Wrap Text
Full Year Results to 30 December 2016
CAPITAL & REGIONAL PLC
(Incorporated in the United Kingdom)
(UK Company number 01399411)
LSE share code: CAL JSE share code: CRP
ISIN: GB0001741544
("Capital & Regional", the "Group" or the "Company")
9 March 2017
Full Year Results to 30 December 2016
Capital & Regional, the UK focused specialist REIT with a portfolio of dominant in-town
community shopping centres, today announces its full year results to 30 December 2016.
Asset management strategy driving strong income growth and underpinning dividend
- 6.7% increase in Net Rental Income to GBP52.6 million (2015: GBP49.3 million)
- Adjusted Profits(1) up 11.7% to GBP26.8 million (2015: GBP24.0 million)
- 8.7% increase in total dividend to 3.39p per share for 2016, ahead of guidance
Successful recycling of capital continuing into 2017
- Acquisition of The Exchange Centre, Ilford completed on 8 March 2017 for GBP78.0 million, reflecting NIY of 6.70%
- Disposal of Ipswich joint venture in February 2017 delivering IRR of over 40%
- Disposal of The Mall, Camberley for GBP86.0 million at NIY of 5.9% in November 2016
- Acquisition of The Marlowes, Hemel Hempstead and adjacent properties in February/March 2016 for GBP53.8 million at NIY of 7.0%
Delivery of asset management initiatives supported by strong occupier demand
- Capex investment of GBP21.2 million on Wholly-owned assets in 2016 including:
- GBP6.2 million at Maidstone - refurbishment and TJ Hughes reconfiguration
- GBP4.2 million at Wood Green - new Travelodge and extended Easygym
- GBP2.9 million at Blackburn - new Ainsworth Mall entrance and units at Blackburn
- New lettings and renewals at an average 18%(2) premium to previous passing rent and combined 2.1%(2) premium to ERV
Enhanced balance sheet strength and flexibility
- GBP372.5 million long-term refinancing completed on 4 January 2017 locking in historically low interest rates and
providing flexibility for asset recycling
- Weighted average debt maturity including new Ilford debt, increased from 3.6 to 7.8 years(3,4,6)
- Basic and EPRA NAV per share resilient, at 68p (2015: 72p and 71p respectively), reflecting a 1.6p
reduction attributable to implementing the new long term debt package and a further 1.2p from the
1% increase in stamp duty
- Average cost of debt after Mall refinancing and Ilford acquisition reduced to 3.26% from 3.51%(6)
2016 2015 Change
See-through Net Rental Income GBP52.6m GBP49.3m +6.7%
Adjusted Profit(1) GBP26.8m GBP24.0m +11.7%
Adjusted Earnings per share 3.8p 3.4p +11.7%
IFRS (Loss)/Profit for the period GBP(4.4)m GBP100.0m
Total dividend per share 3.39p 3.12p +8.7%
Net Asset Value (NAV) per share 68p 72p -4p
EPRA NAV per share 68p 71p -3p
Proforma group net debt(3) GBP328.6m GBP338.1m -GBP9.5m
Proforma see-through net debt to property value(3,5) 42% 41% +1 p.p.
See-through net debt to property value at date of results(3,4,5) 46% 45%(6) +1 p.p.
(1) Adjusted Profit is as defined in the Glossary and Note 1 to the Financial Statements.It incorporates profits
from operating activities and excludes revaluation of properties and financial instruments, gains or losses on
disposal, exceptional items and other defined terms. We previously used 'Operating Profit' but have amended the
term to clarify that it is an adjusted measure. The only change to the definition is to incorporate tax charges
or credits relating to operating activities. A reconciliation to the statutory result is provided in the Financial
Review. EPRA figures and a reconciliation to EPRA EPS are shown in Note 5 to the Financial Statements.
(2) Wholly-owned portfolio excluding The Mall, Camberley given its disposal in November 2016
(3) Reflecting refinancing of Mall assets completed on 4 January 2017, debt maturity is assuming exercise of extension options.
(4) Further adjusted for the Ipswich disposal completed on 17 February 2017 and Ilford acquisition completed on 8 March 2017.
(5) See-through net debt divided by property valuation.
(6) 2015 reflects the Hemel Hempstead acquisitions completed in February/March 2016.
Commenting on the results, John Clare, Chairman said:
"I am pleased to report that Adjusted Profit has grown by 11.7% to GBP26.8 million. This represents another
strong performance in a year where the focus has shifted decisively towards boosting income from delivery
of the asset management and development initiatives across the portfolio.
"The results have supported an increase in the dividend for the year of 8.7%, ahead of previous guidance.
Reflecting our confidence in the growth prospects of the business, underpinned by our ongoing Capex
investment, the Board is reaffirming its commitment to a target of annual dividend growth in the range of 5-
8% in the medium-term."
Hugh Scott-Barrett, CEO added:
"Whilst the business environment may be challenging, the prospects for Capital & Regional are exciting. Our assets have
proven to be very resilient and Capex investment over the last two years has provided a strong platform for
future income growth. This, supported by the high demand we continue to see from occupiers for the
attractive and affordable space in our vibrant centres, provides us with confidence in our ability to maintain
and grow the dividend.
"We expect to benefit from the average 13.5% reduction in rateable values when they are applied next
month and our portfolio of asset management initiatives continues to grow with leisure reconfigurations
providing an opportunity to reposition both the Hemel Hempstead and Ilford schemes. In addition we are
looking for planning consent for the extension and residential development to be granted at Walthamstow
during the year whilst the development of master plans in Luton and Wood Green are likely to be
transformational for both the town centre and our shopping centres which sit at the heart of each community.
"Looking forward, there is no shortage of accretive opportunities both within our existing portfolio and
beyond. This underpins our confidence in the growth prospects of the business by enabling us to focus on
those initiatives which generate the best returns."
For further information:
Capital & Regional:
Hugh Scott-Barrett, Chief Executive Tel: 020 7932 8000
Charles Staveley, Group Finance Director
FTI Consulting:
Richard Sunderland Tel: 020 3727 1000
Claire Turvey Email: Capreg@fticonsulting.com
Notes to editors:
About Capital & Regional plc
Capital & Regional is a UK focused specialist retail REIT with a strong track record of delivering value
enhancing retail and leisure asset management opportunities across a c. GBP1 billion portfolio of in-town
dominant community shopping centres. Capital & Regional is listed on the main market of the London Stock
Exchange and has a secondary listing on the Johannesburg Stock Exchange.
Capital & Regional owns seven shopping centres in Blackburn, Hemel Hempstead, Ilford, Luton,
Maidstone, Walthamstow and Wood Green. It also has a 20% joint venture interest in the Kingfisher Centre
in Redditch. Capital & Regional manages these assets, which comprise approximately 820 retail units and
attract c. 1.7 million shopping visits each week, through its in-house expert property and asset management
platform. For further information see www.capreg.com.
Forward looking statements
This document contains certain statements that are neither reported financial results nor other historical information. These statements
are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed
in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond the Group's ability to control or
estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of
government regulators and other risk factors such as the Group's ability to continue to obtain financing to meet its liquidity needs,
changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or
conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place
undue reliance on these forward-looking statements, which apply only as of the date of this document. The Group does not undertake
any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of
this document. Information contained in this document relating to the Group should not be relied upon as a guide to future performance.
Chairman's statement
Performance Overview
Capital & Regional's strong performance in 2016, against a background of increased economic uncertainty,
has demonstrated the resilience of the business model. This has led to an 8.7% increase in dividend to
3.39p for the full year, delivering an attractive dividend yield to shareholders.
I am pleased to report that Adjusted Profit increased by 11.7% to GBP26.8 million. This is an excellent result in
a year where, building on the solid foundations we have successfully created over the last few years, our
focus shifted decisively towards boosting income from delivery of the asset management and development
initiatives across the portfolio. The performance is all the more creditable as, during the course of the year,
the BHS administration, while providing a medium term opportunity to create value and improve the tenant
mix, did inevitably result in a short term loss of income.
NAV per share as at 30 December 2016 was 68p compared to 72p at the beginning of the year.
This reflects the impact of one-off costs associated with the successful long-term refinancing of the group's
core banking arrangements, the impact of stamp duty increases as well as the modest fall in valuations since
the EU referendum in June 2016. Whilst the EU referendum vote did slow investment activity, the core
portfolio has proven to be very resilient with valuations adjusted for capex down only 2%, supported by a
steady volume of transactional evidence for assets in London and the South East.
IFRS profit for the period fell from GBP100 million to a loss of GBP4.4 million. This reflected a non-cash revaluation
loss, for the reasons noted above, partially reversing the strong unrealised valuation gain recognised in 2015,
together with the GBP11 million charge in relation to implementing the new long-term debt structure.
Strategy
Capital & Regional creates value for shareholders through a focus on increasing income and capital growth
from entrepreneurial asset management initiatives on its portfolio of shopping centres. As we have
successfully demonstrated, once assets have been repositioned we seek opportunities to recycle them if we
believe capital can be more effectively employed on new investments or other asset management initiatives.
Our portfolio offers both resilience and significant opportunities for growth. Our centres combine the scale
and dominance of prime shopping centres with the convenience and affordability of town centres. The
portfolio is increasingly weighted to London and the South East where the demographics are strong and we
see healthy demand from both retailers and leisure operators for affordable space and opportunities for
alternative use remain attractive. The uplift in rents that has been achieved from the re-let BHS space in
Walthamstow and Blackburn highlights the income potential that can be unlocked from this portfolio, as well
as the strong occupier demand for space within it.
Following a very successful investment in Lincoln, which was sold in 2014, the Company has again
demonstrated its ability to generate capital gains through the redevelopment and repositioning of assets, with
the sale of its Ipswich joint venture which completed in February 2017. The centre was acquired in March
2015 and through significant investment and imaginative asset management repositioned as a vibrant leisure
and retail destination, delivering an IRR of over 40% on exit. The progress the Company is making in Hemel
Hempstead on plans to transform the town centre provides another opportunity to grow both income and
create attractive capital gains as does Ilford, following the acquisition of The Exchange centre in March 2017.
We believe that the key characteristics of the underlying assets within the whole portfolio leave us well
positioned to sustainably grow earnings further.
Responsible Business
We have reduced our energy consumption by 5% over the course of this year and our continuous year-on-
year improvement has been recognised by the award of Best in Carbon Management at the Carbon Trust
Awards, ranking Capital & Regional first amongst 150 companies in the UK. Our expertise not only helps
reduce our environmental impact but also enables us to deliver measurable savings to our occupiers through
a very competitive service charge.
We have also intensified the training of our operational teams to ensure staff are prepared for any potential
threat. Our centre teams have implemented scenario planning and conducted exercises in conjunction with
local emergency services.
The award of a 10th consecutive ROSPA Gold award underlines our continued focus on health and
occupational safety standards across the shopping centres.
Dividend
For 2016, the Board is proposing a final dividend of 1.77 pence per share taking the full-year dividend to
3.39 pence per share, representing an increase on 2015 of 8.7%. This is ahead of guidance, which
targets annual dividend growth in the range of 5-8% in the medium-term. The Board is reaffirming its
commitment to this guidance reflecting its confidence in the income growth prospects for the business
underpinned by our asset management programme.
People
As in previous years, I would like to thank all who work at Capital & Regional for their hard work during the
year. I would, in particular, like to celebrate the efforts of those in the shopping centres who have become
Customer Hosts and who have done so much to welcome our visitors and who have selflessly acted to
improve the quality of the service we provide to our shoppers. I would also like to congratulate all Snozone
staff whose efforts in promoting customer service led to being shortlisted alongside Manchester United and
Twickenham Stadium for the School Travel Award.
The Board
I am delighted to welcome Guillaume Poitrinal who joined the Board on 1 November 2016. Guillaume is one
of the most well regarded figures in European real estate and brings with him a wealth of highly relevant
experience and knowledge of the shopping centre sector which will be of great value to the company.
Mark Bourgeois stepped down from the Board on 1 November 2016 after 18 years at Capital & Regional.
On behalf of the Board, I would like to thank Mark for his hard work and significant contribution to the
Group's recent success and we wish him well for the future.
The Board has focused much attention on senior management succession planning during the course of the
year, seeking to balance the introduction of new talent with continuity. Both Hugh Scott-Barrett and I have
indicated a desire to step down from our current roles in 2017 after, respectively, nine and seven years of
service. I am therefore delighted that Lawrence Hutchings, who is a highly experienced and well regarded
retail real estate professional, will join in June 2017 as Chief Executive and Hugh Scott-Barrett will take up
the role of Non-Executive Chairman, at which point I will retire.
I would like to thank my Board colleagues for all their support and guidance over the last seven years. I am
pleased to leave the Company in such a strong position; it has been a privilege to have been Chairman of
Capital & Regional during a time of such significant progress.
John Clare CBE
Chairman
Chief Executive's Statement
Income Growth Drives Operational Performance
Net Rental Income (NRI) within the wholly-owned portfolio grew by 6.6%, from GBP47.3 million to GBP50.4 million.
Stripping out the impact of the Hemel acquisitions, and the disposal of Camberley, underlying growth in
wholly-owned NRI was 1.2%. Adjusted for the impact of the BHS administration, NRI grew by approximately
2.4%. This, combined with tight control over administrative expenses, underpins the strong improvement in
Adjusted Profit of 11.7%. While this partially reflects the return from the Capex spend to date the full
benefit of the investment to date is not likely to be seen until 2017 and 2018.
Leasing activity has been robust during the course of the year. New lettings and lease renewals within the
wholly-owned portfolio excluding Camberley aggregated GBP5.6 million and were agreed at rents 2.1% ahead
of ERV. Critically, they were also ahead of previous passing rent by approximately 18%.
The letting of BHS space at Walthamstow highlights the potential for income growth from within the existing
portfolio. Lettings to Lidl (18,000 sq ft) and The Gym (15,000 sq ft) will generate a 40% uplift in headline rent
on the relevant Walthamstow unit even before the letting of the remaining space, where there is strong
demand, is taken into account.
This reinforces our belief that our centres offer attractive and affordable space to retailers and leisure
operators alike.
Delivery of Asset Management Initiatives
The Group has spent GBP21.2 million of capex on wholly-owned assets during the year, including:
- GBP6.2 million at Maidstone - scheme refurbishment and TJ Hughes reconfiguration
- GBP4.2 million at Wood Green - new Travelodge and extended Easygym
- GBP2.9 million at Blackburn - the opening of the new Ainsworth Mall entrance and units
The redevelopment of the Buttermarket Centre, Ipswich, has been completed on time and on budget
facilitating the sale post year end. This was a complex construction project involving the creation of an
Empire Cinema on the two upper levels surrounded by a suite of nine new restaurants including Coast to
Coast, Prezzo, Wagamama and Cosy Club. The joint venture invested capex of GBP25.1 million to transform
the scheme from a substantially empty shopping centre to a thriving leisure-led destination.
Recycling for Growth
The sale of The Mall, Camberley, for GBP86 million, representing a Net Initial Yield of 5.9%, was completed in
November 2016. The transaction crystallised an IRR of 10% based on the acquisition price at the time of
Capital & Regional's buy-out of The Mall Fund in 2014. It has also raised funds to invest in more accretive
investments both in our existing portfolio and by way of acquisition. The Camberley sale followed the earlier
acquisitions of the Marlowes Shopping Centre in Hemel Hempstead and the adjacent Edmonds Parade and
Fareham House properties for combined consideration of GBP53.8 million. The consolidated scheme presents
the Group with the opportunity to reposition the Hemel Hempstead town centre.
Similarly, the sale shortly after year-end of our joint venture interest in The Buttermarket Centre, Ipswich at a
net equivalent yield of 5.9%, realising an expected GBP13.5 million to the Group, gave us additional fire power
for investment. We quickly put this to use with the acquisition of The Exchange Centre, Ilford, for GBP78 million,
representing a net initial yield of 6.7%, which completed on 8 March 2017. The Exchange Centre, Ilford,
dominates retail in the town centre and offers great potential for leisure and residential development given its
Crossrail link which is expected to open in 2019. It also further strengthens the London and South East bias
of our portfolio.
The Group has a track record of acquiring assets at attractive prices and of recycling capital once innovative
and entrepreneurial asset management initiatives have been completed. This is not just about capital
discipline but about creating fuel for growth by achieving very attractive returns.
Enhanced Balance Sheet Strength and Flexibility
On 4 January 2017 the Group completed the refinancing of its five wholly-owned Mall properties by entering
into three new debt facilities totalling GBP372.5 million with a weighted average maturity of 7.8 years, rising to
8.8 years if the extension options are exercised.
Interest has been fixed enabling us to lock into the historically low interest rates, resulting in an
all-in cost on these new facilities of 3.27%. In addition, the refinancing has also enabled the Group to diversify its
sources of funding and increase the quantum of capex funding. Critically, the facilities also provide flexibility
for asset recycling. We believe that these significant benefits offset the one-off charge of GBP11.0 million
associated with the early redemption of the existing facilities that was recognised in the year.
Outlook
Whilst the business environment may be challenging, the prospects for Capital & Regional are exciting. Our assets have
proven to be very resilient and Capex investment over the last two years has provided a strong platform for
future income and dividend growth. Our portfolio of asset management initiatives continues to grow with
leisure reconfigurations providing an opportunity to reposition both the Hemel and Ilford schemes. We are
looking for planning consent for the extension and residential development to be granted at Walthamstow
during the year whilst the development of master plans in Luton and Wood Green are likely to be
transformational for both the town centre and our shopping centres which sit at the heart of each community.
"Looking forward, there is no shortage of accretive opportunities both within our existing portfolio and
beyond. This underpins our confidence in the growth prospects of the business by enabling us to focus on
those initiatives which generate the best returns."
Operating Review
The Capital & Regional business model is founded upon the acquisition, ownership and management of
dominant community shopping centres which are convenient for shoppers and generate strong footfall with
high levels of repeat visits. These are primarily located in strong south east locations and offer retailers and
leisure operators high quality space in thriving schemes at affordable levels of occupational cost. Every
scheme in the Group's portfolio is subjected to intensive asset management from the Group's specialist in
house asset management team which identifies opportunities to invest capital expenditure in a highly
accretive manner.
The value of the Group's platform is emphasised by the strong operational performance in the period with
lettings and lease renewals combined being above ERV, occupancy being maintained at high levels,
together with the successful asset recycling that has taken place.
Wholly-owned 2016 2015 Change
As at 30 December:
Contracted rent (like-for-like) GBP57.5m GBP56.6m(1) +1.6%
Passing rent (like-for-like) GBP53.0m GBP53.7m(1) -1.3%
Occupancy (like-for-like) 95.4% 96.7%(1) -1.3p.p.
Portfolio value GBP794.1m GBP822.7m -3.5%
For the year ended 30 December:
NRI GBP50.4m GBP47.3m +6.6%
NRI (like-for-like) GBP42.8m GBP42.3m +1.2%
Footfall - versus prior year -0.2% -0.6%
Footfall - versus national index +1.9 p.p +1.1 p.p.
Total Property return 4.1% 16.0% -11.9 p.p
(1) Hemel Hempstead as at acquisition used for 2015
Contracted rent increased by 1.6% on a like-for-like basis, driven by a strong letting performance despite the
impact of the BHS administration which initially reduced both passing and contracted rent by GBP1.3 million. By
30 December 2016 GBP0.6 million of income had been contracted in relation to the BHS space and a further
GBP0.3 million has been signed since the year end. In total at 30 December 2016, there was GBP2.7 million of contracted
rent in a rent free period of which GBP2.6 million will convert to passing rent in 2017. There is also a further GBP1.8 million
of contracted rent where the income will commence once the works to create or convert the units has completed.
Occupancy at 30 December 2016 reflects the impact of the BHS administration where the units involved
closed during the second half of the year. Whilst as noted below good progress has been made reletting the
units the impact of BHS on occupancy at the year end accounted for 1.2 percentage points of the decrease.
New lettings, renewals and rent reviews
Wholly-Owned Centres excluding Camberley Year ended
30 December 2016
Number of new lettings 58
Rent from new lettings (GBPm) GBP4.0m
Comparison to ERV(1)(%) +2.3%
Renewals settled 24
Revised rent (GBPm) GBP1.6m
Comparison to ERV(1) (%) +1.7%
Lettings and renewals compared to previous rent +18%
Rent reviews settled 24
Revised passing rent (GBPm) GBP3.3m
Uplift to previous rent (GBPm) -
Comparison to ERV (%) +3.5%
(1) For lettings and renewals with a term of five years or longer which did not include a turnover rent element
There has been strong leasing activity across the wholly-owned portfolio reflecting the affordability of the
schemes, with GBP4.0 million of rental income achieved through new lettings and a further GBP1.6 million of rent
on renewals settled.
For renewals we also consider the net effective rent taking into account the valuers assumptions on tenant
incentives. The net effective rent achieved on all lease renewals which were for a five year term or greater
and contained no element of turnover rent was, at 96.5% of ERV, 3.4% higher than assumed by the Group's valuers.
Creating opportunity from adversity following the BHS Administration
The value of the Group's in-house team is perfectly illustrated by the progress made in reletting the BHS
units, resulting in the delivery of significant income increases at Blackburn and Walthamstow over the rent
paid by BHS.
At Blackburn, the entire store has been re-let. Wilko have taken a 10 year lease of a 24,500 sq ft store and
Sports Direct, who were a subtenant of BHS, have become a direct tenant. This has resulted in a GBP73,000
uplift in income. Handover of the store to Wilko is scheduled for May 2017.
In Walthamstow, the Group took a surrender of the BHS lease from the administrator and a 25 year letting has been
completed with Lidl on 18,000 sq ft on the ground floor since the year end. On the first floor, The Gym has signed
a 15 year lease over 15,000 sq ft and a Turkish restaurant has agreed a 15 year lease on a 6,800 sq ft ground floor
unit. There are three further retail units totalling 5,400 sq ft which are still available. The Group's aim is to
increase rental income at the units in this centre by approximately GBP500,000 more than was receivable from BHS and
the deals referred to above will secure 79% of that targeted income. The estimated capital expenditure to achieve
this is GBP4.1 million, of which 11.5% will be met by the headlessor, London Borough of Waltham Forest, resulting in
a net incremental income return to the Group of 12%.
In Maidstone, the Group is pursuing a number of asset management strategies ranging from a single letting
of the whole store to scenarios where the store is subdivided for multiple occupiers.
Other leasing activity
Momentum on other lettings has been equally strong driven by the affordability and quality of the space at our schemes.
Occupancy costs in our schemes are significantly lower than regional prime centres. Our service charges are extremely
competitive, an overall GBP4.92 per sq ft which is below Jones Lang LaSalle's most recent OSCAR benchmark of
GBP5.67 per sq ft. Average rent is around GBP15 per sq ft and total occupancy cost ratio is estimated at 12.6%(1). Across the
portfolio, the 2017 business rates revaluation will result in an average decrease in rateable value of 13.5% for the six
wholly-owned schemes held at 30 December 2016, with four of the schemes showing significant declines and the two London
schemes at Walthamstow and Wood Green increasing by 7.1% and 15.0% respectively.
Further progress has been made in increasing the leisure element in our schemes with 13 new leisure
lettings completing with a rent of GBP0.8 million. The increasing leisure offer, which now stands at over 10% of
the portfolio compared to approximately 7% at the end of 2014, attracts a wider customer base and
increases dwell time.
Highlights of letting activity as a whole include:
Blackburn - in addition to Wilko, lettings were made to Costa, Burger King and Muffin Break totalling 6,500 sq ft
on terms of at least 10 years.
Luton - Holland & Barrett took a new 3,700 sq ft store whilst JD Sports upsized to a 5,500 sq ft unit and
Schuh took a 3,400 sq ft unit, all on 10 year terms. Lettings were also completed on a cluster of five new catering offers,
further improving the leisure offering at the centre.
Maidstone - TJ Hughes has taken a 10 year lease of a 33,000 sq ft unit and Poundland has completed a 10 year
lease on a 6,400 sq ft store. Holland & Barrett have relocated and upsized to 5,000 sq ft and several
other occupiers including Greggs, McDonalds and Pizza Hut have refitted following on from the general
refurbishment of the scheme that completed in the summer of 2016.
Walthamstow - in addition to the The Gym and Lidl lettings, Holland & Barrett has taken a 4,400 sq ft unit on
a 10 year term and Shoe Zone and Select each have signed for five years for a 3,300 sq ft store.
Wood Green - lettings have been made to Choice and Footlocker on 10 year terms for units of 5,900 and 3,800 sq ft
respectively. Pret has taken a 15 year lease on 2,500 sq ft at the entrance to the scheme. Since the year end the
letting to Five Guys of a new 3,750 sq ft restaurant has been secured and we are progressing discussions with a
national retailer to expand into unused basement space. We have also received an attractive offer from a national
food retailer for a 7,500 sq ft convenience store.
(1) Estimate based on Blackburn, Luton, Maidstone, Walthamstow, Wood Green. See Glossary for further details.
Administrations and Insolvency
Year ended Year ended 6 months ended
Wholly-owned Centres 30 December 2016 30 December 2015 30 June 2016
Administrations (units) 18 9 12
Passing rent (GBPm) 2.4 0.5 1.9
In 2015, on a like-for-like basis, there were nine administrations with passing rent of GBP0.5 million, compared to
GBP2.4 million of passing rent in 2016, which was largely due to three administrations: AJ Levy Group where seven
units were affected, BHS which accounted for three units and Ed's Diner which affected two units. Eight of the
affected units have been re-let at an increased level of rent. At 30 December 2016, there were five units with
passing rent of GBP0.5 million which were affected by tenant administration where the tenant was continuing to trade.
There are four units impacted by the proposed Creditors Voluntary Arrangement submitted by Blue Inc in
early March 2017 with a combined rent of GBP0.2 million. There were two other units impacted by administration
in 2017 up to the date of these results with a combined rent of less than GBP0.1 million.
Income security has been strengthened by the improved tenant mix, in particular, through greater
diversification, given the increased levels of leisure use within our schemes.
Capital expenditure and developments
The Group's GBP65 million Capex plan was announced with The Mall acquisition in 2014. GBP21.2 million was
spent in 2016, bringing the total spend to date to GBP36.1 million. The largest element of the unspent funds
relates to the Walthamstow development. The projected income return on these projects in total is over 10%.
Spending in 2016 included:
GBP2.9 million at Blackburn relating to the reconfiguration to create a 15,000 sq ft gym and three retail units in
the new entrance opposite the redeveloped bus station.
GBP6.2 million at Maidstone including the refurbishment and works to secure the letting of the 33,000 sq ft
anchor store to T J Hughes which has reported strong trading since opening.
GBP4.2 million at Wood Green including the conversion of offices into a 78 bedroom Travelodge and the
extension of the gym. The 23,000 sq ft gym was handed over in March 2016 and the Travelodge works are
progressing well with handover expected by August 2017. In addition Deichmann opened following the
amalgamation of two units to create a new 5,800 sq ft unit.
A new multi-year capital expenditure plan has now been formulated which incorporates the remainder of the
GBP65 million and planned spending on the recent acquisitions in Hemel Hempstead and Ilford. This totals GBP80
million at an anticipated average income return of around 10%, with at least GBP30 million expected to be spent
in 2017. This emphasises the accretive opportunities inherent within the portfolio owing to their location and
dominance. The GBP80 million includes:
- GBP13 million repositioning of The Marlowes, Hemel Hempstead
- GBP8.5 million net repositioning investment in The Exchange, Ilford
- GBP4.5 million conversion of the Market Hall at Luton into 50,000 sq ft of MSU space.
- GBP3.5 million for the reconfiguration and break-up of the former BHS store at Walthamstow
The Group continues to progress its plans to extend Walthamstow to deliver 92,000 sq ft of new retail space
and over 400 residential units. An agreement has been reached with the London Borough of Waltham Forest
within which the headlease will be extended from 71 years to 250 years. Public consultation has taken
place and a planning application is expected to be submitted in March 2017 with consent expected by the
end of the year.
Footfall, car park income and trade index
Footfall at the Group's wholly-owned shopping centres outperformed the national footfall index by 1.9
percentage points during 2016, registering a small decline of 0.2% versus a national ShopperTrak index
decline of 2.1%.
Car park usage was 5.5 million visits, resulting in gross car park income increasing by 1.3% with tariff
increases more than offsetting a small decline in usage.
Our in-house C&R trade index estimated retailer sales to be 0.1% higher than 2015, indicating resilient levels
of trading across the portfolio.
Short term lettings
Short term lettings are used to maximise the vibrancy of our schemes, to minimise the costs of vacant units,
and to provide opportunities for new and growing retailers to experience our schemes. At 30 December 2016,
on a like-for-like basis, there were 59 temporary lettings (2015: 74) for a net rent of GBP0.8 million (2015: GBP0.4
million) as compared to an ERV of GBP2.5 million (2015:GBP 3.9 million). With increasing levels of occupancy, the
Group will look to convert these lettings onto permanent terms with higher rents.
Investment portfolio performance
The property level total returns for the wholly-owned portfolio, as held at 30 December 2016, are set out below:
Property valuation Capital return Total return Initial yield Equivalent yield
30 December 2016 GBPm % % % %
Wholly-owned portfolio 794.1 -1.9 4.1 6.0 6.2
Acquisitions and Disposals
The Group continually assesses the returns available from the schemes within its portfolio and actively seeks
to recycle capital into assets or projects which offer more accretive opportunities for the Group's in house
asset management team to generate income and value.
Disposals
The Mall Camberley
The Group completed the sale of The Mall Camberley to Surrey Heath Borough Council on 28 October 2016
for GBP86.0 million at a net initial yield of 5.9%. This compares to the value of GBP75.0 million, and a net initial
yield of 7.18%, when Capital & Regional bought out The Mall Fund in 2014. Allowing for the capital
expenditure invested and income returned since then this represents an IRR of 10%.
Buttermarket Centre, Ipswich
The Group sold its 50% interest in The Buttermarket Centre in Ipswich to National Grid Pension Fund on 17
February 2017. This is expected to realise GBP13.5 million to the Group after repayment of related debt,
delivering an IRR of over 40%. The initial consideration received was GBP9.8 million with the expected balance
of GBP3.7 million, contingent on the completion of the letting programme. The impact of the sale is reflected in
the year end numbers as the investment was reclassified as an asset held for sale at 30 December 2016.
The centre was acquired in March 2015 through a 50:50 joint venture with Drum Property Group for GBP9.6
million at a Net Initial Yield of 8.5%. A GBP25 million reconfiguration and modernisation created a 235,000 sq ft
retail and leisure complex. The retail space has been consolidated onto the ground floor and is anchored by
TK Maxx and New Look, while Empire Cinemas has taken a lease of a 12 screen cinema on the upper floors,
as part of a leisure suite of nine restaurant units including Prezzo, Wagamama, Byron Burgers and Coast to
Coast and a Pure Gym.
Acquisitions
The Marlowes, Hemel Hempstead
On 5 February 2016 the Group completed the acquisition of The Marlowes Shopping Centre for GBP35.5 million,
representing an initial yield of 7.0%, with the vendor funding the replacement of the glazed atrium roof as
part of the transaction. The Group subsequently acquired the adjacent Edmonds Parade and Fareham
House properties for a total of GBP18.3 million.
Together these provide the Group with substantial control of the retail heart of a strong south east town with
the potential to be fundamentally repositioned as an attractive shopping and leisure destination, following on
from the significant local authority investment which has already benefitted the town. The Group is planning
to invest capital expenditure of around GBP13 million in the next three years with a targeted income return in the
high single digits.
The Exchange Centre, Ilford
On 8 March 2017 the Group completed the acquisition of The Exchange Centre, Ilford for GBP78 million,
representing a net initial yield of 6.70%.
The Exchange Centre is located opposite Ilford train station which will be rebuilt ahead of the opening of
Crossrail, which is planned for 2019. It has three trading levels with 77 units providing 300,000 sq ft of
lettable space and a multi-storey car park with over 1,000 spaces. The scheme is anchored by Debenhams and
Marks & Spencer with other retailers including H&M, Next, River Island, Sports Direct, TK Maxx and Wilko.
The Group is planning to make a net invest of approximately GBP8.5 million of capital expenditure in the scheme,
focused primarily on transforming the leisure offer and crystallising value from the significant residential
opportunity.
Redditch
The Group has a 20% interest in, and is the property and asset manager of, The Kingfisher Centre, Redditch.
This scheme was also affected by the BHS insolvency in 2016 but following the year end the entire 46,000
sq ft store has been re-let to The Range on a 10 year term. Other significant lettings include the letting of
space that had never previously been let, to a soft play operator, 360 Play, on a 14 year lease. Contracted
income marginally decreased by GBP0.1 million to GBP12.2 million at 30 December 2016.
Occupancy at 30 December 2016 was 93.3% (2015: 96.7%) as a result of the BHS and Ed's Diner
insolvencies which occurred in the second half of the year and represented 3.7% occupancy. Both of these
units have now been re-let.
Snozone
In an increasingly competitive market place, Snozone produced another strong performance returning profits
of GBP1.4 million. With the roll out of its mobile slopes and the launch of a Disability Snow school and Education
programme, Snozone continues to enhance its core offering and explore new opportunities to innovate.
Financial review
2016 2015 Change
Profitability
Net Rental Income GBP52.6m GBP49.3m +6.7%
Adjusted Profit(1) GBP26.8m GBP24.0m +11.7%
Adjusted Earnings per share 3.8p 3.4p +11.7%
IFRS (Loss)/Profit for the period GBP(4.4)m GBP100.0m
EPRA cost ratio (excluding vacancy costs) 25.8% 26.4% -60bps
Net Administrative Expenses to Gross Rent 13.6% 14.8% -120bps
Investment returns
Net Asset Value (NAV) per share 68p 72p -4p
EPRA NAV per share 68p 71p -3p
Dividend per share 3.39p 3.12p +8.7%
Dividend pay-out 88.7% 91.1%
Return on equity (0.9)% 23.5%
Financing(2)
Proforma group net debt GBP328.6m GBP338.1m -GBP9.5m
Proforma see-through net debt GBP354.0m GBP355.7m -GBP1.7m
Adjusted for the 2017 sale of Ipswich and acquisition of Ilford:
Proforma see-through net debt to property value(3,4) 46% 45%(4) +1p.p.
Proforma average debt maturity(4,5) 7.8 years 3.6 years +4.2 years
Proforma cost of debt(4,6) 3.26% 3.51% -25bps
(1) Adjusted Profit is 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 5 to
the Financial Statements.
(2) 2016 adjusted for refinancing of the Mall assets completed on 4 January 2017.
(3) See-through net debt divided by property valuation.
(4) 2015 adjusted to reflect Hemel Hempstead acquisitions completed in February/March 2016.
(5) As at date of results, assuming exercise of all extension options.
(6) Assuming RCF fully drawn.
The above results are discussed more fully in the following pages.
Profitability
Components of Adjusted Profit and reconciliation to IFRS Profit
Amounts in GBPm Year to 30 December Year to 30 December 2015
Net rental income
Wholly-owned assets (see analysis on next page) 50.4 47.3
Kingfisher, Redditch(1) 1.7 1.8
Buttermarket, Ipswich(2) 0.5 0.2
52.6 49.3
Net interest (see analysis on page 14) (20.3) (19.5)
Snozone profit (indoor ski operation) 1.4 1.4
Central operating costs net of external fees (6.9) (7.2)
Adjusted Profit 26.8 24.0
Adjusted Earnings per share (pence)(3) 3.8p 3.4p
Reconciliation of Adjusted Profit to statutory result
Adjusted Profit 26.8 24.0
Property revaluation (including Deferred Tax) (14.5) 74.8
(Loss)/profit on disposals (2.6) 2.5
Loss on financial instruments (2.5) (0.8)
Refinancing costs (11.0) -
Other items(4) (0.6) (0.5)
(Loss)/profit for the period (4.4) 100.0
(1) See note 7d to the Financial Statements.
(2) See note 7e to the Financial Statements.
(3) EPRA figures and a reconciliation to EPRA EPS are shown in Note 5 to the Financial Statements.
(4) Includes GBP0.5 million for the non-cash accounting charge in respect of share-based payments
(2015: GBP0.6 million)
Adjusted Profit and Adjusted Earnings per share increased 11.7% reflecting good operational performance in
the period together with the positive impact from the Hemel Hempstead acquisitions, net of the sale of The
Mall, Camberley.
Included within Loss for the period is the GBP11.0 million of refinancing costs triggered by serving notice on
the existing debt facility on the five Mall assets on 28 December 2016 (see below for further details). They
comprise GBP7.6 million of fixed rate loan redemption costs and the non-cash write off of the GBP3.4 million
unamortised financing costs at 30 December 2016.
Central operating costs net of external fees has improved by GBP0.3 million. We expect our continued emphasis on
reducing costs and improving efficiency to deliver a cost saving of at least GBP0.5 million per annum for 2017.
Wholly-owned assets Net rental income
Further detail on the components of Net rental income for the core wholly-owned portfolio is provided below.
Included within wholly-owned for 2015 were the results for Blackburn, Camberley, Luton, Maidstone,
Walthamstow and Wood Green. 2016 includes Camberley until its disposal on 11 November 2016 and the
contributions from The Marlowes, Hemel Hempstead acquired on 5 February 2017 as well as the adjacent
Edmonds Parade and Fareham House properties on 26 February 2016 and 18 March 2016 respectively.
Net rental income attributable to Camberley in 2016 was GBP4.2 million (2015: GBP5.0 million) and the Hemel
Hempstead assets were GBP3.5 million (2015: nil).
Gross rental income increased by 7.8% to GBP62.0 million and Net rental income by 6.6% to GBP50.4 million.
Amounts in GBPm 2016 2015
Rental income 51.0 47.7
Car park income 8.5 7.4
Ancillary income 2.5 2.4
Gross rental income 62.0 57.5
Service charge and void costs (4.4) (3.6)
Bad debt (0.8) (0.5)
External Operator/Fund Manager fees (0.1) (0.1)
Other property expenses Car park costs (3.4) (3.1)
Head leases (3.1) (3.1)
IFRS head lease adjustment(1) 3.6 3.6
Letting and rent review fees (1.2) (1.2)
Administration expenses (0.5) (0.7)
Repairs and maintenance - (0.2)
Other costs (1.7) (1.3)
(6.3) (6.0)
Net rental income 50.4 47.3
(1) Notional interest charge with offsetting opposite and materially equal credit within net interest.
Net Asset Value
1.6 pence of the fall in Net Asset Value per share was due to the costs associated with putting in place the
new long-term debt on the five Mall assets. A further 1.2 pence was due to the 1% increase in stamp duty
during the year and 0.9 pence from the fall in property values.
Financing
Net interest on a see-through basis
Amounts in GBPm Year to 30 December 2016 Year to 30 December 2015
Wholly-owned assets
Net Interest on loans 14.0 13.0
Amortisation of refinancing costs 1.4 1.3
Notional interest charge on head leases(1) 3.6 3.6
19.0 17.9
Kingfisher, Redditch 0.8 0.8
Buttermarket, Ipswich 0.1 -
Central 0.4 0.8
Net Group interest 20.3 19.5
(1) Notional interest charge with offsetting opposite and materially equal credit within other property operating expenses.
The increase in interest on Wholly-owned assets is a consequence of interest incurred on the Hemel loan of GBP1.1 million
since acquisition. It is expected that total debt costs will be at least GBP0.5 million lower for 2017, benefiting from the
refinancing of the Mall assets that completed on 4 January 2017 and as detailed further below.
Proforma see-through debt
The following analysis is provided on a proforma basis to reflect the refinancing of the debt on the five Mall
assets that completed on 4 January 2017. This is essentially the year end position as the notice to repay the
existing debt had been served on 28 December 2016 and the redemption costs were reflected as a charge in
2016 profit. The table has been further extended to show the impact of the sale of the Buttermarket Ipswich
on 17 February 2017 and acquisition of The Exchange Centre, Ilford on 8 March 2017 to reflect the position
at the time of reporting.
Average Duration
Net Loan to Net debt interest Duration to with
Group share Debt(1) Cash(2) debt Value(3) to value(3) rate Fixed loan expiry extensions
30 December 2016 GBPm GBPm GBPm % % % % Years Years
Mall assets 362.5 (17.3) 345.2 49 47 3.27 100 7.8 8.8
Hemel Hempstead 26.9 (1.9) 25.0 49 46 3.32 100 4.0 6.0
Group RCF - (41.6) (41.6) n/a n/a 3.52 - 2.4 2.4
On balance sheet debt 389.4 (60.8) 328.6
Buttermarket Ipswich 9.7 (0.1) 9.6 36 36 3.51 - - -
Kingfisher Redditch 16.8 (0.8) 16.0 55 52 3.66 100 2.3 2.3
Off balance sheet debt 26.5 (0.9) 25.6
Proforma see-through debt 415.9 (61.7) 354.2 49 42
Adjusted for the sale of Ipswich and acquisition of Ilford:
Ipswich disposal (9.7) (9.7) (19.4)
Ilford acquisition 39.0 40.3 79.3 50 50 2.76 100 7.0 7.0
See-through debt at time of
results 445.2 (31.1) 414.1 49 46 3.26 94 7.0 7.8
(1) Excluding unamortised issue costs.
(2) Excluding cash beneficially owned by tenants.
(3) Debt and net debt divided by investment property at valuation.
Our target range for net debt to property value remains 40%-50% with an intention to bring this to the lower
end of that range in the medium term.
As noted above the existing debt on the Mall assets was refinanced on 4 January 2017 and the following
commentary therefore reflects the new arrangements:
Blackburn, Maidstone, Walthamstow and Wood Green
These were refinanced with a GBP165 million 10 year loan with Teachers Insurance and Annuity Association of
America with a one year extension option, and a GBP100 million bank facility of five years with two one year
extension options with The Royal Bank of Scotland plc. GBP90 million of this latter facility has been drawn
down with a further GBP10 million available to fund future capex.
The weighted average maturity of the two new facilities is 8.1 years, rising to 9.5 years if the extension
options are assumed to be exercised. Interest on the new facilities has been fixed resulting in an overall
blended rate of 3.33%.
Luton
As part of the refinancing The Mall Luton was transferred out of The Mall Limited Partnership which holds the
other four assets. It is now held in a separate structure which allowed us to fund this asset separately and
provides greater future flexibility. Luton was refinanced with a GBP107.5 million seven year loan with Wells
Fargo Bank International Unlimited. Interest on the new facility has been fixed at 3.14%.
The Hemel Hempstead debt facility
The GBP26.9 million Hemel Hempstead loan, which was drawn in two tranches in February and March 2016,
was for an initial five year term with two one year extension options available at the end of each of the first
two years, the first of which was agreed subsequent to 30 December 2016. Interest is fixed via two seven
year swaps resulting in a total interest rate of 3.32%.
The Exchange Ilford debt facility
The GBP39 million facility with DekaBank Deutsche Girozentrale was drawn on completion of the acquisition of
The Exchange Centre, Ilford on 8 March 2017. The debt has been 100% hedged for the full term using
interest rate swaps resulting in an all-in cost of debt of 2.76%.
Group Revolving Credit Facility (RCF)
Interest on the facility is charged at a margin of 3.0% per annum above LIBOR. A non-utilisation fee of 1.5%
is payable. No amount was drawn at year end.
Covenants
The Group and its associates and joint ventures were compliant with their banking and debt covenants at
30 December 2016. Further details are disclosed in the 'covenant information' section at the end of this report.
Going Concern
Under the UK Corporate Governance Code, the Board needs to report whether the business is a going
concern. In considering this requirement, the Directors have taken into account the following:
- The Group's latest rolling forecast in particular the cash flows, borrowings and undrawn facilities;
- The headroom under the Group's financial covenants;
- Options for recycling capital and or alternative means of additional financing for funding new
investments; and
- The principal Group risks that could impact on the Group's liquidity and solvency over the next 12
months and/or threaten the Group's business model and capital adequacy.
The Group's risks and risk management processes are set out on the following pages.
Having due regard to these matters and after making appropriate enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable
future. Therefore, the Board continues to adopt the going concern basis in preparing the financial statements.
South African secondary listing
At 30 December 2016, 58,253,524 of the Company's shares were held on the South African register
representing 8.29% of the total shares in issue.
Dividend
The Board is proposing a final dividend of 1.77 pence per share, taking the full-year dividend to 3.39
pence per share, representing an 8.7% increase from 2015. The Board has re-affirmed its guidance that
the company will target year on year dividend growth in the range of 5% to 8% per annum over the medium term.
The key dates in relation to the payment of the 2016 final dividend are:
- Confirmation of ZAR equivalent dividend and PID percentage 13 April 2017
- Last day to trade on Johannesburg Stock Exchange (JSE) 24 April 2017
- Shares trade ex-dividend on the JSE 25 April 2017
- Shares trade ex-dividend on the London Stock Exchange (LSE) 27 April 2017
- Record date for LSE and JSE 28 April 2017
- AGM 9 May 2017
- Dividend payment date 16 May 2017
The amount to be paid as a PID will be confirmed in the announcement on 13 April 2017. If a Scrip dividend
alternative is offered the deadline for submission of valid election forms will be 28 April 2017. South African
shareholders are advised that the final dividend will be regarded as a foreign dividend. Further details relating
to Withholding Tax for shareholders on the South African register will be provided within the announcement detailing
the currency conversion rate on 13 April 2017. Share certificates on the South African register may not be dematerialised
or rematerialised between 25 April 2017 and 28 April 2017, both dates inclusive. Transfers between the UK and South African
registers may not take place between 13 April 2017 and 28 April 2017, both dates inclusive.
Charles Staveley
Group Finance Director
Managing Risk
Risk management process
There are a number of risks and uncertainties which could have a material impact on the Group's future
performance and could cause results to differ significantly from expectations.
Ahead of every half year and year end the Group undertakes a comprehensive risk and controls review
involving interviews with relevant management teams. The output of this process is an updated risk map
and internal control matrix for each component of the business which is then aggregated into a Group risk
map and matrix which is reviewed by executive management, the Audit Committee and the Board and forms
the basis for the disclosures made below. This process clearly outlines the principal risks, considers their
potential impact on the business, the likelihood of them occurring and the actions being taken to manage,
and the individual(s) responsible for managing, those risks to the desired level.
This risk matrix is also used in performing our annual assessment of the material financial, operational and
compliance controls that mitigate the key risks identified. Each control is assessed or tested for evidence of
its effectiveness. The review concluded that all such material controls were operating effectively during 2016.
Principal risks at 30 December 2016
Following the risk reviews carried out at 30 June 2016 and 30 December 2016 two risks have been added to
the list of principal Group risks to the list disclosed in the 2015 Annual Report being property valuation and
business disruption from a major incident. Property valuation reflects the risk that given the relatively low
current volume of investment market activity a lack of relevant comparable transactional evidence could
increase the level of subjectivity in property valuations and widen the range of possible outcomes. Business
disruption from a major incident reflects the potential impact to operations and future trading of a significant
event such as a terrorist attack.
Otherwise it was concluded that the nature of the Group's risks had not significantly changed, although the
ongoing economic and political uncertainty in the UK, most prominently due to the result of the EU
referendum, has increased some of the wider market risks that the Group is subject to.
The risks noted do not comprise all those potentially faced by the Group and are not intended to be presented
in any order of priority. Additional risks and uncertainties currently unknown to the Group, or which the Group
currently deems immaterial, may also have an adverse effect on the financial condition or business of the
Group in the future. These issues are kept under constant review to allow the Group to react in an appropriate
and timely manner to help mitigate the impact of such risks.
Risk Impact Mitigation
Property risks
Property investment market risks
- Weakening economic - Small changes in property - Monitoring of indicators of market
conditions and poor market yields can have a direction and forward planning of
sentiment in commercial real significant effect on valuation investment decisions
estate markets could lead to - Impact of leverage could - Review of debt levels and
low investor demand and an magnify the effect on the consideration of strategies to
adverse movement in Group's net assets reduce if relevant
valuation
Impact of the economic environment
- Tenant insolvency or distress - Tenant failures and reduced - Large, diversified tenant base
- Prolonged downturn in tenant tenant demand could - Review of tenant covenants
demand and pressure on rent adversely affect rental income, before new leases signed
levels lease incentive, void costs, - Long-term leases and active
cash and ultimately property credit control process
valuation - Good relationships with, and
active management of, tenants
- Void management though
temporary lettings and other
mitigation strategies
Valuation risk
- Lack of relevant transactional - Property valuations - Use of experienced, external
evidence increasingly subjective and valuers who understand the
open to a wider range of specific properties
possible outcomes - Use of more than one valuer
- Valuations reviewed by internal
valuation experts and key
assumptions challenged
Threat from the internet
- The trend towards online - A change in consumer - Strong location and dominance of
shopping may adversely shopping habits towards online shopping centres (portfolio is
impact consumer footfall in purchasing and delivery may weighted to London and South
shopping centres reduce footfall and therefore East England)
potentially reduce tenant - Strength of the community
demand and the levels of rents shopping experience
which can be achieved - Increasing provision of 'Click &
Collect' within our centres
- Digital marketing initiatives
Monitoring of footfall for evidence
of negative trends
- Monitoring of retail trends and
shopping behaviour
Concentration and scale risk
- By having a less diversified - Tenant failures could have a - Regular monitoring of retail
portfolio the business is more greater impact on rental environment and performance of
exposed to specific tenants or income key tenants
types of tenant - Reduced purchasing power - Maintaining flexibility in operating
could impact the ability to drive platform
economies of scale and the - Further diversification considered
feasibility of certain investment through acquisitions or joint
decisions regarding the ventures
operating platform
Competition risk
- The threat to the Group's - Competing schemes may - Monitoring of new planning
property assets of competing reduce footfall and reduce proposals
in town and out of town retail tenant demand for space and - Close relationships with local
and leisure schemes the levels of rents which can councils and willingness to
be achieved support town centres
- Continued investment in schemes
to ensure relevance
- Investment in traditional and
digital marketing
Business disruption from a major incident
- Major incident takes place - Financial loss if unable to trade - Trained operational personnel at
or impacts upon shopper all sites and documented major
footfall incident procedures
- Updated operational procedures
reflecting current threats and
major incident testing run
- Regular liaison with the police
- Key IT applications hosted offsite
- Insurance maintained
Development risk
- Delays or other issues may - May lead to increased cost - Approval process for new
occur to capital expenditure and reputational damage developments
and development projects - Planned value may not be - Use of experienced project co-
realised ordinators and external
consultants with regular
monitoring and Executive
Committee oversight
Funding and treasury risks
Liquidity and funding
- Inability to fund the business - Inability to meet financial - Refinancing of debt on the Mall
or to refinance existing debt obligations when due assets completed shortly after
on economic terms when - Limitation on financial and year end improved liquidity and
needed operational flexibility long-term security
- Cost of financing could be - Ensuring that there are
prohibitive significant undrawn facilities
- Efficient treasury management
and forecasting with regular
reporting to the Board
- Option of asset sales if
necessary
Covenant compliance risks
- Breach of any loan covenants - Unremedied breaches can - Regular monitoring and
causing default on debt and trigger demand for immediate projections of liquidity, gearing
possible accelerated maturity repayment of loan and covenant compliance
- Review of future cash flows and
predicted valuations to ensure
sufficient headroom
Interest rate exposure risks
- Exposure to rising or falling - If interest rates rise and are - Regular monitoring of the
interest rates unhedged, the cost of debt performance of derivative
facilities can rise and ICR contracts and corrective action
covenants could be broken taken where necessary
- Hedging transactions used by - Use of alternative hedges such
the Group to minimise interest as caps
rate risk may limit gains, result
in losses or have other
adverse consequences
Other risks
Execution of business plan
- Failure to execute business - Potential loss of income or - Management of projects and the
plan in line with internal and value resulting in lower cash individual shopping centres by
external expectations flow and property valuation experienced and skilled
- Reputational damage professionals
negatively impacting investor - Strong relationships with retailers
market perception and contractors/suppliers
- Ongoing monitoring of
performance against plan and
key milestones
Property acquisition/disposal strategy
- Exposure to risks around - Overpayment may result in - Regular monitoring of the
overpayment for acquisitions acquisitions not delivering property market and the use of
- Portfolio not effectively forecast returns professional advisers
managed through the - The Group may not be able to - Impact of cycle reflected in
investment cycle, with sales take advantage of investment business planning
and de-leveraging at the opportunities as they arise
appropriate time - Covenants may move
adversely when the cycle
changes
Tax risks
- Exposure to non-compliance - Tax related liabilities and other - Monitoring of REIT compliance
with the REIT regime and losses could arise - Expert advice taken on tax
changes in tax legislation or positions and other regulations
the interpretation of tax - Maintenance of a regular dialogue
legislation with the tax authorities
- Potential exposure to tax
liabilities in respect of
transactions undertaken
where the tax authorities
disagree with the tax
treatment adopted
Regulation risks
- Exposure to changes in - Failure to comply could result - Management undertake training
existing or forthcoming in financial penalties, loss of to keep aware of regulatory
property related or corporate business or credibility changes
regulation - Expert advice taken on
complex regulatory matters
Loss of key management
- Dependence of the Group's - Loss of key individuals or an - Key management are paid
business on the skills of a inability to attract new market salaries and offered
small number of key employees with the competitive incentive packages to
individuals appropriate expertise could ensure their retention
reduce effectiveness - New LTIP awards made in 2016
- Succession planning for key
positions is undertaken as
evidenced by CEO transition
announced post year end
- Performance evaluation, training
and development programmes are
in place to maintain and enhance
the quality of staff
Historic transactions
- Historic sales have included - Warranty and indemnity - Use of professional advisers to
vendor warranties and related liabilities and other achieve properly negotiated
indemnities and as such, the losses could arise agreements in terms of scope,
Group has potential exposure extent of financial liability and
to future claims from the timeframe
purchaser - Monitoring of ongoing exposure
Unaudited preliminary consolidated income statement
For the year to 30 December 2016
2016 2015
Note GBPm GBPm
Continuing operations
Revenue 3 87.2 80.7
Cost of sales (32.5) (29.1)
Gross profit 54.7 51.6
Administrative costs (10.9) (10.8)
Share of profit in associates and joint ventures 7a 0.3 7.8
(Loss)/profit on revaluation of investment properties (14.2) 68.0
Other gains and losses (1.8) 0.2
Profit on ordinary activities before financing 28.1 116.8
Finance income 0.4 0.7
Finance costs (33.0) (19.9)
(Loss)/profit before tax (4.5) 97.6
Tax credit 4a 0.1 -
(Loss)/profit for the year from continuing operations (4.4) 97.6
Discontinued operations
Profit for the year from discontinued operations 13 - 2.4
(Loss)/profit for the year (4.4) 100.0
Continuing operations
Basic earnings per share 5a (0.6)p 13.9p
Diluted earnings per share 5a (0.6)p 13.7p
Continuing and discontinued operations
Basic earnings per share 5a (0.6)p 14.3p
Diluted earnings per share 5a (0.6)p 14.0p
EPRA earnings per share
EPRA basic earnings per share 5a 3.7p 3.4p
EPRA diluted earnings per share 5a 3.7p 3.3p
Unaudited preliminary consolidated statement of comprehensive income
For the year to 30 December 2016
2016 2015
GBPm GBPm
(Loss)/profit for the year (4.4) 100.0
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations - (1.6)
Gain on a hedge of a net investment taken to equity - -
Total items that that may be reclassified subsequently to profit or loss: - (1.6)
Total comprehensive income for the year (4.4) 98.4
There are no items in other comprehensive income that may not be reclassified to income statement.
Profit for the year and total comprehensive income is all attributable to equity holders of the parent.
The EPRA measures used throughout this report are industry best practice performance measures established by the European Public
Real Estate Association. They are defined in the Glossary to these financial statements. EPRA Earnings and EPRA EPS are shown in
Note 5 to these financial statements. EPRA net assets and EPRA triple net assets are shown in Note 11 to these financial statements.
Unaudited preliminary consolidated balance sheet
At 30 December 2016
2016 2015
Note GBPm GBPm
Non-current assets
Investment properties 6 838.5 870.0
Plant and equipment 0.9 0.6
Fixed asset investments 13 1.9 1.6
Receivables 14.3 15.9
Investment in associates 7b 13.9 15.9
Investment in joint ventures 7c - 11.7
Total non-current assets 869.5 915.7
Current assets
Receivables 13.4 13.7
Cash and cash equivalents 8 49.1 49.9
Assets classified as held for sale 7c 13.9 -
Total current assets 76.4 63.6
Total assets 2b 945.9 979.3
Current liabilities
Bank loans 9 (334.6) -
Trade and other payables (41.3) (33.7)
Liabilities directly associated with assets held for sale 7c (0.4) -
(376.3) (33.7)
Net current (liabilities)/assets (299.9) 29.9
Non-current liabilities
Bank loans 9 (26.2) (374.9)
Other payables (4.4) (2.1)
Obligations under finance leases (61.4) (65.4)
Total non-current liabilities (92.0) (442.4)
Total liabilities 2b (468.3) (476.1)
Net assets 477.6 503.2
Equity
Share capital 7.0 7.0
Share premium 158.2 157.2
Other reserves 60.3 60.3
Capital redemption reserve 4.4 4.4
Own shares held (0.4) (0.6)
Retained earnings 248.1 274.9
Equity shareholders' funds 477.6 503.2
Basic net assets per share 11 GBP0.68 GBP0.72
EPRA triple net assets per share 11 GBP0.67 GBP0.70
EPRA net assets per share 11 GBP0.68 GBP0.71
Unaudited preliminary consolidated statement of changes in equity
For the year to 30 December 2016
Other reserves
Net
Foreign investment Capital Own
Share Share Merger currency hedging redemption shares Retained Total
capital Premium(1) Reserve(2) Reserve(1) Reserve(1) Reserve(1) Reserve(3) Earnings(4) Equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 30 December
2014 7.0 157.2 60.3 1.6 (0.4) 4.4 (0.6) 189.5 419.0
Profit for the year - - - - - - - 100.0 100.0
Other comprehensive loss for
the year - - - (1.6) - - - - (1.6)
Total comprehensive
income for the year - - - (1.6) - - - 100.0 98.4
Credit to equity for equity-
settled share-based
payments - - - - - - - 0.6 0.6
Dividends paid (Note 14) - - - - - - - (14.7) (14.7)
Other movements - - - - 0.4 - - (0.5) (0.1)
Balance at 30 December
2015 7.0 157.2 60.3 - - 4.4 (0.6) 274.9 503.2
Loss for the year - - - - - - - (4.4) (4.4)
Other comprehensive income
for the year - - - - - - - - -
Total comprehensive loss
for the year - - - - - - - (4.4) (4.4)
Credit to equity for equity-
settled share-based
payments - - - - - - - 0.5 0.5
Dividends paid (Note 14) - - - - - - - (21.7) (21.7)
Shares issued, net of costs - 1.0 - - - - - (1.0) -
Other movements - - - - - - 0.2 (0.2) -
Balance at 30 December
2016 7.0 158.2 60.3 - - 4.4 (0.4) 248.1 477.6
Notes:
(1) These reserves are not distributable.
(2) The merger reserve of GBP60.3 million arose on the Group's capital raising in 2009 which was structured so as to allow the Company to claim
merger relief under section 612 of the Companies Act 2006 on the issue of Ordinary shares. The merger reserve is available for distribution to
shareholders.
(3) Own shares relate to shares purchased out of distributable profits and therefore reduce reserves available for distribution.
(4) The Company has determined what is realised and unrealised in accordance with the guidance provided by ICAEW TECH 2/10 and the
requirements of UK law. In accordance with UK Companies Act 2006 s831(2), a public company may make a distribution only if, after giving
effect to such distribution, the amount of its net assets is not less than the aggregate of its called up share capital and non-distributable
reserves as shown in the relevant accounts.
Unaudited preliminary consolidated cash flow statement
For the year to 30 December 2016
2016 2015
Note GBPm GBPm
Operating activities
Net cash from operations 10 41.1 29.9
Distributions received from associates 7b 0.5 0.2
Distributions received from fixed asset investments (including German B-note) 4.2 -
Interest paid (14.6) (13.4)
Interest received 0.1 0.4
Income taxes received - 0.9
Cash flows from operating activities 31.3 18.0
Investing activities
Disposal of German joint venture 13 - 42.3
Disposal of The Mall, Camberley 85.7 -
Other disposals 0.7 -
Acquisitions in Hemel Hempstead (56.6) -
Purchase of plant and equipment (0.5) (0.2)
Capital expenditure on investment properties (20.6) (11.4)
Investment in joint ventures - (6.4)
Settlement of forward foreign exchange contract - 2.0
Cash flows from investing activities 8.7 26.3
Financing activities
Dividends paid (net of Scrip) 14 (21.7) (13.2)
Bank loans drawn down 26.9 -
Bank loans repaid (45.4) (23.4)
Loan arrangement costs (0.6) (0.4)
Cash flows from financing activities (40.8) (37.0)
Net (decrease)/increase in cash and cash equivalents (0.8) 7.3
Cash and cash equivalents at the beginning of the year 49.9 42.6
Cash and cash equivalents at the end of the year 8 49.1 49.9
Notes to the unaudited preliminary financial statements
For the year to 30 December 2016
1 Significant Accounting Policies
General information
Capital & Regional plc is a company domiciled and incorporated in the United Kingdom under the Companies Act 2006. The financial
information set out in the announcement does not constitute the Company's statutory financial statements for the years ended 30
December 2016 or 2015. The financial information for the year ended 31 December 2015 is derived from the statutory accounts for that
year which have been delivered to the Registrar of Companies. The auditor reported on those accounts: their report was unqualified,
did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies
Act 2006. The audit of the statutory accounts for the year ended 31 December 2016 is not yet complete. These accounts will be
finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the company's annual general meeting.
Basis of accounting
These unaudited preliminary consolidated annual financial statements of Capital & Regional plc are prepared in accordance with IFRSs
as adopted by the European Union.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient
information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in March 2016.
Accounting developments and changes
In the current financial year the Group has adopted Annual Improvements to the IFRSs 2010-2012 Cycle (various standards). None of
these standards have impacted the Group's reporting. Other than this the accounting policies applied by the Company were the same
as in the prior year.
Going concern
The financial statements have been prepared on the going concern basis. Details on going concern are provided within the Financial Review.
Operating segments
The Group's reportable segments under IFRS 8 are Wholly-owned assets, Other UK Shopping Centres, Snozone and Group/Central.
Other UK Shopping Centres consists of the Group's share in the Kingfisher Limited Partnership (Redditch) and, until its reclassification
as held for sale on 30 December 2016, Buttermarket Ipswich Limited. Group/Central includes external management fee income, Group
overheads incurred by Capital & Regional Property Management, Capital & Regional plc and other subsidiaries and the interest
expense on the Group's central borrowing facility.
Wholly-owned assets and Other UK Shopping Centres derive their revenue from the rental of investment and trading properties. The
Snozone and Group/Central segments derive their revenue from the operation of indoor ski slopes and the management of property
respectively. The split of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues from different
products and services. Depreciation and charges in respect of share-based payments represent the only significant non-cash expenses.
The Group's interests in the assets, liabilities and profit or loss of its associates and joint ventures are proportionately consolidated and
are also shown on a see-through basis as this is how they are reported to the Board of directors. There are no differences between the
measurements of the segments' assets, liabilities and profit or loss as they are reported to the Board of directors and their presentation
under the Group's accounting policies.
Adjusted Profit
Adjusted Profit is the total of Contribution from Wholly-owned assets and the Group's joint ventures and associates, the profit from
Snozone and property management fees less central costs (including interest, excluding non-cash charges in respect of share-based
payments) after tax. Adjusted Profit excludes revaluation of properties, profit or loss on disposal of properties or investments, gains or
losses on financial instruments and exceptional one-off items. Results from Discontinued Operations are included up until the point of
disposal or reclassification as held for sale.
A reconciliation of Adjusted Profit to the statutory result is provided in Note 2a and, on a per share basis, in Note 5, where EPRA
earnings figures are also provided.
2a Operating segments UK Shopping Centres
Wholly-owned Other UK Group/
assets Shopping Centres(1) Snozone Central Total
Year to 30 December 2016 Note GBPm GBPm GBPm GBPm GBPm
Rental income from external sources 2b 62.0 3.4 - - 65.4
Property and void costs (11.6) (1.2) - - (12.8)
Net rental income 50.4 2.2 - - 52.6
Net interest expense (19.0) (0.9) - (0.4) (20.3)
Snozone income/ Management fees(2) 2b - - 10.2 2.4 12.6
Management expenses - - (8.7) (7.8) (16.5)
Investment income - - - 0.3 0.3
Depreciation - - (0.1) - (0.1)
Variable overhead (excluding non-cash items) - - - (1.8) (1.8)
Tax (charge)/credit - (0.1) - 0.1 -
Adjusted Profit 31.4 1.2 1.4 (7.2) 26.8
Revaluation of properties (14.2) 1.2 - - (13.0)
Deferred tax on revaluation of properties - (1.5) - - (1.5)
Loss on disposal(3) (5.9) (0.6) - - (6.5)
Income from German B Note(4) - - - 3.9 3.9
Loss on financial instruments (2.5) - - - (2.5)
Refinancing costs(5) (11.0) - - - (11.0)
Share-based payments (non-cash) - - - (0.5) (0.5)
Other items - - - (0.1) (0.1)
(Loss)/profit (2.2) 0.3 1.4 (3.9) (4.4)
Total assets 2b 885.9 32.1 4.0 42.1 964.1
Total liabilities 2b (460.9) (18.2) (2.1) (5.3) (486.5)
Net assets 425.0 13.96 1.9 36.8(6) 477.6
(1) Includes Buttermarket Ipswich and Kingfisher Redditch. For further information see Note 7.
(2) Asset management fees of GBP3.6 million charged from the Group's Capital & Regional Property Management entity to Wholly-owned assets
have been excluded from the table above.
(3) Includes GBP0.6 million impairment of Ipswich trading property recognised on reclassification as held for sale.
(4) GBP3.9 million of monies were received in the year through the holding of a share in the German Euro B-Note junior loan instrument
which had previously been fully impaired. The monies were distributed following the sale of properties by the liquidator of the
underlying German LP4 portfolio.
(5) Refinancing costs consist of those triggered by serving notice on the existing debt facility on five Mall assets on 28 December 2016
(see Note 9 for further details). They comprise GBP7.6 million of fixed rate loan redemption costs and the write off of the GBP3.4 million
of financing costs that were unamortised at 30 December 2016.
(6) Net assets of the Buttermarket Ipswich joint venture have been included within Group following its reclassification as held for sale
on 30 December 2016. The results for the year are reflected in the Other UK Shopping Centres column.
UK Shopping Centres
Wholly- Other UK Total
owned Shopping Group/ Continuing Discontinued
assets(1) Centres Snozone Central(1) Operations Operations Total
Year to 30 December 2015 Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Rental income from external sources 2b 57.5 3.1 - - 60.6 - 60.6
Property and void costs (10.2) (1.1) - - (11.3) - (11.3)
Net rental income 47.3 2.0 - - 49.3 - 49.3
Interest income 0.3 - - 0.2 0.5 - 0.5
Interest expense (18.2) (0.8) - (1.0) (20.0) - (20.0)
Snozone income/ Management fees(1) 2b - - 10.3 2.3 12.6 - 12.6
Management expenses - - (8.8) (7.7) (16.5) - (16.5)
Depreciation - - (0.1) (0.1) (0.2) - (0.2)
Variable overhead (excluding non-cash items) - - - (1.7) (1.7) - (1.7)
Tax charge - - - - - - -
Adjusted Profit 29.4 1.2 1.4 (8.0) 24.0 - 24.0
Revaluation of properties 68.0 6.8 - - 74.8 - 74.8
Profit on disposal 0.1 - - - 0.1 2.4 2.5
Loss on financial instruments (0.8) - - - (0.8) - (0.8)
Share-based payments (non-cash) - - - (0.6) (0.6) - (0.6)
Other items - (0.2) - 0.3 0.1 - 0.1
Profit/(loss) 96.7 7.8 1.4 (8.3) 97.6 2.4 100.0
Total assets 2b 923.6 49.0 3.0 25.1 1,000.7 - 1,000.7
Total liabilities 2b (471.4) (21.4) (1.7) (3.0) (497.5) - (497.5)
Net assets 452.2 27.6 1.3 22.1 503.2 - 503.2
(1) Asset management fees of GBP3.8 million charged internally from the Group's Capital & Regional Property Management entity to Wholly-owned
assets have been excluded from the table above which has also been restated to exclude other internal cost recharges.
2b Reconciliations of reportable revenue, assets and liabilities
Year to Year to
30 December 30 December
2016 2015
Revenue Note GBPm GBPm
Rental income from external sources 2a 65.4 60.6
Service charge income 14.0 11.9
Management fees 2a 2.4 2.3
Snozone income 2a 10.2 10.3
Revenue for reportable segments - continuing operations 92.0 85.1
Elimination of inter-segment revenue (1.4) (1.3)
Rental income earned by associates and joint ventures 2a (3.4) (3.1)
Revenue per consolidated income statement - continuing operations 3 87.2 80.7
All revenue in the current and prior years was attributed to activities within the UK.
2016 2015
Assets Note GBPm GBPm
Total assets of reportable segments 2a 964.1 1,000.7
Adjustment for associates and joint ventures (18.2) (21.4)
Group assets 945.9 979.3
Liabilities
Total liabilities of reportable segments 2a (486.5) (497.5)
Adjustment for associates and joint ventures 18.2 21.4
Group liabilities (468.3) (476.1)
Net assets by country
UK 477.5 503.1
Germany 0.1 0.1
Group net assets 477.6 503.2
3 Revenue
Year to Year to
30 December 30 December
2016 2015
Note GBPm GBPm
Gross rental income 51.0 47.7
Ancillary income 11.0 9.8
2a 62.0 57.5
Service charge income 2b 14.0 11.9
External management fees 1.0 1.0
Snozone income 2a 10.2 10.3
Revenue per consolidated income statement - continuing operations 2b 87.2 80.7
External management fees represent revenue earned by the Group's Wholly-owned Capital Regional Property Management Limited subsidiary.
4 Tax
4a Tax credit
Year to Year to
30 December 30 December
2016 2015
GBPm GBPm
Current tax
UK corporation tax - -
Adjustments in respect of prior years (0.1) -
Total current tax credit (0.1) -
Deferred tax
Origination and reversal of temporary timing differences - -
Total deferred tax - -
Total tax credit (0.1) -
GBPnil (2015: GBPnil) of the tax charge relates to items included in other comprehensive income.
4b Tax charge reconciliation
Year to Year to
30 December 30 December
2016 2015
Note GBPm GBPm
(Loss)/profit before tax on continuing operations (4.5) 97.6
(Loss)/profit multiplied by the UK corporation tax rate of 20% (2015:
20.25%) (0.9) 19.8
REIT exempt income and gains (1.5) (18.5)
Non-allowable expenses and non-taxable items (0.5) -
Excess tax losses/(utilisation of tax losses) 0.4 0.3
Unrealised losses/(gains) on investment properties not taxable 2.6 (1.5)
Temporary timing and controlled foreign companies income (0.1) (0.1)
Adjustments in respect of prior years (0.1) -
Total tax credit 4a (0.1) -
4c Deferred tax
The UK corporation tax main rate was reduced to 20% with effect from 1 April 2015. The budget on 16 March 2016 announced a further
phased reduction in the UK corporation tax main rate whereby the rate is proposed to reduce to 17% by 1 April 2020. This proposal was
substantively enacted on 6 September 2016. Consequently the UK corporation tax rate at which deferred tax is booked in the financial
statements is 17% (2015: 18%).
The Group has recognised a deferred tax asset of GBP0.1 million (2015: GBP0.1 million). No deferred tax asset has been recognised in
respect of temporary differences arising from investments or investments in associates or joint ventures in the current or prior years as it
is not certain that a deduction will be available when the asset crystallises.
The Group has GBP13.9 million (2015: GBP9.2 million) of unused revenue tax losses, all of which are in the UK. No deferred tax asset has
been recognised in respect of these losses due to the unpredictability of future profit streams and other reasons which may restrict the
utilisation of the losses (2015: GBPnil). The Group has unused capital losses of GBP30.5 million (2015: GBP30.4 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.
4d REIT compliance
The Group converted to a group REIT on 31 December 2014. As a result, the Group no longer pays UK corporation tax on the profits
and gains from qualifying rental business in the UK provided it meets certain conditions. Non-qualifying profits and gains of the Group
continue to be subject to corporation tax as normal. In order to achieve and retain group REIT status, several entrance tests had to be
met and certain ongoing criteria must be maintained. The main criteria are as follows:
- at the start of each accounting year, the value of the assets of the property rental business plus cash must be at least
75% of the total value of the Group's assets;
- at least 75% of the Group's total profits must arise from the property rental business; and
- at least 90% of the Group's UK property rental profits as calculated under tax rules must be distributed.
The directors intend that the Group should continue as a group REIT for the foreseeable future, with the result that deferred tax is no
longer recognised on temporary differences relating to the property rental business.
5 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:
5a Earnings per share calculation
Year to 30 December 2016 Year to 30 December 2015
Adjusted Adjusted
Note Profit EPRA Profit Profit EPRA Profit
Profit (GBPm)
(Loss)/profit for the year (continuing operations) (4.4) (4.4) (4.4) 97.6 97.6 97.6
Revaluation loss/(gain) on investment properties
(net of tax) 5b - 14.5 14.5 - (74.8) (74.8)
Loss/(profit) on disposal of properties (net of tax) 5b - 6.5 6.5 - (0.1) (0.1)
Income from German B Note 2a - (3.9) (3.9) - - -
Changes in fair value of financial instruments 5b - 2.5 2.5 - 0.8 0.8
Refinancing costs - 11.0 11.0 - - -
Deferred tax credit on capital allowances - - - - 0.1 0.1
Share-based payments 2a - - 0.5 - - 0.6
Other items 2a - - 0.1 - - (0.2)
Profit from continuing operations (4.4) 26.2 26.8 97.6 23.6 24.0
Discontinued operations - - - 2.4 - -
Profit (4.4) 26.2 26.8 100.0 23.6 24.0
Earnings per share (pence) 3.7p 3.8p 3.4p 3.4p
Diluted earnings per share (pence) 3.7p 3.8p 3.3p 3.4p
Earnings per share (pence) (continuing operations) 3.7p 3.8p 13.9p 3.4p 3.4p
Earnings per share (pence) (discontinued
operations) - - 0.4p - -
None of the current year earnings related to discontinued operations (2015: 0.4p basic earnings per share and 0.3p diluted earnings per share).
Weighted average number of shares Year to 30 December Year to
(m) 2016 30 December 2015
Ordinary shares in issue 701.0 700.8
Own shares held (0.6) (1.0)
Basic 700.4 699.8
Dilutive contingently issuable shares
and share options 10.0 12.6
Diluted 710.4 712.4
At the end of the year, the Group had 11,929,797 (2015: 6,253,547) share options and contingently issuable shares granted under
share-based payment schemes that could potentially dilute basic 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.
5b Reconciliation of earnings figures included in earnings per share calculations
Year to 30 December 2016 Year to 30 December 2015
Profit Movement Profit Movement
on disposal of in fair value on disposal of in fair value
Revaluation investment of financial Revaluation investment of financial
movements properties instruments movements properties instruments
Note GBPm GBPm GBPm GBPm GBPm GBPm
Wholly-owned (14.2) (5.9) (2.5) 68.0 0.1 (0.8)
Associates 7d (2.3) - - 1.7 - -
Joint ventures 7e 3.5 (0.6) - 5.1 - -
Tax effect (1.5) - - - - -
Total 5a (14.5) (6.5) (2.5) 74.8 0.1 (0.8)
5c Headline earnings per share
Year to 30 December 2016 Year to 30 December 2015
Basic Diluted Basic Diluted
Profit (GBPm)
(Loss)/profit for the year (4.4) 100.0
Revaluation loss/(gain) on investment
properties (including tax) 14.5 (74.8)
Loss/(profit) on disposal of properties (net of tax) 6.5 (2.5)
Income from German B Note (3.9) -
Headline earnings 12.7 22.7
Weighted average number of shares (m)
Ordinary shares in issue 701.0 701.0 700.8 700.8
Own shares held (0.6) (1.0)
Dilutive contingently issuable shares and share options 10.0 12.6
710.4 712.4
Headline Earnings per share (pence) 1.8p 3.2p
6 Investment properties
6a Wholly-owned properties
Freehold Leasehold Total
investment investment property
properties properties assets
GBPm GBPm GBPm
Cost or valuation
At 30 December 2014 256.7 534.1 790.8
Capital expenditure (excluding capital contributions) 3.6 7.6 11.2
Valuation surplus 32.4 35.6 68.0
At 30 December 2015 292.7 577.3 870.0
Acquired (The Marlowes, Hemel Hempstead) 56.6 - 56.6
Disposals (The Mall, Camberley) - (93.9) (93.9)
Capital expenditure (excluding capital contributions) 13.5 5.9 19.4
Valuation deficit(1) (4.9) (8.7) (13.6)
At 30 December 2016 357.9 480.6 838.5
(1) GBP14.2 million per Note 2a includes letting fee amortisation adjustment of GBP0.6 million.
6b Property assets summary
30 December 2016 30 December 2015
100% Group share 100% Group share
GBPm GBPm GBPm GBPm
Wholly-owned
Investment properties at fair value 794.1 822.7
Head leases treated as finance leases on investment properties 61.3 65.4
Unamortised tenant incentives on investment properties (16.9) (18.1)
IFRS Property Value 838.5 870.0
Associates
Investment properties at fair value 30.8 32.9
Unamortised tenant incentives on investment properties (0.8) (0.8)
IFRS Property Value 30.0 32.1
Joint Ventures(1)
Investment properties at fair value - 14.0
Unamortised tenant incentives on investment properties - (0.4)
IFRS Property Value - 13.6
Total at property valuation 824.9 869.6
Total IFRS Property Value 868.5 915.7
(1) Buttermarket Ipswich Limited has been excluded from this note following its reclassification as held for sale on 30 December 2016.
6c Valuations
External valuations at 30 December 2016 were carried out on all of the gross property assets detailed in the table above. The Group's
share of the total investment properties at fair value was GBP824.9 million of GBP948.2 million (2015: GBP869.6 million of GBP1,015.0 million).
The valuations were carried out by independent qualified professional valuers from CBRE Limited, Cushman & Wakefield LLP and
Knight Frank LLP in accordance with RICS standards. These valuers are not connected with the Group and their fees are charged on a
fixed basis that is not dependent on the outcome of the valuations.
7 Investment in associates and joint ventures
7a Share of results
Year to Year to
30 December 30 December
2016 2015
Note GBPm GBPm
Share of results of associates 7d (1.5) 2.5
Share of results of joint ventures 7e 1.8 5.3
0.3 7.8
7b Investment in associates
30 December 30 December
2016 2015
Note GBPm GBPm
At the start of the year 15.9 13.6
Share of results of associates 7d (1.5) 2.5
Dividends and capital distributions received (0.5) (0.2)
At the end of the year 7d 13.9 15.9
The Group's only significant associate during 2016 was the Kingfisher Limited Partnership in which the Group is in partnership with
funds under the management of Oaktree Capital Management LP. The Kingfisher Limited Partnership owns The Kingfisher Shopping
Centre in Redditch. The Group has a 20% share and exercises significant influence through its representation on the General Partner
board and through acting as the property and asset manager.
7c Investment in joint ventures
30 December 30 December
2016 2015
Note GBPm GBPm
At the start of the year 11.7 -
Investment in joint ventures - 6.4
Share of results of joint ventures 7e 1.8 5.3
Reclassification of Buttermarket Centre, Ipswich as held for sale (13.5) -
At the end of the year 7e - 11.7
The Group's only significant joint venture during 2016 was the Buttermarket Centre, Ipswich. The joint venture's property investment
activity is carried out in a separate limited company, Buttermarket Ipswich Limited. The Buttermarket Centre was acquired on 3 March
2015 in a 50:50 joint venture with Drum Property Group.
The Group has assessed its ability to direct the relevant activities of Buttermarket Ipswich Limited and impact Group returns and
concluded that the company qualifies as a joint venture as decisions regarding it require the unanimous consent of both equity holders.
This assessment included not only rights within the joint venture agreements, but also any rights within the other contractual
arrangements between the Group and Buttermarket Ipswich Limited.
Reclassification as held for sale
Buttermarket Ipswich Limited was reclassified as held for sale on 30 December 2016 as Management, and its joint venture partner,
were committed to a plan to sell and considered a disposal to be highly probable within the following 12 months. On reclassification
Management assessed the fair value of its share of the investment to be GBP13.9 million with the associated costs to sell the entity
expected to be GBP0.4 million. Reflecting these amounts in the 30 December 2016 balance sheet resulted in an impairment charge of GBP0.6
million within the Group's share of Joint Venture results. This is shown within the Group's Other UK Shopping Centres operating
segment (see Note 2a).
On 17 February 2017 the group and its joint venture partner completed the disposal of Buttermarket Ipswich Limited to National Grid
Pension Fund. The Group's share of the initial proceeds was GBP9.8 million with Management estimating the value of deferred contingent
consideration to be a further GBP3.7 million. The Group's share of the disposal costs is expected to be GBP0.4 million.
7d Analysis of investment in associates
Other UK Year to 30 Year to 30
Shopping Centres December December
Kingfisher 2016 2015
Redditch Total Total
GBPm GBPm GBPm
Income statement (100%)
Revenue - gross rent 11.5 11.5 11.9
Property and management expenses (2.0) (2.0) (1.9)
Void costs (1.0) (1.0) (1.1)
Net rent 8.5 8.5 8.9
Net interest payable (3.8) (3.8) (4.1)
Contribution 4.7 4.7 4.8
Revaluation of investment properties (11.8) (11.8) 8.6
Fair value of interest rate swaps (0.2) (0.2) 0.2
Profit before tax (7.3) (7.3) 13.6
Tax (0.7) (0.7) (1.0)
Profit after tax (8.0) (8.0) 12.6
Balance sheet (100%)
Investment properties 150.0 150.0 160.3
Other assets 10.4 10.4 12.2
Current liabilities (6.5) (6.5) (7.6)
Non-current liabilities (84.0) (84.0) (85.1)
Net assets (100%) 69.9 69.9 79.8
Income statement (Group share)
Revenue - gross rent 2.3 2.3 2.4
Property and management expenses (0.4) (0.4) (0.4)
Void costs (0.2) (0.2) (0.2)
Net rent 1.7 1.7 1.8
Net interest payable (0.8) (0.8) (0.8)
Contribution 0.9 0.9 1.0
Revaluation of investment properties (2.3) (2.3) 1.7
Fair value of interest rate swaps - - -
Profit before tax (1.4) (1.4) 2.7
Tax (0.1) (0.1) (0.2)
Profit after tax (1.5) (1.5) 2.5
Balance sheet (Group share)
Investment properties 30.0 30.0 32.1
Other assets 2.1 2.1 2.4
Current liabilities (1.4) (1.4) (1.5)
Non-current liabilities (16.8) (16.8) (17.1)
Net assets (Group share) 13.9 13.9 15.9
7e Analysis of investment in joint ventures
Year to Year to
Other UK 30 December 30 December
Shopping 2016 2015
Centres -
Buttermarket
Ipswich(1) Total Total
GBPm GBPm GBPm
Income statement (100%)
Revenue - gross rent 2.2 2.2 1.5
Property and management expenses (0.7) (0.7) (0.5)
Void costs (0.6) (0.6) (0.6)
Net rent 0.9 0.9 0.4
Net interest payable (0.3) (0.3) -
Contribution 0.6 0.6 0.4
Revaluation of investment properties 7.2 7.2 10.1
Deferred tax on revaluation (2.9) (2.9) -
Impairment (1.2) (1.2) -
Profit before tax 3.7 3.7 10.5
Tax - - -
Profit after tax 3.7 3.7 10.5
Balance sheet (100%)
Investment properties - - 27.2
Other assets - - 1.7
Current liabilities - - (1.8)
Non-current liabilities - - (4.0)
Net assets (100%) - - 23.1
Income statement (Group share)
Revenue - gross rent 1.1 1.1 0.7
Property and management expenses (0.3) (0.3) (0.2)
Void costs (0.3) (0.3) (0.3)
Net rent 0.5 0.5 0.2
Net interest payable (0.1) (0.1) -
Contribution 0.4 0.4 0.2
Revaluation of investment properties 3.5 3.5 5.1
Deferred tax on revaluation (1.5) (1.5) -
Impairment (0.6) (0.6) -
Profit before tax 1.8 1.8 5.3
Tax - - -
Profit after tax 1.8 1.8 5.3
Balance sheet (Group share)
Investment properties - - 13.6
Other assets - - 0.9
Current liabilities - - (0.8)
Non-current liabilities - - (2.0)
Net assets (Group share) - - 11.7
(1) The Group's investment in Buttermarket Ipswich Limited was reclassified as held for sale at 30 December 2016. On reclassification
Management assessed the fair value of its share of the investment to be GBP13.9 million with the associated costs to sell the entity
expected to be GBP0.4 million and these amounts are shown on the balance sheet at year end (see Note 7c for further details).
8 Cash and cash equivalents
30 December 30 December
2016 2015
GBPm GBPm
Cash at bank and in hand 45.8 41.9
Security deposits held in rent accounts 0.7 0.6
Other restricted balances 2.6 7.4
49.1 49.9
Other restricted balances include amounts subject to a charge against various borrowings and may therefore not be available for
general use by the Group. All of the above amounts at 30 December 2016 were held in Sterling other than GBP0.3 million which was held
in Euros (30 December 2015: GBP0.3 million).
9 Bank loans
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.
30 December 30 December
2016 2015
Borrowings at amortised cost GBPm GBPm
Secured
Fixed and swapped bank loans 233.3 233.3
Variable rate bank loans 128.2 146.7
Total borrowings before costs 361.5 380.0
Unamortised issue costs (0.7) (5.1)
Total borrowings after costs 360.8 374.9
Analysis of total borrowings after costs
Current 334.6 -
Non-current 26.2 374.9
Total borrowings after costs 360.8 374.9
Mall assets debt facility
At 30 December 2016 the GBP334.6 million loan on the five Mall assets comprised a fixed rate tranche of GBP233.3 million with interest fixed
at 1.86% plus applicable margin and a floating rate tranche based on 3 month LIBOR of GBP101.3 million. The latter tranche was hedged
using interest rate caps with a weighted average strike rate of 2.65%. The loan was fully drawn down at 30 December 2016 and 30
December 2015.
Irrevocable notice to repay the existing debt was served on 28 December 2016 and hence the total value of the debt, along with
redemption costs of GBP7.6 million on the fixed rate tranche, are shown as current liabilities at 30 December 2016. The debt was repaid
on 4 January 2017 and replaced with three new facilities totalling GBP372.5 million (of which GBP362.5 million was drawn on refinancing) as
follows:
- a GBP165 million 10 year loan with Teachers Insurance and Annuity Association of America with a one year extension option;
- a GBP107.5 million seven year loan with Wells Fargo Bank International Unlimited Company; and
- a GBP100 million bank facility of five years with two one year extension options with The Royal Bank of Scotland plc. GBP90 million
of this facility has been drawn down with a further GBP10 million available to fund capex.
The GBP107.5 million facility is secured on The Mall, Luton, while the other two facilities are secured on the four assets at Blackburn,
Maidstone, Walthamstow and Wood Green. The weighted average maturity of the new facilities is 7.8 years, rising to 8.8 years if the
extension options are assumed to be exercised. Interest on the new facilities has been fixed resulting in an overall blended rate of 3.27%.
The Hemel Hempstead debt facility
The GBP26.9 million Hemel Hempstead loan comprises two fixed rate tranches with interest fixed at a weighted average of 1.32% plus
applicable margin. The loan was fully drawn down at 30 December 2016. The loans, which were drawn in February and March 2016
are for a five year term but have two one year extension options available at the end of each of the first two years, the first of which was
agreed subsequent to 30 December 2016.
Group revolving credit facility
In November 2015 the Group completed a new core revolving credit facility (RCF) of GBP30 million to 30 May 2019. Interest on the facility
is charged at a margin of 3.0% per annum above LIBOR. A non-utilisation fee of 1.5% is payable. The facility was undrawn at 30
December 2016 and 30 December 2015.
10 Reconciliation of net cash from operations
Year to Year to
30 December 30 December
2016 2015
Note GBPm GBPm
(Loss)/profit for the year (4.4) 100.0
Adjusted for:
Profit on disposal of associates and joint ventures - (2.4)
Income tax credit 4a (0.1) -
Finance income (0.4) (0.7)
Finance expense 33.0 19.9
Loss/(profit) on revaluation of Wholly-owned properties 14.2 (68.0)
Share of profit in associates and joint ventures 7a (0.3) (7.8)
Depreciation of other fixed assets 0.1 0.2
Other gains and losses 1.8 (0.1)
Increase in receivables (0.1) (0.8)
Decrease in payables (3.2) (11.0)
Non-cash movement relating to share-based payments 0.5 0.6
Net cash from operations 41.1 29.9
11 Net assets per share
EPRA has issued recommended bases for the calculation of certain net assets per share information as shown in the following table:
30 December
30 December 2016 2015
Net assets Number of Net assets Net assets
GBPm shares (m) per share (GBP) per share (GBP)
Basic net assets 477.6 702.3 0.68 0.72
Own shares held (0.6)
Dilutive contingently issuable shares and share options 10.0
Fair value of fixed rate loans (net of tax) (2.4)
EPRA triple net assets 475.2 711.7 0.67 0.70
Exclude fair value of fixed rate loans (net of tax) 2.4
Exclude fair value of see-through interest rate derivatives 2.5
Exclude deferred tax on unrealised gains and capital
allowances 1.4
EPRA net assets 481.5 711.7 0.68 0.71
12 Return on equity
30 December 30 December
2016 2015
GBPm GBPm
Total comprehensive income attributable to equity shareholders (4.4) 98.4
Opening equity shareholders' funds plus time weighted additions 503.4 419.0
Return on equity (0.9)% 23.5%
13 Discontinued Operations
German joint venture
On 10 February 2015, the Group completed the sale of its 50:50 German joint venture with a real estate fund managed by Ares
Management, LP to clients and funds under management of Rockspring Property Investment Managers. Under the terms of the
transaction the Group will retain for approximately five years a 5.1% minority stake in each of the five German portfolios. The total profit
on disposal was GBP2.4 million including GBP1.6 million of realised foreign currency gain reclassified from reserves. During the year,
discontinued operations contributed GBPnil (2015: GBPnil) in respect of the Group's net operating cash flows, contributed GBPnil (2015: GBP42.3
million) in respect of investing activities (disposal proceeds) and received GBPnil (2015 GBPnil) in respect of financing activities.
On completion, and included within the proceeds, the Group entered into a long-term loan payable of EUR3.5 million repayable after five
years. After completion a distribution of EUR1.5 million was made in respect of the retained minority stakes, this was used to reduce the
outstanding amount of the loan to EUR2.0 million.
The carrying value of the retained minority stake, treated as a fixed asset investment, was EUR2.2 million at 30 December 2016 or GBP1.9
million at 30 December 2016 exchange rate (2015: EUR2.2 million or GBP1.6 million at 30 December 2015 exchange rate). The carrying value
of the loan payable at 30 December 2016 was a liability of EUR2.1 million or GBP1.8 million at 30 December 2016 exchange rate (2015: EUR2.0
million or GBP1.5 million at 30 December 2015 exchange rate).
14 Dividends
Year to Year to
30 December 30 December
2016 2015
GBPm GBPm
Final dividend per share paid for year ended 30 December 2014 of 0.60p - 4.2
Interim dividend per share paid for year ended 30 December 2015 of 1.50p - 10.5
Final dividend per share paid for year ended 30 December 2015 of 1.62p 11.3 -
Interim dividend per share paid for year ended 30 December 2016 of 1.62p 11.4 -
Amounts recognised as distributions to equity holders in the year 22.7 14.7
Proposed final dividend per share for year ended 30 December 2016 of 1.77p(1) 12.4 -
(1) In line with the requirements of IAS 10 - 'Events after the Reporting Period', this dividend has not been included as a liability in these
financial statements.
15 Events after the balance sheet date
Refinancing of debt on the five Mall assets
Refinancing of the debt on the five wholly-owned Mall properties completed on 4 January 2017. See Note 9 for further information.
Disposal of Buttermarket Ipswich Limited
The Group disposed of its interest in the Buttermarket Ipswich Limited joint venture on 17 February 2017, see Note 7c for further details.
Ilford
On 3 March 2017 the Group exchanged the acquisition of The Exchange Centre, Ilford from a Meyer Bergman fund for GBP78 million,
reflecting a Net Initial Yield of 6.70%. The acquisition, which comprised the purchase of a holding company that owns the property,
completed on 8 March 2017. The acquisition as funded from the Group's existing cash resources as well as through a new seven year
debt facility of GBP39 million, secured on the asset, with DekaBank Deutsche Girozentrale.
Covenant information (Unaudited)
Wholly-owned assets
Borrowings(1) Covenant 30 December
GBPm 2016
Core revolving credit facility (10 00%)
Net Assets - No less than GBP350m GBP477.6m
Gearing No greater than 1.5:1 0.74:1
Historic interest cover No less than 200% 374%
4 Mall assets (100%)
Loan to value 255.0 No greater than 70% 49%
Historic interest cover No less than 175% 377%
A projected interest cover test also applies at a covenant level of no less than 150%
Luton (100%)
Loan to value 107.5 No greater than 70% 51%
Debt yield No less than 8% 10.4%
Historic interest cover No less than 250% 333%
A projected interest cover test also applies at a covenant level of no less than 200%
Hemel Hempstead (100%)
Loan to value 26.9 No greater than 60% 49%(2)
Historic interest cover No less than 200% 460%
A projected interest cover test also applies at a covenant level of no less than 200%
Ilford (100%)
Loan to value 39.0 No greater than 70% 50%(3)
Historic interest cover No less than 225% n/a
A projected interest cover test also applies at a covenant level of no less than 225%
(1) Adjusted for refinancing of the Mall assets completed on 4 January 2017.
(2) Calculated as specified in loan agreement based on 30 December 2016 valuation. Actual bank covenant based on bank valuation updated annually.
(3) At draw down on [8] March 2017.
Glossary of terms
Adjusted Profit is the total of Contribution from wholly-owned assets and the
Group's joint ventures and associates, the profit from Snozone and property
management fees less central costs (including interest excluding non-cash
charges in respect of share-based payments) after tax. Adjusted Profit
excludes revaluation of properties, profit or loss on disposal of properties or
investments, gains or losses on financial instruments and exceptional one-off
items. Results from Discontinued Operations are included up until the point of
disposal or reclassification as held for sale.
C&R is Capital & Regional plc, also referred to as the Group or the Company
C&R Trade index is an internal retail tracker using data from approximately
300 retail units across C&R's shopping centre portfolio.
CRPM is Capital & Regional Property Management Limited, a subsidiary of
Capital & Regional plc, which earns management and performance fees from
the Mall assets and certain associates and joint ventures of the Group.
Contracted rent is passing rent and the first rent reserved under a lease or
unconditional agreement for lease but which is not yet payable by a tenant.
Contribution is net rent less net interest, including unhedged foreign
exchange movements.
Capital return is the change in market value during the year for properties held at the
balance sheet date, after taking account of capital expenditure calculated on a
time weighted basis.
Debt is borrowings, excluding unamortised issue costs.
EPRA earnings per share (EPS) is the profit / (loss) after tax excluding gains
on asset disposals and revaluations, movements in the fair value of financial
instruments, intangible asset movements and the capital allowance effects of
IAS 12 "Income Taxes" where applicable, less tax arising on these items,
divided by the weighted average number of shares in issue during the year
excluding own shares held.
EPRA net assets per share include the dilutive effect of share-based
payments but ignore the fair value of derivatives, any deferred tax provisions
on unrealised gains and capital allowances, any adjustment to the fair value of
borrowings net of tax and any surplus on the fair value of trading properties.
EPRA triple net assets per share include the dilutive effect of share-based
payments and adjust all items to market value, including trading properties
and fixed rate debt.
Estimated rental value (ERV) is the Group's external valuers' opinion as to
the open market rent which, on the date of valuation, could reasonably be
expected to be obtained on a new letting or rent review of a unit or property.
ERV growth is the total growth in ERV on properties owned throughout the
year including growth due to development.
Gearing is the Group's debt as a percentage of net assets. See through
gearing includes the Group's share of non-recourse debt in associates and
joint ventures.
Interest rate cover (ICR) is the ratio of either (i) Adjusted Profit (before
interest, tax, depreciation and amortisation); or (ii) net rental income to the
interest charge.
IPD is Investment Property Databank Limited, a company that produces an
independent benchmark of property returns.
Like-for-like figures, unless otherwise stated, exclude the impact of property
purchases and sales on year to year comparatives.
Loan to value (LTV) is the ratio of debt excluding fair value adjustments for
debt and derivatives, to the fair value of properties (including adjustments for
tenant incentives and head leases).
Market value is an opinion of the best price at which the sale of an interest in
a property would complete unconditionally for cash consideration on the date
of valuation as determined by the Group's external or internal valuers. In
accordance with usual practice, the valuers report valuations net, after the
deduction of the prospective purchaser's costs, including stamp duty, agent
and legal fees.
Net assets per share (NAV) are shareholders' funds divided by the number
of shares held by shareholders at the year end, excluding own shares held.
Net initial yield (NIY) is the annualised current rent, net of revenue costs,
topped-up for contractual uplifts, expressed as a percentage of the capital
valuation, after adding notional purchaser's costs.
Net debt to property value is debt less cash and cash equivalents divided
by the property value.
Net interest is the Group's share, on a see-through basis, of the interest
payable less interest receivable of the Group and its associates and joint ventures.
Net rent is the Group's share, on a see-through basis, of the rental income,
less property and management costs (excluding performance fees) of the
Group and its associates and joint ventures.
Nominal equivalent yield is a weighted average of the net initial yield and
reversionary yield and represents the return a property will produce based
upon the timing of the income received, assuming rent is received annually
in arrears on gross values including the prospective purchaser's costs.
Occupancy cost ratio The proportion of a retailer’s sales compared with the
total cost of occupation being: rent, business rates, service charge and insurance.
Retailer sales are based on estimates by third party consultants which are periodically
updated and indexed using relevant data from the C&R Trade Index.
Occupancy rate is the ERV of occupied properties expressed as a percentage of the
total ERV of the portfolio, excluding development voids.
Passing rent is gross rent currently payable by tenants including car park
profit but excluding income from non-trading administrations and any
assumed uplift from outstanding rent reviews.
Rent per sq ft is calculated as Contracted rent, excluding car park income and
ancillary income, expressed as a percentage of total lettable space.
Rent to sales ratio is Contracted rent excluding car park income, ancillary
income and anchor stores expressed as a percentage of gross 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.
See-through balance sheet is the pro forma proportionately consolidated
balance sheet of the Group and its associates and joint ventures.
See-through income statement is the pro forma proportionately
consolidated income statement of the Group and its associates and joint
ventures.
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 SAYE schemes
which are spread over the performance period.
Wholly-owned assets portfolio information (Unaudited)
At 30 December 2016 (excluding The Exchange Centre, Ilford - acquired on 8 March 2017)
Physical data
Number of properties 6
Number of lettable units 686
Size (sq feet - million) 3,265
Valuation data
Properties at independent valuation (GBPm) 794.1
Adjustments for head leases and tenant incentives (GBPm) 44.4
Properties as shown in the financial statements (GBPm) 838.5
Revaluation loss in the year (GBPm) 14.2
Initial yield 6.0%
Equivalent yield 6.2%
Reversion 16.9%
Loan to value ratio 45.5%(1)
Net debt to value ratio 43.1%(1)
Lease length (years)
Weighted average lease length to break 6.7
Weighted average lease length to expiry 7.9
Passing rent (GBPm) of leases expiring in:
2017 9.3
2018 2.6
2019-2021 13.3
ERV (GBPm) of leases expiring in:
2017 10.3
2018 3.1
2019-2021 14.2
Passing rent (GBPm) subject to review in:
2017 5.3
2018 2.9
2019-2021 7.3
ERV (GBPm) of passing rent subject to review in:
2017 5.2
2018 2.9
2019-2021 9.0
Rental Data
Contracted rent at year end (GBPm) 57.5
Passing rent at year end (GBPm) 53.0
ERV at year end (GBPm per annum) 61.9
Occupancy 95.4%
(1) As at 30 December 2016, not adjusted for the impact of refinancing of Mall assets completed on 4 January 2017.
EPRA performance measures (Unaudited)
As at 30 December 2016
2016 2015
EPRA earnings (GBPm)(1) 26.2 23.6
EPRA earnings per share (diluted)(1) 3.7p 3.3p
EPRA net assets (GBPm) 481.5 503.1
EPRA net assets per share 68p 71p
EPRA triple net assets (GBPm) 475.2 498.6
EPRA triple net assets per share 67p 70p
EPRA vacancy rate(2) 3.7% 2.8%
(1) Continuing and discontinued operations.
(2) Excludes Buttermarket Centre, Ipswich.
EPRA net initial yield and EPRA topped-up net initial yield
2016(1) 2015(1)
GBPm GBPm
Investment property - wholly-owned 794.1 822.7
Investment property - share of joint ventures and associates 30.8 32.9
Less developments - -
Completed property portfolio 824.9 855.6
Allowance for capital costs 15.0 23.8
Allowance for estimated purchasers' costs 56.3 49.5
Grossed up completed property portfolio valuation 896.2 928.9
Annualised cash passing rental income 58.8 60.3
Property outgoings (11.4) (10.8)
Annualised net rents 47.4 49.5
Add: notional rent expiration of rent free periods or other lease incentives 4.4 3.1
Topped up annualised rent 51.8 52.6
EPRA net initial yield 5.3% 5.3%
EPRA topped-up net initial yield 5.8% 5.7%
(1)Excludes Buttermarket Centre, Ipswich.
EPRA Cost ratios
2016 2015
GBPm GBPm
Cost of sales 32.5 29.1
Administrative costs 10.9 10.8
Service charge income (14.0) (11.9)
Management fees (1.0) (1.0)
Snozone (indoor ski operation) costs (8.8) (8.9)
Share of joint venture & associate expenses 1.2 1.1
EPRA costs (including direct vacancy costs) 20.8 19.2
Direct vacancy costs (4.8) (4.0)
EPRA costs (excluding direct vacancy costs) 16.0 15.2
Gross rental income 62.0 57.5
Less ground rent costs (3.1) (3.1)
Share of joint venture & associate gross rental income less ground rent costs 3.4 3.1
Gross rental income 62.3 57.5
EPRA cost ratio (including direct vacancy costs) 33.4% 33.4%
EPRA cost ratio (excluding vacancy costs) 25.8% 26.4%
Sponsor: Java Capital
Date: 09/03/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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