resource) achieved 98% active users.
Supported three interns in 2018 who all went on to secure full-time
employment.
Supported two staff in attending the OSS Academy retail management
development programme.
Priorities for 2019
To launch the GEMs training programme within the Support Office.
All centres to enter the Revo Achievement in Customer Excellence Awards
(ACE) and achieve an average rating of at least 81%.
To deliver a focused training and development programme supporting the
decentralised structure with the aim of developing high performing teams
across the whole business.
HR Fusion - To deliver the successful restructure of C&R and Mall People
Payrolls and implement an online HR System.
Our culture, how we do things and go about our work, is crucial in supporting
the delivery of our strategic priorities. In the summer of 2018, team members
from across the business came together to consider what culture we needed
going forward to be able to thrive in the changing retail world. The outcomes
were shared and the culture we aspire to agreed, as one of innovation and
agility; where we act as one team and are held accountable.
To support the decentralised business structure and culture, we launched
our internal communications platform CARTER to facilitate better interaction
between our support office and centres. Colleagues can more easily share
insights, stimulate conversations and discuss news flow relevant to the business.
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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 2018
Through C&R Cares we raised £340,000 for our local charities in 2018,
+8% on 2017.
We handled 59,000 Collect+ parcels in 2018, a 29% increase on 2017.
Now members of Retail Trust and developed a support platform for our
centre teams and retail customers.
The Mall Blackburn set up a Community Catch Up scheme which is suitable
for people of all ages and backgrounds that want to meet new people, learn
new skills or just enjoy a brew and a chat.
In October 2018 we launched the portfolio’s first Changing Place facilities
where we secured £60,000 financial support from the local authority in Ilford.
All centres supported Purple Tuesday (the UK’s accessible shopping day) in
November 2018.
Priorities for 2019
To continue to work with our local Mall Cares charities and at least match
2018 fundraising.
Committed to a long-term pledge to hold a quiet hour on at least one day
during any family events we hold in the centres.
To support mental health awareness across our communities by ensuring
every centre has at least two qualified Mental Health First Aiders.
To introduce a Disability Confident Committed scheme which supports our
commitment to make the most of the talents disabled people can bring into
the workplace.
CREATING A FULLY INCLUSIVE SHOPPING EXPERIENCE
We are committed to ensuring all of our guests have a positive experience when
visiting our centres. That means making sure our facilities are fully inclusive and
cater to all of our guests’ needs. We support people with disabilities by investing
in areas such as our family changing facilities, accessible toilets including
‘Changing Places’ facilities, as well as other projects such as Quiet Hour, and we
continue to support measures that benefit everyone. A highlight from 2018 was
‘Purple Tuesday’, a national campaign which established the UK’s first accessible
shopping day, to recognise the importance and needs of disabled consumers
and promote inclusive shopping.
DEVELOPMENTS IN OUR COMMUNITIES
Our asset masterplans include significant opportunities to evolve our centres
to keep pace with the rapidly changing retail landscape which includes
development activity at our centres. In evolving these plans we have the
opportunity to create vibrant community hubs combining key services, everyday
essentials and leisure facilities. Our centres are often the community focal point
where people meet, shop, eat, access information and services or simply visit
to be around people. We put great emphasis on building relationships with our
existing communities, making sure they are involved and fully engaged in what
we are doing. We share the view of government and expert industry bodies
in believing in the importance of vibrant, successful and active town centres.
Many of our team members have significant experience in urban regeneration
including award winning masterplans and projects in some of the UK’s largest
cities. We seek to engage the local community actively in the development and
planning process, from consultation and feedback through the planning journey
with continued communication of the development’s progress.
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COMMUNITY IN ACTION
CHANGING
PLACES
Thousands of people with profound
and multiple learning disabilities, as
well as other disabilities that severely
limit mobility, cannot use standard
accessible toilets. Over a quarter
of a million people in the UK need
Changing Places toilets but there are
only just over 1,000 across the UK.
Although the numbers are increasing,
there are still not enough Changing
Places toilets across the country.
The absence of suitable toilets mean
that people with complex disabilities
who need assistance cannot take part
in activities such as shopping, going
out for a meal or attending events.
C&R is committed to improving
accessibility and we have invested
in two state of the art Changing
Places at The Exchange, Ilford
and The Marlowes, Hemel Hempstead
as part of our refurbishment of the
centres’ facilities.
‘QUIETER
HOUR’
We understand how difficult it can
be for individuals and families with
special sensory needs to make a trip
to a shopping centre, like so many
others do regularly, let alone participate
in activities which can be noisy and
overwhelming. So, during The Mall
Luton’s key family campaign events this
year we offered Quiet sessions, in the
evenings and on Sunday mornings when
the centre was closed to the public, with
no music or flashing lights to create a
calming and less daunting environment
for children with autism. We’ve had
excellent guest feedback, and the events
have grown in popularity as attendees
have shared their experience with
others on line and by word and mouth.
In 2019 we have committed to a long
term pledge to hold quiet hours in all of
our centres during family events.
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C&R CARES
Key to supporting our local communities
is our C&R Care initiative. Our centres run
their own unique charitable programme
of fundraising activities for locally
selected charities. This year we raised an
impressive £340,000, an increase of 8% on
2017, benefiting 190 local organisations
and charities.
To launch their 2018 Poppy Appeal,
The Mall Luton squeezed a full-size
Supermarine Spitfire replica into the
centre. Guests stood in awe admiring
the iconic British Royal Air Force aircraft.
Over £24,000 was raised for the Luton
Poppy Appeal through the Poppy stand
and Poppy shop at The Mall, which saw
the Mall team work closely with the Royal
British Legion and volunteers from the
local community.
RESPONSIBLE
BUSINESS
CONTINUED
We understand that the process of delivering change can have lasting effects on
the towns in which we work and their communities. We act in partnership with
these communities seeking opportunity for long-term engagement: to consult,
explain, listen and be adaptable. We operate in a manner that is consistent with
national planning policy and with development plans and frameworks locally.
The views of local people are important and welcomed and we seek consensus
support. We do acknowledge that this is not always possible and that some
groupings within the community will seek development outcomes that are
not aligned with our plans. We are committed to an open dialogue with
community interest groups and individuals to reach the best understanding and
accommodation that is possible. We will not always fully agree and where this
happens will say why.
C&R has formally opposed a planning application for a new out of town retail
led development at Newlands Park at Junction 10A of the M1 motorway (also
including leisure and office space). The applicant is 2020 Developments, a
subsidiary of 2020, owner of Luton Town Football Club. The application was
submitted in anticipation of raising funds to support the development of a new
football stadium on the Power Court site in the town centre. We are supportive
of the new football stadium at Power Court, for which planning permission was
granted on 16 January 2019. Our specific, detailed, evidence-based objection is
to the retail and leisure town centre uses element of Newlands Park which are
advised to be in clear contravention of national planning policy and the Luton
Local Plan. We consider that the retail development will be damaging to the
town centre as a whole and therefore its role in serving the local community.
“ THE MALL IS IN THE HEART OF WALTHAMSTOW
AND WALTHAMSTOW IS IN THE HEART OF
WALTHAM FOREST. TO HAVE A PARTNER
LIKE CAPITAL & REGIONAL WORKING WITH
US, WORKING WITH THE LOCAL COMMUNITY,
BRINGING THEM IN, RUNNING VARIOUS EVENTS
AND SUPPORTING US IN OUR MOST IMPORTANT
YEAR CANNOT BE OVERESTIMATED.”
MARTIN ESOM, CHIEF EXECUTIVE,
LONDON BOROUGH OF WALTHAM FOREST
A section of the local community principally associated with Luton Town Football
Club has characterised our objection to the retail element of the Newlands Park
scheme as C&R acting in a way that is contrary to the will of the community of
Luton Borough. We are clear that this is not the case. Rather, it is a technical
planning dispute which does not compromise our support and commitment to
the community as a whole. We are active in supporting community initiatives
in Luton through local team members serving as Board members or in other
leadership capacities; providing direct financial support; and voluntary work.
Luton Borough Council resolved to grant planning permission for the Newlands
Park development on 11 March 2019 and it has been referred to the Secretary
of State for Housing, Communities and Local Government as it is a departure
from the development plan (Luton Local Plan). C&R, alongside a range of
other parties, has requested that the Secretary of State ‘call-in’ the application
for his own decision following a public inquiry conducted by an independent
Planning Inspector.
In Walthamstow a small group of objectors and activists opposed our plans
to extend the centre to provide 80,000 sq ft of retail and leisure space and
c 500 residential units. We submitted a planning application in the first half
of 2017 following a full public consultation process including open meetings
to understand and address any concerns of the local community. We were
successful in obtaining of full planning consent in July 2018 which was not
challenged. Our proposals are fully supported by the local authority and
GLA. We are comfortable that they entirely align with our commitment to
the local community.
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RESPONSIBLE
BUSINESS
CONTINUED
COMMUNITY ENGAGEMENT IN NUMBERS
190
CHARITIES
SUPPORTED
105
COMMUNITY
GROUPS SUPPORTED
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4,303
VOLUNTARY HOURS DONATED
TO SUPPORTING THE LOCAL
COMMUNITY
158
COMMUNITY
EVENTS HOSTED
£
£340,000
RAISED FOR
C&R CARES
6
CENTRES ACTIVELY
SUPPORT THE BID
(BUSINESS IMPROVEMENT
DISTRICTS)
£128,000
COMMUNITY
FUNDING
SPONSORSHIP
9,265
JOBS SUPPORTED
BY OUR CENTRES
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DIRECTORS
EXECUTIVE DIRECTORS
NON-EXECUTIVE DIRECTORS
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LAWRENCE HUTCHINGS
CHIEF EXECUTIVE, APPOINTED 2017
Member of Responsible Business Committee
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.
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.
HUGH
SCOTT-BARRETT
CHAIRMAN
APPOINTED
CHAIRMAN 2017
(FIRST APPOINTED 2008)
Chairman of Nominations
Committee
Before moving to
become Non-Executive
Chairman, Hugh was Chief
Executive of Capital & Regional
from 2008 to 2017. He was
previously a member of ABN
AMRO’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 University. Hugh is the
Chairman of GAM Holding AG,
a Swiss asset management
company, and a Non-Executive
director of RBR Group
Limited, a privately owned
leisure group.
STUART WETHERLY
GROUP FINANCE DIRECTOR AND COMPANY SECRETARY,
APPOINTED 2019
Member of Disclosure Committee
Stuart joined Capital & Regional as Group Financial Controller
in 2012 and took on the additional role of Company Secretary
in 2013. Stuart was appointed Acting Group Finance Director in
October 2018. Prior to joining Capital & Regional, Stuart was a
Director in Deloitte Audit in London and previous to that worked
at Johnson Matthey plc having originally qualified as a Chartered
Accountant in his first spell with Deloitte LLP.
•=*Independent (as per the UK Corporate Governance Code).
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WESSEL HAMMAN
NON-EXECUTIVE
APPOINTED 2015
Wessel is the Chief Executive
of Clearance Capital Limited,
a real estate investment
management firm which he
co-founded in 2008. Wessel
qualified as a Chartered
Accountant at KPMG in
South Africa and spent ten
years in the Investment
Banking industry with the
FirstRand Group.
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
Safestore Holdings plc
and the Audit Committee
Chair of Primary Health
Properties plc. 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 LLP.
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LOUIS NORVAL
NON-EXECUTIVE
APPOINTED 2009
LAURA WHYTE
NON-EXECUTIVE*
APPOINTED 2015
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 Executive
Chairman of Homestead Group
Holdings Limited and serves
on the board of a number of
other companies including
Hyprop Investments Limited.
He graduated with a BSc (QS)
(with distinction) from the
University of Pretoria.
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 Chair of
XLVets UK Ltd, 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 and Non-Executive
Director of the British
Horseracing Authority. She is a
Trustee of The Old Royal Naval
College, Greenwich.
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SENIOR LEADERSHIP TEAM
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5
6
4
3
2
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1 LAWRENCE
HUTCHINGS
Chief Executive
2 STUART WETHERLY
Group Finance Director and
Company Secretary
3 VASILIKI ARVANITI
Asset Portfolio Director
Vasiliki Arvaniti joined C&R
in 2018 as Director of Asset
Portfolio. Vasiliki has over
15 years’ experience across
different property sectors
working for major property
companies including Landsec,
Hammerson and Lambert
Smith Hampton.
4 SARA JENNINGS
Director of Guest and
Customer Experience
Sara began her retail career
working for House of Fraser
in Store Management before
joining C&R in 2001. She has
held a number of positions
within C&R before taking on
the role of Director of Guest
and Customer Experience.
Sara is responsible for the
day-to-day management of
shopping centres and leads the
integration process of newly
acquired schemes.
5 JAMES RYMAN
Investment Director
As Investment Director, James
is responsible for driving
investment performance
from our shopping centre
portfolio. He joined C&R in
2007 and prior to that qualified
as a Chartered Surveyor
at Donaldsons Chartered
Surveyors where he spent 13
years specialising in all aspects
of shopping centre asset
management, latterly running
the Retail Asset Management
team.
6 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 having previously
worked at NEAT developments,
Ballymore and Hammerson.
Joe leads the development
and project team responsible
for delivery of the business’
capital expenditure across the
portfolio.
7 HELEN MALLOWS
HR Manager
As a long-standing member
of the C&R team, Helen leads
the people management and
office support functions within
C&R. As well as ensuring the
organisation is fully compliant
from an employment
perspective, Helen works
consistently to improve
the employee experience
through the implementation
of the People Plan, delivery of
training and development and
the progress of C&R cultural
change.
SNOZONE
SNOZONE
NICK PHILLIPS
Managing Director, Snozone
Nick joined C&R in 2012 as
Snozone’s Managing Director.
Nick started his career with
Aldi, joining them in their
embryonic stages in the UK as
a regional New Store Openings
Manager in the northwest. He
then went on to hold a number
of positions with Lidl and
Whitbread PLC as David Lloyd
Leisure’s Regional Director
for the south of England
before becoming their Sales &
Operations Director for the UK
& Europe.
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CORPORATE
GOVERNANCE REPORT
CHAIRMAN’S INTRODUCTION
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HUGH SCOTT-BARRETT
CHAIRMAN
I am pleased to present Capital & Regional’s corporate governance
report for 2018.
The primary operational focus of C&R in 2018 has been on the
continued roll-out of our Community Shopping Centre strategy. 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.
There have been changes of personnel on the Board with the
resignation of Charles Staveley as Executive Director and the
resignation of Guillaume Poitrinal as a Non-Executive Director. I
would like to thank both Charles and Guillaume for their contribution
to the Company and wish them well with their future endeavours.
Stuart Wetherly was appointed as Group Finance Director and
Executive Director on 11 March 2019. He will also continue in his role
as Company Secretary for the Group.
It has been agreed that a recruitment process for my successor, led
by our Senior Independent Director Tony Hales, will begin following
the Annual General Meeting in May 2019. I will step down in due
course, once my successor is appointed.
The Board remains committed to high standards of corporate
governance which it considers to be critical to effective management
and to maintaining investor confidence. I am satisfied that our
approach, as embedded throughout our business, delivers this and
will continue to evolve and improve to keep pace with changes in
best practice and regulation, including the adoption of the 2018 UK
Corporate Governance Code.
Hugh Scott-Barrett
Chairman
SNOZONE
SNOZONE
NICK PHILLIPS
Managing Director, Snozone
Nick joined C&R in 2012 as
Snozone’s Managing Director.
Nick started his career with
Aldi, joining them in their
embryonic stages in the UK as
a regional New Store Openings
Manager in the northwest. He
then went on to hold a number
of positions with Lidl and
Whitbread PLC as David Lloyd
Leisure’s Regional Director
for the south of England
before becoming their Sales &
Operations Director for the UK
& Europe.
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CORPORATE
GOVERNANCE REPORT
CONTINUED
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 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 AGM. Other meetings during the year will review the
Company’s strategy and budgets for the next financial year and
the Company’s key risks and financial and operating performance.
COMPLIANCE STATEMENT
Compliance with the UK Corporate Governance Code
The Company has throughout the year ended 30 December
2018, complied with the provisions of the 2016 UK Corporate
Governance 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 the Chief
Executive.
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.
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BOARD COMMITTEES
Audit Committee
Meets at least three times per year
Further information on pages 44-45
Disclosure Committee
Meets as required
Executive Committee
Meets weekly
Nomination Committee
Meets at least once a year
Further information on page 43
Remuneration Committee
Meets at least twice per year
Further information on pages 46-63
Responsible Business Committee
Meets at least twice per year
Further information on pages 30-34
Chairman – Ian Krieger
Members – Tony Hales, Laura Whyte
Chairman – Lawrence Hutchings
Members – Hugh Scott-Barrett, Stuart Wetherly
Chairman – Lawrence Hutchings
Members – James Ryman, Stuart Wetherly
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.
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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 the Chairman, two Executive Directors and
five Non-Executive Directors.
The Board reviews the independence of its Non-Executive
Directors on an annual basis. Hugh Scott-Barrett is not considered
independent as he previously served as Chief Executive of the
Company within the last five years and has served on the Board
for more than nine years from the date of his first appointment.
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. Louis
Norval has served on the Board for more than nine years from
the date of his first appointment. The Board has concluded that
all other Non-Executive Directors continue to demonstrate their
independence.
VISITING THE BUSINESS
Getting out and about in the business is important for the Board
as this enables the Non-Executive Directors to see first-hand
how our assets are run and, importantly, meet local teams.
This provides an experience of the business which cannot be
replicated in the boardroom and also enables the Directors to
engage with teams at all levels in the business. Such activities
give a real insight into how the culture and values of the business
work in a day-to-day setting. The Board generally undertakes one
or two visits to operational locations during the year and holds at
least one Board meeting at a C&R location other than the Support
Office.
BOARD AND COMMITTEE MEETINGS
The number of meetings of the Board and its Committees during
2018, and individual attendance by Directors, is set out below.
Board meeting attendance in 2018
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. Tony Hales,
as Senior Independent Director, undertakes 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.
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
requirements and access to independent advisers. Ongoing
training requirements are reviewed on a regular basis and
undertaken individually, as necessary.
Other committee meeting attendance in 2018
Number of meetings
H Scott-Barrett
L Hutchings
I Krieger
T Hales
L Whyte
Number of meetings
H Scott-Barrett
L Hutchings
C Staveley (resigned 15 August
2018)
T Hales
W Hamman
I Krieger
L Norval
G Poitrinal (resigned 31 October
2018)
L Whyte
Scheduled
Total
6
6/6
6/6
5/5
6/6
6/6
6/6
6/6
2/5
6/6
6
6/6
6/6
5/5
6/6
6/6
6/6
6/6
2/5
6/6
Audit
Committee
3
Remuneration
Committee
4
Responsible
Business
Committee
4
Nomination
Committee
4
4
3
3
3
4
4
4
4
4
4
3
4
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CORPORATE
GOVERNANCE REPORT
CONTINUED
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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);
strategy; and
performance of the Board’s sub-committees.
The completed questionnaires are collated by the Company
Secretary and presented to the Board for a subsequent
discussion. The Board discussed the results of the 2018 evaluation
at its first meeting of 2019. 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 sufficient time and debate was allocated to
strategy which received a high level of support. The established
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 roadshows, 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.
FINANCIAL AND BUSINESS REPORTING
Please refer to:
page 68 for the Board’s statement on the Annual Report and
Accounts being fair, balanced and understandable;
page 29 for the statement on the status of the Company and
the Group as a going concern; and
the Strategic Report on pages 2 to 34 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 68.
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Diversity Policy
The Nomination Committee, and the Board, recognises the
importance of diversity, is supportive of the Davies Report and
subsequent Hampton-Alexander 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.
While the Group falls below the current threshold for reporting
under the Gender Pay Gap Regulations, a review of the Group’s
position was completed in 2018. The results of the review were
discussed by the Board and recommendations arising from the
report have been adopted. A review will be completed annually
to ensure progress continues to be made in reducing the gender
pay gap.
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NOMINATION COMMITTEE
The Nomination Committee meets as required to select and
recommend to the Board suitable candidates for both Executive
and Non-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 transitioning from Chief
Executive to the Non-Executive Chairman. While fully cognisant of
the 2016 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,
given the critical need for experience and continuity at a time
when the Board was undergoing significant change. The Chairman
and the Nomination Committee agree that it is now the
appropriate time to seek a successor and the Committee will
focus in 2019 on managing an orderly transition by recruiting a
new Chair. Further announcements will be made in due course.
Following the resignation of Charles Staveley as Group Finance
Director, Stuart Wetherly was appointed on an interim basis as
Acting Group Finance Director on 1 October 2018. Stuart was
appointed Group Finance Director and Executive Director on
11 March 2019. He will also continue in his role as Company
Secretary for the Group.
Guillaume Poitrinal resigned from the Board on 31 October 2018
due to the demands of other business commitments. While
Guillaume’s appointment was in a personal capacity he was
not deemed independent due to being Chairman of ICAMAP
Investments S.àr.l, a significant shareholder in the Company.
The Board has taken the decision to not appoint a replacement.
The Committee has considered the new requirements under the
2018 UK Corporate Governance Code in relation to workforce
engagement. After considering the methods outlined, Laura
Whyte will be appointed as the designated Non-Executive Director
for workforce engagement. The Committee will focus on further
defining and tailoring the role and responsibilities in line with
C&R’s culture during the first half of 2019.
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AUDIT COMMITTEE REPORT
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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. Undertaking a full tender process in respect of external audit services
in compliance with legislation and The Financial Reporting Council (FRC)
guidance on best practice;
d. Reviewing Deloitte LLP’s plan for the 2018 Group audit and approving
their terms of engagement and proposed fees;
e. Reviewing reports on internal control reviews on payroll and commercial
income matters prepared by management;
IAN KRIEGER
CHAIRMAN OF THE AUDIT COMMITTEE
f. Considering the effectiveness and independence of Deloitte LLP as
external Auditor and recommending to the Board their reappointment;
The Audit Committee is chaired by Ian Krieger, a
Chartered Accountant who has recent and relevant
financial experience as required by the 2016 UK
Corporate Governance Code. The other members of the
Committee are Tony Hales and Laura Whyte. Charles
Staveley, the Group Finance Director, attended the two
Audit Committee meetings held prior to his resignation
in August 2018. Stuart Wetherly, as Acting Group
Finance Director attended the final meeting of the year.
Other senior members of Finance and representatives
from Deloitte LLP, the Company’s external Auditor,
attended meetings by invitation. 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.
g. Reviewing management’s biannual Risk Review report and the
effectiveness of the material financial, operational and compliance
controls that help mitigate the key risks;
h. Reviewing the effectiveness of the Group’s whistleblowing policy;
i. Reviewing and updating the Group’s policy for the award of non-audit
work to its external Auditor;
j. Considering management’s approach to the viability statement in the
2018 Annual Report;
k. 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;
l. Reviewing compliance with the Criminal Finances Act, including the
Group’s approach to prevention of the facilitation of tax evasion and the
Group’s policy and provision of training;
m. Reviewing, responding and concluding a request for further information
regarding the Annual Report process from the FRC Corporate
Governance & Reporting Division, in relation to specific disclosures
relating to the 2017 Annual Report. The review conducted by the FRC
was based solely on the Group’s published report and accounts and does
not provide any assurance that the report and accounts are correct in all
material respects; and
n. 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.
SIGNIFICANT ISSUES CONSIDERED IN RELATION
TO THE FINANCIAL STATEMENTS
During the year, the Committee considered key accounting matters and
judgements in respect of the financial statements relating to:
Investment property valuation – At 30 December 2018 the value of
the Group’s investment property assets was £855.2 million including its
interest in 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 2018 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
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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 alongside the key assumptions, particularly where
balances were held with reference to value in use as opposed
to net assets of the underlying entity.
AUDITOR ROTATION AND TENDER PROCESS
Deloitte LLP has been Auditor of Capital & Regional plc since
1998 and, prior to this year, the audit was last put out to tender
in 2009 when Deloitte was reappointed. Considering this and
the Committee’s commitment to put the audit out to tender at
least every ten years, a tender process was completed in 2018 for
the audit of the year ending 30 December 2018. The Committee
undertook a full tender process in respect of external audit
services in compliance with legislation and FRC guidance on
best practice, in particular ensuring independence in respect of
potential audit firms.
Three firms, including Deloitte LLP, were invited to take part in
the tender process. During the tender process, each firm was
given access to members of the Group’s senior management and
presented to the Audit Committee. The tendering firms were judged
against objective criteria determined in advance of the process,
together with the findings and conclusions of published inspection
reports on the audit firms. Whilst the Committee appreciated
the quality of the proposals presented by all the tendering
firms, it considered that the submission and team from Deloitte
LLP best met the predefined criteria it had set. It was therefore
recommended to the Board that Deloitte LLP be reappointed as the
Company’s Auditor commencing with the audit of the financial year
ending 30 December 2018.
Deloitte LLP, under EU guidance for mandatory Auditor rotation,
can serve as Auditor until the year ending 30 December 2023.
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
was selected to be the new lead audit engagement partner
and 2018 is the first year that Matthew has acted as lead audit
engagement partner.
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OVERSIGHT OF THE EXTERNAL AUDITOR
The Committee reviews the audit plan for the year and
subsequently considers how the Auditor performed in relation
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 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.
The only fees paid to Deloitte LLP during 2018, other than for their
year-end audit, was £40,000 for their review of the Group’s interim
statements for the six months to June 2018 and £20,000 for a
consultancy project where Deloitte were considered best placed to
assist given their market-leading expertise.
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, and an
assessment of material control effectiveness.
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 the Audit Committee
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DIRECTORS’
REMUNERATION REPORT
INTRODUCTION
TONY HALES CBE
CHAIRMAN OF THE REMUNERATION COMMITTEE
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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 2018.
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 2018. The 2016 Remuneration
Policy is published and available on our website for reference at
https://capreg.com/media/2771/cr-remuneration-policy-2016-2018.pdf.
The Committee will present a revised remuneration policy to shareholders
for approval for a three-year period at the 2019 AGM. This follows on from a
review of the policy undertaken by the Committee which believes that there
is a divergence between the existing remuneration arrangements and the
Company’s remuneration principles that are intended to ensure alignment
to the strategy of the Company and to latest corporate governance
best practice.
BOARD CHANGES
As shareholders will be aware, there were two changes to the Board during
the year. Charles Staveley stepped down from the Board as an Executive
Director on 15 August 2018 and on 31 October 2018, Guillaume Poitrinal
stepped down from his position as a Non-Executive Director. These changes
impacted the remuneration of the individuals concerned, however, the
Committee ensured that remuneration packages were in line with the policy
agreed by shareholders.
Charles Staveley continued to be employed by the Company on a full-time
basis until 31 December 2018 on the same terms as he was employed as a
Director. An exit payment of £299,854, was made to Charles and full details
of the payment are outlined in the report. For the purposes of the LTIP,
Charles was treated as a good leaver with his awards pro-rated relevant to
the date of ceasing to be employed.
Stuart Wetherly was appointed as interim Group Finance Director on
1 October 2018 and was appointed as Group Finance Director and Executive
Director on 11 March 2019. He will also continue in his role as Company
Secretary for the Group. His remuneration terms are in line with our Policy
and are fully disclosed in the report.
2018 COMPANY PERFORMANCE AND BONUS TARGETS
In setting annual bonus targets for 2018 the Committee put a weighting
of 80% on Company financial and operating targets with the emphasis on
metrics, including Adjusted Profit, Net Rental Income and cost control. 20%
of bonus reflects personal objectives.
2018 was a good year of operational performance by the business despite
a very challenging operating environment, with the Company recording
Adjusted Profit growth of 4.8%, an increase of 3.1% on a per share basis.
The Company’s strategy continues to focus on maintaining a strong income
return, and this is a major driver of the remuneration policy.
The Committee determined that the bonus pay-out for the Chief Executive
was 52.5% of the maximum opportunity salary and 47.5% for Charles
Staveley as Group Finance Director was fair and reasonable given the overall
performance of the business and the contribution from the individuals when
taking into account the significant external economic challenges facing the
market and retailers. No discretion was exercised in the assessment of the
financial targets that formed part of the bonus for 2018.
Further detail is provided in the remuneration report for 2018.
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LONG-TERM INCENTIVE PLAN (LTIP)
During the year the performance period for the 2015 LTIP
award ended. No awards qualified for vesting as the share price
(adjusted for cumulative dividends and distributions paid in the
performance period) was below the 65p threshold.
PROPOSED CHANGES TO THE
REMUNERATION POLICY IN 2019
During 2018 a review of our incentive arrangements was
undertaken, 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 helped
inform the process for renewing our Remuneration Policy ahead
of the 2019 AGM.
Following the review and consultation with management and
shareholders, the Committee is proposing a new and simplified
incentive structure which is designed to be a transitional
arrangement, to be reviewed in three years’ time as the current
levels of economic uncertainty decline and there is more clarity on
the future of the market.
Due to the macro and micro-economic challenges facing the
Company the Committee believes that the incentive structure
needs to be more responsive to market conditions and has the
ability to align with any required adjustments to a more fluid
Company strategy over the next three years.
The primary area where the Committee believes there is a
divergence from the principles is in relation to the ability to set
and calibrate performance targets for the LTIP that would remain
valid across the performance period. Given the current state
of the retail sector, further exacerbated by the considerable
headwinds driven by the challenges around Brexit, the Committee
believes that it is unrealistic to set precise performance targets
three years into the future that would provide the right balance
of incentive and stretch.
Set out below is a summary of the key changes to the
Remuneration Policy:
The Annual Bonus and Long Term Incentive Plan have been
combined into a Combined Incentive Plan (CIP);
The CIP is an annual award with one third paid in cash after
one year and two thirds of the award deferred into shares.
The shares will vest in three tranches in years 3, 4 and 5
following grant, with each tranche subject to an additional
relative Total Shareholder Return underpin over a three-year
performance period;
Total incentive value has been reduced from 350% to 300% of
base salary for the Chief Executive and from 300% to 250% for
Executive Directors;
Post-cessation holding requirements have been introduced for
Executive Directors; and
Shareholding guidelines have been equalised for all Executive
Directors at 200% of base salary.
The annual target setting allows for more accurate and refined
calibration of targets. The annual nature of the performance
targets will also allow the Committee flexibility to ensure key
short-term strategic goals can be included as the Company reacts
to the changing retail environment. The new structure will also
provide appropriate levels of retention for Executive Directors in a
challenging and competitive market with high levels of uncertainty
across the sector. The new structure will also result in a reduction
of the total maximum incentive package available for Executive
Directors. Given the greater focus on shorter term performance,
the Committee will ensure that targets remain challenging and
that full pay-out will only be earned for exceptional performance.
All performance targets relating to the CIP will be fully disclosed at
the end of the financial year to which they relate.
EXECUTIVE DIRECTOR SALARY INCREASES
The Committee approved an increase in the Chief Executive’s
salary from £383,000 to £425,000. Prior to appointment,
Lawrence was untried as a public company Chief Executive
and his salary was discounted to reflect this. The increase will
bring Lawrence Hutchings’ base salary to the same level of his
predecessor and in line with the highly competitive real estate
market in which the Company competes for and retains talent.
The increase reflects the importance of retaining Lawrence to the
business, the impact both internally and externally he has had
since joining in 2017 and his highly marketable skills as the Chief
Executive of a listed real estate company. Despite the increase
to base salary, it should be noted that the total value of the
remuneration of the Chief Executive under the new policy will not
exceed previous arrangements under the old policy, as detailed
on page 54.
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The Committee also determined that the salary of Stuart Wetherly
on appointment as Group Finance Director on 11 March 2019
would be £275,000 per annum.
Salary increases are normally aligned to the average increase
awarded to the wider workforce; however, increases may be
above this level if there is an increase in the scale, scope or
responsibility of the role or to allow the basic salary of newly
appointed Executives to move towards market norms as their
experience and contribution increases. Subject to shareholder
approval of the new policy at the AGM, going forward the
maximum increase applicable in any year will be capped at 10%
of base salary.
An increase of 2% has been awarded to all employees, applied
from 1 January 2019. The same 2% increase has been applied to
the base fees paid to the Chairman and Non-Executive Directors.
CORPORATE GOVERNANCE REFORMS
During the year the new UK Corporate Governance Code
(2018 Code) was published. Compliance with the new regulations
and the 2018 Code is effective for financial years beginning on
or after 1 January 2019 and will be reported on by the Company
in the 2019 Annual Report. As part of its work-stream, the
Committee is reviewing these new areas and how it plans to
address them. The Committee has also reviewed and amended its
terms of reference to reflect the new requirements
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 the Remuneration Committee
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DIRECTORS’
REMUNERATION REPORT
POLICY
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 previous Remuneration Policy, approved in 2016, is published and available on the Company’s website at
https://capreg.com/media/2771/cr-remuneration-policy-2016-2018.pdf.
REMUNERATION PHILOSOPHY AND PRINCIPLES
Our principles continue to be to maintain a competitive remuneration package that will attract, retain and motivate a high quality 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
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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 members of the
Audit Committee
Ensure that the incentive structure does not raise any environmental, social or governance risks through compliance with our
Responsible Business ethics and standards of operating
HOW THE COMMITTEE SETS REMUNERATION
Salary
Pension
Benefits
Combined Incentive Plan
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 52) and seeks to ensure that
Directors’ fixed compensation is around the median in the comparator group.
The Committee's 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.
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This section of the report contains details of the Directors’ Remuneration Policy that will govern the Company’s future remuneration
payments. The Policy is intended to apply for three years from the approval of the Policy. The Policy described in this part is subject to
approval by shareholders at the Company’s AGM on Thursday, 16 May 2019. The Policy will be displayed on the Company’s website, in
the Investors section, immediately after the 2019 AGM.
Purpose & link to strategy Operation
Opportunity
Performance metrics
Base salary
Reviewed annually effective 1 January to reflect:
To aid recruitment,
retention and motivation
of high quality people
To reflect experience and
importance of role
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 maximum increase
applicable in any year will
be capped at 10% of base
salary.
n/a
Salary increases will normally be aligned to the
average increase awarded to the wider workforce.
Increases may be above this level if there is an
increase in the scale, scope or responsibility of the
role or to allow the basic salary of newly appointed
Executives to move towards market norms as their
experience and contribution increases.
The Company does not operate a defined benefit
pension scheme, all pension benefits are paid either
to defined contribution pensions schemes of each
Executive Director’s choice or as a cash supplement.
Pension
To help recruit and retain
high quality people
To provide an
appropriate market
competitive retirement
benefit
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n/a
Executive Directors
are eligible to receive
a pension allowance
equivalent to up to 15%
of basic salary.
Lawrence Hutchings
receives a pension
allowance of 15% of basic
salary (reduced from
the 20% received by his
predecessor).
Stuart Wetherly will
receive a pension
allowance of 8% of basic
salary, increased from
7.5% received prior
to appointment as an
Executive Director and
which is more in line with
the pension contribution
for the UK workforce
For new appointments,
the Committee will
ensure that pension
contributions are in
line with that of the
workforce.
Benefits
To aid recruitment and
retention
To provide market
competitive benefits
The Company offers a package to Executive Directors
including:
no maximum
n/a
private medical insurance;
critical illness cover;
life insurance;
permanent health insurance; and
holiday and sick pay.
Benefits are brokered and reviewed annually.
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DIRECTORS’
REMUNERATION REPORT
POLICY CONTINUED
Purpose & link to strategy Operation
Opportunity
Performance metrics
Combined Incentive Plan
(CIP)
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
To reinforce delivery
of long-term business
strategy and targets
To align participants with
shareholders’ interests
To retain Directors over
the longer term
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The plan provides a
combined annual awards
of up to 250% of salary
for Executive Directors
/ 300% for the Chief
Executive.
Targets calibrated so
maximum pay-out
represents exceptional
performance.
Performance targets
set annually based
on a 100% Group
financial and strategic
performance targets.
2019 objectives will
be weighted 80% on
financial performance
and 20% strategic and
operational measures.
Financial metrics
may typically include
metrics such as profit,
net rental income and
cost management.
Operational and
strategic metrics may
include metrics such
as footfall and strategy
implementation.
The annual nature
of the targets will
allow the Company
to link them directly
to Company strategy
in a challenging
macro-economic
environment and
ensure that the
remuneration
principles agreed by
the Committee will
be met.
The plan is reviewed annually to ensure bonus
opportunity, performance measures and weightings
are appropriate and support the stated Company
strategy.
One third of the award is paid in cash after one year.
Two thirds of the award is deferred into shares.
Deferred shares will vest in three equal tranches
in years three, four and five and will be subject to
the achievement of a relative Total Shareholder
Return (TSR) underpin. Vested deferred shares will
be subject to an additional holding period to the
5th anniversary of the date of grant. Upon vesting,
sufficient shares can be sold to pay tax.
Up to 100% of deferred shares will lapse if median
relative TSR performance against the peer group is
not achieved.
Malus and Clawback provisions apply such that the
Committee has 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 reputational
damage to the Company; or
A participant’s actions amounting to serious /
gross misconduct.
The discovery that any information used to
determine the bonus and/or the number of plan
shares placed under a share award relating to a
bonus award was based on error, or inaccurate or
misleading information; and/or
Failure of risk management; and/or
Corporate failure.
In line with UK corporate governance best practice,
the Committee will retain the discretion to adjust
the payment and vesting outcomes (both upwards
and downwards) under the CIP to reflect the overall
corporate performance and shareholder experience.
The Committee retains the discretion in exceptional
circumstances to change performance measures and
targets and the weightings attached to performance
measures part-way through a performance if there
is a significant and material event which causes
the Committee to believe the original measures,
weightings and targets are no longer appropriate.
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Purpose & link to strategy Operation
Opportunity
Performance metrics
Executive shareholding
To support alignment of
Executive Directors with
shareholders
All Executive Directors are expected to build a
shareholding to at least 2 x basic annual salary value
based on current market value or the aggregate
purchase price of the shares over a five-year period.
n/a
n/a
Deferred or other unvested share awards not subject
to performance conditions can count towards the
guideline in line with corporate governance best
practice.
There is a 200% base salary post-cessation of
employment shareholding requirement for year
one, reduced to a 100% base salary shareholding
requirement for year two.
Non-Executive Director
Remuneration
To reflect experience and
importance of role
The Chairman and Non-Executive Directors fees
are set by the Board taking into account the time
commitment, responsibilities, skills and experience
and roles on Board Committees. The fees are
reviewed annually.
n/a
n/a
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Details of the fees can be found on page 56.
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.
Non-Executive Directors do not receive any variable
remuneration element or receive any other benefits.
Non-Executive Directors are reimbursed for all
reasonable travelling and subsistence expenses
(including any relevant tax) incurred in carrying out
their duties
NOTES TO THE POLICY TABLE
The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office, notwithstanding
that they are not in line with the policy set out above where the terms of the payment were agreed: (i) before the policy set out above,
or (ii) at a time when a previous policy, approved by the Remuneration Committee was in place provided the payment is in line with
the terms of that policy, or (iii) at a time when the relevant individual was not a Director of the Company and the payment was not in
consideration for the individual becoming a Director of the Company.
CHANGES FROM THE LAST POLICY
Set out below are a summary of the changes from the previous Remuneration Policy:
Introduction of a maximum increase of 10% for base salary for Executive Directors. This change provides clarity to shareholders and
limits significant salary increases for the Executive Directors.
Reduction in maximum pension contribution from 20% to 15% base salary for Executive Directors and new directors' pension in line
with the wider workforce. This change has brought the pension in line with the latest UK Corporate Governance Code and investor
sentiment.
Combination of the Annual Bonus and Long Term Incentive Plan into a Combined Incentive Plan and reduction in overall maximum
opportunity from 350% to 300% of base salary. This change was implemented after a review and shareholder consultation, to allow
for the incentive structure to be aligned to remuneration principles and the strategic objectives of the Company.
Introduction of a post-cessation holding period to align the Policy with UK Corporate Governance requirements
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DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF
APPOINTMENT
Name
Executive Directors
L Hutchings
S Wetherly
Name
Non-Executive Directors
H Scott-Barrett
L Norval
T Hales
I Krieger
W Hamman
L Whyte
Unexpired term
of appointment
Date of service agreement
Notice period
termination payment
Rolling contract
13 June 2017
12 months
Rolling contract
11 March 2019
12 months
Potential
12 months’ salary
and benefits value
12 months’ salary
and benefits value
Potential
of appointment
Date of initial appointment
Notice period
termination payment
Unexpired term
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
6 months
No notice
No notice
No notice
No notice
No notice
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 CONTINUED
DISCRETION
The Committee has discretion in several areas of Policy as set out in this report. The Committee may also exercise operational and
administrative discretions under relevant plan rules approved by shareholders as set out in those rules. In addition, the Committee
has the discretion to amend Policy with regard to minor or administrative matters where it would be, in the opinion of the Committee,
disproportionate to seek or await shareholder approval.
EMPLOYEE CONTEXT
All permanent employees of the Group, including Executive Directors, receive a basic remuneration package including basic salary,
private medical insurance, travel insurance, income protection, critical illness cover and life assurance. For all permanent employees
below Board level, the Company pays pension contributions of between 4% - 8% into either a Group Pension Scheme or individual
employees’ own pension scheme.
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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 LLP, in 2018 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
Intu Properties Plc
Landsec Group Plc
London & Associated Properties Plc
LondonMetric Property Plc
LSL Property Services Plc
McKay Securities 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
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 to reflect the new incentive structure and the potential
incentive gap depending on when an individual joins the Board of the Company. 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 Executive Directors appointed towards the end of
a year may be awarded a notional bonus payment, deferred into shares, to ensure that an appropriate shareholding is built up within a
reasonable timeframe from appointment.
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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, and CIP 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 for both the CIP and legacy arrangements is summarised in the table below:
Combined Incentive Plan (CIP)
Within the CIP, a good leaver is defined as those whose office or employment comes to an end because of death, ill health, injury or
disability, redundancy, or retirement with the agreement of the employing company; the sale of the individual’s employing company or
business out of the Group or any other reasons at the discretion of the Committee.
For leavers during the award year
Typically, for good leavers, rights to awards under the CIP will be pro-rated for time in service to termination as a proportion of the
performance period, and will, subject to performance, be paid at the normal time in the normal manner (i.e. in cash / deferred awards
as appropriate).
Typically for other leavers, rights to awards under the CIP will be forfeit.
For leavers during the deferral period
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Outstanding deferred awards under the CIP will be paid at the normal time, subject to performance against the underpin
performance condition. The Committee retains the discretion to apply time pro-rating (over the deferral period) for good leavers and
to accelerate the vesting and/or release of awards if it considers it appropriate.
Typically for other leavers, rights to deferred awards will be forfeit.
Legacy arrangements
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 detailed treatment of the cessation of employment provisions of the CIP are contained in the AGM circular seeking shareholder
approval for the new arrangement.
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.
On change of control, awards will vest in line with the plan rules.
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.
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.
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G
O
V
E
R
N
A
N
C
E
DIRECTORS’
REMUNERATION REPORT
POLICY CONTINUED
TOTAL COMPENSATION
The total value of the remuneration of the Chief Executive under the new policy will not exceed previous arrangements, as
illustrated below.
Chief Executive
Remuneration
Current
Proposed
Base
Salary
£383,000
£425,000
Maximum
incentive opportunity
350%
300%
Maximum
incentive value
£1,340,500
£1,275,000
Pension
(15% base salary)
£57,450
£63,750
Maximum
package value
£1,780,950
£1,763,650
The following chart shows the value of each of the main elements of the remuneration package for the Chief Executive and Executive
Directors potentially available in 2019 dependent on performance scenarios:
The low scenario is based on nil bonus;
The mid scenario is based on bonus at 50% of maximum (i.e. 150% of salary for Chief Executive and 125% of salary for Executive
Directors); and
The max scenario is based on bonus at 300% salary for Chief Executive and 250% for Executive Directors.
In addition, the max scenario is illustrated based on share price increase of 50% for the maximum share element which could be
granted for the CIP.
All figures in £’000
£3,000
£2,500
£2,000
£2,207
£1,782
Salary
CIP - cash
CIP - shares
Benefits
Pension
No LTIP awards are expected to vest during the year for the Chief Executive.
£1,138
£507
£1,500
£1,000
£500
£0
£1,232
£1,003
£655
£315
Low
Mid
Max
50% share price
appreciation
Low
Mid
Max
50% share price
appreciation
L Hutchings
S Wetherly
CONSULTATION AND SHAREHOLDERS’ VIEWS
During the course of 2018, The Committee undertook a shareholder consultation on the new CIP. Respondents were broadly supportive
of the proposals and in light of feedback, the Committee adjusted the policy so that the entire deferred portion of the CIP would be
subject to a performance underpin.
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.
The Committee reviewed and updated its Terms of Reference in 2018 to reflect latest governance best practice and requirements
and the requirements of the 2018 Corporate Governance Code.
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DIRECTORS’
REMUNERATION REPORT
2018 REMUNERATION REPORT
AUDITED INFORMATION:
THE REMUNERATION COMMITTEE
The Committee met four times during 2018 as well as holding informal meetings and other correspondence to discuss wider
remuneration issues. In addition to the Committee members (see page 40), 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 terms of reference of the Committee are available at www.capreg.com/about-us/people/board-committees
SUMMARY OF PERFORMANCE YEAR ENDED 30 DECEMBER 2018
Net Rental Income1
Adjusted Profit2
Adjusted Earnings per share2
IFRS loss/(profit) for 2018
Total dividend per share
Net Asset Value (NAV) per share
EPRA NAV per share
Group net debt
Net debt to property value
2018
£51.9m
£30.5m
4.23p
£(25.6)m
2.42p
60p
59p
G
O
V
E
R
N
A
N
C
E
2017
£51.6m
£29.1m
4.10p
£22.4m
3.64p
67p
67p
£411.1m
48%
£404.0m
46%
1 Wholly-owned assets
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.
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DIRECTORS’
REMUNERATION REPORT
2018 REMUNERATION REPORT CONTINUED
SINGLE TOTAL FIGURE OF REMUNERATION FOR DIRECTORS:
The table below sets out the remuneration received/receivable in relation to the year ended 30 December 2018.
Salary/Fees
Taxable
benefits (i)
Other
benefits
Total
Bonus (x)
Pension
Total
emoluments
LTIP
vesting (xi)
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
G
O
V
E
R
N
A
N
C
E
£’000
Executive
Director
L Hutchings (ii)
H Scott-
Barrett (Chief
Executive) (iii)
C Staveley (iv)
K Ford (v)
383
212
-
191
-
195
299
113
3
-
1
-
4
819
574
TOTAL
Chairman and Non-Executive Directors
H Scott-
Barrett(iii)
(Chairman)
J Clare (vi)
T Hales (vii)(viii)
W Hamman
I Krieger (vii)
L Norval
G Poitrinal (ix)
L Whyte (vii)
138
-
52
42
47
42
-
47
75
56
51
41
46
41
-
46
-
-
-
-
-
-
-
-
TOTAL
368
356
TOTAL ALL
942 1,175
-
4
1
3
2
2
8
-
-
-
-
-
-
-
-
-
7
-
4
-
11
-
-
-
-
-
-
-
-
-
4
301
148
57
28
752
393
10
6
3
23
-
136
-
437
-
149
46
343
-
29
-
86
38
45
17
-
361
-
246
501
181
128 1,113 1,321
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
138
-
52
42
47
42
-
47
75
56
51
41
46
41
-
46
368
356
8
11
23
437
343
86
128 1,481 1,677
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
752
393
318
152
160
-
361
-
564
653
341
630 1,113 1,951
-
-
-
-
-
-
-
-
-
138
0
52
42
47
42
-
47
75
56
51
41
46
41
-
46
368
356
630 1,480 2,307
i. Private medical care and critical illness cover.
ii. L Hutchings was appointed a Director on 13 June 2017.
iii. H Scott-Barrett stepped down as Chief Executive on 13 June 2017 and became Non-Executive Chairman on the same date.
iv. C Staveley stepped down as a Director on 15 August 2018 but continued to be a full-time employee until 31 December 2018. All remuneration figures
show are up to 15 August 2018 with the total bonus paid of £135,626 pro-rated in the above table.
v. 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 to 9 May 2017 with the total bonus paid of £127,803 pro-rated in the above table.
vi. J Clare resigned on 13 June 2017.
vii. T Hales, I Krieger and L Whyte receive an additional fee of £5,000 per annum as members of the Audit and Remuneration Committees.
viii. T Hales receives a further fee of £5,000 as Senior Independent Director.
ix. G Poitrinal resigned on 31 October 2018. G Poitrinal did not receive a fee or any remuneration.
x.
In line with policy, bonus payments above 60% of maximum (50% for the Chief Executive) are deferred into shares for two years. The split of the 2018
bonus was as follows:
£’000
L Hutchings
C Staveley
Cash
287
136
Deferred
into shares
14
-
Total
301
136
xi. LTIP Vesting – The LTIP award for 2017 was 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 were 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.
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BASIC SALARY INCREASES FOR EXECUTIVE DIRECTORS:
2019
2018
2017
2016
2015
L Hutchings
S Wetherly
C Staveley
H Scott-Barrett
K Ford
M Bourgeois
£’000
425
275
n/a
n/a
n/a
n/a
%
11.0
n/a
n/a
n/a
n/a
n/a
£’000
383
n/a
305
n/a
n/a
n/a
%
2.0
n/a
2.0
n/a
n/a
n/a
£’000
375
n/a
299
427
315
n/a
%
n/a
n/a
2.0
2.0
2.0
n/a
£’000
n/a
n/a
293
418
308
241
%
n/a
n/a
2.0
2.0
2.0
4.3
£’000
n/a
n/a
287
410
302
231
%
n/a
n/a
2.5
2.5
2.5
2.5
With effect from his start date of 13 June 2017, Lawrence Hutchings’ salary was £375,000 per annum. Prior to appointment Lawrence
was untried as a public company Chief Executive and his salary was discounted to reflect this. The increase, from £383,000 to £425,000,
will bring the Lawrence Hutchings’ base salary to the same level of his predecessor and in line with the highly competitive real estate
market. Following this market adjustment it is envisaged that future increases to the base salary of the Chief Executive and any Executive
Directors will be aligned with that of the wider workforce. The increase reflects the importance of retaining Lawrence to the business, the
impact both internally and externally he has had since joining in 2017 and his highly marketable skills as the Chief Executive of a listed
real estate company.
With effect from his start date of 11 March 2019, Stuart Wetherly’s salary is £275,000 per annum.
NON-EXECUTIVE DIRECTOR FEES
The same 2% increase awarded to staff members has been applied to the Chairman’s base fee of £137,700 and Non-Executive Directors’
base fees of £41,616 per annum with effect from 1 January 2019. 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.
G
O
V
E
R
N
A
N
C
E
2018 BONUSES AND ACHIEVEMENT OF OBJECTIVES:
L Hutchings
C Staveley1
Total % of maximum bonus
awarded for 2018
52.5%
47.5%
Bonus paid 2018
£’000
301
136
Maximum achievable
£’000
575
286
1 The Bonus paid and maximum bonus achievable amounts were both pro-rated to September 2018.
The annual bonus criteria for 2018 were determined with a weighting of 80% for Group Objectives (of which 50% related to financial
targets, 10% relating to operating metrics and 20% related to strategy implementation) and 20% on personal objectives.
Group Objectives: Financial Targets (50%)
Performance
Measure
Adjusted Profit1
Adjusted Earnings per share1
Property Level Net Rental Income2
Growth in Net Rental Income2
Cost Management (Central Costs)
Threshold
Required
performance
% of bonus
5
5
10
5
2.5
(£m) % of bonus
10
31.0
10
4.39
10
54.5
15
+2.5%
5
7.8
Maximum
Required
performance
(£m)
32.0
4.51
54.5
+5.0%
7.4
Actual
achieved
(£m)
31.0
4.31
52.3
+0.6%
6.9
Payout
as % of
max.
5
-
-
-
5
1 The Adjusted Profit and Adjusted Earnings per share targets are adjusted for one-off restructuring/redundancy costs and Directors’ bonuses (including NIC).
2 Property Level NRI is before management fees and on a see-through basis including the Group’s proportional share of joint venture assets.
Group Objectives: Operating Metrics (10%)
Performance
Measure
Footfall growth
Leasing performance
% of bonus
5%
5%
Required
performance
+0.5%
–
Actual
achieved
+1.2%
+1.5% to ERV
+3.1% to passing rent
Payout
as % of
max.
5
5
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DIRECTORS’
REMUNERATION REPORT
2018 REMUNERATION REPORT CONTINUED
Group Objectives: Implementation of Strategy (20%)
The Remuneration Committee determined that management’s objectives should also include a focus on the delivery of the strategy and
the successful roll-out and implementation of asset masterplans, progress of Capex initiatives and impact on footfall. In considering
performance for the year the Committee took into account the progress made on the remerchandising of schemes towards needs
based, non-discretionary offers; the deployment of £18.5 million in capex investment; the development of mixed-use asset plans,
including securing planning consent at Walthamstow; and the advancement of the asset masterplans, capex pipeline for the Group’s
major assets and concluded that an award of 15% 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 2018 covered the successful transition and development of the
management team, reflected in the 93% participation rate in the C&R Pulse Staff Engagement survey, strong stakeholder management
and engagement, retaining the ROSPA gold award for health and safety, and the recognition by Revo of the community shopping centre
classification. The Committee determined that against these objectives the following awards, relative to maximum pay-out, be made:
17.5% to Lawrence Hutchings and 12.5% to Charles Staveley.
While acknowledging the level of performance attained against the financial targets, the Committee is of the opinion that the 2018
bonus determination is reflective of the overall corporate performance and contribution made by the Executive Directors in extremely
challenging economic conditions.
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
G
O
V
E
R
N
A
N
C
E
Name
L Hutchings
Date of
Award
08.09.172
No. of
awards
1,260,504
% of
salary
200
18.04.18
1,429,906
C Staveley
23.08.16
483,0133
19.04.17
355,4313
18.04.18
200,2353
H Scott-Barrett
23.08.16
283,06844
200
125
125
150
150
Face value
of awards
granted
during 2018
£0005
–
765
–
–
107
–
Threshold/
Maximum
vesting
share price5
see note 1
below
see note 1
below
see note 1
below
see note 1
below
see note 1
below
see note 1
below
Qualified
for vesting
in the year
–
End of
Performance
Period
19.04.20
Holding
period
2 years
–
–
–
–
–
18.04.21
2 years
23.08.19
19.04.20
18.04.21
–
–
–
23.08.19
2 years
Notes:
1 The performance conditions for the August 2016, April 2017 and April 2018 issues are:
Performance condition
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
Weighting
1/3
1/3
1/3
Time frame
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
Nil
Below index
Threshold (25%)
Above index
Maximum (100%)
Index + 12%
Below 5%
5%
9% (August 2016)
10% (April 2017 & 2018)
Below index
Above index
Index + 1.5% p.a.
2 L Hutchings’ award was granted on 8 September 2017 which was as soon as was practicable following his joining the Company.
3 As a condition of Charles Staveley’s Good Leaver status the value of the awards under the August 2016, April 2017 and April 2018 issues were reduced
pro-rata to 31 December 2018, reflected in the table, and will be exercisable at the end of the applicable performance period.
4 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, reflected in the table, being the date that he ceased being an Executive Director.
5 Calculated based on share price at issue of 53.5 pence.
6 Straight-line vesting applies for all LTIP issues in between threshold and maximum vesting.
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Vesting of March 2015 LTIP issue
The performance period for the March 2015 LTIP issue ended during the year as noted above. 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.
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.
EXIT PAYMENTS
Charles Staveley stepped down as an Executive Director of Capital & Regional on 15 August 2018. Charles remained an employee of
the Group until 31 December 2018 during which time his remuneration arrangements were unchanged. In line with the Remuneration
Policy, the Committee agreed that a payment in lieu of notice plus benefits would be made, equivalent to the contractual notice period,
pension and benefits, and included retraining and termination payments totalling £299,854. For the purposes of the LTIP, the Committee
used its discretion under the plan rules and determined that Charles was a good leaver. Charles will retain his awards received under
the Company’s 2008 Long Term Incentive Plan (“LTIP”). The Holding Periods applicable to the 2014 LTIP award, and to options under the
Company’s Deferred Bonus Share Plan, will be waived such that they will no longer apply from 1 January 2019. For those LTIP awards
with a performance period extending beyond 31 December 2018 a pro rating adjustment will be made to that date. The awards will be
exercisable at the end of the applicable performance period.
G
O
V
E
R
N
A
N
C
E
PAYMENTS TO PAST DIRECTORS
There were no payments to past Directors in 2018.
2019 COMBINED INCENTIVE PLAN (CIP)
The Committee intends to implement The Capital and Regional Combined Incentive Plan (CIP) in 2019, which combines the annual bonus
and LTIP into one structure.
The Committee will continue to set stretching performance targets, with financial performance metrics forming at least 80% of the
metrics used. The remaining 20% will be subject to strategic and operational measures, providing a link between financial and strategic
out turns.
Adjusted Profit
Net Rental Income
Cost Management
Gearing
Total Financial:
Operating metrics
Footfall against benchmark
Leasing performance
Strategy Implementation
Total Operational and Strategic:
% of max.
20%
20%
20%
20%
80%
10%
10%
20%
Pay out levels for threshold performance will remain controlled at 25% of the CIP and maximum pay-out will represent ‘exceptional
performance’. For target performance levels of pay out will be at 50%. To reflect the shorter timeframe over which performance will be
measured the Committee has reduced the overall incentive opportunity from 350% to 300% of base salary for the Chief Executive and
from 300% to 250% for Executive Directors.
Detailed targets have not been disclosed due to their commercially sensitive nature. The targets and the extent to which they have been
achieved will be published in full in the 2019 Directors Remuneration Report.
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DIRECTORS’
REMUNERATION REPORT
2018 REMUNERATION REPORT CONTINUED
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 as these indices provide a measure of a sufficiently broad equity market against
which the Company considers that it is suitable to compare itself. The graph shows how the total return on a £100 investment in the
Company made on 31 December 2008 would have changed over the ten year period measured, compared with the total return on a
£100 investment in the comparable indices.
FTSE All-Share
FTSE 350/ Real Estate -SEC
Capital & Regional plc
G
O
V
E
R
N
A
N
C
E
350
300
250
200
150
100
50
0
D e c-0 8
D e c-0 9
D e c-10
D e c-11
D e c-12
D e c-13
D e c-14
D e c-15
D e c-16
D e c-17
D e c-18
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)
2018
£’000
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
2010
£’000
2009
£’000
752
393
n/a
-
564
2,112
53%
45%
n/a
n/a
796
n/a
n/a
833
n/a
n/a
651
n/a
n/a
765
n/a
n/a
536
n/a
n/a
-
70%
70%
85%
40%
69%
71%
n/a
302
n/a
-
n/a
402
n/a
-
-
-
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
35.26%
91.85%
-
-
-
-
-
-
-
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PERCENTAGE INCREASE IN CHIEF EXECUTIVE REMUNERATION VERSUS THE WIDER WORKFORCE
Salary
All taxable benefits
Annual bonuses
CEO
+11%
No change
+19%
Employee group1
+2%
No change
-1%
The ratio of the salary of the Chief Executive to the average employee salary1 (excluding Directors) was 5.7:1 (£383,000:£67,108).
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)
2018
£m
11.6
17.5
2017
£m
13.1
26.1
%
-11.5
-32.95
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. In 2018 the guidelines were 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.
G
O
V
E
R
N
A
N
C
E
Executive Directors
L Hutchings
C Staveley
Time from
appointment as
Executive Director
1 year 6 months
10 years 3 months
Target
% of
salary
200
100
Target
currently
met?
No
Yes
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DIRECTORS’
REMUNERATION REPORT
2018 REMUNERATION REPORT CONTINUED
DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT
Name
Executive Directors
L Hutchings
S Wetherly
Unexpired term
of appointment
Date of service agreement
Notice period
Potential
termination payment
Rolling contract
13 June 2017
12 months
Rolling contract
11 March 2019
12 months
12 months’ salary
and benefits value
12 months’ salary
and benefits value
G
O
V
E
R
N
A
N
C
E
Name
Non-Executive Directors
H Scott-Barrett
L Norval
T Hales
I Krieger
W Hamman
L Whyte
Unexpired term
of appointment
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Date of initial appointment
Notice period
Potential
termination payment
9 March 20081
15 September 2009
1 August 2011
1 December 2014
2 June 2015
1 December 2015
6 months
No notice
No notice
No notice
No notice
No notice
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.
EXTERNAL APPOINTMENTS
No Executive Directors held external positions during the year.
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 58.
H Scott-Barrett
L Hutchings
T Hales
W Hamman
I Krieger
L Norval
L Whyte
30 December
2018
Shares
3,540,000
79,790
600,000
-
103,133
135,913,866
30 December
2017
Shares
3,489,676
38,710
600,000
-
103,133
135,899,287
78,852
73,929
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.
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COMMITTEE EVALUATION
The Committee reviewed its performance with Board members and other participants, including through the annual Board evaluation.
As part of its review, the Committee updated its Terms of Reference in 2018 to reflect latest governance best practice and requirements
and the requirements of the 2018 UK Corporate Governance Code.
ADVISERS
During the year, the Committee received advice from independent remuneration consultants PwC LLP to support the detailed review of
the remuneration policy, the remuneration reporting regulations and corporate governance changes and to provide advice on an ad hoc
basis. PwC LLP’s fees for this advice were £50,000, which were charged on a time/cost basis.
PwC LLP is a member of the Remuneration Consultants’ Group, and as such chooses to operate pursuant to a code of conduct that
requires remuneration advice to be given objectively and independently. The Committee is satisfied that the advice provided by PwC LLP
in relation to remuneration matters is objective and independent.
CONSULTATION AND SHAREHOLDERS' VIEWS
Shareholder voting on the Directors’ remuneration report, which was tabled at the 9 May 2018 AGM, was as follows:
Resolution
To approve the Directors’
remuneration report for 2017
For
450,760,568
Against
6,992,205
Total Shares
Voted
467,031,951
For/Discretionary as %
of Total Shares Voted
96.52%
Shareholder voting on the remuneration policy, which was tabled at the 10 May 2016 AGM, was as follows:
G
O
V
E
R
N
A
N
C
E
For
415,895,797
Against
48,741,878
Discretionary
28,702
Total Shares
Voted
464,666,377
For/Discretionary as %
of Total Shares Voted
89.51%
Resolution
To approve the Directors’
remuneration policy
Tony Hales CBE
Chairman of Remuneration Committee
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DIRECTORS’ REPORT
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 34 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 2016 UK Corporate Governance Code and Disclosure and
Transparency Rules, which forms part of this Directors’ Report, is set out on pages 39 to 43.
The results for the year are shown in the Group income statement on page 78. There were no reportable events after the balance sheet
date other than a restructuring of the Group’s holding in the Kingfisher Limited Partnership completed on 8 March 2019, as set out in
Note 14b and a £7 million facility to part-fund a cinema development and related leisure works at Hemel Hempstead completed on 13
March 2019. At the same time the Group’s revolving credit facility was rebased to £15 million, as set out in Note 17a. 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 1.82 pence per share (2017: 1.73 pence per share) was paid on 25 October 2018, all as a Property Income
Distribution (PID). The Directors recommend a final dividend of 0.60 pence per share, making a total distribution for the year
ended 30 December 2018 of 2.42 pence per share (2017: 3.64 pence per share).
Subject to approval of shareholders at the Annual General Meeting (AGM) on 16 May 2019, the final dividend will be paid on 23 May
2019. The key dates are set out as below:
G
O
V
E
R
N
A
N
C
E
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
26 March 2019
2 April 2019
3 April 2019
4 April 2019
5 April 2019
16 May 2019
23 May 2019
The amount to be paid as a PID will be confirmed in the announcement on 26 March 2019. 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 26 March 2019. Share certificates on the
South African register may not be dematerialised or rematerialised between 3 April 2019 and 5 April 2019, both dates inclusive.
Transfers between the UK and South African registers may not take place between 26 March 2019 and 5 April 2019, 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 register 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 UK/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.
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DIRECTORS
The names and biographical details of the present Directors of the Company are given on pages 36 to 37. Charles Staveley's and
Guillaume Poitrinal's resignations were effective from 15 August 2018 and 31 October 2018, respectively. All other Directors served
for the full year.
All current Directors will retire and, being eligible, offer themselves for re-election at the 2019 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 62. 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.
G
O
V
E
R
N
A
N
C
E
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 58-59
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 24 March 2019 (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
BlackRock
ICAMAP Investments
Peens Family Holdings
Aberforth Partners
Allan Gray Investment Management
New Fortress Finance Holdings
Thames River Capital
Premier Asset Management
MStead Limited and PDI Investment Holdings are part of the Parkdev group of investors.
No. of shares
69,978,847
65,462,806
58,537,570
53,147,931
38,440,000
37,287,564
37,039,422
27,535,263
25,682,787
17,606,111
%
9.63
9.01
8.06
7.32
5.29
5.13
5.10
3.79
3.54
2.42
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DIRECTORS’ REPORT
CONTINUED
G
O
V
E
R
N
A
N
C
E
SHARE CAPITAL
As at 30 December 2018 the Company’s total issued share capital was 726,389,117 ordinary shares of 1 pence each, all with equal voting
rights. The changes in the Company’s Issued share capital during 2018 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 2018, 64,420,122 of the
Company’s shares were held on the JSE share register, representing 8.87% of the total shares in issue.
CHANGE IN CONTROL
The Group’s core 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 2017 or in 2018 up to 2 April 2019 being the latest practicable date
prior to the issue of this report.
The Company was authorised by shareholders at the 2018 AGM held on 8 May 2018 to purchase up to a maximum of 10.0% of its
ordinary shares in the market. This authority will expire at the 2019 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
At 30 December 2018 the Capital & Regional Employee Share Ownership Trust held 491,219 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 through 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.
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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 2018 the total number of employees was as follows:
Employees
Directors1
Employees – Group
Employees – Wholly-owned assets
Employees – Snozone
Male
8
21
20
162
Female
1
22
57
99
G
O
V
E
R
N
A
N
C
E
Total
9
43
77
261
1 The Group defines its senior management as the members of the Executive Committee which at 30 December 2018 consisted of the Executive Director, the
Group’s Acting Finance Director, Stuart Wetherly and the Group’s Investment Director, James Ryman.
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 2019, accompanies this report and accounts and explains the business to be
covered at the Annual General Meeting of the Company to be held on 16 May 2019.
By order of the Board
Stuart Wetherly
Company Secretary
2 April 2019
Registered Company name: Capital & Regional plc
Registered Company number: 01399411
Registered office: 22 Chapter Street, London SW1P 4NP
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DIRECTORS’
RESPONSIBILITIES STATEMENT
DIRECTORS’ RESPONSIBILITIES STATEMENT
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 judgments and accounting estimates that are reasonable and prudent;
State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in
the financial statements; and
Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in
business.
G
O
V
E
R
N
A
N
C
E
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.
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 2 April 2019 and is signed on its behalf by:
Lawrence Hutchings
Chief Executive
Stuart Wetherly
Group Finance Director
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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 of Capital & Regional plc (the "parent Company") and its subsidiaries (the "Group") give a true and fair view of
the state of the Group’s and of the parent Company’s affairs as at 30 December 2018 and of the Group’s loss 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 Financial Reporting Standard 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 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 31 and parent Company related notes A to F.
G
O
V
E
R
N
A
N
C
E
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”
(United Kingdom Generally Accepted Accounting Practice).
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") 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 Financial Reporting Council’s (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.
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INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC CONTINUED
SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matters that we identified in the current year were:
Valuation of investment properties
Going concern and covenant compliance
Impairment of Company-only investments and intercompany debtors
The key audit matters are consistent with the key audit matters identified in the prior year.
Materiality
The materiality that we used for the Group financial statements was £8.6 million which was
determined on the basis of 2% of net assets.
Scoping
G
O
V
E
R
N
A
N
C
E
We applied a lower threshold of £1.4 million for testing of all balances impacting Adjusted Profit
(as defined in Note 1 of the Group financial statements), which is less than 5% of Adjusted
Profit.
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 97% (2017: 93%)
of net assets and 97% (2017: 96%) of operating profit. Our component audit work was executed
at levels of materiality applicable to each individual component which were lower than Group
materiality.
Significant changes
in our approach
There have been no significant changes in our audit approach.
CONCLUSIONS RELATING TO GOING CONCERN, PRINCIPAL RISKS AND VIABILITY STATEMENT
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.
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 12 months from the date of approval of the financial statements.
We considered as part of our risk assessment the nature of the Group, its business model and related
risks including, where relevant, the impact of Brexit, the requirements of the applicable financial
reporting framework and the system of internal control. We evaluated the Directors’ assessment of
the Group’s ability to continue as a going concern, including challenging the underlying data and key
assumptions used to make the assessment, and evaluated the Directors’ plans for future actions in
relation to their going concern assessment.
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 29 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 29 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.
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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.
VALUATION OF INVESTMENT PROPERTIES
Key audit matter
description
How the scope of our
audit responded to
the key audit matter
Investment property has a carrying value of £898.2 million at 30 December 2018 (30 December 2017:
£930.6 million), comprising 93% (30 December 2017: 92%) of the Group’s assets. The portfolio consists
of seven shopping centres within the Group. These are disclosed in Note 10 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, yields and any impact from Brexit. 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 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 key source of estimation uncertainty.
The Audit Committee’s discussion of this key audit matter is set out on page 44.
G
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A
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We assessed 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, assumptions applied and impacts from Brexit 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.
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INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC CONTINUED
GOING CONCERN AND COVENANT COMPLIANCE
G
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N
A
N
C
E
Key audit matter
description
As at 30 December 2018, external borrowings had a carrying value of £432.9 million (30 December 2017:
£422.2 million). The Group also has an undrawn £15 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. While
there is headroom in the borrowing to property valuation ratio compared to the covenant requirement
over this period, a downwards movement in property valuations could impact on this headroom. In the
event of a 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 12 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 45.
How the scope of our audit
responded to the key audit
matter
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 2018.
Key observations
From the results of our work we concur with management’s conclusions on going concern and covenant
compliance.
IMPAIRMENT OF COMPANY-ONLY INVESTMENTS AND INTERCOMPANY DEBTORS
Key audit matter
description
How the scope of our audit
responded to the key audit
matter
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 key audit matter. 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 £463.7 million at 30 December 2018 (30 December 2017:
£456.7 million), comprising 96% (30 December 2017: 96%) of the parent Company’s assets. Intercompany
debtors had a carrying value of £14.4 million at 30 December 2018 (30 December 2017: £18.7 million),
comprising 3% (30 December 2017: 4%) of the parent Company’s assets.
Investments are subject to an impairment review using discount rates between the range of 7.6% and
9.5% (30 December 2017: 7.4%–9.5%).
The accounting policies for both investments and intercompany debtors are set out in Note A to the
parent Company financial statements.
We assessed 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.
Key observations
We concur with the level of impairment reversal recognised by management for all investments.
We consider that the carrying value of investment and intercompany debtor balances is appropriate.
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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
£8.6 million (2017: £9.5 million)
£7.74 million (2017: £9.15 million)
Basis for
determining
materiality
We applied a lower threshold of £1.4 million
(2017: £1.4 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 (2017: less than 5% of Adjusted Profit).
Parent Company materiality equates to 2% of net
assets, which is capped at 90% of Group materiality
(2017: 2% of net assets).
Parent Company materiality equates to 2% of net
assets, which is capped at 90% of Group materiality
(2017: 2% of net assets).
Rationale for
the benchmark
applied
We used net assets as the benchmark when
determining materiality as it is considered to be
the most critical financial performance measure
for the Group.
We used net assets as the benchmark when
determining materiality as it is considered to be the
most critical financial performance measure for the
Company as a holding company.
G
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N
A
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We applied a lower threshold of £1.4 million (2017:
£1.4 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.
Net assets
£433.0 million
Net assets £433.0 million
Group materiality
Group materiality
£8.6 million
Component materiality
range £7.7 million
to £0.2 million
Audit Committee
reporting threshold
£0.25 million
We applied a lower threshold of £1.4 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 this financial performance measure.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £250,000 (2017: £280,000),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
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INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC CONTINUED
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
Wholly owned assets, Snozone and Group/Central. These are included within individual IFRS 8 segments as disclosed in Note 2 to the
Group financial statements.
All of the above were subject to a full scope audit.
The businesses subject to a full scope audit or specific audit procedures account for 97% (2017: 95%) of the Group’s net assets, 100%
(2017: 100%) of the Group’s revenue and 97% (2017: 99%) of the Group’s operating profit. All investment properties have been included
within the scope of our work. The businesses subject to a full scope audit or specific audit procedures 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% (2017: 2% and 90%) of Group materiality, which corresponds to component materialities between
£0.2 million and £7.7 million.
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.
G
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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.
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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.
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.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud, are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s Report.
G
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R
N
A
N
C
E
EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES,
INCLUDING FRAUD
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design
and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide a
basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, our procedures included the following:
Enquiring of management and the Audit Committee, including obtaining and reviewing supporting documentation, concerning the
Group’s policies and procedures relating to:
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations;
discussing among the engagement team and involving relevant internal specialists, including tax, financial instruments and real
estate valuation specialists regarding how and where fraud might occur in the financial statements and any potential indicators
of fraud. As part of this discussion, we identified potential for fraud in the significant judgements and assumptions used in the
investment property valuations; and
obtaining an understanding of the legal and regulatory framework that the Group operates in, focusing on those laws and
regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations of the Group.
The key laws and regulations we considered in this context included the UK Companies Act 2006, REIT legislation, London Stock
Exchange Listing Rules and tax legislation.
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INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF CAPITAL & REGIONAL PLC CONTINUED
EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES,
INCLUDING FRAUD continued
Audit response to risks identified
As a result of performing the above, we identified the valuation of investment properties as a key audit matter. The key audit matters
section of our report explains the matter in more detail and also describes the specific procedures we performed in response to this key
audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
G
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N
A
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Reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and
regulations discussed above;
Enquiring of management, the Audit Committee and external legal counsel concerning actual and potential litigation and claims;
Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
Reading minutes of meetings of those charged with governance, and reviewing correspondence with HMRC; and
In addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments;
Assessing whether the judgements made in making accounting estimates are indicative of a potential bias;
And evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
internal specialists, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
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.
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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.
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.
We have nothing to
report in respect of
these matters.
OTHER MATTERS
Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the Directors on 19 January 1998 to audit the financial
statements for the year ending 25 December 1997 and subsequent financial periods. The period of total uninterrupted engagement
including previous renewals and reappointments of the firm is 22 years, covering the years ending 25 December 1997 to
30 December 2018.
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 required to provide in accordance
with ISAs (UK).
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 required to state to them
in an Auditor’s Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
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Matthew Hall FCA (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
2 April 2019
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I
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I
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR TO 30 DECEMBER 2018
Revenue
Cost of sales
Gross profit
Administrative costs
Share of loss in associates
Loss on revaluation of investment properties
Other gains and losses
(Loss)/profit on ordinary activities before financing
Finance income
Finance costs
(Loss)/profit before tax
Tax charge
(Loss)/profit 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
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR TO 30 DECEMBER 2018
(Loss)/profit for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Gain on a hedge of a net investment taken to equity
Total items that may be reclassified subsequently to profit or loss
Total comprehensive (expense)/income for the year
Note
3
4
14a
10a
5
5
6
8a
2a
9a
9a
9a
9a
2018
£m
91.0
(34.9)
56.1
(9.2)
(4.6)
(47.5)
(4.5)
(9.7)
3.1
(18.9)
(25.5)
(0.1)
(25.6)
(3.5)p
(3.5)p
4.0p
4.0p
2018
£m
(25.6)
–
–
–
(25.6)
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
There are no items in other comprehensive income that may not be reclassified to the income statement.
Loss for the year and total comprehensive expense are all attributable to equity holders of the parent.
The EPRA alternative performance 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 24 to the Financial
Statements.
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CONSOLIDATED BALANCE SHEET
AT 30 DECEMBER 2018
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
Total current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Net current assets
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
Note
10
11
14b
13
14b
13
15
2b
16
17a
16
26
2b
19
19
21
24
24
24
2018
£m
898.2
2.0
2.8
16.5
–
919.5
15.3
32.0
47.3
966.8
(37.1)
(37.1)
10.2
(432.9)
(2.2)
(61.6)
(496.7)
(533.8)
433.0
7.3
166.5
60.3
4.4
–
194.5
433.0
£0.60
£0.59
£0.59
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)
(3.6)
(61.7)
(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
I
F
N
A
N
C
A
L
S
I
These Financial Statements were approved by the Board of Directors, authorised for issue and signed on their behalf on
2 April 2019 by:
Lawrence Hutchings
Chief Executive
Stuart Wetherly
Group Finance Director
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CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR TO 30 DECEMBER 2018
Share
capital
£m
7.0
–
Share
premium1
£m
158.2
–
Merger
reserve2
£m
60.3
–
Capital
redemption
reserve1
£m
4.4
–
Own
shares
reserve3
£m
(0.4)
–
Retained
earnings
£m
248.1
22.4
–
–
–
–
0.2
–
7.2
–
–
–
–
–
0.1
–
7.3
–
–
–
–
5.1
–
163.3
–
–
–
–
–
3.2
–
166.5
–
–
–
–
–
–
60.3
–
–
–
–
–
–
–
60.3
–
–
–
–
–
–
4.4
–
–
–
–
–
–
–
4.4
–
–
–
–
–
0.3
(0.1)
–
–
–
–
–
–
0.1
–
Total
equity
£m
477.6
22.4
–
22.4
0.9
(19.5)
–
–
481.4
(25.6)
–
22.4
0.9
(19.5)
(5.3)
(0.3)
246.3
(25.6)
–
–
(25.6)
(25.6)
0.7
(23.5)
(3.3)
(0.1)
194.5
0.7
(23.5)
–
–
433.0
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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, net of scrip
Shares issued, net of costs
Other movements
Balance at 30 December 2017
Loss for the year
Other comprehensive income
for the year
Total comprehensive
income for the year
Credit to equity for equity-
settled share-based payments
(Note 20)
Dividends paid, net of scrip
Shares issued, net of costs
Other movements
Balance at 30 December 2018
Notes:
1. These reserves are not distributable.
2. 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.
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CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR TO 30 DECEMBER 2018
Operating activities
Net cash from operations
Distributions received from fixed asset investments including German B-note
Interest paid
Interest received
Cash flows from operating activities
Investing activities
Distributions received from associates
Acquisition of The Exchange, Ilford
Disposal of Buttermarket, Ipswich
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 increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
22
14b
10a
17a
15
2018
£m
46.7
0.8
(14.5)
0.1
33.1
1.2
–
0.3
(0.5)
(18.6)
(17.6)
(23.6)
10.0
–
(0.1)
(13.7)
1.8
30.2
32.0
2017
£m
43.0
0.7
(14.6)
0.1
29.2
4.5
(79.0)
9.8
(0.6)
(16.9)
(82.2)
(19.1)
401.5
(334.6)
(13.7)
34.1
(18.9)
49.1
30.2
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR TO 30 DECEMBER 2018
1 SIGNIFICANT ACCOUNTING POLICIES
GENERAL INFORMATION
Capital & Regional plc is a company domiciled and incorporated in the United Kingdom under the Companies Act 2006. The address of
the registered office is 22 Chapter Street, London, SW1P 4NP. The Group is a specialist real estate investor and asset manager, focused
on dominant in-town community shopping centres. Further information on the Group’s operations is disclosed in Note 2a and 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
31. 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 during 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 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 changes introduced by
IFRS 15 will result in minimal qualitative changes to the revenue disclosure and will not have a quantitative impact on the consolidated
Financial Statements of the Group.
IFRS 9 Financial Instruments – will impact both the measurement and disclosures of financial instruments excluding derivatives and is
effective for the Group’s year ending 30 December 2019. IFRS 9 also introduces an expected credit loss model. These changes will not
have a quantitative impact on the Group’s Financial Statements.
IFRS 16 Leases – will result in the Group recognising on the balance sheet assets it leases along with a corresponding liability and is
effective for the Group’s year ending 30 December 2020. The primary lease contracts that this will impact are the lease on the Group’s
support offices and the leases of the Snozone business on its Basingstoke, Castleford and Milton Keynes sites. The total increase in
both assets and liabilities is expected to be around £15.9 million.
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.
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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 29.
CRITICAL ACCOUNTING JUDGEMENTS
The preparation of Financial Statements requires the Directors to make judgements that may affect the application of accounting
policies. In the opinion of the Directors, no critical judgements have been made in the preparation of these Financial Statements.
KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of Financial Statements requires the Directors to make estimates that may affect the reported amounts of assets and
liabilities, income and expenses. The following are the key sources of estimation uncertainty 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 2018. 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, the 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 analyses 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 2018 by independent third party experts in assessing the fair values of the Group’s
derivative financial instruments, which hedge interest rate risk and are therefore subject to movements in market rates, 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.
BASIS OF CONSOLIDATION
The consolidated Financial Statements incorporate the financial statements of the Company and its subsidiaries at 30 December. Control
of subsidiaries is achieved where the Company has the power over the investee, is exposed, or has rights, to variable return from its
involvement with the investee and has the ability to use its power to affect its returns.
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.
BUSINESS COMBINATIONS
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition
is measured at the aggregate at the date of exchange of the fair values of assets acquired, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the income
statement as incurred. Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity
are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is
recognised in the income statement.
If the initial accounting for a business combination is incomplete by the end of the reporting 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.
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1 SIGNIFICANT ACCOUNTING POLICIES continued
SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
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.
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 = €1.118 (2017: £1 = €1.127). The principal exchange rate used for the
income statement is the average rate for the year: £1 = €1.130 (2017: £1 = €1.141).
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.
Leasehold properties
Leasehold properties that are leased to tenants under operating leases are classified as investment properties or development
properties, as appropriate, and included in the balance sheet at fair value.
Capital expenditure
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.
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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 a 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.
Head leases
Where an investment property is held under a head lease, the head lease is initially recognised as an asset at the present value of the
minimum ground rent payable under the lease. The corresponding rent liability to the leaseholder is included in the balance sheet as a
finance lease obligation.
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 receivables are discounted to take into account the time value of money, where material.
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CONTINUED
1 SIGNIFICANT ACCOUNTING POLICIES continued
Cash and cash equivalents
Cash and cash equivalents include cash in 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.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their
fair value at each balance sheet date. The fair value of forward foreign exchange contracts is calculated by reference to spot and forward
exchange rates at the balance sheet date. The fair value of interest rate swaps is calculated by reference to appropriate forecasts of
yield curves between the balance sheet date and the maturity of the instrument. Changes in fair value are included as finance income
or finance costs in the income statement, except for gains or losses on the portion of an instrument that is an effective hedge of the
net investment in a foreign operation, which are recognised in the net investment hedging reserve. Derivative financial instruments are
classified as non-current when they have a maturity of more than 12 months and are not intended to be settled within one year.
Trade payables
Trade payables are carried at fair value, with any gains or losses arising on remeasurement recognised in the income statement.
TAXATION
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
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.
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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.
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.
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 and any loss in the value of the Group’s wholly-owned interest rate swaps.
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. Other UK Shopping Centres consists of the Group’s interest in Kingfisher Limited Partnership
(Redditch). 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 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.
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
2A OPERATING SEGMENTS
Year to 30 December 2018
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
Loss on disposal of Ipswich
Gain on financial instruments
Share-based payments
Other items
(Loss)/profit
Note
2b
2b
UK Shopping Centres
Wholly-
owned
assets
£m
65.0
(13.1)
51.9
(18.7)
–
–
–
–
–
–
33.2
(47.5)
–
2.6
–
(0.2)
(11.9)
Other UK
Shopping
Centres1
£m
2.2
(0.7)
1.5
(1.1)
–
–
–
–
–
–
0.4
(5.0)
–
–
–
(0.8)
(5.4)
Total assets
Total liabilities
Net assets
2b
2b
951.0
(526.0)
425.0
14.8
(14.0)
0.8
Snozone
£m
–
–
–
–
10.4
(8.7)
–
(0.2)
–
–
1.5
–
–
–
–
–
1.5
5.1
(3.0)
2.1
Group/
Central
£m
–
–
–
(0.2)
2.3
(6.1)
0.4
(0.1)
(0.8)
(0.1)
(4.6)
–
(3.8)
–
(0.7)
(0.7)
(9.8)
Total
£m
67.2
(13.8)
53.4
(20.0)
12.7
(14.8)
0.4
(0.3)
(0.8)
(0.1)
30.5
(52.5)
(3.8)
2.6
(0.7)
(1.7)
(25.6)
9.9
(4.8)
5.1
980.8
(547.8)
433.0
1. Comprises Kingfisher Redditch. For further information see Note 14.
2. Asset management fees of £3.7 million charged from the Group’s CRPM entity to wholly-owned assets have been excluded from the table above.
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2A OPERATING SEGMENTS continued
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
Gain on financial instruments
Refinancing costs
Share-based payments
Other items
Profit/(loss)
Total assets
Total liabilities
Net assets
Note
2b
2b
UK Shopping Centres
Wholly-owned
assets
£m
63.9
(12.3)
51.6
(18.4)
–
–
–
–
–
–
33.2
(3.8)
0.7
–
–
–
30.1
Other UK
Shopping
Centres1
£m
2.3
(0.7)
1.6
(0.9)
–
–
–
–
–
(0.1)
0.6
(2.5)
0.4
(0.5)
–
–
(2.0)
2b
2b
984.1
(518.7)
465.4
30.9
(23.5)
7.4
Snozone
£m
–
–
–
–
10.4
(8.8)
–
(0.1)
–
–
1.5
–
–
–
–
–
1.5
4.4
(2.2)
2.2
Group/
Central
£m
–
–
–
(0.3)
2.2
(6.8)
0.4
(0.1)
(1.6)
–
(6.2)
–
–
–
(0.9)
(0.1)
(7.2)
12.0
(5.6)
6.4
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)
1.1
(0.5)
(0.9)
(0.1)
22.4
1,031.4
(550.0)
481.4
1. Comprises Kingfisher Redditch. For further information see Note 14.
2. Asset management fees of £3.6 million charged from the Group’s CRPM entity to wholly-owned assets have been excluded from the table above.
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NOTES TO THE FINANCIAL STATEMENTS
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
Wholly-owned assets
Other UK Shopping Centres
Snozone
Group/Central
Total assets of reportable segments
Adjustment for fixed asset investments
Group assets
Liabilities
Wholly-owned assets
Other UK Shopping Centres
Snozone
Group/Central
Total liabilities of reportable segments
Adjustment for fixed asset investments
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
Note
2a
2a
2a
2a
3
Note
2a
2a
Year to
30 December
2018
£m
67.2
14.7
2.3
10.4
94.6
(1.4)
(2.2)
91.0
Year to
30 December
2017
£m
66.2
14.1
2.2
10.4
92.9
(1.4)
(2.3)
89.2
2018
£m
951.0
14.8
5.1
9.9
980.8
(14.0)
966.8
(526.0)
(14.0)
(3.0)
(4.8)
(547.8)
14.0
(533.8)
433.0
–
433.0
2017
£m
984.1
30.9
4.4
12.0
1,031.4
(23.5)
1,007.9
(518.7)
(23.5)
(2.2)
(5.6)
(550.0)
23.5
(526.5)
481.3
0.1
481.4
Year to
30 December
2018
£m
51.7
13.3
65.0
14.7
0.9
10.4
91.0
Year to
30 December
2017
£m
51.2
12.7
63.9
14.1
0.8
10.4
89.2
Note
2a
2b
2a
2b
External management fees represent revenue earned by the Group’s wholly-owned Capital & Regional Property Management Limited
subsidiary.
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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)
Total finance costs
6 LOSS/PROFIT BEFORE TAX
The loss/profit 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
2018
£m
(12.7)
(13.3)
(8.9)
(34.9)
Year to
30 December
2017
£m
(11.9)
(12.7)
(8.9)
(33.5)
Year to
30 December
2018
£m
Year to
30 December
2017
£m
0.1
0.4
2.6
3.1
(1.0)
(14.0)
(0.5)
(3.4)
(18.9)
0.1
0.4
0.7
1.2
(1.0)
(13.9)
(0.5)
(3.4)
(18.8)
Year to
30 December
2018
£m
2.1
4.5
0.3
11.6
0.2
Year to
30 December
2017
£m
1.9
(0.3)
0.2
13.1
0.2
Note
11
7
In the current year Other gains and losses relate primarily to a loss of £3.8 million in relation to the 2017 disposal of Ipswich following
the final true-up of deferred consideration after the end of the two-year earn-out window and £0.8 million of impairment related to
Kingfisher Redditch (see Note 14b).
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
6 LOSS/PROFIT 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
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
Consultancy services
Total non-audit fees
Total fees paid to Auditor and their associates
Year to
30 December
2018
£’000
Year to
30 December
2017
£’000
83
72
155
40
–
20
60
215
83
74
157
41
2
–
43
200
7 STAFF COSTS
Salaries
Discretionary bonuses
Share-based payments
Social security
Other pension costs
Note
20
Year to
30 December
2018
£m
8.8
0.9
0.8
10.5
0.9
0.2
11.6
Year to
30 December
2017
£m
9.5
1.4
0.9
11.8
1.2
0.1
13.1
Staff costs amounting to £0.4 million (2017: £0.4 million) 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:
CRPM/PLC
Shopping centres
Snozone
Total staff numbers
Year to
30 December
2018
Number
43
70
135
248
Year to
30 December
2017
Number
46
67
132
245
The monthly average number of total employees (including Executive Directors) employed within the Group during the year was 367 (CRPM
– 45, Shopping centres – 85, Snozone – 237) compared to 354 in 2017 (CRPM – 49, Shopping centres – 80, Snozone – 225).
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8 TAX
8A TAX CHARGE
Current tax
UK corporation tax
Adjustments in respect of prior years
Total current tax credit
Deferred tax
Adjustments in respect of prior years
Total deferred tax
Total tax charge
£nil (2017: £nil) of the tax charge relates to items included in other comprehensive income.
8B TAX CHARGE RECONCILIATION
(Loss)/profit before tax on continuing operations
(Loss)/profit multiplied by the UK corporation tax rate of 19% (2017: 19.25%)
REIT exempt income and gains
Non-allowable expenses and non-taxable items
Excess tax losses
Adjustments in respect of prior years
Total tax charge
8C DEFERRED TAX
Year to
30 December
2018
£m
Year to
30 December
2017
£m
–
–
–
(0.1)
(0.1)
(0.1)
–
–
–
–
–
–
Year to
30 December
2018
£m
(25.5)
(4.9)
3.1
1.7
0.1
0.1
0.1
Year to
30 December
2017
£m
22.4
4.3
(4.0)
(0.4)
0.1
–
–
Note
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 the Finance Act 2016. Consequently, the UK corporation tax rate at which the
deferred tax is booked in the Financial Statements is 17% (2017: 17%).
The Group has recognised a deferred tax asset of £nil (2017: £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 £18.7 million (2017: £12.3 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 (2017: £nil). The Group has unused capital losses of £24.9 million (2017: £25.1 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.
8D REIT COMPLIANCE
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.
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
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:
9A EARNINGS PER SHARE CALCULATION
Year to 30 December 2018
Year to 30 December 2017
Note
Loss
EPRA
Adjusted
profit
Profit
EPRA
Adjusted
profit
(25.6)
(25.6)
(25.6)
22.4
22.4
22.4
Profit (£m)
(Loss)/profit for the year
Revaluation loss on
investment properties (net
of tax)
Loss on disposal of Ipswich
(net of tax)
Changes in fair value of
financial instruments
Refinancing costs
Share-based payments
Other items
(Loss)/profit (£m)
Earnings per share (pence)
Diluted earnings per share (pence)
9b
9b
9b
2a
2a
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–
–
–
–
–
–
(25.6)
(3.5)
(3.5)
52.5
3.8
(2.6)
–
–
0.6
28.7
4.0
4.0
52.5
3.8
(2.6)
–
0.7
1.7
30.5
4.2
4.2
None of the current or prior year earnings related to discontinued operations (2017: none).
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Basic
Dilutive contingently issuable shares and share options
Diluted
–
–
–
–
–
–
22.4
3.2
3.1
Note
21
6.3
–
(1.1)
0.5
–
(0.3)
27.8
3.9
3.9
6.3
–
(1.1)
0.5
0.9
0.1
29.1
4.1
4.1
Year to
30 December
2018
721.9
(0.5)
721.4
4.6
726.0
Year to
30 December
2017
709.2
(0.2)
709.0
6.8
715.8
At the end of the year, the Group had 8,162,625 (2017: 12,128,362) 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.
9B RECONCILIATION OF EARNINGS FIGURES INCLUDED IN EARNINGS PER SHARE CALCULATIONS
Year to 30 December 2018
Year to 30 December 2017
Revaluation
movements
£m
(47.5)
(5.0)
–
–
(52.5)
Note
14c
9a
Loss on
disposal of
investment
properties
£m
–
–
(3.8)
–
(3.8)
Movement
in fair value
of financial
instruments
£m
2.6
–
–
–
2.6
Loss
on disposal of
investment
properties
£m
–
–
–
–
–
Movement
in fair value
of financial
instruments
£m
0.7
0.4
–
–
1.1
Revaluation
movements
£m
(3.8)
(2.5)
–
–
(6.3)
Wholly-owned
Associates
Joint ventures
Tax effect
Total
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9 EARNINGS PER SHARE continued
9C HEADLINE EARNINGS PER SHARE
Headline earnings per share has been calculated and presented as required by the JSE Listing Requirements.
Profit (£m)
(Loss)/profit for the year
Revaluation loss on investment properties (including tax)
Loss on disposal of Ipswich (net of tax)
Other items
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)
10 INVESTMENT PROPERTIES
10A WHOLLY-OWNED PROPERTIES
Cost or valuation
At 30 December 2016
Acquired (The Exchange, Ilford)
Capital expenditure (excluding capital contributions)
Valuation deficit
At 30 December 2017
Capital expenditure (excluding capital contributions)
Valuation deficit1
At 30 December 2018
Year to 30 December 2018
Diluted
Basic
Year to 30 December 2017
Diluted
Basic
(25.6)
52.5
3.8
(0.2)
30.5
721.9
(0.5)
–
721.4
4.2
(25.6)
52.5
3.8
(0.2)
30.5
721.9
(0.5)
4.6
726.0
4.2
22.4
6.3
–
(0.3)
28.4
709.2
(0.2)
–
709.0
4.0
22.4
6.3
–
(0.3)
28.4
709.2
(0.2)
6.8
715.8
4.0
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Total
property
assets
£m
357.9
79.0
4.3
(3.8)
437.4
8.8
(14.1)
432.1
480.6
–
12.3
0.3
493.2
6.1
(33.2)
466.1
838.5
79.0
16.6
(3.5)
930.6
14.9
(47.3)
898.2
1. £47.5 million per Note 2a includes letting fee amortisation adjustment of £0.2 million (2017: £0.3 million).
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
10B PROPERTY ASSETS SUMMARY continued
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
Associates1
Investment properties at fair value
Unamortised tenant incentives on investment properties
IFRS Property Value
See-through property valuation
See-through IFRS Property Value
30 December 2018
30 December 2017
100%
£m
Group share
£m
100%
£m
Group share
£m
855.2
61.3
(18.3)
898.2
–
–
–
855.2
898.2
855.2
61.3
(18.3)
898.2
–
–
–
855.2
898.2
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
1. The Group’s interest in the Kingfisher Limited Partnership has been reclassified to a fixed asset investment as at 30 December 2018 as set out in Note 14b.
10C VALUATIONS
External valuations at 30 December 2018 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 £878.9 million (2017: £915.2 million of £1,029.5 million).
The valuations were carried out by independent qualified professional valuers from CBRE Limited 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 2018:
Wholly-owned assets
Market Value
£m
855.2
Low
13.90
Portfolio
17.59
High
21.88
Low
4.92
Portfolio
6.58
High
8.75
Estimated rental value £ per sq ft
Equivalent yield %
Sensitivities
The following table illustrates the impact of changes in key unobservable inputs (in isolation) on the fair value of the Group’s properties:
Wholly-owned assets
Impact on valuations of
5% change in estimated
rental value
Impact on valuations of
25bps change in
equivalent yield
Impact on valuations of
50bps change in
equivalent yield
Increase
£m
36.3
Decrease
£m
(34.8)
Increase
£m
(32.7)
Decrease
£m
35.4
Increase
£m
(63.0)
Decrease
£m
74.0
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11 PLANT AND EQUIPMENT
Cost
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
30 December
2018
£m
30 December
2017
£m
4.8
0.5
–
5.3
(3.0)
(0.3)
(3.3)
2.0
3.7
1.1
–
4.8
(2.8)
(0.2)
(3.0)
1.8
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
Interest rate swaps
Non-financial assets
Deferred tax asset
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
30 December
2018
£m
30 December
2017
£m
1.2
1.2
–
5.0
10.3
16.5
7.3
–
1.1
1.1
9.5
–
9.5
2.8
1.2
1.8
15.3
0.1
0.1
0.1
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
Included in the non-derivative financial assets balance are trade receivables with a carrying amount of £2.1 million (2017: £1.7 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 £0.6 million (2017: £0.8 million) over trade
receivables as security deposits held in rent accounts. The average age of trade receivables is 29 days (2017: 30 days).
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
13 RECEIVABLES continued
Analysis of non-derivative current financial assets
Not past due
Past due but not individually impaired:
Less than 1 month
1 to 3 months
3 to 6 months
Over 6 months
Allowances for doubtful receivables
At the start of the year
Additional allowances created
Utilised during the year
Unused amounts reversed
At the end of the year
14 INVESTMENT IN ASSOCIATES
14A SHARE OF RESULTS
Share of results of associates
14B INVESTMENT IN ASSOCIATES
At the start of the year
Share of results of associates
Dividends and capital distributions received
Impairment
Reclassification to Fixed asset investments
At the end of the year
30 December
2018
£m
30 December
2017
£m
7.4
0.7
0.6
0.5
0.3
9.5
13.6
0.8
–
0.6
0.3
15.3
30 December
2018
£m
30 December
2017
£m
0.7
1.8
(0.9)
(0.3)
1.3
0.7
1.8
(1.5)
(0.3)
0.7
Year to
30 December
2018
£m
(4.6)
(4.6)
Year to
30 December
2017
£m
(2.0)
(2.0)
Note
14c
30 December
2018
£m
7.4
(4.6)
(1.2)
(0.8)
(0.8)
–
30 December
2017
£m
13.9
(2.0)
(4.5)
–
–
7.4
Note
14c
14c
The Group’s only significant associate during 2017 and 2018 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 previously accounted for its interest as an associate on the basis that it held a 20% share
and exercised significant influence through its representation on the General Partner board and through acting as the property and
asset manager. An agreement to restructure the Kingfisher holding was in place at 30 December 2018 and formally completed on
8 March 2019. As a result of this the Group’s equity holding was diluted to 12% and while the Group continues to act as property and
asset manager it no longer has representation on the General Partner board. We consider that we did not exercise significant influence
at year end and, reflecting this, the Group’s remaining interest in the Kingfisher Limited Partnership has been reclassified to a Fixed Asset
Investment as at 30 December 2018 at a carrying value of £0.8 million.
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14 INVESTMENT IN ASSOCIATES continued
14C 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
Refinancing costs
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
Refinancing costs
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. Comprised Kingfisher Redditch.
Year to 30
December
20181
Total
£m
Year to 30
December
20171
Total
£m
10.8
(2.4)
(1.0)
7.4
(5.7)
1.7
(24.7)
–
–
(23.0)
0.2
(22.8)
–
–
–
–
–
2.2
(0.5)
(0.2)
1.5
(1.1)
0.4
(5.0)
–
–
(4.6)
–
(4.6)
–
–
–
–
–
11.3
(2.7)
(1.1)
7.5
(4.1)
3.4
(12.4)
1.9
(2.5)
(9.6)
(0.2)
(9.8)
138.4
16.1
(6.3)
(111.3)
36.9
2.3
(0.5)
(0.2)
1.6
(0.9)
0.7
(2.5)
0.4
(0.5)
(1.9)
(0.1)
(2.0)
27.7
3.3
(1.3)
(22.3)
7.4
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
15 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Security deposits held in rent accounts
Other restricted balances
30 December
2018
£m
27.3
0.6
4.1
32.0
30 December
2017
£m
24.4
0.8
5.0
30.2
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 2018 were held in sterling other than £0.2 million which
was held in Euros (30 December 2017: £0.9 million).
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
The average age of trade payables is 34 days (2017: 36 days). No amounts incur interest (2017: £nil).
30 December
2018
£m
30 December
2017
£m
0.3
1.7
2.0
0.2
2.2
2.8
17.6
5.3
25.7
10.5
0.9
37.1
0.3
1.8
2.1
1.5
3.6
2.3
17.3
8.4
28.0
10.4
0.6
39.0
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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.
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
Four Mall assets facility
Note
17d
17d
30 December
2018
£m
30 December
2017
£m
438.4
–
438.4
(5.5)
432.9
–
432.9
432.9
428.4
–
428.4
(6.2)
422.2
–
422.2
422.2
During the period, £10 million was drawn on the £100 million bank facility with The Royal Bank of Scotland plc to fund capital
expenditure. This facility and a £165 million loan with Teachers Insurance and Annuity Association of America are secured on the four
assets at Blackburn, Maidstone, Walthamstow and Wood Green.
Hemel Hempstead capital expenditure facility and Group revolving credit facility
On 13 March 2019 the Group completed a new £7 million capital expenditure facility with The Royal Bank of Scotland plc to part fund a
cinema development and related leisure works at Hemel Hempstead. At the same time the Group’s revolving credit facility was rebased
from £30 million to £15 million with improved headroom on both Total Net Worth and Loan to Value covenants. The revolving credit
facility was undrawn at 30 December 2017 and 30 December 2018.
17B MATURITY OF BORROWINGS
Greater than 5 years
From 2 to 5 years
Due after more than one year
Current
17C UNDRAWN COMMITTED FACILITIES
Expiring greater than 5 years
Expiring between 2 and 5 years
30 December
2018
£m
30 December
2017
£m
Note
304.0
134.4
438.4
–
438.4
401.5
26.9
428.4
–
428.4
17a
30 December
2018
£m
30 December
2017
£m
–
30.0
10.0
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.
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
17 BANK LOANS continued
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
2018
£m
30 December
2017
£m
Note
17a
17a
39.0
399.4
438.4
–
438.4
39.0
389.4
428.4
–
428.4
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.
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
30 December
2018
£m
438.4
(27.3)
411.1
30 December
2017
£m
428.4
(24.4)
404.0
Note
17a
15
433.0
95%
481.6
84%
30 December
2018
£m
438.4
(27.3)
411.1
433.0
95%
30 December
2017
£m
451.0
(26.3)
424.7
481.6
87%
855.2
–
855.2
48%
886.6
28.6
915.2
46%
Note
18e
10b
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18 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT continued
18A OVERVIEW continued
Categories of financial (liabilities)/assets
Carrying
value
£m
2018
Gain/(loss)
to income
£m
Gain
to equity
£m
Carrying
value
£m
2017
Gain/(loss)
to income
£m
Gain
to equity
£m
Financial assets
Current receivables
Cash and cash equivalents
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
Significant accounting policies
Note
13
15
13
13
16
17a
16
17a
9.5
32.0
41.5
1.2
–
1.2
(25.7)
–
(2.0)
(432.9)
(460.6)
16
(0.2)
(0.2)
(418.1)
–
–
–
2.3
–
2.3
–
–
–
(1.0)
(1.0)
0.3
0.3
1.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
15.3
30.2
45.5
0.1
–
0.1
(28.0)
–
(2.1)
(422.2)
(452.3)
(1.5)
(1.5)
(408.2)
–
–
–
0.1
–
0.1
–
–
–
(1.0)
(1.0)
0.6
0.6
(0.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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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 Notional principal Contract fixed rate
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
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
£18,650,000
£8,237,000
£107,500,000
£100,000,000
£39,000,000
1.33%
1.30%
1.14%
1.13%
1.00%
30 December 2018
fair value £m
asset/(liability)
(0.1)
–
0.5
0.5
0.4
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
18 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT continued
18B INTEREST RATE RISK continued
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.
100bps increase in interest rates
Year to
30 December
2017
£m
Year to
30 December
2018
£m
100bps decrease in interest rates
Year to
30 December
2017
£m
Year to
30 December
2018
£m
–
13.0
13.0
13.0
(0.1)
15.8
15.7
15.7
–
(13.0)
(13.0)
(13.0)
0.1
(15.8)
(15.7)
(15.7)
Floating rate loans and cash – (loss)/gain
Interest rate derivatives – gain/(loss)
Impact on the income statement – gain/(loss)
Impact on equity – gain/(loss)
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.
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18D LIQUIDITY RISK
Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due. The day-to-
day operations of the Group are largely funded through the items included in the breakdown of 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 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 2018 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 rates.
2018
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Financial liabilities
Borrowings – bank loans
Borrowings – other loans
Current payables
Non-current payables
2017
Financial assets
Current receivables
Cash and cash equivalents
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%
2.3%
9.5
32.0
–
41.5
–
–
(25.7)
–
(25.7)
–
–
–
–
–
–
–
(0.3)
(0.3)
–
–
–
–
(132.4)
(1.7)
–
–
(134.1)
–
–
–
–
(300.5)
–
–
–
(300.5)
Effective
interest rate
%
Less than
1 year
£m
Note
1–2 years
£m
2–5 years
£m
More than
5 years
£m
13
15
17a
16
16
16
0.2%
3.3%
2.3%
15.3
30.2
45.5
–
–
(28.0)
–
(28.0)
–
–
–
–
–
–
(0.3)
(0.3)
–
–
–
(27.4)
(1.8)
–
–
(29.2)
–
–
–
(394.8)
–
–
–
(394.8)
Total
£m
9.5
32.0
–
41.5
(432.9)
(1.7)
(25.7)
(0.3)
(460.6)
Total
£m
15.3
30.2
45.5
(422.2)
(1.8)
(28.0)
(0.3)
(452.3)
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
18 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT continued
18D LIQUIDITY RISK 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.
2018
Borrowings – fixed bank loans
Borrowings – other fixed loans
Non-interest bearing
2017
Borrowings – fixed bank loans
Borrowings – other fixed loans
Non-interest bearing
Less than
1 year
£m
(14.2)
–
(25.7)
(39.9)
Less than
1 year
£m
(14.0)
–
(28.0)
(42.0)
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
(14.2)
(2.3)
(0.3)
(16.8)
(14.2)
–
–
(14.2)
(14.2)
–
–
(14.2)
(147.7)
–
–
(147.7)
1–2 years
£m
(14.0)
–
(0.3)
(14.3)
2–3 years
£m
(14.0)
(2.3)
–
(16.3)
3–4 years
£m
(14.0)
–
–
(14.0)
4–5 years
£m
(40.1)
–
–
(40.1)
More than
5 years
£m
(321.8)
–
–
(321.8)
More than
5 years
£m
(429.4)
–
–
(429.4)
Total
£m
(526.3)
(2.3)
(26.0)
(554.6)
Total
£m
(525.5)
(2.3)
(28.3)
(556.1)
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.
2018
Net settled
Interest rate swaps
2017
Net settled
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
–
–
–
–
–
–
–
–
(0.1)
(0.1)
1.4
1.4
Less than
1 year
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
–
–
–
–
–
–
–
–
–
–
(1.4)
(1.4)
Total
£m
1.3
1.3
Total
£m
(1.4)
(1.4)
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18E FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of financial instruments together with their carrying amounts in the balance sheet are as follows:
Financial liabilities not at fair value through
income statement
Sterling-denominated loans
Total on balance sheet borrowings
Group share of associate borrowings
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
Note
18a
18a
13
Notional
principal
£m
2018
Book value
£m
2018
Fair value
£m
2017
Book value
£m
2017
Fair value
£m
(438.4)
(438.4)
–
(438.4)
(437.9)
(437.9)
–
(437.9)
(428.4)
(428.4)
(22.6)
(451.0)
(430.0)
(430.0)
(22.6)
(452.6)
438.4
–
–
1.3
1.3
–
–
1.3
–
1.3
1.3
–
–
1.3
–
(1.4)
(1.4)
0.1
–
(1.3)
–
(1.4)
(1.4)
0.1
–
(1.3)
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
2018
Number
718,275,760
8,113,357
726,389,117
2017
Number
702,342,500
15,933,260
718,275,760
2018
£m
7.2
0.1
7.3
2017
£m
7.0
0.2
7.2
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 2018, 64,420,122 (2017: 60,477,452) 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 2017
May 2018 – Final 2017 Scrip Dividend
April 2018 – to satisfy Long Term Incentive awards
October 2018 – Interim 2018 Scrip Dividend
Carried forward at 30 December 2018
Price per
share
(pence)
No. of
shares
51.77
0.01
41.64
3,964,342
1,000,000
3,149,015
Total no.
of shares
718,275,760
722,240,102
723,240,102
726,389,117
726,389,117
Nominal
value
(£m)
Share
premium
(£m)
7.2
–
–
0.1
7.3
163.3
2.0
–
1.2
166.5
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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.
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.
Income statement charge
Equity-settled share-based payments – 2008 LTIP
Year to
30 December
2018
£m
0.7
Year to
30 December
2017
£m
0.9
The figures above exclude a National Insurance credit in the year of £0.1 million (2017: charge of £0.2 million).
Movements during the year
Outstanding at 30 December 2016
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 30 December 2017
Granted during the year
Exercised during the year1
Forfeited during the year
Outstanding at 30 December 2018
Exercisable at the end of the year
Number of
Options
21,738,716
6,367,945
(6,759,688)
(6,643,491)
14,703,482
4,632,222
(691,480)
(6,128,416)
12,515,808
–
1. The weighted average share price of options exercised during the year was 45.1p (2017: 54.8p).
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
0.62
0.96%
4.53%
0%
13p
March
2015
57.8p
0.0p
34%
4.50
0.68
0.96%
5.00%
0%
23p
2008 LTIP
August
2016
59.5p
0.0p
27%
5.00
2.64
0.56%
5.00%
0%
26p
April
2017
59.5p
0.0p
19%
5.00
3.30
0.53%
5.70%
0%
25p
April
2018
53.5p
0.0p
16%
5.00
4.30
1.14%
6.80%
0%
21p
Expected volatility is based on the historical volatility of the Group’s share price over the three years to the date of grant. The ten-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.
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21 OWN SHARES HELD
At the start of the year
Disposed of
At the end of the year
Own shares held
£m
0.1
(0.1)
–
The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2018, the Capital &
Regional plc 2002 Employee Share Trust (the “ESOT”) held 491,219 (2017: 182,699) 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 2018 was £0.1 million (2017: £0.1 million).
22 RECONCILIATION OF NET CASH FROM OPERATIONS
(Loss)/profit for the year
Adjusted for:
Income tax charge
Finance income
Finance expense
Finance lease costs (head lease)
Loss on revaluation of wholly-owned properties
Share of loss in associates
Depreciation of other fixed assets
Other gains and losses
Decrease/(increase) in receivables
(Decrease)/increase in payables
Non-cash movement relating to share-based payments
Net cash from operations
Year to
30 December
2018
£m
(25.6)
Year to
30 December
2017
£m
22.4
Notes
8a
14a
11
0.1
(3.1)
18.9
(3.4)
47.5
4.6
0.3
4.5
2.3
(0.2)
0.8
46.7
–
(1.2)
18.8
(3.4)
3.8
2.0
0.2
(0.3)
(3.6)
3.4
0.9
43.0
23 CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
2018
Bank loans
Interest rate swaps
Finance lease liabilities
Total liabilities from financing activities
2017
Bank loans
Interest rate swaps
Finance lease liabilities
Total liabilities from financing activities
Note
17a
16
26
Note
17a
16
26
Non–cash changes
Opening
422.2
1.5
61.7
485.4
Financing
cash flows
9.9
–
–
9.9
Fair value
adjustments
–
(1.3)
–
(1.3)
Other
changes
0.8
–
(0.1)
0.7
30 December
2018
432.9
0.2
61.6
494.7
Non–cash changes
Opening
360.8
2.1
61.3
424.2
Financing
cash flows
53.2
–
–
53.2
Fair value
adjustments
–
(0.6)
–
(0.6)
Other
changes
8.2
–
0.4
8.6
30 December
2017
422.2
1.5
61.7
485.4
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
24 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:
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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
25 RETURN ON EQUITY
Note
21
18e
Total comprehensive income attributable to equity shareholders
Opening equity shareholders’ funds plus time weighted additions
Return on equity
26 LEASE ARRANGEMENTS
THE GROUP AS LESSEE – OPERATING LEASES
Net assets
£m
30 December 2018
Number of
shares (m)
Net assets
per share (£)
30 December
2017
Net assets
per share (£)
433.0
0.5
433.5
(0.5)
(1.3)
–
431.7
0.60
0.67
726.4
(0.5)
4.6
730.5
0.59
0.66
730.5
0.59
0.67
30 December
2018
£m
(25.6)
482.9
(5.3)%
30 December
2017
£m
22.4
480.1
4.7%
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:
Lease payments
Within one year
Between one and five years
After five years
2018
£m
(2.2)
(9.0)
(7.6)
(18.8)
2017
£m
(2.1)
(9.1)
(9.7)
(20.9)
Operating lease payments are denominated in sterling and have an average remaining lease length of 8 years (2017: 9 years) and rentals
are fixed for an average of 3 years (2017: 2 years). During the year there were no contingent rents (2017: £nil) and the Group incurred
lease payments recognised as an expense of £2.1 million (2017: £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
2018
£m
3.5
13.9
358.2
375.6
(314.0)
61.6
2017
£m
3.5
13.9
361.7
379.1
(317.4)
61.7
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.
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26 LEASE ARRANGEMENTS continued
THE GROUP AS LESSOR
The Group leases out all of its investment properties under operating leases for average lease terms of 7 years (2017: 7 years) to expiry.
The leasing arrangements are summarised in the portfolio information on page 122. The future aggregate minimum rentals receivable
under non-cancellable operating leases are as follows:
Unexpired
average
lease term
Years
6.8
Less
than 1
year
£m
44.8
2–5
years
£m
116.4
6–10
years
£m
60.7
11–15
years
£m
29.2
16-20
years
£m
15.6
More
than 20
years
£m
30
December
2018
Total
£m
30
December
2017
Total
£m
79.9
346.6
361.6
27 CAPITAL COMMITMENTS
At 30 December 2018, the Group’s share of the capital commitments of its associates, joint ventures and wholly-owned properties was
£3.5 million (2017: £4.7 million) relating to capital expenditure projects.
28 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 has 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 within 5 years 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.
29 EVENTS AFTER THE BALANCE SHEET DATE
RESTRUCTURING OF HOLDING IN THE KINGFISHER LIMITED PARTNERSHIP
The restructuring of the Group’s holding in the Kingfisher Limited Partnership completed on 8 March 2019. See Note 14b for further
information.
HEMEL HEMPSTEAD CAPITAL EXPENDITURE FACILITY AND AMENDMENT TO THE GROUP REVOLVING CREDIT
FACILITY
A £7 million facility to part fund a cinema development and related leisure works at Hemel Hempstead completed on 13 March 2019. At
the same time the Group’s revolving credit facility was rebased to £15 million. See note 17a for further information.
30 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.
Kingfisher Limited Partnership (Redditch)
Fee income and
rent income
Net amounts
receivable from
Year to
30 December
2018
£m
Year to
30 December
2017
£m
As at
30 December
2018
£m
As at
30 December
2017
£m
0.7
0.7
–
0.2
The Group’s interest in the Kingfisher Limited Partnership has been reclassified to a Fixed Asset Investment as at 30 December 2018, as
disclosed in Note 14b.
Amounts receivable from associates and joint ventures are unsecured and do not incur interest, 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.
The Group paid £0.1 million in 2018 (2017: £nil) to ICAMAP Advisory S.à.r.l. for consultancy services in an arm's-length agreement.
ICAMAP Advisory S.à.r.l. were a related party by virtue of the Chairman of ICAMAP Advisory S.à.r.l. Guillaume Poitrinal, having served as a
director of the Company during the year.
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
30 RELATED PARTY TRANSACTIONS continued
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 12% of the cost by virtue of its investment in the Partnership. No performance fee has been recognised
during the year (2017: 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
2018
£m
1.6
0.1
0.3
2.0
Year to
30 December
2017
£m
1.8
0.1
0.6
2.5
In both years the highest paid Director was the Chief Executive whose remuneration is disclosed in the Directors’ Remuneration Report
on page 56.
31 DIVIDENDS
The dividends shown below are gross of any take-up of Scrip offer.
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
Final dividend per share for year ended 30 December 2017 of 1.91p
Interim dividend per share paid for year ended 30 December 2018 of 1.82p
Amounts recognised as distributions to equity holders in the year
Proposed final dividend per share for year ended 30 December 2018 of 0.60p1
Year to
30 December
2018
£m
–
–
13.7
13.1
26.8
4.4
Year to
30 December
2017
£m
12.4
12.4
–
–
24.8
–
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.
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COMPANY BALANCE SHEET
AS AT 30 DECEMBER 2018
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
Note
2018
£m
2017
£m
C
D
E
459.8
457.0
14.4
3.2
17.6
(17.1)
(17.1)
0.5
460.3
7.3
166.5
60.3
4.4
221.8
460.3
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
The profit for the year attributable to equity shareholders was £22.3 million (2017: £40.8 million).
These Financial Statements were approved by the Board of Directors, authorised for issue and signed on their behalf on
2 April 2019 by:
Lawrence Hutchings
Chief Executive
Stuart Wetherly
Group Finance Director
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STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR TO 30 DECEMBER 2018
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
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 2018
Non-distributable
Distributable
Share
capital
£m
7.0
–
–
–
0.2
7.2
–
–
–
0.1
7.3
Share
Premium
£m
158.2
–
–
–
5.1
163.3
–
–
–
3.2
166.5
Capital
redemption
reserve
£m
4.4
–
–
–
–
4.4
–
–
–
–
4.4
Retained
earnings
£m
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
£m
210.3
40.8
40.8
(19.5)
(5.3)
226.3
22.3
22.3
(23.5)
(3.3)
221.8
Merger
reserve
£m
60.3
–
–
–
–
60.3
–
–
–
–
60.3
Total
£m
440.2
40.8
40.8
(19.5)
–
461.5
22.3
22.3
(23.5)
–
460.3
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 31 to the Group Financial Statements. The other reserves are described in the
consolidated statement of changes in equity in the Group Financial Statements.
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NOTES TO THE COMPANY’S SEPARATE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 DECEMBER 2018
A ACCOUNTING POLICIES
The Company’s separate Financial Statements for the year ended 30 December 2018 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, impairment of assets and
related party transactions.
The Company’s financial statements are presented in pounds sterling.
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 30 to the Group Financial Statements. Except for the Directors, the
Company had no direct employees during the year (2017: 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.
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C FIXED ASSET INVESTMENTS
At the start of the year
Reversal of impairment of investments
At the end of the year
Investments are subject to an impairment review using discount rates between the range of 7.6% and 9.5%.
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
E TRADE AND OTHER PAYABLES
Amounts falling due within one year
Amounts owed to subsidiaries
Accruals and deferred income
Subsidiaries
£m
Other
investments
£m
456.0
2.8
458.8
Total
£m
457.0
2.8
459.8
2017
£m
18.5
0.2
18.7
2017
£m
12.7
2.9
15.6
1.0
–
1.0
2018
£m
14.1
0.3
14.4
2018
£m
14.0
3.1
17.1
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NOTES TO THE COMPANY’S SEPARATE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 DECEMBER 2018 CONTINUED
F SUBSIDIARIES AT 30 DECEMBER 2018
Subsidiaries
Capital & Regional (Europe Holding 5) Limited1
Capital & Regional (Jersey) Limited1
Capital & Regional (Mall GP) Limited
Capital & Regional (Projects) Limited
Capital & Regional (Shopping Centres) Limited1
Capital & Regional Earnings Limited
Capital & Regional Holdings Limited
Capital & Regional Ilford Limited1
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 Limited2,3
Capital & Regional Property Management Limited
Green–Sinfield Limited
Lancaster Court (Hove) Limited
Lower Grosvenor Place London One Limited
Nature of
business
Country of
incorporation
Share of
voting rights
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Dormant
Dormant
Property investment
Property investment
Property management
Dormant
Dormant
Dormant
Jersey
Jersey
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Jersey
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1. Registered office at 47 The Esplanade, St Helier, Jersey JE1 0BD.
2. In liquidation/being dissolved.
3. Registered office at Griffins, Tavistock House South, Tavistock Square, London WC1H 9LG.
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NOTES TO THE COMPANY’S SEPARATE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 DECEMBER 2018 CONTINUED
F SUBSIDIARIES continued
Subsidiaries (continued)
Mall Nominee One Limited
Mall Nominee Two Limited
Mall Nominee Three Limited
Mall Nominee Four Limited
Mall People Limited
Mall Ventures Limited
Marlowes Hemel Limited1
MB Roding (Guernsey) Limited4
Selborne One Limited
Selborne Two Limited
Selborne Walthamstow Limited1
Snozone Holdings Limited
Snozone Leisure Limited
Snozone Limited
The Mall (General Partner) Limited
The Mall (Luton) (General Partner) Limited
The Mall Limited Partnership
The Mall (Luton) Limited Partnership
The Mall REIT Limited
The Mall Shopping Centres Limited
The Mall Unit Trust1
The Mall Walthamstow One Limited
The Mall Walthamstow Two Limited
Wood Green London Limited1
Wood Green One Limited
Wood Green Two Limited
Principal associate entities
Euro B-Note Holding Limited1
Nature of
business
Country of
incorporation
Share of
voting rights
Dormant
Dormant
Dormant
Dormant
Property management
Dormant
Property investment
Dormant
Dormant
Dormant
Dormant
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
Property investment
Dormant
Dormant
Dormant
Dormant
Dormant
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Great Britain
Jersey
Guernsey
Great Britain
Great Britain
Jersey
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%
Finance
Jersey
39.90%
1. Registered office at 47 The Esplanade, St Helier, Jersey JE1 0BD.
2. In liquidation/being dissolved.
3. Registered office at Griffins, Tavistock House South, Tavistock Square, London WC1H 9LG
4. Registered office at PO Box 186, Royal Chambers, St Julian’s Avenue, St Peter Port, Guernsey GY1 4HP.
The registered office of all subsidiaries, unless otherwise noted, is 22 Chapter Street, London SW1P 4NP.
The shares of voting rights are equivalent to the percentages of ordinary shares or units held directly or indirectly by the Group.
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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 but 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.
Adjusted earnings per share is Adjusted profit divided by the
weighted average number of shares in issue during the year
excluding own shares held.
C&R is Capital & Regional plc, also referred to as the Group or the
Company.
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.
ERV growth is the total growth in ERV on properties owned
throughout the year including growth due to development.
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.
C&R Trade index is an internal retail tracker using data from
approximately 300 retail units across C&R’s shopping centre
portfolio.
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.
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.
Interest cover is the ratio of Adjusted profit (before interest, tax,
depreciation and amortisation) to the interest charge (excluding
amortisation of finance costs and notional interest on head
leases).
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.
Like-for-like figures, unless otherwise stated, exclude the impact
of property purchases and sales on year-to-year comparatives.
Loan to value (LTV) is the ratio of debt excluding fair value
adjustments for debt and derivatives, to the 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 Administrative Expenses to Gross Rent is the ratio of
Administrative Expenses net of external fee income to Gross
Rental income including the Group’s share of Joint Ventures and
Associates
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Net assets per share (NAV per share) are shareholders’ funds
divided by the number of shares held by shareholders at the year
end, excluding own shares held.
Rent to sales ratio is contracted rent excluding car park income,
ancillary income and anchor stores expressed as a percentage of
net sales.
Net debt to property value is debt less cash and cash equivalents
divided by the property value.
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 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 or Net rental income (NRI) is the Group’s share of the
rental income, less property and management costs (excluding
performance fees) of the Group.
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.
Occupancy rate is the ERV of occupied properties expressed
as a percentage of the total ERV of the portfolio, excluding
development voids.
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.
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.
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FIVE YEAR REVIEW (UNAUDITED)
Balance sheet
Property assets
Other non–current 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
(Decrease)/increase in NAV per share + dividend
Total shareholder return
Year end share price
Total return
Total comprehensive (expense)/income
Net assets per share
Basic net assets per share
EPRA triple net assets per share
EPRA net assets per share
Gearing
Income statement
Group revenue
Gross profit
(Loss)/profit on ordinary activities before financing
Net interest payable
(Loss)/profit before tax
Tax (charge)/credit
(Loss)/profit after tax
Adjusted profit
Adjusted earnings per share
Interest cover
Earnings per share
Basic
Diluted
EPRA
Dividends per share
2018
£m
898.2
21.3
–
–
32.0
–
(21.8)
(432.9)
(63.8)
433.0
7.3
166.5
64.7
194.5
433.0
(5.3)%
(5.5)%
(46.5)%
27.6p
(25.6)
60p
59p
59p
101%
91.0
56.1
(9.7)
(15.8)
(25.5)
(0.1)
(25.6)
30.5
4.2p
3.4
(3.5)p
(3.5)p
4.0p
2.42p
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)
(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)
(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
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COVENANT INFORMATION (UNAUDITED)
WHOLLY-OWNED ASSETS
Borrowings
£m
Covenant1
30 December
2018
Future changes
Core revolving credit facility
Net assets
Gearing
Historic interest cover
–
No less than £250m
No greater than 1.6:1
No less than 200%
£433.0m
1.0:1
369%
Four Mall assets
Loan to value2
Historic interest cover
A projected interest cover test also applies at a covenant level of no less than 150%
No greater than 70%
No less than 175%
265.0
Luton
Loan to value2
Debt yield
Historic interest cover
A projected interest cover test also applies at a covenant level of no less than 200%
No greater than 70%
No less than 8%
No less than 250%
107.5
Hemel Hempstead
Loan to gross development value2,3
Debt to net rent
Historic interest cover
26.9
No greater than 60%
No greater than 10:1
No less than 200%
Ilford
Loan to value2
Historic interest cover
A projected interest cover test also applies at a covenant level of no less than 225%
No greater than 70%
No less than 225%
39.0
50%
298%
55% Covenant 65% from January 2022
10.3%
353%
43%
8.3:1
373%
45%
384%
Covenant 9:1 from April 2019
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1. Covenants quoted are the default covenant levels. The facilities typically also have cash trap mechanisms.
2.
Calculated as specified in loan agreement based on 30 December 2018 valuation. Actual bank covenant based on bank valuation updated periodically.
3.
Based on loan with £7 million development facility completed on 13 March 2019. Covenant assessed on current loan drawn to projected Gross
Development Value of scheme with leisure development.
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WHOLLY-OWNED ASSETS PORTFOLIO
INFORMATION (UNAUDITED)
AT 30 DECEMBER 2018
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:
2019
2020
2021–2023
ERV (£m) of leases expiring in:
2019
2020
2021–2023
Passing rent (£m) subject to review in:
2019
2020
2021–2023
ERV (£m) of passing rent subject to review in:
2019
2020
2021–2023
Rental data
Contracted rent (£m)
Passing rent (£m)
ERV (£m per annum)
ERV movement (like-for-like)
Occupancy
7
760
3.5
855.2
43.0
898.2
47.5
6.2%
6.6%
10.7%
51%
48%
6.5
7.8
6.7
5.9
15.9
8.0
6.3
16.5
3.2
4.5
8.7
3.1
4.6
10.3
63.4
60.7
67.3
(1.8%)
97.0%
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WHOLLY-OWNED ASSETS PORTFOLIO
INFORMATION (UNAUDITED)
AT 30 DECEMBER 2018
EPRA PERFORMANCE MEASURES
(UNAUDITED)
AS AT 30 DECEMBER 2018
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 – Kingfisher, Redditch
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
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 and 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 and associate gross rental income less ground rent costs
Less inclusive lease costs recovered through rent
Gross rental income
Note
9a
9a
24
24
24
24
2018
28.7
4.0p
431.7
59p
433.5
59p
2.4%
2018
£m
855.2
23.7
–
878.9
(6.2)
57.9
930.6
66.7
(11.9)
54.8
2.1
56.9
5.9%
6.1%
2018
£m
35.4
9.2
(14.7)
(0.9)
(8.9)
0.7
(2.5)
18.3
(2.8)
15.5
65.0
(2.9)
2.2
(2.5)
61.8
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
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EPRA cost ratio (including direct vacancy costs)
EPRA cost ratio (excluding vacancy costs)
29.6%
25.1%
30.9%
25.9%
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ADVISERS AND CORPORATE INFORMATION
Auditor
Deloitte LLP
Statutory Auditor
2 New Street Square
London EC4A 3BZ
Principal valuers
CBRE Limited
Kingsley House
1a Wimpole Street
London W1G 0RE
Investment bankers/brokers
JP Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Principal legal advisers
CMS Cameron McKenna Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London EC4N 6AF
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
Knight Frank LLP
55 Baker Street
London W1U 8AN
Java Capital Trustees and Sponsors Proprietary Limited
(JSE sponsor)
6A Sandown Valley Crescent
Sandown, Sandton 2196
South Africa
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.
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Capital & Regional AR 2018 Strategic proof 6.indd 6
04/04/2019 18:32:28
26298 4 April 2019 4:35 pm Proof 6Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2018Stock Code: CALCAPITAL & REGIONAL PLC 22 Chapter Street London SW1P 4NPTel: +44 (0)20 7932 8000CAPREG.COMCapital & Regional AR 2018 Strategic proof 6.indd 104/04/2019 18:32:26