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Supporting
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Annual Report and Accounts
for the year ended 30 De cember 2020
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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.
Our values
INSPIRING
CREATIVE
THINKING
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
ACTING
WITH
INTEGRITY
DELIVERING
DYNAMIC
SOLUTIONS
Our vision
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
facilitates to satisfy our growing
and evolving communities' needs.
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2020 Highlights
BUSINESS OVERVIEW
FINANCIAL HIGHLIGHTS
Net Rental Income
Adjusted Profit1
2020
2019
£34.1m
2020
£10.3m
£49.3m
2019
£27.4m
Adjusted Earnings
per Share1 2
IFRS Loss
for the Period
2020
2019
9.5p
£(203.4)m
36.7p
£(121.0)m
2020
2019
Basic Earnings
per Share2
(188.3)p
(162.3)p
Total Dividend
per Share2
2020
2019
2020
2019
21p
Net Asset Value (NAV)
per Share2
EPRA NTA
per Share2
2020
2019
150p
2020
2019
361p
158p
364p
Group
Net Debt
2020
2019
Net Debt to
Property Value
£345.1m
2020
£336.9m
2019
65%
46%
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, and other non-operational items. A reconciliation to the equivalent EPRA and statutory
measures is provided in Note 9 to the financial statements.
2.
Per share amounts have been restated to reflect the impact of the 10 for 1 share consolidation that completed
on 15 January 2020.
For further information see
CAPREG.COM
CONTENTS
BUSINESS OVERVIEW
At a Glance
Covid-19 Statement
Our Portfolio
Chairman’s Statement
STRATEGIC REPORT
The Market Backdrop
Our Strategy
Our Business Model
Key Performance Indicators
Chief Executive’s Statement
Operating Review
Financial Review
Managing Risk
Our Stakeholders
ESG Report
02
04
06
08
10
14
18
20
22
24
29
34
40
42
GOVERNANCE
Board of Directors
Senior Leadership Team
Corporate Governance Report
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
52
54
55
62
63
66
68
75
Directors’ Report
84
Directors’ Responsibilities Statement 88
Independent Auditor’s Report
89
Policy
2020 Remuneration Report
100
100
101
FINANCIALS
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of
Changes in Equity
102
Consolidated Cash Flow Statement 103
Notes to the Financial Statements 104
Company Balance Sheet
137
Statement of Changes in Equity
138
Notes to the Company’s
Separate Financial Statements
Glossary of Terms
Five Year Review (Unaudited)
Portfolio Information
(unaudited)
EPRA Performance Measures
(unaudited)
Covenant Information
(unaudited)
Advisers and Corporate
Information
Shareholder Information
139
143
145
150
150
147
146
149
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Stock Code: CAL
At a Glance
We invest in, 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 in 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 provide shareholder value
through income growth.
Our Investment Case
1
2
3
4
Dominant Community
Locations
Our centres are in the heart
of the community, with
strong transport links and
are ideally positioned to
serve their communities.
Diversified Income
Streams
Our mixed-use community
hubs provide a number of
different income streams.
Experienced
Management
We have a diverse and
experienced management
team.
Close Relationships
With Communities
Enable us to respond to
community needs quickly
and effectively.
Our Vision
We define and lead Community Shopping, through our passionate creation of vibrant
retail spaces and exceptional customer and guest experience.
We are developing and delivering dynamic community hubs in the heart of town centres that provide a mix of uses, including everyday
services and facilities to satisfy our growing and evolving communities’ needs.
What we provide – We sit firmly in a position to serve our guests’ essential and regular non-discretionary shopping needs and services.
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.
02
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BUSINESS OVERVIEW Our Strategy
Our ESG Strategy
Define
Define and own the Community shopping centre
category in the UK, consistent with global best
practice.
Environmental Sustainability
Focused on ethical and sustainable practices
that reduce consumption in the three key areas
of waste, water and energy.
Position
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.
People & Community
Our culture, who we are, how we work together
and support each other, is crucial in the delivery
of our strategic priorities. We foster trusted
relationships and make a positive contribution
to our communities, building a safe and inclusive
experience for all.
Focus
Agile management, data driven, decentralised
to accelerate decision-making and delivery.
Governance
High standards of corporate governance and
disclosure in line with best practice.
Read more on our ESG Strategy on pages 42 and 43
Enhance
Right offer driving footfall, dwell time and
ultimately retailer sales, C&R income and
shareholder returns.
Read more on our Strategy on pages 14 to 16
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BUSINESS OVERVIEW Covid-19 Statement
The impact of the Covid-19
pandemic first started in early
March 2020, as news regarding
the spread of the virus impacted
consumer confidence, followed by
the initial closure of non-essential
retail on 23 March 2020.
We immediately responded by supporting
our retailers forced to close, while
ensuring our essential retailers were
equally prepared for ongoing trading in a
challenging environment and supported
our retailers to reopen as restrictions
eased. All seven of the Company’s
community shopping centres remained
open throughout the periods of lockdown,
providing essential services to the
communities we serve. The approach we
adopted across our business throughout
2020 and into this year has been focused
on preserving value for our shareholders
while reaffirming our responsibility to our
teams and the communities we serve.
Preserving Cash
We initiated discussions with our lenders to
agree covenant waivers for the remainder
of 2020 and focused on maintaining
liquidity throughout the period of
disruption. In light of the evolving impact
of the Covid-19 pandemic, a scrip dividend
alternative was offered for the 2019
final dividend, resulting in the majority
of the proposed £11.4 million dividend
payment being preserved in cash within
the business. We focused on rent collection
and dedicated significant resource to this
area, assembling a team from across the
business to best utilise our relationships
with our tenant base at all levels. To further
improve cash flow we reviewed all non-
committed capital expenditure projects
over the course of 2020. Our Executive
Directors and Board also took a temporary
pay cut of 20% for the months of April, May
and June 2020.
Supporting Our Colleagues,
Guests and Retailer Customers
Our overriding priority during this time
has been the health, safety and protection
of our colleagues, guests and retailer
customers. Since the outbreak of the
virus, we have been rigorously following
the official Government guidelines and
advice across our portfolio. We completed
risk assessments of all our centres
and implemented measures including
additional training for our employees,
enhanced cleaning, increased signage
to maintain one-way systems and
04
social distancing and actively managed
centre capacity.
We entered into active discussions with
all our retailer customers regarding their
contractual obligations and the payment
of rent during the course of 2020. We
have worked closely with our retailers to
understand the specific impact of Covid-19
on their individual businesses, seeking to
come to agreements that amicably resolve
the position and appropriately share the
cost of periods when retailers have been
unable to operate. We have provided
support where possible, particularly in
relation to our smaller, independent
occupiers. At the same time, we have taken
a robust stance with larger, profitable and
well-capitalised national and international
retail businesses.
Our people are paramount to our success.
Following Government guidance, all
our Support Office and, where possible,
centre-based colleagues transitioned to
remote working in March 2020 and we put
measures in place to protect and support
our centre-based colleagues who were
unable to do so. Regular business updates
provided by the Chief Executive via our
Townhall meetings, online training focused
on mental health and wellbeing and
virtual social events ensured our teams
were supported and stayed connected
and motivated.
Recovery
The plans announced by the Government
on 22 February 2021 provide a roadmap
for an easing of restrictions, including,
most critically for our business, the
prospect of non-essential retailers being
able to reopen in mid-April 2021. We are
encouraged by how quickly our centres
rebounded following the easing of
restrictions at various points in 2020. Our
community centre strategy launched in
December 2017, and our focus on non-
discretionary goods serving the essential
needs of our local communities and the
in-town location of our centres means we
are well placed for when non-essential
retail reopens.
We look forward to the return to a more
normalised trading environment when
we will be able to better assess the retail
landscape and the needs of the business.
This in turn will allow us to determine
the best approach for addressing debt
levels and shaping the Group’s future to
capitalise on its strengths as an owner and
manager of community shopping centres.
We have placed our full weight behind
national campaigns led by our industry
bodies to increase awareness of the
importance of the high street and local
physical retail. We have also supported
the campaign to review business rates
in partnership with the British Retail
Consortium and other retailer groups.
Looking forward, we are confident in our
community centre positioning.
In this difficult year our focus
has been on preserving value
for our shareholders whilst
reaffirming our responsibility
to our teams and the
communities that we serve.
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
Read more about the effect of
Covid-19 on our operational
performance from page 24
Read more about the effect
of Covid-19 on our financial
performance from page 29
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BUSINESS OVERVIEWcapreg.comCapital & Regional plc ALL SEVEN OF
OUR CENTRES
REMAINED OPEN
THROUGHOUT 2020
80%
2020 RENT
COLLECTION
£60.3m
AVAILABLE
CENTRAL
CASH
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BUSINESS OVERVIEWAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL BUSINESS OVERVIEW
Our Portfolio
1
7
6
7
4
The Mall, Luton
5
Leasehold covered shopping centre
2
on two floors, with over 65,000 sq ft
of offices
3
1
7
7
8
900,000 sq ft
9
165 lettable units
Principal occupiers:
Tesco, Luton Borough Council, Primark,
H&M, TK Maxx, Wilko
6
7
4
2
5
The Mall, Walthamstow
3
Leasehold covered shopping centre
on two floors
8
9
280,000 sq ft
67 lettable units
Principal occupiers:
Lidl, Asda, Boots, The Gym, TK Maxx,
Sports Direct
7
1
9
8
9
4
2
3
5
6
9
7
Key
Wholly owned assets
Other interests
1
The Mall, Blackburn
7
Leasehold covered shopping
1
7
centre on three floors
600,000 sq ft
122 lettable units
Principal occupiers:
Primark, H&M, Next, Wilko, Pure Gym,
Blackburn with Darwen Council
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 parades
7
7
8
350,000 sq ft
110 lettable units
9
Principal occupiers:
Wilko, Sports Direct, Pure Gym,
Tesco Express
6
7
4
2
5
3
The Mall, Wood Green
Freehold partially open shopping
7
8
centre on two floors
9
617,000 sq ft
111 lettable units
Principal occupiers:
Primark, Wilko, Lidl, H&M, Boots,
TK Maxx, Travelodge, Cineworld
06
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BUSINESS OVERVIEWcapreg.comCapital & Regional plc 1
7
1
7
7
6 The Exchange, Ilford
Predominantly freehold covered shopping centre
4
on three floors
2
5
300,000 sq ft
3
79 lettable units
8
7
9
Principal occupiers:
Next, H&M, TK Maxx, M&S
6
7
4
2
3
5
7
The Mall, Maidstone
8
9
Freehold covered shopping centre
1
7
on three floors with over 40,000 sq ft
of offices
500,000 sq ft
110 lettable units
Principal occupiers:
Matalan, Pure Gym, TJ Hughes, Boots, Sports Direct,
Wilko, Iceland, Maidstone Borough Council
6
7
1
9
1
7
7
4
2
3
5
8
Kingfisher Shopping Centre, Redditch
9
C&R acts as Property & Asset Manager
Freehold covered shopping centre on
Centre Characteristics
Dominant strategic locations in the heart of growing towns
Easily accessible with strong transport links
Extensive accretive asset management opportunities (including
leisure, residential and office)
London/South-East bias. six of our seven wholly owned assets
are in the South East
Portfolio Statistics
TOTAL SQ FT
AFFORDABLE RENTS
3.6m sq ft
c.£13psf
average rent
c.12.6%
occupancy cost ratio
TOTAL NUMBER OF
RETAIL UNITS
TOTAL CAR PARKING
SPACES
764
AVERAGE
DWELL TIME
8,250
ESTIMATED RETAIL
CONVERSION RATE
66 minutes
73%
8
9
4
2
3
5
6
9
7
6
7
4
2
3
5
8
7
two principal trading levels
900,000 sq ft and 174 lettable units
Principal occupiers:
The Range, Primark, Next, TK Maxx, Vue Cinema, H&M
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, and in February
2021 became the operator of Snowzone Madrid
In existence since 2000 and has taught over 2
million people to ski or snowboard
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BUSINESS OVERVIEWAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Chairman’s Statement
Growthpoint’s investment into the
Company in December 2019 meant that
Capital & Regional began 2020 in an
optimistic frame of mind with strong cash
resources and net debt to property value of
46%, despite a decline in property values.
However, the position rapidly changed and,
as we are all well aware, 2020 turned out
to be a year of unprecedented challenges
for almost everyone, with the retail,
leisure and hospitality industries being
amongst the hardest hit by significant
restrictions on operations imposed as
part of Government’s efforts to mitigate
the impact of the pandemic. This flowed
through to the landlords in these sectors
and for the Company led to falls in income,
profitability and NAV per share while
contributing to increasing the ratio of net
debt to property value to 65%.
These restrictions materially impacted
all aspects of the Company’s operations
and, in turn, its share price. With falling
rental levels, very low investment demand
and little transactional evidence valuers
marked down the value of shopping centres
materially, particularly outside London.
This was further exacerbated by a higher
rate of corporate failure among retailers
who were already under pressure from
the continued growth of e-commerce with
household names such as Debenhams and
Arcadia falling by the wayside. Furthermore,
an already difficult environment for rent
collection was made even harder by
legislation which has prohibited legal
remedies to pursue contractual obligations.
As a result, the valuation of the Group’s
property portfolio fell from £727.1 million
at 30 December 2019 to £527.0 million at
30 December 2020. While early indications in
2021 are showing the first signs of investor
interest in the sector as a recovery play, the
potential for further falls in rental values
continue to place valuations under threat.
As asset valuations have come under
pressure, the Group’s net debt to property
value ratio has, consequently, increased
markedly over the year, from 46% to 65%.
Given the challenging circumstances, our
lenders have recognised the uniqueness
of this situation and have been highly
supportive in issuing waivers in respect
of covenants which would otherwise have
been breached. Management remains in
constant dialogue with lenders to agree
the most sustainable way forward, and
the Board fully recognises the pressures
which the current debt level places on the
finances of the Company. It is clear the
challenges associated with the pandemic
will not last forever and we remain alert to
the range of options we have available to
us to address debt levels.
Throughout the year we have been
committed to maintaining our cash
resources at the highest possible level,
reflected in total cash of £84.1 million
compared with £95.9 million at December
2019. The Board’s view is that these
resources should be used sparingly,
primarily focused on investment into value-
generating active management initiatives.
Against that backdrop, and without in
any way underestimating the impact on
shareholders of the Company’s finances
and share price, I think it is helpful to
highlight the operational resilience from
the year. All of the Company’s centres
have remained open throughout the
year, with approximately 30% of traders
providing essential goods and services
during the most extreme phases of
lockdown. Rent collection has been a focus
for the management team – especially
with respect to retailers who were able
to pay but chose not to - resulting in 80%
of rents due for the year being collected.
Footfall also proved to be resilient
compared to the national index and we
saw an encouraging trend back towards
normal levels when centres were fully
open at various intervals during the year,
confirming the validity of the Company’s
strategy of focusing on needs-based,
non-discretionary urban community retail
and giving us encouragement regarding
patterns of behaviour once restrictions
are eased. Finally, we were pleased to
report some positive transactional activity
during the year with 63 new leases and
renewals signed at levels generally well
above previous passing rents, agreements
in principle for several further material
lettings, and in December the signing of
a conditional agreement to sell land at
Walthamstow for residential development.
Furthermore, while operations in the
Snozone business have been heavily
impacted throughout the year, with
management focusing on cost savings, it is
heartening that, post the year end, a new
management contract has been signed on
a ski slope in central Madrid.
Dividend and Dividend Policy
The final dividend for 2019, paid in June
2020, was 11 pence per share and the
Board introduced a scrip option which
was taken up by 78% of shareholders,
allowing the preservation of cash as well as
demonstrating confidence in the business
from major shareholders.
2020 was a year
of unprecedented
challenges, with the
retail, leisure and
hospitality industries
being amongst the
hardest hit.
“
DAVID HUNTER
CHAIRMAN
08
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BUSINESS OVERVIEWcapreg.comCapital & Regional plc With significant reductions in revenue
flows no interim dividend was announced
and the Board has concluded that it would
be equally inappropriate to pay any final
dividend for 2020.
While rental flows remain uncertain,
coupled with banking covenants which
restrict the flow of cash through to
the Company, it is not possible to give
guidance as to when dividends might
resume. The Board is mindful of the
distribution requirements under the REIT
legislation, and notes some flexibility
from HMRC in the current circumstances.
However, preservation of cash remains the
key consideration for the Board.
We recognise that stakeholder
expectations of how we deliver our
community-based shopping experience
are evolving rapidly. In line with this, our
Responsible Business Committee in 2021
will become known as our ESG Committee.
This will enable us to better benchmark
against the highest standards and track the
performance of our net zero strategy in
line with industry best practice.
The next year will continue to pose risk,
uncertainty and opportunity. However, our
business is built to adapt and collaborate
with stakeholders to bring the innovation
necessary to deliver the next chapter of
our industry.
ESG
Capital & Regional’s long-standing
commitment to Environmental, Social
and Governance (ESG) best practice and
serving its communities is at the heart
of the Responsible Business Committee.
2020 brought into sharp focus why
this will remain core to our business
and just how vital the progress we
have made is in creating reassurance,
stability and opportunity amidst the
challenges associated with Covid-19. We
have an unwavering ambition to best
serve our employees, retailer customers
and communities.
Board
I was delighted to welcome Katie Wadey
to the Board in October 2020. Katie
brings a very interesting and relevant
customer-focused perspective which
will be of real value to the Company in
facing the challenges of a fast-evolving
retail marketplace and changing
consumer behaviour.
Given the financial circumstances of
the past 12 months, the Board has
decided not to make any further Board
appointments in the near future. As such,
while Tony Hales will stand down at the
2021 AGM, my colleagues Ian Krieger
and Laura White have agreed to take
on Tony’s roles, respectively, as Senior
Independent Director and Chair of the
Remuneration Committee.
People
Finally I would like to record my thanks to
our shareholders and lenders, as well as
to my Board colleagues, for their support
during this extraordinarily difficult year.
Most of all, however, I want to place on
record my appreciation of the exceptional
effort given by our staff at every level of the
business, which has enabled the Company
to withstand the challenges faced.
DAVID HUNTER
CHAIRMAN
24 March 2021
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BUSINESS OVERVIEWAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL The Market Backdrop
The continuing evolution of our assets in changing town centres
1
2
3
4
COMMUNITY AND
LOCAL FOCUS
REMERCHANDISING
RETAIL OFFER
EVOLVING ROLE
OF THE STORE
DIVERSIFICATION
OF USES
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.
Macroeconomic Trends
Covid-19
Covid-19 has created significant global
economic uncertainty and has had a
materially adverse impact across key retail
markets. UK retail market spend declined
by 3.9% (£13.5bn) to £330.5bn1 over
2020 and UK GDP fell by 9.9% over 20202,
although is expected to rebound in 2021.
Unemployment had risen to 5.1% by the
end of December 2020, with 3.8 million
jobs still on the government job retention
scheme. Government-imposed lockdowns,
compounded by social distancing resulting
in greatly reduced footfall, have had a
detrimental impact on town centres and
shopping destinations across the UK, with
repeated closures of non-essential retail.
Home working and stay at home guidance
has seen an acceleration in online
shopping, which in 2020 accounted for
26.2% of retail market share, up from
17.2% in 2019. However, despite the
restrictions on non-essential retail, physical
retailing still accounted for 73.8% of retail
market share. While physical retail saw a
14.3% decline in market share over the
same period1, performance varied across
different physical retail categories. Food
and grocery, a key part of our community
merchandising framework, has performed
strongly; and retailers with a strong and
well-developed omni-channel offer have
seen online pick up, providing some
mitigation to the reduction in in-store sales.
There are growing calls for reform of
business rates for physical retail, and
there is consensus that the system does
not reflect the changing online retail
market share and increasingly penalises
10
physical stores. A government review of
business rates reform more generally is
currently underway and due to conclude
during 2021.
Our strategy has positioned us well
to respond
Covid-19 accelerated the underlying long-
cycle structural shift in the sector and, in
some cases, distorted the balance between
physical and online retailing. However, we
believe that our community centre strategy
launched in 2017 with our focus on local
destinations providing non-discretionary
goods and services has never been more
relevant, as evidenced by our relative
performance on the areas within our
control.
We remain focused in ensuring the
merchandise mix across our centres
continues to build and position around
non-discretionary, essential everyday
uses, aligned to community requirements,
increasing occupancy and income
resilience across a wide mix of community-
centric uses. Our centres remained open
throughout the pandemic, operating in
compliance with Government guidelines,
and we engaged with our retail customers
to facilitate ongoing opening and click and
collect fulfilment when permitted. During
lockdowns, between 11% and 35% of our
retailer customers have been able to trade
or continue some form of commercial
operation, contributing to a rent collection
rate of 80% for 2020. We have seen an
encouraging bounce-back in trading at
those times during the last year when
restrictions were eased.
Recognising the challenging retailing
environment that we have faced, we
have proactively engaged with all our
retail customers and sought to offer
business support where possible. We
have implemented significant reductions
in centre operating costs throughout
lockdown and, as we enter the recovery
phase, we will hold running costs materially
below pre-pandemic levels to support
business recovery.
We have sought to offer rental support
where required, and where we are able to,
balancing the considerations and ongoing
obligations of our own business. We have
looked carefully and compassionately, on a
customer-by-customer approach, to ensure
the support we are able to provide is given
to those in greatest need.
We consider reform and resetting of
retail business rates to be of fundamental
importance to the recovery and ongoing
success of our High Streets and shopping
destinations. We are actively supporting
industry campaigns and submissions
to government advocating the need for
change.
Covid-19 has seen an increased focus on
the community – staying local, working
local and shopping local. We believe
elements of these changes will remain
as we emerge from the pandemic and
our locations in the heart of town centres
are uniquely placed to benefit from this
evolving live/work/shop dynamic.
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STRATEGIC REPORTcapreg.comCapital & Regional plc Our Investment Market
Shopping centre investment transaction volumes in 2020 totalled £350m3, representing only 13% of the average annual market
volume since 2010. The market had generally been subdued prior to Covid-19, with uncertainties around income security and income
sustainability stifling investment appetite. The prevalence of retailer restructuring events, particularly through the CVA mechanism; and
the continued structural shifts to online, affecting physical discretionary spend, particularly fashion, have been key influences.
Shopping Centre Transaction Volumes 2010-2020
Value of transactions, £bn
6
5
4
3
2
1
0
3.5
3.3
2.7
5.4
4.3
4.0
2.6
1.4
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
1.1
1.1
0.4
90
80
70
60
50
40
30
20
10
0
Retail Transaction Volumes 2010-2020
Value of transactions, £bn
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
22%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Shopping Centres
Retail Warehouse
High Street
Foodstores
Source: Property Data, Knight Frank
Covid-19 has only served to exacerbate these concerns, which have filtered through to asset valuations, resulting in significant value
write-downs over the year. MSCI report average capital value declines for shopping centres of -28.8% over the 12 months to the end of
September 2020, a material acceleration in the rate of write-downs already seen over 2018 and 2019.
In contrast, the supermarket sector saw a strong year of transaction volumes, remaining in line with historic averages despite the
pandemic. Investors are seeing the increased attraction and defensive income qualities that these essential everyday retailers provide
and that appeal has translated to supermarket-anchored shopping centres, which have seen greater liquidity.
Geographically, the relative performance of shopping centres has varied considerably, reflective of the underlying trading strength
of locations, and the credibility of opportunities to repurpose or reposition floor space. Assets in London suburbs, with growing and
evolving populations, have retained relative resilience, remaining attractive to retailers and a growing range of alternative uses, such as
residential or medical centres, where highly accessible town centre locations are desirable.
Our strategy has positioned us well to respond
Our prominent town centre locations provide a platform for value recovery. Our community merchandising strategy places food
store anchoring at its heart and we continue to merchandise towards a wider mix of uses and services that provide greater income
resilience and longer-term income certainty. With affordable rents averaging less than £15 per square foot, our locations offer viable
remerchandising and repositioning opportunities across a range of uses, which we believe will ultimately provide an underpin to value.
Our London-dominated, south-east portfolio bias continues to provide strategic land ownerships in strong town centre locations
that cannot be replicated, providing excellent potential to attract a wide variety of retail and service offers and, as evidenced by the
Walthamstow residential initiative, the possibilities to introduce complimentary community developments, strengthening the town
centre core and generating new streams of income and value.
1Source: GlobalData Jan 2021
2Source: Statista.com
3Source: Knight Frank
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL The Market Backdrop
CONTINUED
Industry Trends
1
Trip Differentiation
Consumer shopping habits have changed
with shopping trips increasingly polarising
between discretionary “wants” and
non-discretionary everyday essential
“needs”. Retail destinations are adapting
to align to these distinct shopping
missions, with clarity of purpose and offer
essential attributes to a destination’s
commercial success.
Our strategy
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. We continue to evolve the mix
of offer and services to maintain alignment
with, and relevance to, the growing and
changing communities that we serve.
2
Town Centre Evolution
Town centres are evolving in parallel with
changing community dynamics and what
they require from their town centres. Local
authorities increasingly recognise the
importance of vibrant town centres to the
cohesiveness and identity of a community.
Through planning policy, direct
interventions and closer collaboration
with key stakeholders, town centres are
increasingly seeing a return to mixed use
investment and the delivery of places that
combine living, working and leisure.
Our strategy
Our centres sit in the heart of the
community. They are destinations that
can evolve with community requirements.
Providing the essential community retail
offer remains at their core, but providing
a home for complementary uses such as
offices, medical facilities, residential and
final mile logistics reinforces their influence
and flexibility and ultimate importance to
the fabric of the community.
12
3
Changing Shopping Habits
Traditional retail has evolved to deeper
and more co-ordinated cross-channel
integration. Consumers demand speed
and optionality in how and where they
purchase and expect limited friction
in purchase and returns fulfilment.
Covid-19 restrictions have accelerated
and reinforced the trends to greater
discretionary spending online with the
pace of change affecting fashion retailing
to the greatest degree.
Physical retail remains the principal
fulfilment channel for essential goods
and services. The importance of bricks
and mortar to maximising omni-channel
fulfilment and performance is now well
recognised and remained an important
fulfilment connection with consumers
throughout Covid-19 lockdowns. Physical
retailing still accounted for 73.8% of total
retail market share in 2020.
Our strategy
Our merchandising strategy continues to
pivot towards essential everyday uses that
rely to a greater extent on a physical offer,
providing greater income resilience.
We recognise the fulfilment role our centres
can provide as part of an omni-channel
offer and the trading benefits this provides
to our retail customers. Embracing our
guests’ shopping habits will secure continued
community loyalty and in turn provide wider
halo opportunities to develop our in-centre
offer and experience and grow income,
making our destinations essential to our
community.
Our provision of click and collect services
provides fulfilment for our retailers and an
ability through package handling to indirectly
link with other commercial businesses that
are not physically present within our centres
and their shopper base.
We are upgrading our car park technology
to reduce friction for our guests, while
increasing our knowledge of them and their
habits. The introduction of dark kitchens,
professional kitchens that only produce food
for delivery, into underutilised ancillary floor
space, allows us to satisfy an increasingly
in-demand community expectation – cost-
effectively providing additional commercial
offer and generating new income streams.
4
Changing the Retail Offer to
Meet Needs
Online penetration is continuing to
influence tenant mix with the impact
felt most clearly by discretionary based
retailers, whose store portfolios are
rationalising, particularly across the
fashion sector. Non-discretionary retailing
remains more resilient 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
more limited online integration.
Community retailing typically embraces a
greater exposure to independent traders
who typically provide a unique offer and
point of difference to the more formulaic
destination retail locations. Independent
traders are heavily invested in the
community, financially and emotionally and
in most cases fully reliant on their store.
Our strategy
We proactively remerchandise and
reposition our occupancy mix to provide
relevant and sustainable uses aligned to
our communities. We look to create income
streams that are resilient and varied and
deliver an occupational mix that fully aligns
with community needs. Our core income
profile has fundamentally shifted, with
a balance of income that offers greater
covenant strength, secured against online
integrated or offline dominant occupiers.
Our independent retail customers provide
vitality and a point of difference, enhancing
our connections in the community. They
represent a key part of our community
offer differentiation and we are investing
in skills and experience that can provide
guidance, expertise and support to ensure
they can flourish.
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STRATEGIC REPORTcapreg.comCapital & Regional plc 5
Changing Role Within Local
Communities
With growing trends in localism, our
community assets provide wide-ranging
opportunities to drive performance and
growth and act as a positive voice for
change and progress. Community centres
represent the engine room for retailer
profitability, with the mix of affordable
occupancy costs, attractive productivity
levels and high footfall driving profitability.
Local authorities are increasingly focused
on the future evolution and success of
town centres. Community centres are often
the key stakeholder in a town and have an
important voice in driving, influencing and
facilitating positive change,
Our strategy
With rents averaging less than £15 per sq
ft, our centres offer flexibility to profitably
remerchandise space to evolve and
broaden our offer to meet community
requirements, while unlocking value for
our shareholders. We are proactively
unlocking residential opportunities,
engaging with local public bodies to deliver
much needed medical centres, bringing
office accommodation back into circulation
and introducing new retail uses that
positively enhance the opportunities and
interactions within the community.
Change can also take the form of how we
use our position as a positive advocate
for change and support throughout the
community. Whether that is supporting
local charities, providing accommodation
for community uses or being a proactive
and constructive contributor to our town
centres’ development, we recognise and
take very seriously our position within each
of the communities where we are present.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Our Strategy
The structural changes experienced in the retail sector have accelerated through the impact of Covid-19. The importance and relevance
of community shopping, and its clearly differentiated purpose, has only become clearer, reinforcing our belief and confidence in our
overarching community shopping strategy launched in 2017 and its future potential.
WHY WE ARE WELL POSITIONED
Define
Define
Define and own the
community shopping
centre category in the
UK, consistent with
global best practice.
Focus
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.
Vision
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
facilitates to satisfy our growing
and evolving communities' needs.
Position
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.
Enhance
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.
UNDERPINNED BY OUR VALUES
INSPIRING
CREATIVE
THINKING
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
ACTING
WITH
INTEGRITY
DELIVERING
DYNAMIC
SOLUTIONS
14
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 service 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
Recognition of community shopping has continued
to gather momentum. The industry is increasingly
appreciating the resilience and differentiation of essential
needs shopping. With the rapid failure of the department
store model and pressure on physical fashion, there
is clear evidence of investors focusing on food store
anchoring and appreciating the benefits of the low
affordable rental dynamics of community shopping in
delivering sustainable rent and a baseline that enables
financially accretive delivery of leasing into multiple
community uses.
We continue to push for greater acceptance of Community
Shopping Centres as a distinct investment category,
following its introduction by REVO in 2018. Adoption is
growing but not universal, although wider communication
and discussion across the industry, recognising Community
Shopping as a distinct proposition, has seen a noticeable
positive step change, further highlighted in 2020 as more
people are staying local, working locally and shopping
locally as a result of Covid-19.
Future focus
The accelerated structural changes seen across the retail
sector, combined with the prevalence of high profile retail
failures has universally harmed the retail investment
sector. While there is a greater appreciation of the
community model, we believe the underlying strengths
of occupier resilience to online, affordable rental levels
and the ability to profitably transition and merchandise
to growth uses are yet to be fully reflected in terms of
investment differentiation.
This will continue to be a key area of focus as we emerge
from Covid-19. Delivering performance metrics that
support rental stability; demonstrate continued profitable
remerchandising that strengthens our centres’ income
profile; and ultimately conversion to strong footfall
performance will all be key elements to create further
investment differentiation and disconnection.
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STRATEGIC REPORTcapreg.comCapital & Regional plc Position
Asset and Occupier Mix
Actively remerchandise centres to increase exposure to growth
and online-resilient categories, respond to consumer demand
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, children’s wear and leisure.
All need to be tailored to the specific community’s needs and
aspirations, 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
Demand for retailers to rapidly return to trade, coupled
with a similar response from our guests following periods
of lockdown in 2020, illustrates the continuing relevance of
physical retail and the vital role that our centres play in local
essential community infrastructure. This is evidenced by our
completion of 40 leasing transactions in 2020 and a pipeline of
exciting transformational initiatives that are underway as we
enter 2021. We have a disciplined leasing focus, aligned to our
community merchandise pillars, and these transactions are
enabling us to continue the significant progress we have made
in remerchandising and repositioning our centres, fully aligned
to our strategic aims.
Highlights include:
A new Lidl supermarket in Luton due to open in Q3 2021
The opening of a new Matalan store in Maidstone
The Job Centre in Walthamstow
Plans for a community healthcare facility in Ilford
Securing planning consent in Walthamstow to incorporate a
new station entrance to the Victoria Line underground in the
heart of the centre
Exchanging conditional contracts with a partner to deliver
495 Build to Rent units in our Walthamstow scheme
Creating and realising land value from the sale of a vacant
land plot in Wood Green for residential development
Future focus
Despite the impact of Covid-19 we have continued to progress
a strong pipeline of leasing and asset management initiatives,
which would deliver further step changes to our community
mix. We are encouraged by the range and scale of leasing
and asset management opportunities that have presented
themselves over 2020 and which we expect to build as the
recovery from Covid-19 builds.
The relevance of department stores and large store fashion
formats came increasingly into question over the last 12
months and only serves to reinforce our ongoing focus to
deliver remerchandising or repositioning of these uses at speed
to different uses.
We have continued to take a cautious approach to capital
expenditure commitment, while the trading outlook has
remained uncertain and businesses embark on the recovery
phase as lockdown restrictions start to lift during 2021. We
will continue to be selective in the projects we choose to
bring forward, balancing prudent capital management, with
commitments to those projects that will deliver optimum
performance impact.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Our Strategy
CONTINUED
Focus
Enhance
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.
Progress
2020 was a year of significant investment in our 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, enhancing the quality of decision-making and speed of execution.
Ultimately, data and systems will allow us to optimise our financial outcomes and
reduce the time from deal identification to income coming on stream.
Key system investment has included a replacement and upgrade to our financial
and property management databases and the introduction of “lead to lease”
transaction monitoring software, enabling us to monitor leasing pipeline and all
stages of the transaction process.
Investment has also been made in our key income-generating functions, with
particular focus on the commercial income team to support our focus on smaller,
independent retail entrepreneurs, and the opportunities to identify and unlock new
income sources and business partnerships beyond the more conventional leasing
of shop space. The introduction of dark kitchens and an innovative solution to the
operation of our underutilised space in Luton, Maidstone and Wood Green are
clear illustrations of this function driving new income streams and challenging and
changing historic operational conventions.
Future focus
Each shopping centre is a business with a wide variety of different facilities, income
streams and associated business opportunities. Expertise, insight and creativity are
essential ingredients in maximising performance across the diverse range of uses
and identifying and unlocking new income streams. Continued investment in our
in-house management platform, our people, our systems and data insight remains
core to the successful delivery of, and growth in, our community strategy.
Shareholder Value
The right offer drives footfall and
dwell time, boosting retailer sales
and ultimately letting tension,
improving rental income, property
values and consequently revenue
and shareholder returns.
Progress
2020 has strengthened our belief
that the combination of our
community centre strategy and
our focus on local destinations
providing non-discretionary goods
and services has never been
more relevant. The quality and
performance of our management
platform is recognised in our sector,
by our major shareholders and
our lenders and has inherent value
which transcends the recent market
challenges. We believe this provides
a sound base for navigating the short
to medium term.
The approach we adopted across
our business throughout 2020
and into this year has been
focused on preserving value for
our shareholders. We believe the
acceleration of structural change will
work to our benefit as we further
progress remerchandising our
centres in line with our community
centre strategy.
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 to proactively respond
as markets stabilise.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL 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.
The impact of Covid-19 in 2020 added
further investor uncertainty and we
continued to see subdued investment
market activity, with transaction volumes at
record lows. Valuations declined throughout
the year and capital values per sq ft are at
levels that increasingly 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 and protecting income.
As we emerge from the effects of the
Covid-19 pandemic and 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
with an exciting opportunity as a potential
consolidator of UK community and mixed
use retail assets in the UK.
KEY RESOURCES
EXPERIENCED AND
AGILE MANAGEMENT
STRONG CAPITAL
STRUCTURE
CLOSE
RELATIONSHIPS WITH
COMMUNITIES
DIVERSIFIED
INCOME STREAMS
1
Identify Assets
3
The Result
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.
2
Reposition and Remerchandise
Our approach to managing centres is summarised as follows:
Understand full catchment potential research/benchmarking, input from Centre
teams, engagement with retailers and local communities
Assess product offering against local community needs and expectations – identify
any gaps in offer or amenities
Establish strategic asset masterplans – comprehensive three-to-five year
repositioning plans for each centre, profiling capex spend and evolution of tenant
mix. Reviewed in a continual process 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
Attractive retail and
leisure environments
Improved guest
experience
Increased footfall and
spend
These results drive retailer
sales, letting tension and
income and capital value
growth.
Each asset is held in order
to generate sustainable
income growth. When asset
masterplans have been
successfully executed and
future returns are expected
to become less accretive we
actively seek opportunities
to recycle capital to allow us
to reinvest into assets with
greater growth potential.
Value Generated for Stakeholders
Our Shareholders:
Long-term sustainable growth
Our People:
A dynamic and positive work environment with continued
training and development opportunities
Our Retailer Customers and Occupiers:
Frequent, repeat footfall and high conversion rates coupled
with affordable occupier costs
Our Communities
The creation of vibrant community hubs combining key
services, everyday essentials and leisure facilities.
Supporting local employment
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STRATEGIC REPORTcapreg.comCapital & Regional plc CASE STUDY
STRATEGIC REPORT
Remerchandising Progress
We are making significant
progress towards securing
transformational lettings at
The Exchange, Ilford, which
will deliver a step change
in our merchandising mix
and enhance the quality of
our offer at the centre.
The introduction of an NHS Medical Centre
represent a new destination use that
connects with our community strategy,
providing goods and services that meet the
evolving needs of a diverse and growing
local community.
We have terms agreed with the NHS
to deliver a significant modern clinical
care facility into the heart of the centre.
Through our close and collaborative links
with the local authority, we were able to
identify the ongoing community need
to provide additional medical facilities
required by the population growth in the
borough, connecting with the local NHS to
work collaboratively in identifying an area
within the centre that could satisfy this
requirement.
For the local authority and NHS, The
Exchange provides an easily accessible
location in the heart of the town
centre, with excellent public transport
connectivity and parking. For Capital &
Regional, the 20,000 sq ft medical facility
is fully aligned with our community
strategy direction. The initiative
repurposes and replaces historically
challenging retail floor space in a quiet
part of the centre with a long-term,
high-quality occupier, providing a
destination service that will deliver new
and increased footfall to the centre
and encourage complimentary health-
related merchandising opportunities.
The medical centre is expected to open
in late 2022/early 2023.
Stock Code: CAL
Annual Report and Accounts for the year ended 30 December 2020
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Key Performance Indicators
Risk key 1 Property investment Market Risks 2 Impact of the Economic Environment 3 Treasury Risk 4 Tax and Regulatory Risks
5 People 6 Development Risk 7 Business Disruption from a Major Incident 8 Responsible Business 9 Customers & Changing Consumer Trends
10 IT & Cyber Security
FINANCIAL
Adjusted Profit1
Adjusted Profit Per Share1,2
2020
2019
2018
2017
2016
£10.3m
9.5p
£27.4m
£30.5m
£29.1m
£26.8m
2020
2019
2018
2017
2016
36.7p
42.3p
41.0p
38.2p
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.
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.
How this links to our strategy
We target delivering a strong and sustainable income return.
Progress during the year
A decrease of 62.4% in Adjusted Profit reflected a fall in Net
Rental Income driven by the closure of non-essential retail as
a result of the Covid-19 pandemic and the impact of CVAs and
administrations.
Progress during the year
A decrease of 74.1% on a per share basis reflected a fall in Net
Rental Income driven by the closure of non-essential retail as
a result of the Covid-19 pandemic and the impact of CVAs and
administrations.
Link to strategy
Enhance
Link to risks
2 9
Link to strategy
Enhance
Link to risks
2 9
Net Rental Income
EPRA Net Tangible Assets Per Share2
2020
2019
2018
2017
2016
£34.1m
£49.3m
£51.9m
£51.6m
£50.4m
2020
2019
2018
2017
2016
158p
364p
596p
666p
677p
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.
Progress during the year
Net Rental Income fell by 30.8% reflecting the impact of the
closure of non-essential retail due to the Covid-19 pandemic
and the impact of CVAs and administrations.
Link to strategy
Position, Focus
Link to risks
2 6 9
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
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 NTA fell by 206p due to revaluation loss net of capital
expenditure.
Link to strategy
Position, Enhance
Link to risks
1 2
20
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STRATEGIC REPORTcapreg.comCapital & Regional plc Key Performance Indicators
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, and other non-operational items. A reconciliation to the
equivalent EPRA and statutory measures is provided in Note 9 to the financial statements.
2. Historic per share amounts have been restated 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 30 to 34 in 2020 due to the impact of the fire which occurred in 2019.
Risk key 1 Property investment Market Risks 2 Impact of the Economic Environment 3 Treasury Risk 4 Tax and Regulatory Risks
5 People 6 Development Risk 7 Business Disruption from a Major Incident 8 Responsible Business 9 Customers & Changing Consumer Trends
10 IT & Cyber Security
Net Debt To Property Value
NON-FINANCIAL
Footfall3
2020
2019
2018
2017
2016
65%
46%
48%
46%
46%
2020
2019
2018
2017
2016
C&R: (41.6)% / Index: (45.3)%
C&R: (3.2)% / Index: (4.9)%
C&R: 1.2% / Index: (3.5)%
C&R: 0.1% / Index: (2.8)%
C&R: (0.2)% / Index: (2.1)%
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.
Progress during the year
Net debt to property value increased to 65% due to the fall in
property valuations.
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 was significantly impacted in the year due to Covid-19
social distancing requirements and the repeated closure of
non-essential retail. The Group continued to outperform the
national ShopperTrak index by 3.7%.
Link to strategy
Position, Define
Link to risks
2 9
Dividend Per Share2
Occupancy
2020
0p
2019
2018
2017
2016
21.0p
24.2p
36.4p
33.9p
2020
2019
2018
2017
2016
92.1%
97.2%
97.0%
97.3%
95.5%
Why we use this as an indicator
This is the cash return to be delivered to investors in respect
of the year under review.
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
In light of the current level of uncertainty and a desire to
maximise cash flexibility, the Group has taken the decision not
to declare a final dividend and will maintain this position at
least until markets stabilise.
Link to strategy
Enhance
Link to risks
2 4 9
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
Letting demand muted due to the trading difficulties faced
by retailers as a result of Covid-19 and an increase in voids
and CVAs and Administrations.
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 2020Stock Code: CAL Chief Executive’s Statement
Looking forward
we are confident
in our community
centre positioning
and the critical role
our centres play
in serving their
communities. “
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
Drafting this statement, I reflect on where we were in
March last year and I am reminded of the references to
Covid-19 by both our then Chairman and myself. Few
could have seen the scale, impacts or duration of the
crisis – an event unprecedented in our time.
The Covid-19 pandemic represents a
humanitarian crisis firstly and then an
economic one. This is the approach we
have adopted across our business during
2020 and into this year. Our responsibility
to our teams and the communities we
serve hasn’t wavered. I would like to thank
all our team members for their dedication,
focus, commitment and contribution to
our values and culture over these past
12 months. The compassion that has
been shown to fellow colleagues and our
communities and stakeholders has been
an inspiration during an extraordinary year
of uncertainty, disruption and challenge.
Our customer-facing employees deserve
special mention. They have worked
tirelessly to ensure our guests are able
to access essential services across our
centres, while ensuring our environments
are safe places for communities to visit – in
accordance with Government regulations.
Our commitment to building strong
relationships with our council partners
came to the fore as we worked hand-
in-hand to provide car parking for
key workers and collaborated to align
messaging and enforcement of the
Government measures. This included
supporting our retailer customers with
Covid-19 secure store environments,
external queue management and click and
collect services.
We redirected the money usually allocated
for our team Christmas celebrations to
charities in each of our communities in
addition to the significant amount we
do for community groups across our
portfolio. In partnership with the local
councils, we were proud to ensure our
donations supported those most impacted
by the Covid-19 crisis. We have also been
committed to ensuring that team members
who can work remotely are able to while
staying connected to the wider Capital &
Regional community through a series of
initiatives. In addition, we have provided
targeted support to those most impacted
by the effects of isolation and concern over
the future.
Beyond Covid-19, I want to acknowledge
and reiterate that we remain committed
to creating an inclusive culture that does
not discriminate and I am very proud of
the diversity across the entire spectrum of
backgrounds, beliefs, cultures, gender and
life choices that our Company enjoys.
As the Chairman has acknowledged, the
impact of Covid-19 on our sector and
business has been immense. The three
national lockdowns and the series of
restrictions had a significant impact on all
our key operating metrics; including NRI,
Adjusted Profit, portfolio value, balance
sheet and ultimately our share price. Our
response to the closure of stores has
centred on supporting those smaller and
independent businesses that are genuinely
struggling. This backbone of the UK retail
industry represents a larger percentage
of our income than many of our peers.
Due to our community centre positioning
we are constantly striving to curate the
right blend of national brands and local
retailers and service providers to tailor
our merchandising mix to the unique
and evolving needs of each individual
community.
We have also engaged with the larger
national, and in some cases international,
chain stores to ensure they meet their
contractual obligations. This is essential
in enabling us to support a greater
number of small businesses and meet
our financial obligations to staff, suppliers
and lenders. Unfortunately, our efforts
haven’t always resulted in the outcome
required. As of today, over 60% of arrears
are concentrated in our top 20 retailers.
This is disappointing given most of these
businesses are well capitalised and
profitable.
Continuing on the theme of retailer
support, we have placed our full weight
behind national campaigns led by our
industry bodies to increase awareness of
the importance of the high street and local
physical retail. There is a considerable
body of research that indicates that strong
retail and services hubs are at the heart of
local community and how people perceive
22
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STRATEGIC REPORTcapreg.comCapital & Regional plc where they live. We have also supported
the campaign to review business rates with
a view to rebalancing the tax take between
the physical and online channels – this is
a positive approach in partnership with
the British Retail Consortium and other
retailer groups.
We are encouraged by how quickly our
centres rebounded following the easing
of restrictions at various points last year.
In some cases our centres went from
trading 30% of stores to 96% of stores in 48
hours, a testament to the relevance of our
centres and retailers and the quality and
adaptability of our teams.
The near monopoly that physical
retailing has enjoyed for centuries on
the distribution of goods and services
continues to be disrupted by online
and digital platforms which have
experienced significant growth as a result
of the Covid-19 pandemic and the severe
restrictions on non-essential physical
stores. Our community centre strategy
launched in December 2017 and the
progress made during 2018 and 2019
placed us in a stronger relative position
to our peer group, albeit not immune.
Our focus on non-discretionary goods
and services enabled on average 30%
of our stores to remain trading, where
other centres were forced to close. New
customers discovered ‘local shopping’ as
they worked and schooled from home,
allowing our footfall to outperform the
national index throughout.
Our investments in improving our adoption
of technology to aggregate data from
across our business, to gain enhanced
insights and greater agility and efficiency,
is encouraging and watching our teams
respond and grow is both exciting and
rewarding. Leveraging these investments,
we have moved quickly to closely scrutinise
our structure and cost base, consolidating
the 20% saving in central overheads
delivered over the last four years and
decentralising the business to more local
decision-making supported by technology
and systems. This rigour continued at
centre level where we restructured the
provision of services across the centres,
resulting in a cost saving of c.10% in service
charges for our retailer customers for
2020.
Looking forward, we are confident in our
community centre positioning which is
focused on “needs” or “essential” retail and
services. We believe the acceleration of
structural change will work to our benefit
as we further progress the process we
started three years ago of remerchandising
our centres in line with our community
centre strategy. This format will attract
new retail and services, including medical
centres, employment offices and retailers
who formerly only operated out of town
but now need to respond to a growing
number of consumers who no longer have
cars, especially in and around our highly
urbanised and growing London centres.
We believe in shopping local and the critical
role that our centres play serving their
communities. The attraction to retailers
is supported by our low average rents at
£12-15 per sq ft and knowledge that low
margin, low average transaction value,
high volume retailing poses considerable
challenges to the high cost economics of
online. We must, however, not take that for
granted and work tirelessly to continually
innovate, curate, tailor and adjust our
centres’ customer proposition and develop
our teams.
lockdown. We are acknowledged as the
leading operator in the field and this was
endorsed when the team was appointed
to operate the established ski slope at
the Xanadu leisure destination in Madrid.
This is a world class facility and a well-
established business and an important
step in Snozone’s growth at low investment
and risk. Congratulations to Nick Phillips
who runs the business and his team.
We have also taken meaningful steps to
advance our responsible business and ESG
agenda. Over the last year, we have seen
the effects of climate change and lived
through tremendous societal challenges
and unrest. The expectations of business
have never been higher to lead with
purpose and to help drive progress on
these complex issues. Capital & Regional
has recently taken steps to evaluate
what is most relevant and important to
our business by completing a materiality
analysis and initiating work on a broader
ESG strategy. Moving forward, we will build
on that work and look for ways to evolve
our business practices to be even stronger
stewards of both our environment and the
communities in which we live and work.
Our focus is not driven solely by regulation
or governance, but rather a commitment to
the retailer customers and communities we
serve. We are focusing our attention and
resources to this over the next 12 months
and look forward to sharing our progress
along the way.
Finally I would like to say thank you to our
stakeholders for their forbearance this
year, it has been a tough journey for all and
we appreciate your support.
Our Snozone leisure business was
impacted by the restrictions and the team
responded dynamically to the challenge
of the various levels of restrictions and
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
24 March 2021
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Operating Review
Impact of Covid-19
All seven of the Company’s community shopping centres remained open throughout
2020, providing essential services to the communities we serve. Despite the restrictions
on trading having had a pervasive impact on operating and financial metrics for the year,
it is clear that our “needs-based essential“ offer and positioning is now more relevant than
ever as a number of structural trends that were already under way in the retail industry
have rapidly accelerated. Our strategic focus on local community centres providing
non-discretionary and essential goods and services has clearly assisted in mitigating the
impact of the pandemic on the Group on a relative basis to our retail peer group. This
provides the business with a sound platform for navigating these unprecedented times
and ultimately the recovery from Covid-19 restrictions.
Our overriding priority during this time has been the health, safety and protection of
our colleagues, guests and customers. Since the outbreak of the virus, we have been
rigorously following the official Government guidelines and advice across our portfolio.
Precautionary measures we have taken include:
Enhanced deep cleaning, introducing sanitising stations at key locations and providing
PPE for all centre employees;
We put in place arrows and signage in common areas to encourage directional flow
and a one-way system, as well as providing distancing reminders;
We limited the number of people using guest facilities, escalators, stairs and lifts at any
one time; and
Removed most public seating to discourage congregation and close contact.
Guest movement in our centres is closely monitored through additional staff and existing
footfall technology, with guest capacity carefully controlled to maintain social distancing
and to protect visitors, occupiers and staff. If the density of shoppers rises to levels that
may prevent social distancing, access to the centre is restricted or temporarily stopped
until numbers reduce.
Mindful of the significant impact of Covid-19 on C&R employees, the Executive Directors
volunteered a 20% reduction in salary and Non-Executive Directors a 20% reduction in
their director fees for the months of April, May and June 2020. The funds saved were used
to support C&R employees most financially impacted by Covid-19.
New Lettings, Renewals and Rent Reviews
There were 63 new lettings and renewals in the period. Both new lettings and renewals
were made at an average premium to ERV. Overall, the transactions resulted in a
combined average premium of 22.1%1 to previous passing rent and a 5.6%1 combined
average premium to ERV.
Year ended
30 December 2020
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
40
£1.2m
+4.90%
23
£1.3m
+6.63%
+22.1%
+5.6%
16
£1.1m
+1.7%
1 For lettings and renewals (excluding development deals and CVA variations) with a term of five years
or longer which do not include turnover rent or service charge restrictions.
24
Key Highlights of Letting
Activity
Blackburn
Lease Renewals: H&M and Next
Luton
New Lease: Lidl
Lease Renewals: H&M and TK Maxx
Walthamstow
New Lease: EE
Maidstone
New Lease: Pure Gym
Lease Renewal: McDonalds
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STRATEGIC REPORTcapreg.comCapital & Regional plc Political uncertainty caused by concern
over a ‘no deal’ Brexit and trading
uncertainty caused by the Covid-19
pandemic contributed to a slowing of
leasing momentum. However, as detailed
above, strong progress was still made in
securing a number of key deals across
the portfolio. Activity in 2020 included a
new letting to Pure Gym in Maidstone,
taking the second floor of the former
BHS space, EE in Walthamstow, and Lidl
in Luton, taking the ground floor of the
former M&S store. Significant traction has
been made with commercial mall income,
with a focus on smaller independent
retailers and reflected in a year-on-year
increase in the number of new lettings.
This reflects both the increased focus
and investment in the commercial team
where we are undertaking a growing
number of transactions on a principal to
principal basis through new and existing
relationships. Our management platform
is increasingly recognised as a leader in
the sector.
Key renewals across 2020 included H&M
and Next in Blackburn, McDonalds in
Maidstone and H&M and TK Maxx in Luton.
Consistent with our community centre
strategy, personal and professional
services are a key part of the offer and
therefore we are pleased that detailed
discussions continue with the NHS for a
new purpose-built community healthcare
facility at The Exchange, Ilford. This facility
is another example of how important
community or local retail provision is
to a wide range of uses and we are in
active discussion in other centres in our
portfolio for these primary health care
facilities designed to create more capacity
for the NHS and greater accessibility
for those needing non-trauma medical
care. The letting will be transformational
for The Exchange and represents a new
destination use that is aligned to our
community strategy.
closed was required to do so on 5 January
2021 on announcement of the further
national lockdown and remains closed at
the time of writing. We have been working
closely with our occupiers throughout the
year supporting those who were able to
continue trading and helping prepare and
support those impacted by the various
periods of closure.
Footfall has been significantly impacted by
restrictions on trading throughout the year
and the need to manage capacity at our
centres due to social distancing measures.
In total, there were 44.7 million visits to
our centres during 2020, 41.6%1 lower than
the prior year on a like-for-like basis but
outperforming the national index by 3.7%.
Car park usage and income has also
been impacted in 2020 by the Covid-19
pandemic. Car park charges were waived
throughout the first lockdown from March
to June 2020 to support key workers and
those who needed to use their cars to
access essential services, and to help
minimise touchpoints within centres.
Car park usage was down 42.4%1 from
2019, resulting in a 45.8% drop in car park
income to £5.8 million.
In response to the first national lockdown,
we assessed how to adjust the delivery
of services to better suit the trading
conditions of our centres. As a result, we
successfully managed to reduce service
charge costs during the lockdown months
of April and May by an average of 32%
across the portfolio. At the same time
we also undertook a comprehensive
review of our centre operating model.
The review resulted in the restructuring
and streamlining of teams and services. In
doing so, we have managed to successfully
reduce the 2021 service charge by an
average of 13% across the portfolio,
equating to approximately £2.5 million.
1 Like-for-like figures exclude Walthamstow from
week 30 to 34 due to centre being closed for the
equivalent weeks in 2019 due to a fire.
Impact of CVAs and
Administrations
There were 17 Company Voluntary
Arrangements (CVAs) or administrations
involving national retailers that impacted
our portfolio in 2020 (2019: 8), including
New Look, Travelodge, Select, Debenhams,
Peacocks and Bonmarche, Arcadia and
Moss Bros. CVAs and administrations in
2020 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, although as a result of the
progress we have made in embedding our
non-discretionary community shopping
centre strategy our reliance on such
categories is much less than it once was.
Rent from fashion operators represented
approximately 19% of the Group’s
contracted rent at 30 December 2020.
The total impact upon 2020 NRI of 2020
CVAs and administrations was £4.4 million.
This includes c.£1.4 million from the
write-off of incentives to tenants who have
entered administration during the period.
Debenhams remained in occupation of
three stores in the portfolio as at the year
end and as of the time of writing but the
business is expected to cease trading
all of its physical stores in the coming
months. While the incremental rental
loss of Debenhams ceasing trading is not
material, if vacant the annual empty rates
and service charge cost to the Company
for the three units will be approximately
£2.1 million. The Group has offers on all
three Debenhams stores, encompassing
a range of short to longer term solutions,
and have agreed terms on two of them.
Operational Performance
Under Government restrictions retailers
classed as ‘non-essential’ were required to
close from 23 March to 15 June 2020 and
again from 5 November to 2 December
2020. This saw the proportion of units at
our shopping centres open fall at times
to less than a third. In between the two
periods we had seen a strong return to
physical trading with 97% of units back
open. This peaked further at 98% following
the easing of restrictions from 2 December
2020; however, regional Tier restrictions,
phased in across the country in late
December, again required further closures,
significantly affecting the peak Christmas
trading. All non-essential retail not already
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Operating Review
CONTINUED
Rent Collection
There was significant focus in 2020 on rent collection. Our retailer customers’ ability to trade was impacted throughout the year by the
restrictions that were put in place, and the Government’s introduction of a rent moratorium compromised the measures we would
normally have available as a last resort to protect our contractual positions; particularly in the unfortunate cases where some large
well-funded retailers were able but unwilling to pay. In response, we have dedicated significant resource to this area, assembling a team
from across the business to best utilise our relationships with our tenant base at all levels. We have worked closely with our retailers
to understand the specific impact of Covid-19 on their individual businesses, seeking to come to agreements that amicably resolve
the position and appropriately share the cost of periods when retailers have been unable to operate. These agreements have typically
provided some form of a modest concession in return for settling the remainder of their rent arrears and their service charge obligations
in full.
Total rent collection for the financial year 2020 is currently at approximately 80%. Total concessions granted in the year equate to
£1.4 million before VAT, representing approximately 2.7% of the total rent billed. We have provided within the year end accounts for
approximately half of the remaining balance that is due.
Rent collection for the first quarter of 2021, including monthly invoices for January and February 2021, is running at approximately 60%
and we have agreed deals with tenants that would improve this by approximately 10%. The table below provides further detail:
Rent collected
12m to 30 December 2020
Rent collected
Q1 2021
Rent collected
Concessions provided
Written off
Outstanding
Total billed
Amounts include VAT, amounts billed are up to end of February 2021.
Rental Income and Occupancy
Contracted rent (£m)
Passing rent (£m)
Occupancy (%)
£m
50.5
1.7
1.6
8.9
62.7
80.6%
2.7%
2.5%
14.2%
100%
£m
7.1
0.1
-
4.7
11.9
30 Dec
2020
53.1
51.7
92.1
59.7%
1.2%
-
39.1%
100%
30 Dec
2019
61.1
58.8
97.2
Contracted and passing rent fell by 13.1% and 12.1% respectively in the year reflecting the increase in voids and the impact of CVAs and
administrations, most prominently the administration of Debenhams which had accounted for £1.7 million of rent at the end of 2019.
Occupancy fell to 92.1% (December 2019: 97.2%), reflecting primarily the impact of Covid-19, particularly in the disruption to the peak
Christmas trading period.
Capital Expenditure
In March 2020, in light of the Covid-19 pandemic, we reviewed all capital expenditure and significantly reduced the spend that had been
planned, rationing expenditure to only those projects that were already committed, drive immediate income returns or are of wider
strategic importance. As part of this, the proposed Hemel Hempstead cinema project was effectively stopped, given the impact on the
leisure sector. Alternative options for the scheme are being progressed.
In total, £14.8 million was invested in 2020 (2019: £12 million). Primary projects included: works to facilitate the letting of the former BHS
space in Maidstone to Matalan and Pure Gym (£2.3 million); progression of the Walthamstow residential opportunity (£3.2 million); works
completed on the rebuild of Walthamstow, including the planned new food court outside of the basic rebuild cost covered by insurance
(£4.4 million); and works to create a new unit for Lidl from the former M&S space in Luton (£0.7 million).
26
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STRATEGIC REPORTcapreg.comCapital & Regional plc Walthamstow Residential
Opportunity
We have continued to progress our
residential opportunity throughout 2020.
Having identified a favoured delivery
partner following a comprehensive
marketing process, we exchanged
conditional contracts with Long Harbour in
December 2020. Long Harbour will deliver
495 residential units as a Build to Rent
proposition. The contract is subject to a
number of pre-conditions to satisfy, the
most notable of which relates to securing
final approval of the planning consent and
associated obligations on terms that align
with the commercial parameters agreed
between us.
In parallel with the residential contract
negotiations, we made significant progress
in finalising the overall scheme design,
which also incorporates 47,000 sq ft of
additional commercial floor space, a further
43 residential units and provision for a
new station entrance for the Victoria Line
underground station in the heart of the
scheme. Detailed planning applications
were submitted before the year-end and
a resolution to grant planning consent
was secured from the London Borough
of Waltham Forest on 27 January 2021.
Formal and final approval remains subject
to referral and sign-off from the Greater
London Authority, and we anticipate this
being in place by the end of March 2021.
Delivery of the Long Harbour residential
scheme would represent the first phase
of the wider development opportunity.
Assuming all pre-conditions are satisfied,
the current programme envisages a start on
site in the autumn 2021, with the contracted
land payment of more than £20 million
being triggered at that point. This is more
than £1 million ahead of the amount
recognised within the year-end valuation.
Snozone
Snozone had enjoyed a strong start to 2020
with revenue growth recorded for the first
two months of the year but the emergence
of the Covid-19 pandemic impacted trade
from the end of February and culminated
in all operations being required to close
under Government guidance on 20 March
2020. Having undertaken stringent risk
assessments and precautionary testing,
Snozone reopened its Castleford and
Milton Keynes venues on 7 August 2020,
when restrictions were lifted, with reduced
capacity to ensure social distancing and
with reduced trading hours. The array of
products and activities on offer to guests,
usually around 130, were significantly
reduced and the only group activity
permitted was in the shape of family
ski or snowboard lessons in ‘designated
bubbles’. As Government guidance
changed, the venues were again required
to close throughout November and most of
December, usually the peak trading months.
At the time of writing all venues remain
closed, in line with Government restrictions.
Actions were taken to mitigate costs
throughout the year, to the fullest extent
possible, including the deferral of costs,
utilisation of the Government’s furlough
scheme (£0.8 million) and VAT deferral. The
circumstances meant that, unfortunately,
redundancies were required and a number
of contracted staff were not retained.
Revenue for the year more than halved
to £4.6 million (2019: £10.5 million). This
resulted in a loss for the year (excluding
notional interest on finance leases) of £1.9
million (2019: £1.5 million profit). Since
the year end we have had indication that
we should be able to recover a substantial
amount of the loss for the year through an
insurance claim; this is not reflected in the
year-end numbers.
Management has sought to use the time
that the business has been unable to
trade to deliver initiatives that will drive
long-term benefits. These have included
the installation of a fully integrated online
booking and finance platform, which will
greatly enhance productivity and greater
ease for the customer journey, and the
switch to using 100% renewable energy.
The business has also been pursuing
opportunities to grow and leverage its
highly respected management platform.
On 9 February 2021 Snozone took over the
operations of the ski slope at the Xanadu
leisure destination in Madrid. This is a world
class facility and a well-established business
and represents an excellent opportunity to
grow and develop the Snozone brand at a
low level of risk and investment.
CASE STUDY
CASE STUDY
Matalan Opening,
Maidstone
Snozone, Madrid
Despite the impacts of Covid-19
during the course of 2020, Matalan
pushed forward with the opening
of their new store in Maidstone,
opening in September 2020. The
opening was significant as the
only new store planned for their
business in 2020.
The world class facility is located
in the expansive Xanadu leisure
destination to the east of the city of
Madrid. It is the only indoor snow
centre in Spain and at 18,000 sq m,
is the second largest slope in
Europe, 40% bigger than both
of Snozone’s individual UK snow
centres. The acquisition presents
an excellent opportunity to grow
and develop the Snozone brand as
a leading operator in the sector.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL CASE STUDY
Commercial Mall Income
Increased focus on smaller independent retailer entrepreneurs is providing new
sources of retailer customers and driving income and maximising revenue through
quality uses, experiences and partnerships, embracing physical, digital and emerging
platforms. We have increased investment in the commercial team where we are
undertaking a growing number of transactions on a principal to principal basis
through new and existing relationships. CML is one of the first areas we saw income
recovery in following the first national lockdown, driven by the London assets. Our
platform is increasingly recognised as leader in the sector.
Intelligent Parking Solutions
We have signed agreements for the provision of frictionless parking initiatives with REEF
in Wood Green and Luton and with Your Parking Space in Maidstone, due to go live in
March 2021. REEF and YPS are investing into a new car park management and control
system that will provide efficiency for guests in terms of automated payment methods
together with easier entry and exit into the car park, improving the guest journey. The
increased insight into our guests’ journey will also allow us to target alternative income
opportunities, including dark kitchens and final mile fulfilment centres, bike and scooter
rental stations, electric vehicle charging, ride-share and community spaces for pop-up
businesses.
Kaya’s Barber, Ilford
We have recently completed a new
letting at The Exchange Ilford with Kaya’s
Barber a children’s hairdresser that will
open in the family zone on the lower
level of the shopping centre adjacent
to the kids’ play area. We have worked
closely with the retailer to ensure that the
presentation of this offer is aligned with
our strategic focus for the family zone
ensuring it complements the surrounding
merchandising mix together with providing
a key service for the local community.
Bubble CiTea, Walthamstow &
Blackburn
We will have two new kiosks opening
in Blackburn and Walthamstow in
March 2021. The operation is a British
brand producing unique flavours of the
traditional Taiwanese Tea origins. These
two additional locations illustrate how
the design and quality of typical kiosks
has evolved and underlines our focus of
working with local entrepreneurs wanting
to take space within our portfolio.
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STRATEGIC REPORT Financial Review
STUART WETHERLY
GROUP FINANCE DIRECTOR
Profitability
Statutory Revenue
Net Rental Income (NRI)
Adjusted Profit1
Adjusted Earnings per share (Basic)1, 2
2020
2019
Change
£72.7m
£34.1m
£10.3m
9.5p
£88.9m
£49.3m
£27.4m
36.7p
-18.2%
-30.8%
-62.4%
-74.1%
IFRS Loss
£(203.4)m
£(121.0)m
-£82.4m
Basic Earnings per share2
(188.3)p
(162.3)p
EPRA cost ratio (excluding vacancy costs)
Net Administrative Expenses to Gross Rent
Investment returns
Net Asset Value (NAV) per share2
EPRA NTA per share2
Dividend per share2
Financing
Group net debt
41.1%
20.8%
150p
158p
-
25.9%
10.8%
361p
364p
21.0p
£345.1m
£336.9m
Group net debt to property value
65%
46%
Average debt maturity3
Cost of debt
4.4 years
5.4 years
3.41%
3.26%
-26.0p
+15.2%
+10.0%
-211p
-206p
-21.0p
+£8.2m
-19 pps
-1 years
-15 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 Per share amounts for 2019 have been restated to reflect the impact of the 10 for 1 share
consolidation that completed on 15 January 2020.
3 Assuming exercise of all extension options.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL 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.
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 other non-
operational 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 other items 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
condensed 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. Like-for-like has also been used in the case of
footfall and car park income for Walthamstow in removing from year-on-year comparisons the period of 2019
when the centre was closed due to the fire.
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 (NRI)
Net interest
Investment income
Central operating costs net of external fees
Snozone (loss)/profit (indoor ski operation)
Tax credit
Adjusted Profit1
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 2020
Year to
30 Dec 2019
34.1
(17.5)
0.1
(4.7)
(1.9)
0.2
10.3
9.5
10.3
(208.3)
0.4
-
(5.0)
-
(0.8)
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)
(203.4)
(121.0)
1 EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the financial statements.
2 Per share amounts for 2019 have been restated to reflect the impact of the 10 for 1 share consolidation that completed on 15 January 2020.
30
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STRATEGIC REPORTcapreg.comCapital & Regional plc Adjusted Profit – 2020: £10.3 million (2019: £27.4 million)
Adjusted Profit and Adjusted Earnings per share decreased by 62.4% and 74.1% respectively, driven by a £15.2 million or 30.8% decrease
in NRI, primarily due to the impact of the Covid-19 pandemic. The reduction in NRI has manifested itself across three main areas:
Impairment of Receivables (Bad debt) charged for the period: £7.3 million (30 December 2019: £1.7 million). The rent collection for
2020 now stands at 80%. In assessing the treatment of the debt that remained outstanding at 30 December 2020, we have considered
the underlying credit position of each individual tenant in determining the level of any provision to be made. In total we have provided
for approximately 50% of the net debt that was outstanding as at the year end.
Car park income FY20 £5.8 million (FY19 £10.7 million): we stopped charging for our car parks once the lockdown at the end of March
2020 restricted the opening of all non-essential retailers. We resumed charging in June, when such restrictions were lifted, and
maintained tariffs for the rest of the year; however, usage remained significantly impacted by trading restrictions particularly during
November and December when non-essential retailers were again required to close for significant periods of those months.
Administrations and CVAs: the impact of CVAs and administrations is approximately £4.4 million. This includes c. £1.4 million from the
write-off of incentives to tenants who have entered administration during the period.
Other impacts to NRI during the year include the net benefit of £4.0 million of surrender premium relating to a single unit, and a
reduction of £2.3 million arising from the adoption of the IFRS 16 leasing standard.
The latter is largely offset by a corresponding £2.0 million reduction in notional interest as detailed in the table below. The adoption
of IFRS 16 Leases for the first time has resulted in a notional interest charge being recognised in respect of the lease agreements for
the Group’s office premises and Snozone operations and the basis for the notional interest on the Group’s Head Leases changing. The
latter has resulted in a material reduction of the related finance lease asset and liabilities maintained on the Group balance sheet from
approximately £65 million to £25.6 million at December 2020.
Amounts in £m
Net Interest on loans
Amortisation of refinancing costs
Notional interest charge on finance leases1
Other net interest (receivable)/payable
Net Group interest
Year to
30 Dec 2020
Year to
30 Dec 2019
14.6
1.0
1.4
0.5
17.5
14.6
0.9
3.4
-
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 in line with the prior year.
Outside of the movement in NRI the biggest impact on Adjusted Profit year on year is the contribution from Snozone which saw a swing
of £3.4 million, from a profit of £1.5 million in 2019 to a loss of £1.9 million in 2020 (excluding notional interest). Snozone was required
to close for more than six months of the year, including approximately half of its peak Q4 trading period, and had to manage social
distancing restrictions for four of the six months it was able to trade.
IFRS loss for the period – 2020: Loss of £203.4 million (2019: Loss of £121.0 million)
The loss on revaluation of investment properties for the year was £208.3 million (2019: Loss of £138.6 million) and this was the
key component driving a loss for the period of £203.4 million. A breakdown of valuations by property is provided in the Net Asset
Value section below. The other main factors outside of Adjusted Profit was a loss on financial instruments of £5.0 million, reflecting
expectations of interest rates being lower for longer.
Net Asset Value
The valuation of the portfolio at 30 December 2020 was £527.0 million, a 27.5% decline on 30 December 2019 and reflecting a net initial
yield of 7.88% (2019: NIY: 6.95%).
The decline of retail asset values across the industry continued to accelerate in 2020 albeit driven largely by sentiment with transaction
volumes at historically low levels. The Group’s London assets proved relatively more robust, declining overall by 21.8%. In comparison,
the Group’s assets outside of London were more significantly impacted by negative sentiment towards retail assets with the headline
valuation of the Group’s three South East assets declining by 34% and Blackburn falling by almost 40% over 2020.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Financial Review
CONTINUED
Property portfolio valuation
Property at independent valuation
£m
NIY %
NEY %
£m
NIY %
NEY %
30 December 2020
30 December 2019
London
Ilford
Walthamstow
Wood Green
South East
Hemel Hempstead
Luton
Maidstone
Regional
Blackburn
Portfolio
60.0
106.6
158.0
324.6
23.3
92.5
46.0
161.8
5.30%
5.17%
6.71%
5.96%
10.00%
9.8%
10.67%
10.05%
7.49%
6.15%
6.43%
6.80%
12.69%
9.50%
10.75%
10.89%
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%
6.86%
5.33%
5.66%
5.97%
10.38%
8.17%
9.69%
9.28%
40.6
13.17%
12.23%
66.9
10.24%
10.15%
527.0
7.88%
8.26%
727.1
6.95%
7.62%
The movement in valuations has driven the decline in NAV to £167.8 million and EPRA Net Tangible Assets to £176.7 million compared to
December 2019 amounts of £375.1 million and £378.6 million respectively. Basic NAV per share and EPRA NTA per share were 150p and
158p respectively, representing declines of 211p and 206p respectively (December 2019: 361p and 364p respectively).
Dividend
In light of the current level of uncertainty and desire to maximise cash flexibility, the Group has taken the decision not to declare a Final
dividend and will maintain this position at least until markets stabilise.
A UK REIT is expected to pay dividends (PIDs) of at least 90% of its taxable profits from its UK property rental business by the first
anniversary of each accounting date. By agreement with HMRC, the Group has an extension to the payment date of the balance of the
2019 PID, of approximately £7.6 million, to 30 June 2021 in order to meet its REIT distribution requirements for the financial year ending
2019. The Group has requested a further extension of six months to this deadline given the impact and uncertainties caused to the
Group’s business by Covid-19. If the Group were to not be granted an extension and not meet the minimum requirement, then under
REIT legislation, the Group will incur UK corporation tax payable at 19% while remaining a REIT. We estimate that this would result in a
tax payment of approximately £1.4 million being required to be paid in respect of the balance of 2019. However, this is subject to there
being no legal impediment to distribution. At 30 December 2020 the Company does not have sufficient distributable reserves to declare a
dividend. If this legal impediment to distribution subsists at the date for payment of the balance of the 2019 PID and the date of payment
of the 2020 PID the Group will be deemed to have met the distribution requirement for those periods based on the provisions in CTA
2010 section 530.
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STRATEGIC REPORTcapreg.comCapital & Regional plc Financing
The Group has four non-recourse asset secured loan facilities that each sit within their own ring-fenced special purpose vehicle (SPV)
structure. Funding costs of 3.41% are substantially fixed and secured over the medium term with a weighted average four years to
maturity at 30 December 2020, extending to 4.4 years if the remaining one-year extension on part of The Mall facility is exercised. The fall
in valuations resulted in net debt to value increasing to 65% (December 2019: 46%).
30 December 2020
The Mall (Four Assets)
Hemel
Ilford
Luton
Central Cash
On balance sheet debt
Debt¹
£m
265.0
26.9
39.0
96.5
-
427.4
Cash²
£m
(10.3)
(0.9)
(1.8)
(9.0)
(60.3)
(82.3)
1 Excluding unamortised issue costs.
2 Excluding cash beneficially owned by tenants.
3 Debt and net debt divided by investment property at valuation.
Net
debt
£m
254.7
26.0
37.2
87.5
(60.3)
345.1
Loan to
value3
%
Net debt
to value3
%
75%
115%
65%
104%
-
81%
73%
112%
62%
95%
-
65%
Average
interest
rate
%
3.61
3.32
2.76
3.14
n/a
3.41
Duration to
loan expiry
Years
Duration
with
extensions
Years
4.9
2.1
3.2
3.0
n/a
4.0
5.6
2.1
3.2
3.0
n/a
4.4
Fixed
%
100
100
100
100
n/a
95
From the proceeds of the December
2019 equity raise, the Group had initially
earmarked £50 million to pay down
debt and has to date only utilised
£5 million of this sum, leaving a balance
of £45 million (effectively within the
£60.3 million of Group cash included in the
table above). The Group had previously
been in discussions with lenders about
utilising a proportion of the remaining
funds to voluntarily pay down its four
non-recourse debt facilities in the early
part of the year, but when it became clear
how significant the disruption caused by
Covid-19 would be, we took the decision to
place such discussions on hold. Our priority
since has been to focus our efforts on
defending our assets and on ensuring the
continued stability and therefore flexibility
of the Group to continue to respond to
the volatility and acceleration in structural
change in the sector.
While on a relative basis the Group has
demonstrated operational resilience,
the general outlook remains uncertain
in respect of precisely how long existing
government-mandated restrictions will
remain in place, and the risk of further
infections or lockdowns or Government
restrictions on our operations and ability
to collect rent, coupled with the full
macroeconomic consequences of Covid-19
still being unclear. In consideration of
this, the Group has sought to maximise
flexibility in its management of liquidity
and to prioritise the ability to continue
in all reasonable circumstances to
service the Group’s operational costs,
including interest on its loans, and to
be able to judiciously invest further in
its management platform and capital
expenditure in its assets, where that is
required for the long-term protection of
value and sustainability of income.
On this basis, the Group has been in
discussions with its relevant lenders on a
facility-by-facility basis to actively manage
its loan portfolio, with substantial focus
on the impact that the Covid-19 disruption
has had on both income and loan-to-value
based covenants on the individual facilities.
The Group’s lenders have acknowledged
the quality of the management platform
and the strong relative results in
rent collection, occupancy and key
leasing initiatives.
On the Hemel Hempstead and Luton
facilities, we are mindful that while the
loans are not actually in default, the
December 2020 valuations are significantly
below the covenant levels and a breach
would occur if this valuation were to be
replicated if and when the lender next
independently tests the valuation. We are
working closely and constructively with
the respective lenders and have covenant
waivers currently in place that are being
reviewed on a quarter-by-quarter basis.
While we remain committed to managing
the assets and delivering the best long-
term outcome for all stakeholders, with
asset values at the end of the year being
below the level of the outstanding debt,
the economic rationale for committing
central funds to cure and/or pay down
these non-recourse facilities at the present
time is challenging. On Hemel Hempstead,
we have exchanged on the disposal of the
Edmonds Parade block of assets within the
scheme for a price of £4.65 million. The
net proceeds of this disposal are planned
to be applied in partial prepayment of the
outstanding debt.
On The Mall facility, we have obtained a
waiver of all financial covenants until the
Interest Payment Date (IPD) at the end of
April 2021 and are in detailed discussions
with the lenders about a longer-term
extension of these waivers in return for the
provision of additional funds.
On Ilford, we have secured a waiver of the
financial income covenants until the July
2021 IPD. We have agreed outline terms
on a longer-term modification of these
covenants, covering at least the next 12
months, to facilitate the completion of
the proposed major asset management
initiatives at the asset, being the planned
medical centre and the re-letting of the
Debenhams anchor unit, which, if they
proceed, the Group will partially fund from
central cash.
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 2020, 6,270,782 of the
Company’s shares were held on the JSE
share register representing 5.61% of the
total shares in issue.
STUART WETHERLY
GROUP FINANCE DIRECTOR
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL 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 2020.
Principal Risks at
30 December 2020
In June 2020, a number of risks were
re-profiled, increasing in both likelihood
and significance, due to the impact of the
Covid-19 pandemic. The following risks
were deemed to have increased in terms or
likelihood and/or significance: investment
market risk, economic environment risk,
treasury risk, tax and regulatory risk,
development risk, business disruption
(including Covid-19 or other pandemics)
risk, responsible business risk, and
customer risk. These risks broadly remain
unchanged at 30 December 2020 but
the pervasive and ongoing impact of the
pandemic has increased the risk of further
business disruption, the treasury risk and
economic risk. The potential significance
of development risk has been reduced
as the number of development projects
has decreased.
Potential risks have also been considered,
including the impact of Brexit on the
transport and supply of goods from the
EU to the Group’s retailer customers
and the knock-on impact on their ability
to trade; and the risk that the recovery
from the Covid-19 pandemic, the speed
and effectiveness of the rollout of the
vaccine programme and the reduction
in restrictions diverges from current
guidance/expected timelines.
Covid-19
The impact of Covid-19 is incorporated
within our business disruption from a
major incident risk. All of the Group’s
shopping centres have remained open
throughout the pandemic to provide
essential services but, at the time of
writing, a majority of tenants are currently
closed in line with Government guidelines.
The pandemic has had a pervasive impact
on the business felt primarily through
reduced levels of rent collection, decreases
in non-contracted income such as car
park revenue, increased levels of tenant
failures and the enforced closure of the
Group’s Snozone ski operations. The
uncertainty around the impact of the
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 REPORTcapreg.comCapital & Regional plc
Covid-19 pandemic has also resulted in
declines in asset valuations, impacting our
debt covenants.
1
2
Property Investment Market
Risks
Impact of the Economic
Environment
Risk
Tenant insolvency or distress
Prolonged downturn in tenant
demand and pressure on
rent levels
Impact of Covid-19 has had
a negative effect on general
retail sales, increasing risk of
administrations and insolvencies
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
Long-term leases and active credit
control process
Good relationships with and
active management of tenants
Void management through
temporary lettings and other
mitigation strategies
Risk
Weakening economic conditions
and poor sentiment in
commercial and/or retail real
estate markets has led to low
investor demand and high
volatility in valuations
Valuation risk from lack of
relevant transactional evidence
Impact
Small changes in property
market yields or future cash
flow assumptions can have a
significant effect on valuation
Impact of leverage could magnify
the effect on the Group’s net
assets and risk of breaching loan
covenants which could result in
potential default of facilities if not
cured and therefore the risk of
security being enforced
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
We continue to actively monitor the
situation and contingency plans are in
place to mitigate the further impact on our
operations, our shopping centres and our
tenants as best we can as the situation
continues to develop.
Brexit
The UK left the European Union (EU) at the
end of January 2020 and the EU-UK Trade
and Cooperation Agreement was formally
agreed on 30 December 2020. While these
developments have provided some clarity,
there remains significant uncertainty
over the future impact of Brexit on the
economic environment as the terms of the
agreement are implemented.
Information Security
The Group has an IT Security Governance
Policy in place and has established an IT
Steering Committee which meets on a
monthly basis, with cyber security at the
core of the IT strategy. The Company has
not experienced a serious data breach in
the last three years.
In 2020, we made significant investment
into our IT infrastructure and security
measures. This included the rollout of
best of breed enterprise security solutions
enhancing email security and introducing
multi factor authentication and further
execution of our Cloud strategy, migrating
systems and data into Microsoft Azure
and Office 365 platforms. The Company’s
policies and security practice aligns with
ISO27001 and, in February 2021, Capital
& Regional attained the Cyber Essentials
Plus certification, demonstrating our
commitment to cyber security. Ongoing
investment in employee cyber awareness
training and testing, aims to better equip
staff to mitigate risk.
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.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Managing Risk
CONTINUED
3
Treasury
Risk
4
Tax and Regulatory
Risks
5
People
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 loss of REIT status,
financial penalties, loss of
business or credibility
Mitigation
Monitoring of REIT compliance
Expert advice taken on tax
positions
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
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
and/or lenders taking control of
secured assets
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 prohibitive
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
Regular monitoring and
projections of liquidity, gearing
and covenant compliance with
regular reporting to the Board
Maintain close relationships
with lenders
Option of asset sales if necessary
Facilities are all non-recourse
outside of SPV structures
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STRATEGIC REPORTcapreg.comCapital & Regional plc 6
7
8
Development Risk
Business Disruption from a
Major Incident
Responsible
Business
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
co-ordinators and external
consultants with regular
monitoring and Executive
Management oversight
Monitoring of new planning
proposals
Close relationships with local
councils and willingness to
support town centres
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 at Walthamstow 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
Ensuring centres and support
office are compliant with
Covid-19-secure requirements
Regular liaison with the police and
environmental health officers
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
A risk that centres or specific
retailers are identified as
a ‘hotspot’ for Covid-19
transmission
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 ESG 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
Ensuring centres and support
office are compliant with
Covid-19-secure requirements
Ensuring retailers comply with
Covid-19-secure requirements
Monitoring systems to ensure
tenant compliance
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Managing Risk
CONTINUED
9
10
Customers & Changing
Consumer Trends
IT & Cyber Security
Risk
The trend towards online
shopping, multi-channel retailing,
and increased spending on leisure
may adversely impact consumer
footfall in shopping centres
A risk that Covid-19 will further
accelerate changing customer
shopping habits and accelerate
the trend towards online
shopping
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
Risk
Failure or malicious attack
against the Group’s information
technology hardware and
software systems
Failure to invest in new
technology
Impact
Loss of business time and/or
reputational damage
Data breaches resulting in
reputational damage, fines or
regulatory penalties
Loss of operating capabilities
Mitigation
IT Security Governance Policy in
place aligned with ISO27001
Ongoing investment in technology
infrastructure
Key IT applications hosted offsite
Systems in place to mitigate risk
of malicious attack
Penetration testing carried out by
a specialist security company
Cyber Essentials Plus certified
Information security training
programme in place for all
employees
Maintenance of a disaster
recovery site
Insurance maintained
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STRATEGIC REPORTcapreg.comCapital & Regional plc 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 two-
year period to December 2022. Previously
the Directors have considered viability
over a three-year period but a shorter
time frame has been selected at this year
end given the high level of volatility and
uncertainty that the business is currently
facing, driven primarily by the impact of
Covid-19 and the ongoing longer term
structural changes within the retail sector.
The two-year period is covered by the
Group’s annual budget and business
planning process and none of the Group’s
asset-backed debt financing are scheduled
to mature during the period.
The considerations made by the Directors
in concluding on viability mirror those
considered within the Going Concern
conclusion as documented below. Based
on this 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
making its assessment of Going Concern,
the Group has considered the general
risk environment and specifically the
impact on the business of the significant
disruption arising from Covid-19 as well as
the acceleration of the structural trends
that were already under way in the retail
industry. At the time of writing, all of the
Group’s seven shopping centres are open,
though a majority of tenants are unable
to trade due to current Government
restrictions and rent collection for the first
quarter of 2021 is currently running at
approximately 60%.
The valuation of the Group’s property
portfolio fell from £727.1 million at
30 December 2019 to £527.0 million at
30 December 2020. While there are some
indications that investor interest may
rebound in 2021, the current pressure
on rental values presents a risk of further
valuation declines.
As asset valuations have come under
pressure, the Group’s net debt to property
value ratio has, consequently, increased
markedly over the year, from 46% to
65%. Our lenders have recognised the
unprecedented nature of this situation
and have demonstrated their support
by granting waivers for the first quarter
of 2021 in respect of covenants which
would otherwise have been breached.
Management remains in regular dialogue
with lenders to agree the most appropriate
way forward.
At 30 December 2020 the Group had total
cash on balance sheet of over £75 million,
which is equivalent to more than one year’s
gross revenue. Of this, £60.3 million was
centrally held and free of any restrictions.
This provides a significant cash contingency
to cover any disruption to operations for
an extended period of time.
Management has undertaken actions
to improve the preservation of cash
within the business while this period of
uncertainty persists. These actions include
rationing capital expenditure projects
to only those that immediately drive
income improvements, or are of strategic
importance, and suspending the dividend
until such time as markets stabilise.
In making its assessment of Going
Concern, the Group has run updated
Group forecasts on both a base case
and sensitised basis. In the latter, the
Group has considered the impact of
restrictions extending into the second
half of 2021. The Group’s analysis projects
that the central cash maintained provides
sufficient funds to cover the potential
operational disruption.
The Group’s four asset-backed loan
facilities are ring-fenced within their
own SPV structures with no recourse
to Capital & Regional plc and no cross-
default provisions. Each loan facility has
bespoke covenants as outlined on page
149. Covenants in respect of minimum
interest cover ratios, both projected
and historic, are tested quarterly. The
Group has secured short-term waivers or
deferrals for all income covenants covering
at least the first quarter of 2021 and is in
constructive and detailed dialogue with
the respective lenders on extending these
further as detailed in the Financing section
above. The earliest maturity on any of
the Group’s asset-backed loan facilities is
February 2023.
Hemel and Luton are now in a negative
equity position which means that The
Mall and Ilford combined assets make up
substantively all of the Group’s Net Asset
Value excluding the central cash balance
maintained by the Group at 30 December
2020. In respect of The Mall and Ilford, the
central cash balance maintained by the
Group at 30 December 2020, in addition
to available cash within the relevant
structures, provides sufficient funds to
remedy the loan to value covenants if
values fell by up to a further 15% across
these assets by reference to the December
2020 valuations. This is if the Directors
choose to take this approach, even
without any further covenant relaxation.
If valuations fell by in excess of 15% then
the Group would be reliant on continued
covenant relaxation or would be deemed
to be in breach of the facilities. Ongoing
discussions with the Group’s lenders give
Management confidence that the required
flexibility could be obtained.
Importantly, all of the Group’s four asset-
backed facilities are non-recourse with no
cross-default provisions and all facilities
provide the Group with the opportunity
to cure breaches of financial covenants
or provide for the eventual surrender of
assets, without any recourse to the rest of
the Group, should the Directors choose not
to cure in the event that the lenders do not
grant further covenant modifications.
In coming to its Going Concern conclusion,
the Group has also considered, but not
relied upon, other options available to
generate or conserve additional cash, to
cure loan to value covenants and to fund
value accretive capital expenditure and
letting initiatives. These include but are not
limited to: the potential disposal of assets
either in whole or part; the opportunity
to crystallise value on the Walthamstow
residential development; and the potential
raising of additional funds.
Having due regard to all of the above
matters and after making appropriate
enquiries, including considerations of the
impact of Covid-19 and sensitivities, the
Directors have a reasonable expectation
that the Group and the Company have
adequate resources to continue in
operational existence for the foreseeable
future. Therefore, the Board continues to
adopt the Going Concern basis in preparing
the financial statements.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL 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. We understand that decisions made by the
Board will not always be aligned with the wishes of all of the Group’s stakeholders. The Board strives to ensure that its decisions are
consistent and predictable and are aligned to the Company’s purpose, values and strategy. The Board remains committed to an open
dialogue with our stakeholders.
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.
Our People
What matters
Opportunities for career and personal development
Fair and equitable pay and benefits
An inclusive and diverse environment
Open and transparent communication
Enhanced support and communication while working
from home
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
Our Community
Our retailer customers, our guests and our suppliers.
What matters
Outstanding customer service
Robust Covid-secure measures in place
Affordable rents and service charge
Centres that drive footfall and adapt 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 customers, guests and suppliers
Having a positive impact on local areas, and creating
vibrant and well maintained centres that enhance
their surroundings
Supporting employment in the community
Open communication and engagement on
development opportunities
How we engage
Investment in data to understand consumer and
market trends
Regular visitor surveys
Regular audits of facilities management and
operational standards
The Board considered the impact on current employees
Strong engagement with local and central governments
when making strategic decisions
and Business Improvement Districts
Read more about how we engage with our people
on pages 46, 47 and 58
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 ESG Committee discuss key issues as part of its
agenda and provides 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
The Board reviews and approves all developments within
our communities and receives regular updates on ongoing
planning matters and community outreach programmes.
Read more about how we engage on pages 48 and 49
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STRATEGIC REPORTcapreg.comCapital & Regional plc Our Shareholders and Business Partners
The Environment
What matters
Robust financial accounts
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
advisers.
Feedback from shareholder meetings is shared with the
Board and forms part of boardroom discussions.
Read more about our engagement with our shareholders
on page 58
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
Member of the Better Building Partnership
Signatory to the Climate Change Commitment
How we respond
The Board’s ESG Committee discuss key environmental
issues as part of its agenda and provides regular updates
at Board meetings.
Environmental issues form part of our boardroom
discussions
Read more about how we engage on pages 44 and 45
Principal Decisions in the Year
The Board considered the payment of a final dividend for the year ending 30 December 2019 and the inclusion of a scrip dividend
alternative in early March 2020, in light of the emergence of the Covid-19 pandemic. The Board believed it to be a balanced approach
which resulted in the majority of the proposed £11.4 million dividend payment being preserved in cash within the business and
maintained compliance with the Company’s REIT requirements. The proposal was supported by the Company’s largest shareholders,
who were consulted on the proposal, and provided all shareholders with flexibility to take cash or the scrip alternative. With significant
reductions in revenue flows during 2020, no interim dividend was announced, and the Board concluded it would be inappropriate to pay
a final dividend for 2020.
In the year, the Board considered the use of the proceeds from the equity raise completed in December 2019 and the £50 million
earmarked to pay down debt. The Group had previously been in discussions with lenders about utilising a proportion of the remaining
funds to voluntarily pay down its four non-recourse debt facilities but in light of the significant disruption caused by Covid-19 the Board
agreed that such discussions should be put on hold. The Group remains in active discussions with its relevant lenders regarding income
and loan to value based covenants on the individual facilities, to actively manage its loan portfolio. The Board’s priority remains focused
on defending the Group’s assets and on ensuring the continued stability and therefore flexibility of the Group.
The Board paid due regard to all stakeholders in the decisions taken in response to the pandemic and received regular reports from the
Chief Executive regarding the impact of Covid-19 on the business, its operations and its employees. Areas of discussion included changes
to operational standards and processes to ensure compliance with covid-secure measures; the approach taken to outstanding rent
collection and the granting of concessions; the use of the Coronavirus Job Retention Scheme and restructuring plans across the Group;
and employee support and wellbeing.
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STRATEGIC REPORTAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL ESG Report
The past 12 months have
accelerated stakeholder
expectations regarding
Environmental, Social
and Governance (ESG).
As part of our agenda
to ensure our assets
are fit for the future, we
have renewed our long-
standing commitment
to ESG best practice,
ensuring it continues to
serve our communities
and strengthens our
position, performance and
perspectives.
Our dedication to running a responsible
business is vital. It underpins the way we
operate and is an integral part of who
we are and what we do. Our approach to
ESG will be a critical factor in measuring
and managing our financial performance,
resilience and ability to meet the
heightened expectations and needs of
our stakeholders.
Our aim is to ensure that minimising our
impact on the environment is at the heart
of everything we do. We want to ensure
that C&R is not only a great place to work,
but has a positive impact on our guests,
retailer customers and operators and the
wider community.
Our ESG strategy is developed and
reviewed by our ESG Committee headed
by Non-Executive Director Laura Whyte,
and supported by Non-Executive Director
Katie Wadey, the Chief Executive,
the Director of Guest & Customer
Experience, the Managing Director of
Snozone, and representatives from our
asset management and HR teams. The
Committee meets quarterly and receives
updates on activities across the business
and on the progress made against targets.
The Committee also reports to the Board
on the progress made against our strategy
on a quarterly basis.
Strategy Review
In 2020, we engaged a sustainability
strategy adviser to complete a review
and materiality analysis of C&R’s ESG
Strategy. The outputs of this review
will inform the development of a new
overarching integrated ESG strategy in
2021, and guide our reporting under the
Task Force on Climate-Related Financial
Disclosures (TCFD) recommendations.
We have also partnered with
HDR | Hurley Palmer Flatt (HDR), a leading
independent multidisciplinary engineering
consultancy providing solutions for the
built environment, to assist in developing
our net zero pathway.
Our vision is that our centres are leaders
in sustainable practice, underpinned by
our commitment to net zero operations
and have a positive impact on their
communities. As leaders in sustainable
practice, we will partner with local
authorities, community groups and support
local initiatives for sustainable solutions to
environmental and social issues within our
communities. Our ESG strategy will build
on the following key areas:
Progress made to date and future
aspirations regarding carbon
reductions;
Waste and water management;
Risk management associated with
climate change and the impact of
extreme weather events on our centres;
and
Defining our short, medium and long-
term targets in line with the scenario
of maintaining a 1.5°C change, in
accordance with the Paris Agreement.
Our ESG strategy will be supported by clear
and measurable targets and will focus on
three pillars: Environmental Sustainability,
People & Community and Governance.
Everything we do is underpinned by
clear policies and procedures, which are
committed to the latest health and safety
standards, and ensure best practice
reporting and disclosure.
We are proud of our achievements in
maintaining a responsible business, striving
to meet the needs of our stakeholders and
being strong stewards of the environment.
However, we recognise there is always
potential for improvement. With much of
our assessment completed in 2020, we
are well poised to engage both internal
and external stakeholders throughout
2021 to chart our future ambitions and
set progressive actions that deliver better
outcomes for all.
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STRATEGIC REPORTcapreg.comCapital & Regional plc Environmental Sustainability
People & Community
Governance
We work hard to ensure that
the local communities and
wider catchment areas that
we serve are better places to
be for all. Our commitment
is to focus on ethical and
sustainable practices that
reduce consumption in three
key areas; waste, water and
energy. We work tirelessly
to reduce our carbon
footprint and only partner
with suppliers who share
this mission.
Read more about
environmental
sustainability on pages
44 and 45
Our robust corporate
governance approach spans
structure, organisational
transparency, codes of
conduct, risk, supply chain
management, policy and
impact measurement.
We monitor and continually
develop an inclusive and
diverse working environment,
suitable for everyone
regardless of their age,
gender, race, religion
disability or socioeconomic
background.
While we benchmark against
industry standards and
best practice we also work
closely with our stakeholders
to continue to identify
improvements that bring
meaningful impact and
surpass industry standards.
Read more about Governance
from page 55
Being a responsible business
cannot be achieved
without the support and
active engagement of our
colleagues. Our aim is to
engage, develop and reward
employees, while maintaining
a working environment that
supports the mental health,
wellbeing and general
health and safety of all our
stakeholders, reflecting our
values and ethics and taking
account of the diversity of our
workforce and communities.
Our centres play a key role
in the ongoing development
of the communities and
environments within which
we operate. Our aim is to
engage with our guests,
retailer customer and
operators, suppliers and other
stakeholders, to understand
their needs and continue to
identify ways of improving our
collective performance and
positive social impact.
Read more about our people
on pages 46 and 47
Read more about our community
on pages 48 and 49
UNDERPINNED BY OUR VALUES
INSPIRING
CREATIVE
THINKING
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
ACTING
WITH
INTEGRITY
DELIVERING
DYNAMIC
SOLUTIONS
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Environmental Sustainability
We work hard to ensure that the local
communities which we serve are better
places to be for all. Our commitment is to
reduce the carbon footprint of our owned
and leased properties and focus on the
reduction of waste, water and energy
usage throughout the business. We have
long recognised that all development
activity should mirror this and proactively
minimise energy consumption and mitigate
the effects of climate change throughout
the sustainable acquisition, procurement,
design and refurbishment of our centres.
Energy, Water and
Waste Reduction
The introduction of lockdown restrictions
throughout 2020 significantly impacted
all of our centres’ operations; and in turn
affected our electricity, gas and water
consumption and waste generation. Water
consumption and waste generation were
significantly reduced as a result of lower
footfall across our centres. We continued
our regular operations ensuring the
diversion of waste from landfill; through
recycling and energy production through
incineration. We continued programmes to
divert food waste to anaerobic digestion,
and continued the rollout of refillable
water units across our centres. Through
the lockdown, we regularly assessed
our centres’ energy requirements and
implemented changes to ensure our
centres were operating efficiently while
at reduced capacity, and where possible
we have implemented these efficiencies
permanently as the centres return to
operating at full capacity.
Following Government guidance, we
increased the ventilation within our
centres to help mitigate the transmission
of Covid-19 in enclosed spaces and protect
the health and welfare of our guests,
customers and employees. Maintaining
an increased fresh air intake has resulted
in additional gas consumption during
2020, however we have combatted this by
continuing to develop new initiatives to
reduce waste and increase recycling while
supporting our essential retailer customers
that remained trading. We have also
ensured that we have the benchmarking
and measurements in place to continue
progress.
In 2020, Snozone successfully transitioned
to 100% natural and renewable electricity
for its centres and a key objective for 2021
is exploring how to transition all operations
away from utilising gas.
Pathway to Net Zero
We recognise the threat of climate change
not only to the real estate, retail and leisure
industries in which we operate, but more
importantly to the world in which we live.
The effects of climate change are already
being felt across the retail and leisure
industries through the impact on the global
supply chain infrastructure and extreme
weather events leading to business
disruption. Our guests are also increasingly
championing the effects of climate change
and are heavily focused on reducing
emissions through their purchasing habits
and personal actions.
To combat climate change we committed
to the Better Building Partnership (BBP)
Net Zero Carbon Pathway Framework in
2020. The purpose of this framework is
to aid the real estate industry in defining
and publishing its own Net Zero Carbon
Pathways which set out when and how net
zero carbon targets will be delivered. Each
of our centres has developed its own multi-
year carbon reduction plan, which builds
on the carbon reductions achieved to date,
and outlines the pathway to achieving net
zero by 2040.
From 2015 to 2019, we invested over
£1 million in energy efficiency projects,
which have achieved over 7,600 tCO2e
of savings to date. Approximately 90%
of energy saving opportunities identified
through the first phase of the Energy
Saving Opportunity Scheme (ESOS) have
been completed. Improvements to centres
have included LED lighting upgrades,
plant replacement, BMS upgrades and
energy efficient glass installations. These
improvements have resulted in a 48%
reduction in our (Scope 1 and 2) carbon
footprint and the investment has been
paid back in just over four years. There
have been fewer energy efficiency
improvements completed in 2020 due the
impact of the Covid-19 pandemic; however,
where it has been safe to do so, the BMS
improvements and LED lighting upgrade
programmes have continued across our
centres.
Work to date has focussed on Scope 1 and
Scope 2 for areas that are directly under
our control. As part of the BBP Framework
we must consider the emissions that we
can positively influence, such as our retailer
customers and occupiers usage (Scope 3).
This presents an opportunity to partner
with local stakeholders and develop our
combined emission reduction strategy.
Using a straight-line trajectory, and a
baseline of 2015, a 4% annual decrease
in baseline carbon emissions is required
each year to achieve carbon neutrality for
Scope 1 and 2 emissions by 2040. We have
completed Phase 2 of the ESOS assessment
and have identified further opportunities
for each of our centres. These opportunities
are detailed in an investment plan showing
a £2.5 million investment over the next five
years. Each of the opportunities has been
provisionally identified as high, medium,
or low priority based on the investment
required and the potential savings.
Streamlined Energy and Carbon
Reporting (SECR) Disclosures
HDR were commissioned to provide
independent verification of our 2020 energy
and carbon data, in line with the principles
of BS EN IOS 14064-3:2019. A limited
assurance opinion of the energy and carbon
data for 2020 has been included below, and
a copy of their verification statement can be
found on our website.
The reported CO2 emissions for 2020
have been produced with reference to
the Greenhouse Gas Reporting Protocol.
The reporting boundary has been defined
using the operational control approach,
reporting emissions for operations in
which Capital & Regional has control, and
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) has
been excluded.
Scope 1 emissions account for the total
natural gas consumed by Capital &
Regional. Emissions from emergency
equipment (e.g. standby generators) have
been deemed deminimis and therefore is
not included in the reported figures. Scope
2 emissions account for the total electricity
purchased by Capital & Regional.
44
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STRATEGIC REPORTcapreg.comCapital & Regional plc Actual data has been used wherever possible, however some data has been estimated where required, including for the Support
Office. The reported emissions represent the best information available at the time of issue, on 4 March 2021. It should be noted that
the Scope 1 and Scope 2 emissions (where stated in tCO2e) are absolute values. The annual figures are not directly comparable due
to changes in emission factors, and the property portfolio. We have applied the 2020 “UK Government GHG Conversion Factors for
Company Reporting, v1.0 9th June 20” for calculating 2020 carbon emissions. 100% of energy consumption and emissions relates to the
UK.
Energy Consumption (kWh)
Natural Gas (Scope 1)
Centres2
Snozone
Support Office
Natural Gas (Scope 1) Total
Purchased Electricity (Scope 2)
Centres2
Snozone
Support Office
Purchased Electricity (Scope 2) Total
Renewable Electricity Consumption3
20171
20181
20191
2020
3,315,025
3,215,921
N/A
4,470,580
3,111,650
N/A
4,556,731
2,880,916
N/A
4,629,861
2,220,206
N/A
6,530,946
7,582,230
7,437,647
6,850,067
17,935,659
18,222,598
16,012,429
11,651,768
6,814,595
5,804,621
5,231,454
4,535,305
107,316
97,200
96,096
96,096
24,857,570
24,124,419
21,339,979
16,283,169
–
–
9,861
4,290
%
difference
2019-2020
2%
(23)%
N/A
(8)%
(27)%
(13)%
0%
(24)%
(56)%
Total Scope 1 & Scope 2 kWh
31,388,516
31,706,648
28,777,626
23,133,237
(20)%
Scope 1 & 2 Emissions (tCO2e)4
Natural Gas (Scope 1)
Centres2
Snozone
Support Office
Scope 1 Total tCO2e
Purchased Electricity (Scope 2)
Centres2
Snozone
Support Office
Scope 2 Total tCO2e
611
592
N/A
1,203
6,305
2,396
38
8,739
822
572
N/A
838
530
N/A
1,395
1,367
5,158
1,643
28
6,829
4,093
1,337
25
5,454
851
408
N/A
1,260
2,716
1,057
22
3,796
2%
(23)%
N/A
(8)%
(34)%
(21)%
(9)%
(30)%
Total Scope 1 & Scope 2 tCO2e
9,942
8,224
6,822
5,056
(26)%
Intensity
Scope 1 and 2 kgCO2e/sq ft
2.04
1.69
1.40
1.04
1. 2017, 2018 and 2019 figures have been restated where material changes were subsequently identified.
2. The Centre figures include the Kingfisher Centre, in which C&R acts as Property and Asset Manager.
3. Renewable energy is generated through Solar PV installed at Walthamstow Centre. System was offline for part of 2020.
4. Scope definitions
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).
Not all figures above total correctly due to the omission of decimal places and rounding in underlying data.
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STRATEGIC REPORT
ESG Report
CONTINUED
Our people
Being a responsible business cannot be
achieved without the support and active
engagement of our people. Our aim is to
ensure that we promote a progressive
company culture, dedicated to creating
welcoming environments at both a
corporate and centre level, irrespective
of age, gender, race, religion, disability or
socioeconomic background. 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 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 reflects our values and ethics and
supports the wellbeing and health of all
our people, taking into account of the
diversity of our workforce.
Impact of Covid-19 on working
practices
The Covid-19 pandemic has affected the
working practices of all our colleagues,
whether they are based at our Support
Office or at one of our centres. Following
Government guidance, all Support Office
and, where possible, centre-based team
members transitioned to remote working
in March 2020. In August, we successfully
enabled our Support Office staff to return
to the office through the reconfiguration
of our office space and the introduction
of alternating work patterns and specific
procedures to comply with covid-secure
requirements. The measures were well
received by staff and the majority of our
workforce had returned to the office by
September. Following the reintroduction of
Government guidance to work from home
wherever possible, our Support Office
staff have returned to working from home
and continue to do so and we have put
measures in place to protect and support
our centre-based teams who were unable
to do so. We have continued to support
our colleagues throughout the pandemic,
ensuring that they have the appropriate
equipment and software to be able to work
effectively from home.
46
Going the Extra Mile (GEM)
Programme
We continue to develop our shopping
centre team training and recognition
programme. In 2020, we launched the ‘Safe
Place’ GEM in response to the introduction
of covid-secure measures. This initiative
received a nationally recognised award for
being the first shopping centre business
to achieve ‘World Host 2020 – Beyond
Covid-19’ status. The Safe Place GEM
recognises colleagues who have attained
the WH2020 training standard, which has
now been completed by 95% of our front-
line employees.
CASE STUDY
All About You Committee
Understanding the significant impact working from home could have on our
colleagues mental health and wellbeing, we launched the ‘it’s All About You’
Committee, a social and wellbeing group whose focus is on ensuring employees
feel connected, engaged and supported. The Committee established six pillars of
wellbeing and engagement to focus on and provided regular updates, suggestions
and tips to colleagues.
It’s all about –
- Kids
- Self-care
- Fitness
- Mindfulness
- Connectivity
- Food
The Committee also arranges social events including virtual coffee mornings,
quizzes and ‘happy hours’ to provide opportunities to interact with colleagues
while working remotely.
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capreg.comCapital & Regional plc
CASE STUDY
ACE Awards
The REVO ACE awards recognise the
best in guest experience in the retail
shopping centre industry across the
UK and C&R are extremely proud of
our winners:
ACE Superstar – Paul Clarke,
Kingfisher Redditch
ACE Stars – Carly Laydon,
Kingfisher Redditch, Leander
Shellum, Kingfisher Redditch & Jo
Lucas, Mall Maidstone
Centre who scored 100% on
facilities on both mystery
shopping visits – The Mall
Maidstone (New Award)
In 2020, we undertook two Employee
Engagement surveys to understand how
our employees were managing working
from home, their individual circumstances
and how we could further support them
while working remotely and returning to
the office. The annual Employee Pulse
survey, completed in August, focused on
wellbeing and culture and had a response
rate of 97% (2019: 95%) and an overall
score of 8.2 out of 10 (+5% improvement
from 2019), highlighting both the
willingness of our employees to provide
feedback and their expectation that their
feedback will be acted on. Our Employee
Net Promoter Score was +41 (+28%
improvement from 2019) reflecting the
strong engagement across the business.
Snozone’s team satisfaction survey
received an overall score of ‘Very satisfied’
89% (2019: 85%).
Diversity & Inclusion
Our centres are embedded in culturally
rich communities. Embracing diversity is a
part of our DNA, and we are dedicated to
creating welcoming environments at both
a corporate and centre level, irrespective
of age, gender, race, religion, title/position,
sexual orientation and disability. Through
our self-service HR platform our employees
are invited to provide information related to
equal opportunities. This data will be used
to support the development of actions to
better understand and increase diversity
across the business. Our Shopping Centres’
cleaning and security teams are employed
direct through our contractor Cordant, who
clearly demonstrate their commitment to
promoting diversity and providing equal
opportunity to all areas of their business
from recruitment, employment and career
progression to learning and development.
Snozone has been accredited as a Disability
Confident employer since 2018, reflecting
its commitment to increasing accessibility to
snow sports.
In coordination with National Inclusion
Week, in September 2020, we launched the
C&R Diversity and Inclusion programme
and invited colleagues from across the
business to join a newly formed Committee
to lead and set the agenda for how we best
progress. By adopting a renewed strategic
focus on diversity with the launch of C&R’s
Diversity Committee, we intend to provide
a framework that ensures our commitment
to inclusion can continue to drive
innovation within the business and have a
material impact on our performance.
Considering all issues that impact our
colleagues (both positive and negative),
already the committee is making strides
in progressing our diversity agenda,
beginning with an internal audit to
establish where C&R currently sits as a
business in terms of diversity; what we are
doing well, and where we can improve.
The Committee will also be responsible
for new initiatives to drive awareness of
key diversity issues in the business and
in our communities. The committee will
place greater emphasis on partnerships
with community groups, local and national
charities that are championing the cause
of diversity and promoting equal career
opportunities for underrepresented
backgrounds.
Employee Engagement
With the majority of our colleagues
working remotely for a significant
proportion of 2020 and the beginning of
2021, we have increased our focus on
employee engagement. We have continued
to host our all staff Townhall meetings
remotely with increased frequency to
provide regular updates on the business.
In addition to this we have introduced a
new slot ‘Who am I?’ where colleagues,
from across the business, can share their
personal story to the wider business.
In November 2020, we launched our
Employee Voice 24/7 tool which allows
employees to provide feedback to the
business on any issue or topic that is of
importance to them. The tool is available
24/7 and ensures feedback remains
anonymous. All feedback submitted is
reviewed and acted on by the senior
leadership team. Regular updates continue
to be provided to employees on the
themes emerging and the actions taken to
address them.
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CONTINUED
Our community
We are deeply committed to fostering
trusted relationships within our
communities by creating a safe and
inclusive experience for all, while
contributing to our local communities by
being a responsible, socially aware and
a proactive partner. By partnering with
key stakeholders, we can ensure the right
structures are in place to listen, engage
and use feedback to develop or refine our
approach and we can continue to invest
time and money into supporting the causes
and charities that are important to the
communities within which we operate.
Being at the heart of the local community,
we have a responsibility to ensure that all
our guests have a positive experience when
visiting our centres. That means ensuring
our facilities are fully inclusive and cater to
all our guests’ needs. We support people
with disabilities by investing in areas such
as our family changing facilities, accessible
toilets, including ‘Changing Places’ toilet
facilities, adopting initiatives such as Purple
Tuesday and Hidden Disabilities, providing
accessible events and we continuing to
support measures that benefit everyone.
Working with Government and expert
industry bodies, we believe in the
importance of vibrant, successful and
active town centres in helping communities
thrive. We continue to evolve our asset
master plans, which include opportunities
for development, to ensure our centres
remain relevant in the rapidly changing
retail landscape. For all development plans
we follow the national planning policy and
local frameworks and openly engage with
community interest groups and individuals
to reach the best outcomes for all.
Covid Response Team
The Covid-19 Response Team was
established using our crisis management
framework, as a monitoring body involving
key individuals from across the business.
The Team’s objective is to ensure that
C&R is best placed to react and respond
appropriately to the pandemic, ensuring
the welfare and safety of all our employees,
guests and retailer customers and
occupiers. Non-Executive Director Laura
Whyte also joined the Team, providing a
direct reporting line to the Board.
The Response Team is able to quickly
respond and adapt to an ever-changing
trading environment and advise the
business on the following key areas:
48
Implementation of the latest
Government advice and regulations
Supporting the welfare of our teams
and working environments, including
homeworking
Travel advice to our teams
Supporting the continuation of essential
services in the communities
Implementation of the Communication
Plan, internally and externally
Our overriding priority is the health, safety
and protection of our colleagues, guests
and customers by rigorously following the
latest official Government guidelines and
advice across our portfolio. Precautionary
measures we have taken include:
Enhanced deep cleaning, sanitising
stations at key locations and PPE for all
centre employees;
Arrows and signage in common areas
to encourage directional flow and a
one-way system, as well as providing
distancing reminders;
Limiting the number of people on
escalators, stairs and in lifts and guest
facilities at any one time; and
Removal of most public seating
to discourage congregation and
close contact.
We continue to carefully control visitor
capacity to maintain social distancing and
to protect guests, customers, and our
colleagues, while restricting access when
necessary. We have provided additional
assistance to our retailer customers to
support them in complying with covid-
secure requirements and have promoted
store openings, hours of trading, and the
best times to visit through our social media
channels. Our centre teams have assisted in
the management of queues for busy retailers
and engaged with the local police and PCSOs
to work together on the enforcement of face
coverings, and other covid measures.
C&R Cares
We work to actively support the local
communities we serve through our C&R
Care initiatives. Each centre in our portfolio
runs its own charitable programme of
fundraising activities. The programmes are
planned and delivered at a local level in
conjunction with local partners and driven
by local needs and concerns. Our shopping
centres also support other charity
fundraising activities by providing a venue
for charities to benefit from the high level
of footfall in our centres. Since 2006 over
£6.7 million has been raised under the C&R
Cares initiative.
Due to the impact of Covid-19 on our ability
to host traditional fundraising events,
CASE STUDY
Working in Partnership with Community
Organisations
Award-winning music studio and social enterprise, The RecordShop, opened at
The Mall, Wood Green, in October 2020. The organisation, previously based in
Tottenham, was founded in 2015 by Mary Otumahana and began as a voluntary
social action project and pop-up recording studio that aimed to provide
disadvantaged youths with the opportunity to record and perform their own
music. Two years later, the company launched its social enterprise, offering
recording studio services and other musical opportunities such as workshops,
events, studio time, internships, apprenticeships and employment.
This new multipurpose music space is a cultural hub for creatives. As well as
continuing to support young people through youth projects, they offer a safe
space for students to gain work experience, employability skills and develop their
creativity. The RecordShop is also expanding their services and will be offering
desk space, event space, recording studio facilities and a café for the wider
community. The RecordShop is a great addition to The Mall and complements
C&R’s community strategy, providing young people in the community with a
safe space to explore and nurture their talents, and diversifies its offering to the
community by providing a space to come together and celebrate music and talent.
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The Mall, Luton’s
Space Camp
To celebrate the 50th moon landing
in 2019, The Mall Luton offered
guests a free high quality virtual
reality experience. Their interactive
children’s Space Camp event involved
budding astronauts hopping into a
space suit before entering a pop-up
planetarium to learn about stars and
beyond, floating through space in
virtual reality, touch a real meteorite
and get a taste of space by trying
some Astronaut ice-cream. The event
was a great success and was awarded
a Merit in the 2020 Revo Purple Apple
marketing awards. The event also
encouraged sign-ups to The Mall
Luton Kids Club and generated over
£800 for their charity of the year.
Poppy appeal in
Blackburn
To support the British Legion’s
Poppy Appeal in a new and
inventive way, The Blackburn Mall
created an eye-catching graphic on
an empty unit with details of how
to donate via text or online and
provided a contactless donations
machine at the unit. Over £5.3k
in donations was collected in two
weeks via the contactless donation
machine which is more than the
total raised in 2019.
RoSPA Awards
2020 saw us celebrate our 14th
consecutive RoSPA Gold Award.
Established in 1956, The RoSPA
Health & Safety Awards offer
organisations a prime opportunity
to benchmark safety performance
year on year and ensure consistent
performance between sites.
They also provide an effective
route to demonstrate an ongoing
commitment to raising health and
safety standards. We continue to
support the excellent work that
RoSPA does across the world in
striving to achieve their vision of “life
free from serious accidental injury”.
our centres have refocused their efforts
and partnered with local businesses and
organisations, including the Foodbank
and the Salvation Army, to provide vital
support to local services, NHS staff, key
workers and vulnerable members of our
communities. Our teams donated the
funds that would usually be used for staff
celebrations to local charities, and these
donations were matched by C&R, resulting
in £18,000 being donated to local charities.
Throughout 2020 we were able to provide
support to 80 charities and 78 community
groups, raise £83,306 for C&R Cares and
provide £53,208 in community funding
sponsorship.
Sport for All
For many years, Snozone’s mission has
been to address and vastly improve
diversity and accessibility in the snow
sports industry, with ‘Sport for All’ being
a deliverable ethos. Snozone is the only
European operator with their own Disability
Snow School. The school, which was
founded in 2016, saw a 38% increase of
adaptive lessons in 2020 despite the venues
being closed for the majority of 2020.
A focus on inclusivity for children and
adults with physical disabilities and mental
impairments is also reflective in Snozone’s
charity partner, ‘Sense’, a charity for
deaf/blind adults and children. This is a
partnership that was established in 2014
and has delivered great mutual benefits to
both the charity and the Snozone team.
Snozone has been a champion in
addressing gender inequality in snow
sports and was the first UK operator
to support the Sport England ‘This Girl
Can’ initiative, which encourages a more
positive engagement of girls and women
with snow sports. Snozone has also taken
steps over the years to encourage social
mobility and therefore participation from a
broader and more diverse population.
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
24 March 2021
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Our ESG Strategy in Numbers
£83,306
RAISED FOR C&R CARES
+41
EMPLOYEE NPS
1,758
VOLUNTARY
HOURS DONATED
TO SUPPORTING
THE LOCAL
COMMUNITY
8,267
JOBS SUPPORTED
BY OUR CENTRES
80
CHARITIES
SUPPORTED
78
COMMUNITY
GROUPS
SUPPORTED
26%
REDUCTION IN
TOTAL EMISSIONS
20%
REDUCTION IN
TOTAL ENERGY
CONSUMPTION
50 Capital & Regional plc
50
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STRATEGIC REPORTcapreg.comCapital & Regional plc Our ESG Strategy in Numbers
COVID-19 Our Response
CASE STUDY
STRATEGIC REPORT
2020 has been a year
like no other, with the
discovery of Covid-19
and the imposing of
various lockdowns,
Government guidelines
and subsequent tier
restrictions, which all
businesses needed
to closely follow and
comply with.
Snozone was required to close on
20 March 2020 and, following the first
Government national lockdown on
23 March 2020, only essential retailers
were allowed to remain open, resulting
in many of our retail customers closing
with immediate effect. We immediately
responded by supporting our retailers
forced to close, ensuring our essential
retailers were equally prepared for
ongoing trading in a challenging
environment and then supporting
our retailers to reopen as restrictions
eased. This process was again necessary
in response to introduction of the
Tiers System throughout Q4 2020
and a further national lockdown in
November 2020.
We managed this ongoing process by
following our six key readiness essential
protocols - adapted as Government
knowledge and scientific evidence
resulted in changes to guidelines and
best practice.
1. Building Safety
We ensured that essential planned
maintenance was continued, that our
covid secure risk assessments were
complete and up to date and that our
retailers were safe to open (as and when
allowed to do so).
2. Staffing
Our security, cleaning and
management teams were fully
deployed in helping manage the
requirements of our enclosed spaces
to the required guidelines, aiming
to ensure we delivered a safe and
pleasant experience.
3. Touch Point Cleaning and Hygiene
Touch points located throughout the
centres and facilities were subject to
enhanced cleaning routines, including:
manual doors unable to be held open,
lift buttons and escalator handrails, stair
handrails and car park machinery. We
introduced sanitising stations for guests at
key points located around the centres, and
hand and face protection equipment for all
centre employed staff. We also handed out
free face masks to guests to encourage and
increase compliance.
4. Access Control and Contractor
Engagement.
Contractor access to the centres was
controlled to meet our social distancing
requirements and works in guest-facing
areas restricted to out-of-hours to prevent
conflict with controls in place for guest
access and movement.
5. Communication for Confidence
We ensured all our communication
was transparent and provided clear
concise instructions on a regular basis
to reduce fear, build public confidence,
and to highlight the increased measures
introduced, as our guests returned to
our centres. The centres developed a
suite of instructional messages, displayed
throughout the centres, with a key focus
on respecting all our teams and complying
with Government requirements. Our
centre marketing teams provided regular
communication via social media channels
giving up-to-date opening information, and
clear direction on safe times to visit.
6. Managing Centre Capacity and
Social Distancing
As Government restrictions were eased
our centres were well positioned to move
quickly to re-energise the centres in a safe
and controlled manner while adhering to
Government guidelines.
At our shopping centres, we engaged
our footfall monitoring provider to assist
in managing capacity using real-time
data. The Real-Time Occupancy tracking
solution enabled our centres to accurately
understand shopper density across the
centres, helping us to comply with social
distancing guidelines, stay within maximum
limits and optimise traffic management
strategies. The footfall tracking system
enabled us to understand when our
centres were approaching maximum
occupancy with an easy-to-use dashboard.
Duty Managers would receive an automatic
text and email notification when the
centre reached 75% occupancy (classed
as Amber) and 90% (classed as Red)
occupancy, allowing the onsite team time
to actively review capacity and, if necessary,
implement control measures to manage
access by the implementation of our traffic
light entry system.
Snozone reopened from 17 August 2020
until it was required to close again in
November 2020 until the end of the year
in line with the tier restrictions. During this
period Snozone operated with reduced
capacities across its centres, offering only a
limited choice of activities.
The Importance of Partnership
Working
We worked closely with local authority
council leaders, the police, covid Marshalls,
Environmental Health Officers, local BIDs
and various community groups to ensure
a unified approach to the challenges
that faced us in operating our centres
safely and within the confines of Covid-19
regulations. We responded swiftly and
efficiently to any changes in Government
guidelines to ensure that all our centres
offered and continue to offer a safe
shopping experience for all our guests and
a professional supportive platform for our
retailer customer and occupiers. Snozone
was also awarded the ‘We’re Good to Go’
kite mark from Visit England, the official UK
mark to signal that a tourism and hospitality
business is following Government and
industry Covid-19 guidelines and has a
strong process in place to maintain all
Covid-secure measures accordingly.
WorldHost 2020 – Covid-19 and
Beyond
In September 2020, we became the first
UK shopping centre business to train its
front-line team in a new customer service
module from the Customer Service training
providers WorldHost, launched in response
to the Covid-19 pandemic.
Three hundred and nine staff across all of
our shopping centres, have successfully
completed the training, which was devised to
empower staff with the knowledge and tools
to keep guests and colleagues safe beyond
Covid-19 and drive positive behaviours
in a rapidly changing customer-facing
environment. By empowering our staff to
adapt the experience we provide, it means we
are able to support our guests’ ever-changing
needs and expectations while keeping people
safe and driving consumer confidence.
Stock Code: CAL
Annual Report and Accounts for the year ended 30 December 2020
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Board of Directors
Executive Directors
Non-Executive Directors
LAWRENCE
HUTCHINGS
Chief Executive
Appointed: 2017
E
STUART
WETHERLY
Group Finance
Director
and Company
Secretary
Appointed: 2019
DAVID
HUNTER
Chairman
Appointed: 2020
N
Relevant skills and experience
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.
External Appointments
None
Relevant skills and experience
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 spent 12 years at Deloitte in
London where he qualified as a Chartered
Accountant. Stuart also worked in a group
finance role at Johnson Matthey plc.
External Appointments
London Wildlife Trust (Trustee and
Honorary Treasurer)
Relevant skills and experience
David has many years’ experience in UK
and international real estate markets,
including 15 years as an independent
adviser and professional non-executive
director. His current roles include
Chairman at Custodian REIT Plc and GCP
Student Living Plc and his background
includes previous board-level positions
in the UK and overseas. He is a Senior
Adviser to ICG Real Estate, a leading
real estate debt fund manager. Prior to
2005, David was Managing Director of
Aberdeen Property Investors and in 2004
he was President of the British Property
Federation.
External Appointments
Custodian REIT plc (Chairman)
GCP Student Living plc (Chairman)
ICG-Longbow (Senior Adviser)
KATIE
WADEY
Non-Executive*
Appointed: 2020
LAURA
WHYTE
Non-Executive*
Appointed: 2015
LOUIS
NORVAL
Non-Executive
Appointed: 2009
A
R
E
E
A N R
Relevant skills and experience
Katie is the Group Customer Director
of Aviva Plc, responsible for customer
experience and satisfaction across the
Aviva Group. Katie has over 20 years of
multi-industry experience across a range
of customer engagement and commercial
functions and has held senior roles at a
number of high profile consumer-facing
organisations, including BT, LV=, Tesco,
British Gas and Barclays Bank.
External Appointments
Onside Youth Zones (Trustee)
Transform Housing and Support (Trustee)
Relevant skills and experience
Laura has significant retail and human
resources experience from 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.
External Appointments
XLVets UK Ltd (Chair)
Defence People and Training Board of the
Ministry of Defence
British Horseracing Authority
The Old Royal Naval College, Greenwich
(Trustee)
Relevant skills and experience
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. He is a global
investor and is Executive Chairman of
Homestead Group Holdings Limited as well
as Chairman of the Green Create Group
of Companies, which focuses on green
energy. Louis graduated with a BSc (QS)
(with distinction) from the University of
Pretoria.
External Appointments
Homestead Group Holdings Limited
(Executive Chairman)
Green Create Group (Chairman)
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GOVERNANCEcapreg.comCapital & Regional plc Committee membership:
A Audit Committee R Remuneration Committee N Nomination Committee
E ESG Committee
Chair of Committee
* Independent (as per the UK Corporate Governance Code).
GEORGE
MUCHANYA
Non-Executive
Appointed: 2019
IAN KRIEGER
Non-Executive*
Appointed: 2014
BOARD DIVERSITY
Board composition
(number of Directors)
Relevant skills and experience
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.
External Appointments
Globalworth Real Estate Investments
Limited
Globalworth Poland Real Estate N.V.
Growthpoint Investec African Property
Management Limited
A
RN
Relevant skills and experience
Ian is the Audit Committee Chairman
and Senior Independent Director at both
Safestore Holdings plc and Primary Health
Properties PLC. He is also Chair of Anthony
Nolan. Aside from his Non-Executive
Director experience, Ian also brings
extensive financial expertise from having
previously been a senior partner and vice-
chairman at Deloitte until his retirement in
2012.
External Appointments
Safestore Holdings plc (Audit Committee
Chair, Senior Independent Director)
Primary Health Properties plc (Audit
Committee Chair, Senior Independent
Director)
Anthony Nolan (Chair)
3
2
1
4
Chairman
Executive Directors
Independent Non-Executive Directors
Non-Executive Directors
(not independent)
Board tenure
(number of Directors)
1
NORBERT
SASSE
Non-Executive
Appointed: 2019
TONY HALES
CBE
Non-Executive*
Senior
Independent
Director
Appointed: 2011
R
A
N
2
2
5
Relevant skills and experience
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.
External Appointments
Greenwich Foundation (Chairman)
NAAFI Pension Fund Trustees (Chairman)
Associated Board of the Royal Schools of
Music (Chairman)
Relevant skills and experience
Norbert is the Group Chief Executive
Officer of Growthpoint Properties Limited.
He 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.
External Appointments
Globalworth Real Estate Investments
Limited
Globalworth Poland Real Estate N.V
Growthpoint Properties Limited
Growthpoint Properties Australia Limited
Growthpoint Investec African Property
Management Limited
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0-3 years
6-9 years
3-6 years
9-11 years
Board gender split (%)
20%
80%
Male
Female
53
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Senior Leadership Team
LAWRENCE HUTCHINGS
Chief Executive
ROB HADFIELD
Commercial Director
SARA JENNINGS
Director of Guest and
Customer Experience
Rob was previously Group Property
Director at Debenhams before joining
Capital & Regional 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.
Sara began her retail career working for
House of Fraser in Store Management
before joining Capital & Regional 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 the Group’s shopping centres.
STUART WETHERLY
Group Finance Director and
Company Secretary
JAMES RYMAN
Investment Director
NICK PHILLIPS
Managing Director, Snozone
James joined Capital & Regional 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. As
Investment Director, James is responsible
for driving investment performance from
our shopping centre portfolio.
Nick joined Capital & Regional 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 and 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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GOVERNANCEcapreg.comCapital & Regional plc Corporate Governance Report
Chairman’s introduction
I am pleased to present Capital & Regional’s Corporate
Governance Report for 2020.
In the current economic environment, the
Board has postponed for the time being
the appointment of a further independent
Non-Executive Director, given the need to
restrict costs in line with the scale of the
Company. The Board will, however, keep
this under review. I am satisfied that the
Board comprises the right individuals who
have the skills the Group requires and the
ability to respond well to the challenges
presented by the continually changing
environment in which we operate.
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.
DAVID HUNTER
CHAIRMAN
The primary focus of C&R in 2020 has
been responding to the significant impact
of the Covid-19 pandemic on the day-
to-day operations of our centres and
Snozone and the wider implications for
the longer-term position of the business.
The Board’s activities during the year
have reflected this, with more frequent
meetings and significant time devoted to
both operational updates and considering
how the impacts of Covid-19 will interact
and influence the longer-term structural
changes going on within the retail industry.
The Board has also managed a significant
amount of personnel changes over the
last 18 months. Following the completion
of the transaction with Growthpoint
in December 2019, Norbert Sasse and
George Muchanya joined the Board and
Wessel Hamman stepped down. I joined
the Board in March 2020 and, following
the retirement of Hugh Scott-Barrett at the
close of the 2020 AGM in May, assumed
the role of Non-Executive Chairman.
In 2019, we committed to recruiting two
additional independent Non-Executive
Directors to the Board and I am pleased
to report that we have made progress on
this with Katie Wadey joining the Board in
October 2020. Tony Hales, after nine years
of service, will retire from the Board as
Senior Independent Director at the AGM
in May 2021 and I am delighted that Ian
Krieger has agreed to take on the role of
Senior Independent Director from that
date. I would like to thank Tony for his
invaluable contribution to the Board and
the Company during a period of significant
change.
The Board remains
committed to
high standards
of corporate
governance, which
it considers to be
critical to effective
management and to
maintaining investor
confidence.
DAVID HUNTER
CHAIRMAN
“
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Corporate Governance Report
CONTINUED
Compliance Statement
Compliance with the UK Corporate Governance Code
The Company has throughout the year ended 30 December 2020 complied with the provisions of the 2018 UK Corporate Governance
Code with the exception of (i) Provision 11, that at least half the Board are not considered to be independent and (ii) Provision 38, that
Executive Director pension contributions are not aligned with the workforce.
As noted above, given the current economic environment, the Board has postponed further appointments to the Board, but will continue
to keep Board composition under review. The recruitment of two further independent Non-Executive Directors would result in a large
Board in comparison to the scale of the Group and increase operational costs. 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. The Board considers the current
composition of the Board to be well balanced, with appropriate challenge provided by the independent Non-Executive Directors.
An explanation of the Company’s reasoning in respect of Provision 38 in set out in the Directors’ Remuneration Report on page 67.
Principle of the Code
Board Leadership and Company Purpose
The Board is responsible for delivering the long-term sustainable success of
the Group for the benefit of its shareholders, stakeholders and for the wider
community. The Board is responsible for defining, monitoring and overseeing
the culture of the organisation and ensuring that it is aligned with the Group’s
purpose and strategy.
See pages 57 to 59
Division of responsibilities
The Board has well established division of responsibilities between the
Chairman, Chief Executive, Senior Independent Director, Board and Committees.
Composition, Succession and Evaluation
Audit, Risk and Internal Control
Remuneration
Terms of reference have been agreed and approved by the Board for all its
Committees.
See pages 59 to 61
The Board, via the Nomination Committee, keeps under review the composition
of the Board and its Committees. The Nomination Committee is also responsible
for succession planning and reviewing the policy on diversity and inclusions.
The Board undertakes an annual review of its effectiveness.
See page 61 and the Nomination Committee Report on page 62
The Board, via the Audit Committee, ensures the Group is managed
appropriately, that robust financial controls are in place, and policies and
procedures are in place to manage risk, and oversee internal controls.
See pages 63 to 65 for the Audit Committee Report
The Board, via the Remuneration Committee, ensures that policies are designed
to support strategy and promote long-term sustainable success.
See pages 66 to 83 for the Remuneration Report and Policy
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.
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GOVERNANCEcapreg.comCapital & Regional plc Corporate Governance Report
CONTINUED
BOARD LEADERSHIP AND COMPANY PURPOSE
Role of the Board
The Board has a collective responsibility to promote the long-term sustainable success of the Company for the benefit of its
shareholders, stakeholders 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, stakeholder considerations and governance issues play a key part in
its decision-making and there is a schedule of key matters that are not delegated. Regular Board and Committee meetings are scheduled
throughout the year, ensuring that Directors allocate sufficient time to discharge their duties effectively. 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.
Purpose
Our purpose is to invest in, manage and enhance retail property through the creation of dynamic environments tailored to their local
community. We define and lead community shopping through the creation of vibrant retail spaces and exceptional customer and guest
experience. The Board receives regular updates on the operational performance of the Group’s centres against key KPIs, including
footfall and leasing activity and feedback on guest surveys, providing insight into the demand and engagement within each community.
The Board reviews all proposed developments and the annual business plans outlining the remerchandising strategy and key leasing
initiatives for each centre. Directors are also encouraged to visit centres outside of formal Board visits to gain a better understanding of
the environment and guest experience.
Board Activity
Key strategic matters discussed in 2020 included:
Strategy
Reviewed strategic options for the further growth and development of the business, and held a half day
strategy meeting in June 2020 which included presentations from external presenters on wider industry trends
Received updates on property cycle and sector trends
Risk and Risk
Management
Financial
Performance
Governance
Stakeholders
Considered the emerging and ongoing risks associated with the Covid-19 pandemic and its impact on business
operations
Reviewed the actions undertaken by Management to provide a Covid-19 safe environment at our shopping
centres, Snozone and other business locations
Reviewed the Group’s principal risks and the risk matrix and internal control systems
Via the Board’s Audit Committee met with the Company’s valuers twice in the year
Reviewed the Group’s performance against budget and peers and assessed the impact of Covid-19 on the
Group’s income, cash flows and property valuations.
Approved the annual business plan and budget
Approved interim and full-year results
Reviewed the dividend policy
Discussed the results of the Board evaluation
Received regular updates from the Chairs of the Audit, Remuneration, Nomination and ESG Committees
Received briefings on key governance and regulatory developments
Received updates on interaction with and feedback from shareholders
Reviewed employee engagement survey results and updates on company culture
Received updates on key HR matters
Received updates on operational procedures introduced in light of Covid-19 to support retailer customers and
guests and to ensure centres remained Covid-secure.
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CONTINUED
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 as part of its engagement with the
wider workforce. The Board is of the view that the culture is open,
supportive and transparent, is led from the top, and works across
the business.
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. Social distancing and Covid-19 restrictions
limited the opportunities to meet with shareholders in person in
2020 and key meetings were held remotely. The Chairman, Senior
Independent Director and Committee Chairs hold meetings with
institutional shareholders, when required, to discuss key issues.
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.
In-person activities were limited in 2020 but key engagement
included:
Shareholders invited to attend the full year and interim results
presentations via video conference
Post-results investor road shows covering investors in London,
Edinburgh, Amsterdam and South Africa held via video
conference
Participated in a number of industry conferences
Hosted investor tours at our centres when allowed under
Government restrictions
Provided regular updates to the market throughout the year
Workforce Engagement
The Executive Directors hold ‘Townhall’ meetings following
each scheduled Board meeting to update all employees on the
decisions taken and provide an opportunity for employees to ask
any questions they may have. In 2020 the frequency of Townhall
meetings was increased to provide regular updates to employees
while the majority of the workforce worked remotely. The
Townhall meetings are well attended by employees in the Support
Office and by centre teams. The ESG Committee also reviews the
outputs of the employee engagement surveys “C&R Pulse” and the
“Team Survey” at Snozone on a regular basis.
Laura Whyte is the Non-Executive Director responsible for
workforce engagement. In 2020 we further defined the purpose
and key accountabilities of role. These include:
Learning about employee experiences and perspectives on
current challenges facing the business
Sharing those views at Board meetings to inform broader
decision-making
Ensuring the Board takes appropriate steps to evaluate the
impact of proposals and developments on employees and
consider relevant steps to mitigate any adverse impact
Providing feedback to employees, through the Senior
Leadership Team, on Board decisions that will impact them
directly
In addition to these responsibilities, the Non-Executive Director
attends Townhall meetings as well as social events held at the
Support Office and centres. Attendance on an ad hoc basis at
the All About You and Diversity and Inclusion Committees is also
encouraged. They review and monitor feedback and insights
driven by our employee surveys and is consulted on the topics
covered.
In 2020, this included reviewing employee feedback regarding
returning to work, following the relaxation of Government
guidance on working from home in August 2020. Employees were
asked to share their views and concerns about returning to the
office and information regarding their personal circumstances,
including whether they were shielding, what care responsibilities
they had and their ability to travel to centres safely. Employee
concerns were taken into account prior to the finalisation of
operational and communication plans and positive feedback was
received on the measures put in place from those who returned
to the office in September. As a member of the Remuneration
Committee, Laura is also briefed on any remuneration matters
affecting employees and is able to provide feedback to the
Remuneration Committee on any concerns raised by employees.
In a normal year, the Board would generally undertake one or two
visits to operational locations during the year and would hold at
least one Board meeting at a C&R location other than the Support
Office. In January 2020, the Board visited The Mall, Walthamstow.
As well as undertaking a tour of the centre, the Board met with
the Walthamstow management team and a senior member of the
local authority. The Board also received updates on the rebuilding
of the area of the centre that had been impacted by the fire in
July 2019 and on the residential development project. Due to
Government restrictions imposed in 2020 it was not possible to
undertake further site visits as planned.
Getting out and about in the business is important for the Board
as this enables the Non-Executive Directors to see first hand
how our assets are run and, importantly, meet local teams. This
provides an experience of the business which cannot be replicated
in the boardroom and also enables 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.
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Conflicts of interest
Directors are required to report actual or potential conflicts of interests to the Board for consideration and the Company maintains a
register of authorised conflicts of interest. The Chairman notes the Register and reminds Directors’ of their duties under the Companies
Act 2006 relating to the disclosure of any conflicts of interest at the beginning of each Board meeting.
Directors’ interests in the shares of the Company and the terms of their appointment are disclosed on page 82.
Independent Advice
Directors can raise concerns at Board meetings and have access to the advice of the Company Secretary. There is an established
procedure for Directors, in relevant circumstances, to obtain independent professional advice at the Company’s expense. No such
requests were made in 2020.
Directors’ and Officers’ Liability Insurance is maintained for all Directors.
DIVISION OF RESPONSIBILITIES
Board balance and independence
Details of the Directors, including their qualifications, experience and other commitments, are set out on pages 52 and 53. The Board
currently comprises the Chairman, two Executive Directors and seven Non-Executive Directors.
The Board reviews the independence of its Non-Executive Directors on an annual basis. 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 Homestead Group of companies, a significant shareholder of the Company, and has served on
the Board for more than nine years. The Board has concluded that all other Non-Executive Directors continue to demonstrate their
independence.
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.
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. The Senior Independent Director undertakes regular reviews to ensure the distinction of roles and
responsibilities remains appropriate.
Chairman
Provide effective leadership and maintain a culture of openness, debate and constructive challenge
Set the agenda, style and tone of Board meetings and ensure Directors receive timely, accurate and clear information to assist
decision-making
Monitor the Board’s effectiveness
Oversee new Director inductions and the ongoing training and development of the Board
Chief Executive
Day-to-day responsibility for managing the business of the Group
Recommend the Group’s strategy to the Board and implement the agreed strategy across the Group
Provide regular updates to the Board on all operation matters of significance
Deliver the Group’s ESG strategy
Ensure effective communication with the Group’s shareholders and stakeholders
Senior Independent Director
Act as a sounding board to the Chairman
Act as an intermediary for Non-Executive Directors when necessary and available to shareholders if they wish to raise concerns
outside of the usual communication channels
Evaluate the Chairman’s performance as part of the annual Board evaluation process
Non-Executive Directors
Provide independent judgement, knowledge and commercial experience to discussions and decision-making
Provide constructive challenge to Executive Directors and scrutinise the performance of management against key objectives
Provide oversight of the Group’s strategy
Manage the agenda and deliverables of the Board’s Committees
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Board and Committee Structure
CAPITAL & REGIONAL PLC BOARD
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
ESG
COMMITTEE
DISCLOSURE
COMMITTEE
AUDIT
COMMITTEE
SENIOR LEADERSHIP TEAM
Audit Committee
Meets at least three times per year
Further information on pages 63-65
Disclosure Committee
Meets as required
Nomination Committee
Meets at least once a year
Further information on page 62
Remuneration Committee
Meets at least twice per year
Further information on pages 66-83
ESG Committee
Meets at least twice per year
Further information on pages 42-43
Chairman – Ian Krieger
Members – Tony Hales, Katie Wadey, Laura Whyte
Chairman – Lawrence Hutchings
Members – David Hunter, Stuart Wetherly
Chairman – David Hunter
Members – Tony Hales, Ian Krieger, Laura Whyte
Chairman – Tony Hales
Members – Ian Krieger, Katie Wadey, Laura Whyte
Chairman – Laura Whyte
Members – Lawrence Hutchings, Katie Wadey
Terms of reference for all Committees are available on the Company’s website.
Board and Committee Meetings
The number of meetings of the Board and its Committees during 2020, and individual attendance by Directors, is set out below.
Board
Scheduled
Ad Hoc
6
1/1
5/5
6/6
6/6
6/6
6/6
6/6
6/6
5/6
3/3
6/6
4
2/2
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
1/1
4/4
Total
10
3/3
9/9
10/10
10/10
10/10
10/10
10/10
10/10
9/10
4/4
10/10
Committees
Audit
Remuneration
Nomination
4
-
-
-
-
4/4
4/4
-
-
-
0/0
4/4
2
-
-
-
-
2/2
2/2
-
-
-
0/0
2/2
3
-
2/2
-
-
3/3
3/3
-
-
-
-
3/3
ESG
4
-
-
4/4
-
-
-
-
-
-
1/1
4/4
Number of meetings
H Scott-Barrett
(resigned 20 May 2020)
D Hunter
(appointed 9 March 2020)
L Hutchings
S Wetherly
T Hales
I Krieger
G Muchanya
L Norval
N Sasse
K Wadey
(appointed 20 October 2020)
L Whyte
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CONTINUED
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. 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.
Time Commitment
The Nomination Committee considers the time commitments of
proposed candidates prior to appointment to ensure that they
are able to dedicate sufficient time to the role. Directors’ external
commitments are reviewed on a regular basis to ensure they
continue to devote sufficient time to the role. All Directors are
required to obtain prior approval before taking on any additional
external appointments. Directors are expected to attend all Board
and relevant Committee meetings and attendance in 2020 is set
out in the table above.
The Board schedules five meetings each year as a minimum, and
arranges further meetings as the business requires, ensuring
sufficient time is allocated to discharge their duties. During the
year, the Board held six scheduled meetings, four ad hoc meetings
and an additional half-day strategy session. Directors also made
themselves available for additional meetings and update calls
during the year to discuss time-sensitive matters and the ongoing
response to the Covid-19 pandemic.
COMPOSITION, SUCCESSION AND EVALUATION
Details of the Directors, including their skills and experience, are
outlined on pages 52 and 53.
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 subcommittees.
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. There
had been a smooth transition following the changeover from
Hugh Scott-Barrett to David Hunter as Chairman and a strong
working relationship developed between the Chairman and Chief
Executive. Directors provided sufficient participation and challenge
and demonstrated a collaborative and constructive mindset.
The strategy also received a high level of support and the Board
acknowledged that the community shopping centre focus had
provided relative resilience in 2020. The established Board and
Committee structure ensured that the governance requirements
of the business were met.
Recommendations from the 2020 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 Succession
Succession planning is led by the Nomination Committee. Further
information is provided on page 62.
Peer Group - Further work to identify and understand potential
comparators in different markets to increase insights from
operators outside of C&R’s traditional peer group
Induction and Professional Development
Induction training, managed by the Chairman and Company
Secretary, is given to all new Directors. It consists of an
introduction to the Board and senior management, visits to our
shopping centres, an induction pack, briefings on governance
requirements and their legal and regulatory obligations as a
Director, and access to independent advisers. Ongoing training
requirements are reviewed on a regular basis and undertaken
individually, as necessary.
The Non-Executive induction programme is delivered through:
one-to-one meetings with members of the Senior Leadership
Team;
meetings and briefing sessions with key advisers;
site visits to centres, including meeting with on-site teams;
attendance at Committee meetings; and
access to reference materials.
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
Board diversity, 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 Senior Independent Director seeks
feedback from the other Directors to assist in evaluating the
performance of the Chairman. 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 Board is satisfied that the internal evaluation process is
robust and that the manner in which the evaluation is carried out
encourages a healthy debate on areas of potential improvement.
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.
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Nomination Committee Report
Diversity Policy
The Nomination Committee, and the Board, recognises the
importance of diversity in its broadest sense, including gender,
ethnicity, culture, socioeconomic 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.
In 2020, the Company established a Diversity and Inclusion
Committee led by the Group Finance Director, Stuart Wetherly.
The Committee is made up of a cross-section of individuals from
across the Capital & Regional Group covering a wide spectrum of
roles, background, seniority and experience. The Committee is
responsible for monitoring the existing working environment to
ensure it is inclusive and to explore ways of further improving this
both through internal and external engagement. The Committee
is in the process of developing Group-wide objectives to measure
progress over the coming months and years.
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 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 or its Directors, to conduct
an external assessment and a review of possible candidates for
the role. Following a detailed selection process, the Committee
recommended and the Board approved the appointment of David
Hunter as Non-Executive Director with effect from 9 March 2020.
David assumed the role of Chairman at the close of the AGM on
20 May 2020.
As outlined in the 2019 Annual Report, the Board committed to
appointing two new independent Non-Executive Directors over
the course of 2020, subject to normal social interaction resuming.
Despite the severe restrictions in place during the majority of
2020, Katie Wadey was appointed as Non-Executive Director
on 20 October 2020. The Committee again engaged Odgers
Berndtson to conduct an external search and review of possible
candidates as part of the comprehensive selection process led by
the Chairman.
Board Composition and Succession
Tony Hales, Senior Independent Director, will retire from the
Board at the AGM on 20 May 2021, after nine years of service.
During the year, the Committee met to discuss Board succession
planning and the Committee agreed that Ian Krieger would be
appointed Senior Independent Director at the close of the 2021
AGM. It was also agreed that Laura White would succeed Tony
Hales as Chair of the Remuneration Committee, again with effect
from the 2021 AGM.
Mindful of the Code requirements regarding independence, the
Board remains committed to the principle of recruiting one or
more further independent Non-Executive Directors. However, in
the current economic environment, the Board has postponed for
the time being the appointment of a further NED given the need to
restrict costs in line with the scale of the Company. The Board will
however keep this under review.
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GOVERNANCEcapreg.comCapital & Regional plc Audit Committee Report
IAN KRIEGER
CHAIRMAN OF THE
AUDIT COMMITTEE
e) reviewing reports on internal
control reviews on subsidiary entity
reconciliation processes, Travel and
Expenses processes, and Fire Risk
(Cladding) prepared by management;
f) assessing whether a stand-alone
internal audit function was required;
g) considering the effectiveness of the
external audit process, the effectiveness
and independence of Deloitte LLP as
external Auditor and recommending to
the Board their reappointment;
h) reviewing management’s biannual Risk
Review report and the effectiveness of
the material financial, operational and
compliance controls that help mitigate
the key risks;
i) reviewing the effectiveness of the
Group’s whistleblowing policy;
j) reviewing and updating the Group’s
policy for the award of non-audit work
to its external Auditor;
k) considering management’s approach
to the viability statement in the 2020
Annual Report;
l) meeting with the responsible individuals
from the Group’s independent valuers,
CBRE Limited and Knight Frank LLP, to
review and challenge their valuations of
the Group’s investment properties;
m) meeting with Deloitte LLP without
management;
n) reviewing ongoing REIT regime
compliance;
o) considering management’s approach
progressing the insurance claim in
relation to the fire in 2019 at The Mall,
Walthamstow;
p) reviewing reports on the delivery of
business critical systems transformation
projects; and
q) carrying out an annual performance
evaluation exercise and noting the
satisfactory operation of the Committee.
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, Katie Wadey and Laura
Whyte, all 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 four
times and discharged its responsibilities by:
a) reviewing the Group’s draft Annual
Report and financial statements and
its interim results statement prior to
discussion and approval by the Board;
b) reviewing the continuing
appropriateness of the Group’s
accounting policies;
c) considering managements approach to
the adoption of IFRS 16 and the impact
on the accounting treatment of the
Group’s lease arrangements;
d) reviewing Deloitte LLP’s plan for the
2020 Group audit and approving
their terms of engagement and
proposed fees;
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Auditor Rotation and Tender Process
Deloitte LLP were reappointed 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 2020 audit was the third 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. It considers 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)
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 2020
the value of the Group’s investment property assets was
£527.0 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
2020 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, the impact of Covid-19 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 management’s
assessment of compliance for the year and correspondence
with HMRC, including the granting of a six-month extension
to 30 June 2021 for meeting the minimum PID distribution
requirement for the year ended 30 December 2019. On
consideration of all of this, the Committee was satisfied that the
Group remained compliant with REIT regulations for the period
under review.
Going concern and covenant compliance - The Committee
reviewed, challenged and concluded upon the Group’s
going concern review and consideration of its viability
statement. This process 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 and ongoing discussions with the Group’s
lenders. The Committee also assessed the non-recourse nature
the Group’s loan facilities and the opportunity to cure breaches
of financial covenants or provide for the eventual surrender
of assets, should the Directors choose not to cure in the event
that the lenders do not grant further covenant modifications.
Sensitivity analysis was reviewed as part of the process given
the highly volatile market environment driven by the impact of
Covid-19.
Impairment of receivables and inter-company investments
– Management performs 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. Management also performed a review at the
period end of outstanding trade receivables, assessing on a
tenant by tenant basis the need for provision of outstanding
amounts. The Committee considered the movement over
the year and the key assumptions, particularly in the case of
investments where balances were held with reference to value
in use as opposed to net assets of the underlying entity.
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Risk Management and internal Controls
The Board is responsible for maintaining a sound system of
internal control and risk management. Such a system is designed
to manage, but not eliminate, the risk of failure to achieve
business objectives. There are inherent limitations in any control
system and, accordingly, even the most effective system can
provide only reasonable, and not absolute, assurance.
An ongoing process is in place for identifying, evaluating and
managing risk and the Board is satisfied that this accords with
relevant corporate governance guidance. Key features of the
Group’s system of internal control are as follows:
Defined organisational responsibilities and authority limits.
The day-to-day involvement of the Executive Directors in the
running of the business ensures that these responsibilities and
limits are adhered to;
Financial and operating reporting to the Board, including the
preparation of budgets and forecasts, cash management,
variance analysis, property, taxation and treasury reports and a
report on financing. Year-end and interim financial statements
are reviewed by the Audit Committee and discussed with the
Group’s Auditor, Deloitte, before being submitted to the Board
for approval;
Review and approval of the Group’s risk matrix twice a year
by the Group’s Senior Leadership Team, the Audit Committee
and the Board as detailed in the Managing Risk section of the
Strategic Report;
Anti-Bribery and Corruption policies which are communicated
to all staff and for which compliance reviews are conducted on
an annual basis; and
The Group’s whistleblowing policy.
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 on page 34). A statement of the Directors’
responsibilities regarding the financial statements is on page 88.
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 subsidiary
entity reconciliation processes, Travel and Expenses processes,
and Fire Risk (cladding).
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 and the existing arrangements remain appropriate.
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, on behalf of the Board,
reviews the process annually and reports to the Board on the
process and any reports arising from its operation.
Fair, Balanced and Understandable
The Committee has reviewed the contents of the Annual Report
and Financial Statements 2020 and concluded that the disclosures,
and the processes and controls underlying its production, were
appropriate and recommended to the Board that the Annual
Report and Financial Statements 2020, taken as a whole, is
fair, balanced and understandable and provides the necessary
information for shareholders to assess the Company’s position
and performance, business model and strategy.
IAN KRIEGER
CHAIRMAN OF AUDIT COMMITTEE
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
INTRODUCTION
TONY HALES CBE
CHAIRMAN OF THE
REMUNERATION COMMITTEE
Dear Shareholder
On behalf of the Board, I am pleased
to present the Directors’ Remuneration
Report for the year ended 30 December
2020. The Covid-19 pandemic presented
unprecedented challenges and significantly
affected the business in 2020. The three
national lockdowns and the series of
restrictions significantly impacted our
financial performance, share price and
dividend policy. In light of this, our
approach to remuneration has been
prudent. We ensured that a consistent
approach was taken across the business
and that executive remuneration and
reward reflected the shareholder
experience.
The Committee met two times during
2020 as well as holding informal meetings
and other correspondence to discuss
wider remuneration issues. In addition
to the other Committee members, Ian
Krieger, Katie Wadey and Laura Whyte, all
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.
Board Policy
We presented our Remuneration Policy
to shareholders at the 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 2020, with the
Committee applying downward discretion
to the CIP award. No changes are proposed
to the Remuneration Policy for 2021.
Board Changes
As shareholders will be aware, there were
three changes to the Board during the
year. Hugh Scott-Barrett stepped down as
Non-Executive Chairman at the conclusion
of the 2020 AGM. David Hunter was
appointed as a Non-Executive Director on
9 March 2020 and assumed the role of
Chairman from the conclusion of the 2020
AGM on 20 May 2020. No exit payments
were made to Hugh Scott-Barrett and
David’s remuneration terms are in line with
our policy, with his fee as Chairman in 2020
being at the equivalent level to that paid
to Hugh Scott-Barrett during 2019. Katie
Wadey was appointed as a Non-Executive
Director on 20 October 2020. Katie’s
remuneration is in line with the agreed
policy for Non-Executive Director fees.
2020 Company Performance and
Combined Incentive Plan (CIP)
The operating environment during 2020
was very challenging due to the impact of
the Covid-19 pandemic and Government
restrictions limiting our retailer customers’
ability to trade. A number of retailers
also launched Company Voluntary
Arrangements (CVAs) or Administrations.
There also continued to be an uncertain
political and economic environment
due to the potential of a ‘No-deal’
Brexit, until a deal was announced on
24 December 2020. While the Group’s
relative performance benchmarked well
against industry peers, both NRI and
Adjusted Profit fell. The Group, however,
continued to make progress with cost
control and operational performance
was relatively strong with footfall
outperforming peers and the national
index. Despite the challenges faced by the
Group in 2020, progress continued to be
made on delivering the strategy.
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GOVERNANCEcapreg.comCapital & Regional plc Directors’ Remuneration Report
INTRODUCTION
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.
Mindful of the significant impact of Covid-19 would have on C&R’s
employees and families, in March 2020 the Executive and
Non-Executive Directors decided to take a voluntary 20% reduction
in salary or fees for the months of April, May and June 2020. The
funds saved through this reduction were used to support C&R
employees most financially impacted by Covid-19.
Committee Changes
Katie Wadey joined the Committee following her appointment, in
October 2020. I will be retiring from the Board at the close of the
2021 AGM in May and Laura Whyte will succeed me as Chair of
Remuneration Committee, with effect from the 2021 AGM.
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
Reflecting the above, the ongoing economic uncertainty as a result
of the Covid-19 pandemic in 2021, and the wish of both Executive
Directors for any bonus to be waived, the Committee agreed that
any potential formulaic CIP outturn would be scaled back to nil.
The Committee also considered the remuneration of the wider
workforce, where no bonuses had been awarded in 2020. The
Committee considered the overall result to be an appropriate and
balanced outcome.
The Committee recognised the exceptional efforts made by
the Executive Directors during an extremely difficult year for
the Group and C&R’s employees, retailer customers, guests,
shareholders and other stakeholders and wished to thank them
for their efforts and for waiving any right to a possible bonus.
The Committee continues to believe that the CIP provides the
best mechanism to motivate and retain Executive Directors. For
2021, the Committee will set targets of 80% financial and 20%
strategic which reflect the key priorities of the business over the
next 12 months and the challenging economic headwinds facing
the UK retail business community. As per 2020, the Committee will
provide full disclosure of the targets and outcomes in the 2021
Remuneration Report and, as per previous years, will exercise
downward discretion on CIP outcomes if they do not reflect
corporate performance, the shareholder experience or create
reputational issues from either an internal or external stakeholder
perspective.
Long Term Incentive Plan (LTIP)
During the year, the performance period for the 2017 LTIP award
ended. The performance criteria were not met, resulting in nil
awards vesting.
Executive Director Salary Increases
No salary increases have been awarded for 2021, in line with the
wider workforce. The fees paid to Non-Executive Directors will
also remain the same in 2021. All other benefits, including pension
contributions, remain the same and in line with Policy.
Pension
The Committee remains conscious of the focus on pension
contributions made to Executive Directors and the expectation
that contributions will be equalised with those of the wider
workforce by the end of 2022, in line with corporate governance
best practice. Under the policy approved in 2019, company
pension contributions for future Executive Directors will be set
in line with the wider workforce, currently 4-8% of salary. The
Committee has reviewed the pension arrangements for existing
Executive Directors and believe that the current contributions
of between 8% and 15% of base salary remain appropriate in
the context of their overall remuneration packages and are not
proposing a reduction at this time. The Committee will keep
this under review and explore ways to narrow the gap between
executive pensions and the wider workforce.
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
Policy
Remuneration Philosophy and Principles
Our principles continue to be to maintain a competitive remuneration package that will attract, retain and motivate a high-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
Fixed compensation
Median
Total = Median or above for
above median performance
Combined Incentive
Plan
Performance-based
compensation
Median or above for above
median performance
compensation
The Committee benchmarks remuneration against our selected comparator group companies 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.
The Committee addressed the following factors when determining the remuneration policy and practices, as recommend by the UK
Corporate Governance Code:
Clarity
Simplicity
Risk
The Remuneration Policy and its application in the year is clearly disclosed in the Annual Report. The
Committee engages with shareholders on remuneration matters, and is updated on workforce pay and
benefits across the Group.
The remuneration structure comprises fixed and variable remuneration, with variable remuneration granted
under a single combined scheme, the CIP, clearly outlined in the Remuneration Policy.
The CIP Rules provide discretion to the Committee to reduce award levels. Awards are subject to malus and
clawback provisions. The Committee has overriding discretion to reduce the formulaic outcome of the CIP.
Predictability
The range of possible outcomes under the CIP are outlined on page 74.
Proportionality
CIP awards are determined based on a proportion of base salary and stretching targets set to incentivise
Executive Directors. The Committee has overriding discretion to reduce the formulaic outcome of the CIP.
Alignment to
culture
The Committee ensures that personal performance measures under the CIP incentivise behaviours
consistent with the Company’s culture, purpose and values.
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GOVERNANCEcapreg.comCapital & Regional plc 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 for a period of up to three years, receiving an 87.8% vote in favour.
Purpose and link
to strategy
Operation
Opportunity
Performance metrics
The maximum increase
applicable in any year is
capped at 10% of base
salary.
n/a
Reviewed annually effective 1 January to reflect:
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 with 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.
n/a
Executive Directors
are eligible to receive
a pension allowance
equivalent to up to 15%
of basic salary.
Lawrence Hutchings
receives a pension
allowance of 15% of
basic salary.
Stuart Wetherly
receives a pension
allowance of 8% at the
top of the range of
pension contributions
paid to the 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.
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
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
Policy CONTINUED
Purpose and link
to strategy
Operation
Opportunity
Performance metrics
The plan provides
a combined annual
awards of up to 250%
of salary for Executive
Directors / 300% for the
Chief Executive
Targets calibrated so
maximum pay-out
represents exceptional
performance
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 targets
set annually based
on a 100% Group
financial and strategic
performance targets.
2021 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.
Combined
incentive plan
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
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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GOVERNANCEcapreg.comCapital & Regional plc Opportunity
Performance metrics
n/a
n/a
n/a
n/a
Purpose and link
to strategy
Operation
Executive
shareholding
To support
alignment
of Executive
Directors with
shareholders
All Executive Directors are expected to build a
shareholding to at least 2 x basic annual salary value
based on current market value or the aggregate purchase
price of the shares over a five-year period.
Deferred or other unvested share awards not subject to
performance conditions can count towards the guideline
in line with corporate governance best practice.
There is a 200% base salary post-cessation of
employment shareholding requirement for year one,
reduced to a 100% base salary shareholding requirement
for year two.
Non-Executive
Director
remuneration
To reflect
experience and
importance of
role
The Chairman and Non-Executive Directors’ fees are set
by the Board taking into account the time commitment,
responsibilities, skills and experience and roles on Board
Committees. The fees are reviewed annually.
Details of the fees can be found on page 77. 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 shareholders, 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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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
Policy CONTINUED
Comparator Group
In the review of Remuneration Policy that the Company undertook, with assistance from PwC LLP, in 2018 a comparator group of 28
property companies was used, as disclosed in the 2018 Remuneration Report. The relative size of Capital & Regional in comparison to
the constituents was factored into the benchmarking exercise performed. In addition, consideration was also given to the upper quartile
benchmarks for the FTSE Small Cap. The comparator group was 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.
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 12 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.
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 prorated 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 forfeited.
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 prorating (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 forfeited.
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GOVERNANCEcapreg.comCapital & Regional plc 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.
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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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
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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GOVERNANCEcapreg.comCapital & Regional plc Directors’ Remuneration Report
2020 Remuneration Report
This section sets out how the Directors’ Remuneration Policy was implemented during 2020. Where stated, disclosures regarding
Director’s remuneration have been audited by the Company’s external auditor Deloitte. This section, together with the Annual Statement,
is subject to an advisory vote at the 2021 AGM.
The Remuneration Committee
The Committee met two times during 2020 as well as holding informal meetings and other correspondence to discuss wider
remuneration issues. Committee members include Tony Hales (Chairman), Ian Krieger, Katie Wadey and Laura Whyte, all 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. The Committee also reviews the remuneration of the senior management below Board level. It also makes recommendations
to the Board on matters that require shareholder approval.
The terms of reference of the Committee are available at www.capreg.com/about-us/people/board-committees.
Advisers
In 2020, the Committee received advice from independent remuneration consultants PwC LLP on an ad hoc basis. PwC LLP’s fees for this
advice were £9,612, which were charged on a time/cost basis. No other services were provided by PwC LLP during the course of 2020.
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.
The Committee is satisfied that the members of the PwC LLP team do not have connections with the Company or its Directors which
might impair their independence.
Summary of Performance Year Ended 30 December 2020 (audited)
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 NTA per share2
Group net debt
Net debt to property value
2020
£34.1m
£10.3m
9.5p
2019
£49.3m
£27.4m
36.7p
£(203.4)m
£(121.0)m
150p
158p
21p
361p
364p
£345.1m
£336.9m
65%
46%
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, and other non-operational items. A reconciliation to the equivalent EPRA
and statutory measures is provided in Note 9 to the condensed financial statements.
2. Per share amounts have been restated to reflect the impact of the 10 for 1 share consolidation that completed on 15 January 2020.
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
2020 Remuneration Report CONTINUED
Single Total Figure of Remuneration for Directors (audited)
The table below sets out the remuneration received/receivable in relation to the year ended 30 December 2020.
£’000
Executive
Directors
L Hutchings
S Wetherly4
TOTAL
Salary/fees1
2019
2020
Taxable
benefits2
2020
2019
Other
benefits2
2020
2019
Pension
Annual
bonus
LTIP
vesting3
2020
2019
2020
2019
2020
2019
Total
fixed pay
2020
2019
Total
variable pay
2019
2020
Total pay
2020
2019
407
268
675
425
222
647
3
2
5
3
1
4
7
5
8
4
12
12
64
23
87
64
18
82
Chairman and Non-Executive Directors
D Hunter5
95
-
-
H Scott-Barrett6
T Hales7
W Hamman8
G Muchanya9
I Krieger7
L Norval
N Sasse9
K Wadey7,10
L Whyte7
TOTAL
TOTAL ALL
51
51
-
-
46
41
-
10
46
140
53
40
-
48
42
-
-
48
340
371
1,015 1,018
-
-
-
-
-
-
-
-
-
-
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
-
12
-
12
-
87
-
82
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
218
118
336
-
-
-
-
-
-
-
-
-
-
-
336
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
8
-
10
-
-
-
-
-
-
-
-
481
298
779
95
51
51
-
-
46
41
-
10
46
500
245
745
-
140
53
40
-
48
42
-
-
48
10
371
328
18 1,119 1,116
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
218
126
344
-
10
-
-
-
-
-
-
-
-
481
298
718
371
779 1,089
95
51
51
-
-
46
41
-
10
46
-
150
53
40
-
48
42
-
-
48
10
381
328
354 1,119 1,470
Notes
1. Executive and Non-Executive Directors took a voluntary 20% reduction in salary or fees for the months of April, May and June 2020.
2. Taxable benefits include private medical care and critical illness cover; other benefits include life insurance and permanent health insurance. 2019
benefits for S Wetherly have been restated.
3. 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.
4. S Wetherly was appointed a Director on 11 March 2019.
5. D Hunter was appointed a Director on 9 March 2020 and Chairman on 20 May 2020.
6. H Scott-Barrett retired as Chairman on 20 May 2020.
7. T Hales, I Krieger, K Wadey 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.
8. W Hamman resigned on 9 December 2019.
9. G Muchanya and N Sasse, both appointed on 9 December 2019 as Growthpoint’s representatives, do not receive a fee.
10. K Wadey was appointed a Director on 20 October 2020.
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GOVERNANCEcapreg.comCapital & Regional plc Basic Salary Increases for Executive Directors
No Executive Director salary increases have been awarded in 2021, in line with the wider workforce.
L Hutchings
S Wetherly
C Staveley
H Scott-Barrett
K Ford
M Bourgeois
2021
£’000
429
282
-
-
-
-
%
-
-
-
-
-
-
20201
£’000
429
282
-
-
-
-
%
1.0
2.5
-
-
-
-
2019
£’000
425
275
-
-
-
-
%
11.0
-
-
-
-
-
2018
£’000
383
-
305
-
-
-
%
2.0
-
2.0
-
-
-
2017
£’000
375
-
299
427
315
-
%
-
-
2.0
2.0
2.0
-
2016
£’000
-
-
293
418
308
241
%
-
-
4.3
2.0
2.0
4.3
1. L Hutchings and S Wetherly took a voluntary 20% reduction in salary for the months of April, May and June 2020, the actual base salary received in 2020
was £407k and £268k respectively.
Non-Executive Director Fees
Non-Executive Director fees will remain at £140,000 for the Chairman and £42,873 for Non-Executive Directors in 2021. 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.
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.
Combined Incentive Plan (CIP) (audited)
The number of awards and the performance periods for all outstanding CIP 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. Awards granted in 2020
relate to 2019 performance, as disclosed in the 2019 Remuneration Report.
Name
Date of
award
No. of
awards
Type of
award
L Hutchings
27.04.2020
171,899 Nil cost
option
Face value
at date
of award
£’0001
Dividend
equivalent
shares
awarded in the
year
436
19,302
S Wetherly
27.04.2020
92,691 Nil cost
option
235
10,408
Threshold/maximum
vesting share price
1/3 of shares subject
to median relative TSR
performance2
1/3 of shares subject
to median relative TSR
performance2
1/3 of shares subject
to median relative TSR
performance2
1/3 of shares subject
to median relative TSR
performance2
1/3 of shares subject
to median relative TSR
performance2
1/3 of shares subject
to median relative TSR
performance2
End of
performance
period
Holding
period
01.01.2023
2 years
01.01.2024
1 year
01.01.2025
-
01.01.2023
2 years
01.01.2024
1 year
01.01.2025
-
1. Calculated based on average Market Value of a share over the final nine Dealing Days to 30 December 2019: 253.67 pence
2. Shares will vest subject to the performance underpin of median relative Total Shareholder Return against a retail property comparator group.
Dividend equivalents:
Whenever a dividend or other cash distribution is paid by the Company in respect of shares, the number of shares subject to each
Unvested Share Award (as at the time the dividend or other cash distribution is paid) shall be increased by such number of whole shares
(rounded down to the nearest whole number) as outlined in the CIP Rules.
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
2020 Remuneration Report CONTINUED
2020 achievement of objectives:
L Hutchings
S Wetherly
Maximum CIP
opportunity as
% of salary
% of objectives
achieved
Effective %
of maximum
achieved
Cash bonus
payable
£’000
Deferred share
award
£’000
300%
250%
n/a
n/a
n/a
n/a
nil
nil
nil
nil
The operating environment during 2020 was very challenging due to the impact of the Covid-19 pandemic and Government restrictions
limiting our retailer customers’ ability to trade. A number of retailers also launched Company Voluntary Arrangements (CVAs) or
administrations. There also continued to be an uncertain political and economic environment due to the potential of a ‘No-deal’ Brexit,
until a deal was announced on 24 December 2020. While the Group’s relative performance benchmarked well against industry peers,
both NRI and Adjusted Profit fell. The Group, however, continued to make progress with cost control and operational performance was
relatively strong with footfall outperforming peers and the national index. Despite the challenges faced by the Group in 2020, progress
continued to be made on delivering the strategy.
Reflecting the above, the ongoing economic uncertainty as a result of the Covid-19 pandemic in 2021, and the wish of both Executive
Directors for any bonus to be waived, the Committee agreed that any potential formulaic CIP outturn would be scaled back to nil. The
Committee also considered the remuneration of the wider workforce, where no bonuses had been awarded 2020. Given the decision
to waive any award, no targets or performance outcomes have been published. The Committee considered the overall result to be an
appropriate and balanced outcome.
2021 CIP Objectives
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 (wholly owned)
Arrears collection
Cost management
Balance sheet resilience
Total Financial:
Operating metrics
Footfall against benchmark
Leasing performance
Strategy implementation
Total Operational and Strategic:
% of max.
10%
10%
10%
20%
30%
80%
10%
10%
20%
For 2021, given the exceptionally high level of current volatility as a result of Covid-19, the Committee will implement six-month targets
where possible, whereby if the annual target represents 20% of the maximum award, 10% will apply to the first half target and 10% to
the second half target. The full-year pay-out will be determined at the end of the year.
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 2021 Directors Remuneration Report.
78
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GOVERNANCEcapreg.comCapital & Regional plc Long-Term Incentive Plan (LTIP) (audited)
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 2020.
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 Wetherly5
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)
19.04.17
18.04.18
Nil cost
option
Nil cost
option
Nil cost
option
Nil cost
option
Nil cost
option
7503
7654
1356
1423
1464
% of
salary
200
200
n/a
n/a
n/a
Threshold/
maximum
vesting
share price
See note
1 below
See note
1 below
See note
1 below
See note
1 below
See note
1 below
Qualified
for
vesting
Value at
vesting
£’000
End of
performance
period
Holding
period
nil
–
52,2947
(5,229)
nil
–
–
–
87
–
–
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
Notes:
1. The performance conditions for the August 2016, April 2017 and April 2018 issues are outlined below. Straight-line vesting applies for all LTIP issues in
between threshold and maximum vesting.
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. Calculated based on the closing share price at issue of 59.5 pence.
4. Calculated based on the closing share price at issue of 53.5 pence.
5. The awards were granted when S Wetherly was an employee of the Group but not an Executive Director.
6. Calculated based on the closing share price at issue of 59.5 pence.
7. Calculated based on the closing share price at vesting of 14.5 pence. 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
Performance
Below index
+7.4%
Below index
Total
Vesting
0%
70%
0%
23.3%
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
2020 Remuneration Report CONTINUED
Vesting of April 2017 LTIP issue
The performance period for the April 2017 LTIP issue ended during 2020. Nil awards qualified for vesting as the performance conditions
were not met.
The actual performance against target of the April 2017 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
Performance
Below index
Below target
Below index
Total
Vesting
0%
0%
0%
0%
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.
Deferred Bonus Share Scheme Awards (audited)
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
Date of award
No. of awards
Type of award
Face value
£’000
Date awards are
available for exercise
08.04.19
56,361
(5,636)
Nil cost option
£141
28.03.21
1. Calculated based on the closing share price of 25.45 pence on 28 March 2019.
Exit Payments and Payments to Past Directors (audited)
No exit payments were awarded to Directors in 2020. Neither were any payments made to past Directors.
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 30 December 2010 would have changed over the ten-year period measured, compared with the total return on a
£100 investment in the comparable indices
Capital & Regional plc
FTSE All-Share
FTSE Real Estate
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
D e c-2 0
250
200
150
100
50
0
D e c-10
80
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GOVERNANCEcapreg.comCapital & Regional plc The table below sets out the total remuneration of the Chief Executive over the same period as the Total Shareholder Return graph. The
quantum of Annual Incentive awards granted each year and long-term incentive vesting rates are given as a percentage of the maximum
opportunity available.
Total remuneration
(L Hutchings)
Total remuneration
(H Scott-Barrett)
Annual bonus (% of
max) (L Hutchings)
Annual bonus (% of
max) (H Scott-Barrett)
LTIP vesting (% of
max) (L Hutchings)
LTIP vesting (% of
max) (H Scott-Barrett)
2011
£’000
2012
£’000
2013
£’000
2014
£’000
2015
£’000
2016
£’000
n/a
536
n/a
n/a
765
n/a
n/a
651
n/a
n/a
n/a
n/a
833
796
2,112
2017
£’000
393
564
2018
£’000
752
n/a
2019
£’000
718
n/a
n/a
n/a
n/a
45%
53%
51%
2020
£’000
481
n/a
-
71%
69%
40%
85%
70%
70%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
-
-
-
-
-
-
-
91.85%
35.26%
n/a
n/a
n/a
Annual Change in Pay for Directors Versus the Wider Workforce in 2020
The percentage change in the remuneration of Directors between 2019 and 2020 compared to that of employees generally is included
below. The year-on-year movement in salary for Directors and employees reflects the annual review implemented in January 2020. No
bonuses were paid to employees and no incentive payments made to Executive Directors in respect of 2020. Non-Executive Directors do
not receive any benefits.
2020
Salary
Bonus
Employee
Group1
1%
(100)%
Executive Directors
Non-Executive Directors
L Hutchings
S Wetherly
D Hunter2
T Hales
I Krieger
G Muchanya3
L Norvall
N Sasse3
K Wadey2
L Whyte
Benefits No change No change No change
1%
(100)%
2.5%
(100)%
0%
-
-
1%
-
-
1%
-
-
-
-
-
1%
-
-
-
-
-
-
-
-
1%
-
-
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. D Hunter and K Wadey were appointed on 9 March 2020 and 20 October 2020 respectively.
3. G Muchanya and N Sasse do not receive a fee.
Chief Executive Pay Ratio
The Company has fewer 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. However, the
ratio of the Chief Executive’s pay to the average employees’ pay is taken into consideration when setting Executive remuneration and for
full transparency we therefore disclose the ratio of the salary of the Chief Executive to the average employee salary (excluding Directors)
which was 6.5:1 (£407,000:£62,623)1.
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.
Relative Importance of Spend on Pay Compared to Distributions to shareholders
Executive Director’s remuneration
Employee costs (per Note 7 of the financial statements)
Dividends paid (total of Interim and Final Dividend for the respective year)
2020
£m
0.8
8.7
-
2019
£m
1.1
11.2
18.6
%
(27.3)%
(22.3)%
(100)%
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Remuneration Report
2020 Remuneration Report CONTINUED
Directors’ Service Agreements and Letters of Appointment
Name
Executive Directors
L Hutchings
S Wetherly
Non-Executive Directors
D Hunter
L Norval
T Hales
I Krieger
L Whyte
G Muchanya
N Sasse
K Wadey
Unexpired term
of appointment
Date of service agreement
Notice period
Rolling contract
13 June 2017
12 months
Rolling contract
11 March 2019
12 months
Potential
termination payment
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 2020
15 September 2009
1 August 2011
1 December 2014
1 December 2015
9 December 2019
9 December 2019
20 October 2020
6 months
No notice
No notice
No notice
No notice
No notice
No notice
No notice
None
None
None
None
None
None
None
None
Non-Executive Directors are all appointed on rolling contracts with no notice period, save for David Hunter 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
Executive Directors may accept external appointments as Non-Executive Directors of other companies and retain any related fees paid
to them, subject to the approval of the Board in each case. During the year ended 30 December 2020, Stuart Wetherly served as Trustee
and Honorary Treasurer of the London Wildlife Trust. No fee was received for this appointment.
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 regards 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 employees.
In early 2021, the Chief Executive provided an update to all employees advising that no salary increases or bonuses would be awarded to
Executive Directors, in line with the decision made in regards to the wider workforce and provided an opportunity for employees to raise
any concerns.
Interests in Shares (audited)
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 79.
D Hunter
H Scott-Barrett2
L Hutchings
S Wetherly
T Hales
I Krieger
G Muchanya
L Norval
N Sasse
K Wadey
L Whyte
30 December 2020
Shares
30 December 2019
Shares1
71,285
243,428
6,105
22,174
45,265
11,515
-
10,313,718
42,042
-
27,029
-
354,000
5,566
20,289
41,274
10,550
-
9,407,387
38,335
-
7,998
1. Restated to reflect the impact of the 10 for 1 share consolidation that completed on 15 January 2020.
2. Shares held at date of retirement on 20 May 2020.
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GOVERNANCEcapreg.comCapital & Regional plc Louis Norval is beneficially interested in the shares registered in the name of MStead Limited and PDI Investment Holdings Limited.
George Muchanya and Norbert Sasse, by virtue of being the nominated representative Directors of Growthpoint, are connected to the
Growthpoint shareholdings but do not personally have a beneficial interest in any of these holdings.
There were no changes to Directors’ shareholdings from 30 December 2020 to 24 March 2021, being the latest practicable date prior to the
issue of this report.
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 Directors 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
3 year 6 months
1 year 9 months
Target % of
salary
200
200
Target
currently met?
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.
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 corresponds with shareholders and also engages with ISS and the Investment Association.
Shareholder voting on the Directors’ Remuneration Policy, which was tabled at the 16 May 2019 AGM, was as follows:
Resolution
For
% For
Against
% Against
voted % Shares voted Votes withheld
Total shares
To approve the Directors’
Remuneration Policy
458,092,583
87.78%
63,784,926
12.22% 521,877,509
71.85%
25,932,411
Shareholder voting on the Directors’ Remuneration Report, which was tabled at the 20 May 2020 AGM, was as follows:
Resolution
For
% For
Against
% Against
voted % Shares voted Votes withheld
Total shares
To approve the Directors’
Remuneration Report
81,544,194
98.13%
1,554,669
1.87%
83,098,863
79.99%
280,769
TONY HALES CBE
CHAIRMAN OF REMUNERATION COMMITTEE
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Report
Business Review
Information on the Group’s business, which is required by section 417 of the Companies Act 2006, can be found in the Strategic Report
on pages 2 to 51 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 54 to 62.
The results for the year are shown in the Group income statement on page 100. Post balance sheet events are disclosed in Note 28 to
the financial statements. 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
No interim dividend was paid in 2020 (2019: 1.82 pence per share).
In light of the current level of uncertainty and desire to maximise cash flexibility, the Group has taken the decision to not declare a Final
dividend and will maintain this position at least until markets stabilise.
A UK REIT is expected to pay dividends (PIDs) of at least 90% of its taxable profits from its UK property rental business by the first
anniversary of each accounting date. By agreement with HMRC the Group has an extension to the payment date of the balance of
the 2019 PID, of approximately £7.6 million, to 30 June 2021 in order to meet its REIT distribution requirements for the financial year
ending 2019. The Group has commenced discussions with HMRC in seeking a further extension to this deadline given the impact and
uncertainties caused to the Group’s business by Covid-19. If the Group were to not be granted an extension and not meet the minimum
requirement then under REIT legislation, the Group will incur UK corporation tax payable at 19% whilst remaining a REIT. We estimate
that this would result in a tax payment of approximately £1.4 million being required to be paid. However, this is subject to there being
no legal impediment to distribution. At 30 December 2020 the Company does not have sufficient distributable reserves to declare a
dividend. If this legal impediment to distribution subsists at the date for payment of the balance of the 2019 PID and the date of payment
of the 2020 PID the Group will be deemed to have met the distribution requirement for those periods based on the provisions in CTA
2010 section 530.
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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GOVERNANCEcapreg.comCapital & Regional plc Directors
The names and biographical details of the present Directors of the Company are given on pages 52 to 53. Hugh Scott-Barrett’s
resignation was effective from 20 May 2020. David Hunter and Katie Wadey were appointed on 9 March 2020 and 20 October 2020
respectively. All other Directors served for the full year. David Hunter assumed the role of Chairman on 20 May 2020.
All current Directors will retire and, with the exception of Tony Hales, being eligible, offer themselves for re-election at the 2021 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 82. 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
Pages 77-80
Page 77
Page 77
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
Page 86
Substantial Shareholdings
As at 30 December 2020 and at 24 March 2021 (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 Properties Limited
Mstead Limited
Black Crane Asia Pacific Opportunities Fund
PDI Investment Holdings
Peens Family Holdings
ICAMAP Investments
Mstead Limited and PDI Investment Holdings are part of the Homestead Group of investors.
No. of shares
58,261,066
5,742,052
4,666,691
4,536,568
4,451,416
3,709,726
%
52.10
5.14
4.17
4.06
4.04
3.32
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Report
CONTINUED
Shares Held by Employee Share Ownership Trust
At 30 December 2020 the Capital & Regional Employee Share Ownership Trust held 38,070 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.
Purchase of Own Shares
The Company did not make any purchases of its own shares during 2020 or up to 24 March 2021, being the latest practicable date prior
to the issue of this report.
The Company was authorised by shareholders at the 2020 AGM held on 20 May 2020 to purchase up to a maximum of 10.0% of its
ordinary shares in the market. This authority will expire at the 2021 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.
Share Capital
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. As at 30 December 2020 the Company’s total issued share capital was
111,819,626 ordinary shares of 10 pence each, all with equal voting rights. The changes in the Company’s issued share capital during
2020 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 2020, 6,270,782 of the
Company’s shares were held on the JSE share register representing 5.6% of the total shares in issue.
Controlling Shareholder
Growthpoint, through its nominees, holds 52.1% of the issued share capital of the Company. The Relationship Agreement, entered
into on 17 October 2019, incorporates those terms required by the Listing Rules as a result of Growthpoint becoming a controlling
shareholder. It remains effective as long as Growthpoint and any of its nominees hold at least 20% of the voting rights in the Company.
The Relationship Agreement provides various rights, including the ability to appoint two Non-Executive Directors nominated by
Growthpoint to the Board for as 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%. The Directors believe that the terms of the Relationship
Agreement enable the Group to carry on its business independently of Growthpoint. A copy of the Relationship Agreement is available
on the Company’s website at capreg.com.
Change in Control
The Group’s £39 million debt facility in respect of The Exchange, 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.
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.
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.
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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GOVERNANCEcapreg.comCapital & Regional plc 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 2020 the total number of employees was as follows:
Employees
Directors
Senior Leadership Team
Employees – Group
Employees – Assets
Employees – Snozone
Male
8
4
19
20
58
Female
2
2
21
44
38
Total
10
6
40
64
96
Political Donations
The Group has not made any political donations during the year and intends to continue its policy of not doing so for the
foreseeable future.
Auditor’s Information
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no
relevant audit information of which the Company’s Auditor is unaware; and each Director has taken all the steps that they ought to have
taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s Auditor is aware of
that information. This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act
2006. A resolution to reappoint Deloitte LLP as the Company’s Auditor will be proposed at the forthcoming AGM.
Annual General Meeting
A separate document, the Notice of Annual General Meeting 2021, 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 2021.
The Directors’ Report was approved by the Board of Directors on 24 March 2021 and is signed on its behalf by:
STUART WETHERLY
COMPANY SECRETARY
24 March 2021
Registered Company name: Capital & Regional plc
Registered Company number: 01399411
Registered office: 22 Chapter Street, London, SW1P 4NP
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and Article 4 of the
IAS Regulation and have elected to prepare the parent Company
financial statements in accordance with FRS 101, as published by
the Financial Reporting Council, and applicable law in the United
Kingdom. Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of the
profit or loss of the Company for that year.
In preparing the parent Company financial statements, the
Directors are required to:
select suitable accounting policies and then apply them
consistently;
make 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.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Directors’ responsibilities statement
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole;
the Strategic Report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation as
a whole, together with a description of the principal risks and
uncertainties that they face; and
the Annual Report and financial statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 24 March 2021 and is signed on its behalf by:
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
STUART WETHERLY
GROUP FINANCE DIRECTOR
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GOVERNANCEcapreg.comCapital & Regional plc
Directors’ Responsibilities Statement
Independent Auditor’s Report
To the members of Capital & Regional plc
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
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
The materiality that we used for the Group
financial statements was £3.4 million
(2019: £7.5 million), which was determined
on the basis of 2% (2019: 2%) of net assets.
We applied a lower threshold of £0.52 million
(2019: £1.4 million) for testing of all balances
impacting Adjusted Profit (as defined in Note 1
of the Group financial statements), which is 5%
(2019: 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% (2019: 98%) of net
assets, 100% (2019: 100%) of revenue and
100% (2019: 100%) of profit. Our component
audit work was executed at levels of materiality
applicable to each individual component which
were lower than Group materiality.
We have considered the impact of Covid-19
on our audit approach and key audit matters.
There have been no significant changes in our
audit approach in the current year.
Materiality
Scoping
Significant
changes
in our
approach
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 2020 and of the Group’s
loss for the year then ended;
the Group financial statements have been properly prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and International Financial Reporting Standards (IFRSs) as
adopted by the European Union;
the parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, 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.
We have audited the financial statements which comprise:
the consolidated income statement;
the consolidated statement of comprehensive income;
the consolidated and parent Company balance sheets;
the consolidated and parent Company statements of changes
in equity;
the consolidated cash flow statement; and
the related Notes 1 to 31 and parent Company related Notes A
to F.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law
and international accounting standards in conformity with the
requirements of the Companies Act 2006 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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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Independent Auditor’s Report
To the members of Capital & Regional plc CONTINUED
Conclusions Relating to Going Concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and parent Company’s ability to continue to adopt the going concern basis of
accounting is discussed below.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's and parent Company’s ability to continue as a going concern for a
period of at least 12 months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this
report.
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 £536.1 million at 30 December 2020
(30 December 2019: £770.9 million), comprising 80% (30 December 2019: 86%) of the
Group’s assets. The portfolio consists of seven shopping centres within the Group.
We assessed 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 that form inputs into
the valuation process performed by the Group’s independent valuers, such as yields and
sustainability of the cash flows. The valuations are consequently based on increasingly
subjective evidence in the current Covid-19 and retail climate.
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 valuation methodology and model, large volume of data involved and assumptions
and judgements applied are 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.
The Audit Committee’s discussion of this key audit matter is set out on page 64. The
investment property portfolio is disclosed in Note 10 of the Group financial statements.
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GOVERNANCEcapreg.comCapital & Regional plc 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 evaluated the competence, capabilities and objectivity of the Group’s independent
valuers.
We met with the Group’s independent valuers appointed by management to value the
property portfolio and challenged the significant judgements, assumptions applied and
impact from Covid-19 in their valuation model.
We analysed the individual property valuations to understand significant movements
against prior year and comparative market evidence considered by the valuers.
We documented a clear revised auditing standards approach including a detailed
assessment of the model, data and assumptions used in the valuation.
We considered contradictory evidence across the work performed.
We evaluated the integrity of the methodology, model and data transfer.
We tested the integrity of the information provided to the valuers by management
pertaining to rental income, purchasers’ costs and occupancy.
We verified movements in the key judgements and assumptions and we benchmarked
and discussed yields in detail with the valuers and our own in-house valuation
specialists, who are members of the Royal Institution of Chartered Surveyors. We
determined whether the trend and sentiment on each specific asset was in line with
expectations relevant to that asset and its location, prospects and expected cash flows.
Where possible, market evidence was also used to corroborate yield assumptions.
To test the sustainability of the cash flows we have performed our audit procedures
on revenue and expected credit losses. Additionally, we have tested specifically the
void assumptions, tenant incentives, cash collection as well as variable income and car
park income of each of the properties to conclude that the assumptions used in the
assessment of sustainability of the cash flows are reasonable.
We reviewed the associated disclosures within the financial statements and focus on
any additional requirements that may be necessary, for example, the FRC’s expectations
in relation to sensitivity disclosures in Note 10 and narrative reporting around the
impact of Covid-19.
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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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL 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 2020, Group’s borrowings totalled £423.9 million
(30 December 2019: £422.8 million). The Group also had cash and cash equivalents of
£84.1 million (30 December 2019: £95.9 million), of which £60 million was maintained
centrally and without any restriction (30 December 2019: £70 million).
The Group has seen, and expects there to continue to be, a significant reduction in rental
income and pressure on ability to collect rents throughout the period of at least one year
from the date when the financial statements are authorised for issue as a result of the
ongoing trading restrictions due to the Covid-19 pandemic. As a result of the continuous
impacts of the Covid-19 pandemic and sustained effect of the structural changes in
the retail business, the property valuation impacts may be greater and quicker than
anticipated.
We identified a key audit matter relating to the ability of the Group to meet the loan
covenant requirements relating to loan to value and interest rate cover during the year
and for a period of at least one year from the date when the financial statements are
authorised for issue. There are waivers in place for all covenants at year end and extending
to April 2021, however if these weren’t in place, the covenants would be in a breach
position. There is no certainty that short or long-term waivers for any covenants will
continue to be granted by some or all lenders.
For some of the Group’s asset-backed facilities, there is no longer headroom in the
borrowing to property valuation ratio, and a downwards movement in property valuations
could impact on this headroom even further. 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. Where covenant limits could be breached, we identified that there may not
be sufficient headroom on available central unrestricted Group cash to cure all possible
defaults, especially in a reasonable worst case scenario where property values fell by 15%
from the year-end valuation.
Operationally, the Group has demonstrated sufficient cash to trade for the lookout period
of 12 months and this would enable it to still operate as going concern. However, in the
event that covenant waivers could not be obtained, as outlined above, and in the event of
a default, the Group would need to take alternative courses of action to secure the cash
position of the Group. This could involve the surrender of ring-fenced assets to the relevant
lenders instead of curing the associated breach of covenant. This course of action is
available due to the fact that none of the facilities are cross-default and any of the facilities
can be in default without recourse to the other ring-fenced facilities in the Group.
Management’s consideration of the going concern basis of preparation is set out in the
Going Concern statement on page 39 and Note 1 together with a detailed presentation of
the likely actions they could take to respond to potential covenant breaches and further
mitigation actions available should the Group’s lenders not provide waivers to covenant
breaches if required. Management has adopted the going concern basis of accounting for
the Group and parent Company. On the basis that the Group has sufficient operational
cash and the ability to surrender any of the ring-fenced assets should covenant waivers not
be obtained, and a cure of covenant breaches not be made, Management has concluded
that there are no material uncertainties that may cast significant doubt over the Group’s
and parent Company’s ability to adopt the going concern 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 64.
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GOVERNANCEcapreg.comCapital & Regional plc 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 evaluated management’s modelling of alternative scenarios taking into
consideration projected capital expenditure, discount rates applied to future cash
flows, current business and economic trends and significant developments during and
subsequent to the year ended 30 December 2020.
We assessed key loan documentation to understand the principal terms, including
financial covenants and current waivers in place, and performed a review of the Group’s
existing and forecast compliance with debt covenants and any associated equity cures/
cash traps.
We assessed the availability of further mitigating actions available to management as
presented in Note 1 and assessed the sufficiency of the disclosures made in the annual
report.
We assessed the non-recourse and no cross default nature of the facilities in place.
Key observations
We concur with management’s conclusion to prepare the Group and parent Company
financial statements on a going concern basis.
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 flow model 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 £166.4 million at 30 December 2020
(30 December 2019: £344.0 million), comprising 71% (30 December 2019: 79%) of the
parent Company’s assets. Intercompany debtors had a carrying value of £7.1 million at 30
December 2020 (30 December 2019: £94.0 million), comprising 3% (30 December 2019:
21%) of the parent Company’s assets.
Investments are subject to an impairment review using discount rate of 17.8%.
Management has assessed the recoverability of investments on the basis of nil growth.
Management has posted an impairment of £219.3 million (2019: £215.8 million) as a result
of comparing the carrying value of the investment against its recoverable amount.
The recoverability of the Group debtors of the parent Company is determined using
the expected credit loss model. Following the assessment of intercompany debtors
recoverability the £26 million provision has been booked in the parent Company’s financial
statements.
The accounting policies for both investments and intercompany debtors are set out in Note
A to the parent Company financial statements including management’s assessment of this
as a key source of estimation uncertainty. The Audit Committee’s discussion of this key
audit matter is set out on page 64.
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Independent Auditor’s Report
To the members of Capital & Regional plc CONTINUED
How the scope of our audit
responded to the key audit matter
We obtained an understanding of the parent Company’s key controls to address the risk
of impairment of investments and intercompany debtor balances.
We challenged management’s discounted cash flow 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.
We analysed the recoverability of the Group debtors of the parent Company and how
expected credit loss model has been applied.
We assessed the disclosures included in the annual report.
We concur with the level of impairment recognised by management for all investments. We
consider that the carrying value of parent Company investment and intercompany debtor
balances is appropriate.
Key observations
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:
Materiality
£3.4 million (2019: £7.5 million)
£3.1 million (2019: £6.75 million)
Group financial statements
Parent Company financial statements
Basis for determining
materiality
We determined materiality to be 2% of net
assets (2019: 2% of net assets).
We applied a lower threshold of £0.5 million
(2019: £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 (2019: 5% of Adjusted Profit).
Parent Company materiality equates to
2% of net assets (2019: 2% of net assets),
which is capped at 90% of Group materiality
(2019: capped at 90% of Group materiality).
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 used net assets as a benchmark when
determining materiality as it is considered to be
the most critical financial performance measure
for the parent Company as a holding company.
We applied a lower threshold of £0.5 million
(2019: £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 and other users of the financial
statements.
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GOVERNANCEcapreg.comCapital & Regional plc Net assets
£167.9 million
Net assets
Group materiality
Group materiality
£3.4 million
Component materiality
range £0.11 million
to £3.1 million
Audit Committee
reporting threshold
£0.10 million
We applied a lower threshold of £0.5 million (2019: £1.4 million) for testing of all balances impacting Adjusted Profit (as defined in Note 1
to the Group financial statements), which is 5% (2019: 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.
Performance Materiality
70% (2019: 70%) of Group materiality
70% (2019: 70%) of parent Company materiality
Group financial statements
Parent Company financial statements
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered the following factors:
a) the changes in the business have been factored into the level of materiality; and
b) 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 £0.10 million
(2019: £0.22 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.
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Independent Auditor’s Report
To the members of Capital & Regional plc CONTINUED
An Overview of the Scope of Our Audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group and component levels.
Our Group audit scope focused primarily on the audit work on the major lines of business. These major lines of business are wholly-
owned assets, Snozone and Group/Central. These are included within individual IFRS 8 segments as disclosed in Note 2 to the Group
financial statements.
The businesses subject to a full scope audit or specific audit procedures account for 98% (2019: 98%) of the Group’s net assets, 100%
(2019: 100%) of the Group’s revenue and 100% (2019: 100%) of the Group’s operating profit. This coverage corresponds with the full
scope audit 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 3% and 90% (2019: 2% and
90%) of Group materiality, which corresponds to component materiality of between £0.11 million and £3.06 million (2019: between
£0.18 million and £6.75 million).
At the Group 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.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s
report thereon. The Directors are responsible for the other information contained within the annual report. 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.
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 course of 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 this gives rise to
a material misstatement in the financial statements themselves. 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.
We have nothing to report in this regard.
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.
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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GOVERNANCEcapreg.comCapital & Regional plc Extent to Which the Audit was Considered Capable of Detecting Irregularities, Including Fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
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 24 March 2021;
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 relevant internal specialists, including tax, IT, 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, 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 matter 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 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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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Independent Auditor’s Report
To the members of Capital & Regional plc CONTINUED
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.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified
for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 39;
the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate set out on page 39;
the Directors’ statement on fair, balanced and understandable set out on page 65;
the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 34;
the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out
on page 65; and
the section describing the work of the Audit Committee set out on pages 63 to 65.
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.
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GOVERNANCEcapreg.comCapital & Regional plc Other Matters Which We are Required to Address
Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by 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 24 years, covering the years ending 25 December 1997 to 30 December
2020.
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 parent 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 parent 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 parent Company and the parent 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
24 March 2021
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GOVERNANCEAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Consolidated Income Statement
For the year to 30 December 2020
Revenue
Expected credit loss
Cost of sales
Gross profit
Administrative costs
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 credit
Loss for the year
All results derive from continuing operations.
Basic earnings per share
Diluted earnings per share
EPRA basic earnings per share
EPRA diluted earnings per share
Note
3
4
6
10a
5
5
6
8a
2a
9a
9a
9a
9a
2020
£m
72.7
(7.3)
(27.9)
37.5
(12.0)
(208.3)
1.6
–
(181.2)
0.4
(22.8)
(203.6)
0.2
(203.4)
2019
£m
88.9
(1.7)
(33.6)
53.6
(8.8)
(138.6)
(1.5)
(2.2)
(97.5)
0.4
(23.9)
(121.0)
–
(121.0)
(188.3)p
(188.3)p
9.2p
9.2p
(162.3)p
(162.3)p
35.4p
35.4p
Comparative earnings per share figures have been multiplied by ten to adjust for the impact of the 10 for 1 share consolidation that
completed on 15 January 2020.
Consolidated Statement
of Comprehensive Income
For the year to 30 December 2020
Loss for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Total items that may be reclassified subsequently to profit or loss
Total comprehensive expense for the year
2020
£m
(203.4)
–
–
(203.4)
2019
£m
(121.0)
–
–
(121.0)
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 (EPRA). These reflect the updated guidance issued by EPRA in October 2019; 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 reinstatement value (NRV), net tangible assets (NTA) and net disposal value (NDV) are shown in Note 24 to the Financial Statements.
We consider EPRA NTA to be the most relevant measure for our business.
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FINANCIALScapreg.comCapital & Regional plc
Consolidated Balance Sheet
At 30 December 2020
Non-current assets
Investment properties
Plant and equipment
Right of use assets
Fixed asset investments
Receivables
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
Derivatives
Obligations under finance leases
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Capital redemption reserve
Own shares reserve
Retained earnings
Equity shareholders’ funds
Basic net assets per share
EPRA net reinstatement value per share
EPRA net tangible assets per share
EPRA net disposal value per share
Note
10
11
12
14
14
15
2b
16
17a
16
16
26
2b
19
19
21
24
24
24
24
2020
£m
536.1
2.5
12.2
0.9
14.2
565.9
21.3
84.1
105.4
671.3
(30.9)
(30.9)
74.5
(423.9)
(0.2)
(8.9)
(39.6)
(472.6)
(503.5)
167.8
11.2
244.3
60.3
4.4
–
(152.4)
167.8
150.1p
157.6p
157.6p
139.4p
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)
(1.8)
(3.4)
(61.5)
(489.5)
(525.2)
375.1
10.4
238.0
60.3
4.4
–
62.0
375.1
361.1p
363.5p
363.5p
355.9p
Comparative per share figures have been multiplied by ten to adjust for the impact of the 10 for 1 share consolidation that completed on
15 January 2020.
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on 24 March 2021 by:
STUART WETHERLY
GROUP FINANCE DIRECTOR
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Consolidated Statement of
Changes in Equity
For the year to 30 December 2020
Share
capital
£m
Share
premium1
£m
Merger
reserve2
£m
Capital
redemption
reserve1
£m
Own
shares
reserve3
£m
Retained
earnings
£m
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)
Balance at 30 December 2019
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)4
Balance at 30 December 2020
7.3
–
–
–
–
–
3.1
10.4
–
–
–
–
–
0.8
11.2
Notes:
1 These reserves are not distributable.
166.5
–
–
–
–
–
71.5
238.0
–
–
–
–
–
6.3
244.3
60.3
–
–
–
–
–
–
60.3
–
–
–
–
–
–
60.3
4.4
–
–
–
–
–
–
4.4
–
–
–
–
–
–
4.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
194.5
(121.0)
–
(121.0)
0.1
(11.6)
–
62.0
(203.4)
–
(203.4)
0.4
(4.3)
(7.1)
(152.4)
Total
equity
£m
433.0
(121.0)
–
(121.0)
0.1
(11.6)
74.6
375.1
(203.4)
–
(203.4)
0.4
(4.3)
–
167.8
2 The merger reserve of £60.3 million arose on the Group’s capital raising in 2009 which was structured so as to allow the Company to claim merger relief
under section 612 of the Companies Act 2006 on the issue of ordinary shares. The merger reserve is available for distribution to shareholders.
3 Own shares relate to shares purchased out of distributable profits and therefore reduce reserves available for distribution.
4 Scrip dividends paid, no impact on total equity.
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FINANCIALScapreg.comCapital & Regional plc
Consolidated Statement of
Changes in Equity
For the year to 30 December 2020
Consolidated Cash
Flow Statement
For the year to 30 December 2020
Operating activities
Net cash from operations
Distributions received from fixed asset investments
Interest paid
Interest received
Cash flows from operating activities
Investing activities
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 repaid
Issue of ordinary shares
Fixed payments under head leases
Cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note
22
15
2020
£m
17.9
1.5
(14.3)
0.2
5.3
4.9
(0.8)
(15.6)
(11.5)
(4.2)
–
–
(1.4)
(5.6)
(11.8)
95.9
84.1
2019
£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
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Notes to the Financial Statements
For the year to 30 December 2020
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 IFRS 16, 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 2020:
IFRS 16 Leases
IFRS 16 replaces IAS 17 “Leases” and requires all operating leases in excess of one year, where the Group is the lessee, to be included
on the Group’s balance sheet, and the recognition of a right-of-use asset and a related lease liability representing the obligation to
make lease payments. The right-of-use asset is assessed for impairment annually (incorporating any onerous lease assessments) and
amortised on a straight-line basis, with the lease liability being amortised using the effective interest method. The Group has recognised,
on the balance sheet, an asset for its lease of office premises and the leases of the Snozone business on its Basingstoke, Castleford and
Milton Keynes sites, along with a corresponding liability. The transition to IFRS 16 has also impacted the presentation of our leasehold
properties, previously presented as finance leases. As a result of IFRS 16 these have been remeasured to be based on minimum
payments where applicable, in the case of our leasehold property in Blackburn, this has been remeasured to nil as there is no minimum
payment. This has resulted in a day 2 adjustment of the lease asset and corresponding liability from £61.3 million to £35.6 million.
The Group has applied IFRS 16 using the modified retrospective approach and has not restated comparative information. The transition
date of initial application of IFRS 16 for the Group was 31 December 2019.
For investment properties held under leases that are classified as lease liabilities, the properties are initially recognised at the lower
of fair value of the property and the present value of the minimum lease payments. An equivalent amount is recognised as a lease
liability. After initial recognition, leasehold properties classified as investment properties are held at fair value, and the obligation to the
lessor is included in the balance sheet at the present value of the minimum lease payments. The minimum lease payment valuation is
remeasured at each balance sheet date and the value of the Group’s right-of-use asset is adjusted accordingly over the lease term.
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In the prior year, the Group had four operating leases, relating to office premises and the leases of the Snozone business on its
Basingstoke, Castleford and Milton Keynes sites. These leases had non-cancellable future lease payments of £17.0 million. After
discounting the future lease payments under IFRS 16, the liability on transition was amended to £14.4 million. The Group recognised a
right-of-use asset of £14.4 million in property, plant and equipment and a lease liability of £14.4 million at the transition date. The impact
at the transition date on the opening retained earnings is £nil. As at 30 December 2020, the net carrying value of the right-of-use asset
was £12.2 million and lease liability was £13.0 million. The additional depreciation charge for the right-of-use asset recognised during the
year was £2.2 million. The reduction in the lease liability in respect of principal repayments and interest was £1.4 million.
When measuring the lease liabilities for leases that were classified as operating leases, new lease liabilities acquired and lease
extensions, the Group discounted lease payments using an incremental borrowing rate specific for each asset based on what the Group
would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to
the right-of-use asset in a similar economic environment. A discount rate of 3.92% has been used for the support office and 4.04% for
Snozone leases. The interest rate has been determined using the effective interest rate.
The reconciliation of the opening balance sheet movement is as follows:
Asset associated with head lease obligation
Right-of-use asset
Obligations under head leases
Obligations under lease liabilities
Pre transition
31 December
2019
£m
IFRS 16
adoption
31 December
2019
£m
Post transition
31 December
2019
£m
61.3
–
(61.3)
–
(35.6)
14.4
35.6
(14.4)
25.7
14.4
(25.7)
(14.4)
Accounting policy post transition
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as
leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of
office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line
basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits
from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in-substance fixed
payments), less any lease incentives receivable.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective
interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate.
The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless
the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at
the effective date of the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any initial direct costs.
The right-of-use assets are amortised on a straight-line basis over the length of each lease. To assess for impairment of the right-of-use
asset the Directors have considered whether the Group can reasonably expect to recover the costs of each lease through operation. No
indication of impairment has been deemed to exist.
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Notes to the Financial Statements
CONTINUED
1 Significant Accounting Policies CONTINUED
Accounting policy pre transition
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.
Critical accounting judgements
The preparation of financial statements requires the Directors to make judgements that may affect the application of accounting policies.
Going concern
Under the UK Corporate Governance Code, the Board needs to report whether the business is a going concern. In making its assessment
of Going Concern, the Group has considered specifically the impact on the business of the significant disruption arising from Covid-19. At
the time of writing, all of the Group’s seven shopping centres are open, though a majority of tenants are unable to trade due to current
government restrictions and rent collection for the first quarter of 2021 is currently running at 60%.
At 30 December 2020 the Group had total cash on balance sheet of over £75 million, which is equivalent to more than one year’s gross
revenue. Of this, £60.3 million was centrally held and free of any restrictions. This provides a 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 rationed capital expenditure projects to only those that immediately drive income improvements, or are of strategic importance,
and we have suspended the dividend until such time as markets stabilise.
In making its assessment of Going Concern, the Group has run updated Group forecasts on both a base case and sensitised basis. In the
latter, the Group has considered the impact of restrictions extending into the second half of 2021. The Group’s analysis projects that the
central cash maintained provides sufficient funds to cover this potential disruption.
The Group’s four asset-backed loan facilities each have bespoke covenants as outlined on page 149. Covenants in respect of minimum
interest cover ratios, both projected and historic, are tested quarterly. We have secured waivers or deferrals for all income covenants for
the current quarter and are in constructive and detailed dialogue with the respective lenders on extending these further as detailed in
the Financing section above. The earliest maturity on any of the Group’s asset-backed loan facilities is February 2023.
In respect of The Mall and Ilford loan facilities, where the combined assets make up substantively all of the Group’s Net Asset Value
excluding cash, the central cash balance maintained by the Group at 30 December 2020, in addition to available cash within the relevant
structures, provides sufficient funds to remedy the loan-to-value covenants if values fell by up to a further 15% across these assets by
reference to the December 2020 valuations. This is if the Directors choose to take this approach, even without any further covenant
relaxation. If valuations fell by in excess of 15% then the Group would be reliant on obtaining some form of covenant relaxation beyond
the existing terms of the facility agreements but ongoing discussions with the Group’s lenders leave Management confident that this
would be obtained. All of the Group’s four asset-backed facilities are non-recourse with no cross-default clauses and all facilities provide
the Group with the opportunity to cure breaches of financial covenants.
In coming to its Going Concern assumption, the Group has also considered many of the other options available to generate or conserve
additional cash to remedy loan-to-value covenants and to fund value accretive capital expenditure and letting initiatives. These
include the potential disposal of assets – either in whole or part – the opportunity to crystallise value on the Walthamstow residential
development, the option to effectively surrender ring-fenced assets to lenders and the ability to potentially issue new equity.
Having due regard to all of the above matters and after making appropriate enquiries including considerations of the impact of Covid-19
and sensitivities, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. Therefore, the Board continues to adopt the Going Concern basis in preparing the financial
statements.
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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 2020 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 January 2020).
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.
Derivative financial instruments
Reliance upon the work undertaken at 31 December 2020 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 16 and 18e. Note 18b provides figures showing the Group’s sensitivity to a 100bps increase or decrease in interest rate
expectations.
Increase in credit risk
When measuring expected credit loss the Group uses reasonable and supportable forward looking information, which is based
on assumptions for the future movement of different economic drivers and how these drivers will affect each other. In assessing
whether the credit risk of an asset has significantly increased the Group takes into account qualitative and quantitative reasonable and
supportable forward-looking information. Due to the impact of Covid 19 on collection rates, there has been a significant increase in
our assessed credit risk. Probability of default constitutes a key input in measuring expected credit losses (ECL). Probability of default
is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and
expectations of future conditions.
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.
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.
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Notes to the Financial Statements
CONTINUED
1 Significant Accounting Policies CONTINUED
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 = €1.1123 (2019: £1 = €1.1765 ). The principal exchange rate used for
the income statement is the average rate for the year: £1 = €1.1248 (2019: £1 = €1.1403).
Property, plant and equipment
Group/central
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
Snozone
Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment. Cost includes the original
purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is
provided so as to write off the cost of the assets, less their estimated residual values, on a straight-line basis over their expected useful
lives, which are given below as a general rule; however, as part of the day-to-day running of the business there may be some assets
which fall outside of this, these assets are treated the same and are always depreciated on a straight-line basis over their expected useful
lives. The expected useful lives of the assets are reassessed periodically in the light of experience.
Snow Equipment
Computer Equipment
Office Equipment
Operations Equipment
20% – 100% or 1 – 5 years
20% – 50% or 2 – 5 years
20% – 50% or 2 – 5 years
20% – 50% or 2 – 5 years
Property portfolio
Investment properties
Investment properties are properties owned or leased under finance leases which are held either for long-term rental income or for
capital appreciation or both. Investment property is initially recognised at cost (including directly related transaction costs) and is
revalued at the balance sheet date to fair value, being the market value determined by professionally qualified external or Director
valuers, with changes in fair value being included in the income statement. Valuations are generally carried out twice a year. In
accordance with IAS 40 Investment Property, no depreciation is provided in respect of investment properties.
Leasehold properties
Leasehold properties that are leased to tenants under operating leases are classified as investment properties or development
properties, as appropriate, and included in the balance sheet at fair value.
Capital expenditure
Refurbishment expenditure in respect of major works is capitalised. Renovation and refurbishment expenditure of a revenue nature is
expensed as incurred. Our business model for developments is to use a combination of in-house staff and external advisers. The cost of
external advisers is capitalised to the cost of developments. The cost of staff working on developments is capitalised subject to meeting
certain criteria related to the degree of time spent on and the nature of specific projects.
Property transactions
Acquisitions and disposals are accounted for at the date of legal completion. Investment properties are reclassified as held for sale once
contracts have been exchanged and are transferred between categories at the estimated market value on the transfer date.
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Leases
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
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as
leases with a lease term of 12 months or less) and leases of low-value assets (such as tablets and personal computers, small items of
office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line
basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits
from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted by using the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in-substance fixed
payments), less any lease incentives receivable.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective
interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate.
The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless
the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at
the effective date of the modification.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any initial direct costs.
The right-of-use assets are amortised on a straight-line basis over the length of each lease. To assess for impairment of the right-of-use
asset the Directors have considered whether the Group can reasonably expect to recover the costs of each lease through operation. No
indication of impairment has been deemed to exist.
Fixed asset investments
Fixed asset investments are stated at cost, together with subsequent capital contributions, less provisions for any impairment in value.
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes party to the contractual
provisions of the instrument.
Financial assets
Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss (FVTPL)”, ”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.
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Notes to the Financial Statements
CONTINUED
1 Significant Accounting Policies CONTINUED
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.
Debt instruments that have fixed or determinable payments that are not quoted in an active market are classified as amortised cost.
These 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.
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.
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FINANCIALScapreg.comCapital & Regional plc 1 Significant Accounting Policies CONTINUED
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. Lease incentives are capitalised and amortised over the length of
the lease. Amortisation is offset against rental income.
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.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to
them and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the
related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or
losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised
in profit or loss in the period in which they become receivable, offset against the expense they are intended to compensate where
applicable.
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.
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Notes to the Financial Statements
CONTINUED
1 Significant Accounting Policies CONTINUED
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.
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, 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.
2a Operating Segments
Year to 30 December 2020
Rental income from external sources
Property and void costs
Net rental income
Net interest expense
Snozone income/Management fees1
Management expenses
Investment income
Depreciation
Tax charge
Adjusted Profit/(loss)
Revaluation of properties
Profit on disposal
Loss on financial instruments
Share-based payments
Other items
(Loss)/profit
Total assets
Total liabilities
Net assets
Note
2b
2b
2b
2b
Shopping
Centres
£m
Snozone
£m
Group/
Central
£m
55.6
(21.5)
34.1
(17.6)
–
–
–
–
–
16.5
(208.3)
0.4
(5.0)
–
–
(196.4)
590.9
(482.9)
108.0
–
–
–
(0.5)
4.6
(4.3)
–
(2.2)
–
(2.4)
–
–
–
–
–
(2.4)
14.3
(16.0)
(1.7)
–
–
–
0.6
2.3
(6.5)
0.1
(0.5)
0.2
(3.8)
–
–
–
(0.4)
(0.4)
(4.6)
66.1
(4.6)
61.5
Total
£m
55.6
(21.5)
34.1
(17.5)
6.9
(10.8)
0.1
(2.7)
0.2
10.3
(208.3)
0.4
(5.0)
(0.4)
(0.4)
(203.4)
671.3
(503.5)
167.8
1 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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FINANCIALScapreg.comCapital & Regional plc 2a Operating Segments CONTINUED
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
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
Snozone
£m
Group/
Central
£m
63.0
(13.7)
49.3
(18.9)
–
–
–
–
–
30.4
(138.6)
–
(5.0)
–
–
–
(113.2)
820.0
(514.6)
305.4
–
–
–
–
10.5
(8.7)
–
(0.3)
–
1.5
–
–
–
–
–
–
1.5
3.9
(2.0)
1.9
–
–
–
–
2.3
(6.8)
0.2
(0.2)
–
(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
(15.5)
0.2
(0.5)
–
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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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Notes to the Financial Statements
CONTINUED
2b Reconciliations of Reportable Revenue, Assets and Liabilities
Revenue
Rental income from external sources
Service charge income
Management fees
Snozone income
Revenue for reportable segments
Elimination of inter-segment revenue
Rental income earned by associates and joint ventures
Revenue per consolidated income statement
All revenue in the current and prior years was attributable to activities within the UK.
Assets
Wholly-owned assets
Snozone
Group/Central
Total assets of reportable segments and Group assets
Liabilities
Wholly-owned assets
Snozone
Group/Central
Total liabilities of reportable segments and Group liabilities
Net assets by country
UK
Germany
Group net assets
3 Revenue
Gross rental income
Ancillary income
Service charge income
External management fees
Snozone income
Revenue per consolidated income statement
Year to
30 December
2020
£m
Year to
30 December
2019
£m
55.6
11.7
2.3
4.6
74.2
(1.5)
–
72.7
2020
£m
590.9
14.3
66.1
671.3
(482.9)
(16.0)
(4.6)
(503.5)
166.9
0.9
167.8
63.0
14.6
2.3
10.5
90.4
(1.5)
–
88.9
2019
£m
820.0
3.9
76.4
900.3
(514.6)
(2.0)
(8.6)
(525.2)
375.8
(0.7)
375.1
Year to
30 December
2020
£m
Year to
30 December
2019
£m
43.5
12.1
55.6
11.7
0.8
4.6
72.7
49.6
13.4
63.0
14.6
0.8
10.5
88.9
Note
2a
2a
2a
2a
3
Note
2a
2a
Note
2a
2b
2a
2b
External management fees represent revenue earned by the Group’s wholly-owned subsidiary Capital & Regional Property Management
Limited.
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FINANCIALScapreg.comCapital & Regional plc 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
Total finance income
Finance costs
Amortisation of deferred loan arrangement fees
Interest payable on bank loans and overdrafts
Other interest payable
Finance lease costs
Loss in fair value of financial instruments:
– Interest rate swaps
Total finance costs
6 Loss Before Tax
The loss before tax has been arrived at after charging/(crediting) the following items:
Variable lease payments not capitalised under IFRS 16
Impairment of receivables
Other gains and losses
Depreciation of plant and equipment
Depreciation of right-of-use assets
Staff costs
Auditor’s remuneration for audit services (see below)
Transaction costs in association with Partial Offer and equity raise
Year to
30 December
2020
£m
Year to
30 December
2019
£m
(13.4)
(10.2)
(4.3)
(27.9)
(13.2)
(13.1)
(9.0)
(35.3)
Year to
30 December
2020
£m
Year to
30 December
2019
£m
0.3
0.1
0.4
(1.0)
(14.5)
(0.4)
(1.9)
(5.0)
(22.8)
0.2
0.2
0.4
(1.0)
(14.5)
(0.3)
(3.4)
(4.7)
(23.9)
Note
14
11
12
7
Year to
30 December
2020
£m
Year to
30 December
2019
£m
0.4
7.3
1.6
0.5
2.2
8.7
0.3
–
2.2
2.0
1.5
0.5
–
10.5
0.2
2.2
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Notes to the Financial Statements
CONTINUED
6 Loss Before Tax CONTINUED
Auditor’s remuneration
The analysis of the Auditor’s remuneration is as follows:
Fees payable to the Company’s Auditor and its associates for the audit of the Company’s annual
financial statements
Fees payable to the Company’s Auditor and its associates for other services to the Group – the audit
of the Company’s subsidiaries
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 their associates
7 Staff Costs
Salaries
Discretionary bonuses
Share-based payments
Social security
Other pension costs
Year to
30 December
2020
£’000
Year to
30 December
2019
£’000
213
73
286
45
–
–
45
331
82
73
155
45
2
–
47
202
Note
20
Year to
30 December
2020
£m
Year to
30 December
2019
£m
6.9
0.4
0.4
7.7
0.7
0.3
8.7
8.2
0.9
0.1
9.2
1.0
0.3
10.5
Staff costs amounting to £0.2 million (2019: £0.6 million) have been capitalised as development costs during the year.
Staff numbers
The monthly average number of employees (including Executive Directors), being full-time equivalents, employed by the Group during
the year was as follows:
CRPM/PLC
Shopping centres
Snozone
Total staff numbers
Year to
30 December
2020
Number
Year to
30 December
2019
Number
41
87
60
188
43
61
129
233
The monthly average number of total employees (including Executive Directors) employed within the Group during the year was 263
(CRPM – 41, Shopping centres – 87, Snozone – 135) compared to 369 in 2019 (CRPM – 45, Shopping centres – 80, Snozone – 244).
There were no employees (2019: Nil) employed by the Company during 2020.
The Group has received £1.2m in funds from HMRC for furloughed employees between April to December 2020 (CRPM - £nil, Shopping
centres - £0.2m, Snozone - £1.0m). This has been credited against staff costs in the income statement.
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FINANCIALScapreg.comCapital & Regional plc
8 Tax
8a Tax credit
Current tax
UK corporation tax
Adjustments in respect of prior years
Total current tax credit
Deferred tax
Origination and reversal of temporary timing differences
Total deferred tax
Total tax credit
£nil (2019: £nil) of the tax charge relates to items included in other comprehensive income.
8b Tax credit reconciliation
Loss before tax on continuing operations
Expected tax credit at 19% (2019: 19%)
REIT exempt income and gains
Non-allowable expenses and non-taxable items
Excess tax losses
Actual tax credit
Year to
30 December
2020
£m
Year to
30 December
2019
£m
–
–
–
0.2
0.2
0.2
–
–
–
–
–
–
Year to
30 December
2020
£m
Year to
30 December
2019
£m
Note
(203.6)
38.7
(38.0)
0.1
(0.6)
0.2
(121.0)
23.0
(22.2)
(0.6)
(0.2)
–
8a
8c Deferred tax
On 17 March 2020, the Finance Act 2020 was substantively enacted confirming that the main UK corporation tax rate will be 19% from 1
April 2020 and that it will remain at 19% for the year from 1 April 2021. Consequently, the UK corporation tax rate at which deferred tax
is booked in the financial statements is 19% (2019: 17%). Prior to 17 March 2020 the previous substantively enacted rate was 17%. After
the year end in the Budget on Wednesday 3 March 2021 it was announced that from 1 April 2023 the corporation tax main rate will be
increased to 25% applying to profits over £250,000. This is not anticipated to have a material impact on the Group’s results.
The Group has recognised a deferred tax asset of £0.2 million (30 December 2019: £nil). The Group has recognised deferred tax assets
for the non-REIT profit entities in respect of head lease payments and capital allowances to the extent that future matching taxable
profits are expected to arise.
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 £22.5 million (30 December 2019: £19.0 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 taxable profit streams and other reasons which
may restrict the utilisation of the losses (30 December 2019: £nil). The Group has unused capital losses of £24.9 million (30 December
2019: £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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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Notes to the Financial Statements
CONTINUED
8 Tax CONTINUED
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.
A UK REIT is expected to pay dividends (PIDs) of at least 90% of its taxable profits from its UK property rental business by the first
anniversary of each accounting date. By agreement with HMRC the Group has an extension to the payment date of the balance of
the 2019 PID, of approximately £7.6 million, to 30 June 2021 in order to meet its REIT distribution requirements for the financial year
ending 2019. The Group has commenced discussions with HMRC in seeking a further extension to this deadline given the impact and
uncertainties caused to the Group’s business by COVID-19. If the Group were to not be granted an extension and not meet the minimum
requirement then, under REIT legislation, the Group will incur UK corporation tax payable at 19% whilst remaining a REIT. We estimate
that this would result in a tax payment of approximately £1.4 million being required to be paid. However, this is subject to there being
no legal impediment to distribution. At 30 December 2020 the Company does not have sufficient distributable reserves to declare a
dividend. If this legal impediment to distribution subsists at the date for payment of the balance of the 2019 PID and the date of payment
of the 2020 PID the Group will be deemed to have met the distribution requirement for those periods based on the provisions in CTA
2010 section 530.
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.
VAT
During the year the Group deferred VAT payments of £3.3 million under the government’s deferral scheme. These will be repaid in
instalments over the course of 2021.
9 Earnings Per Share
The European Public Real Estate Association (“EPRA”) has issued recommendations for the calculation of earnings per share information
as shown in the following tables:
9a Earnings per share calculation
Year to 30 December 2020
Year to 30 December 2019
Note
Loss
EPRA
Adjusted
Profit
Loss
EPRA
Adjusted
Profit
Profit (£m)
(Loss) for the year
Revaluation loss on investment properties
(net of tax)
(Profit)/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)
9b
9b
9b
2a
(203.4)
(203.4)
(203.4)
(121.0)
(121.0)
(121.0)
–
–
–
208.3
(0.4)
–
–
–
–
(203.4)
(188.3)
(188.3)
5.0
–
0.4
9.9
9.2
9.2
208.3
(0.4)
–
5.0
0.4
0.4
10.3
9.5
9.5
–
–
–
–
–
–
(121.0)
(162.3)
(162.3)
140.0
0.5
2.2
5.0
–
(0.3)
26.4
35.4
35.4
140.0
0.5
2.2
5.0
0.1
0.6
27.4
36.7
36.7
Comparative per share figures have been multiplied by ten to adjust for the impact of the 10 for 1 share consolidation that completed on
15 January 2020.
None of the current or prior year earnings related to discontinued operations (2019: none).
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FINANCIALScapreg.comCapital & Regional plc 9 Earnings Per Share CONTINUED
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
2020
Year to
30 December
2019
108.0
–
108.0
0.3
108.3
746.2
(0.6)
745.6
3.3
748.9
At the end of the year, the Group had 678,919 (2019: 10,698,595 equivalent to approximately 1,069,859 shares after the 10:1 share
consolidation completed on 15 January 2020) share options and contingently issuable shares granted under share-based payment
schemes that could potentially dilute earnings per share in the future, but which have not been included in the calculation because they
are not dilutive or the conditions for vesting have not been met.
9b Reconciliation of earnings figures included in earnings per share calculations
Year to 30 December 2020
Year to 30 December 2019
Revaluation
movements
£m
Note
Profit
on disposal of
investment
properties
£m
Movement
in fair value
of financial
instruments
£m
(208.3)
–
–
–
(208.3)
9a
0.4
–
–
–
0.4
(5.0)
–
–
–
(5.0)
Loss
on disposal of
investment
properties
£m
Movement
in fair value
of financial
instruments
£m
–
–
(0.5)
–
(0.5)
(5.0)
–
–
–
(5.0)
Revaluation
movements
£m
(140.0)
–
–
–
(140.0)
Wholly-owned
Associates
Joint ventures
Tax effect
Total
9c Headline earnings per share
Headline earnings per share is an alternative performance measure as required by the JSE Listing Requirements. It has been calculated
and presented in line with the JSE guidance.
Profit (£m)
(Loss) for the year
Revaluation loss on investment properties (including tax)
(Profit)/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/Diluted
Year to 30 December 2020
Year to 30 December 2019
Basic
Diluted
Basic
Diluted
(203.4)
208.3
(0.4)
–
0.4
4.9
108.0
–
–
108.0
4.6
(203.4)
208.3
(0.4)
–
0.4
4.9
108.0
–
0.3
108.3
4.5
(121.0)
140.0
0.5
2.2
(0.3)
21.4
746.2
(0.6)
–
745.6
28.7
(121.0)
140.0
0.5
2.2
(0.3)
21.4
746.2
(0.6)
3.3
748.9
28.6
Comparative per share figures have been multiplied by ten to adjust for the impact of the 10 for 1 share consolidation that completed on
15 January 2020.
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Notes to the Financial Statements
CONTINUED
10 Investment Properties
10a Wholly-owned properties
Cost or valuation
At 30 December 2018
Capital expenditure (excluding capital contributions)
Valuation deficit
At 30 December 2019
Capital expenditure (excluding capital contributions)
Disposal
Valuation deficit1
IFRS 16 transition adjustment
At 30 December 2020
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Total
property
assets
£m
Note
432.1
6.6
(59.6)
379.1
4.2
(4.6)
(98.6)
–
280.1
466.1
4.7
(79.0)
391.8
9.8
–
(109.6)
(36.0)
256.0
898.2
11.3
(138.6)
770.9
14.0
(4.6)
(208.2)
(36.0)
536.1
1
1 £208.3 million per income statement and Note 2a includes letting fee amortisation adjustment of £0.1 million.
10b Property assets summary
Investment properties at fair value as reported by the valuer
Add back of lease liabilities
Unamortised tenant incentives on investment properties
IFRS Property Value
30 December
2020
£m
30 December
2019
£m
527.0
25.3
(16.2)
536.1
727.1
61.5
(17.7)
770.9
As described in Note 1 Summary of Significant Accounting Policies, where the valuation obtained for investment property is net of all
payments to be made, it is necessary to add back the lease liability to arrive at the carrying amount of investment property at fair value.
10c Valuations
External valuations at 30 December 2020 were carried out on all of the gross property assets detailed in the table above. The fair value
was £527.0 million (2019: £727.1 million). The valuations at 30 December 2020 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.
Real estate valuations are complex and derived from data that is not widely publicly available and involves a degree of judgement. For
these reasons, the valuations are classified as Level 3 in the fair value hierarchy as defined by IFRS 13. The valuations are sensitive to
changes in rent profile and yields.
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 2020:
Wholly-owned assets
Market value
£m
527.0
Low
7.8
Portfolio
12.0
High
21.2
Low
6.2
Portfolio
8.3
High
12.7
Estimated rental value £ per sq ft
Equivalent yield %
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10 Investment Properties CONTINUED
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
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
12 Leases
Right of use Assets
Cost
At 1 January 2020
Additions
Disposals
At 30 December 2020
Accumulated depreciation
At 1 January 2020
Charge for the year
Disposals
At 30 December 2020
Carrying value
At 30 December 2020
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
21.2
Decrease
£m
(20.2)
Increase
£m
(16.9)
Decrease
£m
18.2
Increase
£m
(32.7)
Decrease
£m
37.7
Impact on valuations of 100bps
change in equivalent yield
Increase
£m
(61.8)
Decrease
£m
81.0
30 December
2020
£m
30 December
2019
£m
5.9
0.8
–
6.7
(3.7)
(0.5)
–
(4.2)
2.5
5.3
0.7
(0.1)
5.9
(3.3)
(0.5)
0.1
(3.7)
2.2
Buildings
£m
14.4
–
–
14.4
–
(2.2)
–
(2.2)
12.2
Lease commitments relate to the leasing of the Group’s registered office and the leases of the Snozone business on its Basingstoke,
Castleford and Milton Keynes sites
The maturity analysis of lease liabilities is presented in Note 26.
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Notes to the Financial Statements
CONTINUED
12 Leases CONTINUED
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Year ended
30 December
2020
£m
Year ended
30 December
2019
£m
2.2
0.6
–
–
13 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.
14 Receivables
Amounts falling due after one year:
Financial assets
Deferred tax
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
2020
£m
30 December
2019
£m
0.2
0.2
3.8
10.2
14.2
14.7
2.7
0.2
17.6
1.5
0.8
1.4
21.3
–
–
4.5
10.2
14.7
6.5
1.3
1.1
8.9
3.5
1.2
1.8
15.4
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 Group does not
recognise revenue where collectability is not reasonably expected. In the case of rental income this relates to tenants who are insolvent
and closed.
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14 Receivables CONTINUED
The following table details the risk profile of trade receivables based on the Group’s provision matrix.
2020
Expected credit loss rate (%)
Estimated total gross carrying amount at
default (£m)
Lifetime ECL (£m)
Adjustment for forward-looking estimate
Total expected credit loss
Not past due
1-30 days
31-60 days
61-90 days
>90 days
5.8
3.1
(0.2)
(2.7)
(2.9)
16.3
17.1
50.3
7.6
(1.2)
–
(1.2)
0.6
(0.1)
–
(0.1)
1.3
(0.6)
–
(0.6)
34.2
10.4
(3.6)
–
(3.6)
2019
Not past due
1-30 days
31-60 days
61-90 days
>90 days
Expected credit loss rate (%)
Estimated total gross carrying amount at
default (£m)
Lifetime ECL (£m)
Adjustment for forward looking estimate
Total expected credit loss
2.6
3.7
(0.1)
–
(0.1)
6.1
2.2
(0.1)
–
(0.1)
7.2
0.1
–
–
–
39.5
28.0
0.3
(0.1)
–
(0.1)
2.7
(0.8)
(0.3)
(1.1)
1 This represents the total lifetime expected credit loss as a percentage of total Group receivables
Total
24.81
23.0
(5.7)
(2.7)
(8.4)
Total
12.31
9.0
(1.1)
(0.3)
(1.4)
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
15 Cash and Cash Equivalents
Cash at bank and in hand
Security deposits held in rent accounts
Other restricted balances
30 December
2020
£m
30 December
2019
£m
1.4
11.5
(2.6)
(1.9)
8.4
1.3
2.0
(0.3)
(1.6)
1.4
30 December
2020
£m
30 December
2019
£m
82.3
0.7
1.1
84.1
90.5
0.7
4.7
95.9
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 2020 were held in sterling other than £0.1 million which
was held in euros (30 December 2019: £0.3 million).
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Notes to the Financial Statements
CONTINUED
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
30 December
2020
£m
30 December
2019
£m
0.1
0.1
0.2
8.9
9.1
1.2
8.3
11.1
20.6
7.1
3.2
30.9
0.1
1.7
1.8
3.4
5.2
1.8
12.0
11.8
25.6
9.3
0.8
35.7
The average age of trade payables is seven days (2019: 18 days). No amounts incur interest (2019: £nil).
17 Bank Loans
17a Summary of borrowings
The Group’s borrowings are arranged to ensure an appropriate maturity profile and to maintain short-term liquidity. There were no
defaults or other breaches of financial covenants that were not waived under any of the Group borrowings during the current year or the
preceding year.
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
2020
£m
30 December
2019
£m
427.4
–
427.4
(3.5)
423.9
–
423.9
423.9
427.4
–
427.4
(4.6)
422.8
–
422.8
422.8
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17 Bank Loans CONTINUED
Undrawn committed facilities
Expiring between two and five years
Expiring greater than five years
30 December
2020
£m
30 December
2019
£m
22.0
–
22.0
–
The Group has four secured loan facilities that make up the £427.4 million detailed in the table in Note 17a. The loans are all maintained
in separate ring-fenced Special Purpose Vehicle (SPV) structures secured against the property interests and other assets within each SPV.
There is no recourse to other Group companies outside of the respective SPV and no cross-default provisions. Each loan has a bespoke
set of financial covenants, these are detailed by each facility on page 149.
The Group’s revolving credit facility and the Hemel Hempstead capital expenditure facility were both undrawn at 30 December 2020 and
30 December 2019. Both facilities were cancelled in January 2021.
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.
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
2020
£m
30 December
2019
£m
Note
262.4
165.0
427.4
–
427.4
262.4
165.0
427.4
–
427.4
17a
30 December
2020
£m
30 December
2019
£m
22.0
–
22.0
–
The Articles of the Company include some restrictions on borrowing but this did not limit the amount available for drawdown on the
above facility during the current year or the preceding year.
17d Interest rate and currency profile of borrowings
Fixed and swapped rate borrowings
Between 2% and 3%
Between 3% and 4%
Variable rate borrowings
30 December
2020
£m
30 December
2019
£m
Note
17a
17a
39.0
388.4
427.4
–
427.4
39.0
388.4
427.4
–
427.4
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Notes to the Financial Statements
CONTINUED
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 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
Categories of financial (liabilities)/assets
Note
17a
15
30 December
2020
£m
30 December
2019
£m
427.4
(82.3)
345.1
167.8
206%
427.4
(90.5)
336.9
375.1
90%
Financial assets
Current receivables
Cash and cash equivalents
Interest rate swaps
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
14
15
16
16
17a
16
17a
16
2020
2019
Carrying
value
£m
Gain/(loss) to
income
£m
Gain
to equity
£m
Carrying
value
£m
Gain/(loss) to
income
£m
Gain
to equity
£m
17.6
84.1
–
101.7
(20.6)
–
(0.2)
(423.9)
(8.9)
(453.6)
(351.9)
–
–
–
–
–
–
–
(1.0)
(5.0)
(6.0)
(6.0)
–
–
–
–
–
–
–
–
–
–
–
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)
–
–
–
–
–
–
–
–
–
–
–
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.
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18 Financial Instruments and Risk Management CONTINUED
18b Interest rate risk
The Group manages its interest rate risk through a combination of fixed rate loans and interest rate derivatives, typically interest rate
swaps or caps. The Group’s objective in managing its interest rate risk is to ensure that it always maintains sufficient headroom to cover
interest payments from anticipated cash flows and the Directors regularly review the ratio of fixed to floating rate debt to assist this
process. The Group does not hedge account its interest rate derivatives and states them at fair value with changes in fair value included
in the income statement.
The following table shows a summary of the Group’s interest rate cap and swap contracts and their maturity dates:
Loan facility
Maturity date
Notional principal
Contract fixed rate
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Hemel Hempstead
Hemel Hempstead
The Mall, Luton
Four Mall assets
The Exchange, Ilford
6 February 2023
6 February 2023
30 December 2023
22 January 2024
8 March 2024
£18,650,000
£8,237,000
£96,500,000
£100,000,000
£39,000,000
1.33%
1.30%
1.14%
1.13%
1.00%
30 December 2020
fair value £m
liability
(0.5)
(0.2)
(3.1)
(3.3)
(1.2)
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
2020
£m
Year to
30 December
2019
£m
Year to
30 December
2020
£m
Year to
30 December
2019
£m
–
7.7
7.7
7.7
–
10.2
10.2
10.2
–
(7.7)
(7.7)
(7.7)
–
(10.2)
(10.2)
(10.2)
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 14 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, are 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.
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CONTINUED
18 Financial Instruments and Risk Management CONTINUED
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 cash reserves and its long-term debt facilities.
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.
Note
14
15
14
17a
17
16
16
Note
14
15
14
17a
17
16
16
Effective
interest rate
%
Less than
1 year
£m
1-2 years
£m
2-5 years
£m
More than
5 years
£m
0.3%
3.4%
2.3%
17.6
84.1
–
101.7
–
–
(20.6)
–
(20.6)
–
–
–
–
–
–
–
(0.1)
(0.1)
–
–
–
–
(260.3)
(0.1)
–
–
(260.4)
Effective
interest rate
%
Less than
1 year
£m
1-2 years
£m
2-5 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)
–
–
–
–
(163.6)
–
–
–
(163.6)
More than
5 years
£m
–
–
–
–
(290.0)
–
–
–
(290.0)
Total
£m
17.6
84.1
–
101.7
(423.9)
(0.1)
(20.6)
(0.1)
(444.7)
Total
£m
8.9
95.9
–
104.8
(422.8)
(1.7)
(25.6)
(0.1)
(450.2)
2020
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Financial liabilities
Borrowings – bank loans
Borrowings – other loans
Current payables
Non-current payables
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
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18 Financial Instruments and Risk Management CONTINUED
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been
drawn up based on the undiscounted cash inflows/(outflows) of financial liabilities based on the earliest date on which the Group can be
required to pay, including both interest and principal cash flows.
2020
Borrowings – fixed bank loans
Borrowings – other fixed
loans
Non-interest bearing
2019
Borrowings – fixed bank loans
Borrowings – other fixed
loans
Non-interest bearing
Less than
1 year
£m
(14.6)
–
(20.6)
(35.2)
Less than
1 year
£m
(13.8)
–
(25.6)
(39.4)
1-2 years
£m
(14.6)
2-3 years
£m
(40.6)
3-4 years
£m
(244.6)
4-5 years
£m
(176.7)
–
(0.1)
(14.7)
–
–
(40.6)
–
–
(244.6)
1-2 years
£m
(13.8)
2-3 years
£m
(13.8)
3-4 years
£m
(13.8)
(2.1)
(0.1)
(16.0)
–
–
(13.8)
–
–
(13.8)
–
–
(176.7)
4-5 years
£m
(136.4)
–
–
(136.4)
More than
5 years
£m
–
–
–
–
More than
5 years
£m
(182.8)
–
–
(182.8)
Total
£m
(491.1)
–
(21.7)
(511.8)
Total
£m
(374.4)
(2.1)
(25.7)
(402.2)
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.
2020
Net settled
Interest rate swaps
2019
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
(3.3)
(3.3)
(2.9)
(2.9)
(2.6)
(2.6)
(0.1)
(0.1)
–
–
–
–
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)
–
–
–
–
Total
£m
(8.9)
(8.9)
Total
£m
(3.4)
(3.4)
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Notes to the Financial Statements
CONTINUED
18 Financial Instruments and Risk Management CONTINUED
18e Fair values of financial instruments
The fair values of financial instruments together with their carrying amounts in the balance sheet are as follows:
Notional
principal
£m
2020
Book value
£m
2020
Fair value
£m
2019
Book value
£m
2019
Fair value
£m
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
Total see-through derivatives
Note
18a
18a
13
427.4
(427.4)
(427.4)
–
(427.4)
(438.9)
(438.9)
–
(438.9)
–
(8.9)
(8.9)
(8.9)
–
(8.9)
(8.9)
(8.9)
(427.4)
(427.4)
–
(427.4)
–
(3.4)
(3.4)
(3.4)
(431.8)
(431.8)
–
(431.8)
–
(3.4)
(3.4)
(3.4)
The fair value of borrowings has been estimated on the basis of quoted market prices. Details of the Group’s cash and deposits are
disclosed in Note 15 and their fair values are equal to their book values. All of the above financial instruments are measured, subsequent
to initial recognition, at fair value. All instruments were considered to be Level 2, as defined in Note 1. There were no transfers between
Levels in the year.
19 Share Capital
Ordinary shares of 10p 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
2020
Number
2019
Number
103,884,038
7,935,588
111,819,626
726,389,117
312,451,263
1,038,840,380
2020
£m
10.4
0.8
11.2
2019
£m
7.3
3.1
10.4
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 2020, 6,270,782
(2019: 58,738,414) 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 2019
15 January 2020 – 10:1 share consolidation
24 June 2020 – new shares issued
Carried forward at 30 December 2020
Price per
share (pence)
No. of shares
Total no. of
shares
Nominal
value (£m)
n/a
10.0
(934,956,355)
7,935,601
1,038,840,380
103,884,025
111,819,626
111,819,626
10.4
–
0.8
11.2
Share
premium
(£m)
238.0
–
6.3
244.3
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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. This 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 (2019: credit of £nil).
Movements 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
Granted during the year
Exercised during the year1
10:1 share consolidation adjustment
Forfeited during the year
Outstanding at 30 December 2020
Exercisable at the end of the year
Year to
30 December
2020
£m
Year to
30 December
2019
£m
0.4
0.1
Number of Options
Deferred
Bonus Share
Scheme
275,146
56,361
(50,106)
–
281,401
–
(22,504)
(253,261)
–
5,636
–
LTIP
12,515,808
–
(833,600)
(3,472,952)
8,209,256
–
(234)
(7,388,369)
(441,670)
378,983
5,403
CIP
–
–
–
–
–
294,300
–
–
–
294,300
–
1 The weighted average share price of the options exercised under the deferred bonus scheme during the year was 106.6p (2019: 27.7p equivalent to
276.5p restated for the 10:1 share consolidation that took place in January 2020). The weighted average share price of the options exercised under the
LTIP is 55.9p (2019: 26.7p equivalent to 266.7p restated for the 10:1 share consolidation).
All options in the tables above have a nil exercise price.
LTIP 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.
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CONTINUED
21 Own Shares Held
The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2020, the Capital &
Regional plc 2002 Employee Share Trust (the “ESOT”) held 38,070 (2019: 608,694 – equivalent to 60,869 shares after the 10:1 share
consolidation that completed on 15 January 2020) 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 2020 was £26,725 (2019: £0.2 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
Depreciation of other fixed assets
Other (gains) and losses
Decrease/(increase) in receivables
(Decrease)/increase in payables
Non-cash movement relating to share-based payments
Net cash from operations
Note
8a
Year to
30 December
2020
£m
Year to
30 December
2019
£m
(203.4)
(121.0)
(0.2)
(0.4)
22.8
(0.2)
208.3
2.7
(1.6)
(4.9)
(5.6)
0.4
17.9
–
(0.4)
23.9
(3.4)
138.6
0.5
2.7
(0.4)
(3.1)
0.1
37.5
23 Changes in Liabilities Arising from Financing Activities
2020
Bank loans
Interest rate swaps
Finance lease liabilities
Total liabilities from financing activities
2019
Bank loans
Interest rate swaps
Finance lease liabilities
Total liabilities from financing activities
Note
17a
16
Note
17a
16
Financing
cash flows
Non-cash changes
Fair value
adjustments Other changes
30 December
2020
–
–
–
–
–
5.0
–
5.0
1.0
0.5
(22.9)
21.4
423.9
8.9
38.6
471.4
Opening
422.9
3.4
61.5
487.8
Opening
Financing cash
flows
Non-cash changes
Fair value
adjustments Other changes
30 December
2019
432.9
0.2
61.6
494.7
(11.0)
–
–
(11.0)
–
3.2
–
3.2
1.0
–
(0.1)
0.9
422.9
3.4
61.5
487.8
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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. On
24 October 2019 EPRA published an update to their guidelines, including three new net asset metrics to replace the previous triple net
asset and net asset measures. These new metrics are also shown below:
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/capital allowances
EPRA net assets
167.8
–
–
(11.5)
156.3
11.5
8.9
(0.2)
176.5
30 December 2020
Net assets
£m
Number of
shares
million
30 December
2019
Net assets
per share
150.1p
Net assets
per share
361.1p
139.4p
355.9p
111.8
–
0.3
–
112.1
112.1
157.4p
363.5p
IFRS Equity attributable to shareholders
Exclude fair value of financial instruments
Include fair value of fixed interest rate debt
Net asset value
Fully diluted number of shares
Net asset value per share
30 Dec 2020
30 Dec 2019
EPRA NRV
£m
EPRA NTA
£m
EPRA NDV
£m
EPRA NRV
£m
EPRA NTA
£m
EPRA NDV
£m
167.8
8.9
–
176.7
112.1
157.6p
167.8
8.9
–
176.7
112.1
157.6p
167.8
–
(11.5)
156.3
112.1
139.4p
375.1
3.5
–
378.6
104.2
363.3p
375.1
3.5
–
378.6
104.2
363.3p
375.1
–
(4.4)
370.7
104.2
355.8p
The number of ordinary shares issued and fully paid at 30 December 2020 was 111,819,626 (30 December 2019: 103,884,025 following
adjustment for the 10:1 share consolidation completed on 15 January 2020). There have been no changes to the number of shares from
30 December 2020 to the date of this announcement.
Comparative per share figures have been multiplied by ten to adjust for the impact of the 10 for 1 share consolidation that completed on
15 January 2020.
25 Return on Equity
Total comprehensive income attributable to equity shareholders
Opening equity shareholders’ funds plus time weighted additions
Return on equity
30 December
2020
£m
30 December
2019
£m
(203.4)
375.1
(54.2)%
(121.0)
437.5
(27.7)%
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Notes to the Financial Statements
CONTINUED
26 Lease Arrangements
The Group as lessee
At the balance sheet date, the Company had outstanding commitments for future minimum lease payments under non-cancellable
leases related to land and buildings, which fall due as set out below. These leases relate to its office premises and the Snozone business’
Basingstoke, Castleford and Milton Keynes sites, as well as three leasehold investment properties.
Lease payments
Within one year
Between one and five years
After five years
2020
£m
(3.8)
(14.6)
(100.7)
(119.1)
2019
£m
(2.3)
(9.5)
(66.7)
(78.5)
Lease payments are denominated in sterling and have an average remaining lease length of 27 years (2019: 28 years) excluding head
leases, rentals are fixed for an average of 2 years (2019: 2 years). The Group’s three leasehold investment properties are variable based
on a percentage of performance, with a minimum payment per year of £1.1m for Luton and £0.3m for Walthamstow (2019: £1.1m and
£0.3m respectively).
The weighted average incremental borrowing rate applied to lease liabilities on 1 January 2020 was of 3.92% for the support office and
4.04% for Snozone leases and 5.50% on the head leases.
The aggregate lease liability recognised in the statement of financial position at 1 January 2020 and the Group’s operating lease
commitment at 30 December 2019 can be reconciled as follows:
Operating lease commitment at 31 December 2019
Effect of discounting lease commitments
Obligations under head leases
£m
17.0
(2.5)
25.6
40.1
The Group has recognised £nil (2019: £nil) as an expense relating to short-term leases and leases of low value assets, applying
paragraph 6 of IFRS 16
The Group as lessor
The Group leases out all of its investment properties under operating leases for average lease terms of 6 years (2019: 7 years) to expiry.
The leasing arrangements are summarised in the portfolio information on page 146. The future aggregate minimum rentals receivable
under non-cancellable operating leases are as follows:
Unexpired
average
lease
term
Years
4.4
5.4
Less
than 1
year
£m
35.2
42.5
2 - 5
years
£m
81.0
106.2
6 - 10
years
£m
35.6
51.6
11 - 15
years
£m
15.1
23.2
16 - 20
years
£m
6.8
12.0
More
than 20
years
£m
39.3
59.3
Total
£m
213.0
294.8
30 December 2020
30 December 2019
27 Capital Commitments
At 30 December 2020, the Group’s share of the capital commitments of its associates, joint ventures and wholly-owned properties was
£3.6 million (2019: £3.9 million) relating to capital expenditure projects.
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28 Events After the Balance Sheet Date
In January 2021 the Group agreed to cancel its undrawn £15 million revolving credit and £7 million Hemel Hempstead capital
expenditure facilities.
On 4 January 2021 the prime minister announced the commencement of a national lockdown with all but essential retailers required to
close. As at 4 March 2021, 31% of shops were open and trading.
Snozone
On 12 January 2021 Snozone received confirmation that HMRC had accepted the principle of an outstanding VAT claim. Snozone now
expects that it may realise approximately £1.2 million through this claim. No amounts were recognised within the year end accounts on
the basis recovery was uncertain at the year end date.
On 9 February 2021 Snozone took over the operations of the ski slope in the Xanadu Shopping Centre in Madrid, acquiring the operating
entities for a nominal value of €2.
On 3 March 2021 Snozone were advised that they are likely to recover £2.5 million in respect of a business continuity claim to
compensate for the impact of Covid-19. No amounts were recognised within the year end accounts on the basis recovery was uncertain
at the year end date.
29 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, all of which occurred at normal market rates, are
disclosed below.
Kingfisher Limited Partnership (Redditch)
Fee income
Net amounts
receivable from
Year to
30 December
2020
£m
Year to
30 December
2019
£m
As at
30 December
2020
£m
As at
30 December
2019
£m
0.5
0.7
0.1
0.1
Amounts receivable from associates 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 (2019: 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
2020
£m
Year to
30 December
2019
£m
1.0
0.1
0.4
1.5
1.3
0.1
0.1
1.5
In both years the highest paid Director was the Chief Executive whose remuneration is disclosed in the Directors’ Remuneration Report
on page 76.
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Notes to the Financial Statements
CONTINUED
30 Dividends
The dividends shown below are gross of any take-up of scrip offer.
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
Final dividend per share for year ended 30 December 2019 of 11p
Amounts recognised as distributions to equity holders in the year
Year to
30 December
2020
£m
Year to
30 December
2019
£m
–
–
11.4
11.4
4.4
7.2
–
11.6
31 Ultimate Controlling Party
Growthpoint Properties Limited (“Growthpoint”) holds 52.1% 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.
136
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FINANCIALScapreg.comCapital & Regional plc
Company Balance Sheet
At 30 December 2020
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
2020
£m
2019
£m
C
D
E
124.8
344.0
5.5
59.6
65.1
(20.0)
(20.0)
45.1
169.9
11.2
244.3
60.3
4.4
(150.3)
169.9
93.9
0.1
94.0
(18.7)
(18.7)
75.3
419.3
10.4
238.0
60.3
4.4
106.2
419.3
The loss for the year attributable to equity shareholders was £245.1 million (2019: £104.0 million loss).
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on 24 March 2021 by:
STUART WETHERLY
GROUP FINANCE DIRECTOR
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Statement of Changes in Equity
For the year to 30 December 2020
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 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
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 2020
7.3
–
–
–
3.1
10.4
–
–
–
0.8
11.2
166.5
–
–
–
71.5
238.0
–
–
–
6.3
244.3
4.4
–
–
–
–
4.4
–
–
–
–
4.4
–
–
–
–
–
–
–
–
–
–
–
221.8
(104.0)
(104.0)
(11.6)
–
106.2
(245.1)
(245.1)
(4.3)
(7.1)
(150.3)
60.3
–
–
–
–
60.3
–
–
–
–
60.3
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 30 to the Group financial statements. The other reserves are described in the
Consolidated Statement of Changes in Equity in the Group financial statements.
Total
£m
460.3
(104.0)
(104.0)
(11.6)
74.6
419.3
(245.1)
(245.1)
(4.3)
–
169.9
138
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FINANCIALScapreg.comCapital & Regional plc
Notes to the Company’s Separate
Financial Statements
For the year ended 30 December 2020
A Accounting Policies
The domicile and legal form of the entity, its country of incorporation and the address of its registered office can be found in Note 1 of
the consolidated financial statements. A description of the nature of the entity’s operations and its principal activities can be found in the
strategic report on pages 3 and 4 of the consolidated financial statements.
The Company’s separate financial statements for the year ended 30 December 2020 are prepared in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards. The main accounting
policies have been applied consistently in the current year and the preceding year.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation
to business combinations, share-based payments, non-current assets held for sale, financial instruments, capital management,
presentation of comparative information in respect of certain assets, presentation of a cash-flow statement, impairment of assets and
related party transactions.
The Company’s financial statements are presented in pounds sterling.
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 (2019: 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
expected credit loss under IFRS 9. 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, in the case of CRPM,
estimated asset management fee income less estimated fixed and variable expenses. Disclosure of accounting policy for expected credit
losses can be found in Note 1 to the Group financial statements.
B Loss for the Year
As permitted by section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these
financial statements.
The 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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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Notes to the Company’s Separate
Financial Statements
For the year ended 30 December 2020 CONTINUED
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
(818.4)
(219.2)
(1,037.6)
13.9
–
–
13.9
(12.9)
–
(12.9)
Total
£m
1,175.3
–
–
1,175.3
(831.3)
(219.2)
(1,050.5)
123.8
1.0
124.8
Investments are subject to an impairment review using a discount rate of 17.8%. Impairment is recognised after comparing the carrying
value of the investment against its recoverable amount, which is the higher of its estimated value in use and fair value less costs to sell.
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
Taxation and social security
2020
£m
5.4
0.1
5.5
2019
£m
94.0
(0.1)
93.9
Amounts owed by subsidiaries are stated after impairment of £26.3 million and are unsecured and repayable on demand. Impairment
is recognised after comparing the carrying value of the investment against its recoverable amount, which is the higher of its estimated
value in use and fair value. 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
Accruals and deferred income
2020
£m
19.1
–
0.9
20.0
2019
£m
14.5
0.3
3.9
18.7
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.
140
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FINANCIALScapreg.comCapital & Regional plc
F Subsidiaries at 30 December 2020
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
1
In liquidation/being dissolved.
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%
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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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Notes to the Company’s Separate
Financial Statements
For the year ended 30 December 2020 CONTINUED
F Subsidiaries at 30 December 2020 (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 Limited2
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.
142
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FINANCIALScapreg.comCapital & Regional plc
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.
CRPM is Capital & Regional Property Management Limited, a
subsidiary of Capital & Regional plc, which earns management and
performance fees from the Mall assets and certain associates and
joint ventures of the Group.
Contracted rent is passing rent and the first rent reserved under
a lease or unconditional agreement for lease but which is not yet
payable by a tenant.
Contribution is net rent less net interest, including unhedged
foreign exchange movements.
Capital return is the change in market value during the year for
properties held at the balance sheet date, after taking account of
capital expenditure calculated on a time weighted basis.
Debt is borrowings, excluding unamortised issue costs.
EPRA earnings per share (EPS) is the profit / (loss) after tax
excluding gains on asset disposals and revaluations, movements
in the fair value of financial instruments, intangible asset
movements and the capital allowance effects of IAS 12 “Income
Taxes” where applicable, less tax arising on these items, divided by
the weighted average number of shares in issue during the year
excluding own shares held.
EPRA net disposal value represents net asset value under a
disposal scenario, where deferred tax, financial instruments and
certain other adjustments are calculated to the full extent of their
liability, net of any resulting tax.
EPRA net reinstatement value is net asset value adjusted to
reflect the value required to rebuild the entity and assuming that
entities never sell assets. Assets and liabilities, such as fair value
movements on financial derivatives, are not expected to crystallise
in normal circumstances and deferred taxes on property valuation
surpluses are excluded.
Estimated rental value (ERV) is the Group’s external valuers’
opinion as to the open market rent which, on the date of
valuation, could reasonably be expected to be obtained on a new
letting or rent review of a unit or property.
ERV growth is the total growth in ERV on properties owned
throughout the year, including growth due to development.
Gearing is the Group’s debt as a percentage of net assets.
See-through gearing includes the Group’s share of non-recourse
debt in associates and joint ventures.
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 initial yield (NIY) is the annualised current rent, net of
revenue costs, topped-up for contractual uplifts, expressed
as a percentage of the capital valuation, after adding notional
purchaser’s costs.
Net debt to property value is debt less cash and cash
equivalents divided by the property value.
Net interest is the Group’s share, on a see-through basis, of
the interest payable less interest receivable of the Group and its
associates and joint ventures.
Net rent 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.
EPRA net tangible assets is a proportionally consolidated
measure, representing the IFRS net assets excluding the mark-to-
market on derivatives and related debt adjustments, the mark-to-
market on the convertible bonds, the carrying value of intangibles
as well as deferred taxation on property and derivative valuations.
Nominal equivalent yield is a weighted average of the net initial
yield and reversionary yield and represents the return a property
will produce based upon the timing of the income received,
assuming rent is received annually in arrears on gross values,
including the prospective purchaser’s costs.
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL Glossary of Terms
CONTINUED
Occupancy cost ratio is the proportion of a retailer’s sales
compared with the total cost of occupation, being: rent, business
rates, service charge and insurance. Retailer sales are based
on estimates by third party consultants which are periodically
updated and indexed using relevant data from the C&R Trade
Index.
Occupancy rate is the ERV of occupied properties expressed
as a percentage of the total ERV of the portfolio, excluding
development voids.
Passing rent is gross rent currently payable by tenants,
including car park profit but excluding income from non-trading
administrations and any assumed uplift from outstanding rent
reviews.
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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FINANCIALScapreg.comCapital & Regional plc 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 price1
Total return
Total comprehensive (expense)/income
Net assets per share
Basic net assets per share1
EPRA triple net assets per share2
EPRA net assets per share2
EPRA Net reinstatement value
EPRA Net tangible assets
EPRA net disposal value
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 share1
Interest cover
Earnings per share1
Basic
Diluted
EPRA
Dividends per share
2020
£m
536.1
29.8
–
–
84.1
–
(9.6)
(423.9)
(48.7)
167.8
11.2
244.3
64.7
(152.4)
167.8
(54.2)%
(57.2)%
(68.0)%
70.2p
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
(27.7)%
(37.2)%
(2.0)%
25.4p
2018
£m
898.2
21.3
–
–
32.0
–
(21.8)
(432.9)
(63.8)
433.0
7.3
166.5
64.7
194.5
433.0
(5.3)%
(5.5)%
(46.5)%
27.6p
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
(203.4)
(121.0)
(25.6)
22.4
(4.4)
150.1p
157.6p
157.6p
139.4p
255%
72.7
37.2
(181.2)
(22.4)
(203.6)
0.2
(203.4)
10.3
9.5p
2.0
(188.3)p
(188.3)p
(9.2)p
36p
36p
36p
363.3p
363.3p
355.8p
114%
89.0
53.6
(97.5)
(23.5)
(121.0)
–
(121.0)
27.4
36.7p
3.2
(162.3)p
(162.3)p
(3.5)p
21.0p
60p
59p
59p
591.0p
591.0p
593.4p
101%
91.0
56.1
(9.7)
(15.8)
(25.5)
(0.1)
(25.6)
30.5
42.0p
3.4
(35.4)p
(35.4)p
4.0p
2.42p
67p
66p
67p
665.9p
665.9p
661.9p
89%
89.2
55.7
40.0
(17.6)
22.4
–
22.4
29.1
41.0p
3.2
32.0p
31.0p
3.9p
3.64p
68p
67p
68p
674.6p
674.6p
667.7p
76%
87.2
54.7
28.1
(32.6)
(4.5)
0.1
(4.4)
26.8
38.0p
3.1
(10)p
(10)p
4p
3.39p
1 Prior year numbers have not been adjusted for the 10:1 share consolidation subsequent to year end. A multiple of ten must be applied to arrive at the
comparative figures
2 EPRA net asset metrics no longer in use
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL
Portfolio Information (Unaudited)
At 30 December 2020
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
Lease length (years)
Weighted average lease length to break
Weighted average lease length to expiry
Passing rent (£m) of leases expiring in:
2021
2022
2023-2025
ERV (£m) of leases expiring in:
2021
2022
2023-2025
Passing rent (£m) subject to review in:
2021
2022
2023-2025
ERV (£m) of passing rent subject to review in:
2021
2022
2023-2025
Rental Data
Contracted rent (£m)
Passing rent (£m)
ERV (£m per annum)
ERV movement (like-for-like)
Occupancy
7
766
3.5
527.0
9.1
536.1
208.3
7.9%
8.6%
6.4%
4.8
6.4
9.0
5.9
10.1
9.2
5.3
8.8
3.4
4.1
5.9
2.8
4.0
5.3
53.1
51.7
55.0
(15.1)%
92.1%
146
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FINANCIALScapreg.comCapital & Regional plc EPRA Performance Measures
(Unaudited)
At 30 December 2020
EPRA earnings (£m)
EPRA earnings per share (diluted)
EPRA reinstatement value (£m)
EPRA net reinstatement value per share
EPRA net tangible assets (£m)
EPRA net tangible assets per share
EPRA net disposal value (£m)
EPRA net disposal value per share
Note
9a
9a
24
24
24
24
24
24
2020
9.9
9.2p
176.7
158p
176.7
158p
156.3
139p
2019
26.4
3.5p
378.6
363p
378.6
363p
370.7
356p
EPRA vacancy rate (UK portfolio only)
7.8%
2.8%
EPRA net initial yield and EPRA topped-up net initial yield
Investment property
Less developments
Completed property portfolio
Allowance for capital costs
Allowance for estimated purchasers’ costs
Grossed up completed property portfolio valuation
Annualised cash passing rental income
Property outgoings
Annualised net rents
Add: notional rent expiration of rent-free periods or other lease incentives
Topped-up annualised rent
EPRA net initial yield
EPRA topped-up net initial yield
2020
£m
527.0
–
527.0
(2.7)
34.9
559.2
55.4
(12.7)
42.7
0.7
43.4
7.6%
7.8%
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%
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL EPRA Performance Measures
(Unaudited) CONTINUED
At 30 December 2020
EPRA cost ratios
Cost of sales (adjusted for IFRS head lease differential)
Administrative costs
Service charge income
Management fees
Snozone (indoor ski operation) costs
Less inclusive lease costs recovered through rent
EPRA costs (including direct vacancy costs)
Direct vacancy costs
EPRA costs (excluding direct vacancy costs)
Gross rental income
Less ground rent costs
Share of joint venture and associate gross rental income less ground rent costs
Less inclusive lease costs recovered through rent
Gross rental income
2020
£m
34.4
12.0
(11.6)
(0.8)
(6.5)
(2.5)
25.0
(3.9)
21.1
55.6
(1.9)
–
(2.5)
51.2
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
EPRA cost ratio (including direct vacancy costs)
EPRA cost ratio (excluding vacancy costs)
48.8%
41.1%
31.6%
25.9%
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FINANCIALScapreg.comCapital & Regional plc Covenant Information (Unaudited)
Wholly owned assets
Facility
Four Mall assets
Loan to value
Historic interest cover
Projected interest cover
Luton
Loan to value
Debt yield
Historic interest cover
Projected interest cover
Hemel Hempstead
Loan to gross development value
Debt to net rent cover
Historic interest cover
Projected interest cover
Ilford
Loan to value
Historic interest cover
Projected interest cover
Borrowings
£m
260.0
Default covenant
30 December
2020
No greater than 70%
No less than 175%
No less than 150%
No greater than 70%
No less than 8%
No less than 250%
No less than 200%
Passed
Waived
Waived
Passed
Waived
Waived
Waived
No greater than 60%
No greater than 9:1
No less than 175%
No less than 200%
Deferred
Deferred
Deferred
Deferred
No greater than 70%
No less than 225%
No less than 225%
Passed
Waived
Waived
96.5
26.9
39.0
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FINANCIALSAnnual Report and Accounts for the year ended 30 December 2020Stock Code: CAL 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
Knight Frank LLP
55 Baker Street
London W1U 8AN
Investment bankers/brokers
Java Capital Trustees and Sponsors Proprietary Limited
(JSE sponsor)
6th Floor, 1 Park Lane, Wierda Valley,
Sandton 2196
South Africa
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
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
JSE Investor Services (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@jseinvestorservices.co.za
* Lines open 08:30 - 17:30, Monday to Friday, excluding bank holidays in England and Wales.
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FINANCIALScapreg.comCapital & Regional plc Capital & Regional AR2020.indd 3
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CAPITAL & REGIONAL PLC
22 Chapter Street
London SW1P 4NP
Tel: +44 (0)20 7932 8000
CAPREG.COM
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