Wrap Text
Full Year Results to 30 December 2017
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")
8 March 2018
Full Year Results to 30 December 2017
Capital & Regional plc (LSE: CAL), the UK focused REIT with a portfolio of dominant in-town community
shopping centres, today announces its full year results to 30 December 2017.
Lawrence Hutchings, Chief Executive, said: "This is another strong set of results that provides me with
further confidence in our decision to focus on serving the non-discretionary, value and "needs" based end
of consumer demand through our portfolio of community shopping centres. I believe that C&R through our platform,
quality portfolio, energy, insight and experience, can redefine and be recognised as the specialist owner/manager,
driving strong returns in this high yielding sector. We have confidence that our repositioning programme and rebased
affordable occupancy costs allow our retailer customers to trade profitably in these high footfall locations that
have proven to be the engine room for their profits.
"The Board has announced a 7.4% increase in total dividend for 2017 and, while fully aware that recent occupier failures
present some challenges to short-term results, believes that both the momentum we have carried through into 2018 and our
strategic asset management masterplans, underpin our objective of delivering annual dividend growth in a
range of 5% and 8% over the medium term."
Highlights:
Income growth driving 7.4% increase in total 2017 dividend
- Adjusted Profit(1) up 8.6% to GBP29.1 million (December 2016: GBP26.8 million); Adjusted Earnings
per Share(1) up 7.3% to 4.10p (December 2016: 3.82p)
- IFRS Profit for the period of GBP22.4 million (December 2016: Loss of GBP4.4 million)
- Like-for-like(2) Net Rental Income up 1.9%
- 79 new lettings and renewals achieved at an average 10.3%(3) premium to previous rents and
an 8.4%(3) premium to ERV. Passing rent up 3.0% on a like-for-like basis
- Occupancy improved to 97.3% (December 2016: 95.4%)
- Cost efficiencies delivered annual savings of GBP1.2 million, on track for annualised savings of
at least GBP1.8 million by end of 2018
- 7.4% increase in total dividend to 3.64p per share (December 2016: 3.39p)
Community shopping centre strategy
- Strong progress since launch at Capital Markets Day in December 2017
- Highly successful implementation of Ilford and Maidstone pilot projects - contributed to 0.5%
increase in footfall in second half of 2017, significantly outperforming national index at -2.9%
- Positive footfall momentum has continued in 2018, portfolio up 3.1% for two months to end of
February 2018 compared to national index at -2.9%
- Strategic asset management masterplans now implemented across portfolio focused on
further enhancing and improving our shopping centres' community offer and trading
environments
- Revised Capex plan with opportunities for over 50 projects across the portfolio totalling over
GBP100 million
Robust balance sheet with long term debt security
- Basic and EPRA NAV per share resilient, both at 67p (December 2016: both 68p)
- Group Cost of debt of 3.25% with average debt maturity of 7.3 years(4)
2017 2016
Net Rental Income GBP51.6m GBP50.4m +GBP1.2m +2.4%
Adjusted Profit(1) GBP29.1m GBP26.8m +GBP2.3m +8.6%
Adjusted Earnings per share(1) 4.10p 3.82p +0.28 +7.3%
IFRS Profit/(Loss) for the period GBP22.4m GBP(4.4)m
Total dividend per share 3.64p 3.39p +0.25p +7.4%
Net Asset Value (NAV) per share 67p 68p -1p -1.5%
EPRA NAV per share 67p 68p -1p -1.5%
Group net debt(5) GBP404.0m GBP398.1m +GBP5.9m +1.5%
Net debt to property value(5) 46% 46% -
Use of Alternative Performance Measures (APMs)
Throughout the results statement we use a range of financial and non-financial measures to assess our performance. A
number of the financial measures, including Adjusted Profit, Adjusted Earnings per share and the industry best practice
EPRA (European Public Real Estate Association) performance measures are not defined under IFRS, so they are termed
'Alternative Performance Measures' (APMs). Management use these measures to monitor the Group's financial
performance alongside IFRS measures because they help illustrate the underlying performance and position of the Group.
All APMs are defined in the Glossary and further detail on their use is provided within the Financial Review.
Notes
All metrics are for wholly-owned portfolio unless otherwise stated.
(1) Adjusted Profit and Adjusted Earnings per share are as defined in the Glossary. Adjusted Profit incorporates profits from operating
activities and excludes revaluation of properties and financial instruments, gains or losses on disposal, exceptional items and other
defined terms. A reconciliation to the equivalent EPRA and statutory measures is provided in Note 5 to the financial statements.
(2) Like-for-like excludes the impact of property purchases and sales on year to year comparatives. Like-for-like footfall also excludes
entrances impacted by development work. A reconciliation of like-for-like Net Rental Income to total Net Rental Income for the period is
provided in the Financial Review.
(3) For lettings and renewals (excluding development deals) with a term of five years or longer and which did not include a turnover element.
(4) As at 30 December 2017, assuming exercise of all extension options.
(5) December 2016 figures are proforma, adjusted for the refinancing of Mall assets completed on 4 January 2017, Ipswich disposal
completed on 17 February 2017 and Ilford acquisition completed on 8 March 2017.
For further information:
Capital & Regional: Tel: +44 (0)20 7932 8000
Lawrence Hutchings, Chief Executive
Charles Staveley, Group Finance Director
FTI Consulting: Tel: +44 (0)20 3727 1000
Richard Sunderland Email: capreg@fticonsulting.com
Claire Turvey
Notes to editors:
About Capital & Regional plc
Capital & Regional is a UK focused retail property REIT specialising in shopping centres that dominate their
catchment, serving the non-discretionary and value orientated needs of their local communities. It has a strong
track record of delivering value enhancing retail and leisure asset management opportunities across a c.
GBP1 billion portfolio of tailored in-town 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 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
C&R is reporting another strong set of results. Adjusted profit, which reflects the underlying performance of
the business, has risen by 8.6% from GBP26.8 million to GBP29.1 million. Given the very challenging retail
environment we have seen for much of the year, this result is an endorsement of the resilience of the existing
portfolio together with the impact of key asset management initiatives at Walthamstow and Wood Green, in
particular, which positively impacted income in 2017. Profit for the period, at GBP22.4 million, compares with a
loss in 2016 of GBP4.4 million which reflected a revaluation loss and an GBP11 million charge in relation to
implementing the new debt structure.
Both Net Asset Value per share and EPRA Net Asset Value per share of 67 pence compare with 68 pence as
at 30 December 2016. This modest decline reflects the strong performance of our assets based in and around
London offset by some yield expansion in those outside of the Greater London area.
Strategy
The appointment of a new chief executive has afforded the opportunity for a root and branch review of strategy.
Lawrence Hutchings has provided the Board with recommendations on how this should evolve and on how
execution can be enhanced in light of the fast changing and challenging retail landscape. This has been
debated extensively and endorsed by the Board. The management team subsequently communicated the
strategy to investors in December 2017.
C&R is well placed to benefit from increasing polarisation within the shopping centre market which is driving
consumers to separate visits to premium destinations for their "wants", and to convenient local venues, which
focus on their regular value and essential non-discretionary spending, for their "needs".
The Group's community malls have benefitted from the rebasing of rents since the global financial crisis. This
makes them appealing to retailers, who can generate a high proportion of their profits from this segment due
to the attractive dynamic between rental levels and sales performance. To be successful, community malls still
need to deliver a quality product tailored to the needs of the individual communities that they serve.
Furthermore, creativity and investment are required to deliver a superior experience as the occupier mix
continues to evolve, to further reflect categories which perform best in physical stores in an increasingly
omnichannel environment. C&R's management platform remains a source of real differentiation given the ever
more critical need for intensive management of these community malls to continually renew, adapt and
implement changes. The success of pilot projects in Ilford and Maidstone demonstrate how responsive
consumers can be to this approach and the disproportionately large impact even quite minor changes can have.
Responsible Business
We continued our record of year-on-year energy improvements reducing our total consumption by more than 10% in 2017.
Our expertise not only helps to reduce our environmental impact but also helps us lower our own costs and
maintain a very competitive service charge for our retailer customers.
We have also stepped up the training of our operational teams to ensure they remain as prepared as possible
for any potential threat. Our 'go to critical plans' were successfully implemented for periods during the year in
response to national security concerns, with our centre teams working closely with local emergency services.
The award of an 11th consecutive Royal Society for the Prevention of Accidents ("ROSPA") Gold award again
underlines our focus on health and occupational safety standards across our shopping centres.
Community engagement remains at the heart of our business and our commitment was demonstrated through
a number of initiatives during the year, including the launch of a new dedicated community hub at Maidstone
as part of the pilot project.
Dividend
The Board is recommending a final dividend of 1.91 pence per share taking the full year dividend to 3.64 pence
per share. This represents an increase of 7.4% over the 2016 full year dividend of 3.39 pence per share, in
line with previous guidance. The dividend is comfortably covered by underlying earnings with a pay-out ratio
of 88.8% compared to 88.7% in 2016. Our strategic asset management masterplans, now implemented
across our portfolio following our successes at Ilford and Maidstone, underpin our objective of delivering annual
dividend growth in a range of 5-8% over the medium-term.
People
I would like to thank all our staff for their hard work during what has been an exciting but challenging year for
the business while managing the evolution in strategy. I would also like to congratulate the Snozone team
who were awarded the Best Sporting Venue at the UK School Travel awards, beating Manchester United's
museum and stadium tours, Twickenham Stadium, Wimbledon Lawn Tennis Association and the National
Football Museum to this prestigious award.
Board
There have been a number of changes in the composition of the Board during the year, reflecting the significant
amount of time the Board had devoted to ensuring a successful senior management succession plan was in
place, in the previous 12 months. John Clare stepped down as chairman on 13 June 2017 after seven years
on the Board. John played a key role in leading C&R through a series of changes that were transformational
for the Group's prospects. Ken Ford stepped down as an executive director on 9 May 2017 and left the Group
on 31 December 2017 after over 20 years of committed service. Ken was one of the founders of C&R and the
architect of the Group's position as a leading owner of community shopping centres. I would like to thank both
John and Ken on behalf of the Board for their contribution over many years.
We were very pleased to welcome Lawrence Hutchings to the Board as chief executive on 13 June 2017.
Lawrence brings extensive retail property expertise from his time at Hammerson and, more recently,
Blackstone in Australia. He has quickly made a very positive impact in terms of the repositioning of the
business, facilitating in the process my transition to non-executive chairman.
Hugh Scott-Barrett
Chairman
Chief Executive's Statement
It is a pleasure to be writing this statement, my first as chief executive of C&R after taking up the role in June
2017. I would like to take this opportunity to thank our former CEO, Hugh Scott Barrett, for all his support and
guidance during my transition into the role. Hugh's continued involvement as chairman is welcome from my
perspective.
We have been busy delivering on our 2017 business plans, where we have seen strong momentum in income
and leasing with our accretive Capex projects, and implementing our new strategy. This was launched
successfully in December 2017 and is designed to ensure that we capitalise fully on the continued evolution
in physical retailing.
We believe that our centres are well placed to take advantage of important and ongoing changes in how we
live, work, socialise and access goods and services, be it through the physical, online or combined
"omnichannel" platforms.
Our renewed focus on better tailoring and aligning our retail and services to the local communities we serve,
coupled with ensuring that our centres are easier and more pleasurable to access and visit, will deliver
continued income growth through improved footfall, sales, tenant demand and rents.
The success of the pilot projects completed in Q4 last year reinforces our confidence in our ability to redefine
the community shopping centre in the UK, through our asset management masterplans which are fundamental
to our ability to continue delivering underlying recurring income growth.
Income growth continues to deliver performance
Net rental income within the wholly-owned portfolio grew 2.4% from GBP50.4 million to GBP51.6 million, or 1.9% on
a like for like basis. Delivery of our capital expenditure ("Capex") programme, which includes unlocking the
potential of the former BHS stores, saw the Group invest GBP17.5 million of Capex during the year which helped
drive income growth, and included:
- Travelodge at Wood Green - GBP6.4 million total project spend (GBP4.2 million in 2017);
- Conversion of the former BHS unit at Walthamstow into units for Lidl, The Gym and further leisure and retail
space - GBP4.3 million total project investment (GBP3.9 million in 2017);
- A new Wilko store in Blackburn formed from the former BHS - GBP1.0 million total project spend all of which
was undertaken in the year under review.
With average rents currently at c.GBP15 psf, we will see further growth in income as the repositioning Capex is
deployed during 2018 and 2019 to improve the productivity of our floor space while maintaining the rental
affordability that makes our centres so attractive to retailers. We continue to adopt a conservative approach in
assessing the return from our Capex projects and in the majority of cases exclude any "halo" impact across
other parts of the centres from the works. These often involve new anchor retailers and significant changes
to customer proposition which further increase the appeal of the centres to their communities.
Cost management and operating efficiencies
This focus on income is supported by a renewed approach to cost management as announced at our half year
results. We are targeting efficiency savings of at least GBP1.8 million from our central cost base by the end of
2018, representing a saving of approximately 20% of the total 2016 central overhead. Pleasingly we have
delivered over 60% of these savings as of year-end, with the balance in varying stages of realisation. We
believe that there are further efficiencies in our overhead as the operational restructuring is implemented and
with decentralisation empowering the centre teams.
Leasing demand supports our strategy
Leasing activity has continued apace in 2017, with 79 new leases and renewals and 32 rent reviews together
totalling GBP9.6 million in annual income underlining demand for our centres from non-discretionary and value
orientated retailers, service providers, hotels, cinemas, supermarkets and food catering. Importantly, our new
leasing and renewals were completed at an average spread of 10.3%(1) over previous passing rent and 8.4%(1)
over valuation ERVs. Occupancy improved to 97.3% from 95.4% at December 2016.
(1) For lettings and renewals (excluding development deals) with a term of five years or longer and which did
not include a turnover element.
Asset recycling
We remain committed to recycling where we believe that we have optimised the asset through active
repositioning and are able to generate more accretive returns from either new acquisitions or additional capital
investment in the rest of the portfolio.
As planned the pace of asset recycling was slower in the second half of the year, after the successful sales of
Camberley in late 2016 and the Buttermarket in Ipswich in February 2017. The proceeds of these sales
supported the acquisition of The Marlowes, Hemel Hempstead in early 2016 and the Exchange, Ilford in March 2017.
We believe that there will be increased potential for investment opportunities and that pricing may become
more attractive to acquire assets as the importance of active, income driven, strategic, long term management
becomes more critical to the success of our type of assets. Our internal management structure and dedicated
team of retail professionals provide us with a real competitive advantage, allowing us to unlock income growth
from well-located community shopping centres that meet our criteria.
Balance sheet strength
The Group continues to benefit from the balance sheet restructuring and refinancing undertaken in January
2017, which covers five of the Group's seven wholly-owned centres, as well as the subsequent new debt facility
for Ilford and the renewal of the Group's Revolving Credit Facility. The Group's all-in cost of debt is now just
3.25%, allowing us to benefit from historically low interest rates, which have subsequently increased. It also
provides us with the stability of a 6.7 year term increasing to 7.3 if all options are exercised.
Our capital expenditure programme is unique amongst our peers in that it comprises a majority of smaller
projects, which are often capable of being completed within a 12-18 month period. This provides us with
maximum flexibility to dynamically manage the balance sheet to react quickly to changes in market conditions
and to new opportunities.
Outlook
While retailing continues to evolve and is undoubtedly facing cyclical and structural headwinds we have full
confidence that our repositioning programme and rebased affordable occupancy costs will continue to allow our retailer
customers to trade profitably in high footfall locations that are the engine room for their profits.
Our weighting to the London and Greater London economy, with its strong population growth and density, is
creating demand from non-retail uses including residential, hotel and leisure with on flow benefits to our core
retail business and customers. We are committed to maximising the value of the Group's assets through
strategic asset master plans and delivering on behalf of our shareholders.
We are steadfast in our endeavours to improve the lives of the communities that we serve, through providing best in
class environments for retail goods, leisure services, social interaction and facilitating click and collect fulfilment.
In short we believe that the intersection of where product and services meet people remains very important.
The Board has announced a 7.4% increase in total dividend for 2017 and, while fully aware that recent occupier failures
present some challenges to short-term results, believes that both the momentum we have carried through into 2018 and our
strategic asset management masterplans, now established across our entire portfolio following the initial results seen at
Ilford and Maidstone, underpin our objective of delivering annual dividend growth in a range of 5% and 8% over the medium term.
Lawrence Hutchings
Chief Executive
Operating review
The core strength and expertise of C&R lies in its ability to create and deliver specialist asset management
improvements across its c GBP1.0 billion portfolio of UK community shopping centres, which is underpinned by a
strong London and South East bias. Key characteristics of our assets are their dominance in their locality,
coupled with their ability to offer occupiers attractive, affordable and high footfall space which caters for the
non-discretionary and value-orientated needs of the local community.
New lettings, renewals and rent reviews
There were 79 new lettings and renewals in the period at a combined average premium of 10.3% 1 to previous
passing rent and an 8.4%1 premium to ERV.
Year ended
30 December 2017
New Lettings
Number of new lettings 47
Rent from new lettings (GBPm) GBP2.7m
Comparison to ERV(1) (%) +8.7%
Renewals settled
Renewals settled 32
Revised rent (GBPm) GBP1.7m
Comparison to ERV(1) (%) +8.1%
Combined new lettings and renewals
Comparison to previous rent(1) +10.3%
Comparison to ERV(1) +8.4%
Rent reviews
Reviews settled 32
Revised passing rent (GBPm) GBP5.2m
Uplift to previous rent (%) +1.2%
(1) For lettings and renewals (excluding development deals) with a term of five years or longer which do not
include a turnover rent element.
Highlights of letting activity across the portfolio in 2017 include:
At Walthamstow, lettings were made to Smiggle, Gökyüzü Turkish restaurant and Lidl, which opened very
successfully just after the year end, in January 2018. At Wood Green, new lettings were completed to River
Island, Blue Inc, Five Guys and Pak cosmetics, while Aldo and Superdrug renewed.
At Blackburn, Specsavers took a new unit and River Island, Scotts, Superdrug, The Perfume Shop and
Thorntons renewed. Genus and Superdrug took new leases at Maidstone and Card Factory signed a five year
term at Ilford. At Luton, Kiko and Scotts opened new units from a split of the former USC unit, while KFC took
a 10 year lease in the new food court and FootLocker renewed for a further five year term.
The outperformance of new lettings and renewals versus ERV demonstrates the continued affordability and
attractiveness of our schemes and this evidence will be supportive of rental tones in the future.
Since 30 December 2017, the positive letting momentum has continued with 19 new lettings and renewals in
the first two months of the year. This includes new lettings to Smiggle at Blackburn and 3G at Walthamstow,
together with the leasing of four floors of a vacant office block in Luton, where GBP5 million of refurbishment
expenditure will deliver an income return in excess of 9%.
Delivery of specialist asset management initiatives
During 2017 we invested GBP17.5 million of capital expenditure. A number of major projects were concluded over
the period including:
- At Wood Green the new 78 bedroom Travelodge opened in October 2017 following a GBP6.4 million
investment project with early trading very encouraging.
- At Walthamstow, Lidl and The Gym both launched successfully around the turn of 2018. Gökyüzü, a
new Turkish restaurant for a local operator which has traded very successfully at our Wood Green
centre for a number of years, opened in February 2018 and two further retail units totalling 5,000 sq ft
have also been created. All of the above have been formed out of the former BHS store.
- At Blackburn, Wilko opened in September 2017 at the refurbished former BHS unit. Sports Direct also
continues to trade from the unit, now via a direct lease.
The above units will deliver a combined annual rent of GBP1.6 million from a total Capex spend of approximately
GBP12 million. 2018 NRI will benefit by approximately GBP0.8 million from the full year impact of these lettings.
In December 2017 we received a resolution to grant planning consent subject to satisfactory s106 agreement
for the proposed extension at Walthamstow. Our plans include the addition of 80,000 sq ft of new retail and
leisure space and approximately 500 new homes, as well as improved public spaces and community facilities.
A development agreement is in place with the London Borough of Waltham Forest and we anticipate
progressing to full planning consent in the first half of 2018.
In Hemel Hempstead we received planning consent in October 2017 for our transformational plans to create
a leisure hub with up to six new restaurant units, anchored by a cinema for which terms have been agreed
with a leading operator. Work is well advanced on renewing the atrium roof, the cost of which is being met by
the previous owner.
Future Capex plans
As part of our strategic asset masterplans we have reviewed our planned Capex investment and assessed
additional opportunities across our portfolio. In total we have identified more than 50 individual projects
totalling over GBP100 million which we believe will deliver in aggregate an income return of at least 9%.
We expect to deploy Capex at a typical rate of approximately GBP15-25 million per annum. The depth of
opportunities across the portfolio enables us to focus investment on those with the strongest impact and
thereby provides flexibility, allowing us to respond dynamically to any changes in occupier demand or further
evolution of shopper dynamics. Key projects in 2018 include the new office letting at Luton, the leisure hub at
Hemel Hempstead and further improvement of the family zone in Ilford.
Rental income and occupancy
30 December 2017 30 December 2016
Contracted rent (GBPm) 64.1 55.8
Passing rent (GBPm) 61.0 53.0
Occupancy (%) 97.3 95.4
The increase in contracted and passing rent reflects the acquisition of the Exchange Centre, Ilford in March
2017 and like-for-like growth of 3.1% and 3.0% respectively. At 30 December 2017 there was GBP3.1 million of
contracted rent where the tenant is in a rent free period, of which GBP3.0 million will convert to passing rent in
2018. The strong letting activity during the year has resulted in an improvement in occupancy to 97.3% at the
year end.
Insolvencies
Year ended Year ended
December 2017 December 2016(1)
Insolvencies (units) 15 18
Passing rent of insolvencies (GBPm) 0.7 2.4
(1) Comparatives exclude the impact of The Mall, Camberley which was disposed of in November 2016.
The number of insolvencies in 2017 was similar to 2016, but the value was much reduced owing to the impact
of BHS last year. The most significant insolvency was Blue Inc, involving five units with a total rent of GBP0.3
million. As at 30 December 2017 five of the 15 units affected by insolvency had been re-let and eight were
continuing to trade as usual.
In the year to date in 2018 there have been three national occupier insolvencies or restructurings that impact upon the portfolio.
Based on information available to date it is expected that their combined impact on 2018 Adjusted Profit will be
approximately GBP0.7 million.
Operational performance
There were 76 million visits to our centres during 2017. For the second half of 2017, our seven wholly-owned
shopping centres achieved a 0.5%(1) increase in footfall compared to a National Index figure of -2.9%. Footfall
for the year as a whole increased by 0.1%(1), again significantly ahead of the National Index which showed a
decline of 2.8%.
In the second half of 2017, we undertook repositioning pilot projects at Maidstone and Ilford and these two
assets recorded particularly strong performances, with Maidstone increasing by 2% in the fourth quarter of
2017, versus 2016, and Ilford increasing by 5.5%.
The positive momentum has continued into the start of 2018 with footfall for the wholly-owned portfolio up 3.1%
in the two months to the end of February 2018, compared to the National Index which was -2.9%.
Car park usage has been stable and car park income was GBP10.2 million, an increase of 7.2% on a like-for-like
basis. Our Collect+ service continues to expand with in excess of 42,000 packages handled in the year, an
increase of 24% year-on-year.
(1) Excluding entrances impacted by development work.
Other assets and operations
The Kingfisher Centre, Redditch (C&R ownership 20%, net investment of GBP7.4 million at 30 December 2017)
The Range successfully opened in July 2017 in the former BHS unit. Other significant lettings during the year
included Smiggle, HMV and Trespass, although the scheme was impacted by the insolvency of Linens Direct
as well as the closure of Argos. The property was valued at GBP142.9 million at 30 December 2017, reflecting a
net initial yield of 6.75%.
Snozone
Snozone enjoyed another strong trading year with revenue increasing 2% to GBP10.4 million (2016: GBP10.2 million)
and profit up 10% to just over GBP1.5 million (2016: GBP1.4 million).
During 2017 Snozone won Best Sporting Venue at the UK School Travel awards, beating Manchester United's
museum and stadium tours, Twickenham Stadium, Wimbledon Lawn Tennis Association and the National
Football Museum to this prestigious award.
In September 2017, Snozone purchased the former 'Skiplex' business at Basingstoke for less than GBP0.1 million,
comprising two indoor slopes inside the iFLY indoor skydiving centre. Rebranded as 'Skizone' this gives
Snozone a foothold south of the M25 from which to grow its data base and auxiliary revenue, as well as
creating a hub from which to open similar sized businesses across the south, should opportunities present
themselves.
Financial review
2017 2016 Change
Profitability
Net Rental Income(1) GBP51.6m GBP50.4m +2.4%
Adjusted Profit(2) GBP29.1m GBP26.8m +8.6%
Adjusted Earnings per share 4.10p 3.82p +7.3%
IFRS Profit/(Loss) for the period GBP22.4m GBP(4.4)m
EPRA cost ratio (excluding vacancy costs) 25.9% 27.4% -150bps
Net Administrative Expenses to Gross Rent 12.7% 13.6% -90bps
Investment returns
Net Asset Value (NAV) per share 67p 68p -1p
EPRA NAV per share 67p 68p -1p
Dividend per share 3.64p 3.39p +7.4%
Dividend pay-out 88.8% 88.7%
Return on equity 4.7% (0.9)%
Financing(3)
Group net debt GBP404.0m GBP398.1m +GBP5.9m
Group net debt to property value 46% 46% -
Average debt maturity(4) 7.3 years 8.0 years -0.7 years
Cost of debt(5) 3.25% 3.25% -
(1) Wholly-owned assets.
(2) 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.
(3) December 2016 comparative figures in this section are adjusted for the refinancing of Mall assets completed on 4 January 2017,
Ipswich disposal completed on 17 February 2017 and Ilford acquisition completed on 8 March 2017.
(4) Assuming exercise of all extension options.
(5) Assuming all loans fully drawn.
The above results are discussed more fully in the following pages.
Use of Alternative Performance Measures (APMs)
Throughout the results statement we use a range of financial and non-financial measures to assess our performance.
The significant measures are as follows:
Alternative performance measure used Rationale
Like-for-like amounts Like-for-like amounts are presented as they measure
operating performance as distinct from the impact of
acquisitions or disposals. In respect of property, the like-
for-like measures, unless otherwise stated, relate to
property which has been owned throughout both periods
so that income can be compared on a like-for-like basis.
For the purposes of comparison of capital values, this will
also include assets owned at the previous period end but
not throughout the prior period.
Adjusted Profit Adjusted Profit is presented as it is considered by
Management to provide the best indication of the extent to
which dividend payments are supported by underlying
profits.
Adjusted Profit excludes revaluation of properties, profit or
loss on disposal of properties or investments, gains or
losses on financial instruments, non-cash charges in
respect of share-based payments and exceptional one-off
items.
The key differences from EPRA earnings, an industry
standard comparable measure, relates to the exclusion of
non-cash charges in respect of share-based payments
and adjustments in respect of exceptional items where
EPRA is prescriptive.
A reconciliation of Adjusted Profit to the equivalent EPRA
and statutory measures is provided in Note 5 to the
financial statements.
Profitability
Components of Adjusted Profit and reconciliation to IFRS Profit
Amounts in GBPm Year to 30 December 2017 Year to 30 December 2016
Net rental income
Wholly-owned assets (see analysis on next page) 51.6 50.4
Kingfisher, Redditch(1) 1.6 1.7
Buttermarket, Ipswich(2) - 0.5
53.2 52.6
Net interest (19.6) (20.3)
Snozone profit (indoor ski operation) 1.5 1.4
Central operating costs net of external fees (5.9) (6.9)
Tax charge (0.1) -
Adjusted Profit 29.1 26.8
Adjusted Earnings per share (pence)(3) 4.10p 3.82p
Reconciliation of Adjusted Profit to statutory result
Adjusted Profit 29.1 26.8
Property revaluation (including Deferred Tax) (6.3) (14.5)
Loss on disposals - (2.6)
Gain/(Loss) on financial instruments 1.1 (2.5)
Refinancing costs (0.5) (11.0)
Other items(4) (1.0) (0.6)
IFRS Profit/(loss) for the period 22.4 (4.4)
(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 GBP0.9 million for the non-cash accounting charge in respect of share-based payments (2016: GBP0.5 million)
Adjusted Profit and Adjusted Earnings per share showed strong increases of 8.6% and 7.3% respectively,
reflecting growth in NRI (see breakdown below), lower interest costs following the refinancing of the Mall assets
and a GBP1.0 million reduction in net central operating costs, reflecting the benefit of completed and ongoing cost
initiatives. Gross central costs fell from GBP9.6 million in 2016 to GBP8.4 million in 2017, a reduction of GBP1.2 million.
A further reduction of at least a further GBP0.6 million of costs per annum is targeted for 2018.
Wholly-owned assets Net rental income
Amounts in GBPm Year to Year to
30 December 2017 30 December 2016
Like for like 43.5 42.7 +1.9%
(Blackburn, Luton, Maidstone, Walthamstow, Wood Green)
Hemel Hempstead - acquired February/March 2016 3.7 3.5
Camberley (sold November 2016) and other disposals - 4.2
Ilford - acquired 8 March 2017 4.4 -
Net rental income (NRI) 51.6 50.4 +2.4%
Net Asset Value
NAV at GBP481.4 million and EPRA NAV at GBP482.6 million increased marginally (December 2016: GBP477.6 million
and GBP481.5 million respectively) with retained profit offsetting the small fall in valuations net of Capex (see
below). On a per share basis Basic NAV and EPRA NAV fell by 1p to 67p due to a slightly higher number of
shares in issue as a result of the Scrip dividend and vesting of the Company's Long Term Incentive Plan.
Property portfolio valuation
Property at independent valuation 30 December 2017 30 December 2016
GBPm NIY % GBPm NIY %
Blackburn 121.3 6.65% 124.1 6.53%
Hemel Hempstead 54.0 6.88% 54.6 7.07%
Ilford(1) 82.4 6.54% 78.0 6.70%
Luton 214.0 6.35% 207.0 6.35%
Maidstone 76.0 6.70% 80.0 6.78%
Walthamstow 107.7 5.25% 103.3 5.25%
Wood Green 231.2 5.25% 225.1 5.25%
Wholly-owned portfolio 886.6 6.06% 872.1 6.08%
(1) Ilford at acquisition price on 8 March 2017.
The valuation of the wholly-owned portfolio at 30 December 2017 was GBP886.6 million, reflecting a net initial
yield of 6.06%.
This is marginally below the 30 December 2016 valuation of GBP794.1 million after allowing for capital expenditure
in the period of GBP17.5 million and the GBP78.0 million acquisition of The Exchange Centre, Ilford in March 2017
(excluding acquisition costs of c GBP1.0 million). Yields on the Group's London and South East assets proved
resilient and were largely unchanged over the period, with the decline in Maidstone reflecting the unlet BHS
unit. Blackburn saw a small fall in valuation due to outward market yield shift partially offset by an increase in
valued income.
Financing
Net interest
Amounts in GBPm Year to 30 December 2017 Year to 30 December 2016
Wholly-owned assets
Net Interest on loans 14.0 14.0
Amortisation of refinancing costs 1.0 1.4
Notional interest charge on head leases(1) 3.4 3.6
18.4 19.0
Kingfisher, Redditch (Group share) 0.9 0.8
Buttermarket, Ipswich (Group share) - 0.1
Central 0.3 0.4
Net Group interest 19.6 20.3
(1) Notional interest charge with offsetting opposite and materially equal credit within other property operating expenses.
The decrease in interest reflects the lower interest cost and amortisation charge following the refinancing of the
Mall assets that completed on 4 January 2017 and the acquisition of Ilford in March 2017.
Group debt
Average Duration
Net Loan to Net debt interest Duration to with
Debt(1) Cash(2) debt value(3) to value(3) rate Fixed loan expiry extensions
30 December 2017 GBPm GBPm GBPm % % % % Years Years
Four Mall assets 255.0 (8.4) 246.6 48% 46% 3.36 100 7.6 8.6
Luton 107.5 (5.8) 101.7 50% 48% 3.14 100 6.0 6.0
Hemel Hempstead 26.9 (1.1) 25.8 50% 48% 3.32 100 4.1 5.1
Ilford 39.0 (2.4) 36.6 47% 44% 2.76 100 6.2 6.2
Group RCF - (6.7) (6.7) - - 3.40 - 4.1 4.1
On balance sheet debt 428.4 (24.4) 404.0 48% 46% 3.25 94 6.7 7.3
(1) Excluding unamortised issue costs.
(2) Excluding cash beneficially owned by tenants.
(3) Debt and net debt divided by investment property at valuation.
The refinancing activity completed in the early part of 2017 has delivered an attractive funding cost of 3.25%
that is fixed and secured over a weighted average 6.7 year maturity, extending to 7.3 years if all extensions
are exercised. Our target range for net debt to property value remains 40%-50% with an intention to reduce it
to the lower end of that range in the medium-term.
Covenants
The Group was compliant with its banking and debt covenants at 30 December 2017 and throughout the year.
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 as to 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
The Company maintains a primary listing on the London Stock Exchange and a secondary listing on the
Johannesburg Stock Exchange (JSE) in South Africa. At 30 December 2017, 60,477,452 of the Company's
shares were held on the JSE register representing 8.4% of the total shares in issue.
Dividend
The Board is proposing a final dividend of 1.91 pence per share, taking the full-year dividend to 3.64 pence
per share, representing a 7.4% increase from 2016. 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 proposed in relation to the payment of the 2017 final dividend are:
- Confirmation of ZAR equivalent dividend and PID percentage 10 April 2018
- Last day to trade on Johannesburg Stock Exchange (JSE) 17 April 2018
- Shares trade ex-dividend on the JSE 18 April 2018
- Shares trade ex-dividend on the London Stock Exchange (LSE) 19 April 2018
- Record date for LSE and JSE 20 April 2018
- Annual General Meeting 9 May 2018
- Dividend payment date 16 May 2018
The amount to be paid as a PID will be confirmed in the announcement on 10 April 2018. If a Scrip dividend
alternative is offered, subject to the requisite regulatory approvals, the deadline for submission of valid election
forms will be 20 April 2018. 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 10 April 2018. Share certificates on
the South African register may not be dematerialised or rematerialised between 18 April 2018 and 20 April 2018,
both dates inclusive. Transfers between the UK and South African registers may not take place between 10 April 2018 and
20 April 2018, 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 2017.
Principal risks at 30 December 2017
Following the risk reviews carried out at 30 June 2017 and 30 December 2017, one further risk has been
added to the list of principal Group risks to the list disclosed in the 2016 Annual Report, being Reputational
Risk. Reputational Risk is defined as the potential impact on the Group's reputation from adverse events or
publicity, and has been added reflecting a general business environment in which corporates are under
increasing and magnified focus from both mainstream and social media.
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,
continues to impact some of the wider market risks that the Group is subject to.
The risks noted do not comprise all those potentially faced by the Group and are not intended to be presented
in any order of priority. Additional risks and uncertainties currently unknown to the Group, or which the Group
currently deems immaterial, may also have an adverse effect on the financial condition or business of the Group
in the future. These issues are kept under constant review to allow the Group to react in an appropriate and
timely manner to help mitigate the impact of such risks.
Risk Impact Mitigation
Property risks
Property investment market risks
- Weakening economic - 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 before
demand and pressure on rent adversely affect rental income, new leases signed
levels lease incentive, void costs, - Long-term leases and active credit
cash and ultimately property 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 with tailored
which can be achieved relevance to the local community
- Concentration on convenience and
value offer which is less impacted
by online presence
- Increasing provision of 'Click &
Collect' within our centres
- Digital marketing initiatives
- Monitoring of footfall for evidence
of negative trends
- Monitoring of retail trends and
shopping behaviour
Concentration and scale risk
- By having a less diversified - 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 support
be achieved town centres
- Continued investment in schemes
to ensure relevance to the local
community
- 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 all
or impacts upon shopper 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 staged
and development projects - Planned value may not be execution to key milestones
realised - Use of experienced project co-
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 in early 2017 improved
on economic terms when - Limitation on financial and liquidity and long-term security
needed operational flexibility - Ensuring that there are
- Cost of financing could be significant undrawn facilities
prohibitive - 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 cycle changes
Reputational risk
- Adverse events or publicity, - Negatively impact investor - Close Board/Management
including social media, may market perception oversight of major issues and
lead to reputational damage - May reduce shopper footfall decision making
and demand from tenants for - Effective pre-planning of
space announcements and applications
- Monitoring of public opinion
through focus groups and review
of press and social media
- Use of PR advisers and Media
training for Management
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 positions
changes in the form or and other regulations
interpretation of tax - Maintenance of a regular dialogue
legislation with the tax authorities
- Potential exposure to tax
liabilities in respect of historic
transactions undertaken
Regulation risks
- Exposure to changes in - Failure to comply could result - Training to keep Management
existing or forthcoming in financial penalties, loss of aware of regulatory changes
property or corporate business or credibility - Expert advice taken on complex
regulation regulatory matters
Loss of key management
- Dependence of the business - Loss of key individuals or an - Key management are paid market
on the skills of a small inability to attract new salaries and competitive incentive
number of key individuals employees with the packages
appropriate expertise could - New LTIP awards made in 2017
reduce effectiveness - Succession planning for key
positions is undertaken as evidenced
by CEO transition in 2017
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 2017
2017 2016
Note GBPm GBPm
Revenue 3 89.2 87.2
Cost of sales (33.5) (32.5)
Gross profit 55.7 54.7
Administrative costs (10.2) (10.9)
Share of (loss)/profit in associates and joint ventures 7a (2.0) 0.3
Loss on revaluation of investment properties (3.8) (14.2)
Other gains and losses 0.3 (1.8)
Profit on ordinary activities before financing 40.0 28.1
Finance income 1.2 0.4
Finance costs (18.8) (33.0)
Profit/(loss) before tax 22.4 (4.5)
Tax credit 4a - 0.1
Profit/(loss) for the year 2a 22.4 (4.4)
All results derive from continuing operations.
Basic earnings per share 5a 3.2p (0.6)p
Diluted earnings per share 5a 3.1p (0.6)p
EPRA basic earnings per share 5a 3.9p 3.7p
EPRA diluted earnings per share 5a 3.9p 3.7p
Unaudited preliminary consolidated statement of comprehensive income
For the year to 30 December 2017
2017 2016
GBPm GBPm
Profit/(loss) for the year 22.4 (4.4)
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations - -
Gain on a hedge of a net investment taken to equity - -
Total items that that may be reclassified subsequently to profit or loss: - -
Total comprehensive income for the year 22.4 (4.4)
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 the Financial Statements. EPRA Earnings and EPRA EPS are shown in
Note 5 to the Financial Statements. EPRA net assets and EPRA triple net assets are shown in Note 11 to the Financial Statements.
Unaudited preliminary consolidated balance sheet
At 30 December 2017
2017 2016
Note GBPm GBPm
Non-current assets
Investment properties 6 930.6 838.5
Plant and equipment 1.8 0.9
Fixed asset investments 2.1 1.9
Receivables 14.2 14.3
Investment in associates 7b 7.4 13.9
Total non-current assets 956.1 869.5
Current assets
Receivables 21.6 13.4
Cash and cash equivalents 8 30.2 49.1
Assets classified as held for sale 7c - 13.9
Total current assets 51.8 76.4
Total assets 2b 1,007.9 945.9
Current liabilities
Bank loans 9 - (334.6)
Trade and other payables (39.0) (41.3)
Liabilities directly associated with assets held for sale 7c - (0.4)
(39.0) (376.3)
Net current assets/(liabilities) 12.8 (299.9)
Non-current liabilities
Bank loans 9 (422.2) (26.2)
Other payables (4.0) (4.4)
Obligations under finance leases (61.3) (61.4)
Total non-current liabilities (487.5) (92.0)
Total liabilities 2b (526.5) (468.3)
Net assets 481.4 477.6
Equity
Share capital 7.2 7.0
Share premium 163.3 158.2
Merger reserve 60.3 60.3
Capital redemption reserve 4.4 4.4
Own shares reserve (0.1) (0.4)
Retained earnings 246.3 248.1
Equity shareholders' funds 481.4 477.6
Basic net assets per share 11 GBP0.67 GBP0.68
EPRA triple net assets per share 11 GBP0.66 GBP0.67
EPRA net assets per share 11 GBP0.67 GBP0.68
Unaudited preliminary consolidated statement of changes in equity
For the year to 30 December 2017
Capital Own
Share Share Merger redemption shares Retained Total
capital premium(1) reserve(2) reserve(1) reserve(3) earnings(4) equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
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 loss for the year - - - - - - -
Total comprehensive income for the year - - - - - (4.4) (4.4)
Credit to equity for equity-settled share-based payments - - - - - 0.5 0.5
Dividends paid (Note 13), net of Scrip - - - - - (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
Profit for the year - - - - - 22.4 22.4
Other comprehensive income for the year - - - - - - -
Total comprehensive income for the year - - - - - 22.4 22.4
Credit to equity for equity-settled share-based payments - - - - - 0.9 0.9
Dividends paid (Note 13), net of Scrip - - - - - (19.5) (19.5)
Shares issued, net of costs 0.2 5.1 - - - (5.3) -
Other movements - - - - 0.3 (0.3) -
Balance at 30 December 2017 7.2 163.3 60.3 4.4 (0.1) 246.3 481.4
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 2/17 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 2017
2017 2016
Note GBPm GBPm
Operating activities
Net cash from operations 10 43.0 41.1
Distributions received from associates 7b 4.5 0.5
Distributions received from fixed asset investments Including German B-note 0.7 4.2
Interest paid (14.6) (14.6)
Interest received 0.1 0.1
Cash flows from operating activities 33.7 31.3
Investing activities
Acquisition of The Exchange, Ilford (79.0) -
Disposal of The Mall, Camberley - 85.7
Disposal of Buttermarket, Ipswich 7c 9.8 -
Other disposals - 0.7
Acquisitions in Hemel Hempstead - (56.6)
Purchase of plant and equipment (0.6) (0.5)
Capital expenditure on investment properties (16.9) (20.6)
Cash flows from investing activities (86.7) 8.7
Financing activities
Dividends paid net of Scrip (19.1) (21.7)
Bank loans drawn down 401.5 26.9
Bank loans repaid (334.6) (45.4)
Loan arrangement costs (13.7) (0.6)
Cash flows from financing activities 34.1 (40.8)
Net (decrease)/increase in cash and cash equivalents (18.9) (0.8)
Cash and cash equivalents at the beginning of the year 49.1 49.9
Cash and cash equivalents at the end of the year 8 30.2 49.1
Notes to the unaudited preliminary financial statements
For the year to 30 December 2017
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 2017 or 2016. The financial information for the year ended 30 December 2016 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 30 December 2017 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 2018.
Accounting developments and changes
The accounting policies used in these financial statements are consistent with those applied in the last annual financial statements, as
amended where relevant to reflect the adoption of new standards, amendments and interpretations which became effective in the year.
These amendments have not had an impact on the financial statements.
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.
Wholly-owned assets consists of the shopping centres at Blackburn, Hemel Hempstead, Ilford (from acquisition on 8 March 2017),
Luton, Maidstone, Walthamstow and Wood Green and, in the prior year, Camberley, until its disposal on 11 November 2016. Other UK
Shopping Centres consists of the Group's interests in Kingfisher Limited Partnership (Redditch) and, in the prior year, until its
reclassification as held for sale on 30 December 2016, Buttermarket Ipswich Limited. Group/Central includes management fee income,
Group overheads incurred by Capital & Regional Property Management, Capital & Regional plc and other subsidiaries and the interest
expense on the Group's central borrowing facility.
Wholly-owned assets and Other UK Shopping Centres derive their revenue from the rental of investment properties. The Snozone and
Group/Central segments derive their revenue from the operation of indoor ski slopes and the management of property funds or
schemes respectively. The split of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues from
different products and services. Depreciation and charges in respect of share-based payments represent the only significant non-cash
expenses.
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 2017 Note GBPm GBPm GBPm GBPm GBPm
Rental income from external sources 2b 63.9 2.3 - - 66.2
Property and void costs (12.3) (0.7) - - (13.0)
Net rental income 51.6 1.6 - - 53.2
Net interest expense (18.4) (0.9) - (0.3) (19.6)
Snozone income/Management fees(2) 2b - - 10.4 2.2 12.6
Management expenses - - (8.8) (6.8) (15.6)
Investment income - - - 0.4 0.4
Depreciation - - (0.1) (0.1) (0.2)
Variable overhead (excluding non-cash items) - - - (1.6) (1.6)
Tax charge - (0.1) - - (0.1)
Adjusted Profit 33.2 0.6 1.5 (6.2) 29.1
Revaluation of properties (3.8) (2.5) - - (6.3)
Income from Euro B Note(3) - - - 0.3 0.3
Gain on financial instruments 0.7 0.4 - - 1.1
Refinancing costs - (0.5) - - (0.5)
Share-based payments - - - (0.9) (0.9)
Other items - - - (0.4) (0.4)
Profit/(loss) 30.1 (2.0) 1.5 (7.2) 22.4
Total assets 2b 984.1 30.9 4.4 12.0 1,031.4
Total liabilities 2b (518.7) (23.5) (2.2) (5.6) (550.0)
Net assets 465.4 7.4 2.2 6.4 481.4
(1) Comprises 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) GBP0.3 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 entities.
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 Euro 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 - - - (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 13.9(6) 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 entities.
(5) Refinancing costs consist of those triggered by serving notice on the existing debt facility on five Mall assets on 28 December 2016.
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 were reflected in the Other UK Shopping Centres column.
2b Reconciliations of reportable revenue, assets and liabilities
Year to Year to
30 December 30 December
2017 2016
Revenue Note GBPm GBPm
Rental income from external sources 2a 66.2 65.4
Service charge income 14.1 14.0
Management fees 2a 2.2 2.4
Snozone income 2a 10.4 10.2
Revenue for reportable segments 92.9 92.0
Elimination of inter-segment revenue (1.4) (1.4)
Rental income earned by associates and joint ventures 2a (2.3) (3.4)
Revenue per consolidated income statement 3 89.2 87.2
All revenue in the current and prior years was attributable to activities within the UK.
2017 2016
Assets Note GBPm GBPm
Total assets of reportable segments 2a 1,031.4 964.1
Adjustment for associates and joint ventures (23.5) (18.2)
Group assets 1,007.9 945.9
Liabilities
Total liabilities of reportable segments 2a (550.0) (486.5)
Adjustment for associates and joint ventures 23.5 18.2
Group liabilities (526.5) (468.3)
Net assets by country
UK 481.3 477.5
Germany 0.1 0.1
Group net assets 481.4 477.6
3 Revenue
Year to Year to
30 December 30 December
2017 2016
Note GBPm GBPm
Gross rental income 51.2 51.0
Ancillary income 12.7 11.0
2a 63.9 62.0
Service charge income 2b 14.1 14.0
External management fees 0.8 1.0
Snozone income 2a 10.4 10.2
Revenue per consolidated income statement 2b 89.2 87.2
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
2017 2016
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 (2016: 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
2017 2016
Note GBPm GBPm
Profit/(loss) before tax on continuing operations 22.4 (4.5)
Profit/(loss) multiplied by the UK corporation tax rate of 19.25% (2016: 20%) 4.3 (0.9)
REIT exempt income and gains (4.0) (1.5)
Non-allowable expenses and non-taxable items (0.4) (0.5)
Excess tax losses 0.1 0.4
Unrealised losses/(gains) on investment properties not taxable - 2.6
Temporary timing and controlled foreign companies income - (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 19% with effect from 1 April 2017. A further reduction in the rate of corporation tax to
17% from 1 April 2020 was substantively enacted in Finance Act 2016. Consequently the UK corporation tax rate at which the deferred
tax is booked in the financial statements is 17% (2016: 17%).
The Group has recognised a deferred tax asset of GBP0.1 million (2016: GBP0.1 million). No deferred tax asset has been recognised in
respect of temporary differences arising from investments or investments in associates or in joint ventures in the current or prior years
as it is not certain that a deduction will be available when the asset crystallises.
The Group has GBP12.3 million (2016: GBP13.9 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 (2016: GBPnil). The Group has unused capital losses of GBP25.1 million (2016: GBP30.5 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 2017 Year to 30 December 2016
Adjusted Adjusted
Note Profit EPRA Profit Profit EPRA Profit
Profit (GBPm)
Profit/(loss) for the year 22.4 22.4 22.4 (4.4) (4.4) (4.4)
Revaluation loss on investment
properties (net of tax) 5b - 6.3 6.3 - 14.5 14.5
Loss on disposal of properties (net of
tax) 5b - - - - 6.5 6.5
Income from German B Note 2a - (0.3) (0.3) - (3.9) (3.9)
Changes in fair value of financial
instruments 5b - (1.1) (1.1) - 2.5 2.5
Refinancing costs 2a - 0.5 0.5 - 11.0 11.0
Share-based payments 2a - - 0.9 - - 0.5
Other items 2a - - 0.4 - - 0.1
Profit 22.4 27.8 29.1 (4.4) 26.2 26.8
Earnings per share (pence) 3.2 3.9 4.1 (0.6)p 3.7p 3.8p
Diluted earnings per share (pence) 3.1 3.9 4.1 (0.6)p 3.7p 3.8p
None of the current or prior year earnings related to discontinued operations (2016: none).
Weighted average number of shares Year to 30 December Year to
(m) 2017 30 December 2016
Ordinary shares in issue 709.2 701.0
Own shares held (0.2) (0.6)
Basic 709.0 700.4
Dilutive contingently issuable shares
and share options 6.8 10.0
Diluted 715.8 710.4
At the end of the year, the Group had 12,128,362 (2016: 11,929,797) share options and contingently issuable shares granted under
share-based payment schemes that could potentially dilute earnings per share in the future but which have not been included in the
calculation because they are not dilutive or the conditions for vesting have not been met.
5b Reconciliation of earnings figures included in earnings per share calculations
Year to 30 December 2017 Year to 30 December 2016
Profit Movement Loss 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 (3.8) - 0.7 (14.2) (5.9) (2.5)
Associates 7d (2.5) - 0.4 (2.3) - -
Joint ventures 7e - - - 3.5 (0.6) -
Tax effect - - - (1.5) - -
Total 5a (6.3) - 1.1 (14.5) (6.5) (2.5)
5c Headline earnings per share
Year to 30 December 2017 Year to 30 December 2016
Basic Diluted Basic Diluted
Profit (GBPm)
Profit/(loss) for the year 22.4 22.4 (4.4) (4.4)
Revaluation loss on investment properties (including tax) 6.3 6.3 14.5 14.5
Loss on disposal of properties (net of tax) - - 6.5 6.5
Income from Euro B Note (0.3) (0.3) (3.9) (3.9)
Headline earnings 28.4 28.4 12.7 12.7
Weighted average number of shares (m)
Ordinary shares in issue 709.2 709.2 701.0 701.0
Own shares held (0.2) (0.2) (0.6) (0.6)
Dilutive contingently issuable shares and share options - 6.8 - 10.0
709.0 715.8 700.4 710.4
Headline Earnings per share (pence) 4.0p 4.0p 1.8p 1.8p
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 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 (4.9) (8.7) (13.6)
At 30 December 2016 357.9 480.6 838.5
Acquired (The Exchange, Ilford) 79.0 - 79.0
Capital expenditure (excluding capital contributions) 4.3 12.3 16.6
Valuation surplus(1) (3.8) 0.3 (3.5)
At 30 December 2017 437.4 493.2 930.6
(1) GBP3.8 million per Note 2a includes letting fee amortisation adjustment of GBP0.3 million (2016: GBP0.6 million).
6b Property assets summary
30 December 2017 30 December 2016
100% Group share 100% Group share
GBPm GBPm GBPm GBPm
Wholly-owned
Investment properties at fair value 886.6 886.6 794.1 794.1
Head leases treated as finance leases on investment properties 61.3 61.3 61.3 61.3
Unamortised tenant incentives on investment properties (17.3) (17.3) (16.9) (16.9)
IFRS Property Value 930.6 930.6 838.5 838.5
Associates
Investment properties at fair value 142.9 28.6 154.1 30.8
Unamortised tenant incentives on investment properties (4.5) (0.9) (4.1) (0.8)
IFRS Property Value 138.4 27.7 150.0 30.0
Total at property valuation 1,029.5 915.2 948.2 824.9
Total IFRS Property Value 1,069.0 958.3 988.5 868.5
6c Valuations
External valuations at 30 December 2017 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 GBP915.2 million of GBP1,029.5 million (2016: GBP824.9 million of GBP948.2 million).
The valuations were carried out by independent qualified professional valuers from CBRE Limited and Knight Frank LLP (2016: 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
2017 2016
Note GBPm GBPm
Share of results of associates 2a, 7d (2.0) (1.5)
Share of results of joint ventures 7e - 1.8
(2.0) 0.3
7b Investment in associates
30 December 30 December
2017 2016
Note GBPm GBPm
At the start of the year 13.9 15.9
Share of results of associates 7d (2.0) (1.5)
Dividends and capital distributions received (4.5) (0.5)
At the end of the year 7d 7.4 13.9
The Group's only significant associate during 2017 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
2017 2016
Note GBPm GBPm
At the start of the year - 11.7
Share of results of joint ventures 7e - 1.8
Reclassification of Buttermarket Centre, Ipswich as held for sale - (13.5)
At the end of the year 7e - -
The Group's only significant joint venture during 2016 was the Buttermarket Centre, Ipswich. 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 17 February 2017 the sale completed 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, net of the Group's share of disposal costs of GBP0.4 million. To date GBP0.3m net additional
consideration has been received by the Group.
7d Analysis of investment in associates
Year to 30 Year to 30
December December
2017(1) 2016(1)
Total Total
GBPm GBPm
Income statement (100%)
Revenue - gross rent 11.3 11.5
Property and management expenses (2.7) (2.0)
Void costs (1.1) (1.0)
Net rent 7.5 8.5
Net interest payable (6.6) (3.8)
Contribution 0.9 4.7
Revaluation of investment properties (12.4) (11.8)
Fair value of interest rate swaps 1.9 (0.2)
Profit before tax (9.6) (7.3)
Tax (0.2) (0.7)
Profit after tax (9.8) (8.0)
Balance sheet (100%)
Investment properties 138.4 150.0
Other assets 16.1 10.4
Current liabilities (6.3) (6.5)
Non-current liabilities (111.3) (84.0)
Net assets (100%) 36.9 69.9
Income statement (Group share)
Revenue - gross rent 2.3 2.3
Property and management expenses (0.5) (0.4)
Void costs (0.2) (0.2)
Net rent 1.6 1.7
Net interest payable (1.4) (0.8)
Contribution 0.2 0.9
Revaluation of investment properties (2.5) (2.3)
Fair value of interest rate swaps 0.4 -
Profit before tax (1.9) (1.4)
Tax (0.1) (0.1)
Profit after tax (2.0) (1.5)
Balance sheet (Group share)
Investment properties 27.7 30.0
Other assets 3.3 2.1
Current liabilities (1.3) (1.4)
Non-current liabilities (22.3) (16.8)
Net assets (Group share) 7.4 13.9
(1) Comprises Kingfisher Redditch.
7e Analysis of investment in joint ventures
Year to Year to
30 December 30 December
2017 2016(1)
Total Total
GBPm GBPm
Income statement (100%)
Revenue - gross rent - 2.2
Property and management expenses - (0.7)
Void costs - (0.6)
Net rent - 0.9
Net interest payable - (0.3)
Contribution - 0.6
Revaluation of investment properties - 7.2
Deferred tax on revaluation - (2.9)
Impairment - (1.2)
Profit before tax - 3.7
Tax - -
Profit after tax - 3.7
Income statement (Group share)
Revenue - gross rent - 1.1
Property and management expenses - (0.3)
Void costs - (0.3)
Net rent - 0.5
Net interest payable - (0.1)
Contribution - 0.4
Revaluation of investment properties - 3.5
Deferred tax on revaluation - (1.5)
Impairment - (0.6)
Profit before tax - 1.8
Tax - -
Profit after tax - 1.8
(1) Comprised Buttermarket Ipswich.
8 Cash and cash equivalents
30 December 30 December
2017 2016
GBPm GBPm
Cash at bank and in hand 24.4 45.8
Security deposits held in rent accounts 0.8 0.7
Other restricted balances 5.0 2.6
30.2 49.1
Cash at bank and in hand include amounts subject to a charge against various borrowings and may therefore not be immediately
available for general use by the Group. All of the above amounts at 30 December 2017 were held in Sterling other than GBP0.9 million
which was held in Euros (30 December 2016: 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
2017 2016
Borrowings at amortised cost GBPm GBPm
Secured
Fixed and swapped bank loans 428.4 260.2
Variable rate bank loans - 101.3
Total borrowings before costs 428.4 361.5
Unamortised issue costs (6.2) (0.7)
Total borrowings after costs 422.2 360.8
Analysis of total borrowings after costs
Current - 334.6
Non-current 422.2 26.2
Total borrowings after costs 422.2 360.8
During the period GBP39.0 million of new debt was drawn in respect of the acquisition of The Exchange, Ilford, and GBP362.5 million in
respect of the refinancing of the Mall assets completed on 4 January 2017. The maturity of the Group's GBP30 million revolving credit
facility was extended in the year to 22 January 2022.
10 Reconciliation of net cash from operations
Year to Year to
30 December 30 December
2017 2016
Note GBPm GBPm
Profit/(loss) for the year 22.4 (4.4)
Adjusted for:
Income tax credit 4a - (0.1)
Finance income (1.2) (0.4)
Finance expense 18.8 33.0
Loss on revaluation of wholly-owned properties 3.8 14.2
Share of loss/(profit) in associates and joint ventures 7a 2.0 (0.3)
Depreciation of other fixed assets 0.2 0.1
Other gains and losses (0.3) 1.8
Increase in receivables (7.3) (0.1)
Increase/(decrease) in payables 3.7 (3.2)
Non-cash movement relating to share-based payments 0.9 0.5
Net cash from operations 43.0 41.1
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 2017 2016
Net assets Number of Net assets Net assets
GBPm shares (m) per share (GBP) per share (GBP)
Basic net assets 481.4 718.3 0.67 0.68
Own shares held (0.2)
Dilutive contingently issuable shares and share options 6.8
Fair value of fixed rate loans (net of tax) (1.6)
EPRA triple net assets 479.8 724.9 0.66 0.67
Exclude fair value of fixed rate loans (net of tax) 1.6
Exclude fair value of see-through interest rate derivatives 1.3
Exclude deferred tax on unrealised gains and capital
allowances (0.1)
EPRA net assets 482.6 724.9 0.67 0.68
12 Return on equity
30 December 30 December
2017 2016
GBPm GBPm
Total comprehensive income attributable to equity shareholders 22.4 (4.4)
Opening equity shareholders' funds plus time weighted additions 480.1 503.4
Return on equity 4.7% (0.9)%
13 Dividends
The dividends shown below are gross of any take up of Scrip offer.
Year to Year to
30 December 30 December
2017 2016
GBPm GBPm
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
Final dividend per share paid for year ended 30 December 2016 of 1.77p 12.4 -
Interim dividend per share paid for year ended 30 December 2017 of 1.73p 12.4 -
Amounts recognised as distributions to equity holders in the year 24.8 22.7
Proposed final dividend per share for year ended 30 December 2017 of 1.91p(1) 13.7 -
(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.
Covenant information (Unaudited)
Wholly-owned assets
Borrowings Covenant 30 December Future changes
GBPm 2017
Core revolving credit facility (100%)
Net Assets - No less than GBP350m GBP481.6m
Gearing No greater than 1.5:1 0.87:1
Historic interest cover No less than 200% 374%
4 Mall assets (100%)
Loan to value(1) 255.0 No greater than 70% 48%
Historic interest cover No less than 175% 291%
A projected interest cover test also applies at a covenant level of no less than 150%
Luton (100%)
Loan to value(1) 107.5 No greater than 70% 55% Covenant 65% from January 2022
Debt yield No less than 8% 10.2%
Historic interest cover No less than 250% 350%
A projected interest cover test also applies at a covenant level of no less than 200%
Hemel Hempstead (100%)
Loan to value(1) 26.9 No greater than 60% 50%
Debt to net rent No greater than 10:1 7.1:1 Covenant 9:1 from April 2019
Historic interest cover No less than 200% 435%
A projected interest cover test also applies at a covenant level of no less than 200%
Ilford (100%)
Loan to value(1) 39.0 No greater than 70% 47%
Historic interest cover No less than 225% 515%
A projected interest cover test also applies at a covenant level of no less than 225%
(1) Calculated as specified in loan agreement based on 30 December 2017 valuation. Actual bank covenant based on bank valuation updated annually.
The covenants above refer to the default covenant. The facilities typically also have a cash trap covenant.
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. Adjusted Earnings per share is Adjusted Profit divided
by the weighted average number of shares in issue during the year
excluding own shares held.
C&R is Capital & Regional plc, also referred to as the Group or the Company.
C&R Trade index is an internal retail tracker using data from
approximately 300 retail units across C&R's shopping centre portfolio.
CRPM is Capital & Regional Property Management Limited, a subsidiary
of Capital & Regional plc, which earns management and performance
fees from the Mall assets and certain associates and joint ventures of the Group.
Contracted rent is passing rent and the first rent reserved under a 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.
Like-for-like figures, unless otherwise stated, exclude the impact of
property purchases and sales on year to year comparatives.
Loan to value (LTV) is the ratio of debt excluding fair value adjustments
for debt and derivatives, to the Market value of properties.
Market value is an opinion of the best price at which the sale of an
interest in a property would complete unconditionally for cash
consideration on the date of valuation as determined by the Group's
external or internal valuers. In accordance with usual practice, the valuers
report valuations net, after the deduction of the prospective purchaser's
costs, including stamp duty, agent and legal fees.
Net 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.
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.
Occupancy cost ratio is the proportion of a retailer's sales
compared with the total cost of occupation being: rent, business
rates, service charge and insurance. Retailer sales are based on
estimates by third party consultants which are periodically updated
and indexed using relevant data from the C&R Trade Index.
Occupancy rate is the ERV of occupied properties expressed as a
percentage of the total ERV of the portfolio, excluding development voids.
Rent to sales ratio is Contracted rent excluding car park income,
ancillary income and anchor stores expressed as a percentage of
net sales.
REIT - Real Estate Investment Trust.
Return on equity is the total return, including revaluation gains and
losses, divided by opening equity plus time weighted additions to
and reductions in share capital, excluding share options exercised.
Reversionary percentage is the percentage by which the ERV
exceeds the passing rent.
Reversionary yield is the anticipated yield to which the net initial
yield will rise once the rent reaches the ERV.
Temporary lettings are those lettings for one year or less.
Total property return incorporates net rental income and capital
return expressed as a percentage of the capital value employed
(opening market value plus capital expenditure) calculated on a time
weighted basis.
Total return is the Group's total recognised income or expense for
the year as set out in the consolidated statement of comprehensive
income expressed as a percentage of opening equity shareholders' funds.
Total shareholder return (TSR) is a performance measure of the
Group's share price over time. It is calculated as the share price
movement from the beginning of the year to the end of the year plus
dividends paid, divided by share price at the beginning of the year.
Variable overhead includes discretionary bonuses and the costs of
awards to directors and employees made under the 2008 LTIP and
other share schemes which are spread over the performance period.
Wholly-owned assets portfolio information (Unaudited)
At 30 December 2017
Physical data
Number of properties 7
Number of lettable units 765
Size (sq feet - million) 3.5
Valuation data
Properties at independent valuation (GBPm) 886.6
Adjustments for head leases and tenant incentives (GBPm) 44.0
Properties as shown in the financial statements (GBPm) 930.6
Revaluation loss in the year (GBPm) 3.8
Initial yield 6.1%
Equivalent yield 6.4%
Reversion 12.3%
Loan to value ratio 48%
Net debt to value ratio 46%
Lease length (years)
Weighted average lease length to break 6.5
Weighted average lease length to expiry 7.8
Passing rent (GBPm) of leases expiring in:
2018 9.0
2019 3.1
2020-2022 17.1
ERV (GBPm) of leases expiring in:
2018 10.9
2019 4.5
2020-2022 17.8
Passing rent (GBPm) subject to review in:
2018 3.0
2019 3.4
2020-2022 9.3
ERV (GBPm) of passing rent subject to review in:
2018 3.0
2019 3.3
2020-2022 12.0
Rental Data
Contracted rent at year end (GBPm) 64.1
Passing rent at year end (GBPm) 61.0
ERV at year end (GBPm per annum) 68.5
ERV movement (like-for-like) +0.3%
Occupancy 97.3
EPRA performance measures (Unaudited)
As at 30 December 2017
Note 2017 2016
EPRA earnings (GBPm) 5a 27.8 26.2
EPRA earnings per share (diluted) 5a 3.9p 3.7p
EPRA net assets (GBPm) 11 482.6 481.5
EPRA net assets per share 11 67p 68p
EPRA triple net assets (GBPm) 11 479.8 475.2
EPRA triple net assets per share 11 66p 67p
EPRA vacancy rate (UK portfolio only) 2.8% 3.7%
EPRA net initial yield and EPRA topped-up net initial yield
2017 2016(1)
GBPm GBPm
Investment property - wholly-owned 886.6 794.1
Investment property - share of joint ventures and associates 28.6 30.8
Less developments - -
Completed property portfolio 915.2 824.9
Allowance for capital costs 8.0 15.0
Allowance for estimated purchasers' costs 60.2 56.3
Grossed up completed property portfolio valuation 983.4 896.2
Annualised cash passing rental income 67.0 58.8
Property outgoings (13.1) (11.4)
Annualised net rents 53.9 47.4
Add: notional rent expiration of rent free periods or other lease incentives 3.6 4.4
Topped up annualised rent 57.5 51.8
EPRA net initial yield 5.5% 5.3%
EPRA topped-up net initial yield 5.8% 5.8%
(1) Excludes Buttermarket Centre, Ipswich.
EPRA Cost ratios
2017 2016
GBPm GBPm
Cost of sales (adjusted for IFRS head lease differential) 33.9 33.0
Administrative costs 10.2 10.9
Service charge income (14.1) (14.0)
Management fees (0.8) (1.0)
Snozone (indoor ski operation) costs (8.9) (8.8)
Share of joint venture & associate expenses 0.7 1.2
Less inclusive lease costs recovered through rent (2.1) (1.9)
EPRA costs (including direct vacancy costs) 18.9 19.4
Direct vacancy costs (3.1) (2.9)
EPRA costs (excluding direct vacancy costs) 15.8 16.5
Gross rental income 63.9 62.0
Less ground rent costs (3.0) (3.1)
Share of joint venture & associate gross rental income less ground rent costs 2.3 3.4
Less inclusive lease costs recovered through rent (2.1) (1.9)
Gross rental income 61.1 60.4
EPRA cost ratio (including direct vacancy costs) 30.9% 32.2%
EPRA cost ratio (excluding vacancy costs) 25.9% 27.4%
Sponsor: Java Capital
Date: 08/03/2018 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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