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Supporting
community living
Annual Report and Accounts
for the year ended 30 De cember 2021
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.
Capital & Regional owns and/or manages shopping centres in Blackburn, Hemel
Hempstead, Ilford, Luton, Maidstone, Redditch, Walthamstow and Wood Green.
Capital & Regional manages these assets through its in-house expert property
and asset management platform.
Our centres are aligned to the needs and aspirations of their respective local
community and form a critical part of the local infrastructure. Capital & Regional
has a strong track record of delivering retail and leisure asset management
initiatives 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.
Our Purpose
Our Vision
We invest, manage and
enhance retail property
through the creation of
dynamic environments
tailored to the local
communities. As a specialist
owner and manager of
shopping centres, we invest
in the retail assets in our
portfolio to unlock their
full value.
To define and lead community shopping
centres, through our passionate creation
of vibrant retail spaces and exceptional
customer and guest experience. To develop
and deliver 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. To be more
than just places to shop, but to operate
essential hubs for the local community.
Our values
INSPIRING
CREATIVE
THINKING
DELIVERING
DYNAMIC
SOLUTIONS
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
LEADING IN
SUSTAINABILITY
WITHIN OUR
COMMUNITIES
ACTING
WITH
INTEGRITY
capreg.com Highlights
Revenue
2021
2020
Adjusted Profit1
2021
2020
£8.1m
£11m
Net Rental Income
£70.0m
2021
£72.7m
2020
£29.0m
£34.1m
Adjusted Earnings per share1
2021
2020
6.8p
10.2p
IFRS Loss for the period
Basic Earnings per share2
2021
2020
£(26.4)m
2021
(22.0)p
£(203.9)m
2020
(188.8)p
Total dividend per share2
Net Asset Value (NAV) per share2
2021
2020
–
–
2021
2020
102p
150p
EPRA NTA per share2
Group net debt
2021
2020
102p
157p
2021
2020
£185.3m
£345.1m
Net debt to property value
2021
2020
49%
65%
Read more about our key performance
indicators on pages 22 to 23
Use of Alternative Performance Measures (APMs)
Throughout the results statement we use a range of financial and non-financial measures to assess
our performance. A number of the financial measures, including Net Rental Income, Adjusted Profit,
Adjusted Earnings per share, Net Debt and the industry best practice EPRA (European Public Real
Estate Association) performance measures are not defined under IFRS, so they are termed APMs. APMs
are not considered superior to the relevant IFRS measures, rather Management use them alongside
IFRS measures to monitor the Group’s financial performance because they help illustrate the trading
performance and position of the Group. All APMs are defined in the Glossary and further detail on
their use is provided within the Financial Review.
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 2020 results have been restated for a prior year adjustment of £0.5m in respect to the treatment
of Software as a Service (SaaS) configuration costs as explained in Note 1. 2020 Adjusted Profit has
also been restated to reflect the introduction of the new Snozone EBITDA performance measures.
Contents
BUSINESS OVERVIEW
01 Highlights
02
Our Community Shopping
Centre Approach
04 Our Portfolio
06 Chairman’s Statement
STRATEGIC REPORT
08 The Market Backdrop
12 Strategy
18 Strategy in Action
20 Our Business Model
22 Key Performance Indicators
24 Chief Executive’s Review
26 Operating Review
30 Financial Review
36 Managing Risk
44 Our Stakeholders
48 ESG Report
GOVERNANCE
64 Directors
66 Senior Leadership Team
67 Corporate Governance Report
Composition, Succession
76
and Evaluation
80 Audit, Risk and Internal Control
86 Remuneration
106 Directors’ Report
110 Directors’ Responsibilities
Statement
111 Independent Auditor’s Report
FINANCIALS
122 Consolidated Income
Statement
122 Consolidated Statement of
Comprehensive Income
123 Consolidated Balance Sheet
124 Consolidated Statement of
Changes in Equity
125 Consolidated Cash Flow
Statement
126 Notes to the Financial
Statements
158 Company Balance Sheet
159 Statement of Changes in Equity
160 Notes to the Company’s
Separate Financial Statements
163 Glossary of Terms
165 Five Year Review (Unaudited)
166 Portfolio Information
(Unaudited)
167 EPRA Performance Measures
(Unaudited)
169 Advisers and Corporate
Information
170 Shareholder Information
Stock Code: CAL
01
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021BUSINESS OVERVIEW
Our Community Shopping Centre Approach
At a time of significant structural change
within our sector, we see the growing
relevance and continuing resilience of
our community centre strategy.
We have been proactive and continue to reposition and
remerchandise our centres to remain relevant to our
communities over the medium to longer term.
Our integrated multi-disciplinary management platform
continues to deliver sector-leading results and is critical to
asset-level performance. In a competitive environment, being
successful at local level is all about our communities and
placing them at the heart of everything that we do.
In our minds, the key to driving footfall and a wider recovery
is our customer or community proposition.
Our customer product
and service offerings
We sit firmly in a position to serve our guests’ essential and regular
non-discretionary shopping needs and services.
7% Variety stores
14% Food & grocery
18% Value apparel
13% Health & beauty
Contracted Rent
by Customer
product/service
10% Services
9% Athleisure &
footwear
10% Non retail
5% Leisure
6% Home & gifts
3% Jewellery
02
capreg.com 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.
01
02
Dominant community locations
Our centres are at 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 diversified tenant base
and income streams.
03
04
Strength of community links
Enables us to respond to community needs
quickly and effectively.
Experienced management
We have a diverse and experienced
management team.
The continued evolution
of our assets
Community and local focus
Our assets are located in local
communities and form essential parts
of community infrastructure at the
heart of these local neighbourhoods.
They play an integral role in the lives
of our guests. We aim to strengthen
communities through meeting their
everyday needs and supporting the
causes that matter to them.
Remerchandising retail offer
Our ability to evolve that offer and to
accelerate remerchandising toward
the shift from discretionary to non-
discretionary retail and services.
Role of the store
The rise of online shopping has
caused questions to be asked of
where the future of physical retail lies.
We sit firmly in a position to serve our
guests’ essential and regular non-
discretionary shopping needs and
services.
Diversification of uses
Frequent, repeat footfall and high
conversion rates coupled with
affordable occupier costs makes our
centres great for a variety of non-
traditional occupier partners.
03
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021BUSINESS OVERVIEW 9
9
9
9
Spain
9
Key
Investment assets
Managed assets
(Held for Sale)
Snozone
Kingfisher Redditch
1
9
8
9
7
6
5
4
2
9
3
1
9
8
9
7
6
5
4
2
3
9
Centre Characteristics
03
01
02
Dominant strategic
locations in the heart
of growing towns
Easily accessible
with strong
transport links
London/
South‑East bias
04
Accretive asset management
opportunities (including leisure,
residential, medical and office uses)
05
Snozone leisure
venues, dominant
in their sector
Our Portfolio
1
The Mall, Blackburn
9
Leasehold covered shopping
centre on three floors
580,000 sq ft
115 lettable units
Principal occupiers:
Primark, Boots, Next, Wilko, Pure
Gym, Blackburn with Darwen Council
8
9
7
6
5
4
2
9
3
2
The Exchange, Ilford
Predominantly freehold
3
covered shopping centre on
three floors
310,000 sq ft
78 lettable units
Principal occupiers:
Next, H&M, TK Maxx
3
The Mall, Maidstone
Freehold covered shopping
centre on three floors
430,000 sq ft
86 lettable units
Principal occupiers:
Matalan, Pure Gym, Boots,
Sports Direct, Wilko, Iceland
Investment Assets represent the asset
pools where the Group retains net equity.
Managed Assets represents assets where the
current debt values in the non-recourse SPV
structures exceed the respective property
value and therefore the Group has negative
equity and the substance of the Group’s role
is as a manager.
1
9
8
9
9
9
7
6
5
4
1
8
9
7
6
5
4
2
9
04
capreg.com 9
9
9
9
9
9
9
1
9
1
9
8
9
7
6
5
9
9
1
1
9
8
9
7
4
17&Central, Walthamstow
Leasehold covered shopping
2
centre on two floors
290,000 sq ft
3
60 lettable units
9
Principal occupiers:
Lidl, Asda, Boots, The Gym, TK Maxx,
Sports Direct
1
9
6
5
2
4
The Marlowes,
Hemel Hempstead
Freehold covered shopping
centre and high street
3
parades
340,000 sq ft
85 lettable units
Principal occupiers:
Sports Direct, Pure Gym, Wilko,
Tesco Express
1
8
Kingfisher Shopping
Centre, Redditch
C&R acts as Property &
7
9
Asset Manager
6
4
Freehold covered shopping
centre on two principal
trading levels
5
2
9
900,000 sq ft
3
174 lettable units
Principal occupiers:
The Range, Primark, Next, TK Maxx,
Vue Cinema, H&M
9
1
9
8
9
8
9
7
6
5
4
2
9
3
7
6
5
9
4
8
9
The Mall, Wood Green
Freehold partially open
2
shopping centre on two floors
3
630,000 sq ft
88 lettable units
9
Principal occupiers:
Primark, Lidl, H&M, Boots, TK Maxx,
Travelodge, Cineworld
8
7
6
5
The Mall, Luton
Leasehold covered shopping
4
centre on two floors, with
over 65,000 sq ft of offices
2
900,000 sq ft
3
142 lettable units
9
Principal occupiers:
Tesco, Lidl, Luton Borough Council,
Primark, H&M TK Maxx, Wilko
Portfolio Statistics
Total
sq ft
3.5m sq ft
Total number of
retail units
654
Total number of
car parking spaces
8,250
Average
rent
c.£12psf
9
Snozone Leisure Business
100% subsidiary
7
Largest indoor ski slope
6
operator in the UK
4
2
5
Operating at Milton Keynes,
Yorkshire and a dry indoor
slope in Basingstoke, and in
Snozone Madrid
3
In existence since 2000 and
has taught over 4 million
people to ski or snowboard
Average
dwell time
66minutes
Estimated retail
conversion rate
73%
05
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021BUSINESS OVERVIEW Chairman’s Statement
2021 was inevitably another very
difficult year for most retailers and retail
landlords. Against that backdrop, the
Company’s performance was resilient.
DAVID HUNTER
CHAIRMAN
A year ago, I wrote of the unprecedented
challenges which the retail sector, and the
Company, faced during 2020. While there was
a renewed sense of optimism with indications
of a return to normality from the effects of
Covid-19 at the end of 2021, and particularly
early in 2022, these challenges and restrictions
were prevalent throughout almost the whole
of 2021, including a full closure of non-
essential retail in England from 6 January to
12 April 2021. As a consequence, 2021 was
inevitably another very difficult year for most
retailers and retail landlords.
Against that backdrop, the Company’s
performance was resilient. All of the Company’s
centres remained open to some extent
throughout the year, with our on-site teams
working closely with retailers and shoppers
to optimise trade while fully observing all
Government restrictions. Rent collection was
robust at 93%, including deferrals, and this
number continues to rise as arrears are pursued.
From 12 April 2021, after the lifting of lockdown
restrictions for non-essential retail, footfall also
recovered, reaching between approximately 70-
80% of pre-pandemic levels when restrictions were
not in place, and encouragingly the trend towards
higher spend per visit continued.
In last year’s statement, while acknowledging
the ongoing support of our lenders, I also
recognised the need to address debt levels when
circumstances permitted. Our recapitalisation
in November 2021, raising £30 million of equity,
allowed us to acquire a proportion of our debt
on The Mall facility at a significant discount,
contributing to the marked reduction in Group
net debt ratio to 49%. While we aim to reduce
leverage further, it has introduced much-
needed stability allowing the business to focus
on optimising the performance of its assets.
I must credit our leadership team with this
remarkable achievement in the most difficult of
circumstances. Coupled with this, our lenders
have continued to provide excellent support,
working closely with our team to facilitate
continued investment in our assets with a view to
increasing rental income to our mutual benefit.
While some of our central funds were utilised in
the recapitalisation, we retain central unrestricted
cash of over £30 million. As owners of community
shopping centres, the re-imagination and leasing up
of vacant space (such as former department stores)
often requires capital expenditure and this forms
an integral part of the Company’s business plan.
Likewise, opportunities to generate capital
receipts were implemented, most notably the
sale of the Maidstone House office block for £7.1
million and addressing the final milestones to
achieve the imminent sale of the Walthamstow
residential development site for £20 million. In
addition, we signed a strategic partnership with
Far East Consortium during the year with the
specific intention of identifying opportunities
for collaboration and value creation across
the portfolio and possibly to work together on
new acquisitions.
Rates of new lettings and lease renewals remained
high across the portfolio, reflecting the fact that
average rent levels at our centres remain more
affordable than other more fashion-led retail
locations and that retailers are attracted to the
above-average footfall they capture. Of course,
the excellent customer relations maintained by
our team play a significant part in this process
too. In total, 143 new leases and renewals were
signed during the year, reinforcing our view that
physical shop units remain a dominant part of
the retail market, provided that rents are realistic
and the environment is managed effectively to
attract shoppers.
Partly reflecting the success in leasing units, and
partly acknowledging a sense in the investment
markets that well-let centres may be over-
discounted, we saw a stabilisation in values during
the second half of 2021. Over the year, the total
portfolio fell by 7.9% on a like-for-like basis to
£473.1 million, but there is reason for cautious
optimism about values going forward from a
recalibrated rental base, as capital begins to focus
on the sector.
Snozone, as a leisure business, also faced
challenges during the year but performed creditably
and extended its operations to Madrid, where it
took on the operation of the slope at the Xanadu
Centre at minimal cost to the business, adding to a
platform which is well-placed to rebound with the
easing of Covid-19 restrictions.
06
capreg.com The Board is well aware of the importance
to shareholders of dividends. The financial
circumstances in 2021 did not permit payment of
a dividend, but as we emerge from the pandemic
in our newly recapitalised position, we intend to
resume dividend payments with the announcement
of our Interim Results in the summer 2022.
Tony Hales retired from the Board at the AGM after
more than nine years of service, including a period
as Senior Independent Director, and Louis Norval
stepped down in December 2021 after 12 years as
a major shareholder and supporter of the business.
My thanks to both for their exceptional service.
My Board colleagues were outstandingly
supportive throughout the year, particularly in the
run up to the recapitalisation where a number of
meetings or calls were required at short notice.
Finally, on behalf of the Board I wish to record our
appreciation of the exceptional performance of all
management and staff, on site and in our support
office, during a very difficult year. The improved
position of the Company at the end of 2021 is
directly attributable to them.
DAVID HUNTER
CHAIRMAN
13 April 2022
Read more about
Board activity
during the year
on page 69
07
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021BUSINESS OVERVIEW The Market Backdrop
Macroeconomic trends
Covid‑19 & Our Communities
The impact of Covid-19 on our communities and
shopping destinations continued to be felt across
the year. Lockdown rules took effect over the first
quarter of the year, which materially impacted
non-essential businesses’ ability to trade and
shopper movement. While such restrictions eased
thereafter, the majority of the year encompassed
some form of restrictions on social distancing
and gatherings, together with working from
home guidance.
Our centres, in the heart of local communities,
have continued to play a pivotal role in serving the
needs of their communities. Our focus on essential,
everyday needs and services, with increasing
food and supermarket anchoring has provided a
resilient occupier base, with one-third of our retail
customers able to trade throughout lockdowns.
Centres have been able to provide convenient
and safe shopping environments, together with
providing access to essential services.
Despite the well-publicised structural changes that
retail has been navigating in recent years, coupled
with the obvious benefits that online channels
provided during lockdown and working from
home periods, it was encouraging to see the speed
at which our retail customers reopened stores
post the easing of lockdown. Over 99% of our
retailers forced to close through lockdown rules
reopened, highlighting the obvious importance
these business place on a physical presence in our
centres and communities.
Footfall has been recovering steadily but remains
behind pre-pandemic levels. Social distancing
measures in place across our centres impacted the
volume of guests we were able to host, combined
with continued cautiousness from the population
while the risks of virus infection remained
prevalent. However, lower visitor numbers have
been balanced with different shopper spending
profiles, with less frequent visits offset by a higher
propensity to spend when visiting. Many retailers,
as a consequence, are reporting sales levels that
are back at, or ahead of, pre-pandemic levels.
Where trading ability was compromised during
lockdown periods, we proactively sought to provide
rental support where business needs were greatest.
This risk-sharing partnership was successful and as
operating arrangements eased over the year, we
were able to revert smoothly to more normalised
contractual arrangements. Over the course of 2021,
we have collected over 90% of rent and service
charge sums to which we are contractually entitled,
with ongoing collection levels starting to recover
towards pre-pandemic levels.
Our Investment Market
Except for food store performance, all retail
investment sectors have experienced challenging
conditions since the last market peak in 2017.
Structural uncertainties compounded by the
impact of Covid-19 had a detrimental impact
on investor sentiment, with limited investment
activity and heavy consequent write-downs in
asset values.
Throughout 2021, sentiment and investor
confidence improved as the outlook around Covid
vaccinations and avoidance of further lockdowns
became more positive. Government and landlord
support measures enabled many retail and
leisure occupiers to navigate the lockdown
periods, with limited retail administrations and
CVAs. Consequently, investment volumes have
rebounded, with increasing evidence of yield and
value stabilisation.
Total deal volumes across the retail sector, as a
whole, were estimated at £7.43bn over the year,
reflecting a 69% improvement to 2020 equivalent
numbers and only 3.5% below the 10-year
average. The retail warehousing sub-sector
showed particularly strong signs of recovery,
with yields tightening markedly and investment
volumes at £3.39bn accounting for approaching
half of all retail investment activity. Demand for
08
capreg.com Following
the weakest
year in
shopping
centre
investment
transaction
volumes for
25 years
in 2020,
2021 saw an
encouraging
bounceback.
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
)
£
(
s
e
u
a
V
l
Investment activity in shopping centre market
19 9 5
19 9 6
19 9 7
19 9 8
19 9 9
2 0 0 0
2 0 01
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 010
2 011
2 012
2 013
2 014
2 015
2 016
2 017
2 018
2 019
2 0 2 0
2 0 21
Volume
Average volume
Number
Average number of deals
180
160
140
120
100
80
60
40
20
0
N
o
.
o
f
D
e
a
l
s
Source: Savills research
food stores remained strong with investors
continuing to be attracted to the secure income
and defensive qualities this sub-sector provides
and its resilience to structural change, with online
penetration at much weaker levels in comparison
to, for example, fashion brands.
the write-down in asset valuations since the last
cycle peak in 2017; a lack of bank lending; and
a focus on smaller assets, where a new pool of
opportunistic equity investors have been actively
acquiring with underlying repurposing and
redevelopment strategies.
Following the weakest year in shopping centre
investment transaction volumes for 25 years in
2020, 2021 saw an encouraging bounceback.
Turnover at £1.5bn, represented a recovery to
levels typically seen in the three years immediately
preceding the pandemic, albeit still well below
historic long-term averages. Deal volumes showed
a dramatic improvement, with 74 transactions
completed over the year.
Average shopping centre transaction values over
2021 equated to £20m, well below the long-term
trend of £50m, but largely following the trends
seen over the last 3–4 years. This has been
driven by a number of factors, but principally
As the year progressed, there were increasing
signs of confidence in the shopping centre market,
illustrated by a far greater depth of assets both
being brought to the market and successfully
transacting and a noticeable uptick in lot size,
within both a £50–75m and £100–150m range –
transaction levels that had been largely absent
over the last 3–4 years. This has continued into
2022 and investors are able to underpin values
as evidence. Trends in benchmark shopping
centre yields have consequently responded to a
more active market, with the second half of 2021
seeing stability in most yield groups – a clear
improvement on the yield expansion witnessed
over the first half of the year.
09
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
-60%
r
a
e
y
-
n
o
-
r
a
e
y
e
g
n
a
h
c
%
Retail Economics Retail Sales Index - Food vs. Non-Food
(value, non-seasonally adjusted, two-year growth)
Food vs. Non-Food
6
1
-
c
e
D
7
1
-
r
p
A
7
1
-
g
u
A
7
1
-
c
e
D
8
1
-
r
p
A
8
1
-
g
u
A
8
1
-
c
e
D
9
1
-
r
p
A
9
1
-
g
u
A
9
1
-
c
e
D
0
2
-
r
p
A
0
2
-
c
e
D
0
2
-
c
e
D
1
2
-
c
e
D
1
2
-
c
e
D
1
2
-
c
e
D
Total Non-Food (3m moving avg.)
Food (3m moving avg.)
Source: Retail Economics- Retail Sales Index
A similar trend can be seen across essential spend categories generally,
delivering consistent year-on-year growth relative to pre-pandemic levels and
resilience in the face of macro-economic shockwaves.
19 9 5
19 9 6
-50
Q 1 2 0 2 3
Q 1 2 0 2 2
Q 3 2 0 2 2
Q 2 2 0 2 2
Q 4 2 0 21
A u g 2 0 21
J u n 2 0 21
Q 4 2 0 2 2
S e p 2 019
A pr 2 0 21
Ja n 2 0 21
J ul 2 0 2 0
F e b 2 0 2 0
A u g 2 019
F e b 2 0 21
A u g 2 0 2 0
O ct 2 019
J ul 2 019
S e p 2 0 2 0
M ar 2 0 2 0
D e c 2 0 21
J u n 2 0 2 0
N o v 2 019
Ja n 2 0 2 0
D e c 2 019
O ct 2 0 2 0
A pr 2 0 2 0
J ul 2 0 21
S e p 2 0 21
M ar 2 0 21
N o v 2 0 2 0
Essential spend YoY
Non-essential spend YoY
GfK Consumer Confidence index
ONS RPI Y0Y
ONS RPI 5 year average (2016-2021)
Source: Savills research, GfK, ONS, Barclaycard, Oxford Economics.
Note:2021 consumer spend is compared to 2019 levels
The Market Backdrop CONTINUED
Macroeconomic trends
Shopping centre valuations showed increasing
signs of stability as 2021 progressed, with some
centres seeing modest value improvements. These
trends are, nevertheless, very asset specific and
there remain material performance differentials
between those assets that can demonstrate
strong underlying fundamentals around location
and purpose, occupancy and tenant mix, income
stability and asset management potential, with
those that do not.
Our Consumer Trends
We continue to proactively merchandise our
community shopping offers towards essential,
everyday good and services, anchored by the
provision of food. We believe this mix provides
resilience and relevance, providing stability
against on-line structural pressures affecting
discretionary spend and the wider macro-
economic pressures that are coming to bear
around inflation, energy prices and the impact
this will have on disposable income.
Resilience in retail sales in these essential areas is
evident in sector sales growth over the two years
of the pandemic, as the following table illustrates.
Food, Health and Beauty, and Homewares are
all key merchandise growth groups within our
community offer, delivering positive sales growth
compared to pre-pandemic levels and stark out-
performance in comparison to other discretionary
spend categories.
-3.9%
-8.5%
3.4%
0.7%
2.3%
9.2%
13.9%
25
20
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
-40
-45
/
)
%
(
d
n
e
p
s
l
i
a
t
e
r
r
a
e
y
-
n
o
-
r
a
e
Y
x
e
d
n
I
e
c
n
e
d
fi
n
o
c
r
e
m
u
s
n
o
C
-2.5%
0
Clothing
Footwear
Electrical
DIY and Gardening
Health and Beauty
Food
Furniture and Flooring
Homewares
Source: Retail Economics, Retail Sales Series –
value, non-seasonally adjusted
We continue to focus our leasing activity on
enhancing our supermarket and fresh food
options at every centre. We opened a new Lidl
in Luton and have an ongoing pipeline of capex
projects focused on increasing floor space and
mix in this core sector. Growth in food sales has
been consistently strong year on year, providing
a staple essential service provision in each of
our communities, driving footfall, spend and
complementary leasing activity.
10
6%
5%
4%
3%
2%
1%
0%
-1%
R
P
I
9
y
e
a
r
-
o
n
-
y
e
a
r
D e c-19
D e c-2 0
D e c-21
c
h
a
n
g
e
)
-2%
-3%
-4%
-5%
-6%
D e c-19
D e c-2 0
D e c-21
capreg.com
team, with design and operational support, these
entrepreneurial businesses provide a point of
differentiation to their communities and the
opportunity to evolve and grow in longer-term
occupiers of retail space.
We remain alert to the wider economic challenges
that our retail customers face in the short term,
including supply chain challenges, inflationary
pressures and the tapering off of government
pandemic support. We maintain close linkages
with our customers to understand their business
needs and pressures and the support we can
give to assist growth. We remain confident, but
not complacent, in our strategy and approach.
We have underlying assurance in the resilience
of our affordable occupancy cost model, with
rents averaging £12-15 per square foot and a
merchandise mix that is increasingly focused on
essential everyday goods and service provisions.
Our Occupational Markets
We have seen continued resilience in occupational
levels across our centres, but have not been
immune to the structural changes facing physical
retail, with the pace of change driven by the
pandemic requiring a corresponding increase in
pace in our remerchandising strategy.
The failure of Debenhams during the first half of
the year had a material impact on our occupancy
levels, with stores in three of our centres. We were
already anticipating a need to remerchandise
away from these less relevant formats and have
made early positive progress in reconfiguring and
repurposing elements of these spaces to a range
of different offers, more focused to community
needs and typically paying rental levels that are,
on a rent per square foot basis, a material step up
from previous department store terms.
Nearly all retail stores across the portfolio
were quick to reopen following lockdown
and, as occupier confidence rebuilds, we have
seen annual leasing volumes at levels that
are above 2019 equivalent levels. This trend
aligns with research from Local Data Company,
showing an improvement in the net balance of
openings/closures, driven primarily by growth in
convenience retail over the first half of 2021.
We have seen a wider range of new community-
aligned occupiers taking significant space across
our portfolio, with notable occupiers including job
centres and NHS medical facilities. We have seen
continued demand from food and leisure offers,
health and beauty and a range of independent
businesses providing a wide spectrum of offers
and a point of difference.
The investment we have made in our commercial
team is enhancing our leasing activity in this
area, with strong local demand from mall kiosk
operators, providing a rapidly growing pipeline of
interesting uses and brands to complement our
in-line retail units. Supported by our retail delivery
We remain
confident,
but not
complacent,
in our
strategy and
approach.
Read more about
how we manage
risk on pages
36 to 42
11
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Strategy
Debt restructuring transaction
We took steps to strengthen the platform of the
business, to allow us to take advantage of market
recovery opportunities, enabling management to
focus on delivering and scaling the core community
centre strategy.
Restructured
• Agreement to acquire outstanding
RBS balance of £100m of the Mall
debt facility for £81m, with TIAA
part-funding the acquisition by
providing an additional facility
of £35m
• Agreement in principle on The
Exchange – Ilford’s debt facilities
subject to additional capex injection
by Capital & Regional
Refocused
New classification into Investment &
Managed Assets
•
Investment Assets (where
Group has net equity): The
Mall – Blackburn, Maidstone,
Walthamstow, Wood Green, and
The Exchange – Ilford
• Managed Assets (where Group
has no net equity): The Marlowes,
Hemel Hempstead, and
The Mall, Luton
Recapitalised
Capital raised to part fund the purchase
of Mall debt facility.
•
Fully underwritten £30m Open
Offer at 56p, representing a (10.4%)
discount to 30-Day VWAP and a
(2.4%) discount to last close
• Growthpoint, (52% shareholder)
irrevocably undertook to take up its
Open Offer entitlement in full and
fully underwrote the issue
• Post-transaction, LTV on Investment
Assets and Central Cash and
Operations reduced to 49.7%
12
capreg.com
Long-term strategy
The structural changes in the retail sector continue to accelerate in the fallout from
the Covid-19 pandemic. 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 and its future potential.
Our long-term strategy is focused on our
Community Centres vision.
Our vision
We aim to define and lead community shopping centres, through our passionate creation of vibrant retail
spaces and exceptional customer and guest experience. To develop and deliver 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. To be more than just places to shop, but to operate hubs
for the local community.
Define
Focus
Define and own the community shopping centre
category in the UK, guided by consumer insight
and consistent with global best practice.
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.
Position
Enhance
Actively remerchandise centres to increase
exposure to growth and online-resilient
categories, responding to consumer demand
and differentiating from competition. Tailored
to community requirements with focus on local,
value, relevance, quality and total experience.
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.
Stock Code: CAL
13
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Strategy CONTINUED
Long-term strategy
Define
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
In line with our decision to reclassify our assets,
we have highlighted the centres with the
potential for clear value accretion from direct
investment.
Throughout the year, we undertook a
rebranding of our Walthamstow centre to align
its image to reflect the community it serves. The
new name, 17&Central, is the result of continued
efforts by the business to differentiate itself
from other centres in the market and to remain
relevant and appealing to the local community.
We have been working to define and realise
value from spaces that go underutilised across
the portfolio, such as our car parks through
forging a partnership with innovative partners
like REEF technologies, ensuring that we
maximise community exposure to modern
goods and services.
Future Focus
Realising 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.
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.
Continuing to ensure the assets we manage
and operate are the right ones to deliver our
community centre strategy and are accretive for
the business remains a key focus. The decision
to re-classify both Luton and Hemel Hempstead
reflect this. The executive team are looking at
the best outcomes for these two assets and
seeking out further opportunities to grow the
Group’s asset pool.
14
capreg.com Position
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.
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.
Progress
With continued decline of the department
store model and increased pressures 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.
We have made progress this year by continuing
to evolve the balance of our shopping centres
through active remerchandising. We have
completed a number of lettings in the “Grab
and Go” food space and opened a new Lidl
supermarket at Luton. Pharmacy is now one
of our largest income segments with the two
market leaders amongst our top occupiers list.
Further highlights include:
• A new Job Centre in Ilford, replacing a
portion of the former Debenhams space;
•
Two further deals with the Department of
Work and Pensions at Blackburn and Wood
Green; and
• Developing a new food hall in Walthamstow.
We continue to maintain affordable £12 per sq
ft average rents to allow for tailoring to local
communities. We are seeing continuing demand
for space, exemplified by having completed
more leasing transactions in 2021 than in 2019
and 2020 combined.
Future Focus
Our leasing focus remains aligned to our
community merchandising pillars as we emerge
from the Covid-19 pandemic. We continue
our ongoing focus to deliver remerchandising
and repositioning opportunities by reducing
our portfolio exposure to at-risk categories,
such as fashion and department stores,
to different uses.
We believe in growing the next generation of
retailers and are proud of the support and
guidance we are able to provide through our
investments. By working with these retailers, we
are encouraged to think and operate differently.
We will continue to be mindful of the projects
we plan for investment, balancing prudent
capital management with commitments to those
projects that will deliver optimum performance.
15
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Strategy CONTINUED
Long-term strategy
Focus
Overview
Our centres are at the heart of what we do.
Our business and resources are focused on
enabling the strong management platform
and operational structure to facilitate timely,
responsive and optimal decision-making in
the delivery of our overarching community
centre strategy.
Progress
The implementation of key systems in the
finance and property investment departments
that had started in 2020, continued through
2021, placing significant demands on key
finance staff in the business. Moving into year-
end processes following implementation has
been challenging, but overall, the new systems
have resulted in highly positive and enhanced
productivity. Robust controls and processes
had been developed to preserve the quality of
decision-making and speed of execution.
We’re investing in our leasing capability and
bringing different skill sets into our business
to assist. We are recruiting individuals from
non-traditional real estate backgrounds, and
they are actively out on the ground in our local
trade areas, sourcing retailers that fit with our
research and data-driven knowledge of our
local communities.
Future Focus
Our people and systems are the backbone of
the business. We are constantly assessing areas
for investment in our in-house management
platform, our people, our systems and
data insight as this remains essential to the
successful delivery of, and growth of, our
community strategy.
Enhance
Overview
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
We have continued to work with our existing
portfolio to realise potential sales and recycle
the resultant capital into redevelopment
initiatives across the schemes. Highlights
include:
•
The exchange and completion of Maidstone
House office sale to local authority at the
Mall, Maidstone.
• A multi-phased comprehensive masterplan
for redeveloping the Exchange, Ilford
centre in response to this dynamic London
borough evolving to become the heart
of Redbridge. This is expected to deliver
key improvements to the net operating
income and overall merchandising mix and
customer proposition.
Future Focus
Our people and resources are critical to the
delivery of our community shopping centre
strategy. We will aim to maximise the value
of our assets through capital expenditure
investment programmes planned to deliver
a capital return over and above the income
enhancement. This will put the Group in a
position to proactively respond and grow as
the market stabilises.
16
capreg.com 17
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Strategy in Action
Rebranding The Mall,
Walthamstow to 17&Central
We have completed an exciting
transformational rebranding of The Mall,
Walthamstow to 17&Central, which has
breathed new life into this rapidly
growing London town ahead of the
exciting planned mixed-use extension
to the scheme.
The introduction of the new rebranding has
enhanced guest experience and positioned
the centre to connect with our community
strategy, providing goods and services that
meet the evolving needs of a diverse and
growing local community.
A key part of these plans is the introduction of
a new food court. In the wake of the fire at the
centre in 2019, we took the initiative to repurpose
and replace the former food court with a more
tailored offering that would be more relevant to
the evolving and diverse community. In order to
make it relevant, we are engaging with high-quality
occupiers to provide a new food hall, bar and
community space incorporating competitive
socialising, potential mixed leisure areas, such
as fitness studios workspaces. This will maximise
the use of the space and potential revenue,
support footfall and encourage complementary
merchandising opportunities.
18
capreg.com Enhancing
grocery anchors
In line with our Community Centre
strategy, we continue to evolve our
remerchandising with a pivot to
more grocery anchors and reducing
our exposure to at-risk discretionary
retail sectors.
At Luton, we expanded our grocery representation
with the opening of a new unit for Lidl in October
2021, complementing Tesco as the second
supermarket within the scheme. We are conscious
of finding the right balance between national
brands and local independent retailers, who
have a deep understanding of their community.
With this in mind, we have also brought in to the
Luton centre a local Polish delicatessen, Delikatesy
Smaczek.
These retailers support our community strategy,
generate footfall and frequency of visit, driving
retailer sales and thus enabling us to achieve
better leasing outcomes across the centre.
Stock Code: CAL
19
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Our Business Model
Community shopping centres are our
specialism. Our core strength is enhancing
through repositioning, managing and
acquiring these types of assets.
The impact of Covid-19 has increased uncertainty
in a sector already undergoing significant
structural change. Valuations declined in the first
six months of the year but have shown signs of
stabilising in the second half and capital values
per sq ft are at levels that increasingly support
accretive repositioning opportunities across a
widening range of uses.
Key
resources
Key
activities
01
Experienced and
agile management
Through our expert management platform, we
seek to generate and grow sustainable income
and drive capital value growth by combining active
asset management with operational excellence.
02
Strong capital structure
We have continued to prioritise the preservation
of cash. 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.
03
Close relationships
with communities
The utilisation of partnerships with research/
benchmarking firms like CACI, alongside input
from centre teams with regular engagement
with retailers and local communities ensure our
relevance to the communities in which we operate.
04
Diversified income streams
The ability to evolve the Community proposition
offer and to accelerate remerchandising into the
shift from discretionary to non-discretionary retail
and services.
Assess product
offering against
local community
needs and
expectations
Identify the
right assets
Community shopping centres
are our core strength. Assets
that typically meet our potential
investment criteria are those that
are underperforming in their
catchment but have significant asset
management opportunities.
Establish strategic
and comprehensive
3–5 year asset
masterplans for
each centre
Engage specialist
teams to ensure
accelerated
delivery with
focus on optimal
performance
Post
implementation
reviews to refine
processes and
to inform future
decision-making
Underpinned by
our ESG focus
and our values
Our ESG focus
Environment
People
Community
Read more about Our ESG focus on pages 48 to 63
20
capreg.com
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. In light of this focus,
the Group has assessed its portfolio and reclassified two assets,
Hemel Hempstead and Luton, as a result of them meeting the
criteria to be classed as “Held for Sale”. Although neither asset has
been sold at the time of writing, it is likely to occur during the year.
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, we believe that our assets
and management expertise will afford Capital & Regional with an
exciting opportunity as a potential consolidator of community and
mixed-use retail assets in the UK.
Value for
stakeholders
Shareholders
By investing in diversified income streams and
maintaining close links to our communities, this will
drive long-term sustainable growth which will result in
sustained shareholder return. As a UK REIT, this is an
essential component.
Retailer Customers and Occupiers
By leveraging our experienced management platform
and frequent, repeat footfall and high conversion rates
coupled with affordable occupier costs.
Our Employees
We are a performance-led culture and by creating a
dynamic and positive work environment, we will ensure
the opportunity for staff to achieve the best from their
careers. It will also allow for continuous development
and training opportunities.
Our Communities & Guests
Ultimately, our business model aims to provide attractive
retail and leisure environments, which are continually
reviewed to enhance guest experience. We are passionate
about creating vibrant community hubs for our guests,
which also support local employment opportunities.
Our Suppliers
We work with a wide range of suppliers over the
long term in order to make our business stronger,
delivering a competitive edge.
Our values
INSPIRING
CREATIVE
THINKING
Stock Code: CAL
ENCOURAGING
COLLABORATIVE
ENGAGEMENT
DELIVERING
DYNAMIC
SOLUTIONS
ACTING
WITH
INTEGRITY
LEADING IN
SUSTAINABILITY
WITHIN OUR COMMUNITIES
21
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT
Key Performance Indicators
Financial
Adjusted profit1
Adjusted profit per share1,2
Dividend per share2
£8.1m
£11.0m
2021
2020
2019
2018
2017
£27.4m
£30.5m
£29.1m
2021
2020
2019
2018
2017
6.8p
10.2p
2021
0p
2020
0p
2019
2018
2017
36.7p
42.3p
41.0p
21.0p
24.2p
36.4p
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.
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
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 26% in Adjusted Profit
or 33% on a per share basis reflected
primarily a further fall in Net Rental
Income largely driven by the impact of
the Covid-19 pandemic. This has been
experienced through the loss of non-
contracted income, primarily car park,
increased bad debt expense and the
cumulative impact of lower Occupancy
and CVAs and administrations. The
movement from 2020 to 2021 also
reflects the £4 million benefit of a
surrender premium received in 2020.
Progress during the year
A decrease of 26% in Adjusted Profit
or 33% on a per share basis reflected
primarily a further fall in Net Rental
Income largely driven by the impact of
the Covid-19 pandemic. This has been
experienced through the loss of non-
contracted income, primarily car park,
increased bad debt expense and the
cumulative impact of lower Occupancy
and CVAs and administrations. The
movement from 2020 to 2021 also
reflects the £4 million benefit of a
surrender premium received in 2020.
Adjusted Profit per share is also impacted
by the dilutive impact of the new share
issue completed in November 2021.
Adjusted Profit per share is also impacted
by the dilutive impact of the new share
issue completed in November 2021.
How this links to our strategy
Dividends are a key element of
shareholder returns. We aim to preserve
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
Given the ongoing uncertainty and high
debt levels within the business, a decision
has been made not to declare a final
dividend. Subject to market conditions,
it is the Company’s intention to resume
paying dividends in the second half of the
financial year ending 2022.
Link to strategy
Enhance
Link to risks
2 9
Link to strategy
Enhance
Link to risks
2 9
Link to strategy
Enhance
Link to risks
4 9
2
Net rental income
EPRA net tangible assets
per share2
Net debt to property value
2021
2020
2019
2018
2017
£29.0m
£34.1m
£49.3m
£51.9m
£51.6m
2021
2020
2019
2018
2017
102p
157p
364p
596p
666p
2021
2020
2019
2018
2017
65%
49%
46%
48%
46%
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 15% reflecting
the impact of the closure of non-essential
retail in the first quarter of 2021, as a
result of the Covid-19 pandemic, and the
factors outlined above. The Group also
had a £4m surrender premium due, dating
back to 2020.
As noted, the 2020 metric included the
benefit of a £4m surrender premium.
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.
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
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 56p due to half-year
2021 valuation decline and the impact of
the recent £30m equity raise, net of the
benefit from the discounted Mall debt
repurchase.
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 decreased
significantly in the year from 72% to
49%, due to the restructuring of the
Mall debt facility, the reclassification of
the Managed Assets, the equity raise
and disposal of the Maidstone House
office block.
Link to strategy
Position, Focus
Link to risks
6 9
2
Link to strategy
Position, Enhance
Link to risks
2
1
Link to strategy
Enhance
Link to risks
2 3
1
22
capreg.com Non-Financial
Footfall
2021
2020
2019
2018
2017
C&R +8.5% / Index +5.7%
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%
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 started the year significantly
impacted by Covid-19 and the closure of
non-essential retail in the first quarter
of the year. Overall, it improved for 2021
against 2020, primarily due to the increase
in operating months with the opening of
non-essential retail from April 2021.
The Group continued to outperform the
national ShopperTrak index, by 6% in 2021.
Link to strategy
Define, Position
Link to risks
9
2
Occupancy
2021
2020
2019
2018
2017
92.7%
92.1%
97.2%
97.0%
97.3%
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
Occupancy has started to recover, having
increased by 0.6% since the end of 2020
and having been 89.7% at 30 June 2021.
The impact of the closure of Debenhams
in the first quarter caused the drop during
the year. New lettings at Blackburn, Ilford
and Luton in the former Debenhams
space has driven approximately 2% of the
improvement to the year ended 2021.
Link to strategy
Define, Position
Link to risks
5 9
2
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
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.
23
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Chief Executive’s Review
Strong leasing performance is driving
a recovery in occupancy and rent
collection is trending back to
pre-pandemic levels.
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
It is pleasing to be writing this statement
having completed our Refocus,
Restructure and Recapitalisation in late
2021. This has brought a number of
benefits and some hard-fought stability
to our business, following two years of
challenges from the combined impacts of
the pandemic and associated acceleration
of structural changes impacting physical
retailing.
I would like to thank our major shareholder,
Growthpoint, for its unwavering support of our
business over the past two years, as well as the
dedicated, talented team in our support office and,
in particular, our front-line centre-based teams
who have performed exceptionally.
As we emerge from what appears to be the
worst of the pandemic and with the Government
now seemingly committed to driving a return to
normality, we all share the considerable challenge
of rebuilding our communities, lives, economy and
businesses. We are looking forward to playing our
part in this important task whilst also continuing to
help address the arguably bigger existential threat
posed by climate change.
We take very seriously the central role we play in
our communities as a large, and often the largest,
employer and main provider of essential services
or community infrastructure.
As we look forward towards navigating a path of
recovery, it is comforting to see greater clarity
emerging in our operating environment, especially
around digital disruption and the impact of online
retailing. This has helped foster the beginnings
of a change in sentiment toward the sector,
which is reflected in the fact that valuations
are stabilising, with two quarters of broadly flat
capital values in the second half of 2021 marking
the first time without a fall in valuations for four
years. Moreover, improved sentiment can also
be evidenced via the increased investment into
the sector and a marked increase in the number
of deals in the investment market. Our income
has also stabilised, strong leasing performance is
driving a recovery in occupancy and rent collection
is trending back to pre-pandemic levels. These
factors bode well for the Company and, in turn,
the potential for the recovery of shareholder value.
As we look
forward
towards
navigating
a path of
recovery, it
is comforting
to see
greater
clarity
emerging
in our
operating
environment,
especially
around
digital
disruption
and the
impact
of online
retailing.
Throughout the pandemic, the reputation of
our business as an expert manager of retail
environments continued to be reflected in our
sector-leading statistics across all key indicators,
including operational responsiveness, rent
collection, leasing spreads and volumes and
footfall. Furthermore, the strength of our
relationships with our customers, local councils
and other stakeholders was tested during the
pandemic and I am pleased to say that many of
these are now in an even stronger and better
place. All of this is testament to the quality of our
teams, their hard work and dedication and the
community shopping centre strategy, which we
launched in December 2017.
Our focus is now firmly fixed on navigating a path
towards pre-pandemic levels of footfall, income,
adjusted profit and valuation. We are optimistic
and excited, but also realistic about the task ahead.
We understand that continuing to improve our
customer and guest proposition, which provides
essential services and goods to some of the UK’s
most vibrant and diverse communities, will be
fundamental to success and requires passion,
empathy, energy, commitment and capital.
We place a great emphasis on our responsibility
to be a good corporate citizen and positive
contributor to these communities. One of our
corporate initiatives this year was to develop
tailored “Community Wheels of Support” at each of
our shopping centres to provide assistance to the
most in need community groups/stakeholders, to
make a difference to the lives of individuals in the
communities we serve. I am proud to say we have
supported over 167 local charities during 2021,
assisting those less fortunate in a wide variety of
areas. One of my personal favourites is Level Trust,
a uniform supply and exchange charity in Luton
that provides free school uniforms for families
who otherwise could not afford to provide their
children with the same clothing as their fellow
pupils.
Consistent with our Community Centre Strategy,
we are proud to support a growing number of
local and independent retailers, both through
our focused leasing programme and by providing
many of them with retailing and retail design skills.
It is therefore most rewarding that several of these
retailers have gone on to expand into multiple
locations in our portfolio.
24
capreg.com We have also continued our programme of
growing the representation of grocery and
pharmacy across our portfolio, with these sectors
anchoring both our strategy and our centres. As
a mark of progress, it is pleasing to see Boots and
Superdrug are now among our top five retailers
by income.
In addition, we have expanded our personal
services offering, including leading local hair
and beauty salons, and our level of professional
services, with the first of our NHS facilities due
to open in Wood Green in 2022. This is an area
where we plan to expand further, and we have
a number of other NHS medical and diagnostic
centres in varying stages of planning across our
portfolio. These facilities provide essential services
to our communities and form a key part of our
drive towards creating sustainable “15-minute
neighbourhoods”.
Our Snozone leisure business was impacted by
the restrictions again this past year and the team
responded well, continuing to work tirelessly to
mitigate the financial impact and provide the
safest environment for our guests. The Xanadu,
Madrid ski slope we added to the business
in February 2021 has performed in line with
expectations, despite Madrid being subject to
further restrictions throughout the year. We are
actively exploring a further expansion of Snozone
in the ski and leisure sectors, leveraging the
expertise and quality of the team.
During 2021, we appointed external property and
sustainability experts, JLL, to help formalise and
prioritise the additional actions we need to take
to meet our ESG targets and address the pressing
issue of the climate crisis. With JLL’s support,
we are developing our net zero carbon strategy
to produce a pathway in line with the UKGBC’s
best practice recommendations and the BBP
Climate Change Commitment, quantifying and
prioritising the necessary emission reductions out
to our net zero carbon target year and beyond.
The net zero carbon pathway will be published
later this year and will provide us a clear and
actionable implementation plan, mapped against
our operations and businesses. We are currently
undertaking a business-level and portfolio risk
assessment to identify the climate-related risks
most material to our business. This will support
a greater understanding of the impacts and
opportunities of these risks and inform our first
response to the Task Force on Climate-related
Financial Disclosures (TCFD) this year.
We accept there is much we need to do to improve
the impact of our assets on the climate change
agenda and we are more committed than ever in
our 40-plus-year history to achieving that objective.
Our communities expect and deserve nothing
less. Our own team at Capital & Regional, covering
more than 150 people, remains vitally important to
us and at the heart of that is our commitment to
having a diverse and inclusive workplace.
Future focus
Looking forward, we are confident in our
community centre positioning, which is
focused on “needs” or “essential” retail
and services. The recent early signs of a
stabilisation in our valuations, supported
by a considerable increase in investment
market activity as investors return to the
sector, coupled with our robust income and
occupancy performance, is cause for further
optimism.
Furthermore, the strong levels of leasing
we have achieved throughout the year, with
more leases agreed than in the previous
two years combined, on average above ERV,
are a strong indication that retailers, as well
as our customers, continue to recognise
that affordable well-located, designed and
managed local physical retail is an essential
part of neighbourhood infrastructure. With
this in mind, we believe that our community
centre strategy is as relevant today as it was
when we first announced this change of
direction in 2017.
The renewed positive backdrop and an
increasing return to normal daily life post-
Covid gives us the confidence to begin
investing further capital into the right
areas of our centres, accelerating their
remerchandising and repositioning in line
with our community centre model. We
will continue to explore options to realise
value through partial sales of non-core
assets, like the Maidstone office building or
Walthamstow residential site, and to partner
with experts in their sectors including
residential or car parking, which add value
to our assets and stakeholders.
It remains our intention to continue as a
REIT, and as such resuming dividends, whilst
being prudent and conscious of our balance
sheet and the capital needs of our assets
and business.
We are looking forward to 2022 and playing
our part in rebuilding our communities,
economy, business and stakeholder value
post pandemic.
Thank you to all our shareholders for your
support this past year.
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
13 April 2022
Read more about our
engagement with
stakeholders on
pages 44 to 45
25
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Operating Review
Impact of Covid‑19
All seven of the Company’s community shopping centres remained open and trading
within the government-enforced restrictions throughout the pandemic, providing
essential services to the communities we serve and in line with our Community Centre
strategy. Restrictions on trading, including the national lockdown, which lasted from
6 January 2021 until 12 April 2021, inevitably had an impact upon our operating and
financial metrics; however, our strategic focus on local community centres providing non-
discretionary and essential goods and services has mitigated the worst of that impact
and provides the business with a sound platform for the future.
Our overriding priority during this time has been the health, safety and protection of our colleagues,
guests and customers. At all times, we have taken all available precautionary measures, while rigorously
following the latest official government guidelines and advice across our portfolio. Access to our centres
has been closely monitored through additional staff and existing footfall technology. When restrictions
have been in place, we have carefully controlled visitor capacity to maintain social distancing and to
protect visitors, occupiers and staff.
New lettings, renewals and rent reviews
New lettings
Number of new lettings
Rent from new lettings (£m)
Renewals settled
Renewals settled
Total resulting annual rent (£m)
Combined new lettings and renewals
Comparison to previous rent1
Comparison to ERV at December 20201
12 months to
December 2021
12 months to
December 2020
89
£4.0m
54
£1.2m
+7.3%
+15.6%
40
£1.2m
23
£1.3m
+22.1%
+5.6%
All seven
of the
Company’s
community
shopping
centres
remained
open and
trading
within the
government-
enforced
restrictions
throughout
the
pandemic.
1 For lettings and renewals (excluding development deals and CVA variations) with a term of 5 years or longer which do not
include turnover rent or service charge restrictions.
26
capreg.com 143 new lettings and renewals were completed
during the period at a combined average premium
to previous rent of 7.3%1, which is even more
pleasing given the significantly disrupted trading
environment. This level of success was also
significantly above the 66 deals completed in 2019
and the 63 in 2020, meaning we completed more
deals than in the previous two years combined.
We are also close to signing an agreement for
lease with the NHS for a community healthcare
centre at The Exchange, Ilford. This will be a
flagship project, providing a new 20,000 sq ft
purpose-built facility that is expected to open to
the public in 2024.
Rental income and occupancy
This increase in deal volumes is a result of the direct
investment we have undertaken into our in-house
leasing platform to specifically and strategically
target local independent operators. Through our
on-the-ground ties to our local communities, we
have seen first-hand the trend of positive growth
amongst this group and have correspondingly been
able to reposition space that has not previously
been income producing, providing them with a
physical location while also expanding our offering
of essential local services.
A key focus of leasing activity in 2021 has been
on remerchandising our centres to alternative
community uses in line with our strategy. Highlights
include new lettings to the Department for
Work and Pensions for Job Centres at Blackburn
and Ilford, where they have taken space in part
of the former Debenhams units, as well as at
Walthamstow. At Wood Green, we signed a 15-year
lease agreement with Whittington Health NHS Trust
to open a state-of-the-art Community Diagnostics
Centre and also agreed deals for new health
and beauty clinics to different independent local
operators at Luton, Walthamstow and Wood Green.
We also completed a number of lettings in the
“Grab and Go” food space, including new units to
Jamaica Blue at Ilford, Sizzle & Stone at Wood Green
and Miss Millies and Subway at Walthamstow. In
Wood Green, we signed deals with REEF Technology
for dark kitchens and last mile logistics, further
reflecting our ability to maximise the utilisation of
space at our centres in new ways, and in Luton, we
opened a new Lidl supermarket in October 2021.
As referenced above, we have made good progress
reletting the three Debenhams stores in our
portfolio after they ceased trading in March 2021.
At Blackburn, the Job Centre letting comprises
approximately 15,000 sq ft of the space and we are
exploring options to potentially upsize an existing
tenant into the remainder. At Luton, furniture
specialist VFM opened in October 2021 taking the
entire former Debenhams unit, covering costs with
a turnover top-up.
At Ilford, we are in process of dividing up the unit
across its three floors. The majority of the top floor
space has been converted into a 22,000 sq ft Job
Centre that opened in early February 2022 and we
expect to sign an agreement for lease imminently
with a major national retailer to relocate from
elsewhere in the centre to take the middle floor.
Occupancy (%)
Contracted rent
(£m) – like for like
Passing rent
(£m) – like for like
30 December
2021
92.8
50.9
48.2
30 December
20201
92.1
50.6
49.6
1 30 December 2020 comparatives restated to remove
rent in respect of the Edmonds Parade (Hemel
Hempstead) and Maidstone House (Maidstone)
properties which were disposed of during the year.
Occupancy is 0.7% higher than at the end of 2020
and has increased by 3.1% since 30 June 2021, with
the impact of the new lettings at Blackburn, Ilford
and Luton in the former Debenhams space driving
approximately 2% of the improvement.
Allowing for the disposals of the Edmonds Parade
(Hemel Hempstead) and Maidstone House
(Maidstone) properties during the year, passing
rent fell by 2.8% but contracted rent marginally
increased. There is over £1 million of contracted
rent that is due to convert to passing rent during
the first quarter of 2022.
Operational performance
In total, there were 47.7 million shopper visits
across the portfolio during 2021. This was 8.5%
higher than in 2020 and outperformed the
national index by 5.7%, reflecting the relative
strength of the convenience based and relevant
offering we have been strategically building for
our communities over the last number of years.
Due to government-imposed lockdown measures,
shopper visits in 2021 were 36% lower than 2019,
driven particularly by the period up to 12 April
2021 when the pandemic restrictions were at their
most stringent.
Up until 12 April 2021, the date on which
non-essential retailers were able to re-open,
approximately one third of leased units were open
and trading and footfall was at approximately
30% of the equivalent weeks in 2019. Since then,
footfall has typically fluctuated to between 70%
and 80% of 2019, with the improving momentum
seen in the autumn months tempered by the
outbreak of the Delta and Omicron variants
towards the end of the year. Footfall in the
two months to the end of February 2022 has
been equivalent to approximately 76% of the
corresponding weeks in 2019.
27
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Operating Review CONTINUED
Rent collection
Rent collection remained a significant area of
focus for our team during 2021. Our retailer
customers’ ability to trade was impacted
throughout the year by the government-enforced
restrictions, especially in the first half of 2021. The
Government’s extension of the rent moratorium
also compromised the measures that would
normally be available to us as a last resort to
protect our contractual positions. We therefore
proactively dedicated significant resource to
this effort, assembling a team from across the
business to engage with and best utilise our
tenant relationships at all levels. Throughout
the pandemic 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 both 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 modest concession to the tenant
in return for settling the remainder of their rent
arrears and the full amount of their service charge
obligations.
In respect of the 2021 financial year, we have
received or agreed formal payment plans for
93% of the rent billed. Total concessions granted
in the year equate to £2.5 million before VAT,
representing approximately 5% of the total rent
billed. In the year-end accounts, we have made
provisions for more than half of the remaining
balance due.
Rent collection for the first quarter of 2022, including monthly invoices for January and February 2022,
is running at 95%. The table below provides further detail:
Rent collected
Payment plans
Total
Outstanding
Bad Debt
Rent concessions
Total billed
Rent collection
12m to 30 December 2021
Rent collection
Q1 2022
£m
45.0
2.3
47.3
0.9
0.3
2.5
51.0
88.1%
4.5%
92.6%
1.8%
0.7%
4.9%
100%
£m
10.1
–
10.1
0.5
–
0.1
10.7
94.7%
–
94.7%
4.9%
–
0.4%
100%
Amounts include VAT, amounts billed for Q1 2022 are up to end of February 2022 as at 8 March 2022.
Capital expenditure investment
In light of the COVID-19 pandemic and balance
sheet pressures, we have prudently focused
capital expenditure on those projects driving
immediate income returns, or those with
strategic priority.
In total, £8.9 million was invested during 2021,
with primary projects being the progression of
the Walthamstow residential opportunity (£4.3
million); the creation of a new Lidl unit at Luton
(£1.7 million in the year); car park upgrade works
to support the introduction of REEF at Luton and
Wood Green (£0.5 million); and £0.5 million across
Blackburn and Ilford to form the new Job Centres
out of the former Debenhams units. The rebuild
of the area at Walthamstow affected by the fire in
July 2019 completed in Q1 2021 and included the
creation of a new mezzanine food court level.
Walthamstow residential opportunity
We are now in the final stages of clearing the
remaining pre-conditions on the Walthamstow
residential opportunity to facilitate the land receipt
of c.£20 million payable by our residential partner,
Long Harbour.
At the end of 2021, planning consent was
confirmed following the expiry of the statutory
Judicial Review period. The consent enables
phased development of 495 high rise Build to
Rent residential apartments, to be developed by
Long Harbour; 43 low-rise private sale residential
apartments; 47,000 sq ft of commercial floor space
and a new station entrance to the Victoria Line
underground station. Since the year-end, we have
concluded terms that deliver vacant possession on
all units required to unlock the development site
and have commenced enabling works to relocate
affected utilities and infrastructure. We have also
agreed the principal form of the development
agreement and headlease documentation with
the local authority. We anticipate achieving full
unconditionality with Long Harbour in the coming
weeks, which will trigger the release of the capital
payment to us and an anticipated start on site
for the high rise residential construction by mid-
year 2022.
Strategic residential
development partnership
In September 2021, we announced that we
had signed an exclusivity agreement with a
subsidiary of Far East Consortium International
Limited (FEC) to work together to identify and
develop new residential opportunities across the
Group’s portfolio of shopping centres. FEC is an
international real estate conglomerate that is
listed in Hong Kong and active across Australia,
Singapore, Hong Kong and the UK, with a strong
track record in residential development.
28
capreg.com While the primary aim of the partnership is to
facilitate projects that will enhance asset value
and/or generate potential land receipts for real
estate in the current Capital & Regional portfolio,
we have also been assessing opportunities for
new projects where the collective expertise and
resources of the partnership can be deployed.
We are pleased with how the partnership is
progressing and a number of options are currently
being explored.
Snozone
Due to government lockdown restrictions in the
UK, which only began to ease from 12 April 2021,
Snozone was unable to operate during its peak
trading period of the first quarter of the year.
The requirement to maintain social distancing
measures, which only lifted from mid-July
2021, limited slope capacity to approximately
half. Trading was further impacted by Snozone
restaurants not being able to open and clothing
hire not being offered during the period while
restrictions were in place. However, when
restrictions lifted in the second half of the year,
we saw paying usage bounce back to around 80%
of the equivalent trade for 2019, with lower levels
of school, corporate and holiday camps largely
accounting for the difference, especially towards
the end of the year as concerns over the Omicron
variant heightened.
Results for the period were supported by the
receipt of a £2.5 million insurance payment under
a pandemic insurance policy that the business
has maintained since 2017. A negotiation and
extension of the Snozone leases on its Yorkshire
and Milton Keynes sites has reduced the annual
cash payments by approximately £0.35 million.
In 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 €2.00. The slope in Madrid
has traded throughout the period, although social
distancing restrictions in Spain reduced footfall
by approximately half and, in similarity to the UK,
corporate and school activity was much reduced.
Snozone recorded an EBITDA for the year of £0.8
million (2020: loss of £1.7 million), supported by
the insurance payment.
Snozone’s IFRS loss of £0.3 million (2020: loss of
£2.4 million) was adversely impacted relative to
prior years due to the renegotiated Yorkshire
and Milton Keynes leases which, under IFRS 16,
resulted in a significantly increased depreciation
and amortisation charge of £2.5 million (2020: £2.2
million; 2019: £0.3 million) despite the annual cash
rent reducing. The loss for the year was mitigated,
however, by a £1.4 million VAT rebate following the
successful pursuit of a historic claim that delivered
a favourable ruling over the treatment of revenue
related to lift passes. This will have an ongoing
benefit of approximately £0.25 million per annum.
29
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Financial Review
The Group has taken the decision not
to declare a final dividend. It is the
Company’s intention to resume paying
dividends from the second half of the
financial year ending 2022.
STUART WETHERLY
GROUP FINANCIAL
DIRECTOR
Profitability
Statutory Revenue
Net Rental Income1 (NRI)
Adjusted Profit1, 2
Adjusted Earnings per share (Basic) 1, 2
IFRS Loss
Basic Earnings per share
EPRA cost ratio (excluding vacancy costs)
Net Administrative Expenses to Gross Rent
Investment returns
Net Asset Value
Net Asset Value (NAV) per share
EPRA NTA per share
Dividend per share
Financing4
Group net debt
Group net debt to property value
Average debt maturity3
Cost of debt
Adjusted
Profit – 30
December
2021: £8.1
million (30
December
2020: £11.0
million).
2021
20202
Change
£70.0m
£29.0m
£8.1m
6.8p
£72.7m
£34.1m
£11.0m
10.2p
-3.7%
-15.0%
-26.4%
-34.3%
£(26.4)m
£(203.9)m
+£177.5m
(22.0)p
(188.8)p
+166.8p
47.8%
27.7%
42.6%
20.2%
+5.2%
+7.5%
£168.4m
£167.1m
+£1.3m
102p
102p
–
150p
157p
–
-48p
-55p
–
£185.3m
49%
5.4 years
3.74%
£345.1m
-£159.8m
65%
-16 pps
4.4 years
+1.0 years
3.41%
+33 bps
1 Adjusted Profit, Adjusted Earnings per share and Net Rental Income 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 The 2020 results have been restated for a prior year adjustment of £0.7 million resulting from the treatment of
Software as a Service (SaaS) configuration costs as explained in Note1 to the financial statements. Adjusted Profit has
also been restated to reflect a change in the presentation of Snozone results following the adoption of IFRS16.
3 Assuming exercise of extension options.
4 Metrics exclude loans in respect of Hemel Hempstead and Luton following reclassification as Held for Sale
(see Note 10 to the condensed financial statements).
30
capreg.com 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 trading profits
and hence the ability of the business to fund dividend payments.
Adjusted Profit excludes revaluation of properties, profit or loss on disposal of properties or investments,
gains or losses on financial instruments, charges in respect of long-term incentive awards and other non-
operational one-off items.
Adjusted Profit includes EBITDA from Snozone (see definition further below). This is a change during the
year arising from the adoption of IFRS 16 and the signing of new lease agreements on Snozone’s two UK
sites. We consider that the combination of these two factors mean that Snozone’s statutory profit no longer
alone provides a full reflection of Snozone’s trading performance and hence have introduced this additional
Alternative performance measure.
The key differences between Adjusted Profit and 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.
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.
In the current year, like-for-like comparisons have been used to adjust for the impact of the disposals of the
Edmonds Parade and Maidstone House properties within the Hemel Hempstead and Maidstone shopping
centre assets that were completed in June 2021 and December 2021 respectively.
Net Debt
Net debt is borrowings, excluding unamortised issue costs, less cash at bank. Cash excludes cash held on
behalf of third parties (e.g. in respect of service charges or rent deposits).
Net debt to
property value
Net debt to property value is debt less cash and cash equivalents divided by the property value.
Net Rent or Net
Rental Income
(NRI)
Net Rental Income is rental income from properties, less provisions for expected credit losses, property and
management costs. It is a standard industry measure. A reconciliation to statutory turnover is provided in
Note 3 to the financial statements.
Snozone EBITDA
(change in 2021)
Snozone EBITDA is based on net profit. It excludes Depreciation, Amortisation, (notional) Interest, Tax
and non-operational one-off items. It includes rent expense, based on contractual payments adjusted for
rent-free periods. This provides a measure of Snozone trading performance which removes the profiling
impact of IFRS 16 that would otherwise see a significantly higher charge in early years of a lease and
significantly lower net charge in later years.
A reconciliation to the IFRS net profit is included within Note 2 to the financial statements.
Reporting Segments
In its Interim Results for the six months ended 30 June 2021, the Group made a change to its reportable segments reflecting the position
of its shopping centre investments and mirroring how information is being reported to the Board. As a result, it split out what was
previously referred to as Shopping Centres into “Shopping Centres – Investment Assets” and “Shopping Centres – Managed Assets”.
Shopping Centres – Investment Assets incorporates the centres at Ilford and within The Mall loan facility; namely Blackburn, Maidstone,
Walthamstow and Wood Green. These represent the asset pools where the Group retains net equity and is focused on long-term
solutions for the loan positions potentially involving the investment of further capital.
Shopping Centres – Managed Assets incorporates Hemel Hempstead and Luton where the current loan balances in the non-recourse
SPV structures exceed the respective property values and therefore the Group has negative equity and the substance of the Group’s
involvement is as a manager. This split has been reflected in the presentation of the results at the year-end with the prior-year
comparatives amended on the same basis.
31
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Financial Review CONTINUED
Reclassification as assets and liabilities held for sale
As at 30 December 2021, the Group concluded that the two assets which were reclassified as “Managed Assets” within the Group’s
half-year results at 30 June 2021, Hemel Hempstead and Luton, met the criteria to be reclassified as “Held for Sale”. This conclusion
was reached as the Group, following close dialogue with the respective lenders of the vehicles, had decided to seek to dispose of
whole or part of the investments or assets as at that date. While no transaction has been agreed as at the time of results, it is viewed
as highly probable that it will be concluded within 12 months of the balance sheet date.
In the Group’s accounts, this has resulted in all assets and liabilities associated with the respective investments being reclassified to
separate lines of “Assets classified as held for sale” and “Liabilities classified as held for sale”. The reclassification has been measured
at the lower of expected net sale proceeds and current carrying value. Given each of the investments is in a net liability position
and that the Group would not expect to realise any proceeds from a disposal (nor be obligated to clear the net liabilities), the
reclassification has been made at their fair values being the same as the year end carrying value.
The following are the amounts in the year-end balance sheet:
Amounts in £m
Assets classified as held for sale
Liabilities classified as held for sale
Net liability in respect of held for sale
Hemel
Hempstead
21.9
(34.5)
(12.6)
Luton
124.5
(131.3)
(6.8)
Total
146.4
(165.8)
(19.4)
For the financial year ended 30 December 2022, any income, costs and changes to asset and liabilities in respect of Hemel
Hempstead and Luton until they are disposed of will be reflected as movements within the categories of Assets and Liabilities
held for sale. Any Asset Management fees received from the two investment vehicles, which have previously been eliminated on
consolidation, will be shown as external fees. We will exclude the results of Hemel Hempstead and Luton, except for Management
fees, within our Adjusted Profit metric for the year ended 30 December 2022.
Profitability
Components of Adjusted Profit and reconciliation to IFRS Profit
Amounts in £m
Shopping Centres – Investment Assets: Net Rental Income
Shopping Centres – Investment Assets: Interest payable
Shopping Centres – Investment Assets: Contribution
Shopping Centres – Managed Assets: Contribution3
Snozone EBITDA (indoor ski operation) profit/(loss)
Central Interest net of investment income
External management fees
Central operating costs
Variable overhead
Current Year Tax credit
Adjusted Profit
Adjusted Earnings per share (pence)2
Reconciliation of Adjusted Profit to statutory result
Adjusted Profit
Property revaluation
(Loss)/Profit on disposal
Snozone depreciation and amortisation
Snozone notional interest (net of rent expense within EBITDA)
Gain/(loss) on financial instruments
Corporation Tax charge in lieu of dividends
VAT rebate within Snozone
Long-Term incentives
Gain on discounted loan purchase (net of costs)
Other items (including transaction costs)
Loss for the period
Year to
December 2021
Year to
December 20202
21.5
(10.8)
10.7
2.1
0.8
(0.2)
2.4
(6.8)
(0.9)
–
8.1
6.7p
8.1
(49.2)
(2.5)
(2.5)
0.5
5.9
(3.1)
1.4
(0.9)
18.4
(2.5)
20.2
(11.4)
8.8
8.3
(1.7)
0.1
2.3
(7.0)
–
0.2
11.0
10.2p
11.0
(208.3)
0.4
(2.2)
1.5
(5.0)
–
–
(0.4)
–
(0.9)
(26.4)
(203.9)
1 EPRA figures and a reconciliation to EPRA EPS are shown in Note 9 to the financial statements.
2 The 2020 results have been restated for a prior year adjustment of £0.5 million resulting from the treatment of Software as a Service (SaaS)
configuration costs as explained in Note1 to the financial statements. Adjusted Profit has also been restated to reflect a change in the presentation of
Snozone results following the adoption of IFRS16.
3 The 2020 results reflect the £4.0 million benefit of surrender premiums received.
32
capreg.com Adjusted Profit – 30 December 2021: £8.1 million
(30 December 2020: £11.0 million)
Shopping Centres – Investment Assets: Net Rental
Income was £21.5 million compared to £20.2
million in 2020 driven by lower bad debt charge net
of rent concessions of approximately £1.3 million.
Interest payable reduced reflecting the reduction
in debt following the restructuring of the Mall loan
facility that completed in November 2021.
Shopping Centres – Managed Assets: Contribution
fell from £7.8 million to £2.1 million primarily as a
result of the 2020 numbers including a £4.0 million
benefit from a surrender premium in respect of a
major unit in Luton.
Snozone EBITDA was £0.8 million compared to
a £1.7 million loss in 2021. Snozone was unable
to trade in the UK until the 12 April 2021 and
social distancing requirements impacted services
thereafter, although results were supported
by the benefit of a £2.5 million pandemic
insurance payment.
Central operating costs fell from £7.0 million to
£6.8 million reflecting efficiency improvements
to the central cost structure. Variable overheads
include bonuses which were not paid in 2020.
Adjusted Earnings per Share for the period
were 6.8 pence (30 December 2020: 10.2 pence)
reflecting the fall in Adjusted Profit and the higher
number of shares for part of the year following the
equity raise completed in November 2021.
IFRS loss for the period – 30 December 2021:
£26.0 million (30 December 2020:
Loss of £204.1 million)
The key elements driving the overall loss for
the period of £26.0 million outside of Adjusted
Profit were:
• Property revaluation loss of £49.2 million
(2020 – £208.3 million). The rate of decline in
property valuations slowed in the first half
of the year relative to 2020. Valuations were
then broadly stable in the second half of 2021
as detailed in the Property Portfolio Valuation
section below.
The loss on disposal of £2.5 million (2020 –
profit of £0.4 million) relates to the difference
between the sale prices of the Edmonds
Parade and Maidstone House offices assets
and the valuation at the start of the period.
The gain on financial instruments
of £5.9 million (2020 – loss of
£5.0 million) is a result of the
revaluation of interest rate swaps
reflecting movements in future
interest rate expectations.
•
•
• A £3.1 million Corporation Tax charge
arising from the Company having not met
the minimum PID distribution requirements
following the suspension of the dividend since
June 2020.
• A receipt of £1.4 million in Snozone following
a favourable ruling over the VAT treatment of
revenue related to lift passes.
•
The £18.4 million gain (after costs) on the
discounted loan purchase arose from acquiring
£100 million of debt in respect of the Group’s
Mall loan facility for a discounted amount of
£81 million.
Dividends
No interim dividend was paid in 2021
(2020: nil).
Mindful of having recently raised new
equity and to help reduce debt levels and
maximise cash flexibility, the Group has
taken the decision not to declare a final
dividend. It is the Company’s intention to
resume paying dividends from the second
half of the financial year ending 2022, in line
with its previous dividend policy which was
to distribute on a semi-annual basis (in the
approximate proportions of 45/55 and in
that order in respect of each financial year)
not less than approximately 90 per cent of
the Company’s EPRA earnings.
A UK REIT is expected to pay dividends (PIDs)
of at least 90 per cent of its taxable profits
from its UK property rental business by the
first anniversary of each accounting date. As
a consequence of not having paid a dividend
since the final dividend for the year ending
30 December 2019, which was paid in June
2020, the Group did not meet the minimum
PID distribution requirement for 2019 or
2020. The Group had agreed with HMRC a
12-month extension to the 2019 deadline
until the end of 2021 but, having not paid a
dividend during 2021, the Group paid £2.5
million in December 2021 to settle the tax
outstanding on the estimated shortfall of
approximately £13 million in respect of the
2019 and 2020 financial years. This brings
the Group effectively up to date in its REIT
compliance.
At 30 December 2021, the Company does
not have sufficient distributable reserves to
declare a dividend. The Company plans to
undertake a capital reduction exercise for
which it will seek shareholder approval
at the 2022 AGM in order to create
sufficient distributable reserves.
33
Read more about
our financial
performance on
pages 122 to 161
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Financial Review CONTINUED
Balance Sheet
Property portfolio valuation
Property at independent valuation
Blackburn
Maidstone
Walthamstow
Wood Green
Ilford
Investment Assets
Luton
Hemel Hempstead
Managed Assets
30 December 2021
30 December 2020
£m
38.2
36.2
100.4
148.9
56.4
380.1
82.5
10.5
93.0
NIY %
12.10%
10.44%
5.84%
7.33%
5.86%
7.78%
11.00%
12.49%
10.66%
NEY %
13.24%
11.22%
6.55%
6.88%
7.99%
8.64%
11.05%
18.20%
12.63%
£m
40.6
46.0
106.6
158.0
60.0
411.2
92.5
23.3
115.8
NIY %
13.17%
10.67%
5.17%
6.71%
5.30%
7.28%
9.8%
10.00%
9.80%
NEY %
12.23%
10.75%
6.15%
6.43%
7.49%
7.99%
9.50%
12.69%
10.65%
The valuation of the Investment Assets portfolio was £380.1 million, at 30 December 2021. Adjusting for the sale of the Maidstone
House office block for £7.1 million that completed in December 2021, this represented a decrease of 5.7% from 30 December 2020.
Having suffered a decline of 6.4% in the first half of 2021, valuations stabilised from 30 June 2021 with the second half of the year seeing
a 0.8% improvement on a like-for-like basis.
The valuation of the Group’s Managed Assets fell from £115.8 million at 30 December 2020 to £93.0 million at 30 December 2021, a fall
of 15.8% adjusting for the sale of the Edmonds Parade block within Hemel Hempstead that completed for £4.65 million in June 2021.
Mall debt restructuring and equity raise
On 12 November 2021, the Group completed a restructuring of its Mall loan facility.
The Mall Facility had comprised of a £265 million debt facility with RBS and TIAA secured over the Four Mall Assets, being the Mall
Blackburn, the Mall Maidstone, the Mall Wood Green and the Mall Walthamstow. TIAA previously held a balance of £165 million
and RBS a balance of £100 million. Under the restructuring, the Group acquired the £100 million of debt outstanding with RBS for a
principal amount of £81 million, representing a discount of £19 million.
This was funded through a combination of:
•
TIAA agreeing to acquire from the Group £35 million of the RBS Debt acquired for £35 million, increasing its lending in the facility
to £200 million;
• An equity raise of £30 million (before costs) that completed on 5 November 2021; and
•
Existing cash resources of £16 million.
In effect, this meant the Group acquired £65 million of debt for £46 million hence an effective discount of c.29%. The transaction
resulted in a one-off gain of £18.4 million, being the benefit of the discount less directly associated costs.
Net Asset Value
Over the year, Net Asset Value increased from £167.1 million to £168.4 million due to the impact of the new £27.1 million of equity
raised (net of costs) and the overall loss for the year of £26.4 million. On a per share basis, Basic NAV per share and EPRA NTA per
share were each 102p, representing declines of 48p and 55p respectively due to the dilutive impact of the enlarged share base
(December 2020: 150p and 157p respectively).
Financing
The Group has taken critical action during the year to bring down debt levels by refocusing the portfolio, completing the restructuring
of its largest debt facility and raising £30 million of new equity. In combination, this has resulted in Net Loan to Value reducing to 49%
at the year-end from 65% at 30 December 2020 and 72% at 30 June 2021.
Excluding Hemel Hempstead and Luton, where all assets and liabilities have been reclassified as “Held for Sale” at the year-end (as
detailed above), the Group has two non-recourse asset secured loan facilities being The Mall and Ilford as detailed in the table below.
30 December 2021
The Mall
Ilford
Central Cash
On balance sheet debt
Debt¹
£m
200.04
39.0
–
239.0
Cash²
£m
(17.2)4
(4.0)
(32.5)
(53.7)
Net
debt
£m
182.8
35.0
(32.5)
185.3
Loan to
value3
%
Net debt
to value3
%
62%
69%
–
63%
56%
62%
–
49%
Average
interest
rate
%
3.93
2.76
n/a
3.74
Duration
to loan
expiry
Years
Duration
with
extensions
Years
5.1
2.2
n/a
4.6
6.1
2.2
n/a
5.4
Fixed
%
82.5
100
n/a
85
1 Excluding unamortised issue costs.
2 Excluding cash beneficially owned by tenants.
3 Debt and net debt divided by investment property at valuation.
4 On 11 January 2022, £7.1 million of cash, being the proceeds from the Maidstone House office sale, was applied to reduce the debt outstanding.
34
capreg.com The Mall
Following the restructure that completed in
November 2021, the Mall facility consists of two
tranches both held with TIAA:
•
•
Facility A – £165 million fixed rate loan at 3.45%
Facility B – £35 million floating rate loan at
SONIA +6%.
The two facilities mature in January 2027 but have
one-year conditional extension options. Facility
B, which was drawn to assist with funding the
acquisition of the previous RBS facility, has no
early repayment penalties. The loan was reduced
by £7.1 million to £27.9 million on 11 January 2022
using the proceeds from the Maidstone House
disposal that were received in late December 2021.
As part of the November 2021 restructuring of
the facility, TIAA provided a waiver of all financial
covenants for two years until November 2023.
Cash trap provisions within the loan agreement
have also been modified for 18 months until
May 2023.
Ilford
The Group has a £39 million facility secured on the
Ilford Exchange shopping centre with Dekabank
Deutsche Girozentrale. The loan is fixed at an all-in
rate of 2.76% and is due to mature in March 2024.
The Group has an existing covenant waiver
that expires in April 2022. Discussions are
well-advanced with the lender to agree a
longer-term modification of the covenants,
covering at least the next 18 months, linked to
funding the major asset management initiatives
at the asset, being the planned medical centre
and the re-letting of the Debenhams anchor unit.
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 2021, 7,690,574 of
the Company’s shares were held on the JSE share
register, representing 4.7% of the total shares in
issue.
STUART WETHERLY
GROUP FINANCE DIRECTOR
35
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Managing Risk CONTINUED
Risk Management Approach
The Audit Committee is delegated the
authority for overseeing the effectiveness
of the risk management process by the
Board and is accountable for reporting
on the identification of principle and
emerging risks to the business. Ultimate
responsibility for the oversight of risk
management within the Group remains
with the Board. The Board defines the risk
appetite of the Group, establishes a risk
management strategy and is responsible
for maintaining a robust internal controls
system. The Board formally reviews and
signs off the Group’s risk register on a
six-monthly basis. Emerging risks are
considered as part of this process or on
an ad hoc basis in instances, such as the
outbreak of the Covid-19 pandemic, where
the risk is of sufficient significance to
require a separate discussion.
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.
At every half-year and year-end, the members of
senior leadership undertake a comprehensive
risk and controls review involving interviews with
relevant management teams. This considers a
review of both the existing identified risks and
any new or emerging risks that may have been
identified during the period. The output of this
process is an updated risk map and internal
control matrix for each component of the
business, which is then amalgamated into the
Group risk map and matrix that is reviewed by the
senior leadership team. Formal submission is then
made to the Audit Committee for review, before
going to the Board for final sign off. The process
for the half-year and full-year 2021 review 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 2021.
36
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
capreg.com
Principal risks at 30 December 2021
Overall, the principal risks broadly remain unchanged at 30 December 2021, but the pervasive and
ongoing impact of the pandemic has increased the significance and likelihood of further Economic
Environment risk due to macroeconomic factors, particularly with regards to rising inflation,
income tax and energy market volatility. The potential significance of People & Skills risk is viewed
to have increased reflecting the growing strain on the retail sector and changing priorities of the UK
workforce. Responsible Business risk had been renamed as Environmental, Social & Governance
risk to align with the shift in focus of the ESG Committee. We consider the potential significance
has increased reflecting the growing focus on environmental matters and reporting. The potential
significance and likelihood of Treasury and Business Disruption risk, while remaining high risks,
were both considered to have reduced relative to their June 2021 position, reflecting the recent
restructuring of the Mall debt facility, reducing Group LTV, and the operating platform that has
been established to mitigate major incidents, in response to Covid-19. Investment Market risk,
although remaining a higher significance, has been viewed to have reduced in likelihood to reflect
the signs of stabilisation of the portfolio’s asset values.
Potential emerging risks have also been considered, including the effects of climate change on
our operations and supply chain and the impact of mandatory TCFD Disclosures on regulatory
reporting. This has led to pulling out Climate-related risk as its own individual principal risk.
Covid-19 remains a potential risk and sits within our Business Disruption from a Major Incident 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.
37
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Managing Risk CONTINUED
1. Property investment
2. Impact of the
market risks
economic environment
3. Treasury risk
Risk
The increased weakened economic
environment and poor sentiment in
commercial and/or retail real estate
markets has led to low transactional
evidence across the industry with
reduced investor confidence and the
gradual decline in valuations.
Valuations can be inherently subjective
leading to a degree of uncertainty and
the risk that property valuations may
not reflect the price received on sale.
Impact
Small changes in property market
yields or future cash flow assumptions
can have a significant effect on
valuations.
The impact of leverage could magnify
the effect on the Group’s net assets
and we risk of breaching loan
covenants with our lenders. This could
result in the default of facilities and
should we not be able to cure these,
we run the risk of security being
enforced.
Highly volatile trading environments
have the potential to increase the
speculation on Property valuations
and are open to a wider range of
possible outcomes.
Mitigation
Regularly monitoring market direction,
comparable property valuations in the
market and recent transactions.
Adequate and timely forward planning
of investment decisions.
We engage multiple experienced,
external valuers who understand the
specific properties and whose output
is reviewed and challenged by internal
specialists.
Regular reviews and consideration
of strategies to reduce debt levels, if
appropriate.
Trend relative to last year
Risk
The Group is sensitive to tenant
insolvency and distress, which can
have increased pressure on rent
levels. There is also risk of prolonged
low tenant demand for space.
Impact of Covid-19 has had a
negative effect on general retail sales
increasing risk of administrations and
insolvencies.
Macroeconomic risks in relation to
rising inflation, income tax and the
volatility of the energy market (and
associated costs of energy) are likely to
negatively impact consumer spending,
which will impact retailing, particularly
discretionary spending.
Rising inflation will also put pressure
on the Group’s cost base and
operating margins.
Impact
Economic pressure on consumer
spending will likely impact the levels
of footfall across the centres and have
a knock-on effect on discretionary
retail tenants.
Tenant failures and reduced tenant
demand could adversely affect rental
income, lease incentive, void costs, cash
and ultimately property valuations.
Mitigation
A key part of our Group strategy is to
ensure a large, diversified tenant base
that is made up of primarily non-
discretionary retail.
Review of tenant covenants before
new leases are signed.
The offering of long-term leases as
standard and maintaining active and
personable credit control processes
that foster positive relationships with
tenants.
Regular dialogue between the
support office and general managers
across the portfolio, who have ad
hoc discussions with tenants, to
understand the issues facing tenants
and customers.
Managing void units though
temporary lettings and other
mitigation strategies.
Trend relative to last year
Risk
The Group is at risk of not being able
to fund the business or to refinance
existing debt on economic terms,
particularly during periods of low
lending market appetite.
Breach of the assets loan covenants
resulting in defaults on debt and the
potential for accelerated maturity
and/or lenders taking control of
secured assets.
Exposure to rising or falling interest
rates, which could affect liabilities on
property sales and refinancing.
Impact
The Group may not be able to meet
financial obligations when they come
due, causing limitation on financial
and operational flexibility.
The cost of financing could be
prohibitive.
Unremedied breaches of loan
covenants can trigger demand for
immediate repayment of loan facilities.
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.
Options of asset sales and assessing
the cost of breaking debt is considered
before undertaking property
transactions.
All the Groups facilities are non-
recourse and outside of SPV
structures.
Trend relative to last year
38
capreg.com Key
Increase
No change
Decrease
4. Tax and regulatory risks
5. People & Skills
6. Development risk
Risk
As a small business, there is a
relatively small number of key
individuals whose skills are depended
on to operate the business effectively.
Retaining these individuals cannot be
guaranteed.
The attraction of new talent to the
business with the right expertise
cannot be guaranteed.
Impact
The loss of key individuals or an
inability to attract new employees
with the appropriate expertise could
compromise the business’s ability to
operate efficiently.
Mitigation
Paying current and new employees
market salaries and offering
competitive incentive packages,
including the use of incentive plans.
Promoting positive working
environments and culture in line with
staff expectations.
Effectively maintaining a Succession
plan for key positions and
departments.
Trend relative to last year
Risk
Exposure to non-compliance with the
REIT regime and changes in the form
or interpretation of tax legislation.
Potential exposure to wider changes
in tax legislation and potential
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 causing significant
financial loss.
Failure to comply with tax or
regulatory requirements could
result in loss of REIT status, financial
penalties, loss of business or
reputational damage.
Mitigation
Constantly monitoring the Group’s
REIT compliance and consideration of
the effects of major decisions on REIT
status.
Expert advice is taken on tax positions
and checks conducted on any unusual
matters that may arise.
Maintaining regular dialogue with the
tax authorities and business groups.
Actively keep key staff up to date
with regulation and ensure necessary
policies and procedures are in place.
Expert advice taken on complex
regulatory matters.
Trend relative to last year
Risk
The costs involved with development
projects overrunning and delays
leading to extended completion times
past expected deadlines.
The threat to the Group’s property
assets of competing in-town and
out-of-town retail and leisure
schemes.
Impact
Increased costs and reputational
damage which may lead to planned
value not being realised.
Competition with other schemes may
reduce footfall and reduce tenant
demand for space and effect the levels
of rents that can feasibly be achieved.
Mitigation
Use of experienced external
project coordinators to oversee
developments with staged execution
to key milestones and updates to be
monitored by steering committees
with the Group.
Implemented well-defined approval
processes for new development
projects and guidance provided for
setting key milestones.
Partnered with external agencies
to raise awareness of new planning
proposals, which are fought, as
necessary, in accordance with relevant
planning laws.
Maintain close working relationships
with local councils and promote
willingness to support the community.
Maintain the flexibility to invest in
marketing strategies to continue
relevance in the market.
Trend relative to last year
39
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT
Managing Risk CONTINUED
7. Business disruption from
8. Environmental, Social
a major incident
& Governance
9. Customers & changing
consumer trends
Risk
Major incidents occur at any of the of
the business’s sites having a significant
impact upon trading.
This includes specific incidents
to a centre or trading location or
a situation such as Covid-19 that
impacts trading on a national scale.
Impact
Such events could cause a reduction in
earnings and additional costs.
Exposure to reputational damage if
the business acts, or is perceived to
have acted, in a negligent manner.
The impact of the pandemic has had
a significant impact on customer
behaviour and habits. There is a
risk that consumer habits have
permanently changed and will impact
business KPIs, such as footfall and
leasing.
Mitigation
Trained operational personnel at all
sites and documented major incident
procedures.
Regular update meetings on
operational procedures reflecting
current threats and major incident
testing runs.
Risk
The Group’s activities may have an
adverse impact on the environment
and the communities in which
we operate.
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 relevant
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 and actions considered by the
Board, through regular reports from
the ESG Committee and its designated
sub-committees.
Ensuring centres and support office
are compliant with Covid-19-secure
requirements.
Appointed ESG specialist to assist
the business in mapping out its ESG
roadmap and key milestones.
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.
Increased use of CVAs by retailers
as a means of restructuring or cost
reduction.
Impact
Changes in consumer shopping habits
towards online shopping and home
delivery could reduce footfall and
therefore potentially reduce tenant
demand and the levels of rents which
can be achieved.
Financial loss from tenants, use and
reliance on CVAs to both write off
arrears and reset lease agreement
terms.
Mitigation
Strong location and dominance of
shopping centres (portfolio is weighted
to London and Southeast 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.
Maintaining positive retailer
relationships and providing for honest
and open dialogue.
Specialist health and safety
compliance manager in place with
internal bespoke health and safety
system to enable incident reporting
and monitoring.
EPC rating certificates are completed
across the portfolio.
Ensuring centres and support office
are compliant with Covid-19-secure
requirements.
Monitoring key business metrics such
as footfall, retail trends and shopping
behaviour.
Ensuring retailers comply with
Covid-19-secure requirements with
periodic inspections to ensure tenant
compliance.
Trend relative to last year
Trend relative to last year
Regular liaison with the police and
environmental health officers.
Insurance for business disruption and
rebuild is always maintained across
the portfolio.
Disaster recovery sites have been
mapped and are maintained in the
event of immediate needs.
Trend relative to last year
40
capreg.com Key
Increase
No change
Decrease
10. IT and Cybersecurity
11. Climate‑related
12. Health & Safety
Risk
In light of the introduction of TCFD
Disclosure requirements, the impact
of climate change has become a
Board-level issue.
Risk
The risk that the Group’s staff,
customers or guests suffer illness,
injury or fatality at one of the
Group’s operations.
Risk
Failure of, or, as a result of
malicious attack on, the Group’s
information technology hardware
and software systems.
Failure to continually keep up with
best practice and invest in new
technology.
Impact
Loss of operating capacity, business
time or reputational damage.
Data breaches resulting in reputational
damage, fines or regulatory penalties.
Mitigation
IT Security Governance Policy in place
aligned with ISO27001.
Ongoing investment in technology
infrastructure with key IT applications
hosted off site.
As a result of COP26, the world stage is
focused on combatting climate change
and businesses that fall behind on
their efforts to mitigate their effect on
the climate run the risk of becoming
non-investable.
Impact
The Group’s failure to act on
environmental issues could lead to
reputational damage, deterioration
in customer and community
relationships, or limit investment
opportunities. Climate-related risks
extend to the global supply chain,
business disruption from extreme
weather events.
Systems in place to prevent and react
to malicious attack.
Failure to comply with regulations
could result in financial exposure.
Regular penetration testing carried out
by a specialist security company.
Cyber Essentials Plus certified.
Information security training
programmes in place to regularly
upskill all employees. A strong
password policy is in place to keep
employees safe.
Maintenance of a disaster recovery
site in the event of critical systems
failures.
Insurance for all IT hardware and
software is maintained at all times.
Trend relative to last year
Mitigation
Environmental policy in place and
consistent with ISO14001.
Management of and compliance with
the Carbon Reduction Commitment
and compliance with the Carbon Trust.
Engaged with external agency, JLL, to
assist with setting out framework to
assess climate-related risks.
Separate risk matrix to be created
specifically on climate-related risks
that will feed into Group risk review
and ESG Committee reporting to the
Board.
Nominated individual from SLT to take
oversight responsibility of climate-
related issues.
Board has oversight of TCFD climate-
related goals and targets through
quarterly ESG reporting.
Trend relative to last year
New
Impact
If found to be as a result of failing
processes or negligence, the Group
and/or individuals in management
positions could face criminal charges,
financial loss and reputational
damage.
Mitigation
Regular risk assessments.
Sharing of information with local
Health & Safety Executive.
Capacity limits agreed with Health &
Safety Executive and reviewed with
external lawyers.
Training for staff by Health & Safety
Executive.
Insurance review meetings with
insurance brokers.
Ensuring sites are compliant with
COVID-Secure requirements.
Trend relative to last year
New
41
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT
Managing Risk CONTINUED
Going concern
Under the UK Corporate Governance Code and
IAS 1– Presentation of Financial Statements, 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 30 December 2021, the Group had total cash
at bank on balance sheet of £53.7 million, which
is equivalent to more than the Group’s annual
Contracted Rent. This excludes cash held within
the Hemel Hempstead and Luton structures, which
has been reclassified as assets held for sale. Of the
£53.7 million, there was £31.6 million held centrally
and free of any restrictions. This provides a
significant cash contingency to cover any disruption
to operations for an extended period of time.
As part of the restructure of The Mall debt facility
that completed in November 2021, the lender
provided covenant waivers that run until November
2023 and modifications to cash trap provisions that
run until May 2023. The completion of The Mall
debt restructuring and equity raise has addressed
the concerns that led the Directors to conclude
that there was a material uncertainty over Going
Concern at the time it published its half-year results
in September 2021.
On the Ilford facility, as noted, the Group is in
advanced discussions to agree a package of waivers
and covenant relaxation to cover at least the next
18 months, linked to supporting the funding of
major asset management initiatives at the asset
through central cash. The Mall loan facility matures
in January 2027, while Ilford matures in March 2024.
All of the Group’s asset-backed loan facilities are
ring-fenced within their own SPV structures with no
recourse to Capital & Regional plc and no cross-
default provisions. The Group is working with the
lenders on its Hemel Hempstead and Luton loan
facilities on a disposal of the investments. While
this is almost certain to realise less than the value
of the debt outstanding, due to the ring-fenced SPV
structure, the net liability of Capital & Regional plc is
effectively capped at nil.
In making its assessment of Going Concern, the
Group has run updated forecasts on both a base
case and downside basis. In the latter, the Group
has sensitised rent collection by 5%, reduced car
park and ancillary income by 10% and removed
any contribution from Snozone to reflect how
a downturn in expected trading, such as might
be caused by a further wave of Government
restrictions, could impact cashflows. The Group’s
analysis projects that the central cash maintained
provides sufficient funds to cover the potential
operational disruption. The Group has also
considered what would happen in what it views
as the unlikely event that agreements to extend
covenant waivers and/or relaxation on its Ilford
facility are not reached. In such a position, the
Group could, in the event the covenants are not
compliant, be faced with a decision whether to
cure the facility or risk the loan defaulting. The
Group anticipates making capital investment into
Ilford over the next two years that is in excess of
income generated and hence from a Going Concern
perspective in a scenario where the loan defaulted
Group central cash would increase versus the
Group’s base case projections.
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 reduce debt levels 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 continue to suspend dividend
payments (or offer a Scrip alternative); 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.
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 2023. Two years has been
selected at this year-end given the continuing
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. It
includes sensitivity analysis to consider adverse
scenarios that could be caused by the principal risks
and uncertainties outlined in the Managing Risk
section below. This incorporated the impact on cash
and covenant compliance of further significant falls
in property valuations or property income. None of
the facilities in respect of the Group’s Investment
Assets 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 above. 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 2023.
42
capreg.com
Stock Code: CAL
43
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Our Stakeholders
With a focus on shopping centres with a community focus, inevitably our stakeholders are at the heart of our strategy and business
model. Setting our strategic outlook and, in turn, ensuring our long-term success as a business relies on engaging with all our
stakeholders to understand their changing needs. Decisions made by the Board will not satisfy the broad and varied desires of the
Group’s stakeholders, as at times, the interests and impacts of our stakeholder groups conflict. The Board aligns decision-making
to the Company’s purpose, values and strategy. The Board remains committed to considering the impact of key decisions on the
Group’s stakeholder groups and to ensure open dialogue.
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 as the strategy of the Group is focussed on medium to long term returns and, as such, the long term is
firmly within the sights of the Board when all material decisions are made; the interests of stakeholders, the impact actions have on
the communities in which we operate and the environment (see more on this within the ESG Report on pages 48 to 63); maintaining
high standards of business conduct through ensuring good governance is instilled from a top-down approach (see more of this in our
governance report on pages 67 to 110); 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
Our Community
What matters
• Opportunities for career and personal development
What matters
• Outstanding customer service
•
Fair and equitable pay and benefits
• Robust Covid-secure measures in place
• An inclusive and diverse environment with a respectful
• Affordable rents and service charge
corporate culture
• Centres that drive footfall and adapt to meet the needs
• Open and transparent communication
of a changing market
•
•
Enhanced support and communication while working
from home
To share their views and have their voice heard in
decision-making
How we engage
•
Intranet; all-staff emails; weekly CEO updates and regular
Town Hall meetings
• Posters and communications
• Whistleblowing procedures
•
Employee surveys that provide option for further
clarification of needs and desires
• 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
• Wellbeing Committees
• Regular visitor surveys
• Regular one-to-one performance reviews between
line manager and employee to ensure career
personal satisfaction
• Provision of necessary equipment to work best while remote
work is in place
• Regular audits of facilities management and
operational standards
•
Strong engagement with local and central governments
and Business Improvement Districts
• Partnering with industry organisations such as retailTRUST
• Designated NED, Laura Whyte, attends staff events
and REVO
throughout the year to gain insight and report on this
back to the Board
•
Supporting local charities and organisations through our
C&R Cares programme
How we respond
•
The Board receives periodic reports on a range of
people matters
• Although postponed for the most part of the year, the Board
usually has the opportunity to meet with staff at all levels in
the organisation when making site visits across our business.
The Board are keen to resume this as soon as possible
•
•
The Board reviews employee engagement through
employee surveys and follows up the actions taken
The Board considered the impact on current employees
when making strategic decisions
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 reviews and approves 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
with our people on pages 56 to 58
Read more about how we engage with
our community on pages 60 to 63
44
capreg.com Our Shareholders and
business partners
What matters
• Robust financial accounts
• Delivering income and capital growth
• Dividend payments
•
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 how we engage with our
shareholders on pages on page 71
The Environment
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 with the
environment on pages 49 to 55
45
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Our Stakeholders CONTINUED
Principal decisions
Reducing Group Debt
During the year, the Board considered the
critical need to reduce the Group’s loan to
value ratio, which stood at 72% at 30 June
2021, making Capital & Regional an outlier
in comparison to its real estate peers and
reliant on covenant waivers across each
of its four secured debt facilities. The
challenges of the position were reflected in
the conclusion that a material uncertainty
existed in respect of Going Concern at
the time it published its half year results in
September 2021.
Discussions with the two lenders on the Group’s
largest loan facility, The Mall, presented the
opportunity for the Group to acquire the
outstanding £100m debt balance from Royal
Bank of Scotland, at a 19% discount with the
facility’s second lender, TIAA, part-funding the
acquisition with an additional facility of £35m.
The combination of this, together with raising
£30 million of new equity enabled the Group to
significantly reduce debt while mitigating the
dilutive impact of raising new capital.
The proposed transactions were announced on
14 October 2021, including confirmation that
Growthpoint, the Group’s largest shareholder,
would underwrite the equity raise.
The Board has also considered the position of its
Hemel Hempstead and Luton centres given the
position whereby in both cases the value of the
property has fallen significantly below the level of
the debt outstanding. The Board took the decision
at 30 June 2021 to classify these two assets as
“Managed Assets” reflecting that it no longer had
any equity left in the investments and therefore
the substance of the Group’s involvement was as
a manager. Reflecting further discussions during
the second half of the year with the respective
lenders, the Board made a decision towards the
end of the year to seek to dispose, in whole, or in
part, of the investments. This culminated in the
two centres being reclassified as “Held for Sale” as
at 30 December 2021.
The effect of the above activities, combined with
the disposal of the Maidstone House office block
in December 2021, has seen the Group reduce net
LTV from 72% at 30 June 2021 to 49% at year-end.
Consideration of stakeholders
With regards to the capital raising, the
Board were particularly keen to ensure that
all shareholders could participate, being
the reason for moving forward with the
Open Offer structure. Due care was given
to the potential dilutive value of the capital
raise on existing shareholders and careful
consideration was given to the price at
which the new equity was raised and it being
around the same level as the prevailing
share price to mitigate the impact on those
shareholders who chose not to participate.
The Board were committed to bringing the
Group back to a stable platform to allow
for growth. If the Mall debt restructure and
capital raise had not gone ahead, it would
likely have cast uncertainty over the future
of the business, and in turn, employee and
stakeholder stability.
Clearly, the potential disposal of two of
the Group’s assets could have a significant
impact on key stakeholders. The decision
to pursue sale transactions was made
following detailed discussions with the
respective lenders and reflecting the capital
constraints of the business and based on the
challenging economic rationale for investing
further equity. The Board remain committed
to seeking out the most beneficial
resolution for the assets from both an
economic perspective and in respect of
the communities that the assets serve
and the Group’s employees who are
involved in managing and running
these centres.
Read more about our
efforts to refocus,
restructure, and
recapitalise on
page 12
46
capreg.com
Principal decisions
Final Dividend for Year Ended 2021
The Board discussed during the year the
position as regards dividend payments.
As a result of the significant reductions to the
Group’s revenues and, therefore, cash flows,
during the Covid-19 pandemic, coupled with
restrictions in the Group’s banking facilities, the
Company paused cash dividend payments in
2020. As a result of restructuring the Mall debt
facility, restrictions to passing cash flow up to
the Company from its core Mall Facility will be
removed. Therefore, assuming rental income
returns to a normalised basis, the Company
should be capable of distributing limited cash
dividends to shareholders during the second half
of the financial year ending 30 December 2022.
The Company will target a sustainable dividend
pay-out ratio and distribute on a semi-annual basis
(in approximate proportions of 45/55 and in that
order in respect of each financial year) not less
than approximately 90% of the Company’s EPRA
earnings, in line with the Company’s requirements
to distribute at least 90% of its taxable profits
under the REIT regime. The Board considered
that the Company’s REIT status was dependent
on resuming the dividend and that considerable
shortfall in meeting the Company’s minimum PID
requirement had been accumulated since 2019.
As the pandemic continued to place pressure on
business operations and in light of the recent
capital raise on the Mall debt restructuring,
the Board thought it prudent to postpone the
revival of the dividend and to retain considerable
cash reserves in an effort to aim off for further
disruption and to fund any capital expenditure
that would add value to the portfolio.
The Group paid £2.5 million in December 2021 to
settle the tax outstanding on the estimated PID
shortfall of £13.0 million in respect of the 2019 and
2020 financial years. This brought the Group up to
date with its PID obligations and HMRC confirmed
it would not view the failure to meet the minimum
PID distribution requirements as a serious breach
of the REIT legislation confirming its ongoing
REIT compliance.
Consideration of stakeholders
The primary consideration for shareholders
was in relation to the Company’s objective
to return to operating in line with UK REIT
requirements and resuming the distribution
of cash dividends in respect of the second
half of the financial year ending 2022.
The Group maintain an ongoing dialogue
with HMRC on its REIT status and around
the requirements to remain compliant.
Ensuring the Group operates as an efficient
and compliant REIT member is paramount.
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 and
restructuring plans across the Group;
and employee support and
wellbeing.
Read more about
this on page 33
Stock Code: CAL
47
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT ESG Report
Introduction
Throughout 2021, we made strides at Capital &
Regional (C&R) to further embed sustainability
principles throughout our business and ensure that
operating responsibly continues to be at the heart
of who we are and what we do.
Our Environment, Social and Governance (ESG) approach, overseen by the
ESG Committee, is aligned with our business strategy and plays a critical role in
driving our resilience and financial performance whilst addressing the increasing
expectations of our stakeholders. The ESG Committee made a significant impact
in its first full year of operation through its increased accountability across the
business, quarterly reporting and continuous efforts to identify where ESG
principles can be further rooted into the everyday operations of the Company.
This year, to strengthen and support our sustainability activity even further, sub-
committees were created for Environment, People and Community. These three
workstreams focus on the specific targets for each pillar, enabling us to move
further and faster. It marks a significant step change in how C&R views, and is
managing, sustainability as a business.
Environmental, Social and
Governance Committee
Laura Whyte
NON‑EXECUTIVE DIRECTOR –
CHAIR
Katie Wadey
NON‑EXECUTIVE DIRECTOR
Lawrence Hutchings
CHIEF EXECUTIVE OFFICER
Sara Jennings
DIRECTOR OF GUEST AND
CUSTOMER EXPERIENCE
Nick Phillips
MANAGING DIRECTOR OF
SNOZONE
Kate Thursfield
NATIONAL GUEST EXPERIENCE
MANAGER
Nikki Jones
HR DIRECTOR, SNOZONE
Alanna Henry
HR CONSULTANT
Stefan Fletcher
ASSISTANT COMPANY SECRETARY
Today, there
is a ribbon
of ESG
that flows
throughout
the entire
business.
It’s not just
one separate
area. In
everything
we do, we
challenge
ourselves to
make sure
we consider
the ESG
impact.
SARA JENNINGS
DIRECTOR OF
GUEST & CUSTOMER
EXPERIENCE
ENVIRONMENT COMMITTEE
PEOPLE COMMITTEE
COMMUNITY COMMITTEE
48
capreg.com Environment
2021 has seen us continue our focus
on increasing efficiencies, reducing
consumption and expanding the
adoption of renewable energy sources.
Read more about Environmental
achievements and targets on
pages 52 to 55
-2%
reduction in
electricity
consumption
2,377 trees planted
by Snozone, resulting in the
reforestation of 3 hectares of
land and an offset of 600 tCO2
Recycling points
at every Snozone, shopping
centre and Support Office
-41%
reduction in
natural gas
consumption
Highlights for 2021
22
participants in
the Snozone
Cycle to Work
scheme
4
C&R
employees
became
mentors to
young people
through
STEP NOW
12
employees
completed the
Mental Health
First Aider
course
People
In 2021, we continued to engage,
develop and reward our employees and
provide them with a work environment
that supports their mental health
and wellbeing. We improved our
training opportunities and focused on
staying connected through increased
communication.
Read more about People achievements
and targets on pages 56 to 58
Community
In 2021, our centres have continued to play
a key role as a community hub, supporting
communities with Randox testing terminals
and through the launch of our Community
Wheel of Support initiative that actively
assists local projects to improve the
communities we serve.
Read more about Community achievements
and targets on pages 60 to 63
Supporting local businesses
As part of Haringey’s Good
Economy Recovery plan, Mall Wood
Green offered a vacant unit to Made
in Haringey, an 8-week pop-up shop
for local makers and creatives
163
hours hosting
community
events (40%
above target)
Best Sporting Venue
Snozone was voted “Best Sporting Venue”
for children and students learning outside
the classroom at the School Travel Awards
Stock Code: CAL
49
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT ESG Report CONTINUED
Our strategy
Putting ESG at the core
2021 marked the first year of our new overarching integrated
ESG strategy. Underpinned by clear policies, procedures and
measurable targets, our ESG strategy is focused on three
pillars: Environmental Sustainability, People & Community and
Governance.
To reflect our commitment to embedding sustainability throughout the
business, and to make that intention clear to all our people, guests, tenants,
suppliers and other stakeholders, this year we added it to the C&R core
values, as shown below. Our sustainability value underpins the four existing
ones and sets out the following intentions:
•
•
•
•
To take an active lead in developing and delivering sustainability within
our communities;
To continue to identify sustainable practices to manage our buildings
responsibly covering energy, water, mobility, telecommunications,
sanitation and waste management services;
To develop cultural ways of working that are obsessive about waste,
recycling and reducing our carbon footprint;
To play our part in an effective response to the urgent threat of climate
change, aligning with the 2015 Paris Agreement commitments reinforced
by COP26; and
•
To reach net zero by 2040.
In addition to signalling the importance of sustainability by making it a core
value, we have integrated ESG into our communications strategy, both
internally and externally. This ensures teams across all our shopping centres
and Snozone venues are aware of, and engaged with, our progress, while
the new ESG section on our website gives any interested external party or
organisation a transparent view of our journey and progress so far and the
targets we’ve set ourselves.
We are committed to
Mapping our future
We are proud of our achievements to date
and recognise that to drive a just transition
we must continue to actively engage with
our stakeholders and forge partnerships
with industry experts and support regional
and global initiatives. For instance, we are
members of the Better Buildings Partnership
(BPP) and signatories of the World Green
Building Council’s (WGBC) Net Zero Carbon
Buildings Commitment.
During 2021, C&R appointed external
property and sustainability experts JLL to
help establish and prioritise the actions
needed to meet our ESG targets and address
the pressing issues of the climate crisis.
We are developing our net zero carbon
strategy to produce a pathway in line with
the UK Green Building Council’s (UKGBC)
best practice recommendations and the
BPP’s Climate Commitment, quantifying
and prioritising the necessary emission
reductions out to our net zero carbon target
year and beyond. The net zero carbon
pathway will be published later in 2022
and will provide a clear and actionable
implementation plan, mapped against our
operations and businesses.
In 2022, we are also undertaking a business-
level and portfolio risk assessment to
identify the climate-related risks most
material to Capital & Regional. This will
support a greater understanding of the
impacts and opportunities of these
risks and inform our first response to
the Task Force on Climate-related
Financial Disclosures (TCFD)
this year.
Acting
with
integrity
Delivering
dynamic
solutions
Inspiring
creative
thinking
Encouraging
collaborative
engagement
Leading in
sustainability
within our communities
50
capreg.com
United Nations Sustainable Development Goals (SDGs)
To help us deliver a positive impact as a business, we have
aligned our sustainability strategy to the United Nations
SDGs, a globally recognised framework that forms a shared
global agenda for environmental improvement, social
empowerment and greater equality.
This framework will support us in tackling the biggest global
challenges. Our strategy is aligned with the seven SDGs that
are most material to our business operations. These are:
We want to ensure
healthy lives and
promoting wellbeing
for everyone, of
all ages.
We’ll do this by rolling out our
Wellbeing and Mental Health Policy
across the business; implementing
and monitoring all our Health &
Safety procedures and policies;
launching our Human Rights
Policy; and by ensuring all
employees, direct or indirect,
have safe working conditions
and access to health
services.
We want to
promote sustainable
economic growth
and decent work
for all.
We’ll do this through our Modern
Slavery Champion Programme,
Stronger Together; by supporting
local charities who work with
disadvantaged members of
society; by offering apprenticeship
opportunities across the business;
and by developing career
mentoring initiatives for the
youth in our communities.
We want to promote
lifelong learning
opportunities for all.
We’ll do this through our
Community Wheel of Support
initiative; by continuing to
partner with Step Now and
giving employees continuous
opportunities to improve their
job skills. Through education@
snozone, Snozone will support the
curriculum in and out of school
with their “good citizenship”
programmes and holiday
camps.
We want to provide
inclusive, safe and
resilient spaces
for all.
We’ll do this by continuing to
manage our buildings responsibly;
ensuring access to affordable
housing is included within our
residential developments; and by
ensuring we maintain access to
public spaces to improve wellbeing
and community cohesion.
We want to end
poverty in all its
forms, everywhere.
We’ll do this by recruiting, training
and employing local community
members; continuing to implement
our national minimum wage (NMW)
policy; ensuring our third-party
suppliers pay their staff fairly and
at NMW levels; and by ensuring
staff have access to essential
health care services as part
of their benefits.
We want to
promote gender
equality and
empower all women
and girls.
We’ll do this by being members of
Real Estate Balance; at Snozone,
by supporting Sports England’s
This Girl Can campaign; and by
establishing a zero-tolerance policy
towards all forms of violence
at work, including verbal and/
or physical abuse; levelling
up where there are gender
imbalances.
We recognise we
have to take urgent
action to combat
the impact of the
climate crisis.
To this end, we will play our part
in driving a just transition; we
will continually review the capital
investment plan for each venue
and centre, including switching to
renewable energy, water recycling
and waste reduction; spearhead
community green initiatives
and ensure each centre/
venue understands the
requirements to reach net
zero by 2040.
Stock Code: CAL
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Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT ESG Report CONTINUED
Environmental Sustainability
Reforesting the world
In August 2021, in a further effort
to offset our carbon footprint and
to help restore and regenerate
nature in areas where biodiversity
transformation is needed, Snozone
partnered with Tree Nation in their
mission to reforest areas of the
world where it is needed. Not only
does this offset Snozone’s carbon
emissions, it also helps restore
and regenerate nature in areas
where biodiversity transformation
is needed.
Snozone gifts two trees for every
membership purchased and for
every rebooking made after a Level
3 lesson. Snozone’s website is also
now carbon neutral as one tree is
planted for every 44,000 website
hits. Snozone planted 2,377
trees in 2021 (since commencing
this initiative in October), which
resulted in the reforestation of over
3 hectares of land and a total offset
of 600 tons of carbon dioxide.
In 2022, we are looking at
expanding this partnership
across our shopping centres.
At Capital & Regional, it’s
imperative to ensure the local
communities we serve are better
places for all – now and in the
future. We acknowledge we
must minimise our impact on
the environment, particularly by
reducing the carbon footprint of
our owned and leased properties
and focus on the reduction of
waste, water and energy usage
throughout the business and its
operations. This means embedding
sustainability principles throughout
acquisition, procurement, design
and refurbishment of our assets.
Our new ESG strategy brought a
renewed focus on areas where we have
been making significant progress and
highlighted key areas where we must
make improvements:
• Driving carbon reductions across our
portfolio;
•
Improving waste and water
management systems;
• Assessing and managing risk
associated with the climate crisis
and the impact of extreme weather
events on our portfolio; and
• Developing a net zero pathway,
defining our short, medium and
long-term targets, aligned with latest
climate science and industry best
practice.
Going further, our net zero pathway and
climate risk management strategy will
help us determine our areas of focus,
investment and expenditure, whilst
providing a clear roadmap for action to
reach net zero by 2040. We expect to be
able to report the results in detail in 2022.
Energy, water and
waste reduction
Despite the ongoing impact of the
pandemic, we made significant strides
against our environmental targets,
including energy reduction, reducing
our Scope 1 and 2 emissions, and
setting waste reduction targets for each
shopping centre.
Driven by our continuous efforts to
implement efficiency measures we
observed significant improvement
across our environmental performance,
particularly across electricity (2%) and gas
(48%). This reduction is notable at our
Snozone venues, as they recorded a 0.4%
reduction in gas consumption against
2020. While in absolute terms this may
not seem significant, in 2021, Snozone
was open for nine months, a considerable
increase from three full months in 2020.
This means that Snozone was able to
make significant gains through increased
operating time.
Going forward, we will aim to replicate
this trend across the business and
decouple growth and emissions across
our portfolio.
Reducing energy and emissions at
Snozone can be particularly challenging
when needing to make snow and
maintain it at -5°C, regardless of the
outside temperature. By using a building
management system (BMS) tool to
control temperatures at the venues
remotely, we have identified certain
times of night that the plant can be
shut down. Those five or six hours of
shutdown are critical and have had a
significant positive impact on electricity
consumption. In Madrid, where higher
temperatures create even more of a
challenge, throughout 2022, we will be
installing solar panels on the roof and
are in consultation with the landlord of
the scheme to install a wind turbine as
well. Across our shopping centres, we
further reduced electricity consumption
by 5% via the conversion of back of house
lighting to LED dimmable light fittings,
operated by movement sensors and
the implementation of a more efficient
mechanical and electrical systems
and gas consumption by 50% due to
the decommissioning of old plant and
machinery with newer, more efficient
equipment. With the lifting of restrictions,
centres have also worked to ensure that
controls of plant and machinery such
as heating, and lighting are optimised
to keep energy use from returning to
pre-pandemic levels.
52
capreg.com Scope 1
Centres
427 tCO2e
Snozone
182 tCO2e
CO
Scope 1 & Scope 2
4,076
tCO2e
-17%
Scope 2
Centres
2,551 tCO2e
Snozone
896 tCO2e
Support
20 tCO2e
Across all our assets, our electricity is
now from 100% renewable sources,
using wind and solar power, and despite
cooling requirements, Snozone produces
zero emissions from refrigerants. We
also made great strides in tackling
emissions where we don’t have direct
impact or control (Scope 3 emissions),
particularly by actively engaging and
supporting our suppliers. At our Snozone
venues, we assessed the frequency of our
deliveries and identified smarter ways
of ordering to cut food and beverage
deliveries by 50%, to just twice a week.
We are also looking more broadly at
the issue of transport to and from our
centres; for example, General Managers
in our shopping centres are looking to
increase the number of electric charging
points in the car parks, while at Snozone
Madrid these are set to double. Also
at Snozone, the Cycle to Work scheme
has been playing an important role in
reducing the environmental impact
from employee commuting and at the
same time encouraging our people to be
more active. The number of participants
increased by 13% in 2021, which has had
a significant health and wellbeing impact
on our people. We aim to increase this to
25% in 2022 and are launching a similar
scheme for all our C&R centres this year.
In terms of water consumption, C&R
observed an increase of 16% across
the Group against 2020. This reflects
increased footfall in our centres and
increased operations in Snozone;
however, water consumption has
decreased 29% from 2019 pre-pandemic
operations. Tackling water efficiency
across our portfolio will remain a priority
in 2022.
A key commitment within C&R’s core
sustainability value, introduced in 2021,
is to develop innovative and engaging
ways of working that promote circular
economy principles through reducing
waste and improving recycling across our
portfolio. Setting waste reduction targets
across our shopping centres led to
significant achievements, including zero
waste sent to landfill from our centres
in 2021.
Management teams at each centre have
made significant progress in engaging
with visitors, for example by introducing
and promoting recycling points, and,
across all our centres, taking part in The
Great Big Green Week. We have also
removed waste bins from employee
desks and left central banks of waste and
recycling bins at our Support Office to
encourage our people to actively think
greener. At each of our Snozone venues,
we appointed a member of the team to
be an ESG Officer. Having a champion
has proved to be very effective, with
Officers talking to guests, coming up with
new ideas and ensuring those strategies
are implemented and monitored. One
successful initiative saw all plastic cutlery
and sauce sachets removed from the
restaurants at our venues and plastic
packaging from our clothing supplier
removed for the sale of merchandise in
our Snozone shops.
We will continue to drive efficiencies
across all our assets to align with our
4% annual reduction targets.
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ESG Report CONTINUED
Environmental Sustainability
Pathway to net zero
C&R’s overarching goal is to achieve
net zero. To this end, with the support
of industry experts, we are developing
a net zero pathway encompassing our
transition plan which will define short,
medium and long-term targets, including
reduction for our Scope 1, 2 and 3
emissions, recommended measures
and investment requirements for
improvement.
As a first step, we are conducting a
detailed portfolio audit, in order to
identify the retrofit measures, including
MEP and fabric upgrades, necessary
to achieve net zero carbon at an asset
level. These audits will also provide cost
estimates for the proposed measures,
which will be critical to inform our
decision-making and planning. The audit
process involves active engagement
with shopping centre tenants, from
large corporates to smaller independent
tenants, through surveys and training.
Taking their views into account will be key
in creating an actionable pathway whilst
engaging our partners along the way.
The pathway we develop will be aligned
with latest climate science and industry
best practice and guidelines, including
the UKGBC’s definition of net zero and
the BBP’s Climate Change Commitment.
C&R plays a prominent role as a member
of the BBP, sitting on their Net Zero
Working Group, ESG Measurement &
Benchmarking Groups and the Owner/
Occupier Forum. C&R will formally sign
the BPP Climate Change Commitment
once our net zero pathway is published
in 2022.
Our net zero carbon pathway will
quantify and prioritise the necessary
emission reductions to our target year
of 2040 and beyond. It will be clearly
mapped against all aspects of the
property lifecycle in the short, medium
and long term, with a detailed timeline
to ensure that we meet every milestone
along the way.
Climate risk management
In addition to developing a net zero
pathway, we are conducting a detailed
assessment of climate risk governance
at C&R and the climate-related risks
posed to the business and portfolio.
By formalising oversight of climate-
related issues into our risk management
framework, we can mitigate the risks
and garner related opportunities, such
as reducing operational costs and capital
expenditure and increasing revenues and
asset values. It will also help us prepare
to begin reporting in line with the best
practice recommendations of the Task
Force of Climate-related Financial
Disclosures (TCFD), one of our key
ambitions for 2022.
The Great Big Green Week
Sustainability took centre stage
at all of our shopping centres
when we took part in The Great
Big Green Week, the campaign to
protect people and the planet.
The Great Big Green Week, running
from 18–26 September, was a
nationwide celebration of action on
climate change through The Climate
Coalition. Over 5,000 events took
place across the country, with more
than 200,000 taking part in their
community online.
Each of our centres planned
activities to support and raise
awareness throughout the week
including:
• Offering free promotional
space to green businesses,
including KeepCup, and hosting
a recycling exhibition;
•
•
Encouraging guests to swap
plastic bags and water bottles
to branded re-usable options;
Introducing a water
dispenser post;
• Building planters and
•
•
introducing a beehive on a
centre rooftop;
Litter picking pledges from
staff; and
Launching sustainability
graphics in a number
of centres.
We also played our part by setting
up central zones with recycling
stations, engaging displays
and strong educational and
informational messaging.
54
capreg.com Other targets include:
• Developing a new ESG risk matrix
that incorporates identified climate-
related risks;
• Regularly conducting climate risk
assessments, i.e. annually across the
portfolio, before acquisitions and
major capex expenditures;
• Defining climate-related minimum
standards/risk thresholds to guide
business strategy, investment
decisions and tenancy requirements;
• Defining and tracking climate-related
metrics and targets; and
•
Engaging with tenants to improve
environmental performance data
collection and transparency.
With a clear and robust net zero carbon
pathway, an actionable plan and a
robust risk management strategy, C&R
will be well-positioned to strengthen
its disclosure approach, increased
transparency and improved reporting,
particularly through our commitments to
WGBC and BPP.
Environmental data
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
20181
20191
2020
2021
4,521,258
1,600,517
n/a
4,556,731
1,691,856
n/a
4,629788
988,968
n/a
2,329,556
993,191
n/a
6,121,774
6,48,587
5,618,756
3,322,747
18,086,210
16,012,429
12,705,437
12,015,267
4,880,914
4,789,855
3,820,241
4,217,762
97,200
96,096
96,096
96,096
23,064,323
20,898,380
16,621,774
16,329,126
18,579
9,861
4,290
6,160
%
difference
2020–2021
(50)%
0%
n/a
(41)%
(5)%
10%
0%
(2)%
44%
Total Scope 1 & Scope 2 kWh
29,186,098
27,146,967
22,240,531
19,651,873
(12)%
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
832
294
n/a
838
311
n/a
851
182
n/a
1,126
1,149
1,033
5,120
1,382
28
6,529
4,093
1,224
25
5,340
2,962
891
22
3,875
427
182
n/a
609
2,551
896
20
3,467
(50)%
0%
n/a
(41)%
(14)%
(1)%
(9)%
(11)%
Total Scope 1 & Scope 2 tCO2e
7,655
6,490
4,908
4,076
(17)%
Intensity
Scope 1 and 2 kgCO2e/sq ft
1.57
1.33
1.01
0.84
1 2018, 2019 and 2020 figures have been restated where material changes were subsequently identified.
2 The Centre figures include the Kingfisher Centre, in which Capital & Regional plc. owns 12% in a joint venture and acts as Property and Asset Manager.
3 Renewable energy is generated through Solar PV installed at Walthamstow Centre. The system was offline for part of 2020 but was repaired in June 2021.
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).
Please note these represent the best information available at the time of issue (22/02/2022)
55
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ESG Report CONTINUED
People
As a responsible business, we want to engage, develop and reward
our employees and provide them with a work environment that
supports their mental health and wellbeing. We want to offer that
positive experience to all, embracing and reflecting the diversity of
our workforce.
Wellbeing in the workplace
We understand the importance of
promoting the physical and mental
health of our people and the effect this
has on their experience in the workplace.
In 2021, working with Marsh Insurance,
we launched our Stress and Mental
Wellbeing Policy. It encapsulates our
commitment to promoting a culture of
open communication, reducing stigma
around mental health and wellbeing
and providing access to support services
where they’re needed. Additionally,
Snozone partnered with Health Assured
who provide a suite of employee
assistance measures with full availability
to assist and support each team member.
In light of the challenges posed by the
pandemic, it’s more important than ever
to empower our C&R team members
to support their fellow employees, and
this quickly became a priority for the
business. Throughout 2021, we rolled
out a comprehensive suite of training
focused on mental health across the
business, including mental health
awareness and stress and mental
wellbeing. We’re particularly proud that
12 colleagues have completed the Mental
Health England First Aider course and are
now equipped to support their teams.
To keep our teams connected during the
36
managers received
Stress & Mental
Wellbeing training
12
employees completed
the Mental Health
England First Aider
course
pandemic, in 2020, we created our All
About You Committee, with the aim of
boosting team building, communication,
trust and cohesion.
Physical health is a key part of
maintaining wellbeing. To that end,
we encourage employees to make
positive changes such as incorporating
exercise into the daily routine. Snozone’s
successful Cycle to Work scheme is an
outstanding example on how we’re
supporting our teams to be more active
and the scheme is now available to all
C&R employees.
We believe in creating workplaces in
which open and honest communication
among all employees is valued and
respected. Our dedicated Human
Rights Policy is in place to create an
inclusive environment where all our
people are treated equally and without
discrimination. We also expect our
suppliers to respect and adhere to
this policy.
Diversity and Inclusion
We believe that our differences give us
strength. We’re committed to making
C&R a welcoming environment for
everyone.
In 2020, we formed our Diversity and
Inclusion (D&I) Committee, tasked to
oversee and drive our D&I agenda. One
of the Committee’s first actions was to
run an internal survey to understand
how people feel about the culture at C&R
and what changes, if any, they’d like to
see introduced. Overall, the feedback
was positive, with comments including
“Communication has improved greatly
in the last year”. The input we received
prompted several new initiatives – staff
felt that it was important to consider
D&I when recruiting; as a result, we
have added our D&I statement to the
recruitment section of our website and
ensure all roles are advertised within the
local communities we serve. There were
also those who felt they’d like to know
more about different cultures. We have
now introduced a calendar of awareness
days, including International Day of
Persons with Disabilities and Pride.
2021 also saw the roll-out of World
Host’s new Inclusive Service Training
programme, designed to help businesses
welcome a diverse range of people
and provide them with a consistent
level of service befitting progressive
moral, ethical and cultural attitudes.
We piloted the programme, delivering
training to over 100 frontline staff and
centre management over the year.
We plan to extend the training to more
people across the business in 2022.
In the meantime, we’re already driving
awareness of diversity issues across
the business via our fortnightly Town
Hall meetings, with presentations
from D&I Committee members and
external speakers.
Putting our beliefs into action, the
D&I Committee reached out to Step
Now, a youth organisation that helps
young people aged 11-18 by educating,
mentoring and empowering them to
be the best they can in life. Committee
members undertook a 5-step programme
before becoming mentors to children
from the charity, giving general career
advice, help with writing CVs and support
in preparing for interviews. The mentees
also benefited from a trip to Snozone
to understand how Snozone operates
as a business, and an interactive,
practical discussion with the Snozone
management team. We plan to roll out a
second wave of mentors from across the
business in early 2022.
Snozone is the only European indoor
operator with its own Disability
Snow School. In 2021, the number of
Adaptive lessons given increased by
21% from 2020. Snozone create an
environment where “sport for all” can
be truly provided. All Snozone centres
have dropped reception desks and bar
counters, offer step free access and
wheelchair-friendly changing areas.
Snozone have created similar back of
house facilities for their team members
with disabilities. Our continuous
efforts resulted in Snozone being once
again awarded Disability Confident as
an employer.
56
capreg.com All About You
The All About You Committee has
gone from strength to strength
in 2021, running a calendar of
events that connect teams across
the business, whether working
remotely or on-site. The Committee
has a dedicated section on our
CARTER intranet site with a number
of sections covering information
and support on areas such as
fitness, self care, mindfulness, food
and family.
During 2021, the All About You
Committee hosted a number
of events including virtual
competitions and escape rooms,
bingo, a virtual café and support
during Mental Health Awareness
Week. In November 2021, we held
a shared lunch at the Support
office, with the centres joining
via video link. We also had a
Christmas-themed virtual event in
December, which colleagues very
much appreciated and enjoyed. A
support bank of advice, with tips
on everything from meditation to
healthy eating, is available to all
employees via our intranet
portal.
Read more about how we
engage with our people on
page 72
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People
Over
50%
of front‑facing
teams have
received training
in at least one
World Host
course
Employee Engagement
To encourage employees to get the
best out of themselves and their
careers, we believe we need to
drive a performance management
culture. In 2021, we developed a
new performance review framework,
underpinned by ongoing monitoring
and assessment, to develop a
culture of greater accountability.
Each individual has their own SMART
objectives, aligned to C&R’s 2022
business objectives. A Workforce
Advisory Committee, being launched
in 2022, will progress and review this
approach on an ongoing basis.
Our approach is very much
future-focused – we want to
help everyone find opportunities
for growth. Although driven
by management, our culture
will be powered by employees.
Responsibility for performance
and development growth sits with
every individual.
We recognise that engagement
is also driven by reward and
recognition. We have employee
reward schemes in place across the
business, including GEM awards,
Going the Extra Mile, which have
an ESG focus. In 2021, we devised
two new GEMs: the Platinum GEM,
which is an extension of the existing
scheme, awarded to employees who
have already progressed through
the first five levels of award together
with some new behaviours and a
Good Citizen GEM, given to those
who lead by example, either by
getting involved in a sustainability
initiative, volunteering or fundraising
for a local charity. We also held a
virtual National Sparkle Awards
event, recognising those exceptional
acts of kindness to a guest, customer
or colleague.
At Snozone, our Hall of Fame
initiative and Annual General
Meeting celebrate our team’s
achievements by inducting team
members who have demonstrated
exceptional guest experience and
championed our values. Additionally,
Snozone has monthly and annual
recognition programmes for team
members that deliver measurable
contributions to our team, guest and
shareholder KPIs.
Health & Safety
The challenges presented by
Covid-19 during 2020 allowed us
to become a more agile business
and as the pandemic inevitably
progressed throughout 2021, we
continued to monitor and closely
follow government guidance. For
instance, our Emergency Duty
Manager cover plan allows us to
be prepared for any serious staff
shortages. In order to support
the health & safety of our local
communities we also put Randox
testing kit stalls in our centres to
allow visitors to pick up pre-booked
tests.
Our Health & Safety policies for
employees and guests are regularly
reviewed and updated and we
take proactive measures to deal
with any incidents. Following an
increase of anti-social behaviour
in some centres, for example, we
are engaging with agencies within
the local communities who support
adolescents. The Snozone Executive
Team undertook an extensive
“real-time” crisis management
exercise with ensuing media training
that successfully tested the resilience
of its updated Major Incident
Management Plan.
This Girl Can
Since 2016, Snozone has been a proud champion of This
Girl Can, Sport England’s campaign to get women and
girls re-engaged in sport. Studies show that, after the
age of 14, a disproportionate number of girls drop out
of participation in sports for a variety of reasons and
pressures, often not returning or coming back until their
early 40s.
Snozone deliberately markets with a female-first approach
throughout all its online channels and platforms and
showcases women and girls of all abilities, not only those
enjoying snow sports but also working across a number
of departments within the Snozone business in the
pursuit of trying to further dismantle barriers to entry
in this sector. The number of female coaches at
Snozone has substantially increased over the
years, re-enforcing this commitment.
58
capreg.com 59
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT ESG Report CONTINUED
Community
Charities
supported
167
Hours of
volunteering
1,149
Raised in 2021
£113k
C&R’s shopping centres and Snozone venues are at
the heart of the local community, providing spaces for
people to shop, eat, work and relax. We want to create
a safe, inclusive experience for all our visitors, as well as
actively contributing to the local communities in which
we operate as a responsible, socially aware business.
Community Wheel of Support
Our social impact work continues to support
community living. In 2021, we created the
Community Wheel of Support initiative, a
corporate objective which actively assists locally
led projects to improve the communities we
serve. As part of this initiative, we encouraged our
centres to choose between four and six spokes,
each one representing a community stakeholder.
These could include:
•
•
•
Local culture and celebrations
Local authorities
Educational establishments
• Nominating a charity of the year
• Community sustainability groups
• Community voluntary groups
All our shopping centres took part in the
Community Wheel of Support initiative, driving
outstanding impact and engagement across
their local communities. Each centre was invited
to present their projects and impact at the C&R
Town Hall. The Mall Wood Green’s Community
Wheel of Support was selected by the senior
leadership team to be featured in the Annual
Report. The submission was formulated through
careful research on the local area’s needs,
discussions with key stakeholders and staff, as
well as observation of important ESG trends. Five
key areas were identified to make the campaign a
success, as outlined in the case study below.
From supporting charities to interacting with
community groups, fundraising to community
investment in the form of sponsorship or
donations, C&R has a broad spread of activities
to support community living that form part of our
KPIs each year. In 2021, we exceeded seven out
of nine targets. The two areas in which we didn’t
reach our KPI target were severely impacted by
Covid-19 restrictions.
M M U N I T Y W HEEL OF SUPP
O
R
T
O
C
Local
authority
Educational
establishments
Support local
culture and
celebrations
Supporting
community living
Charity
of the
year
Community
groups/voluntary
Community
sustainability
groups
60
capreg.com CASE STUDY
The Mall Wood Green’s
Community Wheel of Support
Haringey Council & Wood Green Business
Improvement District (BID)
2021 saw The Mall Wood Green work on a number
of key projects with Haringey Council, partnering
with the Regeneration team and Wood Green
BID to improve the look and feel of the local
area. These projects included offering the use of
vacant units to local entrepreneurs to host pop-up
shops, support during the Covid-19 pandemic, the
development of a space to grow food within the
community and the creation of a mural by a local
artist contributing to the local area and promoting
arts and culture.
Mental Health & the Environment
The Mall Wood Green worked with local charity,
CIC Grow N22, to create a rooftop garden,
designed to link in with existing green spaces
on the High Road to create a green corridor
for wildlife. The centre team also undertook an
extensive litter pick in a bid to improve Wood
Green’s green spaces and pledged to spend 40
hours litter picking to commemorate the centre’s
40th birthday in May 2021.
Celebrating Diversity
The Mall Wood Green wanted to ensure that
Haringey’s LGBTQI+ community felt supported and
represented during Pride month. The Mall created
the #loveislove staircase as a joyful central feature
in the main atrium of the centre in support of a
store manager who had previously suffered a series
of incidents of homophobic abuse. The centre
also expanded their code of conduct, introducing
a zero-tolerance approach to incidents of abuse
resulting in an immediate ban and implemented a
buddy system for affected retail workers to share
experiences and support each other.
Education and Employment
The Mall Wood Green signed up to a 26-week pilot
to become Young Careers Champions working
with recruitment business REED, Wood Green BID
and local retailers to provide:
• Careers talks, focusing on different routes into
employment and myth-busting preconceptions
about the property and retail industries
•
Interview practice
• On-site engagement including tours of the
centre and explaining how the business works
• An apprenticeship for a local student.
In addition, to combat period poverty in the local
area, The Mall Wood Green introduced a scheme
whereby anyone can visit the Guest Lounge to
collect a “package from Florence” and be given a
free period pack, no questions asked. This scheme
has been well-received by guests and has helped
to break the stigma around the issue.
Charity of the Year
The Godwin Lawson Foundation has been The
Mall Wood Green’s chosen charity since 2019.
The organisation was set up to commemorate
Godwin Lawson, who died, a victim of knife crime
at just 17 years old. The centre has supported the
organisation through a number of initiatives such
as fundraising, promoting the anti-knife crime
campaigns and holding engagement sessions
with the Tottenham Hotspur Foundation’s NCS
programme, where 30 young people created
presentations over the summer to pitch
fundraising and awareness campaigns to the
centre team.
Stock Code: CAL
61
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT ESG Report CONTINUED
Community
Charitable funding
Each centre in the C&R portfolio runs its own
fundraising programme. These are planned and
delivered at a local level, in accordance with local
needs and concerns. We also provide venues for
charities to benefit from the high level of footfall
in our centres. In The Mall Luton, for example,
we gave a free unit to the charity, Level Trust, an
inspiring charity that helps families with the costs
of education, to help provide all children in Luton
with an equal chance to learn.
Volunteering
Despite the impact of the ongoing Covid-19
restrictions, our people continued to give
their time to their local communities through
volunteering in 2021 and this has become a key
focus for 2022. We’re currently working on plans
for a volunteering initiative to be run across
all shopping centres with the opportunity for
the Support Office to go out and volunteer in
the communities along with members of the
centre teams.
In December 2021, our Snozone team helped
create some festive magic by delivering and
spreading 20 tonnes of fresh snow at Martin
House, a children’s hospice in Yorkshire. The
charity was overwhelmed with the donation, which
made their Winter Wonderland very special for the
children.
As well as selecting specific local charities
each year, C&R has a number of long-standing
partnerships. Since 2014, Snozone has been
supporting Sense, the charity for deaf/blind
children and adults. In March 2021, staff across
all Snozone venues, including Madrid, were
challenged to undertake a sponsored run, walk
or cycle over a distance 1,116 miles, to represent
the number of CO2 tonnes saved during the year.
More than 300 employees took part and the
company matched their sponsorship, raising over
£5k for the charity.
The company also continued its long-term
partnership with the Poppy Appeal. Over the last
5 years, we’ve raised £225,063 for the charity.
Inclusive spaces
To be true community champions, our centres
need to be safe, inclusive spaces for all our visitors.
Both the Mall Blackburn and The Mall Maidstone
have been working with Dis-Labelled, the
charity who champion inclusivity for all. They’re
petitioning for disabled signage to be changed
from the outdated wheelchair symbol to better
represent the different and diverse types of
disability. Both Malls have now introduced the
new signage and it will be rolled out to all centres
in 2022.
In 17&Central (formerly The Mall Walthamstow),
we made over £90k of funding available for a new
fit-out of the Shopmobility service facility, enabling
guests to be met efficiently. A storage scooter area
was also added to the basement car park.
Our focus is on being better local citizens consistent
with our community centre strategy
education@snozone
Snozone believes in supporting the school curriculum and operates a number of initiatives under
the banner education@snozone.
Snozone is an assessment centre for the snow sports components of GCSE & A Level PE and BTEC
Sport. We also operate school holiday camps which whilst including skiing, sledging and snowboarding,
also feature “warmside” activities such as sign language lessons, conversational French & Spanish
lessons and a first aid course for children called “Mini Medics”. Towards the end of 2021, Snozone’s UK
venues were awarded accreditation to deliver the Duke of Edinburgh bronze award.
We also offer visits to engineering students and deliver talks on how Snozone’s plant and
machinery operates. Additionally, we deliver talks to Year 13 students on how Snozone operates
as a business as a component of GCSE Business Studies. This is all rounded off by a fun sledging
session on the slopes.
In May 2021, in recognition of the education@snozone programme, Snozone was named Best
Sporting Venue for Learning Outside the Classroom, independently voted for by teachers.
The prestigious field of nominees in the category also included the venues and stadia of
Manchester United, Tottenham Hotspur, Twickenham and the former Olympic stadium,
now known as The London Stadium.
62
capreg.com Luton Life
This local podcast focuses on areas of
interest to the Luton community. During
2021, The Mall Luton has worked with Luton
Life to help raise awareness of the charities
it supports. Episode 1, for example, featured
the Luton Food Bank, which has been the
centre’s Charity of the Year for three years
running. Interviews with representatives
from the charity and from people who had
suffered from being unable to afford food
highlighted the real issues affecting local
people. The centre’s support for Luton Food
Bank was reinforced with a “tap & donate”
initiative and a food drop-off point.
In episode 4 of Luton Life, host Sophie
Sulehria spoke to Jane Malcolm, Chief
Executive of Level Trust, raising awareness
of the struggles some families in Luton
have meeting the costs of education.
Wellbeing in the community
Operating at the heart of the community, our
centres are ideally placed to offer essential
services that can help optimise health and
wellbeing. At The Mall Wood Green, C&R have
signed an agreement with Whittington Health
NHS Trust to open a state-of-the-art Community
Diagnostics Centre (CDC), the first of 40 new
CDCs that will be opened by the NHS in a range
of settings across England. The centre will open in
summer 2022 across two ground floor units and
will initially offer x-ray, ultrasound, ophthalmology
and phlebotomy services.
Local environments
We believe in the importance of vibrant, successful
and active town centres in helping communities
thrive. Working with government and expert
industry bodies, we continue to evolve our asset
master plans 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.
As part of the Walthamstow masterplan, for
example, we worked collaboratively with the local
community and stakeholders to adopt branding
that belonged to and would reflect the unique
identities of all the people we serve. As well as a
colourful new look, The Mall changed its name to
17&Central, something the local community can
take pride in.
Thank you NHS
To reflect the incredible work
done by the NHS during the
pandemic, Snozone has offered
all NHS staff and carers a free
weekly 1-hour pass to any
of its venues, any day of the
week. This has been in place all
through 2021 and we plan to
maintain it throughout 2022. To
date, NHS staff have enjoyed
8,000 free hours of skiing and
snowboarding.
63
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021STRATEGIC REPORT Directors
Committee
membership:
A Audit Committee
R
N
Remuneration
Committee
Nomination
Committee
E ESG Committee
Chair of
Committee
Senior
Independent
Director
*Independent (as
per the UK Corporate
Governance Code).
64
Executive Directors
Non-Executive Directors*
Lawrence
Hutchings
Chief Executive
Appointed: 2017
David
Hunter
Chairman
Appointed: 2020
E
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
Stuart
Wetherly
Group Finance
Director and
Company
Secretary
Appointed: 2019
Relevant skills and experience
Stuart joined Capital & Regional as
Group Financial Controller in October
2012, and was additionally appointed
Company Secretary in April 2013. He
was later 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
None
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 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)
ICG-Longbow (Senior Adviser)
Ian
Krieger
Non-Executive*
Appointed: 2014
A
N R
Relevant skills and experience
Ian is the Audit Committee Chairman
and Senior Independent Director at
both Safestore Holdings plc and Primary
Health Properties plc. 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)
capreg.com Norbert
Sasse
Non-Executive
Appointed: 2019
George
Muchanya
Non-Executive
Appointed: 2019
Board Diversity
Board composition
(number of Directors)
1
2
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
Growthpoint Properties Limited
Growthpoint Properties Australia Limited
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 Poland Real Estate N.V.
Growthpoint Investec African Property
Management Limited
Globalworth Real Estate Investments
Limited
Globalworth Real Estate Investments
Limited
2
3
Chairman
Executive Directors
Independent Non-Executive Directors
Non-Executive Directors
(not independent)
Board gender split (%)
25%
Katie
Wadey
Non-Executive*
Appointed: 2020
A
R
E
Laura
Whyte
Non-Executive*
Appointed: 2015
E
R
A N
Male
Female
75%
Relevant skills and experience
Katie is the Innovation Director of
Holland & Barrett. 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
Hammersmith & Fulham Youth Zone
Transform Housing and Support
(Trustee)
Mindmasters Group Limited
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, 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)
British Horseracing Authority
The Old Royal Naval College, Greenwich
(Trustee).
Board tenure
(number of Directors)
2
1
5
1-3 years
3-6 years
6-9 years
65
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Senior Leadership Team
Lawrence Hutchings
Chief Executive
Sara Jennings
Director of Guest and
Customer Experience
Sara began her retail career
working for House of Fraser in Store
Management before joining C&R
in 2001. She has held a number of
positions within C&R before taking
on the role of Director of Guest
and Customer Experience. Sara
is responsible for the day-to-day
management of the Group’s
shopping centres.
James Ryman
Investment Director
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.
Stuart Wetherly
Group Finance Director and
Company Secretary
Nick Phillips
Managing Director, Snozone
Nick joined C&R in 2012 as Snozone’s
Managing Director. Nick started his
career with Aldi, joining them in their
embryonic stages in the UK as a
regional New Store Openings Manager
in the north west. He then went on to
hold a number of positions with Lidl
and Whitbread PLC as David Lloyd
Leisure’s Regional Director for the
south of England before becoming
their Sales & Operations Director for
the UK & Europe.
66
capreg.com Corporate Governance Report
By leading the Group through a £30
million capital raising via Open Offer
and restructuring the Company’s
balance sheet, the business has been
put on a much more stable footing.
DAVID HUNTER
CHAIRMAN
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.
The Board
remains
committed
to high
standards
of corporate
governance.
Chairman’s introduction
I am pleased to present
Capital & Regional’s
corporate governance
report for 2021.
The primary focus of C&R in 2021 was navigating
the significant impact of the Covid-19 pandemic
on the day-to-day operations of our centres
and Snozone. By leading the Group through a
£30 million capital raising via Open Offer and
restructuring the Company’s balance sheet
through the Mall Debt transaction, the business
has been put on a much more stable footing. The
Board’s activities during the year have reflected
this, with more frequent meetings and significant
time devoted to execution of the transaction
and to operational updates and considering
the impacts of Covid-19 and its influence on the
longer-term structural changes going on within the
retail industry.
In 2021, there were two changes in personnel to
the Board. At the AGM in May 2021, Tony Hales
retired from the Board and his role of Senior
Independent Director after nine years of service.
I would like to thank Tony for his invaluable
contribution to the Board and the Company during
a period of significant change. Ian Krieger has
taken over the role of Senior Independent Director
from the same date.
In December 2021, Louis Norval stepped down
from the Board after 12 years as a Non-Executive
Director. Louis had been a Director since his
involvement in the recapitalisation of the Group
post the global financial crisis in 2009 and played
a pivotal role in that transaction, which set the
course of the Company to become a focused
specialist REIT. Louis has been a highly supportive
shareholder and insightful board member for
over a decade and we look forward to an ongoing
relationship as a shareholder in the Company.
67
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Corporate Governance Report CONTINUED
Compliance Statement
Compliance with the UK Corporate Governance Code
Governance Code
The Company has, throughout the year ended 30 December 2021, applied the principles and complied with the provisions of the
2018 UK Corporate Governance Code except for (i) Principle G, Provision 11 – that at least half the Board, excluding the Chair,
are not considered to be independent Non-Executive Directors and (ii) Principle P, Provision 38 – that executive director pension
contributions are not aligned with the workforce.
In light of recent stress on the Group’s balance sheet, the Board has postponed further Non-Executive Director appointments for
the time being. The Board will continue to keep its composition under review and remain committed to maintaining the appropriate
combination of Directors that promotes balanced and robust decision-making. In order to fully comply with Principle G of the 2018
Corporate Governance Code, the Board would need to recruit one further independent Non-Executive Directors. This would result
in a large Board number in comparison to the current scale and complexity of the Business. In the Company’s view, the breadth
of experience and knowledge brought to the Board by the Chairman and Non-Executive Directors, particularly the independent
Non-Executive Directors, coupled with their detachment from the day-to-day issues within the Company, provide for constructive
debate and robust decision-making. The Board considers the current composition to be effective in holding the Executives and the
management team to account.
An explanation of the Company’s reasoning in respect of Principle P, Provision 38 is set out in the Directors’ Remuneration Report on
page 88 to 90.
Principle of
the Code
Board
leadership
and company
purpose
Division of
responsibilities
How we have applied the Code
The Board has overall responsibility for delivering the long-term sustainable
success of the Group. It also has the responsibility to ensure the Group’s key
stakeholders are clearly identified and that the success is for their benefit
and for the wider community.
The Board has devised a clear purpose of the Business with well-defined
values and strategy that aim to provide a solid platform for achieving this
purpose and instilling the right culture across the Business.
The Board and its four Committees have well-established responsibilities
that are set out in the Schedule of Matters Reserved for the Board and
Terms of Reference for each Committee, respectively. The division
of responsibilities between the Chairman, tasked with ensuring the
effectiveness of the Board, and the Chief Executive, who is responsible for
the leadership of the Group’s business, has been clearly defined.
All divisions of responsibilities have been agreed and approved by the Board.
Further information
For more on Board
Structure, see pages 70 to 72
For more on Purpose and
Strategy, see pages 13 to
19 and 71
For more on Division of
Responsibilities, see pages
73 to 75
Composition,
succession and
evaluation
The Board, as a whole, keeps under review the composition of the Board
and its Committees. Appointments to the Board are recommended by the
Nomination Committee. The Nomination Committee is also responsible
for ensuring adequate succession planning is in place for Board and senior
management positions. The Nomination Committee is also responsible for
reviewing the Group’s policy on Diversity and Inclusion.
For more on Composition,
Succession and Evaluation,
see pages 64 to 65 and
76 to 79
The Board undertakes an annual review of its own effectiveness.
Audit, risk and
internal control
The Board delegates and receives updates from the Audit Committee in
respect of monitoring the integrity of financial statements and ensuring
robust systems and adequate controls are in place to manage risk. The
Board has also tasked the Audit Committee with monitoring and maintaining
the Group’s relationship with the external audit firm.
Remuneration
The Board, through the Remuneration Committee, ensures that
remuneration policies and practices are designed to support the Group’s
strategy and promote long-term sustainable success. The Remuneration
Committee ensure that formal and transparent policies are in place for
determining Director and senior management remuneration.
For more on the Group’s
Risk management, see pages
36 to 42
For more on Audit and
Internal Controls, see pages
80 to 85
For more on Remuneration,
see pages 86 to 109
68
capreg.com 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.
Task Force for Climate-Related Financial Disclosures
In accordance with LR 9.8.6(8), details of the Group’s pathway to compliance with the requirements of the Task Force for Climate-
Related Financial Disclosures (TCFD) are provided in the ESG Report on page 50. The Board is aware of the importance in reducing
the Group’s impact on climate to further mitigate its direct link to financial risk.
Board Leadership and Company Purpose
Board Activity
Main activities undertaken during the financial year
Strategy
Risk & Risk Management
Financial Performance
• Reviewed strategic options for the
• Considered the emerging and
• 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
Read more about
our strategy on
pages 12 to 19
Read more about
our Board evaluation
process on pages
76 to 77
further growth and development
of the business
• Received updates on property
cycle and sector trends
• Assessed and ultimately
approved the equity raise and
recapitalisation and restructuring
of the Mall debt facility
• Continued to monitor
management’s progress on
positioning the asset portfolio
to increase exposure to resilient
customer categories in line with
changing consumer demands
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
•
•
Through the Board’s Audit
Committee, met with the
Company’s valuers twice in
the year
Identified a new emerging risk
category; climate-related risk, in
response to growing regulation
around this area
Governance
Stakeholders
• Discussed the results of the Board
• Received updates on interaction
evaluation
• Received regular updates from the
Chairs of the Audit, Remuneration,
Nomination and ESG Committees
• Received briefings on key
governance and regulatory
developments
with and feedback from
shareholders
• Received reports on the re-
opening of customer units across
the centres, during the first half of
the year whilst under government
lockdown measures from January
to April 2021
• Reviewed employee engagement
survey results and updates on
company culture
• Received updates on key HR
matters
• Received updates on operational
procedures to support retailer
customers and guests ensuring
centres remained Covid-secure
69
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Corporate Governance Report CONTINUED
Board Leadership and
Company Purpose
Aligning purpose, values, strategy and
culture & the role of the Board
The Board of Directors at Capital & Regional plc
takes on the collective responsibility to promote
the long-term sustainable success of the Company
for the benefit of its shareholders, stakeholders
and for the wider community. They achieve this
by setting a clear Company purpose and strategy
that aligns to the desired culture and values of
the Group. The Board ensures that it reviews and
approves key policies and decisions, particularly in
relation to culture. It also approves the business
plans, which outline key remerchandising and
leasing initiatives for each centre, against the
strategy on an annual basis, ensuring it remains
relevant to the securing the long-term vision
for the Group. As a premium listed company,
the Board is ever mindful of governance and
compliance with laws and regulations when taking
decisions. It retains ultimate responsibility for
approving business development opportunities,
including major investments and disposals
ensuring these are aligned to long-term strategy.
The Board, with the support of the Company
Secretary, meets regularly, at the very least on a
quarterly basis, throughout the year to ensure
that the Directors allocate sufficient time to
discharge their duties effectively. 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.
The Board delegates the day-to-day management
of the business to the Executives. However, a
Schedule of Matters Reserved for the Board is
maintained to ensure material matters, such
as significant transactions, are brought to the
Board for approval. The Executive Directors take
operational decisions and also approve certain
transactions within defined parameters of the
Delegation of Authority, which forms part of the
Schedule of Matters Reserved for the Board.
The Board delegates certain responsibilities to its
four Committees, which operate within specified
terms of reference that are reviewed annually. The
Committee Chairs’ report on all proposed actions
in relation to their delegated activities to make
sure that the Board retain overall accountability.
More information on this can be found on page 73
and in the Committee reports on pages 78 to 88.
As a premium
listed company,
the Board is
ever mindful
of governance
and compliance
with laws and
regulations
when taking
decisions.
70
capreg.com During 2021,
the Board
took decisive
action to ensure
the future of
the Group, in
light of the
accelerated
structural
changes in the
retail trading
environment
caused by
the impact of
Covid-19.
Purpose
The Group’s primary 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.
Strategy
The Group strategy is coming into its fifth year
since its launch in 2017. The Board continues to
believe that community shopping centres, actively
remerchandised to increase exposure to growth
and resilient non-discretionary retailer offerings
with a best-in-class management platform remains
a robust strategy for delivering shareholder return
in the medium term.
During 2021, the Board took decisive action to
ensure the future of the Group, in light of the
accelerated structural changes in the retail trading
environment caused by the impact of Covid-19.
The stress on the Group’s balance sheet needed
to be addressed in order to bring the capital
structure back to an appropriate level and to
preserve the strength of the platform to take
advantage of market recovery opportunities,
enabling the Board and management to focus on
delivering and scaling the core community centre
strategy. This was done through refocusing the
portfolio into Investment and Managed assets,
by reclassifying the Group’s Managed Assets as
“Held for Sale”, restructuring a key loan facility,
and recapitalising the business through a fully
underwritten capital raising. More information on
this can be found in the CEO’s Statement on pages
24 to 25 and in the GFD’s Financial Review on
pages 30 to 35.
Monitoring and assessing our 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 via regular
Townhall meetings.
The Board’s agenda is managed to ensure that
the value which the Company generates is
preserved over the long term, with key stakeholder
considerations and governance issues playing a
fundamental part in its decision-making.
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 also receives regular people updates
on the Company’s culture and whether it is
embracing the values of inspiring creative thinking,
encouraging collaborative engagement, acting with
integrity and delivering dynamic solutions.
The Board of Directors are also encouraged to
visit centres outside of formal Board visits to
engage with employees and to gain a deeper
understanding of the trading environment and the
differences in guest experiences across the assets.
Shareholder relations
The Company encourages regular dialogue with
its shareholders at the AGM, corporate functions
and property visits. The Company also attends
roadshows, participates in sector conferences and,
following the announcement of final and interim
results, and throughout the year, as requested,
holds update meetings with institutional investors.
Social distancing and Covid-19 restrictions limited
the opportunities to meet with shareholders
in-person in 2021 and key meetings were largely
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 2021 but
key engagement included:
•
Shareholders invited to attend the full
year and interim results presentations
via video conference;
• Post-results investor roadshows
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; and
• Provided regular updates to the
market throughout the year.
Stock Code: CAL
71
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Corporate Governance Report CONTINUED
Board Leadership and
Company Purpose
Employee
concerns
were taken
into account
prior to the
finalisation of
operational and
communication
plans.
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; however, circumstances have dictated that
all Board meetings during 2021 were held remotely.
The Board remains committed to reintroducing
visits to operational locations when circumstances
allow as it appreciates that getting out and about
in the business is important for the Board as this
enables the Non-Executive Directors to see first-
hand how our assets are run and, importantly,
meet local teams. This provides an experience of
the business which cannot be replicated in the
boardroom and also enables the Directors to
engage with teams at all levels in the business. Such
activities give a real insight into how the culture and
values of the business work in a day-to-day setting.
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 104.
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 2021. Directors’ and Officers’
Liability Insurance is maintained for all Directors.
Employee and Workforce engagement
The Board has received regular updates from
Laura Whyte, Non-Executive Director responsible
for workforce engagement and Chair of the ESG
Committee, on staff engagement throughout
the year.
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 2021, Townhall meetings were
maintained at an increased frequency of every
fortnight to provide regular updates to employees
while the majority of the Support Office 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. The
purpose and key accountabilities of the role 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, Laura
periodically attends Townhall meetings and has
an open invitation to join the All About You and
Diversity and Inclusion Committees. Laura reviews
and monitors feedback and insights driven by our
employee surveys and is consulted on the topics
covered. As Chair 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.
During 2021, feedback was sought from employees
regarding returning to working from the office
following the relaxation of Government guidance.
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. Concerns raised regarding
the impact on mental health and wellbeing during
periods of isolation were also addressed through
the introduction of a series of webinars delivered by
a qualified mental health professional.
72
capreg.com Division of Responsibilities
Governance framework
Board
Key Responsibilities
• Collectively responsible for
promoting the long-term
sustainable success of the Group
for the benefit of its stakeholders
through the creation of long-term
sustainable shareholder value and
contribution to wider society.
•
Setting the Group’s strategic
direction and overseeing
management’s execution of the
strategy.
• Responsible for establishing
Group purpose and values, and
for ensuring that our culture and
behaviours are both appropriate
and consistent.
Further information
on Audit Committee
pages 80 to 85
Further information
on Remuneration
Committee pages
86 to 104
Further information
on Nomination
Committee pages
78 to 79
Further information on
ESG Committee pages
48 to 50
Audit Committee
Key responsibilities
• Reviews the clarity, completeness and appropriateness of
disclosure in the Group’s Financial Statements and reports
findings to the Board.
• Advises the board on whether the Annual Report is fair,
balanced and understandable.
• Monitors, reviews and recommends to the Board the need for
an Internal Audit function.
• Recommends the appointment of the External Auditors and
reviews their effectiveness, independence and fees.
• Reviews and approves the Group’s arrangements and policy for
its workforce to raise concerns, in confidence, about possible
wrongdoing.
• Delegated by the Board to monitor the internal controls and risk
management process. Ultimate approval remains with the Board.
Remuneration Committee
Key responsibilities
• Makes recommendations to the Board on the Group’s Executive
Director Remuneration Policy.
• Oversees the Group’s Remuneration Schemes.
• Reviews and recommends to the Board the Group’s
Remuneration Policy.
Disclosure Committee
Key responsibilities
•
Identifies Inside Information.
• Decides on how and when to disclose Inside Information in
accordance with the Disclosure Policy and having regard, in
particular, to information previously disclosed by the Company.
ESG Committee
Key responsibilities
•
Sets the ESG strategy and ensures that it remains fit for
purpose.
• Benchmarking and measuring the Group against national
and global industry standards, in relation to its ESG strategy
and goals.
•
Ensures that there are appropriate policies in place to support
the Group’s ESG framework.
• Assists on other matters related to ESG as may be referred to it
by the Board.
Nomination Committee
Key responsibilities
• Reviews the structure, size and composition of the Board
and Board Committees to ensure that they are appropriately
balanced in terms of diversity, knowledge, skills and experience.
• Reviews and recommends appointments to the Board and to
other senior leadership positions.
73
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Corporate Governance Report CONTINUED
Division of Responsibilities
Board balance and independence
Details of the Executive Directors including their qualifications, experience and other commitments are set out on pages 64
to 65. The Board currently comprises the Chairman, two Executive Directors and five Non‑Executive Directors.
The Board reviews the independence of its Non-Executive Directors on an annual basis. George Muchanya and Norbert
Sasse are not considered independent as they act as representatives of Growthpoint Properties Limited. Louis Norval, who
resigned from the Board in December 2021, was similarly not considered independent as he acted on behalf of a substantial
shareholder of the Company. 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 separation of responsibilities between the 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
Chief Executive
• Responsible for the objective leadership of the
Board of Directors in the effective directing of
the Company.
•
Should maintain a culture of openness and
ensure that time is made for debate and
constructive challenge.
• Responsible for the day-to-day operations and
management of the Group’s business.
• Develop and recommend the Group strategy
to the Board and implement the agreed
strategy across the Group.
• Deliver financial performance in line with the
• Continually assess and monitor the
agreed budgets.
•
•
collaborative nature of the Board and take the
lead in its annual effectiveness review.
Set the annual workplan for the Board and set
the agenda, style and tone of each meeting of
the Board.
Ensure Directors receive timely, accurate and
clear information in order for them to make
informed collective decisions.
• Oversee the induction process for new
Directors and the ongoing training and
development of the Board.
• Provide regular updates to the Board on all
operational matters.
• Responsible for recruitment, leadership and
development of the Senior Leadership Team.
• Deliver the Group’s ESG strategy.
•
Ensure effective communication with the
Group’s shareholders and stakeholders.
Senior Independent Director
Non-Executive Directors
• Act as a sounding board to the Chairman.
• Remain independent of management
•
•
Serves 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
of the Chairman, Chief Executive or other
Executive Directors.
and to be free from any business or other
relationships that could compromise their
independence.
• Provide independent judgement, knowledge
and commercial experience to discussions and
decision-making.
Lead the evaluation of the Chairman’s
performance, as part of the annual Board
evaluation process.
• Provide constructive challenge to Executive
Directors and scrutinise the performance of
management against key objectives.
• Provide oversight of management’s success in
delivering the agreed strategy within the risk
appetite and control framework agreed by the
Board.
• Responsible, through the Board Committees,
for managing the delegated tasks given to
them by the Board.
74
capreg.com Board and committee meeting attendance
The number of meetings of the Board and its Committees during 2021, and individual attendance by Directors, is set out below.
Number of meetings
D Hunter
L Hutchings
S Wetherly
I Krieger
G Muchanya
N Sasse
K Wadey
L Whyte
T Hales
(retired 20 May 2021)
L Norval (resigned
16 December 2021)
Board
Scheduled
Ad-Hoc
5
5/5
5/5
5/5
5/5
5/5
5/5
5/5
4/5
2/2
5/5
4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
2/2
4/4
Total
9
9/9
9/9
9/9
9/9
9/9
9/9
9/9
8/9
4/4
9/9
Committees
Audit Remuneration Nominations
4
–
–
–
4/4
–
–
4/4
4/4
2/2
–
5
–
–
–
5/5
–
–
2/2
5/5
5/5
–
1
1/1
–
–
1/1
–
–
–
1/1
1/1
–
ESG
4
–
4/4
–
–
–
–
4/4
4/4
–
–
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 2021 is set out in the
table above.
The Board schedules five meetings each year, and arranges further meetings as and when the business requires it, ensuring sufficient
time is allocated to discharge their duties. During the year, the Board held five scheduled meetings and four ad-hoc meetings, the latter
primarily related to the equity raise and restructuring transaction. 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.
75
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Composition, Succession and Evaluation
The Chairman,
supported by
the Company
Secretary,
ensures all
new Directors
are provided
with induction
training.
Composition
Details of the Directors, including their skills and
experience are outlined on pages 64 to 65.
Board succession
Succession planning is led by the Nomination
Committee. Further information is provided on
pages 78 to 79.
Induction and professional
development
The Chairman, supported by the Company
Secretary, ensures all new Directors are provided
with induction training. Comprehensive packs
are provided containing the most recent Board &
Committee materials, recent auditor reports, key
business policies and relevant business KPIs.
New Directors are introduced to the Board and
senior management through one-to-one meetings,
coupled with visits to our shopping centres to
tour the trading environments and to meet the
operational teams.
Briefings on governance requirements and their
legal and regulatory obligations as a Director are
delivered and they are made aware of access
to the relevant independent advisers. Ongoing
training requirements are reviewed on a regular
basis and undertaken individually, as necessary.
Board evaluation
Stage 1
Led by the Chairman, all Directors
of the Board complete a detailed
questionnaire covering:
• Performance of the Board, as a
whole, and as individuals;
• Processes that determine the
Board’s effectiveness (including
the Board composition and skills
gaps, experience, independence
and knowledge of the persons on
the Board and decision-making);
• Company culture, strategy and risk
management; and
• Performance of the Board’s
Committees.
The Senior Independent Director
arranges for one-to-one meetings
with each Director of the Board to
review and discuss the performance
of the Chairman.
The Chairman meets with the
Non-Executive Directors without the
presence of the Executive Directors
to evaluate the performance of the
Chief Executive.
Stage 2
The completed questionnaires are
collated by the Assistant Company
Secretary and reviewed with the
Chairman to pull out summaries
and key findings.
Stage 3
A paper, summarising the key
findings with recommendations
and associated actions, is drafted,
and submitted for Board
discussion and approval.
Actions are agreed.
76
capreg.com
Progress has been made since the 2020 Board
evaluation on growing the essential non-
discretionary customer categories across the
portfolio in line with the community centre
strategy.
The review for 2021 took place at the January 2022
Board Meeting. The Board continues to engage
and provide for robust and collective decision-
making. The Board was comfortable that the
Company had the appropriate controls, processes
and approach to risk management.
Management reporting on key operational
challenges and key performance indicators
were thought to be transparent and allowed for
effective analysis of the Group’s performance
against the budget and business plans.
The Board acknowledged the continued resilience
in the community shopping centre focus and
further reshaping of tenant mixes across the
Group’s assets. However, it was highlighted that
devoting more time to strategy development was
necessary.
Area of focus for 2022
Strategy:
The Board is keen to review the Group’s current
strategy and the progress that has been made to
date in fulfilling it. The Board believe the Group is
in a pivotal stage and efforts should be made to
assess and agree the future direction of business
to enable growth and enhanced stakeholder
return.
Peer Group:
Further work will be carried out by the Board to
identify and understand potential comparators in
different markets/jurisdictions to increase insights
from operators outside of the Group’s traditional
peer group.
People and succession planning:
The Directors agreed that the established
Board and Committee structure ensured that
the governance requirements of the business
were properly considered and reflected in the
decision-making process. An emphasis was placed
on ensuring the ESG requirements, particularly
around climate-related disclosures, were more
regularly considered and reviewed.
The Board identified a need for increased focus
on the one of the businesses key stakeholders;
its employees, and the related operational
challenges they are likely to face in the coming
year. Succession planning at Board and at Senior
Leadership level will be key to ensuring the
success of the Group, with a need to increase
visibility of progress at the Board level.
The Chief Executive evaluates the performance
of the Group Finance Director. Subsequently,
the results are discussed by the Remuneration
Committee and relevant consequential changes
are made if required.
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
Annual General Meeting continue to perform
effectively, both individually and collectively as a
Board, and that each demonstrate commitment to
their roles.
Stock Code: CAL
77
Capital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Composition, Succession and Evaluation CONTINUED
Nomination
Committee
Report
David Hunter
Chair of the Nomination Committee
Other members:
Ian
Krieger
Laura
Whyte
Meetings held: 1
The Committee
conducted a
review of the
Board and
Committee
membership.
The Committee
was satisfied
in each case
that the Board
and relevant
Committee
had the
requisite skills,
experience,
knowledge
and diversity.
The Nomination Committee
is chaired by David
Hunter, Chair of the Board
of Directors. The other
members of the Committee
are Ian Krieger and Laura
Whyte, both independent
Non-Executive Directors.
Responsibilities
The Nomination Committee meets as required
to select and recommend to the Board suitable
candidates for both Executive and Non-Executive
appointments. 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 stand down for re-election at the
next Annual General Meeting in order to continue
in office. All existing Directors retire by rotation
every year.
Activities of the Committee during
the year
Following the announcement that Tony Hales would
step down as Non-Executive Director at the 2021
Annual General Meeting, the Committee conducted
a review of the Board and Committee membership.
The Committee was satisfied in each case that the
Board and relevant Committee had the requisite
skills, experience, knowledge and diversity.
As part of the annual Board evaluation process,
all Board members were asked to consider the
composition of the Board and highlight any areas
they viewed were not being suitably covered. The
output of this exercise has fed into succession
planning for future recruitment to the Board.
The Committee are mindful of the Code
requirements regarding independence; however,
given the current economic environment and
sectoral challenges that the business has faced,
the Board has postponed the appointment of
any further Non-Executive Directors in an effort
to restrict costs. Given the scale of the Company,
the Board remain confident in the robust
contributions currently provided by the sitting
Non-Executive Directors. The Committee will,
however, keep this under review.
Diversity Policy
The Nomination Committee, and the Board,
recognises the importance of diversity in its
broadest sense, including gender, ethnicity,
culture, socio-economic background, disability,
sexuality and diversity of thought, perspective
and experience.
Although the Company does not fall within the
FTSE 350, the Committee, and indeed the Board,
is supportive of the Davies Report, Hampton-
Alexander Report and subsequent Parker Review
recommendations. At the financial year-end, the
Board had 25% female representation (2020: 20%),
which, although an improvement on the previous
year, has not yet met the Hampton-Alexander
target of at least one-third female representation
on the Board. The Board has met the Parker
Review target of one ethnic minority Director on
the Board, as at 30 December 2021.
78
capreg.com The Committee seeks to ensure that all suitable
candidates available are taken into account
when drawing up shortlists of candidates for
possible appointments. The Committee continues
to engage 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.
As a business, we are committed to maintaining
a diverse workforce at all levels across the
Company, and more information on how we do
this, including a description of the policies relating
to diversity and how they have been implemented,
can be found in the ESG Report on pages 51 and
56 to 58.
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 are in the process
of developing Group-wide objectives to measure
progress over the coming months and years.
79
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Audit, Risk and Internal Control
Audit
Committee
Report
Ian Krieger
Chair of the Audit Committee
Chair of the audit
Other members:
committee
Katie
Wadey
Laura
Whyte
Meetings held: 4
The
Committee has
recommended
to the Board
that the Annual
Report and
Financial
Statements
2021, taken as
a whole, is fair,
balanced and
understandable.
The Audit Committee is chaired by Senior
Independent Director and Independent Non-
Executive Director, Ian Krieger, a Chartered
Accountant with the recent and relevant financial
experience required by the 2018 UK Corporate
Governance Code. The other members of the
Committee are Katie Wadey and Laura Whyte,
both Independent Non-Executive Directors. All
directors of the Board are able attend Committee
meetings by standing invitation. 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, Deloitte LLP. The Company’s Chairman,
Chief Executive and remaining two Non-Executive
Directors also attended meetings during the
year. Other senior members of Finance and
representatives from Deloitte LLP attended
meetings by invitation.
Responsibilities
The Committee’s role is to assist the Board in
discharging its duties and responsibilities for
ensuring the integrity of financial reporting,
advising the Board on whether the Annual Report
is fair, balanced and understandable, internal
controls and the appointment, remuneration
and relationship management of the Company’s
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.
80
capreg.com 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 2021 Annual
Report and financial statements and the 2021
interim results statement prior to discussion
and approval by the Board;
b. reviewing the continuing appropriateness
of the Group’s accounting policies including
management’s approach to the reassessment
of IFRS 16, the impact of the changes in lease
agreements within Snozone, the impact on
the accounting treatment of the Group’s lease
arrangements and the presentation of the
Group’s Adjusted Profit metric;
c. reviewing Deloitte LLP’s plan for the 2021
Group audit, approving their terms of
engagement and proposed fees and reviewing
and updating the Group’s policy for the award
of non-audit work to its external Auditor;
d. reviewing the Company’s ongoing REIT regime
compliance;
e. reviewing reports on internal control tests and
assessing whether a stand-alone internal
audit function was required;
f. 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;
g. reviewing management’s biannual Group Risk
Review report and the effectiveness of the
material financial, operational and compliance
controls that help mitigate the principle risks;
h. reviewing the effectiveness of the Group’s
Whistleblowing Policy;
i.
considering management’s approach to Going
Concern in respect of the year-end results
announcement, the Annual Report and the
half-year results and the viability statement in
the Annual Report;
j. meeting with the responsible individuals from
the Group’s independent valuers, CBRE Limited
and Knight Frank LLP to review and challenge
their valuations of the Group’s investment
properties;
k. meeting with Deloitte LLP without
management present;
l.
reviewing reports on the delivery of business
critical systems transformation projects; and
m. carrying out an annual performance evaluation
exercise and noting the satisfactory operation
of the Committee.
81
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Audit, Risk and Internal Control CONTINUED
Audit Committee Report
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 2021, the value of the
Group’s investment property assets was
£473.1 million (see Note 10b of the financial
statements for further details). The Group
saw a further decline in property values in
the first half of the year but a stabilisation
in the second six months. The valuation of
investment property is inherently judgemental
and involves a reliance on the work of
independent professional qualified valuers.
During 2021, 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. The valuation judgements
were deemed to be in compliance with the
RICS Red Book.
REIT regime compliance
The Committee continued to monitor and
consider the Group’s compliance with the
REIT regulations and the potential of being
expelled from the REIT regime would have a
significant effect on the financial statements.
As a consequence of not having paid a dividend
since June 2020, the Group did not meet the
minimum PID distribution requirement for
2019 or 2020. The Group had agreed with
HMRC a 12-month extension to the 2019
deadline until the end of 2021 but having not
paid a dividend during 2021, the Group paid
£2.5 million in December 2021 to settle the
tax outstanding on the estimated shortfall of
£13.0 million in respect of the 2019 and 2020
financial years effectively bringing the Group’s
compliance up to date. On consideration of
all of this, the Committee was satisfied that
the Group remained compliant with REIT
regulations for the period under review.
82
capreg.com Management override of controls
The Committee reviewed the risk of material misstatement due to fraud through management
overriding of established controls, particularly around key judgements and estimates made by
management in relation to the valuation of the investment property portfolio, financial reporting
process, accounting of significant unusual transactions and the review of top-side adjustments.
The financial statements were assessed for bias in accounting judgements and management was
asked about any known fraud situations. Journal entries and any unusual activity in this regard
was investigated. Board minutes were assessed for any instances of override of controls being
discussed. The Committee found no issues of note.
Read more about
Going Concern
on page 42
Read more about
the reclassification
of the Group's
assets on pages
4 and 46
Reclassification of assets and
liabilities as held for sale
Going concern and covenant
compliance
The Committee reviewed the position of the
Group’s investments in the Hemel Hempstead
and Luton properties. At 30 June 2021, the
Committee reviewed the rationale for changing
the Group’s Operating Segments to split what
was previously its Shopping Centre segment
between “Shopping Centres – Investment
Assets” and “Shopping Centres – Managed
Assets”. The Committee concluded that
it was appropriate to present such a split
noting it was reflective of the economic
position of the respective investments and of
internal reporting. At 30 December 2021, the
Committee reviewed the conclusion that the
two assets met the criteria to be reclassified
as “Held for Sale”. This conclusion was reached
as the Group, following close dialogue with
the respective lenders of the vehicles, had
decided to seek to dispose of whole or part
of the investments or assets as at that date.
The Committee agreed that the treatment
was appropriate.
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.
The use of reasonable scenarios and sensitivity
analysis by management in response to the
impact of Covid-19 was reviewed as part
of the process given the highly volatile
market environment.
IFRS 3 Business combinations
Impairment of receivables and
inter-company investments
The Committee reviewed management’s
conclusions that the acquisition of two Spanish
entities; Snozone SLU and Ocio y Neive SLU, on
9th February 2021 met the definition of Business
Combination under IFRS 3. The SPA agreement
was assessed to ensure the transaction had
been conducted in line with the terms and
conditions agreed. The fair value assumptions
were cross checked against the net book value
of the acquired assets. No significant differences
in respect of the book value of the assets had
been identified. In line with the requirements of
IFRS 3, goodwill had been accounted for through
the Profit & Loss account. The Committee
found no issues of note.
Management perform an annual review of
inter-company investments and receivables
to determine the values to be maintained
in the plc 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.
83
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Read more about
the independent
auditor's report on
pages 111 to 121
Audit, Risk and Internal Control CONTINUED
Audit Committee Report
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 10 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. The Committee plans
to run a tender process during 2022 to manage
transition from Deloitte, given the requirement for
mandatory rotation.
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 2021 audit was the fourth
year of Matthew Hall’s tenure as lead audit
engagement partner.
Effectiveness of the external Auditor
The Committee carried out a review of the
effectiveness of the external audit process and
considered the reappointment of Deloitte LLP.
The review covered, amongst other factors, the
quality of the staff, the expertise, the resources
and the independence of Deloitte LLP. The
Committee reviews the audit plan for the year
and subsequently considers how the Auditor
performed to the plan. They consider the quality
of written and oral presentations and the overall
performance of the lead audit partner.
It was determined that the overall work completed
had been to a high standard, with Deloitte LLP
having developed a good understanding of
the Group. Strong working relationships had
been maintained between the Committee and
management and the lead audit engagement
partner and their team.
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
in October 2021, 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, the only non-audit
services performed by Deloitte LLP during the year
were its review of the Half-Year Results for which a
fee of £52,000 was charged.
Risk Management and internal controls
The Board delegates the responsibility for
monitoring a sound system of internal control
and risk management to the Audit Committee.
An ongoing biannual process is in place for
identifying, evaluating and managing risk of
the Group. This is fed into the Audit Committee
agenda for review and referral to the Board, which
has ultimate oversight and approval responsibility.
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.
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 operational 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 on pages 36 to 42 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 37).
A statement of the Directors’ responsibilities
regarding the financial statements is on page 110.
84
capreg.com 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, where
deemed appropriate.
In accordance with the Committee’s terms of
reference, the Committee conducted the annual
review of the need to establish an internal audit
function in October 2021. It was determined that
the current size and complexity of the Group did
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 Group’s process provides staff with options
to contact members of senior management, the
Group’s Senior Independent Director and the
Group’s external audit partner.
Strong working
relationships
had been
maintained
between the
Committee and
management
and the
lead audit
engagement
partner and
their team.
The Audit Committee, on behalf of the Board,
reviews the established processes on an annual
basis and last reviewed the policy in October
2021. The Committee reports to the Board on
the process and any updates arising from its
operation.
Fair, balanced and understandable
The Committee has reviewed the contents of the
Annual Report and Financial Statements 2021
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
2021, 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
13 April 2022
85
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration
Annual Statement
Laura Whyte
Chair of the Remuneration Committee
Chair of the ESG
Other members:
committee
Ian
Krieger
Katie
Wadey
Meetings held: 5
Dear Shareholder,
As Chair of the Remuneration Committee and on
behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the year ended
30 December 2021.
The Covid-19 pandemic continued to have a
pervasive impact across the real estate and retail
sector, with the first three months of the year in
national lockdown. The challenges of the wider
economy and structural changes accelerated by
Covid-19 have impacted our financial performance,
share price and dividend policy during the year.
However, the Company has also made significant
progress to stabilise the business. The Company
undertook a restructuring of its largest loan facility
in parallel with a £30 million capital raise, which
together have helped materially improve the
Group’s critical loan to value ratio.
Our approach to remuneration has been
measured and balanced, seeking to ensure that a
consistent approach is taken across the business
and that Executive remuneration and reward
is well-aligned with shareholder objectives and
experience.
The Committee met five times during 2021 to
discharge its responsibilities. In addition, informal
meetings and other correspondence took place to
discuss wider remuneration issues. In addition to
the other Committee members, Ian Krieger and
Katie Wadey, both independent Non-Executive
Directors, the Chief Executive and other Non-
Executive Directors are invited to attend meetings,
as required. In accordance with the Corporate
Governance Code 2018, no Director was included
in the decision-making process for their own
remuneration nor present at any meeting where
the same was being discussed.
Board Policy
Our existing Remuneration Policy was presented
to shareholders at the Company’s Annual General
Meeting in 2019, receiving strong support with a
vote in favour of 87.8%. The Policy is due to expire
at this year’s Annual General Meeting on 19 May
2022. The Board, upon recommendation from the
Committee, is presenting a revised Remuneration
Policy for shareholder approval at this year’s AGM.
The Board is proposing to retain the same
Combined Incentive Plan structure as introduced
in 2019.
Board changes
As shareholders will be aware, there were two
changes to the Board during the year. Tony
Hales retired by stepping down as Non-Executive
Director, Senior Independent Director and Chair
of the Remuneration Committee at the 2021
AGM. Ian Krieger was appointed to the role of
Senior Independent Director and I, Laura Whyte,
as Chair of the Remuneration Committee from
the conclusion of the 2021 AGM on 20 May 2021.
Louis Norval resigned from the Board on 16
December 2021. No exit payments were made to
Tony Hales or Louis Norval. Ian Krieger received
the same additional fee for being appointed
Senior Independent Director that had previously
been paid to Tony Hales. Both Ian’s and my own
remuneration are in line with the agreed policy for
Non-Executive Director fees.
2021 Company performance and
Combined Incentive Plan (CIP)
While all the Company’s centres remained open
for the full year, the operating environment during
2021 was significantly disrupted by the Covid-19
pandemic. This was most pronounced at the end
of 2020 and in the first quarter of the year with
the full national lockdown, which was longer in
duration than the lockdown in 2020 at the start
of the pandemic and covered part of the critical
Christmas and new year sales period. Covid-19
remained a factor throughout the whole 12
months with various levels of restrictions in place
at most times. This led to sustained pressure on
the retail sector, which in turn had an adverse
effect on retail property, increasing the number of
retailer failures and restructuring – including our
largest tenant, Debenhams – impacting contracted
rent, rent collection and ultimately valuations
through both lower income and further expansion
in cap rates for retail assets.
86
capreg.com Read more
about Director
remuneration on
pages 89 to 105
While the Group’s relative performance
benchmarked well against industry peers, both
NRI and Adjusted Profit fell. The Group continued
to ensure prudent cost control and operational
performance was relatively strong with footfall
outperforming the prior year and the national
index. Despite the challenges faced by the Group
in 2021, progress continued to be made on
delivering non-discretionary goods and services
in pursuit of the Community Centre strategy
including completing more leasing deals during
2021 than in 2019 and 2020 combined.
The combination of these factors put significant
pressure on the balance sheets of companies
within the retail property sector, leading to
a variety of remedial actions being taken.
The Company’s “Refocus, Restructure and
Recapitalisation” project that was completed in
the second half of the year was viewed positively
by key stakeholders in the context of some of the
alternative options pursued by others.
The Board believe management performed
exceptionally during the year to protect
shareholder equity in the face of unprecedented
external pressures.
After Committee review, the formulaic outturn of
the 2021 CIP for the year stood at 71.4%. However,
in acknowledgement of a challenging year for
the business, the Committee determined that
downward discretion to reduce the formulaic
outturn to an award of 65% of the maximum
opportunity under the CIP would be more
appropriate based on the objectives set. The
Committee considered the overall result to be an
appropriate and balanced outcome noting that,
while results in absolute terms had seen a decline
in NRI and Adjusted Profit, significant progress had
been made in the year operationally and it was
appropriate to recognise the exceptional efforts
made by the Executive Directors in completing
the equity raise and restructuring of the Mall
loan facility, which have significantly recapitalised
the business and secured its ongoing operation.
The Committee also considered the approach on
bonuses paid to the wider workforce, confirming
that the total bonus pool provided was in line with
the award made in 2019.
The Committee continues to believe that the
CIP provides the best mechanism to motivate,
reward and retain Executive Directors. For 2022,
the Committee will set 70% financial and 30%
non-financial strategic targets which reflect the
key priorities of the business over the next 12
months and to properly incentivise Executive
management. As per 2021, the Committee will
provide full disclosure of the targets and outcomes
in the 2022 Remuneration Report and will exercise
87
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Annual Statement
downward discretion on CIP outcomes if the
Committee view that 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
April 2018 LTIP issue ended on 18 April 2021.
Adjusted Profit, Property Return and TSR metrics
performance criteria were not met, resulting in nil
awards vesting.
At the Extraordinary General Meeting of the
Company, held on 1 November 2021, the Board
proposed an amendment to the existing LTIP rules
by reducing the minimum vesting period from
three years to 18 months for awards that may
be granted under the LTIP to key staff other than
Executive Directors. The amendment was primarily
aimed at aligning retention, similar to the proposed
approach for the Executive Directors.
Retention Award
At an Extraordinary General Meeting (EGM) of the
Company, held on 1 November 2021, the Board
proposed an amendment of the current Directors’
Remuneration Policy to allow for cash-based
Long-Term Retention Awards to be given to the
Executive Directors of the Company. The Board
took the considered view, in full consultation with
the major shareholders accounting for over 60%
of the register, that the Retention Awards should
be paid in cash to provide all shareholders with
the confidence that the Executive Directors, who
are highly regarded by all our stakeholders, were
tangibly and transparently incentivised to deliver
the strategy which is imperative for the Company’s
recovery from its recent difficulties. These are not
normal times and called for a radical approach
outside traditional reward structures.
Having reviewed the performance of the Chief
Executive and Group Finance Director during a
critical and challenging business environment
due to Covid-19 and its enduring effects on the
Business’s industry, the Board considered the Chief
Executive Officer and the Group Finance Director to
have demonstrated exceptional leadership.
The resolution tabled at the EGM passed with
strong support with 93.56% of votes cast in favour.
Executive Director salary increases
The Executive Directors have been awarded
a pay rise of 2%. Fees paid to Non-Executive
Directors will also increase by 2%. Both are in line
with the general pay rise provided to the wider
workforce of 2%.
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 by 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. In order to move towards
alignment, it has been agreed that the Chief
Executive’s pension contribution will be reduced
from 15% to 13% of salary in 2022 and then to 8%,
in line with the range of contributions paid to the
wider workforce, from 1 January 2023.
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’s Senior Leadership Team and is
therefore able to ensure that the remuneration
of the Executive Directors is in line with senior
management and other colleagues.
Committee changes
Tony Hales retired and stepped down as Chair
of the Committee at the conclusion of the
Company’s Annual General Meeting on 20 May
2021. I succeeded Tony as Chair of Remuneration
Committee, with effect from that day.
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.
LAURA WHYTE
CHAIR OF REMUNERATION COMMITTEE
88
capreg.com Directors’ Remuneration 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 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; and
•
Ensure that the incentive structure does not raise any environmental, social or governance risks through compliance with our
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
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’s view is that by putting an emphasis on performance-related compensation, Executives are encouraged to perform
to the highest of their abilities. The performance-based compensation is targeted to be at median or above, for above median
performance, within the comparator group to ensure that outstanding relative performance is appropriately rewarded. The overall
effect is that our total compensation is at median, or above 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
Predictability
Proportionality
Alignment to culture
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 of 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.
The range of possible outcomes under the CIP are outlined on page 95.
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.
The Committee ensures that personal performance measures under the
CIP incentivise behaviours consistent with the Company’s culture, purpose
and values.
89
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Directors’ Remuneration Policy
This part of the report has been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8 of the Large
and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (“the Act”).
This section of the report contains details of the Directors’ Remuneration Policy that will govern the Company’s future remuneration
payments. The Policy is intended to apply for three years from the approval of the Policy. The Policy described in this part is subject
to approval by shareholders at the Company’s AGM on Thursday, 19 May 2022. The results of the shareholder vote will be displayed
on the Company's website immediately after the 2022 AGM, alongside a copy of the Policy.
The Policy was determined following a review of the existing structure provided by the Group’s remuneration advisers, PwC. This
was discussed with the Committee, Executive Management and the Board including the representatives from the Company’s largest
shareholder, Growthpoint. Following the decision to essentially retain the same CIP structure as has been in operation, a short
consultation with other key stakeholders and major shareholders was undertaken before concluding on the policy that is to be
presented for approval at the Annual General Meeting.
Purpose &
link to strategy
Operation
Base salary
•
To aid recruitment,
retention and
motivation of high-
quality people
•
To reflect
experience and
importance of role
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 to the average
increase awarded to the wider workforce.
Increases may be above this level if there is an increase
in the scale, scope or responsibility of the role or to
allow the basic salary of newly appointed Executives to
move towards market norms as their experience and
contribution increases.
•
Performance
metrics
n/a
Opportunity
The maximum
increase
applicable in any
year is capped
at 10% of base
salary.
Change
No change
No change
No change
Pension
•
To help recruit
and retain high-
quality people
•
To provide an
appropriate
market competitive
retirement benefit
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.
Lawrence Hutchings received a pension allowance of 15% of
basic salary in 2021. From 2022 onwards, he will receive 13%
of basic salary.
Stuart Wetherly receives a pension allowance of 8% at the
top of the range of pension contributions paid to the UK
workforce of 4%–8%.
From 1 January 2023, Lawrence and Stuart’s pension
contributions will be 8% of salary, in line with the range of
contributions paid to the wider workforce.
Change
No change
n/a
No change
Executive
Directors are
eligible to receive
a pension
allowance
equivalent to up
to 15% of basic
salary.
For new
appointments,
the Committee
will ensure
that pension
contributions are
in line with that
of the workforce
of 4–8%.
Lawrence
Hutchings’
pension will
reduce to 8% in
January 2023.
Benefits
•
To aid recruitment
and retention
•
•
To provide market
competitive benefits
To support physical,
mental and
emotional wellbeing
The Company offers a package to Executive Directors, in line
with local market, including but not limited to:
No maximum
n/a
critical illness cover;
life insurance;
• private medical insurance;
•
•
• permanent health insurance; and
• holiday and sick pay.
Benefits are brokered and reviewed annually.
Change
No change
No change
No change
90
capreg.com Opportunity
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
payout
represents
exceptional
performance.
The maximum
combined
incentive award
potential in
any year may
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.
Purpose &
link to strategy
Operation
Combined Incentive
Plan (CIP)
•
To incentivise
delivery of
short-term
business targets
and individual
objectives based on
annual KPIs
•
•
•
•
To recognise
performance while
controlling costs
in reaction to the
market context or
company events
To reinforce delivery
of long-term
business strategy
and targets
To align participants
with shareholders’
interests
To retain Directors
over the longer term
The plan is reviewed annually to ensure bonus opportunity,
performance measures and weightings are appropriate and
support the stated Company strategy.
All measures and targets will be reviewed and set annually
by the Committee at the beginning of the financial year and
levels of award determined by the Committee after the year-
end are determined based on achievement of performance
against the stipulated measures and targets.
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 performance underpin. Vested deferred shares will be
subject to an additional holding period to the 5th anniversary
of the date of grant. Upon vesting, sufficient shares can be
sold to pay tax.
Up to 100% of deferred shares will lapse if median relative
TSR performance against the peer group is not achieved.
Malus and clawback provisions apply such that the
Committee has the discretion to reduce or cancel any
awards that have not been exercised, in any of the following
situations:
• C&R’s financial statements or results being negatively
restated due to the Executive’s behaviour;
a participant having deliberately misled management or
the market regarding Company performance;
a participant causing significant reputational damage to
the Company; or
a participant’s actions amounting to serious / gross
misconduct.
the discovery that any information used to determine the
Bonus and/or the number of Plan Shares placed under
a Share Award relating to a Bonus Award was based on
error, or inaccurate or misleading information; and/or
failure of risk management; and/or
corporate failure.
•
•
•
•
•
•
In line with UK corporate governance best practice, the
Committee will retain the discretion to adjust the payment
and vesting outcomes (both upwards and downwards) under
the CIP to reflect the overall corporate performance and
shareholder experience. The 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.
Change
No change
No change
Performance
metrics
Performance
targets set
annually based
on a 100%
Group financial
and strategic
performance
targets.
2022 objectives
will be weighted
70% on financial
performance and
30% 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.
Threshold
performance,
where relevant
for individual
objectives,
is typically
set at 50%
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.
Financial
performance will
be 70%; strategic
and operational
performance
will be 30%
91
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Directors’ Remuneration Policy
Performance
metrics
Continued
employment
and not subject
to disciplinary
or performance
procedures.
Opportunity
Lawrence
Hutchings
will receive a
cash award of
£1,000,000.
Stuart Wetherly
will receive a
cash award of
£500,000.
The maximum
entitlement
for any one
participant
will not be
amended to the
participant’s
advantage.
No new Awards
will be made, but
the Awards made
during 2021
will continue to
vest in line with
the Policy and
scheme rules.
Purpose &
link to strategy
Operation
Long-Term
Retention Award
• Aligns the Executive
Directors’ interests
with those of
shareholders.
• Rewards and helps
retain/recruit
Executives.
A cash-based one-off Long-Term Retention Award has been
implemented by the Company to incentivise the retention of
the Executive Directors.
The Award was approved by shareholders via a General
Meeting on 1 November 2021.
A one-off award was granted to Lawrence Hutchings and
Stuart Wetherly on 1 November 2021, which will vest on 30
September 2023.
The Award is not subject to additional performance measures
outside of continuous employment in order to simplify
the attainment of the Award by the Executive Directors.
It is intended as a method of retention of key individuals
within the business and should not be hindered by complex
performance measures.
Clawback provisions will apply to the Long-Term Retention
Awards if it is discovered within two years of the payment of
a Long-Term Retention Award that:
•
•
•
•
•
•
there has been a material misstatement or miscalculation
in the results of the Company;
the award holder has committed an act of gross
misconduct;
the award holder has committed an act which in the
Remuneration Committee’s opinion has given or could
give rise to serious reputational damage to the Group;
the award holder has committed an act which, in the
Remuneration Committee’s opinion, deliberately misled
the Board or the market as to the performance of
the Group;
the award holder has committed an act which in the
Remuneration Committee’s opinion has caused the
Company or business in which the award holder
is employed to suffer a material failure of risk
management; and/or
the Company enters an involuntary administration or
insolvency process or a company voluntary arrangement.
Malus provisions will apply to allow the Remuneration
Committee to reduce the payment under a Long-Term
Retention Award if any of the circumstances set out
above occur prior to the payment of the Long-Term
Retention Award.
Change
Awards approved at General Meeting on 1 November 2021
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 two years.
n/a
n/a
Change
No change
No change
No change
92
capreg.com Opportunity
Performance
metrics
n/a
n/a
Purpose &
link to strategy
Operation
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 98. 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
Change
No change
No change
No change
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 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.
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.
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.
93
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Directors’ Remuneration Policy
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 is summarised in the table below:
Salary and benefits
Executive Directors are on notice periods of 12 months. In cases of an Executive leaving this can be served or settled with a
payment in lieu of notice.
Combined Incentive Plan (CIP)
For leavers during the award year
•
Typically, for good leavers, rights to awards under the CIP will be pro-rated for time in service to termination as a
proportion of the performance period, and will, subject to performance, be paid at the normal time in the normal manner
(i.e. in cash/deferred awards as appropriate).
•
Typically for other leavers, rights to awards under the CIP will be 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 pro-rating (over the deferral period) for good
leavers and to accelerate the vesting and/or release of awards if it considers it appropriate.
•
Typically for other leavers, rights to deferred awards will be forfeited.
Long-Term Retention Awards
If, prior to the payment date, a participant ceases to be employed by the Group, his Long-Term Retention Award will lapse
with immediate effect. Where, however, a participant ceases employment as a “good leaver”, any Long-Term Retention Award
held by that individual will not lapse and may be retained to the extent that the Remuneration Committee in its discretion
determines taking into account such factors as the Remuneration Committee in its discretion determines including the period
of time that the participant was employed from the award date.
Such retained Long-Term Retention Award will vest on the normal payment date (unless the Remuneration Committee in its
discretion determines that it will be settled earlier) and in the normal manner subject to the other conditions applying to the
Long-Term Retention Award being met.
A participant will be a good leaver if their employment ceases: a) due to death; b) due to injury, ill-health or disability (in
each case evidenced to the satisfaction of the Remuneration Committee); c) due to redundancy or upon the transfer out
of the Group of a company or business by which the participant is employed; or d) in any other circumstance that the
Remuneration Committee determines (other than dishonesty, fraud, misconduct or any other circumstance that justifies
the summary dismissal of the participant).
If, prior to the payment date, a participant has given or received notice to terminate their employment with the Group,
his Long-Term Retention Award will not be paid unless the Committee is satisfied that the participant has performed
satisfactorily and to have met the reasonable expectations of the role for which they are employed during the
period from the date of the award to the payment date.
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.
94
capreg.com Total compensation
•
The minimum scenario is based on nil incentive 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.
•
The Long-Term Retention Award has been excluded from these calculations.
All figures in £’000
£2,500
£2,000
£1,500
£1,000
£500
£1,500
£1,000
£500
Total
£1,162
£438
£219
Total
£505
Total
£2,256
£1,313
Total
£1,818
£875
£438
£438
£438
£438
£438
£438
Total
£1,037
£479
£240
27%
£288
Total
£1,277
£719
£240
22%
£288
Total
£677
£240
£120
42%
£288
Total
£318
87%
£288
£0
£0
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
L Hutchings
Minimum
Target
Maximum
Maximum + 50% share price appreciation
S Wetherly
Minimum
Target
Maximum
Maximum + 50% share price appreciation
Salary
87%
38%
24%
19%
Salary
91%
42%
28%
23%
CIP – Cash
0%
19%
24%
19%
CIP – Cash
0%
18%
23%
19%
CIP – Shares
0%
38%
48%
58%
CIP – Shares
0%
35%
46%
56%
Benefits
2%
1%
1%
0%
Benefits
2%
1%
1%
1%
Pension
11%
5%
3%
3%
Pension
7%
3%
2%
2%
Total
100%
100%
100%
100%
Total
100%
100%
100%
100%
Consultation and shareholders’ views
During 2021, the Committee undertook a consultation with its largest shareholders before implementing the Retention Awards that
were proposed at the General Meeting in November 2021. The vote passed with 93.6% of votes in favour.
Following the decision to essentially retain the same CIP structure as has been in operation, a short consultation with other key
stakeholders and major shareholders was undertaken in early 2022 before concluding on the policy that is to be presented for
approval at the Annual General Meeting.
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.
95
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Directors’ Remuneration Report
This section sets out how the Directors’ Remuneration Policy was implemented during 2021. 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 2022 AGM.
The Remuneration Committee
The Committee met five times during 2021 as well as holding informal meetings and other correspondence to discuss wider
remuneration issues. Committee members include Laura Whyte (Chair), Ian Krieger and Katie Wadey, all independent Non-Executive
Directors. All members of the Committee attended each meeting in the year. 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 2021, the Committee received advice from independent remuneration consultants PwC LLP in respect of advising on the new
Retention Award and the proposed amendments to the Combined Incentive Plan within the new Remuneration Policy. PwC LLP’s
fees for this advice were £72,500, which were charged on a time/cost basis. No other services were provided by PwC LLP during the
course of 2021.
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 2021 (unaudited)
Net Rental Income
Adjusted Profit1
Adjusted Earnings per share1
IFRS Loss for the period
Total dividend per share
Net Asset Value (NAV) per share
EPRA NAV per share
Group net debt
Net debt to property value
2021
£29.0m
£8.1m
6.8p
£(26.4)m
–
102p
102p
£185.3m
49%
20202
£34.1m
£11.0m
9.5p
£(203.4)m
–
150p
157p
£345.1m
65%
1 Adjusted Profit, Adjusted Earnings per share and EBITDA 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 2020 results have been restated for a prior year adjustment of £0.7 million in respect to the treatment of SaaS configuration costs as explained in
Note1. 2020 Adjusted Profit has also been restated to reflect Snozone EBITDA performance measure.
96
capreg.com 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 2021.
£’000
Salary/Fees1
Taxable
benefits1,2
Other
benefits1,2
Pension
Total
fixed pay
Annual
bonus8
Other9
Total
variable pay8
Total
pay
L Hutchings
S Wetherly
Total
D Hunter6
T Hales3, 4
G Muchanya5
I Krieger4
L Norval
N Sasse5
K Wadey4,7
L Whyte4
H Scott-
Barrett
Total
Total all
2021
429
282
711
140
21
–
51
43
–
48
48
2020 2021 2020 2021 2020 2021 2020
64
407
23
268
87
675
–
95
–
51
–
–
–
46
–
41
–
–
–
10
–
46
7
5
12
–
–
–
–
–
–
–
–
64
23
87
–
–
–
–
–
–
–
–
3
2
5
–
–
–
–
–
–
–
–
4
2
6
–
–
–
–
–
–
–
–
2
1
3
–
–
–
–
–
–
–
–
2021
499
308
807
140
21
–
51
43
–
48
48
2020 2021 2020
481 279
298 153
779 432
–
–
–
–
–
–
–
–
95
51
–
46
41
–
10
46
2021
– 1,000
–
500
– 1,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
2021
– 1,279
–
653
– 1,932
–
–
–
–
–
–
–
–
2020
2021
– 1,778
–
961
– 2,739
140
21
–
51
43
–
48
48
2020
481
298
779
95
51
–
46
41
–
10
46
–
351
51
340
1,062 1,015
–
–
6
–
–
5
–
–
3
–
–
12
–
–
87
–
–
–
351
–
–
87 1,158 1,119 432
51
340
–
–
–
–
– 1,500
–
–
–
–
– 1,932
–
351
51
–
–
340
– 3,090 1,119
1 Executive and Non-Executive Directors took a voluntary 20% reduction in salary or fees for the months of April, May and June 2020.Taxable benefits
include private medical care and critical illness cover; other benefits include life insurance and permanent health insurance. Taxable benefits include
the complete list required in paragraph 11(1)(a) of Schedule 8 of the Regulations.
2 Taxable benefits include private medical care and critical illness cover; other benefits include life insurance and permanent health insurance. Taxable
benefits include the complete list required in paragraph 11(1)(a) of Schedule 8 of the Regulations.
3 T Hales retired and stepped down as a Director on 20 May 2021. As a result, he received a pro-rata sum up to his resignation date.
4 T Hales, I Krieger, K Wadey and L Whyte receive(d) an additional fee of £5,000 per annum as members of the Audit and Remuneration Committees. I
Krieger receives a further fee of £5,000 as Senior Independent Director.
5 G Muchanya and N Sasse, both appointed on 9 December 2019 as Growthpoint’s representatives, do not receive a fee.
6 D Hunter was appointed as a Non-Executive Director on 9 March 2020 and Chairman on 20 May 2020.
7 K Wadey was appointed a Non-Executive Director on 20 October 2020.
8 Entries for 2021 represent the cash bonus element of the Combined Incentive Plan and does not include the element deferred into shares subject to
relative TSR performance.
9 A one-off cash-based award was granted to Lawrence Hutchings (£1,000,000) and Stuart Wetherly (£500,000) on 1 November 2021, which will vest
and become payable on 30 September 2023.
Basic salary increases for Executive Directors
Executive Directors have been awarded a pay rise of 2%, in line with the blanket increase provided to the wider workforce.
L Hutchings
S Wetherly
C Staveley
H Scott-Barrett
K Ford
2022
£’000
438
288
–
–
–
%
2.0
2.0
–
–
–
2021
£’000
429
282
–
–
–
20201
£’000
429
282
–
–
–
%
–
–
–
–
–
%
1.0
2.5
–
–
–
2019
£’000
425
275
–
–
–
2018
£’000
383
–
305
–
–
%
1
–
–
–
–
%
2.0
–
2.0
–
–
2017
£’000
375
–
299
427
315
%
–
–
2.0
2.0
2.0
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.
97
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Directors’ Remuneration Report
Non-Executive Director fees
Non-Executive Director fees will increase by 2% in line with the increase provided to the salaries of Executive Directors and the wider
workforce. This will result in a fee of £142,800 for the Chairman and £43,730 for Non-Executive Directors in 2022. No increase will
be applied to the additional £5,000 per annum for being a member of the Audit and Remuneration Committees nor 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, do not receive a fee
as Non-Executive Directors.
Combined Incentive Plan (CIP) (unaudited)
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. No awards were granted in
2021 as the CIP awards for the 2020 financial year were waived by the Executive Directors.
Date of
Name
Award
L Hutchings 27.04.2020
No. of
Type of
awards2
award
191,201 Nil cost option
Face value at
date of award
£’0003
436
S Wetherly
27.04.2020
103,099 Nil cost option
235
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
01.01.2023
Holding
period
2 years
01.01.2024
1 year
01.01.2025
–
01.01.2023
2 years
01.01.2024
1 year
01.01.2025
–
1
Includes dividend equivalent shares subsequently awarded in 2020.
2 Calculated based on average Market Value of a Share over the final nine Dealing Days to 30 December 2019: 253.67 pence.
3 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.
98
capreg.com 2021 Combined Incentive Plan and achievement of objectives (audited):
L Hutchings
S Wetherly
Maximum CIP
opportunity
as % of salary
300%
250%
% of
objectives
achieved
65%
65%
Effective %
of maximum
achieved
195%
163%
Cash bonus
payable
£’000
279
153
Deferred
share award
£’000
558
305
Deferred share awards are subject to the individual remaining in continuing employment (unless they qualify as a good leaver). Up to
100% of deferred shares will lapse if median relative TSR performance is not achieved.
The annual Combined Incentive Plan criteria for 2021 were determined with a weighting of 80% for Financial Objectives and 20% on
Operational and Strategic objectives.
Group Objectives: Financial Targets (80%)
Performance
Measure
Adjusted Profit
Net Rental Income
Rent Collection including deferrals
Cost Management (Central Costs)
Balance Sheet management – based on
reducing the Group’s Net Loan to Value ratio
Total
Threshold
Maximum
Required
performance
H1 – £4.2m
H2 – £4.2m
H1 – £15.6m
H2 – £14.7m
88%
7.8
60
% of bonus
2.5%
2.5%
2.5%
5%
7.5%
20%
% of bonus
10%
10%
10%
20%
30%
80%
Required
performance
H1 – £5.2m
H2 – £6.3m
H1 – £19.0m
H2 – £17.3m
95%
7.0
47.5
Actual
achieved
H1 – £2.3m
H2 – £5.8m
H1 – £13.4m
H2 – £15.6m
92%
£7.5m
Net LTV =
49%
Payout as
% of max.
4.1%
2.5%
6.8%
10.6%
27.3%
51.4%
Group Objectives: Operating Metrics (10%)
Performance Measure
Operating metrics
% of bonus
10%
Required performance
5% based on Footfall
outperforming the national index
by at least 0.5%
5% based on leasing
performance against ERV and
Previous Passing Rent
Actual achieved
Outperformed the
national index by 5.7%
Payout as % of max.
10%
143 new leases and renewals signed
at average premium to previous
rent of 7.3% and to ERV of 15.6%
Total
10%
10%
99
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Directors’ Remuneration Report
Group Objectives: Implementation of Strategy (10%)
In assessing the performance against strategy, the Committee considered the following:
• Completion of equity raise and debt restructuring – acquired £100 million of debt for £81 million, partly funded by new debt of
£35 million meaning an effective discount of 29%. Loan restructuring agreed as part of the transaction providing extended loan
term and two-year covenant waivers. New equity underwritten by Growthpoint at an approximate 10% discount to the 30-day
VWAP and in line with the previous day’s closing share price hence relatively mitigating the dilutive impact to shareholders who
did not participate. Transaction was favourably received by equity analysts and key stakeholders and shareholders.
• Walthamstow residential receipt – completed the critical milestone of planning consent facilitating the anticipated capital receipt
in Q2 2022.
• Remerchandising in line with Community Centre strategy – relet part or whole of all three Debenhams units within the portfolio.
Advanced agreement for lease on Ilford medical centre and exchanged on new NHS diagnostics centre in Wood Green. Opened
new Lidl supermarket in Luton.
• Disposal of non-core assets – further reduced leverage by completing disposals of Edmonds Parade in Hemel and Maidstone
House offices in Maidstone in line with prevailing book value.
In consideration of the significant progress made, most critically in respect of the completion of equity raise and debt restructuring,
the Committee concluded to award a maximum payout of 10%.
Overall Committee Assessment of Combined Incentive Plan Payment
The Committee carefully considered the performance against the Financial Targets and determined that the formulaic outturn
would be 51.4% out of a maximum of 80%. The Committee then reviewed performance against the Operating Metrics and noted
that these had been exceeded, resulting in a payment of 10% out of 10%. Finally the Committee considered the Implementation of
Strategy and noted that performance here had also been very strong, resulting in a payment of 10% out of 10%. Taking into account
the challenges faced during the year, whilst the Committee were broadly satisfied that the formulaic out-turn of 71.4% reflected
performance during the year, it was determined that a bonus of 65% of the overall maximum was more appropriate. The Committee
therefore exercised its discretion to reduce the formulaic outturn such that a payment of 65% of maximum was awarded.
CIP Objectives
The Committee will continue to set stretching performance targets based on the Group’s key financial performance metrics which
form at least 70% of the metrics used. The remaining 30% will be subject to strategic and operational measures, providing a link
between financial and strategic outturns.
Adjusted Profit
Net Rental Income
Rent collection
Cost management
Balance sheet resilience
Total Financial:
Operating metrics
Footfall against benchmark
Leasing performance
Strategy Implementation including ESG performance
Total Operational and Strategic:
% of max.
15%
15%
10%
15%
15%
70%
10%
20%
100%
Payout levels for threshold performance will remain controlled at a minimum of 25% of the CIP and maximum payout will represent
“exceptional performance”. Target performance levels of payout 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 2022 Directors’ Remuneration Report.
100
capreg.com Long-Term Incentive Plan (audited):
Vesting of April 2018 LTIP issue
The performance period for the April 2018 LTIP issue ended during 2021. Nil awards qualified for vesting as the performance
conditions were not met.
The actual performance against target of the April 2018 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
Calculation
Total Shareholder Return relative to FTSE 350 Real Estate
(3 Years to 18 April 2021)
Threshold – outperform index
Maximum – Index + 12%
Actual – C&R 20.0 v Index 104.0
Adjusted Profit per Share (Financial Years 2018–2020)
Threshold – 5% per annum average growth
Maximum – 10%
Actual – -28.1%
Relative Property Return to the UK IPD
(3 Years from 31 December 2017)
Threshold – outperform index
Maximum – Index + 1.2%
Actual – C&R –15.8%% v Index –6.24%
Conclusion
Below index
Vesting
0%
Below target
0%
Below index
0%
Total
0%
Exercise of April 2016 LTIP issue – Stuart Wetherly exercised 5,292 share options on 17 December 2021 at nil cost. 2,487 shares were
sold to settle the tax liability crystallising resulting in a net increase in Stuart’s holding of 2,805 shares.
No LTIP awards were left outstanding at the year ended 30 December 2021.
Long-Term Retention Award (audited):
The number of awards and the performance periods for all outstanding Retention Awards are summarised below.
November 2021 Award
Lawrence Hutchings was granted a cash award of £1,000,000 on 1 November 2021 with the sole condition of remaining in continued
employment and not being subject to disciplinary or performance procedures at the payment date.
Stuart Wetherly was granted a cash award of £500,000 on 1 November 2021 with the sole condition of remaining in continued
employment and not being subject to disciplinary or performance procedures at the payment date.
The November 2021 cash-based Long-Term Retention Awards will be paid once the awards vest and become payable on 30
September 2023.
The Company’s Clawback provisions will apply, where the level of vesting may be reduced, including to nil. Malus provisions will apply
to allow the Remuneration Committee to reduce the payment under a Long-Term Retention Award if any of the circumstances set
out above occur prior to the payment of the Long-Term Retention Award.
Deferred Bonus Share Scheme awards (audited):
Exercise of May 2019 Deferred Bonus Share Scheme issue
Lawrence Hutchings exercised 5,636 share options on 17 December 2021 at nil cost. 2,649 shares were sold to settle the tax liability
crystallising resulting in a net increase in Lawrence’s holding of 2,987 shares.
No Deferred Bonus Share awards were left outstanding at the year ended 30 December 2021.
Exit payments and payments to past Directors (audited)
No exit payments were awarded to Directors in 2021. Neither were any payments made to past Directors.
101
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Directors’ Remuneration Report
Performance graph
The graph below illustrates the Company’s Total Shareholder Return (i.e. share price growth plus dividends paid) performance
compared to the FTSE All Share and FTSE 350 Real Estate indices as these indices provide a measure of a sufficiently broad equity
market against which the Company considers that it is suitable to compare itself. The graph shows how the total return on a £100
investment in the Company made on 30 December 2011 would have changed over the ten-year period measured, compared with
the total return on a £100 investment in the comparable indices.
250
Capital & Regional plc
FTSE All-Share
FTSE Real Estate
200
150
100
50
0
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
D e c-21
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.
2012
£’000
2013
£’000
2014
£’000
2015
£’000
2016
£’000
2017
£’000
2018
£’000
2019
£’000
2020
£’000
2021
£’000
n/a
765
n/a
n/a
651
n/a
n/a
833
n/a
n/a
n/a
796
2,112
393
564
–
–
752
718
481
778
n/a
n/a
45%
53%
51%
–
–
–
65%
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
n/a
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)
102
capreg.com Annual change in pay for Directors versus the wider workforce in 2021
The percentage change in the remuneration of Directors between 2019 and 2021 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 2021. 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.
2019
Employee
Group
L Hutchings
S Wetherly
H Scott-
Barrett T Hales
I Krieger G Muchanya3 L Norval N Sasse3
L Whyte W Hamman
Executive Directors
Non-Executive Directors
n/a
Salary
n/a
Bonus
Benefits No change No change No change
2%
9.7%1
11%
(28%)
n/a
–
–
2%
–
–
2%
–
–
No
change
–
–
–
–
–
–
–
–
2% No change
–
–
–
–
Employee
Group
1%
(100%)
S Wetherly
2020
2.5%
Salary
Bonus
(100%)
Benefits No change No change No change
L Hutchings
1%
(100%)
Employee
Group
–
n/a2
L Hutchings S Wetherly
2021
–
Salary
n/a2
Bonus
Benefits No change No change No change
–
n/a2
Executive Directors
Non-Executive Directors
D Hunter T Hales
1%
–
–
n/a
–
–
I Krieger G Muchanya3 L Norval N Sasse3 K Wadey
n/a
–
–
1%
–
–
1%
–
–
–
–
–
–
–
–
Executive Directors
Non-Executive Director
D Hunter
–
–
–
I Krieger G Muchanya3
–
–
–
–
–
–
N Sasse3
–
–
–
K Wadey
–
–
–
L Whyte
1%
–
–
L Whyte
–
–
–
1 Calculated on a like-for-like basis with reference to employees of Capital & Regional plc and Capital & Regional Property Management Limited who
have been at the Companies for the entirety of the current and prior years.
2 No bonuses were paid in 2020 and hence the percentage change cannot be calculated.
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 6.3:1 (£429,000: £68,282).
1 Calculated with reference to employees of Capital & Regional plc and Capital & Regional Property Management.
Relative importance of spend on pay compared to distributions to shareholders
Executive Director’s remuneration1
Employee costs (per Note 7 of the financial statements)
Dividends paid (Total of Interim and Final Dividend for the respective year)
2021
£m
1.2
11.1
–
2020
£m
0.8
8.7
–
%
59%
28%
–
1 L Hutchings and S Wetherly took a voluntary 20% reduction in salary for the months of April, May and June 2020 and awards under the Combined
Incentive Plan were waived in 2020.
103
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Remuneration CONTINUED
Directors’ Remuneration Report
Directors’ service agreements and letters of appointment
Name
Unexpired term of appointment
Date of service agreement
Notice period
Potential termination payment
Executive Directors
L Hutchings
S Wetherly
Non-Executive Directors
D Hunter
I Krieger
L Whyte
G Muchanya
N Sasse
K Wadey
Rolling contract
13 June 2017
12 months
Rolling contract
11 March 2019
12 months
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Rolling contract
Date of initial appointment
9 March 2020
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
12 months’ salary
and benefits value
12 months’ salary
and benefits value
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 2021, Stuart Wetherly served as
Trustee and Honorary Treasury of the London Wildlife Trust. On 9 October 2021, he resigned from his position having served a term
of six years. 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 regard to Executive pay but
reviews feedback from employee surveys and takes this into account when setting pay. At a Town Hall meeting on 5 November 2021,
through Executive management, employees were made aware of the shareholder resolution to approve the Long-Term Retention
Awards to the Executive Directors. Wider Executive remuneration was also explained in respect of the potential changes to be made
to the existing Executive Remuneration Policy for tabling at the Company’s 2022 AGM.
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
decisions made in respect of the Executive Directors are made with consideration of, and in line with, senior management and other
employees. The Committee also reviews the proposed pay awards and bonus payments made to the wider workforce to ensure
alignment and consistency with the principles set in determining Executive pay, noting that the bonus pool provided for staff was in
line with that paid in 2019.
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 CIP share
awards; these are disclosed separately on page 101.
D Hunter
L Hutchings
S Wetherly
T Hales1
I Krieger
G Muchanya
L Norval2
N Sasse
K Wadey
L Whyte
1 Shares held at date of retirement on 20 May 2021.
2 Shares held at date of resignation on 16 December 2021.
104
30 December
2021 Shares
105,442
12,017
35,603
45,265
17,032
–
10,313,718
62,187
–
31,115
30 December
2020 Shares
71,285
6,105
22,174
45,265
11,515
–
10,313,718
42,042
–
27,029
capreg.com
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 directly have a personal beneficial interest in any of these holdings.
There were no changes to Directors’ shareholdings from 30 December 2021 to 13 April 2022, being the latest practicable date prior to
the issue of this Report.
Executive share ownership (audited)
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
4 year 6 months
2 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 two years. Shares awarded but subject to
further deferral periods or performance conditions are included for the purposes of the calculation.
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
To approve the Directors’
Remuneration Policy
For
% For
Against
% Against
Total Shares
Voted
% Shares
Voted
Votes
Withheld
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 2021 AGM, was as follows:
Resolution
To approve the Directors’
Remuneration Report
For
% For
Against
% Against
Total Shares
Voted
% Shares
Voted
Votes
Withheld
82,908,367
99.66%
282,881
0.34%
83,191,248
74.40%
239,742
Shareholder voting on the Long-Term Retention Awards, which was tabled at the 1 November 2021 EGM, was as follows:
Resolution
To approve the Long-Term
Retention Awards
For
% For
Against
% Against
Total Shares
Voted
% Shares
Voted
Votes
Withheld
74,164,267
93.56
5,107,522
6.44
79,272,149
70.97
84,550
LAURA WHYTE
CHAIR OF REMUNERATION COMMITTEE
105
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Directors’ Report
At 30 December 2021, the Company does not
have sufficient distributable reserves to declare
a dividend. The Company plans to undertake a
capital reduction exercise for which it will seek
shareholder approval at the 2022 AGM in order to
create distributable reserves.
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.
Business review
Information on the Group’s business, which is
required by section 417 of the Companies Act
2006, can be found in the Strategic Report on
pages 1 to 63 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 68 to 69.
The results for the year are shown in the Group
income statement on page 122. The use of
financial derivatives is set out in Note 19 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 2021 (2020: Nil).
Mindful of having recently raised new equity and
to help reduce debt levels and maximise cash
flexibility, the Group has taken the decision to
not declare a Final dividend. Subject to market
conditions, it is the Company’s intention to resume
paying dividends from the second half of the
financial year ending 2022 in line with its previous
dividend policy which was to distribute on a semi-
annual basis (in the approximate proportions of
45/55 and in that order in respect of each financial
year) not less than approximately 90 per cent of
the Company’s EPRA earnings.
A UK REIT is expected to pay dividends (PIDs) of at
least 90 per cent of its taxable profits from its UK
property rental business by the first anniversary
of each accounting date. As a consequence of
not having paid a dividend since June 2020, the
Group did not meet the minimum PID distribution
requirement for 2019 or 2020. The Group had
agreed with HMRC a 12-month extension to the
2019 deadline until the end of 2021, but having
not paid a dividend during 2021, the Group paid
£2.5 million in December 2021 to settle the tax
outstanding on the estimated shortfall of £13.0
million in respect of the 2019 and 2020 financial
years. This brings the Group effectively up to date
in its REIT compliance.
106
capreg.com Directors
The names and biographical details of the present
Directors of the Company are given on pages
64 to 65. Tony Hales’ resignation was effective
from 20 May 2021 and Louis Norval’s from 15
December 2021. All other Directors served for the
full year. Ian Krieger assumed the role of Senior
Independent Director on 20 May 2021.
All current Directors will retire and being eligible,
offer themselves for re-election at the 2022 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 104.
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 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 86 to 105
Pages 97 to 98
Pages 97 to 98
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 108
Substantial shareholdings
As at 30 December 2021 (the accounting reference date of this report), the Company was notified of the
following interests in its issued ordinary share capital:
Growthpoint Properties Limited
Black Crane Capital
Mstead Limited
Peens Family Holdings
No. of shares
100,505,493
6,902,813
5,742,052
4,975,494
%
60.77
4.17
3.47
3.01
As at 4 April 2022 (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
Black Crane Capital
Mstead Limited
Peens Family Holdings
Mstead Limited is part of the Homestead Group of investors.
No. of shares
100,505,493
6,902,813
5,742,052
4,996,494
%
60.77
4.17
3.47
3.02
107
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE
Directors’ Report CONTINUED
Shares held by Employee Share
Ownership Trust
At 30 December 2021, the Capital & Regional
Employee Share Ownership Trust held 31,876
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 2021 or up to 13 April 2022
being the latest practicable date prior to the issue
of this report.
The Company was authorised by shareholders at
the 2021 AGM held on 20 May 2021 to purchase
up to a maximum of 10.0% of its ordinary shares
in the market. This authority will expire at the
2022 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
As at 30 December 2021, the Company’s total
issued share capital was 165,399,863 ordinary
shares of 10 pence each, all with equal voting
rights. The changes in the Company’s Issued share
capital during 2021 are detailed in Note 20 to the
financial statements.
The Company has a Secondary Listing of shares
on the Johannesburg Stock Exchange (JSE). At
30 December 2021, 7,690,574 of the Company’s
shares were held on the JSE share register
representing 4.7% of the total shares in issue.
Controlling shareholder
Growthpoint, through its nominees, holds 60.8%
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 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%. 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 Centre, Ilford allows the lender
to potentially demand repayment of the facility
with 120 days’ notice following an individual or
entity taking control of 50% or more of Capital &
Regional plc’s shares.
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.
108
capreg.com 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 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 Annual General Meeting.
Annual General Meeting
The Company’s Annual General Meeting is due to
be held on the 19 May 2022. The Notice of Annual
General Meeting 2022, accompanies this report,
which accounts for and explains the business
to be covered at the Annual General Meeting of
the Company.
The Directors Report was approved by the Board
of Directors on 13 April 2022 and is signed on its
behalf by:
STUART WETHERLY
COMPANY SECRETARY
13 April 2022
Registered Company name: Capital & Regional plc
Registered Company number: 01399411
Registered office: 22 Chapter Street, London,
SW1P 4NP
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 2021, the total number of
employees was as follows:
Employees
Directors
Senior Leadership
Team
Employees –
Support Office
Employees – Assets
Employees – Snozone
Male
6
Female
2
Total
8
4
2
6
20
21
152
22
42
124
42
63
276
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.
109
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Directors’ Responsibilities Statement
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 13 April 2022 and is signed
on its behalf by:
LAWRENCE HUTCHINGS
CHIEF EXECUTIVE
STUART WETHERLY
GROUP FINANCE DIRECTOR
The Directors are
responsible for preparing
the Annual Report and
the financial statements in
accordance with applicable
law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under
that law the Directors are required to prepare
the Group financial statements in accordance
with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and
Article 4 of the IAS Regulation and have elected to
prepare the parent Company financial statements
in accordance with FRS 101, as published by
the Financial Reporting Council, and applicable
law in the United Kingdom. Under company law
the Directors must not approve the financial
statements unless they are satisfied that they give
a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company
for that year.
In preparing the parent Company financial
statements, the Directors are required to:
•
select suitable accounting policies and then
apply them consistently;
• make judgments and accounting estimates
that are reasonable and prudent;
•
state whether applicable UK Accounting
Standards have been followed, subject to any
material departures disclosed and explained in
the financial statements; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Company will continue in
business.
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.
110
capreg.com Independent Auditor’s Report
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
1. Opinion
In our opinion:
•
•
•
the financial statements of Capital & Regional plc (the ‘parent Company’) and its subsidiaries (the ‘Group’) give a true and fair
view of the state of the Group’s and of the parent Company’s affairs as at 30 December 2021 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 32 and parent Company related notes A to F.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law
and 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).
2. 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.
111
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Independent Auditor’s Report
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
3. 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.
•
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.
Materiality
Scoping
Significant
changes in
our approach
The materiality that we used for the Group financial statements was £3.38 million (2020: £3.40 million), which was
determined on the basis of 2% (2020: 2%) of net assets. We applied a lower threshold of £0.38 million (2020: £0.52
million) for testing of all balances impacting Adjusted Profit (as defined in note 1 of the Group financial statements),
which is 5% (2020: 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 audit coverage of 98% (2020: 98%) of net assets, 100% (2020: 100%) of revenue and 100% (2020:
100%) of loss. Our component audit work was executed at levels of materiality applicable to each individual
component which were lower than Group materiality.
There have been no significant changes in our audit approach in the current year with the exception of the
change in the key audit matter on the going concern and covenant compliance has been refocused solely to going
concern. The Group have obtained covenant waivers as explained in note 18a to the financial statements and
therefore, whilst going concern overall remains a key audit matter, the covenant waivers obtained in the year mean
that covenant compliance specifically is not referred to separately as a key audit matter. We still test covenant
compliance and forecast covenant compliance as part of our response to the going concern key audit matter.
4. 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 in section 5.2.
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 twelve 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.
5. 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.
112
capreg.com
5.1 Valuation of investment properties
Key audit matter
description
The investment property has a carrying value of £374.8 million at 30 December 2021 (30 December 2020:
£536.1 million), comprising 59% (30 December 2020: 80%) of the Group’s assets. The portfolio consists of
five (30 December 2021: seven) shopping centres within the Group. At the year end the Luton and Hemel
Hempstead assets have been classified as assets held for sale, as they meet the IFRS 5 criteria. They continue to
be valued under IAS 40 but are not presented within investment property.
How the scope
of our audit
responded to the
key audit matter
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 liquidity within the
shopping centre investment sector is still relatively limited, though transaction volumes and real estate investor
lending opportunities are increasing. The valuations continued to be impacted by current COVID-19 and the
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 82. The investment property
portfolio is disclosed in note 10 of the Group financial statements.
• 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 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 management in the valuation were reasonable and the
methodology applied was appropriate.
113
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Independent Auditor’s Report
TO THE MEMBERS OF CAPITAL & REGIONAL PLC
5.2 Going concern
Key audit matter
description
The Group operates in the retail and leisure sectors, which have led to significant pressure on cash flows and
property valuations. Going concern is a significant area of focus, particularly due to the impact of ongoing
retail sector restructuring and COVID-19 on property valuations with underlying cash flow and the ongoing
negotiations with the Group’s lenders.
As at 30 December 2021, Group’s borrowings totalled £238.2 million (30 December 2020: £423.9 million).
Following the reclassification of the balances of Luton and Hemel Hempstead as held for sale, the liabilities
(including borrowings) of these structures amounting to £34.5 million for Hemel Hempstead and £131.3 million
for Luton, have been reclassified to “Liabilities directly associated with assets classified as held for sale”. The
Group also had cash and cash equivalents of £58.5 million (30 December 2020: £84.1 million), of which £32.5
million was maintained centrally and without any restriction (30 December 2020: £60.3 million).
We identified a key audit matter relating to the ability of the group to continue trading as a going concern. The
Group going concern assessment is built on cash flow projections, considering only the cash readily available
to the Group which is not restricted, nor trapped. It is the Group’s intention to sell the Luton and Hemel
Hempstead assets, which at the end of the year have been classified as held for sale.
Operationally, the Group has demonstrated sufficient cash to trade for the lookout period of 12 months and this
would enable them to still operate as going concern. However, in the event that covenant waivers could not be
extended for Illford or the liabilities classified as held for sale and in the event of a default of some of the Group’s
assets, 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.
In addition to considering cash flow forecasts, 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 is also relevant.
There are waivers in place for all covenants at the year end, however if these were not in place, the covenants
would be in a breach position. The Group completed a restructuring and reduction of the debt secured over the
four assets of The Mall in November 2021. The restructuring of the debt resulted in the Group acquiring £100
million of debt for a discounted amount of £81 million (at discount of £19 million), financed with a new loan
(£35 million), raise in equity (£30 million before costs) and existing cash (£16 million) and termination of certain
derivative instruments. This included the covenants of The Mall facility being waived until November 2023. The
Mall facility does not expire until 2027 and the Group is forecast to have sufficient cash to keep operating for
at least the next two years. The completion of The Mall debt restructuring and equity raise addressed concerns
that led to the Directors concluding there was a material uncertainty over going concern at the time of the half
year results in September 2021.
The covenants of Ilford, Hemel Hempstead and Luton facilities were either waived or met as at the year end but
waivers have not yet been agreed beyond April 2022 for Ilford. As detailed above, the Hemel Hempstead and
Luton liabilities are classified as held for sale and ring fenced, but should the Group not secure a longer term
modification to the Ilford covenants, the group would consider further courses of action including the potential
to surrender the asset.
Management’s consideration of the going concern basis of preparation is set out in the Going Concern
statement on page 42 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 have adopted the going concern basis of
accounting for the Group and parent Company and have concluded that there are no material uncertainties
that may cast significant doubt over the Group’s and parent Company’s ability to adopt going concern basis for
a period of at least twelve months from the date when the financial statements are authorised for issue.
The Audit Committee’s discussion of this key audit matter is set out on page 83.
114
capreg.com 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.
• We considered the reasonableness of assumptions included in the downside scenario regarding lower
rental collection levels.
• We assessed the refinancing of The Mall facility, and verified the relevant termination agreements and a
newly subscribed loan facility, as well as the termination of the relevant derivative contracts.
• We have assessed the equity raise in the year by inspecting and agreeing it to the relevant documents and
to the cash receipts.
• We evaluated the cash and borrowings forecast for the next two years including the assessment of the viability
statement of the Group and obtained an understanding and relevant support for material cash movements.
• 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 2021.
• We assessed key loan documentation to understand the principal terms, including financial covenants and
current waivers in place, and performed an assessment of the Group’s existing and forecast compliance
with debt covenants and any associated equity cures and 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.
5.3 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 £144.4 million at 30 December 2021 (30 December 2020: £124.8 million),
comprising 82% (30 December 2020: 66%) of the parent Company’s assets. The refinancing process generated a
£46m increase in the value of investments in subsidiaries in the current year. An impairment of £26.5 million (2020:
£219.2 million) has been provided by management as a result of comparing the carrying value of the investment
against its recoverable amount. Intercompany debtors had a carrying value of £37 million at 30 December 2021 (30
December 2020: £5.5 million), comprising 14% (30 December 2020: 3%) of the parent Company’s assets.
Investments are subject to an impairment review using discount rate of 16.3% (2020: 17.8%). Management has
assessed the recoverability of investments on the basis of nil growth. 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 no further provision (2020: £26.3 million) 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 83.
• We obtained an understanding of the parent Company’s relevant 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 assessed 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.
How the scope
of our audit
responded to the
key audit matter
Key observations 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.
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TO THE MEMBERS OF CAPITAL & REGIONAL PLC
6. Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent Company financial statements
Materiality
£3.38 million (2020: £3.40 million)
£3.04 million (2020: £3.10 million)
Basis for
determining
materiality
Rationale
for the
benchmark
applied
We determined materiality to be 2% of net assets
(2020: 2% of net assets).
We applied a lower threshold of £0.38 million (2020:
£0.52 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
(2020: 5% of Adjusted Profit).
We used net assets as a benchmark when determining
materiality as it is considered to be the most critical
financial performance measure for the Group.
We applied a lower threshold of £0.38 million (2020:
£0.52 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.
Parent Company materiality equates to 2% of net
assets (2020: 2% of net assets), which is capped at 90%
of Group materiality (2020: capped at 90% of Group
materiality).
We used net assets as a benchmark when determining
materiality as it is considered to be the most critical
financial performance measure for the parent Company
as a holding company.
Net assets
£168.4 million
Net assets
Group materiality
Group materiality
£3.38 million
Component materiality
range £0.12 million
to £3.04 million
Audit Committee
reporting threshold
£0.17 million
We applied a lower threshold of £0.38 million (2020: £0.52 million) for testing of all balances impacting Adjusted Profit (as defined in
Note 1 to the Group financial statements), which is 5% (2020: 5%) of this financial performance measure.
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capreg.com 6.2 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
Basis and
rationale for
determining
performance
materiality
Group financial statements
Parent Company financial statements
70% (2020: 70%) of Group materiality
70% (2020: 70%) of parent Company materiality
In determining performance materiality, we considered the following factors:
a. the changes in the business have been factored into the level of materiality;
b. control environment of the Group and our ability to rely on controls; and
c. our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements
identified in prior periods.
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.17 million
(2020: £0.10 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.
7. An overview of the scope of our audit
7.1 Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and
assessing the risks of material misstatement at the Group and component levels.
Our Group audit scope focused primarily on the audit work on the major lines of business. These major lines of business are wholly-
owned assets, Snozone and Group/Central. These are included within individual IFRS 8 segments as disclosed in note 2 to the Group
financial statements.
The businesses subject to a full scope audit or specific audit procedures account for 98% (2020: 98%) of the Group’s net assets,
100% (2020: 100%) of the Group’s revenue and 100% (2020: 100%) of the Group’s loss. 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 4% and 90% (2020: 3% and 90%) of Group materiality, which corresponds to component
materiality of between £0.12 million and £3.04 million (2020: between £0.11 million and £3.06 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.
7.2 Our consideration of the climate-related risks
As a part of our audit, we have obtained management’s climate-related risk assessment and held discussions with management to
understand the process of identifying climate-related risks, the determination of mitigating actions and the impact on the Group’s
financial statements. Management has assessed that there is currently no material impact arising from climate change on the
judgements and estimates determining the valuations within the financial statements.
We performed our own assessment of the potential impact of climate change on the Group’s account balances and classes of
transaction and did not identify any reasonably possible risks of material misstatement. Our procedures also included reading
disclosures included in the Strategic Report to consider whether they are materially consistent with the financial statements and our
knowledge obtained in the audit.
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TO THE MEMBERS OF CAPITAL & REGIONAL PLC
8. 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.
9. 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.
10. 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.
11. 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.
11.1 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 13 April 2022;
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.
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capreg.com 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 valuation of investment
properties. 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,
RICS standards 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.
11.2 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:
•
reviewed 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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TO THE MEMBERS OF CAPITAL & REGIONAL PLC
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. 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.
13. 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 42;
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 42;
the directors’ statement on fair, balanced and understandable set out on page 85;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages
36 to 37;
the section of the annual report that describes the review of effectiveness of risk management and internal control systems
set out on pages 84 to 85; and
•
the section describing the work of the Audit Committee set out on pages 80 to 85.
14. Matters on which we are required to report by exception
14.1 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.
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capreg.com 14.2 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.
15. Other matters which we are required to address
15.1 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 25 years, covering the years ending 25 December 1997 to 30
December 2021.
15.2 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).
16. 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
13 April 2022
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Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021GOVERNANCE Consolidated Income Statement
For the year to 30 December 2021
Revenue
Other income
Expected credit loss
Cost of sales
Gross profit
Administrative costs
Loss on revaluation of investment properties
Other gains and losses
Loss on ordinary activities before financing
Finance income
Finance costs
Loss before tax
Tax
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
3
6
4
10a
6
5
5
6
8a
2a
9a
9a
9a
9a
Consolidated statement of Comprehensive Income
For the year to 30 December 2021
Loss for the year
Other comprehensive income
Total comprehensive expense for the year
2021
£m
70.0
2.5
(4.9)
(33.3)
34.3
(12.7)
(49.2)
14.0
(13.6)
7.6
(17.3)
(23.3)
(3.1)
(26.4)
2020
Restated1
£m
72.7
–
(7.3)
(27.9)
37.5
(12.5)
(208.3)
1.6
(181.7)
0.4
(22.8)
(204.1)
0.2
(203.9)
(22.0)p
(22.0)p
(188.8)p
(188.8)p
2.9p
2.9p
9.2p
9.2p
2021
£m
(26.4)
–
(26.4)
2020
Restated1
£m
(203.9)
–
(203.9)
The results for the current and preceding year are fully attributable to equity shareholders.
The EPRA alternative performance measures used throughout this report are industry best practice performance measures
established by the European Public Real Estate Association (EPRA). 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 6 to the Financial Statements. We consider EPRA NTA to be the most relevant
measure for our business.
1 2020 results have been restated for a prior year adjustment of £0.5 million to the treatment of Software as a Service (SaaS) configuration costs as
explained in Note 1.
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capreg.com
Consolidated Balance Sheet
At 30 December 2021
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
Assets classified as held for sale
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax
Lease liabilities
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Net current assets
Non-current liabilities
Bank loans
Other payables
Derivatives
Lease liabilities
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
2021
£m
374.8
1.7
24.5
0.1
10.0
411.1
20.0
58.5
146.4
224.9
636.0
(29.3)
(1.1)
(2.8)
(165.8)
(199.0)
25.9
(238.2)
(0.3)
–
(30.1)
(268.6)
(467.6)
168.4
16.5
266.1
60.3
4.4
–
(178.9)
168.4
101.8p
101.6p
101.6p
101.0p
2020
Restated1
£m
536.1
1.8
12.2
0.9
14.2
565.2
21.3
84.1
–
105.4
670.6
(30.9)
–
–
–
(30.9)
74.5
(423.9)
(0.2)
(8.9)
(39.6)
(472.6)
(503.5)
167.1
11.2
244.3
60.3
4.4
–
(153.1)
167.1
149.5p
157.0p
157.0p
138.8p
Note
10
11
12
14
14
15
16
2b
17
27
16
18a
17
17
27
2b
20
20
22
25
25
25
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on
13 April 2022 by:
STUART WETHERLY
GROUP FINANCE DIRECTOR
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
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Consolidated Statement of Changes in Equity
For the year to 30 December 2021
Share
capital
£m
10.4
–
Share
premium1
£m
238.0
–
Merger
reserve2
£m
60.3
–
Capital
redemption
reserve1
£m
4.4
–
Own
shares
reserve3
£m
–
–
–
–
–
–
0.8
11.2
–
–
–
–
5.3
16.5
–
–
–
–
6.3
244.3
–
–
–
–
21.8
266.1
–
–
–
–
–
60.3
–
–
–
–
–
60.3
–
–
–
–
–
4.4
–
–
–
–
–
4.4
–
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
£m
61.8
(203.9)
Total
equity
£m
374.9
(203.9)
–
–
(203.9)
(203.9)
0.4
(4.3)
(7.1)
(153.1)
0.4
(4.3)
–
167.1
(26.4)
(26.4)
–
–
(26.4)
(26.4)
0.6
–
(178.9)
0.6
27.1
168.4
Balance at 30 December 20194
Loss for the year4
Other comprehensive income for
the year
Total comprehensive expense for
the year4
Credit to equity for equity-settled
share-based payments (Note 20)
Dividends paid, net of scrip
Shares issued, net of costs (Note 20)
Balance at 30 December 20204
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 21)
Shares issued, net of costs (Note 20)
Balance at 30 December 2021
Notes:
1 These reserves are not distributable.
2 The merger reserve of £60.3 million arose on the Group’s capital raising in 2009 which was structured so as to allow the Company to claim merger
relief under section 612 of the Companies Act 2006 on the issue of ordinary shares. The merger reserve is available for distribution to shareholders.
3 Own shares relate to shares purchased out of distributable profits and therefore reduce reserves available for distribution.
4 2020 results and opening equity have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
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capreg.com
Consolidated Cash Flow Statement
For the year to 30 December 2021
Operating activities
Net cash from operations
Distributions received from fixed asset investments
Interest paid
Interest received
Income tax paid
Cash flows from operating activities
Investing activities
Disposal of investment properties
Purchase of plant and equipment
Capital expenditure on investment properties
Cash flows from investing activities
Financing activities
Dividends paid (net of scrip) including withholding tax
Bank loans drawn down
Bank loans repaid
Derivatives settled
Loan arrangement costs
Issue of ordinary shares (net of costs)
Fixed payments under head leases
Cash flows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Assets classified as held for sale
Cash and cash equivalents excluding assets classified as held for sale
Note
23
10
15
2021
£m
25.1
0.7
(14.4)
–
(2.5)
8.9
11.3
(0.4)
(8.3)
2.6
–
35.0
(84.9)
(0.2)
(0.7)
27.1
(1.4)
(25.1)
(13.6)
84.1
70.5
(12.0)
58.5
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)
95.6
84.1
–
84.1
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Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
Notes to the Financial Statements
For the year to 30 December 2021
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
32. 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 accounting standards in conformity with
the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
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.
In April 2021, the IFRS Interpretations Committee published a decision which addressed how a customer should account for their
costs configuring or customising software that is utilised through a Software as a Service (SaaS) agreement that is determined to be
a service contract. They concluded that:
• Where the configuration and customisation costs do not result in an intangible asset of the customer, the customer should
recognise the costs as an expense when the configuration or customisation services are received. If the customer pays the
supplier before receiving those services, the prepayment should be recognised as an asset.
•
•
If the configuration or customisation services are performed by the supplier of the application software (or its agent) and the
services received are not distinct from the right to receive access to the supplier’s application software, then the customer should
recognise the costs as an expense over the term of the SaaS arrangement.
In limited circumstances, certain configuration and customisation activities undertaken in implementing SaaS arrangements may
give rise to a separate asset. This may be the case if the arrangement results, for example, in additional code from which the
customer has the power to obtain the future economic benefits and to restrict others’ access to those benefits. In this case, the
customer should recognise an intangible asset if the additional code is “identifiable” and meets the recognition criteria in IAS 38
Intangible Assets.
In adopting the above treatment the Group has restated the 2020 results for a prior year adjustment of £0.5m. 2020 Opening equity
has been restated by £0.2m.
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The following table summarises the impact of the change in policy on the financial statements of the Group. There is no impact of the
change in policy on both basic and diluted earnings per share.
Consolidated income statement
Administrative costs
Decrease in profit for the financial year
Consolidated balance sheet
Plant and equipment
Decrease in net assets
Consolidated statement of changes in equity
2020 opening retained earnings
30/12/2020
£m
0.5
(0.5)
(0.7)
(0.7)
(0.2)
Negative goodwill arising from the purchase of Snozone Madrid has been recognised in the period. This has been credited to the
income statement in administrative expenses. Further details can be obtained from Note 31.
Impact of the initial application of Interest Rate Benchmark Reform amendments
In the current year, the Group adopted the Phase 2 amendments Interest Rate Benchmark Reform—Amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16. Adopting these amendments enables the Group to reflect the effects of transitioning from interbank
offered rates (IBOR) to alternative benchmark interest rates (also referred to as “risk free rates” or RFRs) without giving rise to
accounting impacts that would not provide useful information to users of financial statements. The Group has not restated the prior
period. Instead, the amendments have been applied retrospectively with any adjustments recognised in the appropriate components
of equity as at 1 January 2021.
The amendments are relevant for the Group’s LIBOR linked borrowings and interest rate swap derivatives. Details of the financial
instruments affected by the interest rate benchmark reform together with a summary of the actions taken by the Group to manage
the risks relating to the reform and the accounting impact, appear in Note 19.
As a result of the Phase 2 amendments:
• when the contractual terms of the Group’s bank borrowings are amended as a direct consequence of the interest rate
benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the basis
immediately preceding the change, the Group changes the basis for determining the contractual cash flows prospectively by
revising the effective interest rate. If additional changes are made, which are not directly related to the reform, the applicable
requirements of IFRS 9 are applied to the other changes.
• when changes are made to the hedging instruments, hedged item and hedged risk as a result of the interest rate benchmark
reform, the Group updates the hedge documentation without discontinuing the hedging relationship.
New and revised standards issued but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards
that have been issued but are not yet effective:
IFRS 17 Insurance Contracts including Amendments to IFRS 17
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures – Sale or
Contribution of Assets between an Investor and its Associate or Joint Venture
Amendments to IFRS 3 – References to the Conceptual Framework
Amendments to IAS 16 – Property, Plant and Equipment – Proceeds before Intended Use
Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract
Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 Agriculture–Annual Improvements to IFRS Standards 2018–2020
Amendments to IAS 1 – Classification of Liabilities as Current or Non-current including Classification of Liabilities as Current or
Non-current
Amendments to IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies
Amendments to IAS 8 – Definition of Accounting Estimates
None of these standards are anticipated to have a material impact upon the Group’s results.
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Critical accounting judgements
The preparation of financial statements requires the Directors to make the following judgement 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 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 30 December 2021, the Group had total cash at bank on balance sheet of £53.7 million, which is equivalent to more than the
Group’s annual Contracted Rent. This excludes cash held within the Hemel Hempstead and Luton structures which has been
reclassified as assets held for sale. Of the £53.7 million, more than £30 million was held centrally and free of any restrictions. This
provides a significant cash contingency to cover any disruption to operations for an extended period of time.
The Group completed a £30 million Capital Raise and £100 million restructuring of The Mall debt facility in November 2021. As part
of the restructure of The Mall debt facility, the lender provided covenant waivers that run until November 2023 and modifications to
cash trap provisions that run until May 2023. On the Ilford facility the Group is in advanced discussions to agree a package of waivers
and covenant relaxation to cover at least the next 18 months, linked to supporting the funding of major asset management initiatives
at the asset through central cash. The Mall loan facility matures in January 2027, while Ilford matures in March 2024.
All of the Group’s asset backed loan facilities are ring-fenced within their own SPV structures with no recourse to Capital & Regional
plc and no cross-default provisions. The Group is working with the lenders on its Hemel Hempstead and Luton loan facilities on a
disposal of the investments. While this is almost certain to realise less than the value of the debt outstanding, due to the ring-fenced
SPV structure, the net liability of Capital & Regional plc is effectively capped at nil.
In making its assessment of Going Concern, the Group has run updated forecasts on both a base case and downside basis. In the
latter, the Group has sensitised rent collection, car park and ancillary income and Snozone revenue to reflect how a downturn
in expected trading, such as might be caused by a further wave of government restrictions, could impact cashflows. The Group’s
analysis projects that the central cash maintained provides sufficient funds to cover the potential operational disruption.
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 reduce debt levels 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 continue to suspend dividend
payments (or offer a Scrip alternative); 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.
Assets and liabilities held for sale
Note 16 describes the reclassification of the two “Managed Assets”, Hemel Hempstead and Luton, as held for sale. In making this
reclassification, the Directors were required to make a judgement about whether these assets met the criteria to be classified as
held for sale in accordance with IFRS 5. After taking into consideration the position of the two assets and the probability that they
would be disposed within 12 months of the balance sheet date, the Directors have decided the two assets meet the criteria for
reclassification.
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.
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The investment property valuation contains a number of assumptions upon which the valuation of the Group’s properties as at
30 December 2021 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. Estimated rental values and
equivalent yields are considered key assumptions. 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.
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. Sensitivity of the expected credit loss to probability of default is disclosed in
Note 14.
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
The results of subsidiaries 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 which differ from Group accounting policies are adjusted on
consolidation. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
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 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 = €1.1918 (2020: £1 = €1.1123). The principal
exchange rate used for the income statement is the average rate for the year: £1 = €1.1727 (2020: £1 = €1.1248).
Property, plant and equipment
Group/central
Property, plant and equipment (PPE) is stated at cost, net of depreciation and any provision for impairment. Depreciation is provided
on all PPE, 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
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Snozone
PP&E is 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 20%–100% or 1–5 years
Computer Equipment 20%–50% or 2–5 years
Office Equipment 20%–50% or 2–5 years
Operations Equipment 20%–50% or 2–5 years
Property portfolio
Investment properties
Investment properties are properties owned or leased, 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 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 it is highly probable that a transaction will be completed within the next 12 months.
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).
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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.
Assets classified as held for sale
Assets that are classified as held for sale in accordance with IFRS 5 are measured in accordance with that Standard. Non-current
assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather
than through continuing use. The Group’s two “Managed Assets”, Hemel and Luton, have been classified as held for sale as the
Group, in conjunction with the respective lenders who have effective ultimate control of the vehicles, had decided to seek to dispose
of whole or part of the investments. It is viewed as highly probable that it will be concluded within 12 months of the balance sheet
date. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value
less costs to sell.
Financial assets
Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss (FVTPL)”, ”fair
value through other comprehensive income (FVOCI)” and “amortised cost”. The classification depends on the nature and purpose of
the financial assets and is determined at the time of initial recognition.
Effective interest rate method
The effective interest rate method is a method of calculating the amortised cost of a debt instrument and of allocating the interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including
all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or
discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount in
initial recognition.
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. Restricted cash balances
relate to amounts held by the Group on behalf of tenants including ring-fenced service charge funds and tenant deposits.
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Financial liabilities
Borrowings
Borrowings are initially measured at fair value net of transaction costs. Borrowings are subsequently measured at amortised cost
using the effective interest method with interest expense recognised on an effective yield basis.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured
to their fair value at each balance sheet date. The fair value of forward foreign exchange contracts is calculated by reference to spot
and forward exchange rates at the balance sheet date. The fair value of interest rate swaps is calculated by reference to appropriate
forecasts of yield curves between the balance sheet date and the maturity of the instrument. Changes in fair value are included as
finance income or finance costs in the income statement. Derivative financial instruments are classified as non-current when they
have a maturity of more than twelve months and are not intended to be settled within one year. 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.
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 and is
recognised 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.
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 for asset and property management, project co-ordination, procurement, and management of service charges and directly
recoverable expenses.
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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 sales taxes) 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 relate to the coronavirus job retention scheme and 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.
Operating segments
The Group’s has made a change to its reportable segments for this period reflecting the position of its shopping centre investments.
The Group has split out what was previously called Shopping Centres into ”Shopping Centres – Investment Assets” and “Shopping
Centres – Managed Assets”. This reflects the fact that management consider these groups separately in operating decisions.
Shopping Centres – Investment Assets incorporating the centres at Ilford and within The Mall loan facility, namely Blackburn,
Maidstone, Walthamstow and Wood Green. These represent the asset pools where the Group retains net equity and is focused on
long-term solutions for the loan positions potentially involving the investment of further capital in some shape or form. Shopping
Centres – Managed Assets incorporates Hemel Hempstead and Luton where the current debt values in the non-recourse SPV
structures exceed the respective property value and therefore the Group has negative equity. The Group has determined that the
economic and strategic rationale for additional investment to cure and/or to pay down these non-recourse facilities is, at the present
time, is insufficient. In agreement with and at the request of the various lenders, the Group continues to manage these assets for
the time being, whilst various outcomes are explored in conjunction with the lenders. As at 30 December 2021, the Group concluded
that the two “Managed Assets”, Hemel Hempstead and Luton, met the criteria to be reclassified as “Held for Sale”. Further detail is
disclosed in Note 16.
Group/Central includes management fee income, Group overheads incurred by Capital & Regional plc, Capital & Regional Property
Management and other subsidiaries and the interest expense on the Group’s central borrowing facility.
The Shopping Centres segments derive their revenue from the rental of investment properties. The Snozone and Group/Central
segments derive their revenue from the operation of indoor ski slopes and the management of property funds or schemes
respectively. The split of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues from different
products and services. Depreciation and charges in respect of share-based payments represent the only significant non-cash
expenses. Prior period comparatives have also been restated as a result.
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
adjusting 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.
Adjusted profit within Snozone is Leisure EBITDA. Leisure EBITDA is an alternative performance measure for the Snozone business.
It excludes Depreciation, Amortisation, (notional) Interest, Tax and non-operational one-off items. It includes rent expense, based on
contractual payments adjusted for rent-free periods. This provides a measure of Snozone trading performance which removes the
profiling impact of IFRS 16 that would otherwise see a significantly higher charge in early years of a lease and significantly lower net
charge in later years.
A reconciliation of Adjusted Profit to the statutory result is provided in Note 2a and, on a per share basis, in Note 9, where EPRA
earnings figures are also provided.
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Year to 30 December 2021
Rental income from external sources
Property and void costs1
Net rental income
Net interest expense
Snozone income/Management fees2
Other income4
Management expenses
Depreciation
Variable overhead
Adjusted Profit/(loss)
Revaluation of properties
Loss on disposal
Snozone depreciation and amortisation
Notional interest (net of rent expense
within EBITDA)
Gain on financial instruments
Long-term incentives
Tax charge
Prior period tax3
Other items
Gain on debt repurchase
Loss
Total assets
Total liabilities
Net assets/(liabilities)
1
Includes expected credit loss.
Shopping
Centres –
Investment
Assets
£m
Shopping
Centres –
Managed
Assets
£m
Snozone
£m
Group/
Central
£m
Note
3b
3b
35.5
(14.0)
21.5
(10.8)
–
–
–
–
–
10.7
(29.2)
(1.4)
–
–
2.7
–
–
–
–
–
(17.2)
14.2
(6.7)
7.5
(5.4)
–
–
–
–
–
2.1
(20.0)
(1.1)
–
–
3.2
–
–
–
–
–
(15.8)
–
–
–
–
6.8
2.5
(8.5)
–
–
0.8
–
–
(2.5)
0.5
–
–
0.2
1.4
(0.7)
–
(0.3)
3b
3b
425.6
(267.9)
157.7
146.4
(165.8)
(19.4)
29.0
(31.2)
(2.2)
Total
£m
49.7
(20.7)
29.0
(16.4)
9.2
2.5
(15.0)
(0.3)
(0.9)
8.1
(49.2)
(2.5)
(2.5)
0.5
5.9
(0.9)
0.2
(1.9)
(2.5)
18.4
(26.4)
636.0
(467.6)
168.4
–
–
–
(0.2)
2.4
–
(6.5)
(0.3)
(0.9)
(5.5)
–
–
–
–
–
(0.9)
–
(3.3)
(1.8)
18.4
6.9
35.0
(2.7)
32.3
2 Asset management fees of £3.6 million charged from the Group’s Capital & Regional Property Management entity to wholly owned assets have been
excluded from the table above.
3 £1.4 million in Snozone relates to a £1.4 million reclaim of VAT.
4 Other income includes £2.5 million insurance proceeds.
134
Notes to the Financial Statements CONTINUEDcapreg.com 2a Operating segments CONTINUED
Year to 30 December 2020
Rental income from external sources
Property and void costs1
Net rental income
Net interest expense
Snozone income/Management fees2
Management expenses
Investment income
Depreciation
Current Tax
Adjusted Profit/(loss)
Revaluation of properties
Profit on disposal
Snozone depreciation and amortisation
Notional interest (Net of rent expense
within EBITDA)
Loss on financial instruments
Long-term incentives
Other items
Loss
Total assets
Total liabilities
Net assets/(liabilities)
1
Includes expected credit loss.
Shopping
Centres –
Investment
Assets
Restated
£m
Shopping
Centres –
Managed
Assets3
Restated
£m
Snozone4
Restated
£m
Group/
Central
Restated4
£m
36.0
(15.8)
20.2
(11.4)
–
–
–
–
–
8.8
(137.6)
0.4
–
–
(2.8)
–
–
(131.2)
440.4
(329.4)
111.0
19.6
(5.7)
13.9
(5.6)
–
–
–
–
–
8.3
(70.7)
–
–
–
(2.2)
–
–
(64.6)
–
–
–
–
4.6
(6.3)
–
–
–
(1.7)
–
–
(2.2)
1.5
–
–
–
(2.4)
150.5
(153.5)
(3.0)
14.3
(16.0)
(1.7)
–
–
–
–
2.3
(6.5)
0.1
(0.5)
0.2
(4.4)
–
–
–
–
–
(0.4)
(0.9)
(5.7)
65.4
(4.6)
60.8
Note
3b
3b
3b
3b
Total4
£m
55.6
(21.5)
34.1
(17.0)
6.9
(12.8)
0.1
(0.5)
0.2
11.0
(208.3)
0.4
(2.2)
1.5
(5.0)
(0.4)
(0.9)
(203.9)
670.6
(503.5)
167.1
2 Asset management fees of £3.6 million charged from the Group’s Capital & Regional Property Management entity to wholly owned assets have been
excluded from the table above.
Includes the benefit of £4 million of surrender premiums received during the period.
3
4 2020 results have been restated for a prior year adjustment in respect of the treatment of SaaS configuration costs as explained in Note 1. 2020
results have also been restated to reflect Snozone Leisure EBITDA performance measure and to eliminate intercompany interest amounts from net
interest expense.
135
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS 2b Reconciliations of reportable revenue, assets and liabilities
Revenue and other income
Rental income from external sources
Service charge income
Management fees
Snozone income
Other income (Snozone business continuity insurance receipt)
Revenue for reportable segments
Elimination of inter-segment revenue
Revenue and other income per consolidated income statement
Revenue and other income by country
UK
Spain
Revenue and other income per consolidated income statement
Assets
Investment assets
Managed assets
Snozone
Group/Central
Total assets of reportable segments and Group assets
Liabilities
Investment assets
Managed assets
Snozone
Group/Central
Total liabilities of reportable segments and Group liabilities
Net assets by country
UK
Spain
Germany
Group net assets
Note
2a
2a
2a
2a
3
Note
16
2a
16
2a
Year to
30 December
2021
£m
Year to
30 December
2020
£m
49.7
12.7
2.4
6.8
2.5
74.1
(1.6)
72.5
70.4
2.1
72.5
2021
£m
425.6
146.4
29.0
35.0
636.0
(267.9)
(165.8)
(31.2)
(2.7)
(467.6)
167.8
0.6
–
168.4
55.6
11.7
2.3
4.6
–
74.2
(1.5)
72.7
72.7
–
72.7
20201
£m
440.4
150.5
14.3
65.4
670.6
(329.4)
(153.5)
(16.0)
(4.6)
(503.5)
166.2
–
0.9
167.1
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
136
Notes to the Financial Statements CONTINUEDcapreg.com 3 Revenue
Gross rental income
Car Park and ancillary income
Lease surrender premiums received
Income from external sources
Service charge income
External management fees
Snozone income1
Other income1
Revenue and other income per consolidated income statement
Year to
30 December
2021
£m
Year to
30 December
2020
£m
Note
41.1
8.1
0.5
49.7
12.7
0.8
9.3
2.5
72.5
43.5
7.4
4.7
55.6
11.7
0.8
4.6
–
72.7
2a
2b
2a
2a
2b
1 Other income includes £2.5m insurance proceeds in Snozone and Snozone income includes £1.4m VAT rebate received from HMRC.
Management fees represent revenue earned by Capital & Regional Plc and the Group’s wholly owned Capital & Regional Property
Management subsidiary. Fees charged to wholly owned assets have been eliminated on consolidation.
4 Cost of sales
Property and void costs
Service charge costs
Snozone expenses
Total cost of sales
5 Finance income and costs
Finance income
Interest receivable
Income from fixed asset investments
Gain in fair value of financial instruments:
−
Interest rate swaps
Total finance income
Finance costs
Amortisation of deferred loan arrangement fees
Interest payable on bank loans and overdrafts
Other interest payable
Lease liabilities
Loss in fair value of financial instruments:
−
Total finance costs
Interest rate swaps
Year to
30 December
2021
£m
Year to
30 December
2020
£m
(14.4)
(11.1)
(7.8)
(33.3)
(13.4)
(10.2)
(4.3)
(27.9)
Year to
30 December
2021
£m
Year to
30 December
2020
£m
–
–
7.6
7.6
(1.0)
(13.7)
(0.2)
(2.4)
–
(17.3)
0.3
0.1
–
0.4
(1.0)
(14.5)
(0.4)
(1.9)
(5.0)
(22.8)
137
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
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
Expected credit loss
Other gains and losses (see below)
Depreciation of plant and equipment
Depreciation of right of use assets
Staff costs
Auditor’s remuneration for audit services (see below)
Other gains and losses
Discount on purchase of loan net of costs
(Loss)/gain on disposal of investment property
Foreign exchange (loss)/gain
Impairment of investment
Investment income
Total other gains and losses
Auditor’s remuneration
The analysis of the Auditor’s remuneration is as follows:
Note
14
11
12
7
Note
18
Fees payable to the Company’s Auditor and its associates for the audit of the Company’s annual
financial statements
Fees payable to the Company’s Auditor and its associates for other services to the Group – the audit
of the Company’s subsidiaries
Total audit fees for the Company and its subsidiaries
Fees payable to the Company’s Auditor and its associates for other services to the Group – reporting
to parent company auditors
Audit related assurance services – Review of Interim Report
Other assurance services
Total non-audit fees
Total fees paid to Auditor and their associates
Year to
30 December
2021
£m
Year to
30 December
2020
£m
0.3
4.9
14.0
0.5
2.2
11.1
0.4
0.4
7.3
1.6
0.5
2.2
8.7
0.3
Year to
30 December
2021
£m
Year to
30 December
2020
£m
16.7
(2.5)
(0.2)
(0.7)
0.7
14.0
–
0.4
0.1
(0.4)
1.5
1.6
Year to
30 December
2021
£’000
Year to
30 December
2020
£’000
231
88
319
26
52
–
78
397
213
73
286
–
45
–
45
331
138
Notes to the Financial Statements CONTINUEDcapreg.com
7 Staff costs
Salaries
Discretionary bonuses
Share-based payments
Social security
Other pension costs
Note
21
Year to
30 December
2021
£m
Year to
30 December
2020
£m
7.7
1.3
0.6
9.7
1.1
0.3
11.0
6.9
0.4
0.4
7.7
0.7
0.3
8.7
Staff costs amounting to £nil million (2020: £0.2 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
2021
Number
Year to
30 December
2020
Number
40
56
66
162
41
87
60
188
The monthly average number of total employees (including Executive Directors) employed within the Group during the year was 248
(CRPM – 44, Shopping centres – 65, Snozone – 139) compared to 263 in 2020 (CRPM – 41, Shopping centres – 87, Snozone – 135).
These do not agree to the table above as they are average total employees not adjusted for full-time equivalents.
There were no employees (2020: nil) employed by the Company during 2021.
The Group has received £0.2m in funds from HMRC for furloughed employees between January to December 2021 (CRPM – £nil,
Shopping centres – £nil, Snozone – £0.2m (2020: £1.2m comprising CRPM – £nil, Shopping centres – £0.2m, Snozone – £1.0m). This
has been credited against staff costs in the income statement.
8 Tax
8a Tax (charge)/credit
Current tax
UK corporation tax
Adjustments in respect of prior years
Total current tax (charge)/credit
Deferred tax
Prior year adjustments
Origination and reversal of temporary timing differences
Total deferred tax
Total tax (charge)/credit
£nil (2020: £nil) of the tax charge relates to items included in other comprehensive income.
Year to
30 December
2021
£m
Year to
30 December
2020
£m
(1.0)
(2.6)
(3.6)
(0.1)
0.6
0.5
(3.1)
–
–
–
–
0.2
0.2
0.2
139
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
8 Tax CONTINUED
8b Tax (charge)/credit reconciliation
Loss before tax on continuing operations
Expected tax credit at 19% (2020: 19%)
REIT exempt income and gains
Non-allowable expenses and non-taxable items
Excess tax losses
Other adjustments
Prior year adjustments
Effect of tax rate change on deferred tax
Actual tax (charge)/credit
Year to
30 December
2021
£m
Year to
30 December
2020
£m
Note
(23. 3)
4.4
(3.6)
(0.1)
(0.3)
(1.0)
(2.7)
0.2
(3.1)
(204.3)
38.7
(38.0)
0.1
(0.6)
–
–
–
0.2
8a
8c Deferred tax
The Finance Act 2020 enacted provisions maintaining the main rate of UK corporation tax at 19% for the years starting 1 April 2020
and 1 April 2021. On 10 June 2021, Finance Act 2021 received Royal Assent and enacted provisions maintaining the main corporation
tax rate at 19% for the year commencing 1 April 2022 and increasing the rate to 25% for the year commencing 1 April 2023.
Consequently, the UK corporation tax rate at which deferred tax is booked in the Financial Statements is 25% (2020: 19%).
The Group has recognised a deferred tax asset of £0.7 million (30 December 2020: £0.2m). 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
in the current or prior years as it is not certain that a deduction will be available when the asset crystallises.
The Group has £24.1 million (30 December 2020: £22.5 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 2020: £nil). The Group has unused capital losses
of £24.9 million (30 December 2020: £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.
8d REIT compliance
The Group converted to a group REIT on 31 December 2014. Therefore, the Group does not pay 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 retain group REIT status, 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 per cent of its taxable profits from its UK property rental business by
the first anniversary of each accounting date. By agreement with HMRC, the Group had an extension to the payment date of the
balance of the 2019 PID. However, as the Group made no PID distributions in the year to 30 December 2021, the Group paid tax
on the outstanding PID balance for 2019 as well as the outstanding PID balance for 2020 to HMRC in December 2021 in the sum
of £2.5 million. This amount together with an additional provision of £0.2 million to cover interest on the prior year amounts paid
as well as a small balancing amount of tax estimated to be payable for the prior years is included in the prior year adjustment of
£2.7 million.
At 30 December 2021, the Company does not have sufficient distributable reserves to declare a dividend. The Company plans to
undertake a capital reduction exercise for which it will seek shareholder approval at the 2022 AGM in order to create distributable
reserves.
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. As a REIT, the Group will endeavour to meet
its mandatory PID distribution requirements for the year ended 30 December 2021 by the due date of 30 December 2022. However,
until there is certainty on the quantum of any dividends payable in the year to 31 December 2022, a provision for tax in the sum
of £1 million has been maintained in respect of the estimated 2021 mandatory PID distribution. The final tax to be settled may be
reduced to the extent dividends are paid within the year to 30 December 2022.
140
Notes to the Financial Statements CONTINUEDcapreg.com
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 2021
Year to 30 December 20201
Note
Loss
EPRA
Adjusted
Profit
Loss
EPRA
Adjusted
Profit
(26.4)
(26.4)
(26.4)
(203.9)
(203.9)
(203.9)
Profit (£m)
(Loss) for the year
Revaluation loss on investment
properties (net of tax)
(Profit)/Loss on disposal (net of tax)
Changes in fair value of financial
instruments2
Share-based payments
Other items3
(Loss)/profit (£m)
Earnings per share (pence)
Diluted earnings per share (pence)
9b
9b
9b
2a
–
–
–
–
–
(26.4)
(22.0)
(22.0)
49.2
2.5
(5.9)
–
(15.9)
3.5
2.9
2.9
49.2
2.5
(5.9)
0.9
(12.2)
8.1
6.8
6.7
None of the current or prior year earnings related to discontinued operations.
Weighted average number of shares (m)
Ordinary shares in issue
Own shares held
Basic
Dilutive contingently issuable shares and share options
Diluted
–
–
208.3
(0.4)
208.3
(0.4)
–
–
–
(203.9)
(188.8)
(188.8)
Note
21
5.0
–
0.9
9.9
9.2
9.2
5.0
0.4
1.6
11.0
10.2
10.2
Year to
30 December
2021
Year to
30 December
2020
119.9
–
119.9
0.3
120.2
108.0
–
108.0
0.3
108.3
At the end of the year, the Group had no (2020: 678,919) 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.
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
2 2021 includes £0.2 million cost related to the termination of interest rate swap liabilities within The Mall loan facility.
3 Other Items includes the £18.4 million gain on repurchase of debt at a discount (see Note 17 for further details) and other non-operating
transactional costs.
9b 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)
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 2021
Year to 30 December 20201
Basic
Diluted
Basic
Diluted
(26.4)
49.2
2.5
(15.9)
9.4
119.9
–
–
119.9
7.8
(26.4)
49.2
2.5
(15.9)
9.4
119.8
–
0.3
120.2
7.8
(203.9)
208.3
(0.4)
0.4
4.2
108.0
–
–
108.0
3.9
(203.9)
208.3
(0.4)
0.4
4.2
108.0
–
0.3
108.3
3.9
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
141
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS 10 Investment properties
10a Wholly owned properties
Cost or valuation
At 30 December 2019
Capital expenditure (excluding capital contributions)
Disposal
Valuation deficit1
IFRS 16 transition adjustment
At 30 December 2020
Capital expenditure (excluding capital contributions)
Disposal
Valuation deficit1
Transfer to held for sale
At 30 December 2021
Freehold
investment
properties
£m
Leasehold
investment
properties
£m
Total
property
assets
£m
Note
379.1
4.2
(4.6)
(98.6)
–
280.1
1.6
(13.3)
(32.5)
(10.2)
225.7
391.8
9.8
–
(109.6)
(36.0)
256.0
7.3
–
(16.8)
(97.5)
149.0
770.9
14.0
(4.6)
(208.2)
(36.0)
536.1
8.9
(13.3)
(49.3)
(107.7)
374.8
1
16
1 £49.2 million per Income statement and Note 2a includes letting fee amortisation adjustment of £(0.1) million (2020: £0.1million).
During the period, the Group sold a parade of properties at Hemel Hempstead known as Edmonds Parade and Stephyns Chambers.
These properties had a value of £5.3m. A loss on disposal of £1.1m has been recognised in the accounts in relation to this sale.
In December 2021, the Group sold Maidstone House, an office block attached to The Mall Maidstone, this office block had a value
of £7.07m. A loss on disposal of £1.4m has been recognised in the income statement in relation to this sale with reference to the
valuation of the property at the start of the year.
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
2021
£m
30 December
2020
£m
380.1
6.0
(11.3)
374.8
527.0
25.3
(16.2)
536.1
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 2021 were carried out on all of the gross property assets detailed in the table above. The fair
value was £380.1 million (2020: £527.0 million). External valuations were carried out on all of the property assets detailed in the table
above. The valuations at 30 December 2021 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 2021:
Wholly owned assets
380.1
Market Value
£m
Low
9.24
Portfolio
16.65
High
23.99
Low
6.6
Portfolio
8.6
High
13.2
Estimated rental value £ per sq ft
Equivalent yield %
142
Notes to the Financial Statements CONTINUEDcapreg.com
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 (restated)
Additions
Disposals
At the end of the year
Accumulated depreciation
At the start of the year (restated)
Additions
Charge for the year
Eliminated on disposal
At the end of the year
Carrying amount
At the end of the year
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
15.5
Decrease
£m
(15.4)
Increase
£m
15.4
Decrease
£m
(14.6)
Increase
£m
32.0
Decrease
£m
(28.0)
Impact on valuations of 100bps
change in equivalent yield
Increase
£m
68.8
Decrease
£m
(53.1)
30 December
2021
£m
30 December
2020
Restated1
£m
5.9
0.7
(0.8)
5.8
(4.1)
(0.2)
(0.6)
0.8
(4.1)
1.7
5.7
0.2
–
5.9
(3.7)
–
(0.4)
–
(4.1)
1.8
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
12 Leases
Right of use Assets
Cost
At the start of the year
Additions
Remeasurement
At the end of the year
Accumulated depreciation
At the start of the year
Charge for the year
Disposals
At the end of the year
Carrying value
At the end of the year
30 December
2021
£m
30 December
2020
£m
14.4
3.3
11.2
28.9
(2.2)
(2.2)
–
(4.4)
14.4
–
–
14.4
–
(2.2)
–
(2.2)
24.5
12.2
Lease commitments relate to the leasing of the Group’s registered office and the leases of the Snozone business on its Basingstoke,
Yorkshire and Milton Keynes sites. During the period, the Group has signed amendments to the lease agreements for the Yorkshire
and Milton Keynes sites within its Snozone business, resulting in the remeasurement of the right of use asset and the related lease
liability. Additions for the year relate to the lease acquired on acquisition of Snozone Madrid.
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Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
12 Leases CONTINUED
The maturity analysis of lease liabilities is presented in Note 27.
Amounts recognised in profit and loss
Depreciation expense on right-of-use assets
Interest expense on lease liabilities
Year ended
30 December
2021
£m
Year ended
30 December
2020
£m
2.2
1.0
2.1
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
Non current:
Non-financial assets
Deferred tax
Unamortised tenant incentives
Unamortised rent-free periods
Current:
Financial assets
Trade receivables (net of allowances)
Other receivables
Accrued income
Current financial assets
Non-financial assets
Prepayments
Unamortised tenant incentives
Unamortised rent-free periods
Current non-financial assets
30 December
2021
£m
30 December
2020
£m
0.7
2.1
7.2
10.0
8.9
4.2
0.9
14.0
4.0
0.4
1.6
6.0
20.0
0.2
3.8
10.2
14.2
14.7
2.7
0.2
17.6
1.5
0.8
1.4
2.7
21.3
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.
144
Notes to the Financial Statements CONTINUEDcapreg.com
14 Receivables CONTINUED
The following table details the risk profile of trade receivables based on the Group’s provision matrix.
2021
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
19.4
35.5
31.5
60.4
45.0
4.2
(0.8)
(0.8)
(1.6)
2.7
(1.0)
–
(1.0)
0.3
(0.1)
–
(0.1)
0.1
(0.1)
–
(0.1)
6.8
(3.0)
–
(3.0)
2020
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
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)
1 This represents the total lifetime expected credit loss as a percentage of total group receivables.
Total
35.31
14.1
(5.0)
(0.8)
(5.8)
Total
24.81
23.0
(5.7)
(2.7)
(8.4)
Allowances for credit loss
At the start of the year
Additional allowances created
Utilised during the year
Unused amounts reversed
Transfer to held for sale
At the end of the year
The following table illustrates the impact of a 5% change in the rate of expected credit loss.
30 December
2021
£m
30 December
2020
£m
8.4
3.7
(1.8)
(3.6)
(0.9)
5.8
1.4
11.5
(2.6)
(1.9)
–
8.4
Expected credit loss
15 Cash and cash equivalents
Cash at bank and in hand
Security deposits held in rent accounts
Other restricted balances
Provision at
30 December
2021
£m
Impact of a
5% increase
£m
Impact of a
5% decrease
£m
5.8
0.7
(0.7)
30 December
2021
£m
30 December
2020
£m
53.7
0.7
4.1
58.5
82.3
0.7
1.1
84.1
Cash at bank and in hand include amounts subject to a charge against various borrowings and may therefore not be immediately
available for general use by the Group. Of the cash at bank and in hand, £32.5 million was held on short-term deposit and
immediately available free of any restrictions or conditions at the year-end date (30 December 2020: £60.9 million). The remaining
balances are subject to meeting conditions or having passed through relevant waterfall calculations within relevant loan facilities.
All of the above amounts at 30 December 2021 were held in Sterling other than £0.6 million which was held in Euros (30 December
2020: £0.1 million).
145
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
16 Assets and liabilities held for sale
As at 30 December 2021, the Group concluded that the two “Managed Assets”, Hemel Hempstead and Luton, met the criteria to
be reclassified as “Held for Sale”. This conclusion was reached as the Group, in conjunction with the respective lenders, which had
decided to seek to dispose of whole or part of the investments as at that date. While no transaction has been agreed as at the time
of results, it is viewed as highly probable that it will be concluded within 12 months of the balance sheet date.
This has resulted in all of the assets and liabilities associated with the respective investments being reclassified to separate lines of
“Assets classified as held for sale” and “Liabilities classified as held for sale”. The reclassification has been measured at the lower of
expected net sale proceeds and current carrying value. Given each of the investments is in a net liability position and that the Group
would not expect to realise any proceeds from a disposal (nor be obligated to clear the net liabilities), the reclassification has been
made at their fair values being the same as the year end carrying value.
The following are the amounts in the year end balance sheet:
Amounts in £m
Assets classified as held for sale
Liabilities classified as held for sale
Net liability in respect of held for sale
17 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
Hemel
Hempstead
21.9
(34.5)
(12.6)
Luton
124.5
(131.3)
(6.8)
Total
146.4
(165.8)
(19.4)
30 December
2021
£m
30 December
2020
£m
0.3
–
0.3
–
0.3
1.4
8.0
11.0
20.4
7.3
1.6
29.3
0.1
0.1
0.2
8.9
9.1
1.2
8.3
11.1
20.6
7.1
3.2
360.9
The average age of trade payables is 9 days (2020: 7 days). No amounts incur interest (2020: £nil).
During the year interest rate swaps relating to the Mall loan facility and Marlowes Hemel loan facility were terminated.
146
Notes to the Financial Statements CONTINUEDcapreg.com
18 Bank loans
18a 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
18d
18d
30 December
2021
£m
30 December
2020
£m
239.0
–
239.0
(0.8)
238.2
–
238.2
238.2
427.4
–
427.4
(3.5)
423.9
–
423.9
423.9
On 12 November 2021, the Group completed a restructuring of its Mall loan facility.
The Mall Facility had comprised of a £265 million debt facility with RBS and TIAA secured over the Four Mall Assets, being the Mall
Blackburn, the Mall Maidstone, the Mall Wood Green and the Mall Walthamstow. TIAA previously held a balance of £165 million and
RBS a balance of £100 million. Under the restructuring the Group acquired the £100 million of debt outstanding with RBS for a
principal amount of £81 million, representing a discount of £19 million.
This was funded through a combination of:
•
TIAA agreeing to acquire from the Group £35 million of the RBS Debt acquired for £35 million, increasing its lending in the facility
to £200 million;
• An equity raise of £30.0 million (before costs) that completed on 5 November 2021; and
•
Existing cash resources of £16 million.
The transaction resulted in a one-off gain of £18.4 million being the benefit of the discount less directly associated costs. The
transaction had the net result of reducing external debt by £65 million. As part of this restructure, £1.7 million of unamortised issue
costs were written off to the income statement within finance costs.
On 30 December 2021, £119.5 million of loans relating to Luton and Hemel Hempstead were reclassified to Held for Sale (see Note
16 for further details). The Luton facility has a fixed rate and a maturity date of 28 December 2023. The Hemel Hempstead facility has
a variable rate and a maturity date of 5 February 2023.
The movement of Secured loans in the year is summarised in the table below:
Secured bank loans at 30 December 2020
Acquisition of RBS loan on The Mall
Draw down of new TIAA loan
Repayment of Hemel Hempstead loan from proceeds of Edmonds Parade sale
Reclassification of Hemel Hempstead loan to liabilities in respect of assets held for sale
Reclassification of Luton loan to liabilities in respect of assets held for sale
£m
427.4
(100.0)
35.0
(3.9)
(23.0)
(96.5)
239.0
All loans are 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.
147
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
18 Bank loans CONTINUED
18b Maturity of borrowings
From two to five years
Greater than five years
Due after more than one year
Current
18c Undrawn committed facilities
Expiring between two and five years
Expiring greater than five years
30 December
2021
£m
30 December
2020
£m
Note
39.0
200.0
239.0
–
239.0
262.4
165.0
427.4
–
427.4
18a
30 December
2021
£m
30 December
2020
£m
–
–
22.0
–
The £22.0 million of undrawn facilities as at 30 December 2020 related to the group’s revolving credit facility and the Hemel
Hempstead capital expenditure facility. Both facilities were cancelled in January 2021.
18d Interest rate profile of borrowings
Fixed and swapped rate borrowings
Between 2% and 3%
Between 3% and 4%
Between 6% and 7%
Variable rate borrowings
30 December
2021
£m
30 December
2020
£m
Note
39.0
165.0
35.0
239.0
–
239.0
39.0
388.4
–
427.4
–
427.4
18a
18a
19 Financial instruments and risk management
19a 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
Note
18a
15
30 December
2021
£m
30 December
2020
£m
239.0
(53.7)
185.3
168.4
109.9%
427.4
(82.3)
345.1
167.1
206%
148
Notes to the Financial Statements CONTINUEDcapreg.com
19 Financial instruments and risk management CONTINUED
Categories of financial (liabilities)/assets
Financial assets
Current receivables
Cash and cash equivalents
Financial assets measured at
amortised cost
Financial liabilities
Current payables
Current borrowings
Non-current payables
Non-current borrowings
Financial liabilities measured at
amortised cost
Interest rate swaps
Total financial (liabilities)/assets
Note
14
15
17
18a
17
18a
17
2021
2020
Carrying
value
£m
Gain/(loss) to
income
£m
Gain
to equity
£m
Carrying
value
£m
Gain/(loss) to
income
£m
Gain
to equity
£m
14.0
58.5
72.5
(20.4)
–
(0.3)
(238.2)
(258.9)
–
(186.4)
–
–
–
–
–
–
(2.7)
(2.7)
7.6
4.9
–
–
–
–
–
–
–
–
–
–
17.6
84.1
101.7
(20.6)
–
(0.2)
(423.9)
(444.7)
(8.9)
(351.9)
–
–
–
–
–
–
(1.0)
(1.0)
(5.0)
(6.0)
–
–
–
–
–
–
–
–
–
–
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.
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.
19b 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 swap contracts and their maturity dates:
Interest rate swap1
Interest rate swap
The Mall, Luton
The Exchange, Ilford
30 December 2023
8 March 2024
£96,500,000
£39,000,000
1.14%
1.00%
Loan facility
Maturity date
Notional principal
Contract fixed rate
30 December 2021
fair value £m
Asset/(liability)
(0.2)
–
1 Reclassified to Assets Held for Sale at 30 December 2021.
IBOR reform
The above loan facilities and the fair value of the above interest rate swaps are affected by the IBOR reform. As at 30 December 2021,
the Luton Loan Facility had transitioned from LIBOR floating rate to SONIA, impacting the value of the swap. The Ilford facility will
transition in January 2022.
The Directors do not consider the Group to be exposed to significant risks arising from the transition, owing to the negligible balance
sheet value of the interest rate swaps.
149
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19 Financial instruments and risk management CONTINUED
Sensitivity analysis
The following table shows the Group’s sensitivity to a 100bps increase or decrease in interest rates. To calculate the impact on the
income statement for the year the interest rates on all external floating rate interest bearing loans and borrowings and interest
earning cash, 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 – gain/(loss)
Interest rate derivatives – gain/(loss)
Impact on the income statement – gain/(loss)
Impact on equity – gain/(loss)
100bps increase
in interest rates
100bps decrease
in interest rates
Year to
30 December
2021
£m
Year to
30 December
2020
£m
Year to
30 December
2021
£m
Year to
30 December
2020
£m
–
0.8
0.8
0.8
–
7.7
7.7
7.7
–
(0.8)
(0.8)
(0.8)
–
(7.7)
(7.7)
(7.7)
19c 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 expected credit loss 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.
19d 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 closeout 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.
150
Notes to the Financial Statements CONTINUEDcapreg.com 19 Financial instruments and risk management CONTINUED
The following table shows the maturity analysis of non-derivative financial assets/(liabilities) at the balance sheet date and, where
applicable, their effective interest rates.
2021
Financial assets
Current receivables
Cash and cash equivalents
Non-current receivables
Financial liabilities
Borrowings – bank loans
Borrowings – other loans
Current payables
Non-current payables
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
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
n/a
0%
n/a
3.7%
n/a
n/a
n/a
14.0
58.5
–
89.8
–
–
(20.4)
–
(20.4)
–
–
–
–
–
–
–
(0.3)
(0.3)
–
–
–
–
(38.8)
–
–
–
(38.8)
Effective
interest rate
%
Less than
1 year
£m
1–2 years
£m
2–5 years
£m
n/a
0.3%
n/a
3.4%
2.3%
n/a
n/a
17.6
84.1
–
101.7
–
–
(20.6)
–
(20.6)
–
–
–
–
–
–
–
(0.1)
(0.1)
–
–
–
–
(260.3)
(0.1)
–
–
(260.4)
–
–
–
–
(199.4)
–
–
–
(199.4)
More than
5 years
£m
–
–
–
–
(163.6)
–
–
–
(163.6)
Total
£m
14.0
58.5
–
89.8
(238.2)
–
(20.4)
(0.3)
(258.9)
Total
£m
17.6
84.1
–
101.7
(423.9)
(0.1)
(20.6)
(0.1)
(444.7)
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.
2021
Borrowings – fixed bank loans
Borrowings – other fixed loans
Non-interest bearing
2020
Borrowings – fixed bank loans
Borrowings – other fixed loans
Non-interest bearing
Less than
1 year
£m
(8.9)
–
(20.4)
(29.3)
Less than
1 year
£m
(14.6)
–
(20.6)
(35.2)
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
(8.9)
–
(0.3)
(9.2)
(47.1)
–
–
(47.1)
(7.9)
–
–
(7.9)
(208.3)
–
–
(208.3)
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
(14.6)
–
(0.1)
(14.7)
(40.6)
–
–
(40.6)
(244.6)
–
–
(244.6)
(176.7)
–
–
(176.7)
More than
5 years
£m
–
–
–
–
More than
5 years
£m
–
–
–
–
Total
£m
(281.1)
–
(20.7)
(301.8)
Total
£m
(491.1)
–
(20.7)
(511.8)
151
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
19 Financial instruments and risk management CONTINUED
The following tables detail the Group’s remaining contractual maturity for its derivative financial assets/(liabilities), all of which are
net settled, based on the undiscounted net cash inflows/(outflows). When the amount payable or receivable is not fixed, it has been
determined by reference to the projected interest rates as illustrated by the yield curves existing at the reporting date.
2021
Net settled
Interest rate swaps
2020
Net settled
Interest rate swaps
Less than
1 year
£m
–
–
Less than
1 year
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
–
–
–
–
–
–
–
–
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
–
–
More than
5 years
£m
(3.3)
(3.3)
(2.9)
(2.9)
(2.6)
(2.6)
(0.1)
(0.1)
–
–
–
–
Total
£m
–
–
Total
£m
(8.9)
(8.9)
19e Fair values of financial instruments
The fair values of financial instruments excluding receivables and payables together with their carrying amounts in the balance sheet
are as follows:
Notional
principal
£m
2021
Book value
£m
2021
Fair value
£m
2020
Book value
£m
2020
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
19a
19a
13
39.0
(239.0)
(239.0)
–
(239.0)
(240.0)
(240.0)
–
(240.0)
–
–
–
–
–
–
–
–
(427.4)
(427.4)
–
(427.4)
–
(8.9)
(8.9)
(8.9)
(438.9)
(438.9)
–
(438.9)
–
(8.9)
(8.9)
(8.9)
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.
During the year interest rate swaps relating to the Mall loan facility and Marlowes Hemel loan facility were terminated.
152
Notes to the Financial Statements CONTINUEDcapreg.com
20 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
2021
Number
2020
Number
111,819,626
53,580,237
165,399,863
103,884,038
7,935,588
111,819,626
2021
£m
11.2
5.3
16.5
2020
£m
10.4
0.8
11.2
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 2021,
7,690,574 (2020: 6,270,782) 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 2020
Shares issued on 5 November 2021
Carried forward at 30 December 2021
Price per share
(Pence)
No. of shares
Total No.
of shares
Nominal value
(£m)
Share premium
(£m)
56.0
53,580,237
111,819,626
165,399,863
165,399,863
11.2
5.3
16.5
244.3
21.8
266.1
21 Share-based payments
The Group’s share-based payments comprise the 2008 LTIP and the Executive Directors’ deferred bonus share scheme (DBSS) and
the combined incentive plan (CIP). Further details are disclosed in the Directors’ Remuneration Report. Awards under the Combined
Incentive Plan are nil cost deferred shares that vest in equal thirds on the third, fourth and fifth anniversaries of the award date.
The awards can be reduced by up to 100% if TSR performance does not achieve the median of performance against the Company’s
relevant peer group.
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 (2020: credit of £nil).
Year to
30 December
2021
£m
Year to
30 December
2020
£m
0.6
0.4
Movements 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
Granted during the year
Exercised during the year1
Forfeited during the year
Outstanding at 30 December 2021
Exercisable at the end of the year
Number of Options
Deferred
Bonus Share
Scheme
281,401
–
(22,504)
(253,261)
–
5,636
–
(5,636)
–
–
–
LTIP
8,209,256
–
(234)
(7,388,369)
(441,670)
378,983
–
(37,341)
(341,642)
–
–
CIP
–
294,300
–
–
–
294,300
–
–
–
294,300
–
1 The weighted average share price of the options exercised under the deferred bonus scheme during the year was 58p (2020: 106.6p). The weighted
average share price of the options exercised under the LTIP was 60p (2020: 55.9p).
All options in the tables above have a nil exercise price.
153
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
21 Share-based payments CONTINUED
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
57.8p
0.0p
34%
4.50
0.68
0.96%
5.00%
0%
23p
March
2016
59.5p
0.0p
27%
5.00
2.64
0.56%
5.00%
0%
26p
August
2017
59.5p
0.0p
19%
5.00
3.30
0.53%
5.70%
0%
25p
April
2018
53.5p
0.0p
16%
5.00
4.30
1.14%
6.80%
0%
21p
Expected volatility is based on the historical volatility of the Group’s share price over the three years to the date of grant. The
10 year UK Gilt rate at time of grant is used for estimating the risk free rate. Options are assumed to be exercised at the earliest
possible date.
22 Own shares held
The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2021, the Capital
& Regional plc 2002 Employee Share Trust (the “ESOT”) held 31,876 (2020: 38,070) 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 2021 was £18,775 (2020: £26,725).
23 Reconciliation of net cash from operations
Loss for the year
Adjusted for:
Income tax charge/(credit)
Finance income
Finance expense
Finance lease costs (head lease)
Loss on revaluation of wholly owned properties
Depreciation of other fixed assets
Other gains
Increase in receivables
Increase/(decrease) in payables
Non-cash movement relating to share-based payments
Net cash from operations
Note
8a
Year to
30 December
2021
£m
Year to
30 December
2020
£m
(26.4)
(203.4)
3.1
(7.6)
17.3
(1.1)
49.2
0.5
(14.0)
(4.1)
7.8
0.4
25.1
(0.2)
(0.4)
22.8
(0.2)
208.3
2.7
(1.6)
(4.9)
(5.6)
0.4
17.9
154
Notes to the Financial Statements CONTINUEDcapreg.com
24 Changes in liabilities arising from financing activities
2021
Bank loans
Interest rate swaps
Lease liabilities
Total liabilities from financing activities
2020
Bank loans
Interest rate swaps
Lease liabilities
Total liabilities from financing activities
25 Net assets per share
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
Note
18a
17
Note
18a
17
Financing
cash flows
Non–cash changes
Fair value
adjustments Other changes
30 December
2021
(69.7)
(0.2)
–
(69.9)
–
(8.8)
–
(8.8)
(116.0)
0.1
(6.7)
(122.6)
238.2
–
32.9
271.1
Financing
cash flows
Non–cash changes
Fair value
adjustments Other changes
30 December
2020
–
–
–
–
–
5.0
–
5.0
1.0
0.5
(21.9)
(20.4)
423.9
8.9
39.6
472.4
Opening
423.9
8.9
39.6
472.4
Opening
422.9
3.4
61.5
487.8
EPRA NRV
£m
30 Dec 2021
EPRA NTA
£m
168.4
–
–
168.4
165.7
101.6
168.4
–
–
168.4
165.7
101.6
30 Dec 20201
EPRA NDV
£m
EPRA NRV
£m
EPRA NTA
£m
EPRA NDV
£m
168.4
–
(1.0)
167.4
165.7
101.0
167.1
8.9
–
176.0
112.1
157.0p
167.1
8.9
–
176.0
112.1
157.0p
167.1
–
(11.5)
155.6
112.1
138.8p
The number of ordinary shares issued and fully paid at 30 December 2021 was 165,399,863 (30 December 2020: 111,819,626). There
have been no changes to the number of shares from 30 December 2021 to the date of this announcement.
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
26 Return on equity
Total comprehensive expense attributable to equity shareholders
Opening equity shareholders’ funds plus time weighted additions
Return on equity
30 December
2021
£m
30 December
20201
£m
(26.4)
171.2
(15.4)%
(203.9)
375.1
(54.4)%
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
27 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, Yorkshire, Milton Keynes and Madrid sites, as well as two leasehold investment properties.
Lease payments
Within one year
Between one and five years
After five years
2021
£m
(3.9)
(15.1)
(125.2)
(144.2)
2020
£m
(3.8)
(14.6)
(100.7)
(119.1)
Lease payments are denominated in Sterling and have an average remaining lease length of 31 years (2020: 27 years) excluding head
leases, rentals are fixed for an average of 2 years (2020: 2 years). The Group’s three leasehold investment properties are variable
based on a percentage of performance, with a minimum payment per year of £0.3 million for Walthamstow (2020: £1.1 million for
Luton and £0.3 million for Walthamstow, respectively). The Group signed new lease agreements on its Yorkshire and Milton Keynes
sites within Snozone.
155
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
27 Lease arrangements CONTINUED
The Group as lessor
The Group leases out all of its investment properties under operating leases for average lease terms of 9 years (2020: 6 years) to
expiry. The leasing arrangements are summarised in the portfolio information on page 166. The future aggregate minimum rentals
receivable under non-cancellable operating leases are as follows:
Unexpired
average
lease
term
Years
8.9
4.4
Less
than 1
year
£m
22.0
35.2
2–5
years
£m
49.2
81.0
6–10
years
£m
24.4
35.6
11–15
years
£m
11.0
15.1
16–20
years
£m
6.1
6.8
More
than 20
years
£m
32.5
39.3
Total
£m
145.3
213.0
30 December 2021
30 December 2020
28 Capital commitments
At 30 December 2021, the Group’s share of the capital commitments of its associates and wholly-owned properties was £4.5 million
(2020: £3.6 million) relating to capital expenditure projects for the development of the Group’s investment properties. The Group also
had £0.1 million relating to contractual commitments for the acquisition of property, plant and equipment (2020: £0.1 million).
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
2021
£m
Year to
30 December
2020
£m
As at
30 December
2021
£m
As at
30 December
2020
£m
0.5
0.5
–
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 (2020: 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
2021
£m
Year to
30 December
2020
£m
1.2
0.1
0.4
1.7
1.0
0.1
0.4
1.5
In both years, the highest paid Director was the Chief Executive whose remuneration is disclosed in the Directors’ Remuneration
Report on page 97. There are no Directors included in a company pension scheme (2020: nil).
156
Notes to the Financial Statements CONTINUEDcapreg.com
30 Dividends
The dividends shown below are gross of any take-up of Scrip offer.
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
2021
£m
Year to
30 December
2020
£m
–
–
11.4
11.4
31 Acquisition of subsidiaries
Snozone Madrid
On 9 February 2021, the Group acquired 100% of the issued share capital of Snozone SLU and Ocio y Nieve SLU, being the joint
operators of Snozone Madrid, obtaining control of Snozone SLU and Ocio y Nieve SLU. Snozone SLU is the operating company of
Snozone Madrid, Europe’s largest indoor snow slope; Ocio y Nieve SLU is a services company that employs the workforce of Snozone
Madrid. On the 30 July, Snozone SLU and Ocio y Nieve SLU were merged. Both Snozone SLU and Ocio y Nieve qualify as businesses as
defined in IFRS 3. Snozone Madrid was acquired to provide the group with an operating presence in continental Europe.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.
Inventory
Property, plant and equipment
Working capital
Cash
Total identifiable assets acquired and liabilities assumed
Negative Goodwill
Total consideration
Satisfied by:
Cash
Total consideration transferred
Net cash outflow arising on acquisition:
Cash consideration
Less: cash and cash equivalent balances acquired
30 December
2021
£m
0.1
0.2
(0.6)
0.4
0.1
–
0.1
0.1
0.1
(0.1)
0.4
0.3
The negative goodwill of £0.02 million arising from the acquisition has been recognised in the income statement in the period.
Acquisition-related costs (included in administrative expenses) amount to £0.2 million.
Snozone Madrid contributed £2.1 million of revenue and £1.3m loss to the Group’s profit for the period between the date of
acquisition and the reporting date.
32 Ultimate controlling party
Growthpoint Properties Limited (“Growthpoint”) holds 60.8% 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.
The financial statements of Growthpoint are available at this address.
157
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
Company Balance Sheet
As at 30 December 2021
Registered number: 01399411
Prepared in accordance with FRS 101
Non-current assets
Investments
Receivables – amounts falling due after one year
Total non-current assets
Current assets
Receivables – amounts falling due within one year
Cash and deposits
Total current assets
Total assets
Current liabilities
Trade and other payables
Net current assets
Non-current liabilities
Other payables
Net assets
Equity
Share capital
Share premium
Merger reserve
Capital redemption reserve
Retained earnings
Shareholders’ funds
Note
C
D
D
2021
£m
144.3
37.0
181.3
0.4
30.0
30.4
2020
Restated1
£m
124.8
5.4
130.2
0.1
59.6
59.7
211.7
189.9
E
(20.5)
(20.0)
10.0
39.7
(0.2)
–
191.0
169.9
16.5
266.1
60.3
4.4
(156.3)
191.0
11.2
244.3
60.3
4.4
(150.3)
169.9
The loss for the year attributable to equity shareholders was £6.2 million (2020: £245.1 million loss).
1 2020 results have been restated for a prior year adjustment to the treatment receivables from group entities as explained in Note A.
These financial statements were approved by the Board of Directors, authorised for issue and signed on their behalf on
13 April 2022 by:
STUART WETHERLY
GROUP FINANCE DIRECTOR
158
capreg.com
Statement of Changes in Equity
For the year to 30 December 2021
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 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
Retained profit for the year
Total comprehensive profit for the year
Dividends paid, net of Scrip
Credit to equity for equity-settled share-
based payments
Shares issued, net of costs
Balance at 30 December 2021
10.4
–
–
–
0.8
11.2
–
–
–
–
5.3
16.5
238.0
–
–
–
6.3
244.3
–
–
–
–
21.8
266.1
4.4
–
–
–
–
4.4
–
–
–
–
–
4.4
–
–
–
–
–
–
–
–
–
–
–
–
106.2
(245.1)
(245.1)
(4.3)
(7.1)
(150.3)
(6.2)
(6.2)
–
0.2
–
(156.3)
60.3
–
–
–
–
60.3
–
–
–
–
–
60.3
Total
£m
419.3
(245.1)
(245.1)
(4.3)
–
169.9
(6.0)
(6.0)
–
0.2
27.1
191.0
The Company’s authorised, issued and fully paid-up share capital is described in Note 20 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.
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.
159
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
Notes to the Company’s Separate Financial Statements
For the year ended 30 December 2021
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 1 to 5 of the consolidated financial statements.
The Company’s separate financial statements for the year ended 30 December 2021 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 29 to the Group financial statements. Except for the Directors, the
Company had no direct employees during the year (2020: 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 21 to the Group’s financial statements.
Accounting developments and changes
The 2020 financial statements have been restated to reclassify receivables from group entities as non-current rather than current, to
reflect the liquidity of those receivables: as repayment is not expected within twelve months of the reporting period, these assets do
not meet the definition of a current asset. In adopting the above treatment, the Company has restated the 2020 results for a prior
year adjustment.
The following table summarises the impact of the change in policy on the financial statements of the Group. There is no impact of the
change in policy on net assets.
Balance sheet
Non-current assets
Current assets
Change in net assets
30/12/2020
5,4
(5.4)
–
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 and amounts owed by subsidiaries 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 less costs of disposal. 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.
Sensitivities
The following table shows the sensitivity of investment and intercompany receivable impairment to a 5% change in future cashflows
and a 2% change in the discount rate used. The Directors consider these reasonably possible.
Impairment of investments
Impairment of intercompany receivables
Impact of 5% change in
future cashflows
Impact of a 2% change in
discount rate
Increase
£m
Decrease
£m
Increase
£m
Decrease
£m
0.4
–
(0.4)
–
(0.8)
–
1.0
–
There are no critical accounting judgements that affect these financial statements.
160
capreg.com 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.
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
Reversal of impairment/(impairment) of investments
At the end of the year
Carrying value
30 December 2021
30 December 2020
Subsidiaries
£m
Other
investments
£m
1,161.4
46.0
–
1,207.4
(1,037.6)
(25.5)
(1,063.1)
144.3
123.8
13.9
–
–
13.9
(12.9)
(1.0)
(13.9)
–
1.0
Total
£m
1,175.3
46.0
–
1,221.3
(1,050.5)
(26.5)
(1,077.0)
144.3
124.8
Investments are subject to an impairment review using a discount rate of 16.3% (2020: 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. During the year, the Company made an additional investment in Capital &Regional Holdings Limited.
Note F shows the subsidiaries, associates held by the Group and the Company.
D Receivables
Amounts falling due after one year
Amounts owed by subsidiaries
Amounts falling due within one year
Other receivables
Taxation and social security
2021
£m
37.0
37.0
2021
£m
0.3
0.1
0.4
2020
£m
5.4
5.4
2020
£m
–
0.1
0.1
Amounts owed by subsidiaries are stated after impairment of £nil (2020: £26.3 million) and are unsecured and repayable on demand.
Impairment is recognised after comparing the carrying value of the receivable against its recoverable amount, which is the higher
of its estimated value in use and fair value less costs of disposal. 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
2021
£m
19.2
0.2
1.1
20.5
2020
£m
19.1
–
0.9
20.0
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.
161
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
Notes to the Company’s Separate Financial Statements CONTINUED
F Subsidiaries at 30 December 2021
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
Mall Nominee One Limited
Mall Nominee Two Limited
Mall Nominee Three Limited
Mall Nominee Four Limited
Mall People Limited
Mall Ventures Limited
Marlowes Hemel Limited 2
MB Roding (Guernsey) Limited 4
Selborne One Limited
Selborne Two Limited
Selborne Walthamstow Limited 2
Snozone Holdings Limited
Snozone Leisure Limited
Snozone Limited
The Mall (General Partner) Limited
The Mall (Luton) (General Partner) Limited
The Mall Limited Partnership
The Mall (Luton) Limited Partnership
The Mall REIT Limited
The Mall Shopping Centres Limited
The Mall Unit Trust 2
The Mall Walthamstow One Limited
The Mall Walthamstow Two Limited
Wood Green London Limited 2
Wood Green One Limited
Wood Green Two Limited
Principal associate entities
Euro B-Note Holding Limited 2
1
In liquidation/being dissolved.
Nature of
business
Country of
incorporation
Share of
voting rights
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
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
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
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%
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.
162
capreg.com
Glossary of Terms
Adjusted Profit is the total of Contribution from wholly-owned
assets and the Group’s joint ventures and associates, Snozone
EBITDA and property management fees less central costs
(including interest but excluding non-cash charges in respect of
long-term incentive awards) 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.
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).
Adjusted Earnings per share is Adjusted Profit divided by the
weighted average number of shares in issue during the year
excluding own shares held.
Like-for-like figures, unless otherwise stated, exclude the
impact of property purchases and sales on year-to-year
comparatives.
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.
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.
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.
Leisure EBITDA or EBITDA is an alternative performance
measure for the Snozone business. It excludes Depreciation,
Amortisation, (notional) Interest, Tax and non-operational
one-off items. It includes rent expense, based on contractual
payments adjusted for rent-free periods. This provides a
measure of Snozone trading performance which removes
the profiling impact of IFRS 16 that would otherwise see
a significantly higher charge in early years of a lease and
significantly lower net charge in later years.
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) Net Rental Income is
rental income from properties, less provisions for expected
credit losses, property and management costs. It is a standard
industry measure.
Nominal equivalent yield (NEY) 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.
163
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS Glossary of Terms CONTINUED
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.
164
capreg.com Five Year Review (Unaudited)
Balance sheet
Property assets
Other non-current assets
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 price2
Total return
Total comprehensive (expense)/income
Net assets per share
Basic net assets per share2
EPRA triple net assets per share3
EPRA net assets per share3
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 share2
Interest cover
Earnings per share2
Basic
Diluted
EPRA
Dividends per share
2021
£m
374.8
36.3
–
58.5
(19.4)
(10.4)
(238.2)
(33.2)
168.4
16.5
266.1
64.7
(178.9)
168.4
(15.4)%
(32.1)%
(16.1)%
58.9p
20201
£m
536.1
29.1
–
84.1
–
(9.6)
(423.9)
(48.7)
167.1
11.2
244.3
64.7
(153.1)
167.1
(54.4)%
(55.6)%
(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
(26.4)
(203.9)
(121.0)
(25.6)
22.4
102p
–
–
102p
102p
101p
142%
70.0
34.3
(13.6)
(9.7)
(23.3)
(3.1)
(26.4)
8.1
6.8p
2.3
(22.0)p
(22.0)p
2.9p
–
149.5p
–
–
157.0p
157.0p
138.8p
255%
72.7
37.5
(181.7)
(22.4)
(204.1)
0.2
(203.9)
11.0
10.2p
2.0
36p
36p
36p
363.3p
363.3p
355.8p
114%
89.0
53.6
(97.5)
(23.5)
(121.0)
–
(121.0)
27.4
37.0p
3.2
(188.8)p
(188.8)p
(8.8p)
–
(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
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1. Prior years are other
than in this case as originally presented, no adjustment has been made to restate prior years for changes in IFRS standards that have been adopted
in subsequent years.
2 Prior year numbers are other than where stated have not been adjusted for the 10:1 share consolidation subsequent to year-end. A multiple of 10
must be applied to arrive at the comparative figures.
3 EPRA net asset metrics no longer in use.
165
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS
Portfolio Information (Unaudited)
At 30 December 2021
Physical data1
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:
2022
2023
2024–2026
ERV (£m) of leases expiring in:
2022
2023
2024–2026
Passing rent (£m) subject to review in:
2022
2023
2024–2026
ERV (£m) of passing rent subject to review in:
2022
2023
2024–2026
Rental Data
Contracted rent (£m)
Passing rent (£m)
ERV (£m per annum)
ERV movement (like-for-like)
Occupancy
1 This data includes properties classified as held for sale.
166
7
730
3.5
473.1
9.3
482.4
(49.2)
8.4
9.5
11.7
4.5
6.2
6.2
3.9
8.5
6.4
4.6
7.5
4.5
3.0
3.4
3.9
2.1
3.0
50.9
48.2
53.8
0.6
92.8
capreg.com EPRA Performance Measures (Unaudited)
As at 30 December 2021
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
EPRA vacancy rate
Estimated rental value of vacant space
Estimated rental value of whole portfolio
EPRA vacancy rate
EPRA net initial yield and EPRA topped-up net initial yield
Investment property
Completed property portfolio
Allowance for capital costs
Allowance for estimated purchasers’ costs
Grossed up completed property portfolio valuation
Annualised cash passing rental income
Property outgoings
Annualised net rents
Add: notional rent expiration of rent-free periods or other lease incentives
Topped up annualised rent
EPRA net initial yield
EPRA topped-up net initial yield
EPRA net initial yield (investment assets only)
EPRA topped-up net initial yield (investment assets only)
Note
9a
9a
25
25
25
25
25
25
2021
3.5
2.9p
168.4
102p
168.4
102p
167.4
101p
2021
£m
3.9
53.8
7.2%
2021
£m
473.1
473.1
(10.1)
31.4
494.4
56.2
(13.7)
42.5
0.6
43.1
8.6%
8.7%
8.1%
8.3%
20201
9.9
9.2p
176.0
157p
176.0
157p
155.6
139p
2020
£m
4.2
55.0
7.8%
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%
7.0%
7.2%
167
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS EPRA Performance Measures (Unaudited) CONTINUED
As at 30 December 2021
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
Less inclusive lease costs recovered through rent
Gross rental income
EPRA cost ratio (including direct vacancy costs)
EPRA cost ratio (excluding vacancy costs)
2021
£m
38.1
12.7
(12.7)
(0.8)
(8.5)
(4.0)
24.8
(3.8)
21.0
49.7
(1.7)
(4.0)
44.0
20201
£m
34.4
12.7
(11.6)
(0.8)
(6.5)
(2.5)
25.7
(3.9)
21.8
55.6
(1.9)
(2.5)
51.2
56.4%
47.8%
50.2%
42.6%
1 2020 results have been restated for a prior year adjustment to the treatment of SaaS configuration costs as explained in Note 1.
168
capreg.com 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)
6A Sandown Valley Crescent
Sandown, 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
Registered office
22 Chapter Street
London SW1P 4NP
Telephone: +44 (0)20 7932 8000
capreg.com
Registered number
01399411
169
Stock Code: CALCapital & Regional plc Annual Report and Accounts for the year ended 30 December 2021FINANCIALS 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.
170
capreg.com CAPITAL & REGIONAL PLC
22 Chapter Street
London SW1P 4NP
Tel: +44 (0)20 7932 8000
CAPREG.COM
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