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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Capital & Regional Plc | LSE:CAL | London | Ordinary Share | GB00BL6XZ716 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.40 | -2.72% | 50.00 | 49.30 | 50.00 | 50.20 | 49.90 | 50.20 | 167,458 | 16:35:10 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMCAL
RNS Number : 0496H
Capital & Regional plc
08 March 2018
8 March 2018
Capital & Regional plc ("C&R" or "the Company")
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
Hot Features
Premium
-- 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) GBP22.4m GBP(4.4)m
for the period
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 11(th) 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.
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
(1) For lettings and renewals (excluding development deals) with a term of five years or longer and which did not include a turnover element.
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 GBP2.7m
(GBPm)
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 GBP5.2m
(GBPm)
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 30 December
2017 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 December
2017 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% -
-0.7
Average debt maturity(4) 7.3 years 8.0 years 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 Rationale
measure used
------------------------ ------------------------------------
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 Year to 30
December 2017 December 2016
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 30 December
2017 2016
-------------------------------- ------------- ------------- ------
Like for like
(Blackburn, Luton, Maidstone,
Walthamstow, Wood Green) 43.5 42.7 +1.9%
-------------------------------- ------------- ------------- ------
Hemel Hempstead - acquired
February/March 2016 3.7 3.5
-------------------------------- ------------- -------------
Camberley (sold November
2016) and other disposals - 4.2
-------------------------------- ------------- -------------
Ilford - acquired 8 March 4.4 -
2017
-------------------------------- ------------- ------------- ------
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 30 December 30 December
valuation 2017 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 Year to 30
December 2017 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
DebtP(1) Cash(2) Net Loan Net Average Fixed Duration Duration
debt to debt interest to with
value to rate loan extensions
(3) value(3) expiry
30 December GBPm GBPm GBPm % % % % Years Years
2017
----------------- --------- -------- ------ ------- ---------- ----------- ------ --------- ------------
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 conditions and poor sentiment in * Small changes in property market yields can have a * Monitoring of indicators of market direction and
commercial real estate markets could lead to low significant effect on valuation forward planning of investment decisions
investor demand and an adverse movement in valuation
* Impact of leverage could magnify the effect on the * Review of debt levels and consideration of strategies
Group's net assets to reduce if relevant
Impact of the economic environment
* Tenant insolvency or distress * Tenant failures and reduced tenant demand could * Large, diversified tenant base
adversely affect rental income, lease incentive, void
costs, cash and ultimately property valuation
* Prolonged downturn in tenant demand and pressure on * Review of tenant covenants before new leases signed
rent levels
* Long-term leases and active credit control process
* Good relationships with, and active management of,
tenants
* Void management though temporary lettings and other
mitigation strategies
Valuation risk
* Lack of relevant transactional evidence * Property valuations increasingly subjective and open * Use of experienced, external valuers who understand
to a wider range of possible outcomes the specific properties
* Use of more than one valuer
* Valuations reviewed by internal valuation experts and
key assumptions challenged
Threat from the internet
* The trend towards online shopping may adversely * A change in consumer shopping habits towards online * Strong location and dominance of shopping centres
impact consumer footfall in shopping centres purchasing and delivery may reduce footfall and (portfolio is weighted to London and South East
therefore potentially reduce tenant demand and the England)
levels of rents which can be achieved
* Strength of the community shopping experience with
tailored relevance to the local community
* Concentration on convenience and value offer which is
less impacted by online presence
* Increasing provision of 'Click & Collect' within our
centres
* Digital marketing initiatives
* Monitoring of footfall for evidence of negative
trends
* Monitoring of retail trends and shopping behaviour
Concentration and scale risk
* By having a less diversified portfolio the business * Tenant failures could have a greater impact on rental * Regular monitoring of retail environment and
is more exposed to specific tenants or types of income performance of key tenants
tenant
* Reduced purchasing power could impact the ability to * Maintaining flexibility in operating platform
drive economies of scale and the feasibility of
certain investment decisions regarding the operating
platform * Further diversification considered through
acquisitions or joint ventures
Competition risk
* The threat to the Group's property assets of * Competing schemes may reduce footfall and reduce * Monitoring of new planning proposals
competing in town and out of town retail and leisure tenant demand for space and the levels of rents which
schemes can be achieved
* Close relationships with local councils and
willingness to support 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 or impacts upon * Trained operational personnel at all sites and
shopper footfall documented major incident procedures
* Updated operational procedures reflecting current
threats and major incident testing run
* Regular liaison with the police
* Key IT applications hosted offsite
* Insurance maintained
Development risk
* Delays or other issues may occur to capital * May lead to increased cost and reputational damage * Approval process for new developments and staged
expenditure and development projects execution to key milestones
* Planned value may not be 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 or to refinance * Inability to meet financial obligations when due * Refinancing of debt on the Mall assets in early 2017
existing debt on economic terms when needed improved liquidity and long-term security
* Limitation on financial and operational flexibility
* Ensuring that there are significant undrawn
facilities
* Cost of financing could be 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 causing default on debt * Unremedied breaches can trigger demand for immediate * Regular monitoring and projections of liquidity,
and possible accelerated maturity repayment of loan gearing and covenant compliance
* Review of future cash flows and predicted valuations
to ensure sufficient headroom
Interest rate exposure risks
* Exposure to rising or falling interest rates * If interest rates rise and are unhedged, the cost of * Regular monitoring of the performance of derivative
debt facilities can rise and ICR covenants could be contracts and corrective action taken where necessary
broken
* Use of alternative hedges such as caps
* Hedging transactions used by the Group to minimise
interest rate risk may limit gains, result in losses
or have other adverse consequences
Other risks
Execution of business plan
* Failure to execute business plan in line with * Potential loss of income or value resulting in lower * Management of projects and the individual shopping
internal and external expectations cash flow and property valuation centres by experienced and skilled professionals
* Reputational damage negatively impacting investor * Strong relationships with retailers and
market perception contractors/suppliers
* Ongoing monitoring of performance against plan and
key milestones
Property acquisition/disposal strategy
* Exposure to risks around overpayment for acquisitions * Overpayment may result in acquisitions not delivering * Regular monitoring of the property market and the use
forecast returns of professional advisers
* Portfolio not effectively managed through the
investment cycle, with sales and de-leveraging at the * The Group may not be able to take advantage of * Impact of cycle reflected in business planning
appropriate time investment opportunities as they arise
* Covenants may move adversely when cycle changes
Reputational risk
* Adverse events or publicity, including social media, * Negatively impact investor market perception * Close Board/Management oversight of major issues and
may lead to reputational damage decision making
* May reduce shopper footfall and demand from tenants
for space * Effective pre-planning of 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 with the REIT regime and * Tax related liabilities and other losses could arise * Monitoring of REIT compliance
changes in the form or interpretation of tax
legislation
* Expert advice taken on tax positions and other
regulations
* Potential exposure to tax liabilities in respect of
historic transactions undertaken
* Maintenance of a regular dialogue with the tax
authorities
Regulation risks
* Exposure to changes in existing or forthcoming * Failure to comply could result in financial penalties, * Training to keep Management aware of regulatory
property or corporate regulation loss of business or credibility changes
* Expert advice taken on complex regulatory matters
Loss of key management
* Dependence of the business on the skills of a small * Loss of key individuals or an inability to attract * Key management are paid market salaries and
number of key individuals new employees with the appropriate expertise could competitive incentive packages
reduce effectiveness
* New LTIP awards made in 2017
* Succession planning for key positions is undertaken
as evidenced by CEO transition in 2017
Historic transactions
* Historic sales have included vendor warranties and * Warranty and indemnity related liabilities and other * Use of professional advisers to achieve properly
indemnities and as such, the Group has potential losses could arise negotiated agreements in terms of scope, extent of
exposure to future claims from the purchaser financial liability and timeframe
* 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.
5
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
---------------------------
Other
UK Group/
Wholly-owned Shopping
assets 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
---------------------------
Other
UK Group/
Wholly-owned Shopping
assets 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 Year to 30 December
2017 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 Year to Year to
number of shares 30 December 30 December
(m) 2017 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 Year to 30 December
2017 2016
Profit Movement Loss Movement
on disposal in fair on disposal in fair
of value of 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 Year to 30 December
2017 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
Group Group
100% share 100% 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
-------------------------------- ----- ------------ ------------
2a,
Share of results of associates 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 Year
to 30 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 0.4 -
rate swaps
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 Number
assets of Net assets Net assets
shares per share per share
GBPm (m) (GBP) (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 GBP481.6m
GBP350m
No greater
Gearing than 1.5:1 0.87:1
Historic interest No less than
cover 200% 374%
4 Mall assets (100%)
No greater
Loan to value(1) 255.0 than 70% 48%
Historic interest No less than
cover 175% 291%
A projected interest cover test also
applies at a covenant level of no less
than 150%
Luton (100%)
Covenant 65%
No greater from January
Loan to value(1) 107.5 than 70% 55% 2022
No less than
Debt yield 8% 10.2%
Historic interest No less than
cover 250% 350%
A projected interest cover test also
applies at a covenant level of no less
than 200%
Hemel Hempstead
(100%)
No greater
Loan to value(1) 26.9 than 60% 50%
Debt to net No greater 7.1:1 Covenant 9:1
rent than 10:1 from April 2019
Historic interest No less than
cover 200% 435%
A projected interest cover test also
applies at a covenant level of no less
than 200%
Ilford (100%)
No greater
Loan to value(1) 39.0 than 70% 47%
Historic interest No less than
cover 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 Net assets per share (NAV)
of Contribution from wholly-owned are shareholders' funds
assets and the Group's joint divided by the number of
ventures and associates, the shares held by shareholders
profit from Snozone and property at the year end, excluding
management fees less central own shares held.
costs (including interest
excluding non-cash charges Net initial yield (NIY)
in respect of share-based is the annualised current
payments) after tax. Adjusted rent, net of revenue costs,
Profit excludes revaluation topped-up for contractual
of properties, profit or loss uplifts, expressed as a
on disposal of properties percentage of the capital
or investments, gains or losses valuation, after adding
on financial instruments and notional purchaser's costs.
exceptional one-off items.
Results from Discontinued Net debt to property value
Operations are included up is debt less cash and cash
until the point of disposal equivalents divided by the
or reclassification as held property value.
for sale. Adjusted Earnings
per share is Adjusted Profit Net interest is the Group's
divided by the weighted average share, on a see-through
number of shares in issue basis, of the interest payable
during the year excluding less interest receivable
own shares held. of the Group and its associates
and joint ventures.
C&R is Capital & Regional
plc, also referred to as the Net rent is the Group's
Group or the Company. share, on a see-through
basis, of the rental income,
C&R Trade index is an internal less property and management
retail tracker using data costs (excluding performance
from approximately 300 retail fees) of the Group and its
units across C&R's shopping associates and joint ventures.
centre portfolio.
Nominal equivalent yield
CRPM is Capital & Regional is a weighted average of
Property Management Limited, the net initial yield and
a subsidiary of Capital & reversionary yield and represents
Regional plc, which earns the return a property will
management and performance produce based upon the timing
fees from the Mall assets of the income received,
and certain associates and assuming rent is received
joint ventures of the Group. annually in arrears on gross
values including the prospective
Contracted rent is passing purchaser's costs.
rent and the first rent reserved
under a lease but which is Passing rent is gross rent
not yet payable by a tenant. currently payable by tenants
including car park profit
Contribution is net rent less but excluding income from
net interest, including unhedged non-trading administrations
foreign exchange movements. and any assumed uplift from
outstanding rent reviews.
Capital return is the change
in market value during the Occupancy cost ratio is
year for properties held at the proportion of a retailer's
the balance sheet date, after sales compared with the
taking account of capital total cost of occupation
expenditure calculated on being: rent, business rates,
a time weighted basis. service charge and insurance.
Retailer sales are based
Debt is borrowings, excluding on estimates by third party
unamortised issue costs. consultants which are periodically
updated and indexed using
EPRA earnings per share (EPS) relevant data from the C&R
is the profit / (loss) after Trade Index.
tax excluding gains on asset
disposals and revaluations, Occupancy rate is the ERV
movements in the fair value of occupied properties expressed
of financial instruments, as a percentage of the total
intangible asset movements ERV of the portfolio, excluding
and the capital allowance development voids.
effects of IAS 12 "Income
Taxes" where applicable, less Rent to sales ratio is Contracted
tax arising on these items, rent excluding car park
divided by the weighted average income, ancillary income
number of shares in issue and anchor stores expressed
during the year excluding as a percentage of net sales.
own shares held.
REIT - Real Estate Investment
EPRA net assets per share Trust.
include the dilutive effect
of share-based payments but Return on equity is the
ignore the fair value of derivatives, total return, including
any deferred tax provisions revaluation gains and losses,
on unrealised gains and capital divided by opening equity
allowances, any adjustment plus time weighted additions
to the fair value of borrowings to and reductions in share
net of tax and any surplus capital, excluding share
on the fair value of trading options exercised.
properties.
Reversionary percentage
EPRA triple net assets per is the percentage by which
share include the dilutive the ERV exceeds the passing
effect of share-based payments rent.
and adjust all items to market
value, including trading properties Reversionary yield is the
and fixed rate debt. anticipated yield to which
the net initial yield will
Estimated rental value (ERV) rise once the rent reaches
is the Group's external valuers' the ERV.
opinion as to the open market
rent which, on the date of Temporary lettings are those
valuation, could reasonably lettings for one year or
be expected to be obtained less.
on a new letting or rent review
of a unit or property. Total property return incorporates
net rental income and capital
ERV growth is the total growth return expressed as a percentage
in ERV on properties owned of the capital value employed
throughout the year including (opening market value plus
growth due to development. capital expenditure) calculated
on a time weighted basis.
Gearing is the Group's debt
as a percentage of net assets. Total return is the Group's
See through gearing includes total recognised income
the Group's share of non-recourse or expense for the year
debt in associates and joint as set out in the consolidated
ventures. statement of comprehensive
income expressed as a percentage
Interest rate cover (ICR) of opening equity shareholders'
is the ratio of either (i) funds.
Adjusted Profit (before interest,
tax, depreciation and amortisation); Total shareholder return
or (ii) net rental income (TSR) is a performance measure
to the interest charge. of the Group's share price
over time. It is calculated
Like-for-like figures, unless as the share price movement
otherwise stated, exclude from the beginning of the
the impact of property purchases year to the end of the year
and sales on year to year plus dividends paid, divided
comparatives. by share price at the beginning
of the year.
Loan to value (LTV) is the
ratio of debt excluding fair Variable overhead includes
value adjustments for debt discretionary bonuses and
and derivatives, to the Market the costs of awards to directors
value of properties. and employees made under
the 2008 LTIP and other
Market value is an opinion share schemes which are
of the best price at which spread over the performance
the sale of an interest in period.
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.
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%
--------------------------------------- ------- -------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BDLLBVXFZBBK
(END) Dow Jones Newswires
March 08, 2018 02:00 ET (07:00 GMT)
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