Annual Report and Accounts
for the year ended 30 December 2019
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Capital & Regional is a UK-focused retail property
REIT specialising in community shopping centres
that provide needs based, non-discretionary and
value-orientated retail goods and services. Our
centres are tailored to the needs and aspirations
of each centre’s local community and form a
critical part of the local infrastructure.
Capital & Regional has a strong track record of
delivering value enhancing retail and leisure asset
management opportunities across its 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
THINKING
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
ACTING
WITH
INTEGRITY
DELIVERING
DYNAMIC
SOLUTIONS
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capreg.com INSPIRING
CREATIVE
THINKING
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
ACTING
WITH
INTEGRITY
DELIVERING
DYNAMIC
SOLUTIONS
Highlights
NET RENTAL INCOME
£49.3m -5.0%
2019
£49.3m
2018
£51.9m
ADJUSTED PROFIT1
£27.4m -10.2%
2019
2018
£27.4m
£30.5m
ADJUSTED EARNINGS PER
SHARE1, 2
IFRS LOSS FOR THE
PERIOD
36.7p -13.2%
2019
2018
36.7p
42.3p
-£121m
0
30
60
90
120
150
£(121.0)m
£(25.6)m
2019
2018
TOTAL DIVIDEND
PER SHARE2
NET ASSET VALUE
(NAV) PER SHARE2
21p -13.2%
0
5
10
2019
2018
15
20
25
21p
24.2p
361p -39.4%
0
100
200
300
2019
2018
400
500
600
361p
596p
EPRA NAV PER SHARE2
GROUP NET DEBT
364p -38.4%
0
100
200
300
400
500
600
£336.9m -18.0%
0
100
200
300
400
500
2019
2018
364p
591p
2019
2018
£336.9m
£411.1m
NET DEBT TO
PROPERTY VALUE
46% -2pps
2019
2018
46%
48%
Notes
1 Adjusted Profit and Adjusted Earnings per share are as
defined in the Glossary. Adjusted Profit incorporates
profits from operating activities and excludes
revaluation of properties and financial instruments,
gains or losses on disposal, exceptional items and
other defined terms. A reconciliation to the equivalent
EPRA and statutory measures is provided in Note 9 to
the financial statements.
2 Per share amounts are adjusted to reflect the impact of
the 10 for 1 share consolidation that completed on
15 January 2020.
GROWTHPOINT TRANSACTION
In September 2019, the Company announced that it was in discussions with Growthpoint
Properties Limited (“Growthpoint”), the largest real estate investment trust primary listed
on the Johannesburg Stock Exchange, to make a substantial investment in the Company.
A formal offer to acquire a majority stake was confirmed in October 2019 and approved by
shareholders at a General Meeting on 26 November 2019.
Following this, 311,451,258 new Capital & Regional shares were issued to Growthpoint
at 25 pence per share on 9 December 2019 resulting in gross proceeds of approximately
£77.9 million being received by the Company. On 23 December 2019 Growthpoint
completed a partial offer to acquire a further 219,786,924 existing Capital & Regional
plc shares at 33 pence per share for approximately £72.5 million resulting in a total
investment of £150.4 million. The two transactions combined have resulted in
Growthpoint holding 51.1% of the issued share capital of the Company.
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CONTENTS
STRATEGIC REPORT
Our Portfolio
Chairman’s Statement
The Market Backdrop
Our Strategy
Our Business Model
Key Performance Indicators
Chief Executive’s Statement
Operating Review
Financial Review
Managing Risk
Responsible Business
GOVERNANCE
04
06
09
10
12
16
18
20
23
27
36
Directors
Senior Leadership Team
Corporate Governance Report
Audit Committee Report
Directors’ Remuneration Report
42
43
44
52
54
56
63
Directors’ Report
72
Directors’ Responsibilities Statement 76
Independent Auditor’s Report
77
Policy
2019 Remuneration Report
FINANCIALS
86
86
87
88
89
90
122
123
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)
133
Advisers and Corporate Information 134
124
128
130
131
132
For further information see
CAPREG.COM
01
06/05/2020 10:49:10
STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL
At a glance
We invest, manage and enhance retail property through the creation of dynamic
environments tailored to the local communities.
As a specialist owner and manager of shopping centres, we invest in the retail assets across our portfolio to unlock their full value.
We focus on delivering cost effective, efficiently run centres that meet the needs of our guests and customers and create shareholder
value through income growth.
Our investment case
1
2
EXPERIENCED
MANAGEMENT
DIVERSIFIED
INCOME STREAMS
3
DOMINANT
COMMUNITY
LOCATIONS
4
RESEARCH DRIVEN
UNDERSTANDING
OF COMMUNITY
NEEDS
→ Read more in our Business Model on pages 12 and 13
Community strategy
We define and lead Community Shopping, through our passionate creation of
vibrant retail spaces and exceptional customer and guest experience
High Street
Hemel Hempstead
Wood Green
Hotel
Luton
Wood Green
Casual Dining
Hemel Hempstead
Walthamstow
Wood Green
Family & Guest Services
Blackburn
Luton
Hemel Hempstead
Ilford
Maidstone
Walthamstow
Wood Green
Office
Luton
Maidstone
02
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capreg.comCapital & Regional plcSTRATEGIC REPORT Our vision
Our strategy
We define and lead community shopping, through our passionate
creation of vibrant retail spaces and exceptional customer and
guest experience. We have the opportunity to create dynamic
community hubs providing a mix of uses, everyday services and
facilities to satisfy our growing and evolving communities’ needs.
DEFINE
Community Shopping Centres
Define and own the Community shopping centre category in the
UK, consistent with global best practice.
WHAT WE PROVIDE
We sit firmly in a position to serve our guest's essential and
regular non-discretionary shopping needs.
OUR DIFFERENCE
We’re proudly different from regional destination shopping
centres. We’re local and part of everyday life. More than just
places to shop, we operate hubs for the local community.
HOW OUR PARTNERS BENEFIT
Frequent, repeat footfall and high conversion rates coupled with
affordable occupier costs make our centres great for our occupier
partners. Community centres are the engine room of modern
retail.
POSITION
Assets And Retail Mix
Actively remerchandise centres to increase exposure to growth
and online resilient categories and differentiate from competition.
Tailored to community requirements with focus on local, value,
relevance, quality and total experience.
FOCUS
Management Team
Agile management, data driven, decentralised to accelerate
decision making and delivery.
ENHANCE
Shareholder Value
Right offer driving footfall, dwell time and ultimately retailer sales,
C&R income and shareholder returns.
Entertainment
& Leisure
Luton
Hemel Hempstead
Ilford
Wood Green
Walthamstow
Car Parks
Blackburn
Luton
Hemel Hempstead
Ilford
Maidstone
Walthamstow
Wood Green
Everyday Retail
Blackburn
Luton
Hemel Hempstead
Ilford
Maidstone
Walthamstow
Wood Green
Fresh Food & Grocery
Luton
Hemel Hempstead
Maidstone
Walthamstow
Wood Green
Residential
Hemel Hempstead
Walthamstow
Wood Green
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03
06/05/2020 10:49:16
STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Our portfolio
1
7
Key
Wholly owned assets
Other interests
7
7
6
7
1
4
The Mall, Luton
Leasehold covered shopping centre,
2
5
with over 65,000 sq ft of offices
3
900,000 sq ft
165 lettable units
9
8
Principal occupiers:
Primark, H&M, TK Maxx, Wilko,
Luton Borough Council, Debenhams
6
7
4
2
5
The Mall, Walthamstow
3
Leasehold covered shopping centre
and high street units
8
9
260,000 sq ft
67 lettable units
Principal occupiers:
TK Maxx, Sports Direct, Lidl, Asda,
Boots, The Gym
7
1
9
1
The Mall, Blackburn
7
Leasehold covered
shopping centre
1
7
600,000 sq ft
122 lettable units
Principal occupiers:
Primark, Debenhams, H&M, Next,
Wilko, Pure Gym
6
7
4
2
3
5
8
4
7
The Marlowes, Hemel Hempstead
5
9
6
7
2
1
Freehold covered shopping centre
3
and high street units
7
7
8
350,000 sq ft
110 lettable units
9
Principal occupiers:
Wilko, New Look, Sports Direct,
Pure Gym
6
7
4
2
5
3
The Mall, Wood Green
Freehold covered shopping centre
7
8
with high street units
9
540,000 sq ft
111 lettable units
Principal occupiers:
Primark, Wilko, H&M, Boots,
TK Maxx, Travelodge, Cineworld
04
8
9
4
2
3
5
6
9
7
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capreg.comCapital & Regional plcSTRATEGIC REPORT 1
7
1
7
7
6 The Exchange, Ilford
Predominantly freehold covered
4
shopping centre
5
2
300,000 sq ft
3
79 lettable units
8
7
Principal occupiers:
Debenhams, Next, H&M, TK Maxx
9
6
7
4
2
3
5
1
7
7
The Mall, Maidstone
8
9
Freehold covered shopping centre
with over 40,000 sq ft of offices
500,000 sq ft
110 lettable units
Principal occupiers:
Boots, Sports Direct, Wilko, Next, Iceland,
Maidstone Borough Council, TJ Hughes
6
7
4
2
3
5
8
1
7
7
1
9
8
9
4
2
3
5
6
9
7
6
7
4
2
3
5
8
7
Kingfisher Shopping Centre, Redditch
9
C&R owns 12% in JV and acts as Property
& Asset Manager
Freehold covered shopping centre
900,000 sq ft and 174 lettable units
Principal occupiers:
Vue Cinema, H&M, The Range, Primark,
Next, Debenhams, TK Maxx
9
Snozone Leisure Business
100% subsidiary
Largest indoor ski slope operator
in the UK
Operating at Milton Keynes, Castleford
and a dry indoor slope in Basingstoke
In existence since 2000 and has taught
over 2 million people to ski
or snowboard
Key characteristics
of our malls
HIGH FOOTFALL
AFFORDABLE RENTS
74.3m
shopper visits per year
c. £15psf
average rent
1.4m
average weekly footfall
c. 12.6%
occupancy cost ratio
SCALE AND
DOMINANCE OF
RETAIL OFFER
LONDON AND
SOUTH-EAST BIAS
3.5m sqft
total sqft of
shopping centres
combined
6/7
of our wholly
owned assets are
in the South East
TOTAL NUMBER OF
RETAIL UNITS
762
TOTAL NUMBER
OF CAR PARKING
SPACES
8,250
AVERAGE DWELL
TIME
ESTIMATED RETAIL
CONVERSION RATE
66MINUTES
73%
DOMINANT
LOCATIONS
in the heart of
growing towns
EXTENSIVE ACCRETIVE
ASSET MANAGEMENT
OPPORTUNITIES
including leisure,
residential and office
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05
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL HUGH SCOTT-BARRETT
CHAIRMAN
“
The investment
of £77.9 million
by Growthpoint
in December
2019 represents a
hugely important
milestone for the
Company.
“
Chairman’s Statement
The investment in Capital & Regional of £77.9 million
by Growthpoint, which completed in December 2019,
represents a hugely important milestone for the
Company.
Not only does the investment enable
the Company to reduce leverage but
it also allows it to continue to invest in
its shopping centres to enhance their
relevance to the communities they
serve. The investment was concluded
on terms which sought to limit dilution
for existing shareholders and the inter-
conditional partial offer for 30.2 per cent
of the Company’s share capital provided
shareholders with a liquidity event at
a significant premium to the prevailing
share price. The Board would like to
thank existing shareholders for their
support for the transaction and welcomes
Growthpoint as the Company’s majority
shareholder.
In the short time since the release of the
Group’s preliminary results, the outlook
for the UK economy and for the retail
sector in particular has been transformed
by the onset of COVID-19 and the steps
taken by the Government to limit the
spread of the virus. I would like to pay
a particular tribute to all who work for
Capital & Regional for the way in which
they have responded to ensure that our
shopping centres remain open for our
retail partners and for our guests to safely
purchase essential foods and medicines.
This has not been easy given the obvious
concerns for their own welfare and that of
their families.
Whilst the focus remains on operational
resilience amidst the continuing lockdown,
it would be premature to draw any
definitive conclusions as to the longer
term implications of COVID-19. However,
it is quite possible that the structural
shift in the retail landscape driven by the
increased market share taken by online
shopping will accelerate at a much faster
pace than previously assumed. The
polarisation between “needs” and “wants”
focused shopping centres is set to be
accentuated further.
Capital & Regional is well placed to
capitalise on these profound changes
through its focus on high footfall centres,
characterised by affordable rents, that
are anchored by ‘non-discretionary’ offers
such as grocery, professional and personal
services, including health and beauty and
day to day services, which serve the daily
“needs” of the underlying communities.
It is increasingly clear that there remain
significant opportunities for alternative use
including medical centres, where we have
received several unsolicited approaches,
and residential development given the
geographical bias of the portfolio to
London and the South East
Despite the wider market pressures, the
Group’s operational performance in 2019
was relatively resilient with like-for-like
footfall outperforming its benchmark by
1.7 percentage points and occupancy up
year-on-year to 97.2%.
As with the broader market, there has
been continued pressure on the Group’s
property valuations. The impact has been
greater outside London with the Group’s
London asset values proving to be more
resilient, given their location and the
strength of demand experienced at these
locations. As at 30 December 2019 the
Group’s property portfolio was valued at
£727.1 million compared to £855.2 million
as at 30 December 2018, representing
a decline of 15.0%. In the same period,
Group net debt has reduced by 18.1%
from £411.1 million to £336.9 million,
reflecting the Growthpoint investment.
Group net debt to property value
therefore fell from 48% as at December
2018 (and 52% as at June 2019) to 46%
as at December 2019.
The fall in property valuations has
impacted statutory results for the year
with an IFRS Loss for the year of £121.0
million (Year to December 2018: Loss of
£25.6 million).
On an adjusted basis, which reflects the
ongoing operating performance, the
Company reported an Adjusted Profit
for the year of £27.4 million, compared
to £30.5 million in the year ended
December 2018.
RESPONSIBLE BUSINESS
We are committed to running our business
responsibly. It underpins the way we
operate and is an integral part of who
we are and what we do. Our aim is to be
socially responsible so that C&R is not
only a great place to work but it has a
positive impact on our guests, retailer
customers and the wider community,
whilst minimising our environmental
impact. Our Responsible Business strategy
06 Capital & Regional plc
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capreg.comSTRATEGIC REPORT is underpinned by explicit targets and is
focused on four key areas:
The Marketplace: Which is all about
engagement with our local guests,
customers, suppliers and stakeholders
in order to better understand their
needs and to identify ways of improving
our collective responsible business
performance.
Environmental sustainability: We
are committed to continuing to reduce
our impact on the environment in the
areas of waste, water and energy to
ensure that the local communities we
serve are better places to be for all.
We are already on the pathway to net
zero carbon having reduced the energy
intensity of our centres by 36% since
2008, including a 6% fall in 2019.
People: Our culture, who we are and
how we work together are fundamental
to delivering on our vision to define
and lead community shopping, through
our passionate creation of vibrant
retail spaces and exceptional customer
and guest experience. We can only
achieve this with the support and
active engagement of our colleagues
who, once again, have gone the extra
mile to deliver outstanding service, a
commitment which was recognised by
number of highly prized awards this
year.
Community: We recognise our centres
play a key role in the development of
the communities and environments
in which we operate. We seek to work
closely with key stakeholders to ensure
we listen, engage and use feedback
to develop or refine our approach.
We understand that the process of
delivering change can have lasting
effects on the towns in which we work
and their communities. We strive
for consensus. We are committed to
an open dialogue with community
interest groups to ensure that where
this is not possible, we reach the best
understanding and accommodation
possible.
DIVIDEND AND DIVIDEND
POLICY
The Company paid an Interim Dividend of
1p per share (equivalent to 10p per share
following the 10 for 1 share consolidation
that completed in January 2020) in respect
of the half year ended 30 June 2019 and
was only payable on completion of the
Growthpoint transaction. Growthpoint was
not entitled to this dividend, which was
paid on 27 December 2019.
Following completion of the investment
by Growthpoint, and as disclosed in the
transaction’s prospectus, the Company
intends to distribute on a semi-annual
basis not less than approximately 90% of
the Company’s EPRA earnings, which is in
line with the requirements to distribute at
least 90% of taxable profits under the UK
REIT regime.
The Board is now proposing a final
dividend of 11 pence, to be paid to all
shareholders, resulting in a full year
dividend equivalent to 21 pence per share,
compared to an equivalent of 24.2 pence
per share for 2018.
very pleased to report that David Hunter
has accepted to join, initially as a Non-
Executive Director, and following the
AGM, as Chair. David brings a wealth of
experience in the property sector and a
track record of successfully leading boards.
The Board strives to adhere to the highest
standards of corporate governance in line
with the requirements of the UK Corporate
Governance Code. Mindful of the Code
requirements regarding independence it is
intended that two new independent Non-
Executive Directors are appointed during
the course of this year, subject to the
practical constraints imposed by COVID-19.
Capital & Regional started 2020 from a
position of strength. Having closed the
Growthpoint transaction, we are now
fortunate to have a well-funded and
highly respected international real estate
business as a majority shareholder. The
importance of this and the actions taken
to recapitalise the balance sheet in 2019
has been brought into sharper focus with
recent developments. These put Capital
& Regional in a much stronger position
to weather the impact of COVID-19 and
beyond that the continued roll out of
its community, asset management and
remerchandising strategy and provides
us with a platform for future growth.
Furthermore, Growthpoint shares our
conviction that needs-based, non-
discretionary urban community retail
continues to have an important part to
play in the evolving retail landscape.
HUGH SCOTT-BARRETT
CHAIRMAN
The Board has considered this dividend
in the context of the uncertainty related
to COVID-19. The Board has concluded
in response to this to introduce a Scrip
option which shareholders, representing
at least 65% of the ordinary shares, and
including Growthpoint, have agreed to
take up.
The Board believe this approach to be the
most beneficial course of action to take in
the current circumstances, noting that it:
Results in at least the majority of the
proposed £11.4 million total dividend
payment being preserved in cash within
the business;
Demonstrates a vote of confidence by
the major shareholders in the prospects
for the business;
Maintains compliance in line with the
Company’s REIT requirements; and
Provides other shareholders with
flexibility to take cash or the scrip
alternative.
BOARD
I am also delighted to welcome Norbert
Sasse and George Muchanya to the
Board. Norbert and George joined in
December 2019 and are Growthpoint’s
representatives on the Capital &
Regional Board. I am sure we will benefit
significantly from their deep knowledge
of the property sector across the globe. At
the same time Wessel Hamman stepped
down from the Board. I would like to
thank him for his valuable contribution
over the last four years. Wessel has
provided considered and thoughtful advice
throughout this challenging period for
the Company and his opinions are greatly
respected by the Board as a whole.
As foreshadowed last year, Tony Hales,
as Senior Independent Director, has led
a recruitment process to recruit a new
Chair. As previously announced, I am
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06/05/2020 10:49:26
STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL The market backdrop
The continuing evolution of our assets in changing town centres
1
2
3
4
REMERCHANDISING
TO COMMUNITY
NEEDS
COMMUNITY
COLLABORATION
EVOLVING ROLE
OF THE STORE
DIVERSIFICATION
OF USES
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. Omni-channel retailing,
combining both physical and online, continues to grow and
online retailers have responded by opening physical stores
and pop-up shops.
Our response
Physical stores continue to provide a central role in the
omni-channel retailing environment, providing a crucial
intersection between products and people. 2019 saw yet
more pureplay online retailers recognising the importance
of the interface between physical and online, in many cases
looking to establish or increase their physical presence. Our
community centres, in well connected, easily accessed town
centre locations are ideally positioned to meet the modern
consumers’ needs. The integrated provision of Collect+,
Amazon Lockers and Guest Lounge services in our centres,
enables our guests to shop online and pick up their goods
when it is convenient for them, while also driving footfall
to the centre. Our research shows that guests who use the
service go on and spend further in our centres, supporting
our retailers.
POLARISATION
The polarisation in retail between discretionary “wants” and
non-discretionary everyday essential “needs” continues.
Consumers differentiate their shopping trips accordingly,
with retail destinations needing to align clearly to these
distinct shopping trips.
Our response
Our community centres provide a clearly defined focus
in satisfying the everyday needs of our communities, in
engaging and stimulating environments. They cater to our
guests’ need for accessibility, speed, ease of use, relevant
retail and services, and provide the focal point for the local
community.
Non-Retail
Variety Stores
Home &
Gifts
Service (Pers.)
Services (Prof.)
Footwear
Health & Beauty
Department
stores
Fashion &
Footwear
Speciality Fashion
NEEDS
NEEDS:
Community shopping
centres
Department Stores
Fashion
Casual Dining
Express Food
Leisure
Fresh Food
Supermarkets
Health & Beauty
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
08
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Capital & Regional plcSTRATEGIC REPORT The continuing evolution of our assets in changing town centres
C&R Approach
Our dominant centres located in the heart of growing towns
are ideally positioned to serve their communities. Town
centres are rapidly evolving to meet the changing demands
of their communities. With affordable rents and low capital
values, our centres are uniquely placed to accretively evolve
in step with our communities’ changing needs.
RETAILER EVOLUTION
Online 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 and in many cases physical floorspace is growing.
Retailers at this end of the retail spectrum continue to
predominantly fulfil their customers everyday needs directly
from store, with limited online integration.
Our response
Our convenient and strategically located community
centres provide an essential platform in the fulfilment of
these shoppers’ everyday needs. Our focus remains on
remerchandising and repositioning our centres to reflect
the changing requirements our communities, guests and
retailers have in relation to physical retail destinations.
RETAILER EVOLUTION
COMMUNITY FUNDAMENTALS
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, attractive productivity levels and high
footfall driving profitability.
Our response
With rents averaging approximately £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. We
continue to engage with opportunities to unlock the latent
value of our real estate and increase density through the
addition of residential, hotel, offices, leisure and other uses
that enhance our communities, broaden our income profile,
and generate value for our shareholders.
Uber
Centre
Major
Mall
Regional
Mall
Community
Plus
Community
Neighbour-
hood
Functional
Department Stores
Fashion
Casual Dining
Express Food
Leisure
Supermarkets
Health & Beauty
Services - Professional
Services - Personal
Home & Gifts
Variety Stores
Non Retail
-1.0
0.0
1.0
Headline rent in £m
C&R Change of use since 1 January 2017
)
f
s
p
/
£
(
t
n
e
r
A
e
n
o
Z
e
n
i
l
d
a
e
H
350
300
250
200
150
100
50
0
Mall
Centre
Mall
Centre
Mall
Centre
Retail Park Outlet
Headline Zone A rent (£/psf)
SHOPSCORE sales productivity index
Source: Javelin Group/SHOPSCORE (2017)
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL
Our strategy
DEFINE
Community shopping centres
Define 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:
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
At the end of 2018, REVO committed
to the investment reclassification of
UK Shopping Centres to include the
Community Shopping Centre.
Throughout 2019, we continued to
encourage industry participants to
embrace the Community Shopping
Centre category. We are seeing
increasing evidence of adoption as the
industry increasingly recognises the
differentiated role of the Community
Shopping Centre.
Future focus
As the new terminology becomes more
widely utilised, further refinement of the
classification definitions will be required.
Encouraging the industry to fully adopt
and embed the new categorisations in
the UK will be an ongoing process.
In the US in 2019, shopping centre REITs
have outperformed their regional mall
peers suggesting that investors are
increasingly differentiating between
different sectors of the retail property
market.
10
Highlights include:
Completion of the family zone and
the opening of Tinies crèche and
Pure Gym in Hemel Hempstead.
The leasing of part of the former
BHS unit to Pure Gym and Matalan
at Maidstone.
Completion of the Arndale House
office letting to Luton Borough
Council.
Significant refurbishment of the
Tesco grocery offer in Luton as part
of a long-term renewal.
Development of in-depth
concept and design plans for
projects at Maidstone, Luton and
Walthamstow.
Continued investment to unlock
opportunities such as residential,
maximising the potential of our
central locations.
Future focus
Given the uncertainty caused by
COVID-19 we have put all non-
essential and non-committed Capital
Expenditure projects on hold but
maintain a pipeline of potential future
projects including cinemas, leisure,
offices, grab-and-go, amenities,
family and ambiance, building on
the successes and learnings of our
investment to date.
POSITION
Assets and retail mix
Actively remerchandise centres
to increase exposure to growth
and online-resilient categories and
differentiate from competition.
Tailored to community requirements
with focus on local, value, relevance,
quality and total experience.
Overview
We believe retailers and communities
are clear in their expectations for what
they want to see from their Community
Centres with a strong mix of everyday
essentials including:
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 – localised leisure.
All need to be tailored to the specific
community’s needs and aspiration,
and 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 our retailer customers’ sales.
Progress
Throughout 2019, we have continued
to proactively remerchandise to
a needs-based, non-discretionary
offer that is most relevant to our
communities’ needs and most resilient
to structural changes in retail.
In 2019 we invested £12 million in
capex across our portfolio, helping to
maintain leasing momentum, retain
engagement with our core occupiers
and help attract new occupiers and
guests to our centres.
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capreg.comCapital & Regional plcSTRATEGIC REPORT FOCUS
Management team
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.
Overview
In 2019 we have worked to refine
and strengthen the decentralised
management platform introduced
in 2018. Significant investments
have also been made in systems
and processes to improve efficiency
and the use of research and data
to inform investment, leasing and
marketing decisions.
Increasing our use of technology
and data will support our continued
focus on driving operational
performance across every part of
the business.
Future focus
With the retail real estate investment
class becoming more operational
we will continue to invest further in
strengthening the expertise of our
in-house leasing and commercial
income teams and the technology
that supports our management
platform.
ENHANCE
Shareholder value
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.
Objectives
2019 has been a challenging year
for the shopping centre industry,
with significant pressure on property
valuations and revenue. Through
our focused community strategy
our performance has been relatively
resilient, with footfall outperforming
the national index and occupancy
remaining stable.
The transaction with Growthpoint,
completed in the second half of
the year, provided shareholders
with partial liquidity at a significant
premium to share price and
materially improved leverage and
the balance sheet position.
Future focus
Continued investment in people and
resources is critical to the delivery
of our community shopping centre
strategy and associated income
growth and resilience. This will
position C&R well to proactively
respond as markets stabilise.
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IncomeSalesFootfall & dwellRelevancePropositionSTRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Our business model
Our core strength is enhancing through
repositioning, managing and acquiring
community shopping centres.
With our expert team, our strong retailer relationships and our
extensive community connections, we seek to generate and grow
sustainable income and drive capital value growth by combining
active asset management with operational excellence. Our
approach is summarised below.
2019 continued to see subdued investment market activity,
with transaction volumes at record lows. Valuations declined
throughout the year with capital values per sq ft at levels that
increasing support accretive repositioning opportunities across
a widening range of uses. This has particularly been the case in
London and the South East where our portfolio is most heavily
weighted. Our focus has therefore remained on repositioning and
remerchandising our existing portfolio. 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.
Key
resources
Key
activities
1
2
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.
EXPERIENCED AND
AGILE MANAGEMENT
STRONG CAPITAL
STRUCTURE
RESEARCH DRIVEN
UNDERSTANDING OF
COMMUNITY NEEDS
DIVERSIFIED INCOME
STREAMS
REPOSITION AND
REMERCHANDISE
Our approach to managing centres is
summarised as follows:
Understand full catchment potential
– research/benchmarking, input
from Centre teams, engagement
with retailer customers and local
communities
Assess product offering against
local community needs and
expectations – identify any gaps in
offer or amenities
Establish strategic asset
masterplans – comprehensive
three to five year repositioning
plans for each centre profiling
capital expenditure and evolution
of tenant mix. Masterplans
continually reviewed to ensure
ongoing relevance and that
assets continue to meet guests’
expectations as they evolve
over time
Execution – engage specialist
teams to ensure accelerated
delivery with focus on optimal
performance
Review and refine – post
implementation reviews to inform
future decision making, respond
quickly to changes.
→ Read more about our remerchandising
strategy on page 10
12
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capreg.comCapital & Regional plcSTRATEGIC REPORT Our values
INSPIRING
CREATIVE
THINKING
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
ACTING
WITH
INTEGRITY
DELIVERING
DYNAMIC
SOLUTIONS
3
THE RESULT
Attractive retail and leisure
environments
Improved guest experience
Increased footfall and spend
These results drive retailer sales,
letting tension, 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.
Stakeholder
value
OUR SHAREHOLDERS
Long-term sustainable growth
OUR PEOPLE
A dynamic and positive work
environment with continued
training and development
opportunities
OUR CUSTOMERS
& RETAILERS
Frequent, repeat footfall and high
conversion rates coupled with
affordable occupier costs
Driving high levels of footfall;
ultimately driving retailer sales,
letting tension, and income
capital value growth
OUR COMMUNITIES
The creation of vibrant
community hubs combining key
services, everyday essentials and
leisure facilities.
Supporting local
employment.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Remerchandising progress
Continued progress to diversify income and align to community needs
HEMEL HEMPSTEAD
LUTON
MAIDSTONE
DELIVERED
DELIVERED
Offer: Family services
Offer: Grocery
IN PROGRESS
Offer: Gym
Action:
Creation of a new shopper
crèche, opened October 2019
Asset/Community Impacts:
Enhances family offer for our key
community group
Encourages dwell time and
footfall.
Offer: Gym
Action:
Converted vacant first floor to
14,000 sq ft Pure Gym
Asset/Community Impacts:
New and diversified use and
income stream
Enhances town centre leisure
provisions - footfall driver
Highly accretive remerchandising
of off-pitch location.
Action:
Delivered eight-year lease
renewal and full refit for Tesco
Store re-opened December 2019
Asset/Community Impacts:
Enhances food store offer – a key
community asset
Secures long-term material
income stream from quality
covenant.
IN PROGRESS
Offer: Offices
Action:
Refurbishment and letting of
13,000 sq ft office to the local
authority
Asset/Community Impacts:
Increased income diversity and
use
Brings worker footfall directly to
centre
Significant income quantum
Action:
Converting the top floor of the
previous BHS to a 14,000 sq ft
Pure Gym
Asset/Community Impacts:
New and diversified use and
income stream
Enhances town centre leisure
provisions - footfall driver
Highly accretive remerchandising
of off-pitch location.
Offer: Everyday Apparel
Action:
Converting the lower level of the
previous BHS to a 23,000 sq ft
Matalan
Asset/Community Impacts:
Enhances the needs-based staple
apparel offer
Enhances family offer for our key
community groups.
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capreg.comCapital & Regional plcSTRATEGIC REPORT Walthamstow
Fire Response
On 22 July 2019 a fire
led to the closure of The
Mall, Walthamstow. The
Mall is at the heart of the
Walthamstow community
and the fire not only
affected the mall team
and retailers but also the
surrounding businesses,
customers and our local
community.
PARTNERING WITH
retailTRUST
On the evening of the fire we knew we
were dealing with a major incident and the
impact on our retailer customers would be
significant. As a business we are members
of retailTRUST and so we reached out to
them asking for their support. RetailTRUST
arranged for trauma specialists to be on
site to deliver critical incident support,
counselling and emotional assistance. A
fund was set up by the trust to support
employees who have been financially
affected by the fire, with retailTRUST
donating £25,000 to this fund. This pledge
was matched by C&R and Waltham Forest
Council kindly donated a further £10,000.
Members of the local community also
reached out and we were flooded with
offers of help and donations to help those
local employees financially impacted by
the fire. In total almost £61,000 was raised.
The fund has assisted several independent
businesses along with over 20 local
families whose parents worked in the mall
and required financial support. The fund
will continue to support those individuals
who still require assistance until The Mall
is fully reopen.
in our key messaging in and around the
centre. In early September 2019, we held
a re-opening party and invited the local
community to celebrate the return of
their shopping centre with free parking,
entertainment and gifts to thank everyone
for their support during the re-build stage
and the phased re-opening.
REBUILD
The first retailers re-opened less than a
week after the fire and just under 85% of
the units in the centre had re-opened prior
to the COVID-19 restrictions taking effect.
Reconstruction plans are now in place for
the remaining units and, subject to the
impact of current restrictions, we hope to
re-open these units in the course of 2020.
The Food Court was one of the areas
that sustained significant damage. We
have taken the decision to use this as
an opportunity to design and deliver a
unique and modern food and beverage
offer, which is accessible and inclusive;
tailored to the needs of the Walthamstow
community and providing opportunities
for local and independent operators.
REINSTATEMENT OF CRITICAL
SERVICES
The Mall provides a number of critical
services to the community. The Mall is
home to two pharmacies, which could
not open due to the impact of the fire.
Both provide critical care to a large
section of the community and it was
vital we explored temporary solutions
to reinstate these essential services as a
matter of urgency. Working in partnership
with Walthamstow Forest Council we
were able to identify space on the Town
Square where within seven days pop-up
pods were installed for both Boots and
Superdrug.
COMMUNITY CAMPAIGN
While The Mall was closed, and throughout
the phased re-opening and rebuild,
we wanted to ensure we had strong
and consistent messaging, to keep the
local community informed of every key
milestone achieved. Our campaign covered
online, print and physical messaging. As
part of our engagement we asked the
community to let us know what The Mall
meant to them and used these comments
Stock Code: CAL
Annual Report and Accounts for the year ended 30 December 2019
15
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STRATEGIC REPORT Key performance indicators
FINANCIAL
1. ADJUSTED PROFIT1
£27.4m
2019
2018
2017
2016
2015
2. ADJUSTED PROFIT PER SHARE1,2
36.7p
£27.4m
£30.5m
£29.1m
£26.8m
£24.0m
2019
2018
2017
2016
2015
36.7p
42.3p
41.0p
38.2p
34.2p
Why we use this as an indicator
Adjusted Profit seeks to track the recurring profits of the business
which is the key driver for dividend payments.
How this links to our strategy
We target delivering a strong and sustainable income return.
Progress during the year
A decrease of 10.2% in Adjusted Profit reflected a fall in Net Rental
Income driven by the impact of CVAs and administrations.
Why we use this as an indicator
Adjusted Profit seeks to track the recurring profits of the business
which is the key driver for dividend payments.
How this links to our strategy
We target delivering a strong and sustainable income return.
Progress during the year
A decrease of 13.2% on a per share basis reflected a fall in Net
Rental Income driven by the impact of CVAs and administrations.
Link to strategy
Enhance
Link to risks
2 9
Link to strategy
Enhance
Link to risks
2 9
4. DIVIDEND PER SHARE2
5. EPRA NET ASSETS PER SHARE2
21.0p
2019
2018
2017
2016
2015
364P
21.0p
24.2p
2019
2018
2017
2016
2015
36.4p
33.9p
31.2p
364p
596p
666p
677p
706p
Why we use this as an indicator
This is the cash return to be delivered to investors in respect of
the year under review.
Why we use this as an indicator
This is a measure of the movement in the underlying value of
assets and liabilities underpinning the value of a share.
How this links to our strategy
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.
Progress during the year
The Board is recommending a final dividend of 11 pence per share
taking the full year dividend to 21 pence per share.
How this links to our strategy
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.
Progress during the year
EPRA NAV fell by 232p due to revaluation loss net of capital
expenditure.
The Board has adopted a policy of distributing on a semi-annual basis
not less than approximately 90% of the Company’s EPRA earnings.
Link to strategy
Position
Link to risks
1 2
Link to strategy
Enhance
Link to risks
2 4 9
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capreg.comCapital & Regional plcSTRATEGIC REPORT FINANCIAL
Notes
1 Adjusted Profit and Adjusted Earnings per share are as defined in the Glossary. Adjusted Profit incorporates profits from operating activities
and excludes revaluation of properties and financial instruments, gains or losses on disposal, exceptional items and other defined terms. A
reconciliation to the equivalent EPRA and statutory measures is provided in Note 9 to the financial statements.
2 Per share amounts are adjusted to reflect the impact of the 10 for 1 share consolidation that completed on 15 January 2020.
3 Like-for-like figures exclude Walthamstow from Week 29 of 2019 due to the impact of the fire.
3. NET DEBT TO PROPERTY VALUE
7. FOOTFALL3
NON-FINANCIAL
46%
2019
2018
2017
2016
2015
C&R -3.2% vs Index -4.9%
-5
-4
-3
-2
-1
0
1
2
46%
48%
46%
46%
45%
2019
2018
2017
2016
2015
C&R
Index
C&R
Index
C&R
Index
C&R
Index
C&R
Index
1.2%
-3.2%
-4.9%
-3.5%
0.1%
-2.8%
-0.2%
-2.1%
-0.4%
-1.7%
Why we use this as an indicator
We aim to manage our balance sheet effectively with the
appropriate level of gearing.
How this links to our strategy
Having the appropriate level of gearing is important to effectively
manage our business through the property cycle. We are
targeting a range of 35%-45% in the medium term.
Progress during the year
Net debt to property value decreased to 46% as the fall in
property valuations was offset by the proceeds of the Growthpoint
transaction.
Link to strategy
Enhance
Link to risks
1 2 3
Why we use this as an indicator
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.
How this links to our strategy
Footfall performance provides an indication of the relevance and
attractiveness of our centres, influencing occupier demand and
future letting performance.
Progress during the year
Footfall at the Group’s UK shopping centres fell in absolute
terms but outperformed the national ShopperTrak index by
1.7 percentage points.
Link to strategy
Position, Define
Link to risks
2 9
6. NET RENTAL INCOME
£49.3m
0
10
20
30
40
50
2019
2018
2017
2016
2015
8. OCCUPANCY
97.2%
2019
2018
2017
2016
2015
60
£49.3m
£51.9m
£51.6m
£50.4m
£49.3m
97.2%
97.0%
97.3%
95.4%
96.7%
Why we use this as an indicator
This is the key driver of Adjusted Profit.
How this links to our strategy
Net Rental Income is the most critical component of our Adjusted
Profit and the source for maintaining a strong and sustainable
income return.
Why we use this as an indicator
We aim to optimise the occupancy of our centres as attracting
and retaining the right mix of occupiers will enhance the trading
environment.
How this links to our strategy
Occupancy has a direct impact on the profitability of our schemes
and also influences footfall and occupier demand.
Progress during the year
Net Rental Income fell by £2.6 million reflecting the £3.0 million
impact of CVAs and administrations.
Progress during the year
Strong letting activity during the year resulted in occupancy rates
increasing to 97.2%.
Link to strategy
Position, Focus
Link to risks
2 6 9
Link to strategy
Position, Define
Link to risks
5 2 9
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
“
2019 was
a year of
significant
progress in
delivering our
Community
Centres
strategy
“
Chief Executive’s Statement
2019 was a year of significant progress in delivering our
Community Centres strategy and placing our balance
sheet in a robust position to counter the headwinds
derived from a combination of economic uncertainty and
the ongoing structural changes taking place in retailing.
The transaction with Growthpoint is
transformational on several levels
and we are proud that Growthpoint’s
extensive due diligence on the Company,
its assets, strategy and management
platform led them to the decision to invest
approximately £150 million to acquire a
51.1% stake. This was achieved through a
combined placement and a partial offer
to existing shareholders at a significant
premium to the undisturbed share price.
We look forward to working more closely
with Growthpoint, benefiting from its
team’s deep understanding of real estate
as an operational asset class, and seeking
to replicate the success they have seen in
similar investments outside their domestic
market of South Africa.
2020 has been dominated by the COVID-19
pandemic. This is first and foremost a
human crisis, but the responses needing
to be undertaken to mitigate the spread
of the virus are also having a serious
economic impact.
It is too early to fully measure the effect
on our business, but I echo the Chairman’s
sentiments that one impact is likely to be
a further acceleration of the structural
changes that have been ongoing within
the retail sector over recent years. While
there are likely to be impacts on rental
income and asset valuations, as we seek to
support our smaller independent retailers,
I believe Capital & Regional is ultimately
well positioned to respond to these and
emerge stronger in time.
The other aspect which has been
reinforced in the past few weeks is the
importance of specialised, experienced
management and I am full of admiration
for how our team have responded to
the challenges of the COVID-19 crisis.
Responding to government guidelines
has at times involved closing parts of our
centres, with only hours’ notice, while also
maintaining access to the essential uses
we have located in our centres. All of our
team members have worked tirelessly and
selflessly to achieve this, ensuring security
is enhanced to manage social distancing
and the environments are maintained to
the highest standards possible.
Our thoughts and prayers go out to all
those directly impacted by COVID-19
and to our team members who continue
operating at our front line.
2019
Operationally we made significant
progress in 2019 on the three pillars
of our strategy, whereby we aim to:
1. Define community centres in the UK
to a definition closer to that of other
developed global real estate markets.
2. Position our centres into the
community centre format through
remerchandising our tenant roster
more toward those who offer non-
discretionary or needs-based goods
and services.
3. Structure and refocus on our teams
towards a more efficient decentralised
structure that allows us to improve
data capture across the business,
converting this insight to drive faster
and better-informed decision making
and activity.
We believe by focusing on these key areas
we will be able to deliver strong relative
returns.
During 2019 we delivered 66 new lettings
and renewals totalling £4.5 million in
annual rent and covering approximately
280,000 sq ft of leased space. Activity
was focused on operators in the key
community centre merchandise categories
including; personal services, grocery,
express food, gyms and other needs-based
retailers and service providers. These
transactions resulted in a positive spread
to both previous passing rents and ERV
assisting us in offsetting the impact of
retailer restructuring including CVAs.
We are investing in evolving our processes,
teams, systems and infrastructure to
accommodate a growing proportion
of smaller, independent retailers while
reducing our exposure to retail concepts
that continue to lose relevance. We are
also acutely focused on tailoring our assets
to the specific and individual needs of their
local communities.
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capreg.comSTRATEGIC REPORT While the balance sheet pressures driven
by lower valuations and income reductions
from retailer restructuring prompted us
to slow our capex spending during the
year to £12 million in 2019 (from £18.5
million in 2018) we have continued to
progress and maintain our accretive
capex pipeline which refreshes our offer
and enables continued leasing progress,
and income performance in future years.
During the year, we undertook over 20
targeted projects across the portfolio,
prioritising those which can most quickly
make a positive impact while laying the
foundations for further improvements.
In 2019, the most prominent of these
were the introduction of a gym and family
area at Hemel Hempstead, the latter
incorporating a Tinies crèche facility for
shoppers, the first such roll out at a UK
shopping centre.
We continue to strive to be the centre of
the communities we serve and during the
year we undertook some 165 community
projects in and around our seven centres.
These included ‘Purple Tuesday’ across
all centres, Luton YMCA Bedfordshire’s
‘SleepEasy’, hosting Walthamstow Forest
Borough of Culture events and, in Wood
Green, supporting the Godwin Lawson
Foundation, to name but a few. There are
rare occasions where we are compelled
to take action where we have cause to
question the direction of a town centre
masterplan or the merits of a competing
retail project that we believe stands to
harm the fabric of the town centre. We do
this as we believe the vibrancy, vitality and
prosperity of a town centre is critical to our
communities.
In July 2019 there was a major fire at
our shopping centre in Walthamstow.
While the damage in certain areas of the
scheme has been significant, critically no
one was seriously hurt thanks in no small
part to the quick and professional work
of the emergency services, to whom we
are extremely grateful. The first retailers
re-opened less than a week after the fire
and just under 85% of the units in the
centre were open and trading prior to the
government COVID-19 restrictions taking
effect. Reconstruction plans are now in
place for the remaining units which we
hope to open, subject to the impact of
current restrictions, within the course
of 2020. We are insured for both loss
of income and the cost of rebuilding. I
would like to thank the centre team and
colleagues from the support office for their
exceptional commitment and hard work
during what has been a traumatic time. In
addition, I would also like to express our
gratitude to The retailTRUST, who helped
support retailer staff placed in a position
of hardship from the stores being closed,
and Walthamstow Council for providing
temporary offices for our centre team
and their absolute commitment to assist
us in maintaining critical services such as
accessing medical prescriptions from our
pharmacy tenants.
Our commitment to improving our
environmental impact in our communities
continues with a total of 3,396 tonnes
of waste recycled during the year and a
reduction in carbon emissions of 15%. This
is an increasing focus for our business
in the coming years and one we are
embracing fully and enthusiastically.
As previously announced, and as you
will have seen from the Chairman’s
Statement, we will have a new Chairman
immediately following the AGM in May
when David Hunter steps into the role.
David brings a wealth of property and fund
management experience to our Board
and business. In welcoming David, I am
keen to acknowledge Hugh Scott-Barrett's
role and contribution to the business
over the past 12 years as both CEO and
as Chair from mid-2012, when I joined
as CEO. Hugh led the recapitalisation of
the business following the GFC in 2008
which was described by a leading analyst
as "text book". Hugh's guidance, advice,
always offered thoughtfully, and insight
along with his encouragement and support
during some difficult times has been
exceptional and I am enormously grateful
of his tireless work on behalf of all our
stakeholders to ensure a smooth transition
and provide exceptional stewardship. We
wish him well for the future and in his
other Board roles.
OUTLOOK
While the retail environment clearly
remains volatile and the impact of
COVID-19 is likely to be significant, we are
remaining focused on delivering for all our
stakeholders during this challenging and
unprecedented time.
Looking further ahead we see continuing
opportunities to deliver our strategy,
working closely with those retailers who
are well equipped to thrive in an omni-
channel retailing environment.
I remain confident that our focus
on needs-based, non-discretionary
merchandise and the urban bias of our
real estate and its proximity to people
sees us well positioned to evolve, adapt
and grow in tune with the rapidly evolving
retail landscape.
Finally, I would like to highlight that our
significant progress in 2019 was the
product of a considerable amount of hard
work from a talented team, at both our
support office and in our centres, across
many disciplines. I am very pleased with
the way our team has come together over
the past two and a half years to build an
industry-leading platform and we are
committed to attracting and retaining
talent by creating a culture that places
personal growth, diversity, employee
engagement and inclusion at its core.
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL KEY HIGHLIGHTS OF LETTING
ACTIVITY
Operating review
BLACKBURN
New lease: Vodafone
Lease Renewals: B&M and TUI
LUTON
New Leases: Lidl, Wenzels the
Baker and Luton Borough Council
Lease renewal: Tesco
Our key focus remains the ongoing remerchandising and repositioning of our centres to
reflect the changing requirements of the communities, guests and retail customers that
we serve. 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.
AFFORDABILITY AND OCCUPANCY COST DRIVING SUCCESSFUL
NEW LETTINGS, RENEWALS AND RENT REVIEWS
There were 66 new lettings and renewals in the period. New lettings were made at
a significant premium to ERV, while renewals were marginally below. Overall, the
transactions resulted in a combined average premium of 20.9%1 to previous passing rent
and a 7.3%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 2019
34
£2.2m
+22.3%
32
£2.3m
-0.6%
+20.9%
+7.3%
17
£2.1m
+1.6%
1 For lettings and renewals (excluding development deals and CVA variations) with a term of five years
ILFORD
New lease: The Entertainer
Renewal: Warren James
HEMEL HEMPSTEAD
New leases: Empire Cinema and
Pure Gym
Renewals: TUI and Toni & Guy
or longer which do not include turnover rent or service charge restrictions.
Political uncertainty caused first by concern over a no-deal Brexit and then the general
election in the middle of the key Christmas trading period contributed to a slowing down
in leasing volumes in the second half of the year. However, strong progress was still made
in securing a number of key deals across the portfolio. In Maidstone new lettings for two
of the three floors of the former BHS space have been signed with Matalan and, post year-
end, with PureGym. At Luton since the year end we have exchanged on c 16,000 sq ft of
previously vacant office space and agreed terms with Lidl for a new supermarket.
This follows on from a strong first half of 2019 where we concluded new lettings to
Vodafone in Blackburn, Empire Cinema and Pure Gym at Hemel Hempstead, Wenzels the
baker and Luton Borough Council (Offices) at Luton. At Ilford we opened the Entertainer
from a unit that has been vacant for over ten years, directly as a result of completion of
the new family precinct.
Key renewals across 2019 included Sports Direct and a new ten-year lease to Tesco at
Luton, B&M and TUI at Blackburn, TUI and Toni & Guy at Hemel Hempstead, Carphone
Warehouse at Ilford, Clarks shoes and Claire’s Accessories at Walthamstow and Argos,
Carphone Warehouse and office space to the Metropolitan Police Service at Wood Green.
WOOD GREEN
Renewal: Office space to
Metropolitan Police Service
MAIDSTONE
New Leases: Matalan and Pure Gym
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capreg.comCapital & Regional plcSTRATEGIC REPORT Operating review
OPERATIONAL PERFORMANCE
There were 74.3 million visits to our
centres during 2019. Footfall in 2019
outperformed the national index by 170
basis points, with the like-for-like portfolio
decrease of 3.2%1 comparing to a national
index decline of 4.9%.
Car park usage, down 4.0% on a like-for-
like basis1, was consistent with the decline
in footfall but income increased by 1% on
a like-for-like basis to £10.7 million, due to
tariff increases and other parking revenue
initiatives.
Click and collect transaction volumes
continued to grow, increasing by 14%
on the prior year, further reinforcing the
strength of our locations in the omni-
channel shopping experience and cost-
effective last mile fulfilment.
1 Like-for-like figures exclude Walthamstow from
Week 29 due to the impact of the fire.
IMPACT OF CVAS AND
ADMINISTRATIONS
There were eight Company Voluntary
Arrangements (CVAs) or administrations
involving national retailers that impacted
our portfolio in 2019. Four of the CVAs
– Debenhams, Arcadia, Monsoon/
Accessorize and Select – affected multiple
units. The largest single impact was that
of the Debenhams CVA which reduced
2019 NRI by approximately £0.7 million
(all in the second half of the year) and is
equivalent to £1.3 million on an annualised
basis. CVAs and administrations in
2019 have been largely focused on the
department store and fashion categories
that remain under significant pressure
from the ongoing structural changes
in retail. Such pressures continue to
persist and translate into the risk of
further failure and challenges in renewal
negotiations. Our strategy remains
committed to repositioning our centres to
remerchandise away from such categories
and increase further our focus on needs-
based, non-discretionary merchandise and
services.
The total impact upon 2019 NRI of all
of the 2019 CVAs and administrations
was £1.3 million, this will equate to £2.8
million on an annualised basis. The
full year impact on 2019 of CVAs and
administrations from 2018 was £1.7
million, resulting in a total impact in 2019
of £3.0 million.
RENTAL INCOME AND
OCCUPANCY
30 Dec
2019
30 Dec
2018
Contracted rent (£m)
Passing rent (£m)
Occupancy (%)
60.8
58.8
97.2
63.4
60.7
97.0
Contracted and passing rent showed
declines of £2.6 million (4.1%) and £1.9
million (3.1%) respectively reflecting
primarily the impact of CVAs and
administrations partially offset by the new
letting activity in the year.
At 30 December 2019, there was £2.0
million of contracted rent where the
tenant is in a rent-free period, all of which
will convert to passing rent in 2020.
Occupancy has remained strong at 97.2%
(December 2018: 97.0%).
CAPITAL EXPENDITURE
Conscious of balance sheet pressures
within the business prior to the
Growthpoint transaction, we scaled back
capex spend in 2019 to £12 million (from
£18.5 million in 2018). We were still active
on over 20 projects across the portfolio
including progressing the Walthamstow
residential development opportunity,
landlord works to facilitate a newly
refurbished Tesco unit in Luton following
the lease renewal, delivery of a new unit
for Pure Gym in Hemel Hempstead and
completion of a new family area and child
soft play in Hemel Hempstead. The latter
has incorporated a Tinies crèche facility
for shoppers, the first such roll out at a
UK shopping centre. We expect to deploy
capex at a typical rate of approximately
£15-20 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.
RESIDENTIAL OPPORTUNITIES
Walthamstow
We have made good progress with our
residential opportunity. Following a
comprehensive marketing process, we
have identified a favoured partner to
deliver 450 residential units which has
potential to realise a significant capital
receipt around the end of 2020. Detailed
contractual negotiations are ongoing and
progressing well. The precise timing of
the capital receipt will be dependent upon
changes to the existing planning consent
that will improve design and deliverability
and incorporate a new station entrance for
the Victoria Line underground station.
Wood Green
We successfully completed the sale of
a vacant plot of land to Aitch Group in
February 2020 for £5 million, in line with
book value. Aitch Group intends to bring
forward a residential scheme on the land of
up to 100 units, which will bring benefit to
the shopping centre in the form of increased
footfall and immediate on-site catchment.
WALTHAMSTOW FIRE
On 22 July 2019 a fire led to the closure
of The Mall, Walthamstow. The first
retailers re-opened less than a week
after the fire and just under 85% of the
units in the centre had re-opened prior
to the COVID-19 restrictions taking effect.
Reconstruction plans are now in place for
the remaining units and, subject to the
impact of current restrictions, we hope to
re-open in the course of 2020. The centre
is insured for both replacement and for up
to four years’ loss of income.
SNOZONE
Snozone produced another robust
performance in 2019 with revenue
increasing 1% to £10.5 million (2018: £10.4
million) and profits stable at £1.5 million
(2018: £1.5 million) despite cost pressures
and increased competition from the
broader active-leisure sector.
In 2019, Snozone received accreditation as
a ‘Disability Confident’ employer and came
runner-up at the UK School Travel Awards as
best Sporting Venue alongside prestigious
nominees such as; Chelsea FC, Lord’s cricket
ground, Wembley Stadium and Wimbledon
Lawn Tennis grounds. Snozone was also a
finalist for the award of Best Family Day Out
with the national online listings magazine,
Days Out With The Kids.
Given the seasonality of snow sports,
even indoors, Snozone has been focused
on increasing usage during the summer
months. This has included offering
corporate conferencing and banqueting
facilities, product launches for brands
including BMW and Audi, and slope hire
for filming including the BBC and other
commercial channels. Elements of the
2019 Disney ‘reboot’ of Aladdin were also
filmed on the slopes.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Family Zone
and Tinies
in Hemel
Hempstead
In May 2019, The Marlowes,
Hemel Hempstead,
launched their new
Family Zone, as part of
C&R’s ongoing strategy
to enhance the family
offering, in May 2019.
The Family Zone creates a clearly defined
area for families featuring a new kids play
area, social seating, the relocated Guest
Services and a new food services kiosk.
The area has been a popular addition to
the centre, seeing an immediate footfall
increase of 6% in the first four weeks of
the operation.
TINIES CRÈCHE
In October 2019, to further enhance the
family offering, The Marlowes opened the
first Ofsted-registered Tinies Shoppers
Crèche, in partnership with renowned
childcare providers, Tinies Daycare.
The crèche offers two hours free
childcare for guests shopping in the
centre. Tinies Crèche enables parents to
enjoy a convenient, stress-free shopping
experience while ensuring that their
children receive the highest standards of
care.
Since it opened more than 2,000 children
have been cared for with an average
dwell time of 1 hour 41 minutes which
represents a 23 minute increase (29%)
against the centre average.
Parent feedback:
“My son went to Tinies yesterday and I cannot
praise them enough. He came out and when
I asked if he liked it he said ‘no I didn’t like it I
LOVED it’ he has already asked when we can
go into town again. Popping into town used
to be a struggle to me as he hated walking
around the shops and the only time I’m off
work I’m with him. Well done Tinies and the
Marlowes. How lucky we are to have such
a safe fun and friendly area to leave our
children.”
DELIVERING RESULTS
6%
Increase in footfall*
29%
increase in dwell time
*In first 4 weeks of operation
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capreg.comCapital & Regional plcSTRATEGIC REPORT STUART WETHERLY
GROUP FINANCE DIRECTOR
Financial review
Profitability
Statutory Revenue
Net Rental Income (NRI)
Adjusted Profit1
Adjusted Earnings per share1, 4
2019
2018
Change
£88.9m
£49.3m
£27.4m
36.7p
£91.0m
£51.9m
£30.5m
42.3p
-2.2%
-5.0%
-10.2%
-13.2%
IFRS Loss
£(121.0)m
£(25.6)m
-£95.4m
Basic Earnings per share4
(162)p
(35)p
EPRA cost ratio (excluding vacancy costs)
Net Administrative Expenses to Gross Rent
Investment returns
Net Asset Value (NAV) per share4
EPRA NAV per share4
Dividend per share4
Dividend pay-out5
Return on equity
Financing
Group net debt
-127p
+0.8%
+0.1%
-235p
-227p
-3.2p
25.9%
10.8%
361p
364p
21.0p
68%
25.1%
10.7%
596p
591p
24.2p
57.2%
(27.8)%
(5.3)%
£336.9m
£411.1m
-£74.2m
Group net debt to property value
46%
48%
-2 pps
Average debt maturity2
5.4 years
6.3 years
-0.9 years
Cost of debt3
3.26%
3.27%
-1 bps
1 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.
2 Assuming exercise of all extension options.
3 Assuming all loans fully drawn.
4 Per share amounts are adjusted to reflect the impact of the 10 for 1 share consolidation that
completed on 15 January 2020.
5 Total dividend as a percentage of Adjusted Profit.
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Stock Code: CAL
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019 Financial review
Continued
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
Adjusted Profit
Rationale
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 financial
statements.
Like-for-like
amounts
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 financial statements.
PROFITABILITY
Amounts in £m
Net rental income
Net interest
Investment income
Central operating costs net of external fees
Kingfisher Redditch
Snozone profit (indoor ski operation)
Tax charge
Adjusted Profit
Adjusted Earnings per share (pence)1,2
Reconciliation of Adjusted Profit to statutory result
Adjusted Profit
Property revaluation
Loss on disposal
Impairment
(Loss)/Gain on financial instruments
Transaction costs on issue of new equity and partial offer
Other items
IFRS loss for year
Year to
30 Dec 2019
Year to
30 Dec 2018
49.3
(18.9)
0.2
(4.7)
–
1.5
–
27.4
36.7
27.4
(138.6)
(0.5)
(1.4)
(5.0)
(2.2)
(0.7)
(121.0)
51.9
(18.9)
0.4
(4.7)
0.4
1.5
(0.1)
30.5
42.3
30.5
(52.5)
(3.8)
–
2.6
–
(2.4)
(25.6)
1 EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the Financial Statements.
2 Per share amounts are adjusted to reflect the impact of the 10 for 1 share consolidation that completed on 15 January 2020.
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capreg.comCapital & Regional plcSTRATEGIC REPORT Adjusted Profit – 2019: £27.4 million (2018: £30.5 million)
Adjusted Profit and Adjusted Earnings per share decreased by 10.2% and 13.2% respectively, driven primarily by a £2.6 million or 5.0%
decrease in NRI. This was largely due to CVAs and retailer restructurings, which impacted by approximately £3.0 million in 2019.
Net interest remained in line with 2018 as broken down in the following table:
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 2019
Year to
30 Dec 2018
14.6
0.9
3.4
18.9
–
18.9
14.4
0.9
3.4
18.7
0.2
18.9
1 Notional interest charge with offsetting opposite and materially equal credit within other property operating expenses.
Central operating costs (net of external fees) were flat year on year with efficiency improvements offsetting the impact of salary inflation.
Following the restructuring of the Kingfisher Redditch Joint Venture that completed early in 2019 the Group no longer equity accounts for
its interest and no distributions were received during the year. Snozone contribution remained stable on a rounded basis, at £1.5 million.
IFRS loss for the period – 2019: Loss of £121.0 million (2018: Loss of £25.6 million)
The loss on revaluation of investment properties for the year was £138.6 million (2018: Loss of £52.5 million) and this was the key
component driving a loss for the period of £121.2 million. A breakdown of valuations by property is provided in the Net Asset Value
section below. The other main factors outside of Adjusted Profit were a loss on financial instruments of £5.0 million, reflecting
expectations of interest rates being lower for longer, a £1.4 million impairment of the Group’s fixed asset investment in the Kingfisher
Redditch Joint Venture and £2.2 million of costs in respect of the Growthpoint transaction costs. A further £3.3 million of costs in relation
to this transaction have been charged to Share Premium as they directly related to the issue of new shares.
NET ASSET VALUE
The valuation of the portfolio at 30 December 2019 was £727.1 million, a 15% decline on 30 December 2018 and reflecting a net initial
yield of 6.95% (2018: NIY: 6.23%).
The decline of retail asset values across the industry accelerated in 2019 and the disconnect of London and regional assets continued
albeit driven largely by sentiment with transaction volumes remaining at historically low levels. The Group’s London assets proved
relatively more robust with an overall decline of 7.6%. The Group’s assets outside of London were, however, significantly impacted
by negative sentiment towards retail assets with the headline valuation of the Group’s three South East assets declining by 20.7% and
Blackburn falling by over 30% over 2019.
Property portfolio valuation
Property at independent valuation
London
Ilford
Walthamstow
Wood Green
South East
Hemel Hempstead
Luton
Maidstone
Regional
Blackburn
Portfolio
30 December 2019
30 December 2018
£m
NIY %
£m
NIY %
77.4
126.0
211.5
414.9
34.7
148.7
61.9
245.3
6.06%
5.28%
5.48%
5.54%
8.50%
8.00%
8.38%
8.17%
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%
66.9
10.24%
96.8
7.70%
727.1
6.95%
855.2
6.23%
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Financial review
Continued
NAV decreased to £375.1 million and EPRA NAV at £378.6 million (December 2018: £433.0 million and £431.7 million), respectively,
reflecting the impact of the fall in valuations (net of capital expenditure) of £138.6 million partially offset by the Adjusted Profit of £27.4
million and net equity injection of £72.4 million from the Growthpoint transaction.
On a per-share basis Basic NAV and EPRA NAV fell to 361 pence and 364 pence respectively, declines of 235 pence and 228 pence from
the respective 2018 equivalents.
FINANCING
The Group’s debt facilities are outlined in the table below. The fall in valuations, offset by the proceeds of the Growthpoint transaction,
resulted in net debt to value decreasing to 46% (December 2018: 48%).
Details on these covenants are provided in the “covenant information” section on page 131. The Group was compliant with them
throughout the year and up to the date of this announcement.
30 December 2019
Four Mall assets
Hemel
Ilford
Luton
Central Cash
£15m Revolving
Credit Facility
(undrawn)
On balance
sheet debt
Debt¹
£m
265.0
26.9
39.0
96.5
–
–
Cash²
£m
(8.3)
(0.8)
(1.9)
(5.3)
Net
Debt
£m
256.7
26.1
37.1
91.2
(74.2)
(74.2)
–
–
427.4
(90.5)
336.9
Loan to
value3
%
Net debt
to value3
%
Average
interest rate
%
57%
78%
50%
65%
–
n/a
59%
55%
75%
48%
61%
–
n/a
46%
3.33
3.32
2.76
3.14
n/a
3.79
3.26
Duration to
loan expiry
Years
Duration
with
extensions
Years
5.9
3.1
4.2
4.0
n/a
2.1
5.0
6.6
3.1
4.2
4.0
n/a
2.1
5.4
Fixed
%
100
100
100
100
n/a
–
94
1 Excluding unamortised issue costs.
2 Excluding cash beneficially owned by tenants.
3 Debt and net debt divided by investment property at valuation.
£50 million of the net proceeds from the equity raise in the year have
been earmarked for the repayment or restructuring of debt. £5 million
had been utilised by 30 December 2019 contributing to a total pay
down of the Luton debt facility of £11 million in the second half of 2019
reducing the outstanding loan amount to £96.5 million. In addition to
the facilities listed above the Group has a Revolving Credit Facility of
£15 million currently undrawn and fully available.
Negotiations are ongoing with the Group’s lenders regarding the
possible utilisation of the remaining £45 million across its different
loan facilities with the Group seeking an improvement to covenant
terms in exchange for any voluntary repayment. Based on the existing
covenant terms, without any further improvement, the £45 million
provides the Group with the ability to withstand a further 20% fall from
the 30 December 2019 valuations without facing any default or cash
trap restrictions on any of its facilities.
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 2019, 58,738,414 of
the Company’s shares were held on the JSE share register representing
5.65% of the total shares in issue.
DIVIDEND
As outlined in the Prospectus published on 7 November 2019, the
Company agreed to adopt a policy of distributing on a semi-annual
basis (in the approximate proportions of 45 / 55 and in that order in
respect of each financial year) not less than approximately 90% of the
Company’s EPRA earnings.
This will make the full-year dividend, adjusting the interim dividend of
1 pence for the impact of the recent 10 for 1 share consolidation, to 21
pence per share (December 2018: equivalent to 24.2 pence per share).
The key dates proposed in relation to the payment of the 2019 final
dividend are:
Annual General Meeting
Confirmation of ZAR equivalent
Wednesday, 20 May 2020
Thursday, 21 May 2020
dividend
Last day to trade on Johannesburg
Tuesday, 2 June 2020
Stock Exchange (JSE)
Shares trade ex-dividend on the JSE Wednesday, 3 June 2020
Shares trade ex-dividend on the
London Stock Exchange (LSE)
Thursday, 4 June 2020
Record date for LSE and JSE
Dividend payment date/despatch
Friday, 5 June 2020
Thursday, 24 June 2020
of share certificates
A scrip offer will be made available subject to approval at the Annual
General Meeting. 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 Thursday, 21 May 2020. Share certificates on the
South African register may not be dematerialised or rematerialised
between Wednesday, 3 June 2020 and Friday, 5 June 2020, both dates
inclusive. Transfers between the UK and South African registers may
not take place between Thursday, 21 May 2020 and Friday, 5 June 2020,
both dates inclusive.
The Board is proposing a final dividend of 11 pence per share, based
on approximately 90% of earnings for the second half of 2019. This will
be paid as 100% property income distribution.
STUART WETHERLY
GROUP FINANCE DIRECTOR
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capreg.comCapital & Regional plcSTRATEGIC REPORT Managing risk
RISK MANAGEMENT APPROACH
The Board has ultimate responsibility for the oversight of risk
management within the Group. The Board defines the risk appetite
of the Group, establishes a risk management strategy and is
responsible for maintaining a robust internal controls system.
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 2019.
PRINCIPAL RISKS AT 30 DECEMBER 2019
As part of the risk review completed as at 30 December 2019, the
groupings and categorisations of the Group’s principal risk were
reviewed and refined with a few common risks being consolidated
together. Amongst the main factors considered, were the
continuing structural changes to UK retail and the continuing
use of CVAs by struggling retailers, and the ongoing economic
and political uncertainty concerning the terms of the country’s
exit from the European Union (see below). The review concluded
that while as a result of these combined factors the profile of
a number of risks, including property investment market risks
and the impact of the economic environment, had changed, the
ultimate nature and significance of them had not.
COVID-19
The impact of COVID-19 is incorporated within our Business
disruption from a major incident risk. At the time of writing all
of the Group’s seven shopping centres remain open to provide
essential services although a majority of tenants are currently
closed in line with government guidelines. Approximately 50%
of the rent due for the second quarter of 2020 has so far been
collected. We are in active discussions with all our retailer
customers on the outstanding rents appreciating these are
challenging times and are actively monitoring the situation and
ensuring contingency plans are in place to mitigate the potential
impact on our operations, our shopping centres and our tenants
as best we can as the situation develops further.
BREXIT
The UK formally left the European Union (EU) at the end of January
2020. It has now entered a transitional period until the end of
2020 and must negotiate its future trading relationship with
the EU. While these developments have provided some clarity,
there remains significant uncertainty over the future impact of
Brexit on a number of the Group’s principal risks. From a risk
perspective, the main impact of Brexit is on Property investment
market risks, the economic environment and Tax and regulatory
risks. The ultimate impact will be dependent on the terms of the
UK’s relationship with the EU. Any significant change, such as the
inability to reach a trade agreement, resulting in the application of
WTO rules, is likely to have an adverse impact on the Group.
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.
N
W
O
D
P
O
T
Oversight,
identification,
assessment
and mitigation
of risk at a
Group Level
Board
Responsible for oversight of risk
management and internal controls
processes.
Defines the Group’s risk appetite and
assesses the Group’s principal risks
with the Executive Directors.
Audit Committee
Supports the Board in the
management of risk and is responsible
for reviewing the effectiveness of the
risk management strategy and internal
control processes throughout the year.
Senior Leadership Team
Responsible for the day-to-day
operational application of the risk
management strategy and ensuring
that all staff are aware of their
responsibilities.
Identification,
assessment
and mitigation
of risk at an
Operational
Level
Operational management
Responsible for implementing
and maintaining risk management
procedures, and maintaining risk
registers including identification of
risks, mitigating controls and actions
required.
Employees
Responsible for complying with risk
management procedures and internal
control measures, and provide
feedback to operational management
on day-to-day risk management.
P
U
M
O
T
T
O
B
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL
Managing risk
Continued
1
2
3
PROPERTY INVESTMENT
MARKET RISKS
IMPACT OF THE
ECONOMIC ENVIRONMENT
TREASURY
RISK
Strategic priorities
Strategic priorities
Strategic priorities
Define, Position
Position
Position, Focus
Risk
Tenant insolvency or distress
Prolonged downturn in tenant
demand and pressure on rent
levels
Impact
Tenant failures and reduced tenant
demand could adversely affect
rental income, lease incentive, void
costs, cash and ultimately property
valuation
Mitigation
Large, diversified tenant base
Review of tenant covenants before
new leases signed
Risk
Inability to fund the business
or to refinance existing debt on
economic terms when needed
Breach of any loan covenants
causing default on debt and
possible accelerated maturity
Exposure to rising or falling
interest rates
Impact
Inability to meet financial
obligations when due
Limitation on financial and
operational flexibility
Cost of financing could be
Long-term leases and active credit
prohibitive
control process
Good relationships with, and active
management of, tenants
Void management through
temporary lettings and other
mitigation strategies
Unremedied breaches can trigger
demand for immediate repayment
of loan
If interest rates rise and are
unhedged, the cost of debt facilities
can rise and ICR covenants could be
broken
Hedging transactions used by the
Group to minimise interest rate risk
may limit gains, result in losses or
have other adverse consequences
Mitigation
Ensuring that the Group maintains
appropriate levels of cash reserves
and/or undrawn facilities
Regular monitoring and projections
of liquidity, gearing and covenant
compliance with regular reporting
to the Board
Option of asset sales if necessary
Regular monitoring of the
performance of derivative contracts
and corrective action taken where
necessary
Use of alternative hedges such as
caps
Risk
Weakening economic conditions
and poor sentiment in commercial
and/or retail real estate markets
could lead to low investor demand
and an adverse movement in
valuation
Valuation risk from lack of relevant
transactional evidence
Impact
Small changes in property
market yields or future cashflow
assumptions can have a significant
effect on valuation
Impact of leverage could magnify
the effect on the Group’s net assets
Property valuations increasingly
subjective and open to a wider
range of possible outcomes
Mitigation
Monitoring of indicators of market
direction and forward planning of
investment decisions
Use of multiple experienced,
external valuers who understand
the specific properties and whose
output is reviewed and challenged
by internal specialists
Regular review and consideration
of strategies to reduce debt levels
if appropriate
Maintenance of cash and covenant
headroom to provide flexibility
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capreg.comCapital & Regional plcSTRATEGIC REPORT
4
TAX AND REGULATORY
RISKS
5
PEOPLE
6
DEVELOPMENT
RISK
Strategic priorities
Strategic priorities
Strategic priorities
Focus
Focus
Focus
Risk
Dependence of the business on
the skills of a small number of key
individuals
Impact
Loss of key individuals or an
inability to attract new employees
with the appropriate expertise
could reduce effectiveness
Mitigation
Pay market salaries and offer
competitive incentive packages
Positive working environment and
culture
Use of share incentive plans
Succession planning for key
positions
Risk
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
Exposure to changes in existing or
forthcoming property or corporate
regulation
Impact
Tax-related liabilities and other
losses could arise
Failure to comply with tax or
regulatory requirements could
result in financial penalties, loss of
business or credibility
Mitigation
Monitoring of REIT compliance
Expert advice taken on tax
positions and other regulations
Maintenance of a regular dialogue
with the tax authorities
Training to keep Management
aware of regulatory changes
Expert advice taken on complex
regulatory matters
Risk
Delays or other issues may
occur to capital expenditure and
development projects
The threat to the Group’s property
assets of competing in town and
out of town retail and leisure
schemes
Impact
May lead to increased cost and
reputational damage
Planned value may not be realised
Competing schemes may reduce
footfall and reduce tenant demand
for space and the levels of rents
which can be achieved
Mitigation
Approval process for new
developments and staged
execution to key milestones
Use of experienced project
coordinators and external
consultants with regular
monitoring and Executive
Committee oversight
Monitoring of new planning
proposals
Close relationships with local
councils and willingness to support
town centres
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL
Managing risk
Continued
7
8
9
BUSINESS DISRUPTION
FROM A MAJOR INCIDENT
RESPONSIBLE
BUSINESS
CUSTOMERS & CHANGING
CONSUMER TRENDS
Strategic priorities
Strategic priorities
Strategic priorities
Focus
Position, Focus
Define, Position
Risk
Major incident or situation
develops that has a significant
impact upon trading. This could
be something specific to a centre
or trading location (e.g. the fire
in Walthamstow that occurred
in 2019) or a situation such as
COVID-19 that impacts trading
on a national scale.
Impact
Financial loss if unable to trade or
impacts upon shopper footfall
Reputational and financial damage
if business has or is perceived to
have acted negligently
Mitigation
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
Risk
The Group’s activities may
have an adverse impact on the
environment and communities
Health and safety incidents could
cause death or serious injury
Impact
Failure to act on environmental
and social issues could lead to
reputational damage, deterioration
in relationships with customers
and communities and limit
investment opportunities
Failure to comply with regulations
could result in financial exposure.
Health and safety incidents could
result in reputational damage,
financial liability for the Group and
potentially criminal liability for the
Directors
Mitigation
Issues considered as part of the
Group’s Responsible Business
Committee
Environmental policy in place and
consistent with ISO14001
Management of and compliance
with the Carbon Reduction
Commitment and compliance with
the Carbon Trust
Specialist health and safety
compliance manager in place
Monitoring systems to ensure
tenant compliance
Risk
The trend towards online
shopping, multi-channel retailing,
and increased spending on leisure
may adversely impact consumer
footfall in shopping centres
Impact
Changes in consumer shopping
habits 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
Mitigation
Strong location and dominance
of 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, retail trends
and shopping behaviour
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capreg.comCapital & Regional plcSTRATEGIC REPORT
10
HISTORIC
TRANSACTIONS
Strategic priorities
Focus
Risk
Historic sales have included vendor
warranties and indemnities and
as such, the Group has potential
exposure to future claims from the
purchaser
Impact
Warranty and indemnity-related
liabilities and other losses could
arise
Mitigation
Use of professional advisers
to achieve properly negotiated
agreements in terms of scope,
extent of financial liability and time
frame
Monitoring of ongoing exposures
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL
Managing risk
Continued
VIABILITY STATEMENT
In accordance with the 2018 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 2022. 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
asset backed 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 27 to 31.
We have considered specifically the
impact on the business of the significant
disruption arising from COVID-19. At
the time of writing on 15 April 2020, all
of the Group’s seven shopping centres
remain open to provide essential services
although a majority of tenants are
currently closed in line with government
guidelines. Approximately 50% of the rent
due for the second quarter of 2020 has
so far been collected. We are in active
discussions with all our retailer customers
on the outstanding rents appreciating
these are challenging times.
As of the time of writing on 15 April 2020
the Group has total cash on balance
sheet of over £90 million, which is
equivalent to more than one year’s gross
revenue. Approximately £70 million of
the £90 million is maintained centrally
and is immediately and freely available.
In addition, the group has an undrawn
revolving credit facility of £15 million
available until January 2022. The earliest
maturity on any of the Group’s other loan
facilities is February 2023. This provides
significant cash contingency to cover any
disruption to operations for an extended
period of time.
We have also undertaken actions to
improve the preservation of cash
within the business while this period of
uncertainty persists. We have suspended
all non-essential or non-committed capital
expenditure projects and are planning to
implement a scrip dividend alternative
32
Based on an assessment of all of the
above and the resources and actions
available 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 2022.
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;
the relatively high level of cash
currently maintained centrally that
is fully available to the Group for any
purpose and free from any restrictions
over its use;
options for recycling capital and
or alternative means of additional
financing 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 27 to 31.
Having due regard to these matters
and after making appropriate enquiries
including considerations of the impact
of COVID-19 as outlined in the viability
statement, 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.
for the forthcoming Final 2019 Dividend
payment which our largest shareholders
have committed to taking meaning there
will be at least 65% take-up and the
majority of the proposed £11.4 million
total dividend payment being preserved
in cash within the business. In addition,
selling an asset or part of an asset, the
accelerated monetising of residential
development opportunities or raising new
equity would all be additional options
potentially open to Management for
increasing cash levels within the business.
The Group’s four asset backed loan
facilities each have covenants as outlined
on page 131. Covenants in respect of
minimum interest cover ratios, both
projected and historic, are tested
quarterly. At the most recent test date
prior to the impact of COVID-19, in January
2020, the respective covenant headroom
on this basis was a minimum of 33% and
most facilities were in the range of 33%
to 45%. Put another way the headroom
provides cover such that qualifying net
income or expected qualifying net income
for the respective test period could fall
by between approximately a third and up
to just under a half before the covenants
would be at risk. If there is significant
disruption to trading across multiple
quarters, or in respect of valuation
covenants a deemed significant long
term reduction in value, then there are
scenarios where the headroom could be
eroded and, dependent on the impact
upon the specific properties within each
loan agreement, the risk that covenants
could be breached.
Initial discussions with our lenders have
indicated a willingness to potentially
provide waivers or relaxation of covenants
where potential breaches are due to the
short term disruption of COVID-19. In the
event waivers are not obtained the level
of cash currently maintained by the Group
also provides resource to potentially
cure loan facilities or use in return for
negotiating further covenant relaxation
should it be necessary. In the event that
this did not prove sufficient then the
Group has further options potentially
available for increasing available cash
within the business including as noted
above the divestment of an asset, the
accelerated monetising of residential
development opportunities or the raising
of new equity.
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capreg.comCapital & Regional plcSTRATEGIC REPORT Our Stakeholders
Our Stakeholders
Our stakeholders are at the heart of our strategy and business model. By engaging with them we are able to understand their changing
needs which helps inform our strategic decision making and ensure our long-term success.
SECTION 172 STATEMENT
The Board has regard to the matters set out in Section 172(1) of the Companies Act 2006 when performing its duties under Section 172
to promote the success of the Company. When making decisions, the Board pays due regard to: the likely consequences of decisions
in the long term; the interests of stakeholders, the impact actions have on the communities in which we operate and the environment;
maintaining high standards of business conduct; and acting fairly at all times. Our key stakeholders, how we engage with them and
consider their needs and concerns is outlined below.
The Marketplace
Our retailers, our
customers and our
partners
What matters
Affordable rents and service charge
Outstanding customer service
Centres that drive footfall and are adaptable to meet the needs of a changing market
Prompt and fair payments to suppliers and contractors
Ethical and fair dealings that protect human rights and the health and safety of our partners
How we engage
Investment in data to understand consumer and market trends
Regular visitor surveys
Regular audits of facilities management and operational standards
How we respond
The Board’s Responsible Business Committee discuss key issues as part of its agenda and provide regular
updates at Board meetings.
The Board reviewed and approved the Modern Slavery Statement
Changing consumer and market trends form part of boardroom discussions and decision making
Our People
→ Read more about how we engage on pages 35 to 36
What matters
Opportunities for career and personal development
Fair and equitable pay and benefits
An inclusive and diverse environment
Open and transparent communication
How we engage
Intranet; all-staff emails; weekly CEO updates and regular townhall meetings
Workforce posters and communications
Whistleblowing procedures
Employee surveys
Wellbeing Committees
How we respond
The Board receives periodic reports on a range of people matters
The Board regularly takes the opportunity to meet with staff at all levels in the organisation when making
site visits across our business
The Board reviews employee engagement through employee surveys and follows up the actions taken
The Board considered the impact on current employees when making strategic decisions, including the
impact of the Growthpoint transaction
→ Read more about how we engage with our people on pages 39, 49 and 75
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Our Stakeholders
Continued
Our Shareholders
What matters
Robust financial accounts
Sustainable dividend income
Delivering income and capital growth
ESG performance
How we engage
AGMs, results presentations and investor events
One-to-one meetings with the Chairman, Senior Independent Director and Management
How we respond
Review and act on regular reports from analysts and advisors
Feedback from shareholder meetings is shared with the Board and forms part of boardroom discussions
The Board considered the impact of various recapitalisation strategies and the resulting Growthpoint
transaction on shareholders
In 2019, the Remuneration Committee Chair engaged with shareholders and reviewed and acted on the
feedback received from them and governance agencies before and after the publication of the 2019
Remuneration Policy
The Community
→ Read more about our engagement with our shareholders on page 49
What matters
Having a positive impact on local areas
Supporting employment in the community
Vibrant and well-maintained centres that enhance their surroundings
Open communication and engagement on development opportunities
How we engage
Strong engagement with local and central governments and Business Improvement Districts
Partnering with industry organisations such as retailTRUST and REVO
Supporting local charities and organisations through our C&R Cares programme
How we respond
The Board’s Responsible Business Committee discuss key issues as part of its agenda and provide regular
updates at Board meetings
The Board reviews and approves all developments within our communities and receives regular updates
on ongoing planning matters and community outreach programmes
The Environment
→ Read more about how we engage with our communities on pages 40 to 41
What matters
Awareness of the environmental impact of our activities
Reduction of CO2 emissions and energy and water consumption
Reducing waste, in particular plastic waste, and diverting waste from landfill
How we engage
Develop and implement various sustainability schemes across our centres
Engage with our retailers to increase awareness and education
Maintain Global Real Estate Benchmark Green Star Status
Member of the Better Building Partnership
Signatory to the Climate Change Commitment
How we respond
The Board’s Responsible Business Committee discuss key environmental issues as part of its agenda and
provide regular updates at Board meetings
Environmental issues form part of our boardroom discussions
→ Read more about how we engage on page 38
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capreg.comCapital & Regional plcSTRATEGIC REPORT Community engagement in numbers
9,078
Jobs supported by our
centres
£157K
Community funding
sponsorship
3,847
Voluntary hours donated
to supporting the local
community
165
Community events hosted
£327 K
Raised for C&R Cares
163
Charities supported
163
Community groups
supported
+32
Net Promoter Score –
for staff
+14
Net Promoter Score –
Guests
+18
Net Promoter Score –
Customers
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Stock Code: CAL
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STRATEGIC REPORT 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.
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, the environment, our people and our
communities.
THE MARKETPLACE
Our aim is to engage with our local guests,
customers, suppliers and stakeholders, to
understand their needs and identify ways
of improving our collective responsible
business performance. We recognise the
positive impact our retail customers and
suppliers can have on our sustainability
efforts and continue to work in partnership
to deliver our goals to create vibrant retail
spaces.
HIGHLIGHTS FROM 2019
Retained the ROSPA Gold Award for
13th consecutive year.
Our revised Operational Standards
Assessments, rolled out in 2019,
received an average score of 95%
across the portfolio.
Our Compliance and Facilities
Management audit achieved an average
score across the portfolio of 95.7%.
The centres participated in the Revo
Achievement in Customer Excellence
Awards (ACE) and achieved an average
Mystery Shopper rating of 89%,
compared to the industry average of
87%.
C&R awarded the Top Scoring
Owner award at the 2019 Revo ACE
Awards. The Mall, Blackburn was also
recognised, coming runner up in the
community shopping centre category.
PRIORITIES FOR 2020
Retain the ROSPA Gold Award.
Introduce innovations across the
service charge contracts to provide
measurable efficiencies. Engage with
the Revo Service Charge benchmark
due to be launched in 2020.
Improve the visibility of key personnel
including Guest Services, Security and
Cleaning, in response to guest exit
surveys and NPS surveys.
Obtain external recognition from a
nationally recognised body for the
Going the Extra Mile (GEMS) training
programme.
Develop and launch a new Operational
Standards framework focusing on
key areas of the guest and customer
journey including; facilities, car parking,
community spaces, accessibility, and
customer relationships.
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capreg.comCapital & Regional plcSTRATEGIC REPORT MENTAL HEALTH
TRAINING
ACTIVE AUGUST
CHALLENGE
C&R has committed to delivering
mental health first aid courses
across the business, to support
both our colleagues and our guests
in their daily lives. In 2019, we
partnered with Get Mental Health
Training to teach the skills and
confidence to respond, support and
manage crisis.
In 2019, we trained 37 colleagues
across the business, in varying roles
from front of house to support roles
within our centres. The initiative has
increased the level of knowledge
within our teams and has assisted
them in responding to a wide
range of issues and supporting our
community members.
Our younger guests spent this
summer taking part in our Active
August Challenge where they
completed an activity trail, collecting
clues from a number of checkpoints
positioned around the centre and
taking part in active play games.
Participants were given a pedometer
to count the number of steps
completed during the challenge.
Once they found all the checkpoints
and spelt the magic word, they
could then log the total number of
steps they had completed on the
leader board, competing for prizes,
with ‘top steppers’ winning prizes
including a £500 gift card.
The aim of the campaign was to
promote healthy living whilst driving
footfall to our centres by providing
fun, family friendly activity. The
event received great feedback and
achieved the following KPI’s:
A total of 5,500,000 steps were
recorded by our guests
The Active August Challenge was
taken on by 2,865 guests across
our centres.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Responsible business
Report on Greenhouse Gas Emissions
Scope 1 and 2 Mandatory Reporting*
2016**
2017**
2018**
2019
Emissions
Scope 1 tCO2e
Scope 2 tCO2e
Intensity
Scope 1 and 2 kgCO2e/sq ft
* Scope definitions:
1,154
9,996
1,184
7,721
1,371
6,790
1,357
5,369
2.25
1.69
1.55
1.28
Scope 1: Direct GHG emissions from controlled operations (natural gas consumption)
Scope 2: Indirect GHG emissions from the use of purchased electricity, heat or steam
(electricity consumption)
**2016, 2017 and 2018 figures have been restated where material changes were subsequently
identified.
Approach
The reported CO2 emissions for 2019 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 have
control. It does not account for GHG emissions from operations in which it owns an
interest but has no operational control. Energy use from metered sources identified as
fully controlled by third parties (e.g. tenants) have also been excluded.
Scope 1 emissions account for total gas consumption of Capital & Regional. 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 by Capital & Regional.
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 2016,
2017, 2018 and 2019 figures are not necessarily directly comparable due to changes in
emission factors, and the Capital & Regional property portfolio included in the boundary.
Capital & Regional moved its Support Office location in 2018. The new office consumption
is an estimate based on current floor area and consumption in the old office. This
is because electricity use is not billed directly to Capital & Regional but the landlord.
Consumption information was not available from the landlord at the time of the report.
The reported emissions represent the best information available at the time of issue Net
19 February 2020.
Electricity Intensity reduction 2008-2019 (centres owned for whole period).
W
k
s
n
o
i
l
l
i
M
6
5
4
3
2
1
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Blackburn
Luton
Maidstone
Wood Green
Walthamstow
ENVIRONMENTAL
SUSTAINABILITY
We work hard to ensure that our local
communities which we serve are better
places to be for all. Our commitment is to
reduce our impact on the environment in
the three key areas of waste, water and
energy. In addition, we continue 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 2019:
Retained the Global Real Estate
Benchmark (GRESB) Green Star Status.
Reduced CO2 emissions by over 15%
and also reduced gas and electricity
consumption on a like-for-like basis by
6%, saving c.£200,000 in costs. Energy
intensity has been reduced by 36%
since 2008.
Of the 3,396 tonnes of waste treated
99% was diverted from landfill, of which
63% was recycled and 36% waste to
energy or incineration.
Food waste initiatives and the Pilot
‘Don’t Waste’ scheme resulted in
improved efficiencies. Cost savings of
over £60,000 have been identified and
are being implemented at two centres.
69 tonnes of food waste was sent for
anaerobic digestion.
Refillable water units were rolled out
at Hemel Hempstead, Luton and Wood
Green with the remaining centres to
follow in 2020.
Priorities for 2020:
Achieve GRESB Green Star 4 star rating
and satisfy all carbon compliance
reporting and legislative requirements.
Reduce gas and electricity consumption
by 1.5% and water consumption
(normalised by footfall at landlord
controlled facilities) by 1%.
Divert at least 99% waste direct from
landfill and 70% recycled back to the
supply chain.
As a member of the Better Building
Partnership and signatory to the
Climate Change commitment, establish
a net zero carbon pathway outlining our
trajectory towards net zero carbon.
Roll out a sustainability awareness
programme at each centre informing
our guests and staff on how they can
make a difference in their daily lives.
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capreg.comCapital & Regional plcSTRATEGIC REPORT
Hosted the first National Sparkle Award
as part of GEMs to reward those who
had delivered exceptional guest and
customer service in 2019. The GEMs
programme was also shortlisted for a
SCEPTRE award.
Supported staff in attending the
OSS Academy retail management
development programme.
Successfully launched our decentralised
management platform across the
business.
Priorities for 2020:
To launch a ‘SuperGEM’ category as
the pinnacle of the GEMs programme.
Individuals that attain the award will
become ambassadors of the scheme
and will provide onboarding, training
and coaching to new team members.
Creation of centre-specific Responsible
Business Plans, tailored to the needs of
the local community.
Completion of the rollout of CARTERHR
and additional functionality to all staff.
Review how C&R’s culture is defined
and aligned to the business strategy
and recruitment, procedures and
policies and further develop KPIs to
monitor progress.
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.
Our culture, who we are, how we work
together and the pride we generate, is
crucial in supporting the delivery of our
strategic priorities. Our culture is one of
innovation and agility, where we act as one
team and are held accountable.
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 that 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 2019:
Achieved 95% return rate on C&R Pulse,
our in-house Staff Engagement Survey,
+11% on previous year.
Employee NPS (Net Promotor Score)
achieved +32 average for the year
compared to industry average of +5.
The launch of a dedicated Wellbeing
resource on CARTER and a review
of wellbeing arrangements across
the portfolio, which has resulted in
improvements and enhancements
within staff welfare areas.
Successful delivery of the restructure
of the C&R and Mall People payroll
systems and rollout of training for
CARTER HR, the new self-serve online
HR portal.
NATIONAL SPARKLE
AWARDS
2019 saw the very first Capital &
Regional National Sparkle Awards,
held at the Museum of Brands in
London, in October. The Sparkle
Awards, which are part of our GEMs
programme, are awarded to our
centre team members who go above
and beyond supporting our guests
or retail customers and recognises
exceptional acts or extraordinary
guest/customer service.
In the first year, 83 Sparkles have
been awarded. The top 21 Sparkle
Award winners, nominated by the
General Managers from across the
centres, were invited to a special
celebratory lunch. Our judging
panel selected two runners up and
an overall National Sparkle Award
winner. The two runners up were
Shiraz Kahn, Security Officer from
The Mall Luton, and Akua Asantewaa,
Cleaner at The Mall Walthamstow.
Our overall National Sparkle Award
winner for 2019 was Des Larkin,
Cleaner at The Mall Luton.
The very worthy winner and National
Award winner, Des, had recently
moved into a new role cleaning the
guest facilities. On this particular
day he was alerted to an elderly
guest asking for help. Without fuss,
Des provided assistance, while
maintaining the guest’s dignity and
keeping the facilities fully open.
This particular act of kindness is a
great example of going above and
beyond for a guest, and Des’ selfless
act demonstrates compassion and
thoughtfulness, leaving a lasting
impression on the elderly guest and
his family.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Responsible business
Continued
PURPLE TUESDAY
On Tuesday 12th November 2019,
we joined the Purple Tuesday
campaign for the second year
running. The campaign focuses on
changing the guest experience for
people with disabilities and ensuring
we are accessible for all.
Purple Tuesday, marked the start of
our pledge to train all our guest-
facing teams in Autism Awareness.
Once trained, team members will
receive a recognisable Autism Aware
pin badge to wear.
Official Sunflower Lanyards for
those with hidden disabilities are
now available to collect in all of our
centres. Wearing the Sunflower
Lanyard indicates to people around
you that help may be required.
Being at the heart of the local
community we are committed to
ensuring all our guests enjoy their
experience of shopping with us and
offer a wide range of services for
people with disabilities.
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 2019:
Through C&R Cares we raised over
£327,000 in 2019.
Sponsored Waltham Forest as London’s
first Borough of Culture.
Each centre now has at least two
qualified Mental Health First Aiders.
C&R were successful in attaining
Disability Confident Committed status
in 2019.
C&R joined the Purple Tuesday
campaign for the second year running.
Partnered with the retailTRUST to
launch an appeal to support those
employed at The Mall, Walthamstow
and who were impacted by the fire
in July 2019. Waltham Forest Council
donated £10,000 and both C&R and the
retailTRUST donated £25,000 towards
the fund.
Priorities for 2020:
To continue to work with our local C&R
Cares charities and at least match 2019
fundraising.
In collaboration with community-
based groups, service partners and
C&R teams, develop and introduce
“back to work” skills workshops to
help and support members of our
local communities in returning to
employment.
Commit to training all guest facing
teams in Autism Awareness as part of
our commitment to Purple Tuesday.
Improve processes for engagement
with our local communities to gain
detailed insights into their needs and
expectations.
Creating a fully inclusive shopping
experience
Being at the heart of the local community
we have a commitment to ensure 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 guest’s needs.
We support people with disabilities by
investing in areas such as our family
changing facilities, accessible toilets
including ‘Changing Places’ toilet facilities,
as well as other projects such as Quiet
Hour, Purple Tuesday, and accessible
events such as ‘Signing Santa’, and we
continue to support measures that benefit
everyone.
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capreg.comCapital & Regional plcSTRATEGIC REPORT DEVELOPMENTS IN OUR
COMMUNITIES
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. We continue to evolve
our asset masterplans, which include
opportunities to develop our centres so
that they remain relevant in the rapidly
changing retail landscape.
We understand that the process of
delivering change can have lasting
effects on the towns in which we work
and their communities. The views of
our communities 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 operate in a
manner that is consistent with national
planning policy and with development
plans and frameworks locally. We remain
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.
In 2019 C&R formally opposed an
outline planning application by 2020
Developments, a subsidiary of 2020 which
owns Luton Town Football Club, for a new
out of town retail-led development at
Newlands Park at Junction 10A of the M1
motorway. The application was submitted
in anticipation of raising funds to support
the development of a new football
stadium on the Power Court site in Luton
town Centre. We consider that the retail
development would be damaging to the
town centre as a whole and therefore
its role in serving the local community.
Following our objection, the Secretary of
State for Housing, Communities and Local
Government determined not to call in
the application for review and it achieved
planning consent in September 2019.
C&R subsequently lodged an application
for judicial review to the High Court but,
this was not allowed to proceed and the
planning consent stands.
We remain supportive of the initiative
by 2020 Developments to develop a new
stadium for the club on the Power Court
site for which 2020 received outline
planning consent in January 2019. We are
also supporting Luton Borough Council
in bringing forward a new town centre
framework to improve the town centre
overall and we continue to be active in
supporting a wide range of community
initiatives in Luton.
Plans to redevelop The Mall Walthamstow
to provide increased retail and leisure
space and c300 new homes received
full planning consent in July 2018. Since
then these plans have continued to be
reviewed and improved, in particular as
we and Waltham Forest Council have
worked closely with Transport for London
to integrate a proposed new entrance
to Walthamstow Central underground
station. A public consultation on
proposed changes to the scheme was also
undertaken in October 2019.
This Strategic Report, which has been
prepared in accordance with the
requirements of the Companies Act 2006,
has been approved and signed on behalf
of the Board.
STUART WETHERLY
GROUP FINANCE DIRECTOR AND
COMPANY SECRETARY
16 April 2020
C&R CARES
In the last 10 years C&R Cares has
raised over £3.7 million. In 2019 we
supported 163 local charities and
raised over £327,000.
Through C&R Cares we have
supported One Great Day for the
last four years, raising over £8,000.
One Great Day raises money for
Great Ormond Street Hospital
and is supported by 205 shopping
centres across the UK. Our centres
host annual family fun days and
our Support Office takes part in the
annual ‘Race to GOSH’ fun run to
raise funds.
In 2019, examples of our support
included:
The Mall Luton hosted YMCA
Bedfordshire’s SleepEasy event.
Groups from local schools,
businesses, Guides, and families
settled down for the night - both
indoors in The Mall and outdoors
in The Mall’s car park.
The event raised over £14,000
for the vital services provided
locally by YMCA Bedfordshire,
supporting people of all ages
in Luton who rely on them for
accommodation, and increased
awareness of rough sleeping.
The Mall Wood Green raised
£5,000 in 2019 for the Godwin
Lawson Foundation, founded by
the Lawsons to commemorate
the life of their son, Godwin,
who was fatally stabbed in
2010 in an unprovoked attack.
The GLF’s key objective is to
reduce gun and knife crime
across London. The Centre also
held peer-2-peer workshops
for parents of youths at risk to
increase awareness.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2019Stock Code: CAL Directors
LAWRENCE HUTCHINGS
Chief Executive
Appointed: 2017
STUART WETHERLY
Group Finance Director and
Company Secretary
Appointed: 2019
HUGH SCOTT-BARRETT
Chairman
Appointed: 2017 (first appointed 2008)
RB
N
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.
Stuart joined Capital & Regional as Group
Financial Controller in October 2012, and
was appointed Group Finance Director
in March 2019. Prior to joining Capital &
Regional, Stuart was a Director in Deloitte
Audit in London specialising in listed
companies and previous to that Stuart was
Corporate Accounting Manager at Johnson
Matthey plc having originally qualified as a
Chartered Accountant in his first spell with
Deloitte LLP.
Before moving to become Non-Executive
Chairman, Hugh was Chief Executive of
Capital & Regional from 2008-2017. 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 a director of
GAM Holding AG, a Swiss asset management
company, and a Non-Executive Director of
RBR Group Limited, a privately-owned leisure
group. Hugh will be stepping down from the
Board at the 2020 Annual General Meeting.
GEORGE MUCHANYA
Non-Executive
Appointed: 2019
LOUIS NORVAL
Non-Executive
Appointed: 2009
NORBERT SASSE
Non-Executive
Appointed: 2019
George is part of Growthpoint’s Group
Executive Committee and also sits on the
boards of some of Growthpoint’s investee
companies. Working alongside the
Group CEO and the South African CEO of
Growthpoint, George has played a key role
in the implementation of Growthpoint’s
strategic initiatives both offshore and
in South Africa. An engineer by training,
George had career stints in investment
banking and management consulting
before joining Growthpoint in 2005.
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
JSE) 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.
Norbert is the Group Chief Executive
Officer of Growthpoint and holds a BCom
and Honours Degree in Accounting
from Rand Afrikaans University and is a
Chartered Accountant. Norbert has 25
years’ experience in corporate finance,
funds management and all aspects of
listed property, as well as equity and debt
capital market experience. He is a Director
of all major Growthpoint subsidiaries and
investments in South Africa, Australia and
the United Kingdom.
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capreg.comCapital & Regional plcGOVERNANCE Committee membership:
A Audit committee
N Nomination committee
Chair of committee
R Remuneration committee
RB Responsible business
committee
TONY HALES CBE
Non-Executive*
Senior Independent Director
DAVID HUNTER
Non-Executive* and Chairman
designate
Appointed: 2011
R
A
N
Appointed: 2020
N
IAN KRIEGER
Non-Executive*
Appointed: 2014
A
RN
Tony is currently Chairman of the
Greenwich Foundation, NAAFI Pension
Fund Trustees and the Associated Board
of the Royal Schools of Music. Tony
was previously Chief Executive of Allied
Domecq plc, and has extensive Non-
Executive Director experience including
HSBC Bank plc and as Chairman of
Workspace Group plc.
David is currently Chairman of Custodian
REIT plc and a Non-Executive Director of GCP
Student Living plc. He is a Senior Adviser
to ICG-Longbow, the leading real estate
debt fund manager. Earlier in his career,
David was a leading fund manager, most
significantly from 2001 to 2004 when, as
managing director of Aberdeen Property
Investors, he oversaw the business’ £6.5
billion UK and international assets. In 2004,
David was the President of the British
Property Federation. It is intended that
David will assume the role of Chairman from
the conclusion of the 2020 Annual General
Meeting.
Ian is the Audit Committee Chairman and
Senior Independent Director at Safestore
Holdings plc and the Audit Committee
Chair and Senior Independent Director of
Primary Health Properties plc. He is also
Chair of Anthony Nolan. Ian was previously
a senior partner and vice-chairman at
Deloitte LLP.
LAURA WHYTE
Non-Executive*
Appointed: 2015
RB
A
N R
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.
* Independent (as per the UK Corporate Governance Code).
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43
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE Senior leadership team
LAWRENCE HUTCHINGS
Chief Executive
ROB HADFIELD
Commercial Director
SARA JENNINGS
Director of Guest and
Customer Experience
→ Read more about Lawrence Hutchings
on page 42
Rob was previously Group Property
Director at Debenhams before joining C&R
as Commercial Director in 2019. Previous
to Debenhams, Rob held senior positions
at Costa Coffee and Flight Centre. Rob is
responsible for directing the leasing team,
commercial income and temporary lettings
with a view to driving new leases and
optimising the use of space across the C&R
portfolio.
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.
STUART WETHERLY
Group Finance Director and
Company Secretary
→ Read more about Stuart Wetherly on
page 42
JAMES RYMAN
Investment Director
NICK PHILLIPS
Managing Director, Snozone
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.
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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capreg.comCapital & Regional plcGOVERNANCE HUGH SCOTT-BARRETT
CHAIRMAN
Corporate governance report
Chairman’s introduction
I am pleased to present Capital & Regional’s corporate
governance report for 2019.
led by our Senior Independent Director,
Tony Hales, David Hunter has been
selected by the Board. David joined the
Board on 9 March 2020 as a Non-Executive
Director and is planned to assume the
role of Chairman on appointment to the
Board at the close of the forthcoming
AGM. David will lead the process to
identify two independent Non-Executive
Directors to join the Board, to address the
imbalance of independent Non-Executive
Directors. While this process has begun,
the Committee does not expect to move
to its advanced stages until normal social
interaction has resumed.
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.
HUGH SCOTT-BARRETT
CHAIRMAN
The primary operational focus of C&R in
2019 has been on the continued roll-
out of our Community Shopping Centre
strategy and the repositioning of our
assets. At a strategic level, the focus has
been on securing investment into the
Company to support the Group’s strategy
and to deleverage and strengthen the
balance sheet. The Board’s activities
during the year have reflected this, with
significant time devoted to ensuring the
successful completion of what ultimately
became the transaction undertaken
with Growthpoint, while ensuring strong
governance. During the year, the Board
received detailed briefings on the Takeover
Code requirements and Directors’
responsibilities and held several non-
scheduled Board meetings, often called
at short notice, as required during a
significant transaction.
There have been changes of personnel
on the Board in 2019. Following the
completion of the transaction with
Growthpoint, Norbert Sasse and George
Muchanya joined the Board and Wessel
Hamman stepped down. I would like
to thank Wessel for his invaluable
contribution and support to the Company
and wish him well in his future endeavours.
As previously disclosed, I will step down
as Chairman and a Director at the AGM in
May 2020. I am pleased to announce that,
following a robust recruitment process,
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Stock Code: CAL
45
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Annual Report and Accounts for the year ended 30 December 2019GOVERNANCE Corporate governance report
Continued
COMPLIANCE WITH THE UK
CORPORATE GOVERNANCE
CODE
The Company has throughout the year
ended 30 December 2019, complied with
the provisions of the 2018 UK Corporate
Governance Code with the exception that
(i) 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 and (ii) at least half the board are
not considered to be independent.
As disclosed the Company intends to
appoint David Hunter as Chairman
from the date of the Company’s 2020
Annual General Meeting who is deemed
independent on appointment and also is
seeking to appoint two new Independent
Non-Executive Directors to address the
imbalance of independent Non-Executive
Directors.
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 the benefit of its
shareholders and for the wider community.
Its role includes reviewing and approving
key policies and decisions, particularly in
relation to culture, 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.
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.
BOARD COMMITTEES
Audit Committee
Meets at least three times per year
Further information on page 53
Disclosure Committee
Meets as required
Nomination Committee
Meets at least once a year
Further information on page 51
Remuneration Committee
Meets at least twice per year
Further information on pages 54 to 71
Responsible Business Committee
Meets at least twice per year
Further information on pages 36 to 41
Chairman – Ian Krieger
Members – Tony Hales, Laura Whyte
Chairman – Lawrence Hutchings
Members – Hugh Scott-Barrett, 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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capreg.comCapital & Regional plcGOVERNANCE 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 board room 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 BALANCE AND
INDEPENDENCE
Details of the Directors including their
qualifications, experience and other
commitments are set out on pages 42 to
43. The Board currently comprises of the
Chairman, two Executive Directors and six
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. George
Muchanya and Norbert Sasse are not
considered independent as they act as
representatives of Growthpoint Properties
Limited. Louis Norval is not considered
independent as he acts as a representative
of the Parkdev Group of companies, both
significant shareholders of the Company.
This similarly applied to Wessel Hamman
for the period of time he served as a
Director. The Board has concluded that all
other Non-Executive Directors continue to
demonstrate their independence.
The Company has well established
differentiation between the roles of
Chairman and Chief Executive and written
terms of reference are available on the
Group’s website. Tony Hales, as Senior
THE BOARD
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.
1
3
3
2
1
Chairman
Executive Directors
Senior Independent Director
Non-Executive Directors
Independent Non-Executive Directors
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE Corporate governance report
Continued
BOARD AND COMMITTEE MEETINGS
The number of meetings of the Board and its Committees during 2019, and individual attendance by Directors, is set out below.
Board
Committees
Scheduled
Ad-Hoc
Number of meetings
H Scott-Barrett
L Hutchings
S Wetherly
(appointed 11 March 2019)2
T Hales
W Hamman
(resigned 9 December 2019)
I Krieger
G Muchanya
(appointed 9 December 2019)
L Norval
N Sasse
(appointed 9 December 2019)
L Whyte
5
5/5
5/5
3/3
5/5
5/5
5/5
–
5/5
–
5/5
6
6/6
6/6
6/6
6/6
6/6
6/6
–
6/6
–
5/6
Total
11
11/11
11/11
9/9
11/11
11/11
11/11
–
11/11
–
10/11
Audit
Remuneration
Nomination
Responsible
Business
3
–
–
–
3/3
–
3/3
–
–
–
5
–
–
–
5/5
–
5/5
–
–
–
4
1/11
–
–
4/4
–
3/4
–
–
–
3
–
3/3
–
–
–
–
–
–
–
3/3
5/5
4/4
3/3
1 Hugh Scott-Barrett did not attend the three Nominations Committee meetings which were held to discuss the recruitment of his successor as Chairman.
2 Stuart Wetherly was in attendance for the two Board meetings that occurred prior to his appointment as a Director of Capital & Regional plc.
At each scheduled Board meeting, the Executive Directors provide updates on their key areas of responsibility. The Committee Chairs
also provide updates on the work of the Committees and highlight any matters requiring consideration by the full Board. Other matters
for discussion are added to the agenda for scheduled Board meetings, or discussed at additionally convened Board meetings, as
required.
BOARD ACTIVITIES
Key strategic matters discussed in 2019 included:
Strategy
Received updates on property cycle and sector trends
Considered strategic options for recapitalisation of the business culminating in the transaction with
Growthpoint
Reviewed strategic options for the further growth and development of the business including external
presentations on industry trends
Risk and risk
management
Reviewed the Group’s principal risks and the risk matrix and internal control systems
Met with the Company's valuers twice in the year via the Board's Audit Committee
Reviewed the Group’s performance against budget and peers
Approved interim and full year results
Reviewed the dividend policy
Discussed the results of the Board evaluation
Discussed feedback from shareholder engagement activities
Received regular updates from the Chairs of the Audit, Remuneration, Nomination and Responsible
Business Committees
Considered application of the new Corporate Governance code and agreed the appointment of Laura Whyte
as the designated director for workforce engagement
Financial
Performance
Governance
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capreg.comCapital & Regional plcGOVERNANCE SHAREHOLDER RELATIONS
The Company encourages regular
dialogue with its shareholders at the AGM,
corporate functions and property visits.
The Company also attends road shows,
participates in sector conferences and,
following the announcement of final and
interim results, and throughout the year,
as requested, holds update meetings with
institutional investors. All the Directors
are accessible to all shareholders, and
queries received verbally or in writing are
addressed as soon as possible.
Announcements are made to the London
Stock Exchange, the Johannesburg
Stock Exchange and the business media
concerning business developments
to provide wider dissemination of
information. Registered shareholders
are sent copies of the Annual Report and
relevant circulars. The Group’s website
(capreg.com) is kept up to date with all
announcements, reports and shareholder
circulars.
Key activities in 2019 included:
Shareholders invited to attend the full
year and interim results presentations
in London
Held post-results investor road
shows covering London, Edinburgh,
Amsterdam and South Africa
All Directors attended the AGM held in
London in May 2019
The Remuneration Committee Chair
engaged with shareholders to seek
their views on the Remuneration Policy
implemented in 2019.
Participated in a number of industry
conferences
Hosted various investor tours and
presentations at our centres
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 with support of the Assistant
Company Secretary 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);
company culture, strategy and risk
management; and
performance of the Board’s sub-
committees.
The completed questionnaires are collated
by the Assistant Company Secretary and
presented to the Board for a subsequent
discussion. This year’s review found that
the performance of the Board and its
Committees continued to be effective in
dealing with both day-to-day and ongoing
strategic issues and that 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.
Recommendations from 2019
Review:
People and succession planning –
increase focus on succession planning
below Board level and developing a
strong, diverse talent pipeline
Strategy – review current strategy and
progress against the agreed strategy.
Board skills and composition – review
Non-Executive Director skills and Board
requirements to inform process for
recruitment of new Non-Executive
Directors
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.
It is the Board’s intention to continue
to review annually its performance and
that of its Committees and individual
Directors. The Chairman has confirmed
that the Non-Executive Directors standing
for re-election at this year’s AGM continue
to perform effectively, both individually
and collectively as a Board, and that each
demonstrate commitment to their roles.
CULTURE
The Board is responsible for defining,
monitoring and overseeing the culture
of the organisation and ensuring that it
is aligned with the Company’s purpose
and strategy. To foster and support an
open culture, where all staff understand
the strategic direction of the business,
key points arising from strategic
discussions held by the Board and Senior
Leadership Team are communicated
to staff members. This also encourages
strategic engagement at all levels within
the Company. The Board receives regular
updates regarding how the Company’s
culture and its values, of inspiring creative
thinking, encouraging collaborative
engagement, acting with integrity and
delivering dynamic solutions, have been
embedded across the business.
WORKFORCE ENGAGEMENT
The Board agreed in 2018 that Non-
Executive Director, Laura Whyte, would be
responsible for workforce engagement.
The Executive Directors hold ‘Townhall’
meetings following each Board meeting
to update all employees on the decisions
taken and provide an opportunity for
employees to ask any questions they may
have. In 2019, regular Townhalls were
held after each of the key milestones of
the Growthpoint transaction to ensure
employees were full informed of the
process and potential impacts and in
December 2019 the two Growthpoint
Board appointees Norbert Sasse and
George Muchanya presented to C&R staff.
The Townhall meetings are well attended
in person by employees in the Support
Office and by conference call by the
centre teams. The Responsible Business
Committee also reviews the outputs of
the employee engagement surveys “C&R
Pulse” and the “Team Survey” at Snozone
on a regular basis.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE Corporate governance report
Continued
FINANCIAL AND BUSINESS
REPORTING
Please refer to:
page 76 for the Board’s statement on
the Annual Report and accounts being
fair, balanced and understandable;
page 32 for the statement on the status
of the Company and the Group as a
going concern; and
the Strategic Report on pages 1 to 41
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:
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 76.
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 LLP, 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
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capreg.comCapital & Regional plcGOVERNANCE Nomination committee report
DIVERSITY POLICY
The Nomination Committee, and the
Board, recognises the importance
of diversity in its broadest sense,
including gender, ethnicity, culture,
socio-economic background, disability,
sexuality and diversity of thought,
perspective and experience. The
Board 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 Committee engages with
executive search firms that are
signatories to the UK Voluntary
Code for “Women on Boards" and
the Voluntary Code of Conduct for
Executive Search Firms. 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.
RESPONSIBILITIES
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 and
senior leadership positions. The formal role
of the Nomination Committee is set out in
its terms of reference.
The recruitment process for Directors
typically includes the development of a
candidate profile and the engagement of
a professional search agency (which has
no other connection with the Company).
Candidate profiles are provided to
the Committee, which, after careful
consideration, makes a recommendation
to the Board. Any new Directors are
appointed by the Board and, in accordance
with the Company’s articles of association,
must be elected at the next AGM to
continue in office. All existing Directors
retire by rotation every year.
ACTIVITIES OF THE
COMMITTEE DURING
THE YEAR
Following the announcement in 2019 that
Hugh Scott-Barrett would step down as
Chairman and a Non-Executive Director
at the 2020 AGM, the Committee, led by
Senior Independent Director, Tony Hales,
began the search for a new Non-Executive
Chairman. The Committee engaged
Odgers Berndtson, a leading independent
executive search firm with no other
connection to the Company, to conduct
an external assessment and a review of
possible candidates for the role.
Following a detailed selection process,
the Committee recommended the
appointment of David Hunter as Non-
Executive Director with effect from 9 March
2020. It is planned that David will assume
the role of Chairman on appointment to
the Board at the close of the forthcoming
AGM. David’s extensive Board level and
Real Estate experience will complement the
current Board’s knowledge and expertise
and will provide strong leadership for C&R
going forward.
Following the completion of the transaction
with Growthpoint, Wessel Hamman, a
nominated representative of the Parkdev
Group of companies, resigned from the
Board on 9 December 2019 as a result
of the change in the rights under the
Relationship Agreement to appoint a
Director falling from two to one. Louis
Norval remains on the Board as the
nominated representative under the
terms of the new Homestead Relationship
Agreement. He is not considered to be
independent. Norbert Sasse and George
Muchanya were appointed to the Board as
Non-Independent Directors on 9 December
2019, in line with the Relationship
Agreement with Growthpoint. Norbert and
George are not considered independent as
they represent a controlling shareholder
of the Company however, the Board
considers that this will not impede the
effective operation of the Board in light of
the strength and skills of the independent
Non-Executive Directors on the Board.
BOARD COMPOSITION AND
SUCCESSION
Mindful of the Code requirements
regarding independence, and as outlined
in the Prospectus published in November
2019, it is intended that two new
independent Non-Executive Directors be
appointed to the Board in the next six to
twelve months. While this process has
begun, the Committee does not expect to
move to its advanced stages until normal
social interaction has resumed.
The Committee is also cognisant that,
under the Code, an appointment term of
longer than nine years is a factor that may
affect whether a Non-Executive Director
is considered independent. Tony Hales,
the Senior Independent Director, will
have served on the Board for nine years
in August 2020. It is intended that Tony
will stand down before the 2021 AGM and
David Hunter will lead a process for the
appointment of Tony’s successor as Senior
Independent Director.
In consideration of the new requirements
under the 2018 UK Corporate Governance
Code in relation to workforce engagement
Laura Whyte was appointed as the
designated Non-Executive Director for
workforce engagement in 2019. Further
information regarding the Board’s
engagement with the workforce can be
found on page 49.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE IAN KRIEGER
CHAIRMAN OF THE AUDIT
COMMITTEE
Audit committee report
The Audit Committee is chaired by Ian
Krieger, a Chartered Accountant who has
recent and relevant financial experience
as required by the 2018 UK Corporate
Governance Code.
The other members of the Committee
are Tony Hales and Laura Whyte, both
independent Non-Executive Directors.
Stuart Wetherly, Group Finance Director
attended each of the meetings held in
the year apart from those parts of the
meeting reserved for the Committee to
meet privately with the Company’s external
Auditor. 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.
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 appropriate-
ness of the Group’s accounting policies;
c. reviewing Deloitte LLP’s plan for the
2019 Group audit and approving their
terms of engagement and proposed
fees;
d. reviewing reports on internal control
reviews on Group Treasury and Prop-
erty Valuation processes prepared by
management;
e. considering the effectiveness and in-
dependence of Deloitte LLP as external
Auditor and recommending to the
Board their reappointment;
f.
reviewing management’s biannual Risk
Review report and the effectiveness of
the material financial, operational and
compliance controls that help mitigate
the key risks;
g. reviewing the effectiveness of the
Group’s whistleblowing policy;
h. reviewing and updating the Group’s
policy for the award of non-audit work
to its external Auditor;
i.
considering management’s approach
to the viability statement in the 2019
Annual Report;
j. meeting with the responsible individ-
uals from the Group’s independent
valuers, CBRE Limited and Knight
Frank LLP to review and challenge their
valuations of the Group’s investment
properties;
k. reviewing ongoing REIT regime com-
pliance;
l.
reviewing reports on the potential
impact of the Non-Resident Landlord
Scheme rules and compliance with the
Non-resident Capital Gains Tax rules;
m. assessing the provision of Internal
Audit work and considering whether
a stand-alone Internal Audit function
is required
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.
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capreg.comGOVERNANCE 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 2019 the value of the
Group’s investment property assets
was £727.1 million (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
2019 the Audit Committee met with the
valuers, considered their independence
and qualifications and reviewed and
challenged the valuations for both the
year end and interim results dates to
understand the basis for them and the
rationale for movements in the context
of both the individual properties and
the general property investment
market.
REIT regime compliance – The
Committee noted that, should the
Group not comply with the REIT
regulations, it could incur tax penalties
or ultimately be expelled from the REIT
regime, which would have a significant
effect on the financial statements. The
Committee reviewed, and were satisfied
with, management’s assessment of
compliance for the year and forecast
compliance for the foreseeable future.
Going concern and covenant
compliance - The Committee reviewed,
challenged and concluded upon the
Group’s going concern review and
consideration of its viability statement
with particular focus on the impact
of the COVID-19 pandemic. The
Committee’s assessment included
giving due consideration to the
appropriateness of key judgements,
assumptions and estimates underlying
the budgets and projections that
underpin the review and a review
of compliance with key financial
covenants.
Impairment of inter-company
investments and receivables –
Management perform an annual review
of inter-company investments and
receivables to determine the values
to be maintained in the plc Company
only and individual subsidiary balance
sheets. The Committee considered
the movement over the year and the
key assumptions, particularly where
balances were held with reference to
value in use, as opposed to net assets
of the underlying entity.
AUDITOR ROTATION AND
TENDER PROCESS
Deloitte LLP were re-appointed following
a tender process in 2018. Deloitte LLP have
been Auditor of Capital & Regional plc
since 1998. The Committee is committed
to putting the external audit out to tender
at least every ten years in compliance
with legislation and FRC guidance on
best practice, in particular, ensuring
independence in respect of potential
audit firms. 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 2019 audit was the second year
of Matthew Hall’s tenure as lead audit
engagement partner.
EFFECTIVENESS OF THE
EXTERNAL AUDITOR
The Committee carried out a review of
the effectiveness of the external audit
process and considered the reappointment
of Deloitte LLP. The review covered
amongst other factors, the quality of the
staff, the expertise, the resources and
the independence of Deloitte LLP. The
Committee reviews the audit plan for the
year and subsequently considers how
the Auditor performed to the plan. They
consider the quality of written and oral
presentations and the overall performance
of the lead audit partner.
AUDITOR INDEPENDENCE
The Committee considers the external
Auditor to be independent. 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. During the year, Deloitte
LLP undertook the following non-audit
services:
review of the Half Year Results
(£45,000);
an agreed upon procedures report
to verify information relating to the
vesting of the Company’s 2014 LTIP
scheme award (£2,500)
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 Treasury,
Property Valuations 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. The Audit Committee
reviews the process annually and reports
to the Board on the process and any
reports arising from its operation.
IAN KRIEGER
Chairman of Audit Committee
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE TONY HALES CBE
CHAIRMAN OF REMUNERATION
COMMITTEE
Directors’ Remuneration
Report - Introduction
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
2019.
The Committee met five times during 2019
as well as holding informal meetings and
other correspondence to discuss wider
remuneration issues. In addition to the
other Committee members, Ian Krieger
and Laura Whyte, both independent Non-
Executive Directors, 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.
We presented our Remuneration Policy to
shareholders at our last Annual General
Meeting in 2019 where we received strong
support with a vote in favour of 87.8%.
This Policy covers the three-year period
until the AGM in 2022 and we applied it
consistently during 2019.
BOARD CHANGES
As shareholders will be aware, there were
four changes to the Board during the
year. Stuart Wetherly was permanently
appointed as Group Finance Director and
as an Executive Director on 11 March
2019. Following the completion of the
Growthpoint transaction, Wessel Hamman
stepped down as a Non-Executive Director
and Norbert Sasse and George Muchanya
were appointed as Non-Executive Directors
on 9 December 2019. The remuneration
for Stuart Wetherly was as disclosed in
the 2018 report. No exit payment was
made to Wessel Hamman. Norbert Sasse
and George Muchanya are the appointed
representatives of Growthpoint, they do
not take a fee as Directors.
Since the year end we have announced the
proposed appointment of David Hunter
as Chairman. David joined the Board as a
Non-Executive Director on 9 March 2020.
His appointment as Chairman is proposed
to take effect from the conclusion of
the 2020 Annual General Meeting on 20
May 2020. David’s remuneration terms
are in line with our policy with his fee as
Chairman being at the equivalent level
to that paid to Hugh Scott-Barrett during
2019.
2019 COMPANY
PERFORMANCE AND
COMBINED INCENTIVE
PLAN (CIP)
The Company implemented a new
Combined Incentive Plan (CIP) in 2019
following a review and consultation with
management and shareholders. The
Committee believes the simpler structure
of the CIP, with clear performance metrics,
a reduced overall maximum result and the
ability to set shorter term performance
targets is more appropriate to ensure
incentivisation aligns with strategy given
the volatile nature of the Company’s
operating landscape.
In setting the performance targets for
2019 the Committee put a weighting of
80% on Company financial targets with the
emphasis on metrics including Adjusted
Profit and Net Rental Income to reflect
the focus on income generation, Gearing
to reflect a focus on improved balance
sheet solidity and cost control to reflect
the need for financial discipline. 20% of
targets reflected strategic and operating
targets including strategy implementation
and operating metrics that support both
shorter term performance and longer-term
strategic progress.
The operating environment during 2019
was very challenging with a number of
retailers launching Company Voluntary
Arrangements (CVAs) or Administrations
and an uncertain political and economic
environment. While the Group’s relative
performance benchmarked well against
industry peers, both NRI and Adjusted
Profit decreased, by 5% and 10.2%
respectively, failing to meet the stringent
budget targets set and therefore resulting
in a nil bonus being recognised against
the NRI and Profit metrics. The Group,
however, made strong progress on
addressing Gearing, with the successful
completion of the Growthpoint transaction,
cost control, where the total Group
overhead has been reduced by more than
£2.5 million or 25% since 2016, operational
performance, where leasing spreads and
footfall both outperformed peers and the
national index and on strategy.
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capreg.comGOVERNANCE
WORKFORCE AND SENIOR
MANAGEMENT PAY
The Committee is regularly updated on
workforce pay and benefits throughout
the Group and considers workforce
remuneration as part of the review of
executive remuneration. The Committee
is also tasked with overseeing major
changes in employee benefit structures.
It has responsibility for the remuneration
of the members of the Group Senior
Leadership Team and is therefore able
to ensure that the remuneration of the
Executive Directors is in line with senior
management and other colleagues.
COMMITTEE AIMS
Our aim as a Committee continues to be
to ensure we recruit and retain talented
individuals who are motivated to deliver
outperformance for shareholders receiving
a fair base pay with potential for significant
rewards on delivering strong shareholder
returns.
TONY HALES CBE
Chairman of Remuneration
Committee
EXECUTIVE DIRECTOR
SALARY INCREASES
Executive Director salary increases, applied
from 1 January 2020. Lawrence Hutchings
was awarded a 1% increase in line with the
general increase awarded to all employees.
When Stuart Wetherly was permanently
appointed Group Finance Director in
March 2019 his salary, reflecting him
being an internally promoted candidate,
was set at £275,000. Recognising a strong
performance in his first full year in the
role the Committee have awarded a 2.5%
increase, applied from 1 January 2020. This
is above the general increase awarded to
staff but still results in a salary below the
level paid to his predecessor and external
benchmarking. All other benefits, including
pension contributions remain the same
and in line with policy.
The same 1% awarded as a general increase
to employees has been applied to the base
fees paid to Non-Executive Directors.
The Committee is conscious of the
increasing focus on pension contributions
made to Executive Directors and the
expectation that contributions will
be equalised with those by the wider
workforce by 2023. The Committee will
give careful consideration to addressing
this point in the course of 2020.
Mindful of the significant impact of
COVID-19 on C&R employees, the
Executive Directors have agreed to take
a voluntary 20% reduction in salary and
Non-Executive Directors have also all
agreed to take a voluntary 20% reduction
in their director fees for the months of
April, May and June 2020. The funds saved
will be used to support C&R employees
most financially impacted by COVID-19.
Reflecting the above, the Committee
determined that an award of 54% of the
maximum opportunity under the CIP
would qualify based on the objectives
set. The Committee then considered
the Group’s overall profit performance,
noting the falls in the Group’s NRI and
Adjusted Profit but that Total Shareholder
Return over the calendar year had been
+7.1% (assuming pro rata take up of the
Partial Offer element of the Growthpoint
transaction). In consideration of the above
the Committee considered it appropriate
to scale back the formulaic CIP outturn
awards by 5% resulting in an effective
qualifying percentage of 51% overall.
Shareholders should note that the share
price used for calculating the share element
of bonus, 2/3 of the total, was fixed on
December 30 2019. The ultimate value
of this award will depend entirely on the
future share price (including the underpin
condition), in the short term already
impacted by the COVID-19 pandemic.
Our incentive scheme is heavily weighted
to aligning shareholder returns over the
longer term to management reward.
The Committee considered the overall
result to be an appropriate and balanced
outcome, noting that while results in
absolute terms had seen a decline in NRI
and Adjusted Profit, significant progress
had been made in the year operationally
and particularly strategically, most
critically in completing the transaction
with Growthpoint which had significantly
recapitalised the business. The Committee
continues to believe that the CIP provides
the best mechanism to motivate and retain
Executive Directors.
The current financial year of 2020 is clearly
a totally exceptional year due to the impact
and uncertainty of COVID-19. It impacts
on everything we do as an organisation
and will clearly impact on our approach to
remuneration.
LONG TERM INCENTIVE PLAN
(LTIP)
During the year, the performance period
for the 2016 LTIP award ended. 23.3%
of the awards qualified for vesting. 70%
of the Average Annual Growth in Adjusted
Profit Per Share condition qualified but
the Total Shareholder Return and Total
Property Return conditions both fell
below threshold. No discretion was used
in calculating the percentage of award
to vest.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE 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”).
Our Directors’ Remuneration Policy was approved at the 2019 AGM receiving an 87.8% vote in favour.
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
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
Performance-based
compensation
Total = Median or above for above
Median performance
The Committee benchmarks remuneration against our selected comparator group companies (see page 60) and seeks to ensure
that Directors’ fixed compensation is around the median in the comparator group. Remuneration is also dependent on the skills and
experience of the individual and the scope and responsibility of the position.
The Committee view is that by putting an emphasis on performance-related compensation, Executives are encouraged to perform to the
highest of their abilities. The performance-based compensation is targeted to be at median or above, for above median performance,
within the comparator group to ensure that outstanding relative performance is appropriately rewarded. The overall effect is that our
total compensation is at median, or above median, for above median performance.
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capreg.comCapital & Regional plcGOVERNANCE Purpose and link
to strategy
Operation
Base salary
Reviewed annually effective 1 January to reflect:
Performance
metrics
n/a
Opportunity
The maximum increase
applicable in any year is
capped at 10% of base
salary.
To aid recruitment,
retention and
motivation of high
quality people
To reflect
experience and
importance of role
Pension
To help recruit and
retain high quality
people
To provide an
appropriate
market competitive
retirement benefit
Benefits
To aid recruitment
and retention
To provide market
competitive
benefits
To support
physical, mental
and emotional
wellbeing
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;
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.
Executive Directors are
eligible to receive a pension
allowance equivalent to up
to 15% of basic salary.
n/a
Lawrence Hutchings
receives a pension
allowance of 15% of basic
salary.
Stuart Wetherly receives a
pension allowance of 8%
at the top of the range of
pension contributions paid
to the UK workforce of
4% – 8%.
For new appointments,
the Committee will ensure
that pension contributions
are in line with that of the
workforce.
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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Opportunity
The plan provides a
combined annual award
of up to 250% of salary for
Executive Directors / 300%
for the Chief Executive
Targets calibrated so
maximum pay-out
represents exceptional
performance
The maximum combined
incentive award potential
in any year will be adjusted
downwards to reflect the
year-on-year reduction in
the profit outturn (if any)
or if the shareholder return
over the same period is
negative.
Performance
metrics
Performance
targets set annually
based on a 100%
Group financial
and strategic
performance
targets.
2020 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 allows 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.
Policy continued
Purpose and link
to strategy
Combined
Incentive Plan
(CIP)
To incentivise
delivery of
short-term
business targets
and individual
objectives based on
annual KPIs
To recognise
performance while
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
58
Operation
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 fifth 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 maximum combined incentive award potential in
any year (300% of salary) will be adjusted downwards to
reflect the year-on-year reduction in the profit outturn (if
any) or if the shareholder return over the same period
has been negative.
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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capreg.comCapital & Regional plcGOVERNANCE Opportunity
n/a
Performance
metrics
n/a
n/a
n/a
Purpose and link
to strategy
Executive
shareholding
To support
alignment of
Executive Directors
with shareholders
Non-Executive
Director
Remuneration
To reflect
experience and
importance of role
Operation
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.
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.
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.
Details of the fees can be found on page 64. The Senior
Independent Director and individuals who are members
of both the Audit and Remuneration Committees receive
an additional fee 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.
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.
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.
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Policy continued
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 Company will not make an ex-gratia award to new joiners. 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.
SERVICE CONTRACTS
Executive Directors are employed on rolling service contracts with notice periods of twelve months from the Company and from the
Executive Director. Copies of the Directors’ service agreements are available to view, upon appointment, at the Company’s registered office.
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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capreg.comCapital & Regional plcGOVERNANCE 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
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 were contained in the AGM circular seeking shareholder
approval for the new arrangement which is available on the Company’s website capreg.com.
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.
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Policy continued
TOTAL COMPENSATION
The minimum scenario is based on nil CIP award;
The on target scenario is based on CIP award at 50% of maximum (i.e. 150% of salary for Chief Executive and 125% of salary for
Executive Directors), split into 1/3 cash and 2/3 shares (excluding share price appreciation and accrual of dividend equivalent
payments); and
The maximum scenario is based on CIP award at 100% of maximum (i.e. 300% salary for Chief Executive and 250% for Executive
Directors) split into 1/3 cash and 2/3 shares (excluding share price appreciation and accrual of dividend equivalent payments).
In addition, the maximum 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
£2,500
£2,000
£1,500
£1,000
£500
£0
Total
£2,220
£429
Total
£1,791
£858
£858
£429
£429
Total
£1,141
£425
£212
Total
£504
£429
£429
£429
£429
Total
£1,017
Total
£1,252
£235
£470
£470
£235
27%
£282
£235
22%
£282
Total
£661
£233
£116
42%
£282
Total
£312
87%
£282
Minimum
Target
Maximum
L Hutchings
Maximum
+50% share price
appreciation
Minimum
Target
Maximum
S Wetherly
Maximum
+50% share price
appreciation
Salary
Benefits
Pensions
CIP – Cash
CIP – Shares
Share price appreciation
CONSULTATION AND SHAREHOLDERS’ VIEWS
During the course of 2018 and early 2019, The Committee undertook a shareholder consultation on the new CIP. Respondents were
broadly supportive of the proposals though 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. The Committee also removed the ability to grant ex-gratia awards to incoming
Executive Directors.
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.
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capreg.comCapital & Regional plcGOVERNANCE Directors’ Remuneration Report
2019 Remuneration Report
Audited information:
Net Rental Income
Adjusted Profit1
Adjusted Earnings per share1, 2
IFRS Loss for the period
Total dividend per share2
Net Asset Value (NAV) per share2
EPRA NAV per share2
Group net debt
Net debt to property value
2019
£49.3m
£27.4m
36.7p
£(121.0)m
21p
361p
363p
2018
£51.9m
£30.5m
42.3p
£(25.6)m
24.2p
596p
591p
£336.9m
46%
£411.1m
48%
Notes
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 condensed financial statements.
2 Per share amounts are adjusted to reflect the impact of the 10 for 1 share consolidation that completed on 15 January 2020.
SINGLE TOTAL FIGURE OF REMUNERATION FOR DIRECTORS
The table below sets out the remuneration received/receivable in relation to the year ended 30 December 2019.
Total
Salary/Fees
Bonus (ii)
2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018
Total
variable pay
LTIP
vesting (iii)
Taxable
benefits (i)
Other
benefits (i)
Total
fixed pay
Total pay
Pension
£’000
Executive
Director
L Hutchings
S Wetherly (iv)
C Staveley (v)
TOTAL
425
222
-
647
383
-
191
574
3
6
-
9
Chairman and Non-Executive Directors
H Scott-Barrett
140
138
T Hales (vi)
W Hamman (vii)
I Krieger (vi)
G Muchanya(viii)
L Norval
G Poitrinal (viii)
N Sasse (viii)
L Whyte (vi)
53
40
48
-
42
-
-
48
52
42
47
-
42
-
-
47
TOTAL
TOTAL ALL
371
1,018
368
942
-
-
-
-
-
-
-
-
-
-
9
3
-
1
4
-
-
-
-
-
-
-
-
-
-
4
8
1
-
9
-
-
-
-
-
-
-
-
-
-
9
7
-
4
11
64
18
-
82
57
-
29
86
218
118
-
336
301
-
136
437
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
-
8
10
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500
247
-
747
450
-
225
657
218
126
301
-
718
373
751
-
-
136
-
361
344
437 1,091 1,112
140
138
10
53
40
48
-
42
-
-
48
52
42
47
-
42
-
-
47
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150
138
53
40
48
-
42
-
-
48
52
42
47
-
42
-
-
47
-
11
-
82
-
86
-
336
-
437
10
18
371
-
368
- 1,118 1,043
10
354
-
368
381
437 1,472 1,480
Notes
(i) Taxable benefits include private medical care and critical illness cover, other benefits include life insurance and permanent health insurance.
(ii)
Entries for 2019 represent the cash bonus element of the Combined Incentive Plan and does not include the element deferred into shares subject to
relative TSR performance. 2018 figures include both the cash and the element deferred into shares, £14k of L Hutching’s 2018 bonus was deferred into
share for two years. Details of performance conditions are set out below.
(iii) LTIP vesting represents shares that vested from the 2016 LTIP issue, they are valued with reference to the share price of 14.5 pence per share on 23
August 2019 being the date the Performance Period ended. Hugh Scott-Barrett’s shares under this issue were awarded from when he held the role of Chief
Executive. The share price at the original grant date of 23 August 2016 was 59.5 pence per share. Details of performance conditions are set out below.
(iv) S Wetherly was appointed a Director on 11 March 2019.
(v)
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
shown are up to 15 August 2018 with the total bonus paid of £135,626 pro-rated in the above table.
(vi) T Hales, I Krieger and L Whyte receive an additional fee of £5,000 per annum as members of the Audit and Remuneration Committees. T Hales receives
a further fee of £5,000 as Senior Independent Director.
(vii) W Hamman resigned on 9 December 2019.
(viii) G Muchanya and N Sasse, both appointed on 9 December 2019 as Growthpoint’s representatives, do not receive a fee. G Poiterinal, who resigned on 31
October 2018, did not receive a fee or any remuneration.
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2019 Remuneration Report continued
BASIC SALARY INCREASES FOR EXECUTIVE DIRECTORS:
L Hutchings
S Wetherly
C Staveley
H Scott-Barrett
K Ford
M Bourgeois
2020
£’000
429
282
n/a
n/a
n/a
n/a
%
1
2.5
n/a
n/a
n/a
n/a
2019
£’000
425
275
n/a
n/a
n/a
n/a
%
11.0
n/a
n/a
n/a
n/a
n/a
2018
£’000
383
n/a
305
n/a
n/a
n/a
%
2.0
n/a
2.0
n/a
n/a
n/a
2017
£’000
375
n/a
299
427
315
n/a
%
n/a
n/a
2.0
2.0
2.0
n/a
2016
£’000
n/a
n/a
293
418
308
241
%
n/a
n/a
2.0
2.0
2.0
4.3
2015
£’000
n/a
n/a
287
410
302
231
%
n/a
n/a
2.5
2.5
2.5
2.5
Executive Director salary increases, applied from 1 January 2020. Lawrence Hutchings was awarded a 1% increase in line with the
general increase awarded to all employees. When Stuart Wetherly was permanently appointed Group Finance Director in March 2019
his salary, reflecting him being an internally promoted candidate, was set at £275,000. Recognising a strong performance in his first full
year in the role the Committee have awarded a 2.5% increase, applied from 1 January 2020. This is above the general increase awarded
to staff but still results in a salary below the level paid to his predecessor and external benchmarking.
NON-EXECUTIVE DIRECTOR FEES
The same 1% general increase awarded to staff members has been applied to Hugh Scott-Barrett’s Chairman’s fee of £140,454 and
Non-Executive Directors’ base fees of £42,448 per annum with effect from 1 January 2020 resulting in increases to £141,859 and £42,873
respectively. 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. David Hunter’s proposed appointment as
Chairman will be on a fee of £140,000.
George Muchanya and Norbert Sasse, in accordance with the terms of the Growthpoint Relationship agreement, are not entitled to
receive a fee as Non-Executive Directors.
2019 COMBINED INCENTIVE PLAN AND ACHIEVEMENT OF OBJECTIVES:
L Hutchings
S Wetherly
Maximum CIP
opportunity as
% of salary
% of objectives
achieved
Scale back
applied
(5% reduction)
Effective %
of maximum
achieved
Cash Bonus
payable
£’000
Deferred Share
award
£’000
300%
250%
54%
54%
95%
95%
51%
51%
218
118
436
235
Deferred share awards are subject to the individual remaining in continuing employment (unless they qualify as a good leaver). Up to
100% of deferred shares will lapse if median relative TSR performance is not achieved.
The annual Combined Incentive Plan criteria for 2019 were determined with a weighting of 80% for Financial Objectives and 20% on
Operational and Strategic objectives.
Group Objectives: Financial Targets (80%)
Performance
Measure
Adjusted Profit1
Adjusted Earnings per share1
Property Level Net Rental Income
Growth in Net Rental Income (excluding
impact of CVAs)
Cost Management (Central Costs)
Gearing
Total
Threshold
Maximum
% of bonus
Required
performance
% of bonus
Required
performance
Actual achieved
Pay-out as
% of max.
5%
5%
5%
5%
15%
15%
50%
£29.3m
4.03p
£50.6m
+1.5%
£6.6m
47%
10%
10%
10%
10%
20%
20%
80%
£31.6m
4.35p
£53.3m
+5%
£6.4m
42.5%
£27.8m
3.73p
£49.3m
-5%
£6.5m
46%
0%
0%
0%
0%
18.5%
17%
35.5%
Notes:
1 The Adjusted Profit and Adjusted Earnings per share targets are adjusted for one-off restructuring/redundancy costs and Directors’ bonuses
(including NIC).
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capreg.comCapital & Regional plcGOVERNANCE Group Objectives: Operating Metrics (10%)
Performance Measure
Footfall growth
Leasing performance
Total
% of bonus
Required performance
Actual achieved
5%
5%
10%
Outperform the Index
–
+1.7% v the index
+7.3% to ERV
+20.9% to passing rent
Pay-out as
% of max.
4.5%
5%
9.5%
Group Objectives: Implementation of Strategy (10%)
In a difficult market, the Company has pursued a strategy to reposition itself, focusing on the strongest sectors of the retail market - in
particular needs based product areas rather than the more discretionary categories. Cost reduction and alternative use opportunities
were also strategic aims. The Remuneration Committee considered that delivery of strategy by management had been implemented well
resulting in outperformance compared to competitors. Strong progress to reposition shopping centres has been made through active
asset management and careful capital investment, together with the continued progress on restructuring the management platform.
The committee concluded that an award of 9% of bonus was appropriate.
Scaling back of award
Having considered the individual outcomes of each performance target the Committee then considered the resulting 54% pay-out in the
context of the Group’s overall profit and shareholder return performance.
The Committee noted that the Group’s NRI and Adjusted Profit had fallen in the year by 5.0% and 10.2% respectively but that Total
Shareholder Return over the calendar year had been +7.1% (assuming pro rata take up of the Partial Offer element of the Growthpoint
transaction). In consideration of the above the Committee considered it appropriate to scale back the maximum awards by 5% resulting
in an effective qualifying percentage of 51% overall.
DEFERRED BONUS SHARE SCHEME AWARDS
The number of awards and the performance periods for all outstanding Deferred Bonus Share awards are summarised in the table
below. The awards are subject only to continued employment and no further performance conditions.
The original number of awards is shown below with the adjusted amount, following the 10 for 1 share consolidation completed on
15 January 2020, shown in brackets.
Name
L Hutchings
H Scott-Barrett
Date of award
No. of awards
Type of award
08.04.19
23.05.17
56,361
(5,636)
225,040
(22,504)
Nil cost
option
Nil cost
option
Face value
£’000
£141
£1252
Date awards
are available
for exercise
28.03.21
Available
now
1 Calculated based on the closing share price of 25.45 pence on 28 March 2019.
2 Calculated based on the closing share price of 55.75 pence on 39 March 2017.
Change of control
The Committee agreed that the Growthpoint Transaction did not necessitate any accelerated vesting or exercise of options under the
Scheme rules.
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2019 Remuneration Report continued
LONG-TERM INCENTIVE PLAN (LTIP)
The number of awards and the performance periods for all outstanding LTIP awards are summarised in the table below. The Company’s
Clawback provisions apply during the holding period where the level of vesting may be reduced, including to nil. No LTIP awards were
made during 2019.
The original number of awards is shown below with the adjusted amount, following the 10 for 1 share consolidation completed on
15 January 2020, shown in brackets.
Name
L Hutchings
S Wetherly
H Scott-Barrett
Date of
Award
No. of
awards
Type of
award
Face value
£’000
23.08.16
08.09.172 1,260,504
(126,050)
18.04.18 1,429,906
(142,990)
226,890
(22,689)
238,757
(23,875)
273,813
(27,381)
283,0684
(28,307)
23.08.16
19.04.17
18.04.18
Nil cost
option
Nil cost
option
Nil cost
option
Nil cost
option
Nil cost
option
Nil cost
option
7505
7656
1357
1425
1466
1687
% of
salary
200
200
n/a
n/a
n/a
150
Threshold/
Maximum
vesting
share price3
Qualified
for
vesting in
the year
Value at
vesting
£’000
End of
Performance
Period
Holding
period
see note
1 below
see note
1 below
see note
1 below
see note
1 below
see note
1 below
see note
1 below
–
–
52,2948
(5,229)
–
–
66,0288
(6,603)
–
–
89
–
–
19.04.20
2 years
18.04.21
2 years
23.08.19
2 years
19.04.20
2 years
18.04.21
2 years
109
23.08.19
2 years
Notes:
1 The performance conditions for the August 2016, April 2017 and April 2018 issues are:
Performance condition
Weighting
Time frame
Nil
Threshold
(25%)
Maximum
(100%)
Total Shareholder Return relative to
the FTSE 350 Real Estate Index
Average Annual Growth in Adjusted
Profit Per Share
Total Property Return relative to the
IPD UK Retail Quarterly Property Index
1/3
1/3
1/3
3 years from date of grant
Below index
Above index
Index + 12%
3 financial years from start of
year of grant
3 years from year end or half
year end immediately preceding
grant
Below 5%
5%
10%
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 Straight-line vesting applies for all LTIP issues in between threshold and maximum vesting.
4 H. Scott-Barrett’s awards under the 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 the closing share price at issue of 59.5 pence
6 Calculated based on the closing share price at issue of 53.5 pence
7 Calculated based on the closing share price at issue of 59.5 pence
8 The actual performance against target of the August 2016 issue was:
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
9 Calculated based on the closing share price at vesting of 14.5 pence
Performance
Below index
+7.4%
Below index
Total
Vesting
0%
70%
0%
23.3%
Vesting of August 2016 LTIP issue
The performance period for the August 2016 LTIP issue ended during the year. 23.3% of awards qualified for vesting as 70% of the
Average Annual Growth in Adjusted Profit Per Share condition qualified but the Total Shareholder Return and Total Property Return
conditions both fell below threshold.
Early vesting of awards
Where a liquidity event triggers early vesting the Committee will prorate awards for performance and, other than in exceptional
circumstances, for time. In the event of a capital raising or any other such event that would have a dilutive impact upon the awards the
Remuneration Committee may, in line with the scheme rules, adjust the awards granted to take account of this. The Committee agreed
that the Growthpoint Transaction did not necessitate any accelerated vesting or exercise of options under the Scheme rules.
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capreg.comCapital & Regional plcGOVERNANCE EXIT PAYMENTS AND PAYMENTS TO PAST DIRECTORS
No exit payments were awarded to Directors in 2019. Neither were any payments made to past Directors.
2020 COMBINED INCENTIVE PLAN (CIP)
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 a minimum of 25% of the CIP and maximum pay-out will represent
"exceptional performance". Target performance levels of pay-out will be at 50%.
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 2020 Directors' Remuneration Report.
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 2009 would have changed over the ten-year period measured, compared with the total return on a
£100 investment in the comparable indices.
300
200
150
100
50
0
D e c-0 9
Capital & Regional plc
FTSE All-Share
FTSE Real Estate
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
D e c-19
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2019 Remuneration Report continued
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.
2019
£’000
2018
£’000
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
2012
£’000
2011
£’000
2010
£’000
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)
718
752
393
n/a
–
–
564
2,112
51%
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
–
n/a
–
n/a
–
70%
70%
85%
40%
69%
71%
n/a
n/a
n/a
35.26%
91.85%
n/a
–
n/a
–
n/a
–
n/a
–
n/a
–
n/a
302
n/a
–
n/a
–
PERCENTAGE INCREASE IN CHIEF EXECUTIVE REMUNERATION VERSUS THE WIDER WORKFORCE
IN 2019
The percentage change in the remuneration of the Chief Executive Officer between 2018 and 2019 compared to that of employees
generally was as follows:
Salary
All taxable benefits
Annual bonuses
Notes:
CEO
+11%
No change
-28%2
Employee
group1
+2%
No change
+9.7%
1 Calculated on a like-for-like basis with reference to employees of Capital & Regional plc and Capital & Regional Property Management who have been at the
Company for the entirety of the current and prior years.
2 The introduction of the CIP in 2019 means that the 2018 and 2019 bonus award for the Chief Executive are not directly comparable. The 2018 figure
included deferred bonus and a higher potential award level than the 2019 cash bonus award potential.
The Committee approved an increase in the Chief Executive’s salary of 11% and further detail regarding this decision was include in the
2018 Annual Report. As outlined in the Remuneration Policy approved in 2019, going forward the maximum increase in any year will be
capped at 10% of base salary.
CHIEF EXECUTIVE PAY RATIO
The Company has less than 250 employees and is therefore not required to disclose the ratio between the Chief Executive’s pay and the
pay of other employees in the Company, as outlined in the Companies (Miscellaneous Reporting) Regulations 2018. The ratio of the Chief
Executive’s pay to the average employees’ pay is taken into consideration when setting Executive remuneration and the ratio (excluding
Directors) was 6.3:1 (£425,000: £67,976).
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)
2019
£m
11.2
18.6
2018
£m
11.6
17.5
%
-3.4%
+6.3%
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capreg.comCapital & Regional plcGOVERNANCE DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT
Unexpired term
of appointment
Date of service agreement
Name
Notice period
Potential
termination payment
Executive Directors
L Hutchings
S Wetherly
Non-Executive Directors
H Scott-Barrett
L Norval
T Hales
I Krieger
L Whyte
G Muchanya
N Sasse
D Hunter
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
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Date of initial appointment
9 March 20081
15 September 2009
1 August 2011
1 December 2014
1 December 2015
9 December 2019
9 December 2019
9 March 2020
6 months
No notice
No notice
No notice
No notice
No notice
No notice
6 months
None
None
None
None
None
None
None
None
1 Hugh Scott-Barrett’s contract was amended on 13 June 2017 when he ceased to be Chief Executive and became the Non-Executive Chairman. He will step
down from the Board at the 2020 AGM.
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.
WORKFORCE ENGAGEMENT
The Committee is regularly updated on workforce pay and benefits throughout the Group and considers workforce remuneration as part
of the review of executive remuneration. The Committee did not engage directly with employees in regard to executive pay but reviews
feedback from employee surveys and takes this into account when setting pay. The Committee is also tasked with overseeing major
changes in employee benefit structures. It has responsibility for the remuneration of the members of the Group Senior Leadership Team
and is therefore able to ensure that the remuneration of the Executive Directors is in line with senior management and other colleagues.
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 66.
H Scott-Barrett
L Hutchings
S Wetherly
T Hales
W Hamman
I Krieger
G Muchanya
L Norval
N Sasse
L Whyte
30 December 2019
Shares
30 December 2018
Shares
2,434,300
55,676
202,906
412,743
–
105,500
–
94,073,908
383,357
80,000
3,540,000
79,790
–
600,000
–
103,133
–
135,913,866
–
78,852
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 until 9 December
2019, was connected to the MStead Limited, PDI Investment Holdings Limited and other related shareholdings but did not personally
have a beneficial interest in any of these holdings.
On 17 December 2019 all Directors participated in the partial cash offer by Growthpoint to acquire shares in the Company, representing
approximately 30% of their existing shareholdings.
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2019 Remuneration Report continued
Following the 10 for 1 share consolidation that completed on 15 January 2020 the revised beneficial shareholdings of Directors are
detailed below. The revised figures include share dealings by Directors between 31 December 2019 and 15 January 2020.
H Scott-Barrett
L Hutchings
S Wetherly
T Hales
I Krieger
G Muchanya
L Norval
N Sasse
L Whyte
15 January 2020
Shares
243,428
5,566
20,289
41,274
10,550
–
9,407,387
38,335
7,998
The following were the only transactions impacting the above shareholdings between 15 January 2020 and 15 April 2020, being the latest
practicable date prior to the issue of this report.
On 14 March 2020, Philip Mickelborough, the husband of Laura Whyte, acquired 18,500 ordinary shares
On 18 March 2020, David Hunter, following his appointment on 9 March 2020, acquired 65,000 ordinary shares
EXECUTIVE SHARE OWNERSHIP
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.
There is no set timescale for Executive Director to reach the prescribed target but they are expected to retain net shares received on the
vesting of long-term incentive awards until the target is achieved. Shares that count towards the holding guideline are unfettered and
beneficially owned by the Executive Directors and their connected persons.
Executive Directors
L Hutchings
S Wetherly
Time from appointment as
Executive Director
Target % of
salary
Target
currently met?
2 year 6 months
9 months
200
200
No
No
POST CESSATION SHAREHOLDING REQUIREMENTS
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 for Executive Directors.
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 2019 to reflect latest governance best practice and requirements
and the requirements of the 2019 UK Corporate Governance Code.
ADVISERS
Across 2018 and 2019, 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 £55,000, which were charged on a time/cost basis. No other services were provided
by PwC LLP during the course of 2019.
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. PwC were appointed by the Remuneration Committee,
following a robust tender process. The Committee is satisfied that the advice provided by PwC LLP in relation to remuneration matters is
objective and independent.
PwC LLP had no other connection with the Company or individual Directors in 2019.
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capreg.comCapital & Regional plcGOVERNANCE CONSULTATION AND SHAREHOLDERS’ VIEWS
In 2019 Tony Hales, the Committee Chair, engaged extensively with shareholders during the development of the 2019 Remuneration
Policy. The Chair corresponded with shareholders representing over 60% of the Company’s share register. The Chair also engaged with
ISS and the Investment Association to ask for their views on the proposed policy. The Committee reviewed and considered all feedback
received as part of their discussions when finalising the policy. Following publication of the policy, and ahead of the AGM the Committee
received further feedback from shareholders and in response to this feedback announced that following changes to the policy would be
made:
the removal of the ability to grant an ex gratia award to an incoming Executive Director; and
the maximum combined incentive award potential in any year (300% of salary) will be adjusted downwards to reflect the year on year
reduction in the profit out-turn (if any) or if the shareholder return over the same period has been negative.
Shareholder voting on the Directors’ Remuneration Policy and Remuneration Report, which were tabled at the 16 May 2019 AGM, was as
follows:
Resolution
For
% For
Against
% Against
Voted Votes Withheld
Total Shares
To approve the Directors’ Remuneration
Policy
To approve the annual report on Directors’
remuneration
TONY HALES CBE
Chairman of Remuneration Committee
458,092,583
87.78%
63,784,926
12.22% 521,877,509
25,932,411
426,359,828
89.52%
49,887,357
10.48% 476,247,185
71,562,735
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE 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 1 to 41 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 2018 UK Corporate Governance Code and Disclosure and
Transparency Rules, which forms part of this Directors’ Report, is set out on pages 45 to 51.
The results for the year are shown in the Group income statement on page 86. There were no reportable events after the balance sheet
date. The use of financial derivatives is set out in Note 18 to the financial statements.
The purpose of this annual report is to provide information to the members of the Company. The annual report contains certain
forward-looking statements with respect to the operations, performance and financial condition of the Group. By their nature, these
statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from
those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this annual
report and the Group undertakes no obligation to update them. Nothing in this annual report should be construed as a profit forecast.
DIVIDENDS
An interim dividend of 1.00 pence per share (2018: 1.82 pence per share) was paid on 27 December 2019, all as a Property Income
Distribution (PID).
On 15 January 2020 the Company completed a share consolidation whereby every ten Ordinary Shares of 1 pence each were
consolidated into one ordinary share of 10 pence each. Further details can be found in Note 19 to the Financial Statements.
The Directors recommend a final dividend of 11 pence per share all to be paid as a Property Income Distribution (PID). This will result in
a total distribution for the year ended 30 December 2019 equivalent to 21 pence per new share (2018: 24.2 pence per share on the same
equivalent basis).
Subject to approval of shareholders at the Annual General Meeting (AGM) on Wednesday, 20 May 2020, the final dividend will be paid on
Thursday, 26 June 2020. The key dates are set out as below:
Confirmation of ZAR equivalent dividend
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
Dividend payment date/despatch of share certificates
Thursday, 21 May 2020
Tuesday, 2 June 2020
Wednesday, 3 June 2020
Thursday, 4 June 2020
Friday, 5 June 2020
Thursday, 24 June 2020
A scrip offer will be made available subject to approval at the Annual General Meeting. 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 Thursday, 21 May 2020. Share certificates
on the South African register may not be dematerialised or rematerialised between Wednesday, 3 June 2020 and Friday, 5 June 2020,
both dates inclusive. Transfers between the UK and South African registers may not take place between Thursday, 21 May 2020 and
Friday, 5 June 2020, 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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capreg.comCapital & Regional plcGOVERNANCE DIRECTORS
The names and biographical details of the present Directors of the Company are given on pages 42 to 43. Wessel Hamman’s resignation
was effective from 9 December 2019. Norbert Sasse and George Muchanya were appointed on 9 December 2019. All other Directors
served for the full year.
All current Directors will retire and, being eligible, offer themselves for re-election at the 2020 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 69 to 70. 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.
Pursuant to the Homestead Relationship Agreement that the Company entered into in 2019, the Company agrees, upon request, to
appoint one Non-Executive Director nominated by the Homestead Group to the Board for so long as they own 6% or more of the issued
ordinary share capital in the Company. Louis Norval is the Homestead nominated Non-Executive Director.
Pursuant to the Growthpoint Relationship Agreement that the Company entered into in 2019, the Company agrees, upon request,
to appoint two Non-Executive Directors nominated by Growthpoint to the Board for so long as they own 20% or more of the issued
ordinary capital in the Company and one Non-Executive Director to the Board if they own less than 20%, but not less than 15%. George
Muchanya and Norbert Sasse are the Growthpoint nominated Non-Executive Directors.
All other Directors are appointed in a personal capacity.
The Company maintains insurance for the Directors in respect of liabilities arising from the performance of their duties.
LISTING RULE 9.8.4R DISCLOSURES
The following table sets out where disclosures required in compliance with Listing Rule 9.8.4R are located.
Interest capitalised and tax relief
Details of long-term incentive schemes
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Non pre-emptive issues of equity for cash by major subsidiary
undertakings
Parent company participation in a placing by a listed subsidiary
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
n/a
Page 66
Page 64
Page 64
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 15 April 2020 (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:
Growthpoint
Mstead Limited
Peens Family Holdings
PDI Investment Holdings
ICAMAP Investments
MStead Limited and PDI Investment Holdings are part of the Homestead Group of investors.
No. of shares
53,123,818
5,235,729
4,342,236
4,136,550
3,709,725
%
51.14
5.04
4.18
3.98
3.57
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE Directors’ Report
continued
SHARE CAPITAL
As at 30 December 2019 the Company’s total issued share capital
was 1,038,840,380 ordinary shares of 1 pence each, all with equal
voting rights. The changes in the Company’s Issued share capital
during 2019 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 2019,
58,738,414 of the Company’s shares were held on the JSE share
register representing 5.7% of the total shares in issue.
On 15 January 2020 the Company completed a share consolidation
whereby every ten Ordinary Shares of 1 pence each were
consolidated into one ordinary share of 10 pence each; this
resulted in 103,884,025 shares being in circulation.
CHANGE IN CONTROL
The Group’s £15 million revolving credit facility can be called in
if there is a change in direct control of the borrower, Capital &
Regional Holdings of 50% or more of its issued share capital.
The Group’s £39 million debt facility in respect of The Exchange
Centre, Ilford allows the lender to potentially 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.
The lender consented to the change of control occurring by virtue
of Growthpoint Properties Limited’s acquisition of a 51.2% interest
in Capital & Regional plc.
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, unlike Growthpoint Properties Limited, 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 2019 or up to 15 April 2020, being the latest practicable
date prior to the issue of this report.
The Company was authorised by shareholders at the 2019 AGM
held on 16 May 2020 to purchase up to a maximum of 10.0% of
its ordinary shares in the market. This authority will expire at the
2020 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 2019 the Capital & Regional Employee Share
Ownership Trust held 608,694 shares in the Company. The shares
held by the Trust are registered in the nominee name, Forest
Nominees Limited, and a dividend waiver is in place to cover the
entire holding.
HUMAN RIGHTS
The Group operates in the UK and Jersey and, as such, is subject
to the European Convention on Human Rights and the UK Human
Rights Act 1998.
The Group respects all human rights and in conducting its
business the Group regards those rights relating to non-
discrimination, fair treatment and respect for privacy to be the
most relevant and to have the greatest potential impact on its key
stakeholder groups of customers, employees and suppliers.
The Board has overall responsibility for ensuring the Group
upholds and promotes respect for human rights. The Group
seeks to anticipate, prevent and mitigate any potential negative
human rights impacts as well as enhance positive impacts
through its policies and procedures and, in particular, through its
policies regarding employment, equality and diversity, treating its
stakeholders and customers fairly and information security. Group
policies seek to ensure that employees comply with the relevant
legislation and regulations in place to promote good practice.
The Group’s policies are formulated and kept up to date and
communicated to all employees through the Staff Policy Manual.
The Group has not been made aware of any incident in which the
organisation’s activities have resulted in an abuse of human rights.
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capreg.comCapital & Regional plcGOVERNANCE 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 2019 the total number of employees was as follows:
Employees
Directors
Senior Leadership Team
Employees – Group
Employees – Assets
Employees – Snozone
Male
8
4
16
27
168
Female
1
1
20
67
106
Total
9
5
36
94
274
POLITICAL DONATIONS AND CHARITABLE 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. The Group made a charitable donation of £25,000 in 2019 to the retailTRUST (see page 15 for further details).
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 20 May 2020.
The Directors Report was approved by the Board of Directors on 15 April 2020 and is signed on its behalf by:
STUART WETHERLY
Company Secretary
16 April 2020
Registered Company name: Capital & Regional plc
Registered Company number: 01399411
Registered office: 22 Chapter Street, London, SW1P 4NP
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE 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:
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
select suitable accounting policies and then apply them
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 15 April 2020 and is signed on its behalf by:
LAWRENCE HUTCHINGS
Chief Executive
STUART WETHERLY
Group Finance Director
consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 requires that Directors:
properly select and apply accounting policies;
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance; and
make an assessment of the Company’s ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
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.
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capreg.comCapital & Regional plcGOVERNANCE
Independent Auditor’s report
To the members of Capital & Regional plc
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 parent company investments
and intercompany debtors
Within this report, key audit matters are
identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Scoping
Materiality The materiality that we used for the group financial
statements was £7.5 million which was determined
on the basis of 2% of net assets. 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
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 98% (2018: 97%) of net
assets, 100% (2018: 100%) of revenue and 100%
(2018: 97%) of operating profit. Our component
audit work was executed at levels of materiality
applicable to each individual component which
were lower than group materiality.
There have been no significant changes in our
audit approach in the current year.
Significant
changes
in our
approach
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 2019 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 32 and parent company related Notes A
to F.
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. The
non-audit services provided to the group for the year are disclosed
in Note 6 to the financial statements. 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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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE Independent Auditor’s report
To the members of Capital & Regional plc continued
CONCLUSIONS RELATING TO GOING CONCERN, PRINCIPAL RISKS AND VIABILITY STATEMENT
Going concern
We have reviewed the Directors’ statement in Note 1 to the financial statements about
whether they 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.
Going concern is the basis of preparation
of the financial statements that
assumes an entity will remain in
operation for 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 the COVID-19 pandemic
and 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.
We confirm that we have nothing material
to report, add or draw attention to in
respect of these matters.
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:
Viability means the ability of the group
to continue over the time horizon
considered appropriate by the Directors.
We confirm that we have nothing material
to report, add or draw attention to in
respect of these matters.
the disclosures on pages 27 to 31 that describe the principal risks, procedures to
identify emerging risks, and an explanation of how these are being managed or
mitigated;
the Directors’ confirmation on page 27 that they have carried out a robust
assessment of the principal and emerging risks facing the group, including those
that would threaten its business model, future performance, solvency or liquidity;
or
the Directors’ explanation on page 32 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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capreg.comCapital & Regional plcGOVERNANCE 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
The investment property has a carrying value of £770.9 million at 30 December 2019 (30 December 2018:
£898.2 million), comprising 86% (30 December 2018: 93%) 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 yields and cash flows, together with the lack of
transactional evidence and liquidity in the market. The valuations are consequently based on increasingly
subjective evidence.
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 be subject to undue influence by management.
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.
As discussed in Note 29 to the financial statements, the impact of the COVID-19 pandemic on the valuation
of the group’s investment properties is considered a non-adjusting subsequent event. There is therefore
uncertainty over the future impact on the valuation of the group’s investment properties, which at the date of
this report has not been quantified.
The Audit Committee’s discussion of this key audit matter is set out on page 53.
How the scope
of our audit
responded to
the key audit
matter
We obtained an understanding of the group’s relevant controls around investment 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 involvement of our internal real estate valuation specialists, who are members
of the Royal Institution of Chartered Surveyors.
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 evaluated the competence, capabilities and objectivity of the external valuers.
We assessed the appropriateness of the disclosure of the non-adjusting subsequent event.
Key
observations
We concur with the assumptions adopted by the management in the valuation were reasonable and the
methodology applied was appropriate.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE Independent Auditor’s report
To the members of Capital & Regional plc continued
Going concern and covenant compliance
Key audit matter
description
As at 30 December 2019, external borrowings had a carrying value of £422.8 million (30 December 2018:
£432.9 million). The group also has an undrawn £15 million central revolving credit facility, which matures in
January 2022 together with cash and cash equivalents of £95.9 million (30 December 2018: £32.0 million).
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, should any of the group’s lenders call for a valuation under the terms of the
loan agreement, the group may not meet this covenant requirement. As a result of the COVID-19 pandemic,
the valuation impacts may be greater and quicker than anticipated at the year end.
The group expects there may be a significant reduction in rental income throughout the period of one year
from the date of this Auditor’s Report as a result of the trading restrictions due to the COVID-19 pandemic.
The impact of this potential reduction in rental income could mean that the group breaches its interest cover
covenants in this period; however the group has forecast sufficient cash to cure potential breaches.
Management’s consideration of the going concern basis of preparation is set out in the Going Concern
statement on page 32 and Note 1 together with a detailed presentation of the likely actions they could take
to respond to the potential covenant breaches and further mitigation actions available should the group’s
lenders not provide waivers to covenant breaches if required. 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 53.
How the scope
of our audit
responded to
the key audit
matter
We obtained an understanding of the group’s relevant controls around 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, considering the
reasonableness of assumptions regarding lower rental collection levels.
We considered management’s conclusions regarding the likelihood of cash flow timings relating to
assumptions driven by the ongoing COVID-19 pandemic.
We reviewed management’s modelling of alternative scenarios taking into 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 2019.
We reviewed key loan documentation to understand the principal terms, including financial covenants,
and performed a review of the group’s existing and forecast compliance with debt covenants and any
associated equity cures/cash traps.
We reviewed the availability of further mitigating actions available to management as presented on
page 32.
Key
observations
We concur with management’s conclusion to prepare the group and company financial statements on a going
concern basis.
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capreg.comCapital & Regional plcGOVERNANCE Impairment of parent company investments and intercompany debtors
Key audit matter
description
There is a risk that the carrying value of the investments and intercompany debtors cannot be supported.
The accuracy of forecast future cash flows to support the carrying values of the investments is a key area
of judgement and is identified as a 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 £344.0 million at 30 December 2019 (30 December 2018: £459.8
million), comprising 79% (30 December 2018: 96%) of the parent company’s assets. Intercompany debtors
had a carrying value of £94.0 million at 30 December 2019 (30 December 2018: £14.4 million), comprising
21.5% (30 December 2018: 3%) 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 2018: 7.6% and 9.5%). Management have assessed the recoverability of investments on the
basis of nil growth. Management have posted an impairment of £115.8 million as a result of comparing the
carrying value of the investment against its recoverable amount.
The accounting policies for both investments and intercompany debtors are set out in Note A to the parent
company financial statements. The Audit Committee’s discussion of this key audit matter is set out on page 53.
How the scope
of our audit
responded to the
key audit matter
We obtained an understanding of the group’s relevant controls around 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 involvement of our internal valuations specialists. The inputs considered included the cash flow
projections, long-term growth rates 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 recognised by management for all investments. We consider that
the carrying value of company only investment and intercompany debtor balances is appropriate.
OUR APPLICATION OF MATERIALITY
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
Materiality
£7.5 million (2018: £8.6 million)
Basis for
determining
materiality
We determined materiality to be 2% of net assets (2018: 2% of net
assets).
We applied a lower threshold of £1.4 million (2018: £1.4 million) for
testing of all balances impacting Adjusted Profit (as defined in Note
1 to the group financial statements), which is 5% of Adjusted Profit
(2018: less than 5% of Adjusted Profit).
Rationale for
the benchmark
applied
We used net assets as a benchmark when determining materiality as
it is considered to be the most critical financial performance measure
for the group.
We applied a lower threshold of £1.4 million (2018: £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.
Parent financial statements
£6.75 million (2018: £7.74 million)
Parent company materiality equates
to 2% of net assets (2018: 2% of net
assets), which is capped at 90% of
group materiality (2018: capped at
90% of group materiality).
We used net assets as a benchmark
when determining materiality as it
is considered to be the most critical
financial performance measure for the
company as a holding company.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE Independent Auditor’s report
To the members of Capital & Regional plc continued
Net assets
£375.10 million
Net assets
Group materiality
Group materiality
£7.50 million
Component materiality
range £6.75 million
to £0.18 million
Audit Committee
reporting threshold
£0.225 million
We applied a lower threshold of £1.4 million (2018: £1.4 million) for testing of all balances impacting Adjusted Profit (as defined in Note 1
to the group financial statements), which is 5% (2018: 5%) of this financial performance measure.
Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 70% of group
materiality for the 2019 audit (2018: 70%). In determining performance materiality, we considered the following factors:
there have been no significant changes in the business; and
our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified in prior
periods.
Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.225 million (2018:
£0.250 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report
to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Identification and scoping of components
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.
The businesses subject to a full scope audit or specific audit procedures account for 98% (2018: 97%) of the group’s net assets, 100%
(2018: 100%) of the group’s revenue and 100% (2018: 97%) of the group’s operating profit. This coverage corresponds with the full scope
audit procedures, except for Capital & Regional Holdings Limited where we performed specified audit procedures. The remainder of the
group’s net assets were subject to central analytical procedures. 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% (2018: 2% and 90%) of group materiality, which corresponds to component materialities between £0.18 million and
£6.75 million (2018: 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.
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capreg.comCapital & Regional plcGOVERNANCE 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.
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.
We have nothing to report in respect of these matters.
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 and non-compliance with laws
and regulations 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.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE 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
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, we considered the following:
the nature of the industry and sector, control environment and business performance including the design of the group’s
remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;
the group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was approved by the
Board on 15 April 2020;
results of our enquiries of management and the audit committee about their own identification and assessment of the risks of
irregularities;
any matters we identified having obtained and reviewed the group’s documentation of their 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; and
− the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
the matters discussed among the audit engagement team and involving relevant internal specialists, including tax, valuations, and
industry specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the significant judgements and assumptions used in the investment property valuations
in common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management
override.
We also obtained an understanding of the legal and regulatory framework that the group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The
key laws and regulations we considered in this context included the UK Companies Act, REIT legislation, London Stock Exchange Listing
Rules and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty. These included the group’s
environmental regulations.
Audit response to risks identified
As a result of performing the above, we identified Valuation of investment properties as a key audit matter related to the potential risk
of fraud. The key audit matters section of our report explains the matters in more detail and also describes the specific procedures we
performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
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, reviewing internal audit reports 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.
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capreg.comCapital & Regional plcGOVERNANCE 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 the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the strategic report or the Directors’ report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not
been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
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 23 years, covering the years ending 25 December 1997 to 30 December
2019.
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.
MATTHEW HALL FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
16 April 2020
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALGOVERNANCE Consolidated income statement
For the year to 30 December 2019
Revenue
Cost of sales
Gross profit
Administrative costs
Share of loss in associates
Loss on revaluation of investment properties
Other gains and losses
Transaction costs in association with Partial Offer and equity raise
Loss on ordinary activities before financing
Finance income
Finance costs
Loss before tax
Tax charge
Loss for the year
All results derive from continuing operations.
Basic earnings per share1
Diluted earnings per share1
EPRA basic earnings per share1
EPRA diluted earnings per share1
Consolidated statement
of comprehensive income
For the year to 30 December 2019
Loss for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Gain on a hedge of a net investment taken to equity
Total items that may be reclassified subsequently to profit or loss
Total comprehensive expense for the year
Note
3
4
6
14a
10a
5
5
6
8a
2a
9a
9a
9a
9a
2019
£m
88.9
(35.3)
53.6
(8.8)
–
(138.6)
(1.5)
(2.2)
(97.5)
0.4
(23.9)
(121.0)
–
(121.0)
(16.2)p
(16.2)p
3.5p
3.5p
2019
£m
(121.0)
–
–
–
(121.0)
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)
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.
1 Per share amounts are unadjusted for the impact of the 10 for 1 share consolidation that completed on 15 January 2020. A multiple of ten needs to be
applied to calculate the equivalent values.
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capreg.comCapital & Regional plcFINANCIALS
Consolidated balance sheet
At 30 December 2019
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 share1
EPRA triple net assets per share1
EPRA net assets per share1
Note
10
11
13
14b
13
15
2b
16
17a
16
26
2b
19
19
21
24
24
24
2019
£m
770.9
2.2
1.2
14.7
–
789.0
15.4
95.9
111.3
900.3
(35.7)
(35.7)
75.6
(422.8)
(5.2)
(61.5)
(489.5)
(525.2)
375.1
10.4
238.0
60.3
4.4
–
62.0
375.1
36.1p
35.6p
36.4p
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
59.6p
59.3p
59.1p
1 Per share amounts are unadjusted for the impact of the 10 for 1 share consolidation that completed on 15 January 2020. A multiple of ten needs to be
applied to calculate the equivalent values.
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on 16 April 2020 by:
Lawrence Hutchings
Chief Executive
Stuart Wetherly
Group Finance Director
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
Consolidated statement of change in equity
For the year to 30 December 2019
Share
capital
£m
Share
premium1
£m
Merger
reserve2
£m
Capital
redemption
reserve1
£m
Balance at 30 December 2017
Loss for the year
Other comprehensive income for the year
Total comprehensive expense for the year
Credit to equity for equity-settled share-based
payments (Note 20)
Dividends paid, net of scrip
Shares issued, net of costs (Note 19)
Other movements
Balance at 30 December 2018
Loss for the year
Other comprehensive income for the year
Total comprehensive expense for the year
Credit to equity for equity-settled share-based
payments (Note 20)
Dividends paid, net of scrip
Shares issued, net of costs (Note 19)
Other movements
Balance at 30 December 2019
7.2
–
–
–
–
–
0.1
–
7.3
–
–
–
–
–
3.1
–
10.4
163.3
–
–
–
–
–
3.2
–
166.5
–
–
–
–
–
71.5
–
238.0
60.3
–
–
–
–
–
–
–
60.3
–
–
–
–
–
–
–
60.3
4.4
–
–
–
–
–
–
–
4.4
–
–
–
–
–
–
–
4.4
Own
shares
reserve3
£m
(0.1)
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
Retained
earnings
£m
246.3
(25.6)
–
(25.6)
0.7
(23.5)
(3.3)
(0.1)
194.5
(121.0)
–
(121.0)
0.1
(11.6)
–
–
62.0
Total
equity
£m
481.4
(25.6)
–
(25.6)
0.7
(23.5)
–
–
433.0
(121.0)
–
(121.0)
0.1
(11.6)
74.6
–
375.1
1.
2.
These reserves are not distributable.
The merger reserve of £60.3 million arose on the Group’s capital raising in 2009 which was structured so as to allow the Company to claim merger relief
under section 612 of the Companies Act 2006 on the issue of ordinary shares. The merger reserve is available for distribution to shareholders.
3. Own shares relate to shares purchased out of distributable profits and therefore reduce reserves available for distribution.
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capreg.comCapital & Regional plcFINANCIALS
Consolidated cash flow statement
For the year to 30 December 2019
Operating activities
Net cash from operations
Distributions received from fixed asset investments
Interest paid
Interest received
Cash flows from operating activities
Investing activities
Distributions received from associates
Acquisitions and disposals
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
Issue of ordinary shares
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
17a
15
20191
£m
37.5
2.3
(14.8)
0.2
25.2
–
–
(0.7)
(12.7)
(13.4)
(11.6)
–
(11.0)
74.7
–
52.1
63.9
32.0
95.9
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
1. Due to presentational adjustments, values differ from the preliminary announcement published on 5 March 2020.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
Notes to the financial statements
For the year to 30 December 2019
1 SIGNIFICANT ACCOUNTING POLICIES
General information
Capital & Regional plc is a public company limited by shares domiciled and incorporated in England, 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. The following new or revised accounting standards are applicable for the first time in the year ended 30 December 2019:
IFRS 15 “Revenue from Contracts with Customers”
IFRS 9 “Financial Instruments”
IFRS 15 “Revenue from Contracts with Customers”
On 31 December 2018, the Group adopted IFRS 15 “Revenue from Contracts with Customers”. IFRS 15 establishes the principles that the
Group applies when reporting information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract
with a customer.
Prior to its adoption, the Group completed a review of the requirements of IFRS 15 against its current accounting policies. The Group
concluded that there was no material change in the amounts and timing of revenue recognised following the adoption of the standard
and no transition adjustments have been made. IFRS 15 does not apply to revenue transactions that are within the scope of the leasing
standard; therefore, it is not applicable for the Group’s rental income. We have considered the effect of IFRS 15 with respect to service
charge income. Previously, service charge income has been recognised over time at the consideration, which we expect to be entitled to
for the service. This has not changed under IFRS 15.
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capreg.comCapital & Regional plcFINANCIALS 1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED
IFRS 9 “Financial Instruments”
The standard applies to classification and measurement of financial assets and financial liabilities, as well as impairment provisioning,
through the introduction of the expected credit loss model. The changes in accounting policies resulting from the adoption of IFRS 9 have
been applied retrospectively. The adoption, however, has not had a material impact on the recognition and measurement of income
and costs in the statement of comprehensive income or of assets and liabilities on the balance sheet. The Group has not identified
any significant changes in how it accounts for financial assets or liabilities under IFRS 9. The Directors have assessed the impact of
impairment losses recognised for trade receivables under IFRS 9 at 30 December 2019 based on actual losses experienced over the past
two years and consider the impact to the Group’s bad debt provision to be immaterial. In the case of the Company only accounts, an
expected credit loss model has been applied to intercompany receivables using the same method, the impact on bad debt provision is
immaterial in this case also.
The following new standards and amendments to standards have been issued but are not yet effective for the Group:
IFRS 16 Leases – this 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 of the
Group’s support office at 22 Chapter Street London 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 £14.4 million. The key assumptions used to
arrive at this are:
− A discount rate of 3.92% for the support office, and 4.04% for Snozone leases based on the average borrowing rate
− Yield of 2.25% for the support office, and 6% for the Snozone leases
The Group has also considered the impact on its three leasehold properties and considers there to be no change in cash flows or
presentation, as actual cash flows are neither fixed nor variable depending on an index or rate. 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.
IFRS 17 insurance contracts
IFRS 10 and IAS 28 (amendments) – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Amendments to IFRS 3 – definition of a business
The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the
Group in future periods, except as noted.
Critical accounting judgements
The preparation of financial statements requires the Directors to make judgements that may affect the application of accounting policies.
Going concern
The Directors have considered the impact of the COVID-19 pandemic on the Going Concern assumption and viability statement
disclosures. The process and scenario planning undertaken, the factors assessed and risk considered are detailed on page 32. The
financial statements have been prepared on a going concern basis.
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. We are now in a phase of the valuation cycle where there is persistent negative sentiment and low transactional evidence as
such greater judgement has been applied.
The investment property valuation contains a number of assumptions upon which the valuation of the Group’s properties as at 30
December 2019 was based. 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 valuation was based prove to be inaccurate, this may have an impact on the value of the Group’s
investment properties, which could in turn have an effect on the Group’s financial position and results. Note 10c provides sensitivity
analysis estimating the impact that changes in the estimated rental values or equivalent yields would have on the Group’s property
valuations.
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1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Derivative financial instruments
Reliance upon the work undertaken at 31 December 2019 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.
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 = €1.1765 (2018: £1 = €1.18). The principal exchange rate used for the
income statement is the average rate for the year: £1 = €1.1403 (2018: £1 = €1.130).
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued 1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to
the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred
in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line
basis over the lease term. Incentives and costs associated with entering into tenant leases are amortised on a straight-line basis over the
term of the lease.
The Group as lessee
Assets held under finance leases are recognised as assets at their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a
finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly
attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs.
Contingent rentals are recognised as expenses in the years in which they are incurred.
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.
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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)”,”fair
value through other comprehensive income (FVOCI)” and “amortised cost”. 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
amortised cost. 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 provision for impairment (credit losses). 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.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses (“ECLs”). The Group
calculates impairment of trade receivables using the expected credit loss model as required by IFRS 9. ECLs are calculated by: (a)
identifying scenarios in which a loan or receivable defaults; (b) estimating the cash shortfall that would be incurred in each scenario
if a default were to happen; (c) multiplying that loss by the probability of the default happening; and (d) summing the results of all
such possible default events. The Group has adopted the simplified “provision matrix” approach to calculate expected credit losses
on trade receivables. The Group loss allowance is based on the expected credit loss as calculated using the provision matrix approach
and a forward looking component based on individual tenant profiles. The Group considers a financial asset to be in default when the
borrower is unlikely to pay its credit obligations to the Group in full. The Group writes off trade receivables when there is no reasonable
expectation of recovery; receivables are written off after six months.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand deposits and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities
Financial liabilities are classified as financial liabilities “at FVTPL”.
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. 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. As the Group does not apply hedge accounting, the provisions of
IFRS 9 do not apply.
Trade payables
Trade payables are carried at fair value, with any gains or losses arising on remeasurement recognised in the income statement.
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued 1 SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
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 Capital & Regional Property Management Limited (“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.
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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 now Shopping Centres, Snozone and Group/Central. UK Shopping Centres consists of
the shopping centres at Blackburn, Hemel Hempstead, Ilford, Luton, Maidstone, Walthamstow and Wood Green. Group/Central includes
management fee income, Group overheads incurred by Capital & Regional Property Management Limited, Capital & Regional plc and
other subsidiaries and the interest expense on the Group’s central borrowing facility.
In the prior year Shopping Centres was split between Wholly-owned assets and Other UK Shopping Centres. The latter consisted of the
Group’s interest in the Kingfisher Limited Partnership (Redditch) until reclassification to a Fixed Asset Investment on 30 December 2018 –
see Note 14b for further information. Following this reclassification the Group’s interest in the Kingfisher Limited Partnership is no longer
equity accounted. The prior period segment information has been restated to reflect this change in reportable segments due to the
change in the structure of the Group.
The Shopping Centres segment derives its revenue from the rental of investment properties. The Snozone and Group/Central segments
derive their revenue from the operation of indoor ski slopes and the management of property funds or schemes respectively. The split
of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues from different products and services.
Depreciation and charges in respect of share-based payments represent the only significant non-cash expenses.
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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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued 2A OPERATING SEGMENTS
Year to 30 December 2019
Rental income from external sources
Property and void costs
Net rental income
Net interest expense
Snozone income/Management fees1
Management expenses
Investment income
Depreciation
Variable overhead (excluding non-cash items)
Tax charge
Adjusted Profit
Revaluation of properties
Loss on disposal
Loss on financial instruments
Share-based payments
Transaction costs on issue of new equity
Other items
(Loss)/profit
Total assets
Total liabilities
Net assets
Note
2b
2b
2b
2b
Shopping Centres
£m
63.0
(13.7)
49.3
(18.9)
–
–
–
–
–
–
30.4
(138.6)
–
(5.0)
–
–
–
(113.2)
820.0
(514.6)
305.4
Snozone
£m
–
–
–
–
10.5
(8.7)
–
(0.3)
–
–
1.5
–
–
–
–
–
–
1.5
3.9
(2.0)
1.9
Group/
Central
£m
–
–
–
–
2.3
(6.0)
0.2
(0.2)
(0.8)
–
(4.5)
(1.4)
(0.5)
–
(0.1)
(2.2)
(0.6)
(9.3)
76.4
(8.6)
67.8
Total
£m
63.0
(13.7)
49.3
(18.9)
12.8
(14.7)
0.2
(0.5)
(0.8)
–
27.4
(140.0)
(0.5)
(5.0)
(0.1)
(2.2)
(0.6)
(121.0)
900.3
(525.2)
375.1
1 Asset management fees of £3.4 million charged from the Group’s CRPM entity to wholly-owned assets have been excluded from the table above.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS UK Shopping Centres
Wholly-owned
assets
£m
Other UK
Shopping
Centres1
£m
Snozone
£m
Group/
Central
£m
2A OPERATING SEGMENTS CONTINUED
Note
2b
2b
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
Gain on financial instruments
Refinancing costs
Share-based payments
Other items
Profit/(loss)
65.0
(13.1)
51.9
(18.7)
–
–
–
–
–
–
33.2
(47.5)
–
2.6
–
(0.2)
(11.9)
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
–
–
–
–
10.4
(8.7)
–
(0.2)
–
–
1.5
–
–
–
–
–
1.5
5.1
(3.0)
2.1
–
–
–
(0.2)
2.3
(6.1)
0.4
(0.1)
(0.8)
(0.1)
(4.6)
–
(3.8)
–
(0.7)
(0.7)
(9.8)
9.9
(4.8)
5.1
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)
980.8
(547.8)
433.0
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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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued 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
Note
2a
2a
2a
2a
3
Note
2a
2a
Year to
30 December
2019
£m
Year to
30 December
2018
£m
63.0
14.6
2.3
10.5
90.4
(1.5)
–
88.9
2019
£m
820.0
–
3.9
76.4
900.3
–
900.3
(514.6)
–
(2.0)
(8.6)
(525.2)
–
(525.2)
375.8
(0.7)
375.1
67.2
14.7
2.3
10.4
94.6
(1.4)
(2.2)
91.0
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
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS 3 REVENUE
Gross rental income
Ancillary income
Service charge income
External management fees
Snozone income
Revenue per consolidated income statement
Year to
30 December
2019
£m
Year to
30 December
2018
£m
49.6
13.4
63.0
14.6
0.8
10.5
88.9
51.7
13.3
65.0
14.7
0.9
10.4
91.0
Note
2a
2b
2a
2b
External management fees represent revenue earned by the Group’s wholly-owned subsidiary Capital & Regional Property Management
Limited.
Year to
30 December
2019
£m
Year to
30 December
2018
£m
(13.2)
(13.1)
(9.0)
(35.3)
(12.7)
(13.3)
(8.9)
(34.9)
Year to
30 December
2019
£m
Year to
30 December
2018
£m
0.2
0.2
–
0.4
(1.0)
(14.5)
(0.3)
(3.4)
(4.7)
(23.9)
0.1
0.4
2.6
3.1
(1.0)
(14.0)
(0.5)
(3.4)
–
(18.9)
4 COST OF SALES
Property and void costs
Service charge costs
Snozone expenses
Total cost of sales
5 FINANCE INCOME AND COSTS
Finance income
Interest receivable
Income from fixed asset investments
Gain in fair value of financial instruments:
– Interest rate swaps
Total finance income
Finance costs
Amortisation of deferred loan arrangement fees
Interest payable on bank loans and overdrafts
Other interest payable
Finance lease costs (head lease)
Loss in fair value of financial instruments:
– Interest rate swaps
Total finance costs
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued 6 LOSS BEFORE TAX
The loss before tax has been arrived at after charging/(crediting) the following items:
Operating lease charge
Impairment of receivables
Reversal and utilisation of impairment of receivables
Other gains and losses
Depreciation of plant and equipment
Staff costs
Auditor’s remuneration for audit services (see below)
Transaction costs in association with Partial Offer and equity raise
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
Other assurance services
Consultancy services
Total non-audit fees
Total fees paid to Auditor and its associates
7 STAFF COSTS
Salaries
Discretionary bonuses
Share-based payments
Social security
Other pension costs
Note
13
13
11
7
Year to
30 December
2019
£m
Year to
30 December
2018
£m
2.2
2.0
(1.9)
1.5
0.5
10.5
0.2
2.2
2.1
1.8
(1.2)
4.5
0.3
11.6
0.2
–
Year to
30 December
2019
£'000
Year to
30 December
2018
£'000
82
73
155
45
2
–
47
202
83
72
155
40
–
20
60
215
Note
20
Year to
30 December
2019
£m
Year to
30 December
2018
£m
8.2
0.9
0.1
9.2
1.0
0.3
10.5
8.8
0.9
0.8
10.5
0.9
0.2
11.6
Staff costs amounting to £0.6 million (2018: £0.4 million) have been capitalised as development costs during the year.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
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
2019
Number
Year to
30 December
2018
Number
43
61
129
233
43
70
135
248
The monthly average number of total employees (including Executive Directors) employed within the Group during the year was 369
(CRPM – 45, Shopping centres – 80, Snozone – 244) compared to 367 in 2018 (CRPM – 45, Shopping centres – 85, Snozone – 237).
There were no employees (2018: Nil) employed by the Company during 2019.
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 (2018: £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% (2018: 19%)
REIT exempt income and gains
Non-allowable expenses and non-taxable items
Excess tax losses
Adjustments in respect of prior years
Total tax charge
Year to
30 December
2019
£m
Year to
30 December
2018
£m
–
–
–
–
–
–
–
–
–
(0.1)
(0.1)
(0.1)
Year to
30 December
2019
£m
Year to
30 December
2018
£m
Note
(121.0)
(23.0)
22.2
0.6
0.2
–
–
(25.5)
(4.9)
3.1
1.7
0.1
0.1
0.1
8a
8c Deferred tax
The UK corporation tax main rate was reduced to 19% with effect from 1 April 2017. A further reduction in the rate of corporation tax to
17% from 1 April 2020 was substantively enacted in Finance Act 2016. Consequently, the UK corporation tax rate at which the deferred
tax is booked in the financial statements is 17% (2018: 17%).
The Group has recognised a deferred tax asset of £nil (2018: £nil). 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 £19 million (2018: £18.7 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 (2018: £nil). The Group has unused capital losses of £24.9 million (2018: £24.9 million) that are available for offset
against future gains but similarly no deferred tax has been recognised in respect of these losses owing to the unpredictability of future
capital gains and other reasons which may restrict the utilisation of the losses. The losses do not have an expiry date.
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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.
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
Profit (£m)
(Loss)/profit for the year
Revaluation loss on
investment properties (net
of tax)
Loss on disposal (net of tax)
Transaction costs on issue of
new equity
Changes in fair value of
financial instruments
Share-based payments
Other items
(Loss)/profit (£m)
Earnings per share (pence)
Diluted earnings per share
(pence)1
Year to 30 December 2019
Year to 30 December 2018
Note
Loss
EPRA
Adjusted
Profit
Loss
EPRA
Adjusted
Loss
(121.0)
(121.0)
(121.0)
(25.6)
(25.6)
(25.6)
9b
9b
9b
2a
–
–
–
–
–
–
(121.0)
(16.2)
(16.2)
140.0
0.5
140.0
0.5
2.2
5.0
–
(0.3)
26.4
3.5
3.5
2.2
5.0
0.1
0.6
27.4
3.7
3.7
–
–
–
–
–
–
(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
1 Per share amounts are unadjusted for the impact of the 10 for 1 share consolidation that completed on 15 January 2020. A multiple of ten needs to be
applied to calculate the equivalent values.
None of the current or prior year earnings related to discontinued operations (2018: none).
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Basic
Dilutive contingently issuable shares and share options
Diluted
Note
21
Year to
30 December
2019
Year to
30 December
2018
746.2
(0.6)
745.6
3.3
748.9
721.9
(0.5)
721.4
4.6
726.0
At the end of the year, the Group had 10,698,595 (2018: 8,162,625) 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.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS 9 EARNINGS PER SHARE CONTINUED
9b Reconciliation of earnings figures included in earnings per share calculations
Year to 30 December 2019
Year to 30 December 2018
Loss
on disposal of
investment
properties
£m
Movement
in fair value
of financial
instruments
£m
Revaluation
movements
£m
Loss
on disposal of
investment
properties
£m
Movement
in fair value
of financial
instruments
£m
Revaluation
movements
£m
(140.0)
–
–
–
(140.0)
–
–
(0.5)
–
(0.5)
(5.0)
–
–
–
(5.0)
(47.5)
(5.0)
–
–
(52.5)
–
–
(3.8)
–
(3.8)
2.6
–
–
–
2.6
Note
14c
9a
Wholly-owned
Associates
Joint ventures
Tax effect
Total
9c Headline earnings per share
Headline earnings per share has been calculated and presented as required by the JSE Listing Requirements.
Profit (£m)
(Loss) for the year
Revaluation loss on investment properties (including tax)
Loss on disposal (net of tax)
Transaction costs on issue of new equity
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) Basic/Diluted1
Year to 30 December 2019
Year to 30 December 2018
Basic
Diluted
Basic
Diluted
(121.0)
140.0
0.5
2.2
(0.3)
21.4
746.2
(0.6)
–
745.6
2.9
(121.0)
140.0
0.5
2.2
(0.3)
21.4
746.2
(0.6)
3.3
748.9
2.9
(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
1 Per share amounts are unadjusted for the impact of the 10 for 1 share consolidation that completed on 15 January 2020. A multiple of ten needs to be
applied to calculate the equivalent values.
10 INVESTMENT PROPERTIES
10a Wholly-owned properties
Cost or valuation
At 30 December 2017
Capital expenditure (excluding capital contributions)
Valuation deficit1
At 30 December 2018
Capital expenditure (excluding capital contributions)
Valuation deficit
At 30 December 2019
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Total
property
assets
£m
437.4
8.8
(14.1)
432.1
6.6
(59.6)
379.1
493.2
6.1
(33.2)
466.1
4.7
(79.0)
391.8
930.6
14.9
(47.3)
898.2
11.3
(138.6)
770.9
1 £47.5 million per Income statement and Note 2a includes letting fee amortisation adjustment of £0.2 million.
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
10 INVESTMENT PROPERTIES CONTINUED
10b Property assets summary
Investment properties at fair value
Head leases treated as finance leases on investment properties
Unamortised tenant incentives on investment properties
IFRS Property Value
30 December 2019
30 December 2018
100%
£m
727.1
61.5
(17.7)
770.9
Group share
£m
727.1
61.5
(17.7)
770.9
100%
£m
855.2
61.3
(18.3)
898.2
Group share
£m
855.2
61.3
(18.3)
898.2
10c Valuations
External valuations at 30 December 2019 were carried out on all of the gross property assets detailed in the table above. The fair value
was £727.1 million (2018: £855.2 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 2019:
Wholly-owned assets
Market Value
£m
727.1
Estimated rental value £ per sq ft
Low
9.3
Portfolio
15.4
High
24.3
Equivalent yield %
Low
5.3
Portfolio
7.6
High
10.4
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
30.6
Decrease
£m
(28.8)
Increase
£m
(25.8)
Decrease
£m
27.7
Increase
£m
(49.7)
Decrease
£m
57.7
Impact on valuations of 100bps
change in equivalent yield
Increase
£m
(93.0)
Decrease
£m
125.6
Wholly-owned assets
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
Eliminated on disposal
At the end of the year
Carrying amount
At the end of the year
30 December
2019
£m
30 December
2018
£m
5.3
0.7
(0.1)
5.9
(3.3)
(0.5)
0.1
(3.7)
2.2
4.8
0.5
–
5.3
(3.0)
(0.3)
–
(3.3)
2.0
105
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
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
Unamortised tenant incentives
Unamortised rent free periods
Amounts falling due within one year:
Financial assets
Trade receivables (net of allowances)
Other receivables
Accrued income
Non-derivative financial assets
Non-financial assets
Prepayments
Unamortised tenant incentives
Unamortised rent free periods
30 December
2019
£m
30 December
2018
£m
–
–
4.5
10.2
14.7
6.5
1.3
1.1
8.9
3.5
1.2
1.8
15.4
1.2
1.2
5.0
10.3
16.5
7.3
1.1
1.1
9.5
2.8
1.2
1.8
15.3
Included in the non-derivative financial assets balance are trade receivables with a carrying amount of £4.3 million (2018: £2.1 million)
which are past due at the reporting date for which the Group has not provided, as there has not been a significant change in credit
quality and the amounts are still considered recoverable. The Group holds collateral of £0.7 million (2018: £0.6 million) over trade
receivables as security deposits held in rent accounts. The average age of trade receivables is 26 days (2018: 29 days).
Analysis of non-derivative current financial assets
Not past due
Past due but not individually impaired:
Less than 1 month
1 to 3 months
3 to 6 months
Over 6 months
Allowances for credit loss
At the start of the year
Additional allowances created
Utilised during the year
Unused amounts reversed
At the end of the year
106
30 December
2019
£m
30 December
2018
£m
4.6
2.0
0.4
1.2
0.7
8.9
7.4
0.7
0.6
0.5
0.3
9.5
30 December
2019
£m
30 December
2018
£m
1.3
2.0
(0.3)
(1.6)
1.4
0.7
1.8
(0.9)
(0.3)
1.3
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
13 RECEIVABLES CONTINUED
The creation and release of credit loss allowances have been included in cost of sales in the income statement.
Credit losses are calculated at an amount equal to lifetime expected credit losses. The expected credit losses on trade receivables are
estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial
position, adjusted for factors that are specific to the debtor and an assessment of both the current as well as the forecast direction of
conditions at the reporting date.
There has been no change in the estimation techniques or significant assumptions made during the current reporting period.
The Group writes off a trade receivable when there is information indicating that there is no realistic prospect of recovery. Changes in
expected credit loss allowance arise from increase in calculated expected credit loss, as well as amounts written off.
The following table details the risk profile of trade receivables based on the Group’s provision matrix.
Not past due
2.6
1-30 days
6.1
31-60 days
7.2
61-90 days
39.5
>90 days
28.0
Expected credit loss rate (%)
Estimated total gross carrying amount at
default (£m)
Lifetime ECL (£m)
Adjustment for forward looking estimate
Total expected credit loss
3.7
(0.1)
–
(0.1)
2.2
(0.1)
–
(0.1)
0.1
–
–
–
Total
12.31
9.0
(1.1)
(0.3)
(1.4)
2.7
(0.8)
(0.3)
(1.1)
1 This represents the total lifetime expected credit loss as a percentage of total group receivables.
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
0.3
(0.1)
–
(0.1)
Note
14c
Note
14c
14c
Year to
30 December
2019
£m
Year to
30 December
2018
£m
–
(4.6)
(4.6)
30 December
2019
£m
30 December
2018
£m
–
–
–
–
–
–
7.4
(4.6)
(1.2)
(0.8)
(0.8)
–
The Group’s only significant associate during 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 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 December 2018 and
reflecting this the Group’s remaining interest in the Kingfisher Limited Partnership was reclassified to a Fixed Asset Investment effective
from that date.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
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.
108
Year to
30 December
20191
Total
£m
Year to
30 December
20181
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)
–
–
–
–
–
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
15 CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Security deposits held in rent accounts
Other restricted balances
30 December
2019
£m
30 December
2018
£m
90.5
0.7
4.7
95.9
27.3
0.6
4.1
32.0
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 2019 were held in sterling other than £0.3 million which
was held in euros (30 December 2018: £0.2 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 18 days (2018: 34 days). No amounts incur interest (2018: £nil).
30 December
2019
£m
30 December
2018
£m
0.1
1.7
1.8
3.4
5.2
1.8
20.0
3.8
25.6
9.3
0.8
35.7
0.3
1.7
2.0
0.2
2.2
2.8
17.6
5.3
25.7
10.5
0.9
37.1
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
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
Note
17d
17d
30 December
2019
£m
30 December
2018
£m
427.4
–
427.4
(4.6)
422.8
–
422.8
422.8
438.4
–
438.4
(5.5)
432.9
–
432.9
432.9
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 The Marlowes Hemel Hempstead. The facility is undrawn as at 31 December 2019. 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 2018 and 30 December 2019.
17b Maturity of borrowings
From two to five years
Greater than five years
Due after more than one year
Current
17c Undrawn committed facilities
Expiring between two and five years
Expiring greater than five years
30 December
2019
£m
30 December
2018
£m
Note
262.4
165.0
427.4
–
427.4
134.4
304.0
438.4
–
438.4
17a
30 December
2019
£m
30 December
2018
£m
22.0
–
30.0
–
The Articles of the Company include some restrictions on borrowing but this did not limit the amount available for drawdown on the
above facility during the current year or the preceding year.
17d Interest rate and currency profile of borrowings
Fixed and swapped rate borrowings
Between 2% and 3%
Between 3% and 4%
Variable rate borrowings
110
30 December
2019
£m
30 December
2018
£m
Note
17a
17a
39.0
388.4
427.4
–
427.4
39.0
399.4
438.4
–
438.4
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
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 35% to 45% 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
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
Note
17a
15
Note
18e
10b
30 December
2019
£m
30 December
2018
£m
427.4
(90.5)
336.9
375.1
90%
438.4
(27.3)
411.1
433.0
95%
30 December
2019
£m
30 December
2018
£m
427.4
(90.5)
336.9
375.1
90%
727.1
–
727.1
46%
438.4
(27.3)
411.1
433.0
95%
855.2
–
855.2
48%
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
18 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
18A OVERVIEW continued
Categories of financial (liabilities)/assets
Financial assets
Current receivables
Cash and cash equivalents
Interest rate swaps
Interest rate caps
Financial assets measured at
amortised cost
Financial liabilities
Current payables
Current borrowings
Non-current payables
Non-current borrowings
Interest rate swaps
Financial liabilities measured at
amortised cost
Total financial (liabilities)/assets
Note
13
15
13
13
16
17a
16
17a
16
Carrying
value
£m
2019
Gain/(loss)
to income
£m
Gain to
equity
£m
Carrying
value
£m
2018
Gain/(loss)
to income
£m
Gain to
equity
£m
8.9
95.9
–
–
104.8
(25.6)
–
(1.8)
(422.8)
(3.4)
(453.6)
(348.6)
–
–
–
–
–
–
–
–
(1.0)
(4.7)
(5.7)
(5.7)
–
–
–
–
–
–
–
–
–
–
–
–
9.5
32.0
1.2
–
42.7
(25.7)
–
(2.0)
(432.9)
(0.2)
(460.8)
(418.1)
–
–
2.3
–
2.3
–
–
–
(1.0)
0.3
(0.7)
1.6
–
–
–
–
–
–
–
–
–
–
–
–
Significant accounting policies
Details of the significant accounting policies adopted in respect of each class of financial asset, financial liability and equity instrument,
including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, are
disclosed in the 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.
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Loan facility
Hemel Hempstead
Hemel Hempstead
The Mall, Luton
Four Mall assets
The Exchange, Ilford
Maturity date
6 February 2023
6 February 2023
30 December 2023
22 January 2024
8 March 2024
Notional principal
£18,650,000
£8,237,000
£96,500,000
£100,000,000
£39,000,000
Contract fixed rate
1.33%
1.30%
1.14%
1.13%
1.00%
30 December 2019
fair value £m
liability
(0.3)
(0.1)
(1.3)
(1.3)
(0.3)
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
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.
Floating rate loans and cash – (loss)/gain
Interest rate derivatives – gain/(loss)
Impact on the income statement - (loss)/gain
Impact on equity – (loss)/gain
100bps increase in interest rates 100bps decrease in interest rates
Year to
30 December
2019
£m
Year to
30 December
2018
£m
Year to
30 December
2019
£m
Year to
30 December
2018
£m
–
10.2
10.2
10.2
–
13.0
13.0
13.0
–
(10.2)
(10.2)
(10.2)
–
(13.0)
(13.0)
(13.0)
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 expected credit loss
allowance 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, calculated in accordance with IFRS 9. The Group recalculates expected credit losses each year, with
reference to forward looking information, changes in credit risk, including improvements, being identified as part of this process. The
Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and
revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk before the amount
becomes past due.
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.
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 £15 million fully available at 30 December 2019 as disclosed in Note 17c.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS 18 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
18d Liquidity risk continued
The following table shows the maturity analysis of non-derivative financial assets/(liabilities) at the balance sheet date and, where
applicable, their effective interest rates.
2019
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Financial liabilities
Borrowings – bank loans
Borrowings – other loans
Current payables
Non-current payables
2018
Financial assets
Current receivables
Cash and cash equivalents
Financial liabilities
Borrowings – bank loans
Borrowings – other loans
Current payables
Non-current payables
Note
13
15
13
17a
16
16
16
Note
13
15
17a
16
16
16
Effective
interest rate
%
Less than
1 year
£m
1–2 years
£m
2–5 years
£m
More than
5 years
£m
–
0.5%
–
–
3.3%
2.3%
–
–
–
8.9
95.9
–
104.8
–
–
(25.6)
–
(25.6)
–
–
–
–
–
–
–
(0.1)
(0.1)
–
–
–
–
(132.8)
(1.7)
–
–
(134.5)
Effective
interest rate
%
Less than
1 year
£m
1–2 years
£m
2–5 years
£m
–
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)
–
–
–
–
(290.0)
–
–
–
(290.0)
More than
5 years
£m
–
–
–
(300.5)
–
–
–
(300.5)
Total
£m
8.9
95.9
–
104.8
(422.8)
(1.7)
(25.6)
(0.1)
(450.2)
Total
£m
9.5
32.0
41.5
(432.9)
(1.7)
(25.7)
(0.3)
(460.6)
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
required to pay, including both interest and principal cash flows.
2019
Borrowings – fixed bank loans
Borrowings – other fixed loans
Non-interest bearing
2018
Borrowings – fixed bank loans
Borrowings – other fixed loans
Non-interest bearing
Less than
1 year
£m
(13.8)
–
(25.6)
(39.4)
Less than
1 year
£m
(14.2)
–
(25.7)
(39.9)
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
(13.8)
(2.1)
(0.1)
(16.0)
(13.8)
–
–
(13.8)
(13.8)
–
–
(13.8)
(136.4)
–
–
(136.4)
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)
More than
5 years
£m
(182.8)
–
–
(182.8)
More than
5 years
£m
(321.8)
–
–
(321.8)
Total
£m
(374.4)
(2.1)
(25.7)
(402.2)
Total
£m
(526.3)
(2.3)
(26.0)
(554.6)
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
18 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
18d Liquidity risk continued
The following tables detail the Group’s remaining contractual maturity for its derivative financial assets/(liabilities), all of which are
net settled, based on the undiscounted net cash inflows/(outflows). When the amount payable or receivable is not fixed, it has been
determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.
2019
Net settled
Interest rate swaps
2018
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
(0.9)
(0.9)
(0.9)
(0.9)
(0.9)
(0.9)
(0.7)
(0.7)
–
–
–
–
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
(0.9)
(0.9)
(0.9)
(0.9)
(0.9)
(0.9)
(0.9)
(0.9)
(0.7)
(0.7)
–
–
Total
£m
(3.4)
(3.4)
Total
£m
4.3
4.3
18e Fair values of financial instruments
The fair values of financial instruments together with their carrying amounts in the balance sheet are as follows:
Note
18a
18a
13
Financial liabilities not at fair value
through income statement
Sterling denominated loans
Total on balance sheet borrowings
Group share of associate borrowings
Total see-through borrowings
Derivative assets/(liabilities) at fair value
through income statement
Interest rate caps
Interest rate swaps
Total on balance sheet derivatives
Group share of sterling interest rate caps in
associates and joint ventures
Group share of sterling interest rate swaps in
associates and joint ventures
Total see-through derivatives
Notional
principal
£m
2019
Book value
£m
2019
Fair value
£m
2018
Book value
£m
2018
Fair value
£m
(427.4)
(427.4)
–
(427.4)
(431.8)
(431.8)
–
(431.8)
(438.4)
(438.4)
–
(438.4)
(437.9)
(437.9)
–
(437.9)
427.4
–
–
(3.4)
(3.4)
–
–
(3.4)
–
(3.4)
(3.4)
–
–
(3.4)
–
1.3
1.3
–
–
1.3
–
1.3
1.3
–
–
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.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
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
2019
Number
2018
Number
726,389,117
312,451,263
1,038,840,380
718,275,760
8,113,357
726,389,117
2019
£m
7.3
3.1
10.4
2018
£m
7.2
0.1
7.3
The Company has one class of Ordinary shares which carry voting rights but no right to fixed income.
On 15 January 2020 the Company completed a share consolidation whereby every ten Ordinary Shares of 1 pence each were
consolidated into one ordinary share of 10 pence each; this resulted in 103,884,025 shares being in circulation.
The Company maintains a Secondary Listing on the Johannesburg Stock Exchange (“JSE”) in South Africa. At 30 December 2019,
58,738,414 (2018: 64,420,122) 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 2018
04 November 2019 – new shares issued
09 December 2019 – new shares issued
23 December 2019 – new shares issued
Carried forward at 30 December 2019
Price per share
(Pence)
No. of shares
Total No. of
shares
Nominal value
(£m)
Share premium
(£m)
1.0
25.0
1.0
1,000,000
726,389,117
727,389,117
311,451,258 1,038,840,375
5 1,038,840,380
1,038,840,380
7.3
–
3.1
–
10.4
166.5
–
71.5
–
238.0
20 SHARE-BASED PAYMENTS
The Group’s share-based payments comprise the 2008 LTIP and the Executive Directors’ deferred bonus share scheme (DBSS). 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, which is subsequently updated at each reporting date.
Income statement charge
Equity-settled share-based payments – 2008 LTIP & CIP
The figures above exclude a National Insurance credit in the year of £nil (2018: credit of £0.1 million).
Movements during the year
Outstanding at 30 December 2017
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at 30 December 2018
Granted during the year
Exercised during the year1
Forfeited during the year
Outstanding at 30 December 2019
Exercisable at the end of the year
Year to
30 December
2019
£m
Year to
30 December
2018
£m
0.1
0.7
Number of Options
Deferred
Bonus Share
Scheme
275,146
–
–
–
275,146
56,361
(50,106)
–
281,401
225,040
LTIP
14,703,482
4,632,222
(691,480)
(6,128,416)
12,515,808
–
(833,600)
(3,472,952)
8,209,256
–
1 The weighted average share price of options exercised during the year was 26.7p (2018: 45.1p).
All options in the tables above have a nil exercise price. Figures are unadjusted for the impact of the 10 for 1 share consolidation that
completed on 15 January 2020. Outstanding amounts need to be reduced by a multiple of ten needs to calculate the equivalent number
of shares.
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
20 SHARE-BASED PAYMENTS CONTINUED
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 2015
March 2016
August 2017
April 2018
57.8p
0.0p
34%
4.50
0.68
0.96%
5.00%
0%
23p
59.5p
0.0p
27%
5.00
2.64
0.56%
5.00%
0%
26p
59.5p
0.0p
19%
5.00
3.30
0.53%
5.70%
0%
25p
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.
21 OWN SHARES HELD
At the start of the year
Disposed of
At the end of the year
Own shares
held
£m
–
–
–
The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2019, the Capital &
Regional plc 2002 Employee Share Trust (the “ESOT”) held 608,694 (2018: 491,219) 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 2019 was £0.2 million (2018: £0.1 million).
22 RECONCILIATION OF NET CASH FROM OPERATIONS
(Loss) 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 operations1
Note
8a
14a
11
Year to
30 December
2019
£m
Year to
30 December
2018
£m
(121.0)
(25.6)
–
(0.4)
23.9
(3.4)
138.6
–
0.5
2.7
(0.4)
(3.1)
0.1
37.5
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. Due to presentational adjustments, this value differs to the preliminary announcement published on 5 March 2020.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
23 CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
2019
Bank loans
Interest rate swaps
Finance lease liabilities
Total liabilities from financing activities
2018
Bank loans
Interest rate swaps
Finance lease liabilities
Total liabilities from financing activities
Note
17a
16
26
Note
17a
16
26
Non-cash changes
Financing
cash flows
Fair value
adjustments
Other
changes
30 December
2019
(11.0)
–
–
(11.0)
–
3.2
–
3.2
1.0
–
(0.1)
0.9
422.9
3.4
61.5
487.8
Non-cash changes
Financing
cash flows
Fair value
adjustments
Other
changes
30 December
2018
9.9
–
–
9.9
–
(1.3)
–
(1.3)
0.8
–
(0.1)
0.7
432.9
0.2
61.6
494.7
Opening
432.9
0.2
61.6
494.7
Opening
422.2
1.5
61.7
485.4
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:
Basic net assets
Own shares held
Dilutive contingently issuable shares and share options
Fair value of fixed rate loans (net of tax)
EPRA triple net assets
Exclude fair value of fixed rate loans (net of tax)
Exclude fair value of see-through interest rate derivatives
Exclude deferred tax on unrealised gains and capital
allowances
EPRA net assets
Note
21
18e
Net assets
£m
375.1
(4.4)
370.7
4.4
3.5
–
378.6
30 December 2019
Number of
shares (m)
Net assets
per share1
30 December
2018
Net assets
per share
36.1p
59.6p
1,038.8
(0.6)
3.3
1,041.5
35.6p
59.3p
1,041.5
36.4p
59.1p
1 Per share amounts are unadjusted for the impact of the 10 for 1 share consolidation that completed on 15 January 2020. A multiple of ten needs to be
applied to calculate the equivalent values.
25 RETURN ON EQUITY
Total comprehensive income attributable to equity shareholders
Opening equity shareholders’ funds plus time weighted additions
Return on equity
30 December
2019
£m
30 December
2018
£m
(121.0)
437.5
(27.7)%
(25.6)
482.9
(5.3)%
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
26 LEASE ARRANGEMENTS
The Group as lessee – operating leases
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
2019
£m
(2.3)
(9.4)
(5.3)
(17.0)
2018
£m
(2.2)
(9.0)
(7.6)
(18.8)
Operating lease payments are denominated in sterling and have an average remaining lease length of seven years (2018: eight years)
and rentals are fixed for an average of two years (2018: three years). During the year there were no contingent rents (2018: £nil) and the
Group incurred lease payments recognised as an expense of £2.2 million (2018: £2.1 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
2019
£m
3.5
13.8
354.9
372.2
(310.7)
61.5
2018
£m
3.5
13.9
358.2
375.6
(314.0)
61.6
Finance lease liabilities are in respect of head leases on investment property. These leases provide for payment of contingent rent,
usually a proportion of net rental income, in addition to the rents above.
The Group as lessor
The Group leases out all of its investment properties under operating leases for average lease terms of six years (2018: seven years)
to expiry. The leasing arrangements are summarised in the portfolio information on page 132. The future aggregate minimum rentals
receivable under non-cancellable operating leases are as follows:
Unexpired
average
lease
term
Years
5.4
6.8
Less
than 1
year
£m
42.5
44.8
2–5
years
£m
106.2
116.4
6–10
years
£m
51.6
60.7
11–15
years
£m
23.2
29.2
16–20
years
£m
12.0
15.6
More
than 20
years
£m
59.3
79.9
Total
£m
294.8
346.6
30 December 2019
30 December 2018
27 CAPITAL COMMITMENTS
At 30 December 2019, the Group’s share of the capital commitments of its associates, joint ventures and wholly-owned properties was
£3.9 million (2018: £3.5 million) relating to capital expenditure projects.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS 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 have provided an indemnity to the purchaser for potential German Real Estate Transfer Tax (RETT) liabilities if they arise out
of actions undertaken by the Group within five years post completion. This period expired on 10 February 2020. 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
On 15 January 2020 a 10:1 share consolidation came into effect. Every ten Ordinary Shares of 1 pence each have been converted into one
ordinary share of 10 pence each, this resulted in 103,884,025 shares being in issue on this date.
In March 2020 the COVID-19 virus was declared a pandemic. Government announcements progressively brought in restrictions resulting
in only shops providing essential services being allowed to remain open for trade. While all of the Group’s shopping centres remained
open as at 15 April 2020, being the last practicable day before finalising this report, a majority of its tenants had closed as of the end of
March. While It is too early to quantify the overall impact of COVID-19 on the Group's operations there will clearly be a significant level of
disruption both to income, in at least the short term, and potentially to property valuations depending on how long it is until conditions
allow a return to a more normalised trading environment.
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
2019
£m
Year to
30 December
2018
£m
As at
30 December
2019
£m
As at
30 December
2018
£m
0.7
0.7
0.1
–
The Group’s interest in the Kingfisher Limited Partnership was 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 and they are payable on demand and
settled in cash. Management fees are received by Capital & Regional Property Management Limited (CRPM) and are payable on demand.
They are unsecured, do not incur interest and are settled in cash.
Property Management incentive arrangements
CRPM will earn an additional equity return from Kingfisher Limited Partnership if distributions result in a geared return in excess of a
15% IRR. The Group will bear 12% of the cost by virtue of its investment in the Partnership. No performance fee has been recognised
during the year (2018: 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
2019
£m
Year to
30 December
2018
£m
1.3
0.1
0.1
1.5
1.6
0.1
0.3
2.0
In both years the highest paid Director was the Chief Executive whose remuneration is disclosed in the Directors’ Remuneration Report
on page 63.
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capreg.comCapital & Regional plcFINANCIALSNotes to the financial statementsContinued
31 DIVIDENDS
The dividends shown below are gross of any take-up of Scrip offer.
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
Final dividend per share for year ended 30 December 2018 of 0.6p
Interim dividend per share paid for year ended 30 December 2019 of 1.0p
Amounts recognised as distributions to equity holders in the year
Proposed final dividend per share for year ended 30 December 2019 of 11p
per 10p shares (this is equivalent to 1.1p per old 1p shares – see note 29)1
Year to
30 December
2019
£m
Year to
30 December
2018
£m
–
–
4.4
7.2
11.6
11.4
13.7
13.1
–
–
26.8
4.4
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.
32 ULTIMATE CONTROLLING PARTY
On 9 December 2019 Growthpoint Properties Limited (“Growthpoint”) were issued 311,451,258 new Capital & Regional plc shares at 25
pence per share which enlarged the Group’s total issued share capital to 1,038,840,375. By 23 December 2019 Growthpoint completed a
partial offer to acquire a further 219,786,924 Capital & Regional plc shares at 33 pence per share.
These two transactions combined resulted in Growthpoint holding 51.2% of the issued share capital of the Company. As such
Growthpoint is the ultimate controlling party of the Company and the largest group into which the results of the Company are
consolidated. The registered office of Growthpoint Properties Limited is The Place, 1 Sandton Drive, Sandton, 2196, Johannesburg,
South Africa.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
Company balance sheet
At 30 December 2019
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
2019
£m
2018
£m
C
D
E
344.0
459.8
94.0
0.1
94.1
(18.8)
(18.8)
75.3
419.3
10.4
238.0
60.3
4.4
106.2
419.3
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
The loss for the year attributable to equity shareholders was £104.0 million (2018: £22.3 million profit).
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on 16 April 2020 by:
Lawrence Hutchings
Chief Executive
Stuart Wetherly
Group Finance Director
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capreg.comCapital & Regional plcFINANCIALS
Statement of changes in equity
For the year to 30 December 2019
Non-distributable
Distributable
Share
capital
£m
Share
Premium
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Retained
earnings
£m
Merger
reserve
£m
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
Retained loss for the year
Total comprehensive loss for the year
Dividends paid, net of Scrip
Shares issued, net of costs
Balance at 30 December 2019
7.2
–
–
–
0.1
7.3
–
–
–
3.1
10.4
163.3
–
–
–
3.2
166.5
–
–
–
71.5
238.0
4.4
–
–
–
–
4.4
–
–
–
–
4.4
–
–
–
–
–
–
–
–
–
–
–
226.3
22.3
22.3
(23.5)
(3.3)
221.8
(104.0)
(104.0)
(11.6)
–
106.2
60.3
–
–
–
–
60.3
–
–
–
–
60.3
Total
£m
461.5
22.3
22.3
(23.5)
–
460.3
(104.0)
(104.0)
(11.6)
74.6
419.3
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 32 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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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
Notes to the Company’s separate
financial statements
For the year ended 30 December 2019
A ACCOUNTING POLICIES
The Company’s separate financial statements for the year ended 30 December 2019 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. The following new or revised accounting standards
are applicable for the first time in the year ended 30 December 2019:
− IFRS 15 “Revenue from Contracts with Customers”
− IFRS 9 “Financial Instruments”
IFRS 15 “Revenue from Contracts with Customers”
The Company adopted IFRS 15 “Revenue from Contracts with Customers” on 31 December 2018. Prior to its adoption, the Company
completed a review of the requirements of IFRS 15 against its current accounting policies. The Company concluded that there was no
material change in the amounts and timing of revenue recognised following the adoption of the standard and no transition adjustments
have been made.
IFRS 9 “Financial Instruments”
The adoption has not had a material impact on the recognition and measurement of income and costs or of assets and liabilities. An
expected credit loss model has been applied to receivables from subsidiaries at 30 December 2019 based on actual losses experienced
over the past two years. The Directors have assessed the impact to be immaterial. The changes in accounting policies resulting from the
adoption of IFRS 9 have been applied retrospectively.
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.
Trade payables are carried at fair value, with any gains or losses arising on remeasurement recognised in the income statement.
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 (2018: 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.
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:
Impairment of investments and intercompany receivables
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.
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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capreg.comCapital & Regional plcFINANCIALS C FIXED ASSET INVESTMENTS
Cost
At the start of the year
Additions
Disposals
At the end of the year
Impairment
At the start of the year
Impairment of investments
At the end of the year
Carrying value
At the end of the year
Subsidiaries
£m
Other
investments
£m
1,161.4
–
–
1,161.4
(702.6)
(115.8)
(818.4)
13.9
–
–
13.9
(12.9)
–
(12.9)
Total
£m
1,175.3
–
–
1,175.3
(715.5)
(115.8)
(831.3)
343.0
1.0
344.0
Investments are subject to an impairment review using discount rates in the range of 8.5% 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
2019
£m
94.0
–
94.0
2018
£m
14.1
0.3
14.4
Amounts owed by subsidiary companies are unsecured and repayable on demand. Interest is charged at 3.5% above Bank of England
base rate per annum.
E TRADE AND OTHER PAYABLES
Amounts falling due within one year
Amounts owed to subsidiaries
Trade payables
Taxation and social security
Accruals and deferred income
2019
£m
14.5
0.3
0.1
3.9
18.8
2018
£m
14.0
–
–
3.1
17.1
Amounts owed to subsidiary companies are unsecured and repayable on demand. Interest is charged at 3.5% above Bank of England
base rate per annum.
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
Notes to the Company's separate
financial statements
Continued
F SUBSIDIARIES AT 30 DECEMBER 2019
Subsidiaries
Capital & Regional (Europe Holding 5) Limited 2
Capital & Regional (Jersey) Limited 2
Capital & Regional (Mall GP) Limited
Capital & Regional (Projects) Limited
Capital & Regional (Shopping Centres) Limited 2
Capital & Regional Earnings Limited
Capital & Regional Holdings Limited
Capital & Regional Ilford Limited 2
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 Limited 1,3
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 In liquidation/being dissolved.
2 Registered office at 47 The Esplanade, St Helier, Jersey, JE1 0BD.
3 Registered office at Griffins, Tavistock House South, Tavistock Square, London, WC1H 9LG.
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capreg.comCapital & Regional plcFINANCIALS
F SUBSIDIARIES AT 30 DECEMBER 2019 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 Limited 2
MB Roding (Guernsey) Limited 4
Selborne One Limited
Selborne Two Limited
Selborne Walthamstow Limited 2
Snozone Holdings Limited
Snozone Leisure Limited
Snozone Limited
The Mall (General Partner) Limited
The Mall (Luton) (General Partner) Limited
The Mall Limited Partnership
The Mall (Luton) Limited Partnership
The Mall REIT Limited
The Mall Shopping Centres Limited
The Mall Unit Trust 2
The Mall Walthamstow One Limited
The Mall Walthamstow Two Limited
Wood Green London Limited 2
Wood Green One Limited
Wood Green Two Limited
Principal associate entities
Euro B-Note Holding Limited 2
1 In liquidation/being dissolved.
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%
2 Registered office at 47 The Esplanade, St Helier, Jersey, JE1 0BD.
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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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS
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.
C&R Trade index is an internal retail tracker using data from
approximately 300 retail units across C&R’s shopping centre
portfolio.
CRPM is Capital & Regional Property Management Limited, a
subsidiary of Capital & Regional plc, which earns management and
performance fees from the Mall assets and certain associates and
joint ventures of the Group.
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.
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.
Debt is borrowings, excluding unamortised issue costs.
EPRA earnings per share (EPS) is the profit/(loss) after tax
excluding gains on asset disposals and revaluations, movements
in the fair value of financial instruments, intangible asset
movements and the capital allowance effects of IAS 12 “Income
Taxes” where applicable, less tax arising on these items, divided by
the weighted average number of shares in issue during the year
excluding own shares held.
EPRA net assets per share include the dilutive effect of
share-based payments but ignore the fair value of derivatives,
any deferred tax provisions on unrealised gains and capital
allowances, any adjustment to the fair value of borrowings net of
tax and any surplus on the fair value of trading properties.
EPRA triple net assets per share include the dilutive effect
of share-based payments and adjust all items to market value,
including trading properties and fixed rate debt.
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.
128
Gearing is the Group’s debt as a percentage of net assets.
See-through gearing includes the Group’s share of non-recourse
debt in associates and joint ventures.
Interest 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).
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.
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.
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.
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capreg.comCapital & Regional plcFINANCIALS 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.
Rent to sales ratio is Contracted rent excluding car park income,
ancillary income and anchor stores expressed as a percentage of
net sales.
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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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS 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 share1
2019
£m
770.9
18.1
–
–
95.9
–
(20.3)
(422.8)
(66.7)
375.1
10.4
238.0
64.7
62.0
375.1
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
(27.7)%
(37.2)%
(2.0)%
25.4p
(5.3)%
(5.5)%
(46.5)%
27.6p
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
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
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
(121.0)
(25.6)
22.4
(4.4)
98.4
36p
36p
36p
114%
89.0
53.6
(97.5)
(23.5)
(121.0)
–
(121.0)
27.4
3.7p
3.2
(16.2)p
(16.2)p
(3.5)p
21.0p
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
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
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
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
1 Interim dividend per share has been amended to reflect the share consolidation subsequent to year end.
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Proof 8
Proof 8
Proof 8
capreg.comCapital & Regional plcFINANCIALS
Covenant information (unaudited)
Wholly owned assets
Borrowings
£m
Covenant1
30 December
2019
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%
£375.1m
0.9:1
366.9%
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%
265.0 No greater than 70%
No less than 175%
56.8%
285.7%
Luton
Loan to value2
96.5 No greater than 80%
64.9%
Covenant, 70% from 1 October
2020, 65% from January 2022
Debt yield
Historic interest cover
A projected interest cover test also applies at a covenant level of no less than 200%
No less than 8%
No less than 250%
11.5%
371.7%
Hemel Hempstead
Loan to Gross Development Value2,3
Historic interest cover
26.9 No greater than 60%
No less than 200%
43.0%
276.0%
Ilford
Loan to value2
Historic interest cover
A projected interest cover test also applies at a covenant level of no less than 225%
39.0 No greater than 70%
No less than 225%
50.4%
399.6%
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 2019 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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Proof 8
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131
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS Wholly-owned assets portfolio
information (unaudited)
At 30 December 2019
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:
2020
2021
2022-2024
ERV (£m) of leases expiring in:
2020
2021
2022-2024
Passing rent (£m) subject to review in:
2020
2021
2022-2024
ERV (£m) of passing rent subject to review in:
2020
2021
2022-2024
Rental Data
Contracted rent (£m)
Passing rent (£m)
ERV (£m per annum)
ERV movement (like-for-like)
Occupancy
132
7
757
3.5
727.1
43.8
770.9
138.6
6.9%
7.6%
10.2%
58.8%
46.3%
5.7
6.9
8.6
5.5
13.8
9.5
6.4
13.6
3.9
3.3
8.0
4.6
3.4
9.0
60.8
58.8
64.8
(3.7)%
97.2%
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Proof 8
Proof 8
capreg.comCapital & Regional plcFINANCIALS EPRA performance measures
(unaudited)
At 30 December 2019
EPRA earnings (£m)
EPRA earnings per share (diluted)1
EPRA net assets (£m)
EPRA net assets per share1
EPRA triple net assets (£m)
EPRA triple net assets per share1
Note
9a
9a
24
24
24
24
2019
26.4
3.5p
378.6
36.4p
370.7
35.6p
2018
28.7
4.0p
431.7
59.1p
433.5
59.3p
EPRA vacancy rate (UK portfolio only)
2.8%
2.4%
1 Per share amounts are unadjusted for the impact of the 10 for 1 share consolidation that completed on 15 January 2020. A multiple of ten needs to be
applied to calculate the equivalent values.
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 & associate expenses
Less inclusive lease costs recovered through rent
EPRA costs (including direct vacancy costs)
Direct vacancy costs
EPRA costs (excluding direct vacancy costs)
Gross rental income
Less ground rent costs
Share of joint venture & associate gross rental income less ground rent costs
Less inclusive lease costs recovered through rent
Gross rental income
2019
£m
727.1
–
–
727.1
(8.7)
48.0
766.4
62.9
(12.8)
50.1
2.0
52.1
6.5%
6.8%
2019
£m
36.0
8.8
(14.6)
(0.8)
(9.0)
–
(2.0)
18.4
(3.3)
15.1
63.0
(2.8)
–
(2.0)
58.2
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
EPRA cost ratio (including direct vacancy costs)
EPRA cost ratio (excluding vacancy costs)
31.6%
25.9%
29.6%
25.1%
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Annual Report and Accounts for the year ended 30 December 2019Stock Code: CALFINANCIALS 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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Proof 8
capreg.comCapital & Regional plcFINANCIALS 27188
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Proof 8
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06/05/2020 10:49:06
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Proof 8
CAPITAL & REGIONAL PLC
22 Chapter Street
London SW1P 4NP
Tel: +44 (0)20 7932 8000
CAPREG.COM
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