Capital & Regional - Full Year Results to 30 December 2022
02/03/2023 07:00
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RNS Number : 5983R Capital & Regional plc 02 March 2023
2 March 2023
Capital & Regional plc
("Capital & Regional" or "C&R" or "the Company" or "the Group")
Full Year Results to 30 December 2022
STRONG OPERATIONAL PERFORMANCE DRIVING PROFITABILITY AND DIVIDENDS
Capital & Regional (LSE: CAL), the UK focused REIT with a portfolio of
in-town community shopping centres, today announces its full year results to
30 December 2022.
Lawrence Hutchings, Chief Executive, comments:
"2022 was a good year for Capital & Regional, both operationally, as well
as in terms of strengthening the Company's balance sheet following the
successful capital raise and Mall debt restructuring in November 2021. Despite
the broader macro-economic headwinds throughout the year, the continued retail
recovery from Covid and a robust Christmas trading season has helped us drive
a strong operational performance in 2022.
"We maintained leasing momentum with an average uplift on previous rents of
34%(3), supported by our affordable average rents of c. £14 per sq ft,
helping us to grow occupancy, net rental income and profit. Occupier
profitability will be further supported by the recent rates revaluation which
will take effect from April 2023 with average reductions in business rates to
our occupiers of 30%-35% across most of our portfolio.
"The Group has delivered a significant improvement in Net LTV from 49% to 41%,
despite the market wide fall in valuations in the second half of 2022. As a
result, we are now able to focus on investing in our portfolio, allowing us to
further reposition and remerchandise our centres at the heart of the local
communities that we serve, driving footfall back towards pre-pandemic levels
and creating vibrant trading places for our occupiers' essential goods and
services whilst growing our occupancy, income and profit as part of our post
covid recovery.
"We are encouraged by our operational resilience and a growing appreciation of
the critical role which physical stores play in successful omnichannel
retailing. We believe we are well-positioned to continue to navigate the
current cyclical pressures and the Board's confidence in the Company's future
prospects is reflected in a proposed final dividend of 2.75p per share,
resulting in a total dividend for 2022 of 5.25p per share. Finally, I would
like to thank our teams and stakeholders for all their hard work and support
during 2022."
Continuing operational resilience
· 109 new lettings and renewals achieved during the year at a combined average
premium of 34.0% to previous rent(3) and 13.7% to ERV(3) representing £5.4
million of annual rent (2021: £5.2 million). Key lettings completed include
the Walthamstow food hall, extension to Wood Green diagnostics centre, and at
Ilford a 25-year lease agreement with the NHS for a new community healthcare
centre and the upsizing and relocation of TK Maxx.
· Occupancy has improved to 94.1% (December 2021: 92.9%).
· 53 million shopper visits in 2022 (up 27.4% on 2021) and footfall continuing
recovery at c.84% of 2019 levels (88% for H2 22).
· Rent collection back in line with pre-pandemic levels, with 97.6% collected
for the 2022 financial year.
· Snozone's EBITDA(1) for the year increased to £1.4 million (2021: £0.8
million, which included £2.5 million business continuity insurance receipt)
with trading continuing to improve throughout the year.
· 42% fall in carbon emissions by 2022 against the 2019 baseline, driven by a
28% reduction in energy consumption.
Improved profitability supporting resumption of dividend
· 16.9% growth in Net Rental Income(1, 2) (NRI) on Investment Assets to £23.5
million (December 2021: £20.1 million(2)) driven by improved occupancy and
rent collection. Statutory revenue(2) increased 10.9% to £60.6 million
(December 2021: £54.6 million(2)).
· 58.5% increase in Adjusted Profit(1) to £10.3 million (December 2021: £6.5
million(1,2)), reflecting the improvement in NRI. Adjusted EPS increased to
6.2p (December 2021: 5.4p(2)) reflecting the improvement in Adjusted Profit,
partially offset by the higher number of shares in issue from the £30 million
capital raise which completed in November 2021.
· Significant improvement in IFRS Profit for the period to £12.1 million
(December 2021: Loss of £26.4 million) primarily due to the Adjusted Profit
of £10.3 million, combined with gains of £12.5 million and £6.8 million
respectively from the discounted purchase of the Hemel Hempstead loan facility
and deconsolidation of Luton. This was partially offset by a 3.6%
like-for-like fall in the value of the portfolio which led to a £19.6 million
revaluation loss.
· 6.3% growth in NAV to £179.1 million (31 December 2021: £168.4 million)
· Net Asset Value per share and EPRA NTA per share increased to 106p and 103p
respectively (December 2021: 102p and 102p).
· Resumption of dividends during the year, reflecting the recovery of the
business post-pandemic together with the substantial progress made in reducing
debt. Following an interim dividend of 2.5p per share a final dividend of
2.75p per share is being proposed resulting in total dividends for 2022 of
5.25p per share (2021: nil).
Refocus, Restructure and Recapitalise
· Transactional activity during 2022 reduced the Group's Net Loan to Value (LTV)
ratio from 49% at 30 December 2021 (and 72% at 30 June 2021) to 41% at 30
December 2022.
· Debt maturity of 4.5 years(5) with average cost of debt of 3.66%(5), 98%
fixed(5).
· In August 2022, the £40 million disposal of The Mall, Blackburn completed at
a c. 5% premium to the December 2021 valuation.
· In May 2022, the Group secured ownership of the Marlowes centre in Hemel
Hempstead through the buyback at a 51% discount of the asset's loan facility
for £11.8 million, which also increased Group Net Asset Value by
approximately £12.5 million.
· Signed package of amendments to the £39 million Ilford loan in May 2022,
facilitating the investment of more than £10 million for the creation of the
new community healthcare centre and anchor unit for TK Maxx.
· Proposed disposal of the Group's investment in The Mall, Luton is expected to
complete imminently. The Group's investment in Luton was deconsolidated during
the year resulting in an increase to Net Asset Value of £6.8 million.
· In July 2022, the Group completed the sale of land for residential development
at its 17&Central community shopping centre in Walthamstow to Long Harbour
for c. £21.6 million. The first phase of the development is now under way
which will see the creation of 495 Build to Rent apartments in two residential
towers and providing a new captive audience of shoppers for the centre.
Year to Year to
Dec 2022 Dec 2021
Revenue (2) £60.6m £54.6m
Net Rental Income (2) £23.5m £20.1m
Adjusted Profit (1, 2) £10.3m £6.5m
Adjusted Earnings per share (1, 2) 6.2p 5.4p
IFRS Profit/(Loss) for the period £12.1m £(26.4)m
Basic earnings/(loss) per share 7.3p (22.0)p
Total dividend per share (4) 5.25p -
Net Asset Value £179.1m £168.4m
Net Asset Value (NAV) per share 106p 102p
EPRA NTA per share 103p 102p
Group net debt £130.9m £185.3m
Net debt to property value 41% 49%
( )
Notes
(1) Adjusted Profit, Adjusted Earnings per share, Net Rental Income, Net Debt
and the Snozone EBITDA metric are as defined in the Glossary. Adjusted Profit
incorporates profits from operating activities and excludes revaluation of
properties and financial instruments, gains or losses on disposal, and other
non-operational items. A reconciliation to the equivalent EPRA and statutory
measures is provided in Note 5 to the condensed financial statements.
(2) 2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions due to an IASB IFRS interpretation issued in
October 2022 as detailed in Note 1 to the condensed financial statements. The
amendment stipulates that losses which were incurred on granting rent
concessions, which for the Group occurred during the Covid-19 pandemic, should
be charged to the income statement in the year they are granted. 2021
revenue has also been impacted by the reclassification of Luton as a
Discontinued Operation. The adjustment for the treatment of rent concessions
reduced revenue and Adjusted Profit in 2021 by £1.6 million, with a
corresponding reduction in the loss on revaluation of investment properties.
The Adjusted Profit for 2022 is £0.3 million higher than it would have been
without this adjustment to rent concessions. The reclassification of Luton
as a Discontinued Operation reduced revenue in 2021 by £13.8 million.
(3) For lettings and renewals (excluding development deals and CVA variations)
with a term of 5 years or longer which do not include turnover rent or service
charge restrictions.
(4) Includes dividends declared post period end but related to the period in
question.
(5) Weighted average, debt maturity assumes exercise of extension options.
Use of Alternative Performance Measures (APMs)
Throughout the results statement we use a range of financial and non-financial
measures to assess our performance. A number of the financial measures,
including Net Rental Income, Adjusted Profit, Adjusted Earnings per share, Net
Debt and the industry best practice EPRA (European Public Real Estate
Association) performance measures are not defined under IFRS, so they are
termed APMs. APMs are not considered superior to the relevant IFRS measures,
rather Management use them alongside IFRS measures to monitor the Group's
financial performance because they help illustrate the trading performance and
position of the Group. All APMs are defined in the Glossary and further detail
on their use is provided within the Financial Review.
( )
For further information:
Capital & Regional: Tel: +44 (0)20 7932 8000
Lawrence Hutchings, Chief Executive
Stuart Wetherly, Group Finance Director
FTI Consulting: Tel: +44 (0)20 3727 1000
Richard Sunderland, Maria Saud, Katie Hughes Email: Capreg@fticonsulting.com
Notes to editors:
About Capital & Regional
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 the local communities. It has a strong track
record of delivering value enhancing retail and leisure asset management
opportunities across a portfolio of in-town shopping centres. Capital &
Regional is listed on the main market of the London Stock Exchange (LSE) and
has a secondary listing on the Johannesburg Stock Exchange (JSE).
Using its in-house expert property and asset management platform Capital &
Regional owns and / or manages shopping centres in Hemel Hempstead, Ilford,
Luton, Maidstone, Redditch, Walthamstow and Wood Green.
For further information see capreg.com (http://www.capreg.com) .
South African secondary listing
At 30 December 2022, 7,565,067 of the Company's total 169,191,918 shares were
held on the South African register representing 4.47% of the total issued
share capital. Java Capital acts as JSE Sponsor for the Group.
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
In headline terms Capital & Regional delivered a strong performance in
2022, completing a number of initiatives to strengthen its balance sheet and
reduce debt, undertaking capital expenditure in line with its community
strategy, and improving occupancy. This positive momentum saw the Company
increase Net Rental Income from its Investment Assets by 16.9% to £23.5m,
which led to a 58.5% increase in Adjusted Profit to £10.3 million. Despite
the wider economic backdrop and increases in inflation and interest rates
which impacted the commercial property sector, the Company delivered 6.3%
growth in NAV to £179 million (31 December 2021:
£168 million) and a 1.8% increase in EPRA NTA per share to 103 pence per
share, despite a valuation decline in the second half of the year.
After the very obvious challenges of 2020 and 2021, the retail environment
facing the Company in 2022 was more nuanced. On the positive side, we saw an
end to the pandemic restrictions with all traders open for business and
footfall trending back upwards towards 2019 levels. Retail failures were
significantly down and rent collection levels much improved. Counteracting the
good news, the UK economy faced increasing difficulties from low growth, high
inflation and a sharp end to over a decade of very low interest rates
accompanying a dramatic fall in consumer confidence.
Despite fears that Christmas 2022 trading would be materially affected by
these factors, seasonal retail sales were robust, albeit with volumes slightly
below 2019 levels. Footfall for the year in the Company's centres was 27%
ahead of 2021 and reached 84% of 2019 levels.
Another notable positive trend during the year was the slowdown in the growth
of online retail reflected in challenges faced by a number of online only
retailers, coupled with a widespread recognition that an omnichannel offering
is an optimum model for retailers.
Based on these trends, the Company enters 2023 optimistic that our business
model of Community Centres, meeting the needs of customers for
non-discretionary goods and services, is well placed to benefit from a steady
recovery in physical retail and weather the current economic headwinds.
Recognising the importance of income to REIT investors, we were pleased to
resume the payment of dividends in 2022, supported by the improvements in NRI
and Adjusted Profit.
Capital & Regional continued to demonstrate an active approach to
portfolio management to ensure it delivers value for its shareholders and to
be good stewards of capital, notably:
· The sale of The Mall, Blackburn for a price in excess of its December 2021
valuation.
· The purchase of the outstanding debt on Hemel Hempstead at a significant
discount to face value, allowing the property to be restored to the Investment
Assets portfolio.
· Signing major lease commitments at Ilford with TK Maxx and the local NHS
Health Board, allowing a package of amendments to be agreed on the loan on
that asset.
· Completing the sale of the Walthamstow residential development site.
Assisted by these initiatives, the Company's net debt ratio improved over the
year from 49% to 41% despite a modest fall in values of 3.6%.
Whilst the market had anticipated that falls in 2020 and 2021 would mark the
low point in valuations, steeply falling values in other sectors in the second
half of 2022 coupled with an absence of available bank debt continued to
impact retail valuations, albeit to a far lesser degree than other real estate
sectors. This also reflected very limited investment comparable transactions
and general continuation of negative sentiment. Our view is that following
the repricing there is now a very selective buying opportunity in the sector.
The underlying resilience of the leasing market was demonstrated by the
Company's success in achieving lease renewals and new leases well ahead of
both previous rent and ERV, with the affordability of rents being a key
consideration in this. A total of 109 new lettings and renewals were signed
in 2022, with an annual rent of £5.4 million and headline occupancy reaching
94% at the year end. Consistent with this rent collection improved from
approximately 93% in 2021 to 97.6% in 2022.
Snozone continued to make strong progress post the pandemic with overall
revenues up 35% and with Madrid in particular growing by 66% supported by
leveraging the UK management platform, improved productivity and full systems
integration. The EBITDA contribution improved from £0.8 million in 2021 to
£1.4 million in 2022, despite inflation in utility costs.
Although this was a year of recovery, it continued to present many challenges
to the Company's management and staff and I should record the Board's
appreciation of their exceptional efforts in meeting these and delivering a
positive year for Capital & Regional. I should also thank my Board
colleagues for their unstinting support.
David Hunter, Chairman
Chief Executive's Statement
I would like to start by echoing the Chairman's comments about the positive
progress made across all aspects of the Group over the course of 2022, which
have led to this strong set of results underpinned by further improvements at
an operating level driven by demand led growth in rental income.
In writing this statement I felt compelled to look back over 2022 with the
realisation it was a year of two halves and how challenging the second half
has been for both UK PLC and the global economy. It is easy to forget that
we were still in varying forms of Covid restrictions in the first quarter of
2022. These had a significant impact on our operations, albeit through the
restrictions in 2020 and 2021 our teams had learnt how to support our
communities, with providing safe access to our essential goods and services,
and each other alongside protecting our business through the varying
disruptions.
During the second quarter of 2022, we witnessed a sense of optimism throughout
the retail sector after two years of significant disruption and an
acceleration in the long cycle structural changes driven by technology,
specifically online retailing. The restrictions on physical retail forcing
retailers and consumers online through a closure of all but essential stores
had provided the catalyst to test the role of the physical store in the
distribution of goods and services. I am pleased to say that the market is
now starting to once again appreciate the critical role that the physical
store plays, a vital and expanding function in what remains one of the largest
sectors of the UK economy. We have seen first-hand the renewed focus on the
physical store with better leasing and occupancy outcomes throughout 2022
across our portfolio of community centres.
The impact of a maturing in online migration is very significant to the future
of physical retailing and accordingly to our business and community centre
strategy. The return to physical retailing by consumers, communities and
retailers has been faster and more comprehensive than many retailers and
analysts had envisaged. We believe the future of retailing will be a
seamless, omnichannel ecosystem where the store plays a vital role in selling
goods and services, facilitating, and lowering the cost of last mile, forward
and return logistics and in the acquisition of new customers. The continued
evolution of the physical store is positive for our community centre strategy
which envisaged the challenges of online disruption when it was launched in
December 2017. Encouragingly our retailer tenants often tell us that our
stores are some of the most profitable in their operations, particularly in an
era where the operational cost of online is increasing. The recent review of
rateable values will also see our retailers benefit from significant savings
in business rates payable from April 2023 with the typical reduction at our
centres around 30%-35%.
In locations where we are most progressed with delivering our community
strategy, including Wood Green and Walthamstow in London, we are seeing the
greatest benefits to our stakeholders with a recovery in footfall, and
occupancy as well as encouraging leasing outcomes which are driving growth in
rental income. We have also seen a good recovery from our Snozone business
with an EBITDA contribution of £1.4 million (2021: £0.8 million) reflecting
a more normalised trading year and significant progress in our Snozone Madrid
operation that was acquired in February 2021.
These factors and the hard work of our teams supported a recovery in our
operational business, together with the stability in our balance sheet that
our 'Refocus, Restructure and Recapitalise' transaction provided. The
culmination of these actions has enabled us to reinstate our dividend after
more than two years and we are pleased to be a fully functioning Real Estate
Investment Trust once again.
Following the ongoing tragic events in Ukraine, and wider global
cost-of-living and inflationary pressures, we witnessed a rapid unravelling of
quantitative easing by central banks in the second half of 2022. This created
further uncertainty for the sector with the prospect of higher energy and food
costs impacting consumer confidence and spending. To date, the UK Consumer has
proven more resilient than many forecasts or indices have suggested. This was
evidenced in a more resilient performance over the key Christmas trading
period, relative to media and industry predictions. Nonetheless, we remain
vigilant and cautious of the impact of inflationary pressures as we look to
accelerate the roll out of our community strategy through active repositioning
of our centres via the deployment of our capex programme. Replacing
discretionary retail with essential community centre retailers such as
supermarkets and NHS medical centres remains a key income and value driver for
the Company.
Our operational focus in the short to medium term is clear, to recover income
and value lost over the past two years through increasing occupancy,
converting temporary let shops to permanent, delivering the additional income
from our capex programme and streamlining our cost base.
We are not immune from the impacts of high inflation or higher interest rates
on property valuations. However, following six years of rebasing in rents
and valuations we are better positioned than many sectors of the commercial
property market with higher yielding, well-let centres in strong growing urban
locations, especially in London, which now represents more than 85% of our
portfolio by value.
Our commitment to ESG continues and we are very proud of all the work we have
undertaken in partnership with over 180 charities in the communities we serve,
supporting those most in need. I cannot recall a time when our support is
more necessary. One of my favourite charities is the Level Trust in Luton
which has provided more than 4,000 school uniforms for children from
households who are unable to afford them. Key to us being able to tailor our
support to where it is most needed is our relationships with the local
councils. I was humbled whilst attending a function in Walthamstow where the
council described our relationship and support as "exemplar".
Continuing on the theme of making a difference to people's lives, our GEMS
('going the extra mile') awards highlight the often extraordinary lengths our
onsite team(s) go to in order to assist members of our communities. This can
be as simple as helping people who have encountered difficulties, or visitors
just appreciating having someone to chat to, at our guest service desks or in
our security teams, on their regular visits to our centres.
Outlook
The macroeconomic environment continues to present a challenging backdrop,
most prominently through the impact of inflationary pressures on the consumer
exacerbated by the tragic war in Ukraine.
Nonetheless, the actions taken over the last 18 months to restructure the
balance sheet and refocus the portfolio have stabilised and significantly
strengthened the business. This, aligned with our operational resilience and a
growing appreciation of the critical role which physical stores play in
successful omnichannel retailing, leave us well positioned to withstand such
pressures. The profile of our assets with their focus on non-discretionary
goods and services, the previous resetting of rents and values, and the
portfolio premium to the risk-free rate, puts us in a stronger position on a
relative basis than some other retail property assets and the wider real
estate sector.
We have a clear roadmap to increase Adjusted Profits by more than 20% in the
medium term and are also well placed to take advantage of selective
opportunities to grow the business and further utilise our proven skills and
management expertise.
Finally, I would like to thank our team members for all their hard work over
the past year in ever changing, often unfamiliar and challenging circumstances
both professionally and personally.
We remain committed to navigating the economic and sectoral challenges whilst
delivering for all our stakeholders of which our shareholders are of critical
importance. We are ambitious as owners of commercial property and stewards of
capital and we will continue our relentless focus on improving every aspect of
our business.
Thank you to all our shareholders.
Lawrence Hutchings, Chief Executive
Operating review
New lettings, renewals and rent reviews(1)
12 months to 12 months to December 2021
December 2022
New Lettings
Number of new lettings 71 89
Rent from new lettings (£m) £3.4m £4.0m
Renewals settled
Renewals settled 38 54
Total resulting annual rent (£m) £2.0m £1.2m
Combined new lettings and renewals
Comparison to previous rent(2) +34.0% +7.3%
Comparison to previous ERV(2) +13.7% +15.6%
(1) Includes transactions for Hemel Hempstead, Ilford, Maidstone, Walthamstow,
Wood Green, Blackburn (until the point of sale in 2022) and Luton.
(2) For lettings and renewals (excluding development deals and CVA variations)
with a term of 5 years or longer which do not include turnover rent or service
charge restrictions.
Demonstrating the team's ability to capture rental growth and the continued
demand for space at our centres, we completed 109 new lettings and renewals
during the year, securing annualised rent of £5.4 million at a combined
average premium to previous rent of 34.0%(2) and to previous ERV of
13.7%(2). This was fewer deals than 2021 but a higher total value (2021: 143
new lettings and renewals for a combined annual rent of £5.2 million).
Highlights include signing an agreement for lease with the NHS for a new
community healthcare centre at Ilford on a 25-year lease term. Planning
permission was obtained in October 2022 and construction work commenced at the
end of 2022. The new 20,000 sq ft purpose-built facility is due to open to
the public in 2024. At Wood Green the new NHS diagnostics centre opened in
October 2022 and we subsequently signed an agreement to extend it by a further
3,000 sq ft, to approximately 8,500 sq ft.
Also at Ilford, we signed an agreement to relocate and upsize TK Maxx into a
new 35,000 sq ft store occupying the first floor of what was the former
Debenhams unit. This will enable remerchandising of the existing TK Maxx
unit which sits in a prime location at the entrance next to Ilford station,
which will benefit from the full opening of the new Elizabeth Line.
At Walthamstow we have let the entire new 16,000 sq ft food hall on the
mezzanine level, which we created in the rebuild following the 2019 fire, to a
great local operator, Crate. The facility will involve seven street eat
style food operators alongside an in-house bar and coffee kiosk, coupled with
events and exhibition space, all of which is due to open in late summer 2023.
All of these initiatives are great examples of our strategy in action and
further embed our centres at the heart of their local communities, helping
drive footfall to the benefit of the other retailers while providing all in
one convenience and experience to our customers.
Rental income and occupancy
Investment Assets(1) 30 December 30 December 2021
2022
Occupancy (%) 94.1% 92.9%
Contracted rent (£m) 31.5 31.8
Passing rent (£m) 30.5 30.0
(1) Investment Assets include the Group's centres at Hemel Hempstead, Ilford,
Maidstone, Walthamstow and Wood Green. Prior year comparatives restated on
the same basis.
Occupancy increased by 120 basis points over the year to 94.1%, with one of
the main drivers being the inclusion of the NHS community healthcare centre at
Ilford. Only around 4% of the total now relates to temporary lettings or
development units. as we have gradually improved this from approximately 7%
over the last 18 months. The potential to convert more of these temporary
arrangements to permanent lettings on typically stronger terms provides
opportunity to improve Net Rental Income.
Contracted rent is broadly in line with the December 2021 level. This
excludes approximately £1.2 million of rent where deals have exchanged but
completion remains subject to planning or other conditions. Such deals
include the NHS community healthcare centre at Ilford and the new Crate food
hall at Walthamstow.
Passing rent has improved by £0.5 million to £30.5 million since 30 December
2021, with the largest contributor being the letting to the Department for
Work and Pensions for Job Centres at Ilford commencing cash rent payments
during the period.
Operational performance
In total there were 53 million shopper visits across the portfolio during
2022. This was 27.4% higher than in 2021. This increase is 2.8% lower than
the growth in the national index, reflecting the Company's strong
outperformance in 2021 when non-essential retailers were unable to open.
Footfall continued to recover to pre-pandemic levels with the 2022 levels
equivalent to 84.3% of 2019, compared to 79% for the first six months.
Anecdotal evidence from our retailers suggests that sales have bounced back at
a higher rate than footfall reflecting more efficient use of visits.
Car park income for the year was £6.0 million for the Group's Investment
Assets, approximately 26% higher than 2021 although 29% lower than 2019 both
on a like for like basis excluding Blackburn.
Business rates
The recent review of business rates will result in a significant reduction in
rates payable for most retail operators. Across our portfolio the typical
reduction that will apply to occupiers will be 30%-35%, with the exception of
Walthamstow where reductions are estimated to be approximately 10%. The
withdrawal of downwards transitional arrangements means that occupiers will
immediately see the full benefit of reductions from April 2023. The changes
will deliver significant benefits to store affordability and profitability.
Rent Collection(1)
97.6% of rent in respect of 2022 has now been collected, broadly representing
a return to pre-pandemic levels and an approximate 4.5% increase on 2021.
The improved collection rates have enabled the net release of provisions
totalling c. £1.4 million. The table below provides further detail:
Rent collection
12m to 30 December 2022
£m
Rent collected 31.2 97.6%
Outstanding 0.6 2.2%
Bad Debt 0.1 0.2%
Total billed 31.9 100%
(1) Investment Assets include the Group's centres at Hemel Hempstead, Ilford,
Maidstone, Walthamstow and Wood Green.
Rent collection for the first quarter of 2023, including monthly invoices for
January and February 2023, is currently running at 91.9%.
Capital expenditure investment
In total £9.0 million was invested across the Group's Investment Assets in
2022. £5.3 million was invested in planning fees, enabling works and other
costs including relocating tenants, all to facilitate delivery of the £21.6
million Walthamstow residential land sale receipt. Other projects included
£0.8 million for the creation of the new Job Centre at Ilford which opened in
March 2022, £0.8 million across the NHS and TK Maxx projects in Ilford and
£0.4 million on the new Walthamstow Food Hall.
We anticipate capital expenditure in 2023 to be more than £15 million with
the major projects being:
· Ilford - Community healthcare centre and TK Maxx, c. £10.0 million
· Walthamstow - Crate food hall c. £1.5 million
· Wood Green
- Remerchandising of former WH Smiths unit to leisure uses, £1.9 million
- Bridge link new grab and go catering units, c. £0.7 million
The average yield on cost of the above projects is expected to be in the range
of 8% to 9%. This financial metric does not factor in the 'halo' effect
these improvements have in terms of driving footfall and sales across the
centres as a whole.
Shopping Centre ESG
For the shopping Centre portfolio, we have established our Net Zero Carbon
(NZC) Pathway aligned with industry best practice and guidelines, including
the UKGBC's definition of net zero and the Better Building Partnership's (BBP)
Climate Commitment, both of which we are now signatories. Our NZC Pathway
quantifies and prioritises the necessary emission reductions to our target
year of 2040 and beyond and includes ambitious emission reduction targets
across Scope 1 and 2. The creation of our NZC Pathway is an important
milestone on our journey and defines the actions and priorities we need to put
in place to stay true to our commitment to our communities, employees and the
long-term resilience and success of our business.
We have upskilled our operational teams through training on sustainability
awareness, especially in relation to supporting our occupiers and helping to
reduce Scope 3 emissions. We are in the process of developing an occupier
engagement programme on sustainability to increase awareness and profile.
We have made significant strides against our environmental targets increasing
our energy efficiency, reducing Scope 1 natural gas consumption by 53% and
Scope 2 electricity consumption by 20%, against 2019.
In addition to developing our NZC pathway we have also completed a detailed
assessment of climate risk governance and the climate related risks aligned to
best practice recommendations of the Task Force of Climate-related Financial
Disclosures (TCFD). By formalising oversight of climate related issues into
our risk management framework, we can mitigate the risks and garner related
opportunities, such as reducing operational costs and capital expenditure and
increasing revenues and asset values.
2022 was a year of giving back, putting our communities and guests at the core
of our initiatives. Following a successful launch in 2021, the Community Wheel
of Support continued to play a critical role in encouraging engagement and
supporting our shopping centres to prioritise areas of impact. We set out nine
KPI targets to align with our Wheel of Support. Improving from 2021, we saw an
11% increase in the number of charities supported, a 15% increase in
volunteering hours and a 9% increase in charitable fundraising.
To account for local needs, our shopping centres are given the responsibility
and autonomy to run their own fundraising events. In 2022, we hosted a total
of 244 events, collectively supporting 187 charities and volunteering more
than 1,300 hours of employees' time to important community causes.
Snozone
Snozone recorded a significant improvement in EBITDA for the year to £1.4
million (December 2021: £0.8 million) as it returned to a more normalised
trading year. Total revenue for 2022 increased to £13.0 million (2021:
£6.8 million), although trading in the early part of 2022 was still heavily
impacted by the Omicron variant, with revenue in the key month of January down
20% on pre-pandemic levels. From mid-February 2022, Snozone has been able to
offer guests its full offering in contrast to 2021 when the UK venues were
shut for the first four months of the year due to government restrictions. As
the impact of the Omicron variant subsided, Snozone made a good recovery and
revenues generally exceeded the equivalent levels in 2019 although some key
revenue streams such as corporate activities and food and beverage have not
yet returned to pre-pandemic levels.
EBITDA in 2021 was supported by the receipt of a £2.5 million insurance
payment under a pandemic insurance policy that the business has maintained
since 2017.
The integration of the operations of the ski slope in the Xanadú shopping
centre in Madrid, which was acquired in February 2021 for a nominal value, has
progressed well with revenues increasing 65% to £3.5 million (2021: £2.1
million). The impact of significant increases in government-controlled
electricity prices to £1.2 million (2021: £0.7 million) has latterly been
mitigated by the installation of solar panels which became operational in
November 2022.
Snozone's Group IFRS profit for the period, which includes the notional IFRS
16 interest charge on the occupational leases, was £0.1 million (December
2021: Loss of £0.3 million). The prior year benefited from £1.4 million of
VAT rebate received in addition to the £2.5 million insurance payment.
Snozone ESG
Snozone's pathway to net zero strategy is underpinned by a cyclical four-year
plan for capital investment into new plant and machinery which we are now
halfway through. Nine units of blast coolers have been replaced at the Milton
Keynes venue which will save 214,000 kWh per year. In addition, given the
significant increase in government-controlled electricity pricing in Madrid,
solar panels were fitted to the roof of our venue and were fully operational
as of November 2022.
These two initiatives helped deliver a 6% reduction in electricity utility
consumption in 2022 versus the 2019 base year and a 23% reduction in gas.
There was an overall reduction in carbon tonnage by 8% to 2,633 tonnes versus
2,857 tonnes in 2019. All of Snozone's electricity is 100% renewable and is
sourced from wind and solar power.
New supplier deals have been agreed for Snozone's restaurants. All coffee,
non-alcoholic and alcoholic beverages are supplied in 100% recycled glass,
recycled aluminium cans or compostable boxes. Snozone's shop merchandise and
clothing provider also delivers all products 100% free of plastic packaging.
Snozone maintained its partnership with Tree Nation last year, planting trees
when guests rebook certain activities or join as members to offset their
emissions of visitation. These trees are planted in areas of the world where
biodiversity and reforestation are most needed. Over 11,500 trees to date have
now been planted in Africa with over 9,000 planted in 2022 - offsetting over
1,400 tonnes of C02 and now reforesting over 14 hectares of land.
Snozone's other social KPIs include an increase in disability snow sports
participation by 29% versus 2021 and Snozone is the only European indoor
centre to own and operate its own disability snow school. In addition, Snozone
was once again voted Best Sporting Venue for children learning outside the
classroom at the School Travel Awards, beating such illustrious businesses as
The London Stadium, Manchester United, Silverstone, Twickenham Stadium and the
UK Sailing Academy. Snozone was also voted partner of the year by Sense, the
charity for deafblind adults and children for the awareness its team has drawn
to the charity, as well as its many fundraising activities.
Refocus, Restructure and Recapitalise
The Group's actions over the last 18 months have significantly reshaped the
business and reduced debt to sustainable levels. Following on from the
transaction to restructure the Group's largest facility, The Mall, and the
£30m capital raise which completed in November 2021, a number of other key
initiatives were completed during 2022:
Ilford loan amendment
In May 2022, the Group signed a package of amendments to its £39 million
secured loan facility in respect of The Exchange Centre, Ilford, to facilitate
the investment of more than £10 million for the creation of the new community
healthcare centre and anchor unit for TK Maxx. The amendments include a
conditional extension option that can be triggered by the Company at the end
of 2023 to extend the loan maturity by 18 months from March 2024 until
September 2025. They also provide a combination of covenant waivers and
improvements to existing covenant terms that apply through to the end of
2024.
Restructuring of The Marlowes Centre, Hemel Hempstead debt
Also in May 2022, the Group completed the buyback of the loan facility of the
Marlowes centre in Hemel Hempstead. The Group paid £11.8 million in
order to settle the loan and associated debt liabilities of c. £24.0
million, representing a discount of approximately 51%. The transaction
increased the Group's Net Asset Value by approximately £12.5 million or
7.4%. The asset was reclassified to the Group's Investment Assets as of 11
April 2022, being the date the transaction was agreed, and NRI from the asset
is included from that date.
To partially fund the transaction, the Group subsequently drew down a new
£4.0 million loan facility in July 2022, which was provided by BC Invest, a
subsidiary of the Group's strategic residential partner Far East Consortium.
The new non-recourse secured debt is for an initial period of three years at a
margin of 5.95% over SONIA.
Proposed sale of The Mall, Luton
The Group has been working closely with the respective lender on the proposed
disposal of the Group's investment in The Mall, Luton. The disposal is
expected to complete imminently. As part of the agreement to run a
consensual sale process, changes to the constitution of the Luton entities
were made in May 2022 including the appointment of an independent director
with specific rights regarding the sale process. The effective change of
control that these amendments triggered resulted in the Group deconsolidating
its interest in Luton from that date. This has increased the Group's Net
Asset Value by £6.8 million being the net liabilities at the point of
deconsolidation. Given the Group's interest in Luton has been deconsolidated
the sale will not result in any profit or loss on disposal. The Group's
involvement as Property and Asset Manager, for which it generated fees of
£1.4 million in 2022, will cease upon disposal.
Sale of The Mall, Blackburn
In May 2022, the Group exchanged contracts for the sale of The Mall, Blackburn
to the retail arm of the Adhan Group of Companies for £40 million,
representing a premium to the £38.2 million December 2021 valuation. The
sale completed in August 2022 delivering net cash proceeds of £39 million.
The sale alone reduced the Group's Net Loan to Value ratio by approximately
600 basis points.
Walthamstow residential
In July 2022, the Group completed the sale of land for residential development
at its 17&Central community shopping centre in Walthamstow to Long Harbour
for £21.6 million. The Group had secured planning consent at the end of
2021 for a residential-led, mixed use development, incorporating a new
Victoria Line tube station entrance and new public space including a new
park. Construction work is now underway on the first phase of the
development which will see the creation of 495 Build to Rent residential
apartments in two residential towers. Completion is scheduled for 2025.
£52.9 million of the combined c. £60 million received from the Blackburn and
Walthamstow transactions was utilised for repayment of the debt on the Group's
Mall loan facility. This reduced the outstanding amount to £140 million and
repaid in full the remainder of the £35 million Facility B tranche that was
drawn to help fund the repurchase of £100 million of debt in November 2021.
The combined impact of the above transactions has helped further reduce the
Group's Net Loan to Value ratio from 49% at 30 December 2021 (and 72% at 30
June 2021) to 41% at 30 December 2022.
Financial review
Year to Year to
Dec 2022 Dec 2021
Profitability
Statutory Revenue (1) £60.6m £54.6m
Net Rental Income (NRI) (1) £23.5m £27.4m
Net Rental Income (NRI) - Investment Assets only (1) £23.5m £20.1m
Adjusted Profit (1,2) £10.3m £6.5m
Adjusted Earnings per share (1,2) 6.2p 5.4p
IFRS Profit/(loss) for the period £12.1m £(26.4)m
Basic earnings/(loss) per share 7.3p (22.0)p
EPRA cost ratio (excluding vacancy costs) (1,2) 37.8% 49.6%
Net Administrative Expenses to Gross Rent (1) 22.4% 29.1%
Investment Returns
Net Asset Value £179.1m £168.4m
Net Asset Value (NAV) per share 106p 102p
EPRA NTA per share (2) 103p 102p
Proposed Final Dividend per share (3) 2.75p -
Total Dividend per share (3) 5.25p -
Financing
Group net debt £130.9m £185.3m
Group net debt to property value ( ) 41% 49%
EPRA LTV 44.0% 64.1%
Average maturity of Group debt (4) ( ) 4.5 years 5.4 years
Cost of Group debt (weighted average) ( ) 3.58% 3.74%
(1) 2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions due to an IASB IFRS interpretation issued in
October 2022 as detailed in Note 1 to the condensed financial statements. The
amendment stipulates that losses which were incurred on granting rent
concessions, which for the Group occurred during the Covid-19 pandemic, should
be charged to the income statement in the year they are granted. 2021
revenue has also been impacted by the reclassification of Luton as a
Discontinued Operation. The adjustment for the treatment of rent concessions
reduced revenue and Adjusted Profit in 2021 by £1.6 million, with a
corresponding reduction in the loss on revaluation of investment properties.
The Adjusted Profit for 2022 is £0.3 million higher than it would have been
without this adjustment to rent concessions. The reclassification of Luton
as a Discontinued Operation reduced revenue in 2021 by £13.8 million.
(2) Adjusted Profit is as defined in the Glossary. 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. The calculation
of EPRA cost ratio is provided in the EPRA performance measures section.
(3) Represents dividends declared post period end but related to the period in
question.
(4) Assuming exercise of all extension options.
Use of Alternative Performance Measures (APMs)
Throughout the results statement we use a range of financial and non-financial
measures to assess our performance. The significant measures are as follows:
Alternative performance measure used Rationale
Adjusted Profit Adjusted Profit is used as it is considered by management to provide the best
indication of trading profits and hence the ability of the business to fund
dividend payments.
Adjusted Profit excludes revaluation of properties, profit or loss on disposal
of properties or investments, gains or losses on financial instruments,
charges in respect of long-term incentive awards and other non-operational
one-off items.
Adjusted Profit includes EBITDA from Snozone (see definition further below).
This was a change implemented in 2021 arising from the adoption of IFRS 16 and
the signing of new lease agreements on Snozone's two UK sites. We considered
that the combination of these two factors meant that Snozone's statutory
profit no longer alone provides a full reflection of Snozone's trading
performance and hence introduced this additional Alternative Performance
Measure.
The key differences between Adjusted Profit and EPRA earnings, an industry
standard comparable measure, relates to the exclusion of non-cash charges in
respect of share-based payments and adjustments in respect of Snozone as
detailed above. In the current year we have excluded from our Adjusted
Profit a £0.3 million tax credit as it relates to prior years but this is
included within the EPRA metric.
Adjusted Earnings per share is Adjusted Profit divided by the weighted average
number of shares in issue during the year excluding own shares held.
A reconciliation of Adjusted Profit to the equivalent EPRA and statutory
measures is provided in Note 5 to the condensed financial statements.
Like-for-like amounts Like-for-like amounts are presented as they measure operating performance
adjusted to remove the impact of properties that were only owned for part of
the relevant periods.
For the purposes of comparison of capital values, this will also include
assets owned at the previous period end but not necessarily throughout the
prior period.
In the current year like-for-like comparisons have been used to adjust for the
impact of the disposals of the Edmonds Parade and Maidstone House properties
within the Hemel Hempstead and Maidstone shopping centre assets that were
completed in June 2021 and December 2021 respectively as well as The Mall,
Blackburn that was disposed of in August 2022 and Walthamstow residential
receipt.
Net Debt Net debt is borrowings, excluding unamortised issue costs, less cash at
bank. Cash excludes cash held on behalf of third parties (e.g. in respect of
service charges or rent deposits).
Net debt to property value Net debt to property value is debt less cash and cash equivalents divided by
the property value.
Net Rent or Net Rental Income (NRI) Net Rental Income is rental income from properties, less provisions for
expected credit losses, property and management costs. It is a standard
industry measure. A reconciliation to statutory turnover is provided in Note
3 to the condensed financial statements.
Snozone EBITDA Snozone EBITDA is based on net profit. It excludes Depreciation,
Amortisation, (notional) Interest, Tax and non-operational one-off items. It
includes rent expense, based on contractual payments adjusted for rent free
periods. This provides a measure of Snozone trading performance which
removes the profiling impact of IFRS 16 that would otherwise see a
significantly higher charge in early years of a lease and significantly lower
net charge in later years. A reconciliation to the IFRS net profit is
included within Note 3 to the condensed financial statements.
Profitability
Components of Adjusted Profit and reconciliation to IFRS Profit
Amounts in £m Year to Year to
December 2022 December 2021(2)
December 2016
Year to Year to
December 2016 December 2016
Shopping Centres - Net Rental Income 23.5 20.1
Shopping Centres - Interest payable (9.3) (10.8)
Shopping Centres - Contribution 14.2 9.3
Managed Assets - Contribution - 1.9
Snozone (indoor ski operation) EBITDA 1.4 0.8
External management fees 3.3 2.4
Central operating costs (including central interest) (7.0) (7.0)
Variable overhead (1.6) (0.9)
Adjusted Profit (1) 10.3 6.5
Adjusted Earnings per share (pence) (1) 6.2p 5.4p
Reconciliation of Adjusted Profit to statutory result
Adjusted Profit 10.3 6.5
Property revaluation (19.6) (47.6)
Profit/(loss) on disposal 1.5 (2.5)
Snozone depreciation and amortisation (2.1) (2.5)
Snozone notional interest (net of rent expense in EBITDA) 0.8 0.5
Gain on financial instruments 1.1 5.9
Corporation Tax credit/(charge) in lieu of dividends 0.3 (3.1)
VAT rebate within Snozone - 1.4
Long Term incentives (0.5) (0.9)
Gain on discounted loan purchase (net of costs) 12.5 18.4
Write up following Luton deconsolidation 6.8 -
Other items (including transaction costs) 1.0 (2.5)
Profit/(loss) for the period 12.1 (26.4)
(1) EPRA figures and a reconciliation to EPRA EPS are shown in Note 5 to the
condensed Financial Statements.
(2) 2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions due to an IASB IFRS interpretation issued in
October 2022 as detailed in Note 1 to the condensed financial statements. The
amendment stipulates that losses which were incurred on granting rent
concessions, which for the Group occurred during the Covid-19 pandemic, should
be charged to the income statement in the year they are granted. 2021
revenue has also been impacted by the reclassification of Luton as a
Discontinued Operation. The adjustment for the treatment of rent concessions
reduced revenue and Adjusted Profit in 2021 by £1.6 million, with a
corresponding reduction in the loss on revaluation of investment properties.
The Adjusted Profit for 2022 is £0.3 million higher than it would have been
without this adjustment to rent concessions. The reclassification of Luton
as a Discontinued Operation reduced revenue in 2021 by £13.8 million.
Adjusted Profit - 30 December 2022: £10.3 million (30 December 2021: £6.5
million)
Net Rental Income (NRI) improved to £23.5 million (30 December 2021 - £20.1
million). This reflects improved occupancy and rent collection levels, the
latter enabling the net release of approximately £1.4 million of provisions
during the period.
The balance includes £0.5 million from Hemel Hempstead being the NRI from 11
April 2022, being the date the transaction was agreed and hence the asset was
reclassified to Investment Assets, having been in Managed Assets NRI in the
prior year. The £23.2 million includes £2.7 million from Blackburn, the
sale of which completed in August 2022.
Interest payable has fallen from the prior year reflecting primarily the
restructuring and reduction of debt in The Mall loan facility that completed
in November 2021. The Mall debt was further reduced by £7.1 million in
January 2022 from the proceeds of the sale of Maidstone House and then by
£52.9 million in the second half of the year from the combined proceeds of
the Walthamstow residential receipt and Blackburn disposal. The full year
interest saving benefit of the latter repayments will see interest in 2023
reduce by approximately £1.8 million.
Managed Assets Contribution is no longer included within Adjusted Profit
following the reclassification of what were deemed Managed Assets as Held for
Sale from 30 December 2021. As noted, the results of Hemel Hempstead have
been included within Adjusted Profit from 11 April 2022. The results from
Luton have been excluded from Adjusted Profit in 2022 as it was Held for Sale
until 23 May 2022 and then deconsolidated from the Group as at that date.
Snozone EBITDA at £1.4 million (30 December 2021 - £0.8 million) reflected a
return to a more normalised trading year although the peak first trading
quarter in 2022 was still significantly impacted by concerns over the Omicron
variant. The result in 2021 was supported by a £2.5 million business
continuity insurance receipt mitigating the impact of the operations being
required to shut for most of the first half of 2021 due to Government Covid
restrictions.
External Management Fees of £3.3 million break down between Asset and
Property Management fees on external properties (Redditch and in 2022, Luton)
of £2.1 million and Property Management fees on the Group's Investment Assets
of £1.2 million (as these are charged to the Service Charge). The increase
from the prior year relates to the inclusion of Asset Management fees on Luton
as these were previously being eliminated on consolidation. Sale processes
remain ongoing for both Luton and Redditch, where we act as property and asset
manager, which will see the Group's involvement as manager cease. These are
expected to complete imminently.
Central operating costs at £7.0 million (30 December 12021 - £7.0 million)
have been maintained at the same level as 2021. We are targeting annualised
cost savings in 2023 of approximately 10%, with a reduction in the Group's
underlying cost base, reflecting the lower number of assets under management,
offsetting the impact of inflation.
Variable overheads of £1.6 million (30 December 2022 - £0.9 million) have
increased due to a £0.6 million increase in the charge for the one-off
Executive retention awards issued in November 2021 which run through until
September 2023.
Adjusted Earnings per Share for the period were 6.2 pence (30 December 2021:
5.4 pence) reflecting the improvement in Adjusted Profit, partially offset by
the higher number of shares in issue from the £30 million capital raise which
completed in November 2021.
We expect 2023 to be a partly transitional year with the loss of income from
the sale of Blackburn, the absence of the one-off benefit from bad debt
provision releases and likely reduction in management fee income offset by
underlying improvement in NRI, the reduction in interest costs as a result of
the £52.9 million of repayments made in the second half of 2022, a further
recovery in Snozone and reduced central costs.
In the medium term there is potential for Adjusted Profit to increase by more
than 20%, driven primarily by further recovery in occupancy rates
post-pandemic, car park income and Snozone, alongside beginning to realise the
benefit of the Capex projects currently underway, most prominently the TK Maxx
and NHS community healthcare centre units at Ilford, introduction of new
catering units to the bridge link, the remerchandising of the WH Smith's unit
at Wood Green and the new Crate food hall at Walthamstow.
IFRS profit for the period - 30 December 2022: £12.1 million (30 December
2021: Loss of £26.4 million)
The Group has returned to profitability in 2022. Aside from the Adjusted
Profit of £10.3 million the key elements in the result were:
· The £12.5 million gain (after costs) on the discounted purchase of the
Group's Hemel Hempstead loan facility.
· A £6.8 million gain in the Group's Net Asset Value on the deconsolidation of
Luton due to it previously sitting as a liability on the Group's balance
sheet.
· Property revaluation loss of £19.6 million (December 2021 - loss of £49.2
million). The fall in property values in the second half of the year driven
by macro-economic conditions has seen an overall like for like decline of
3.6%, this compares to a 5.7% fall in 2021.
· A £1.5 million profit on disposal from the Blackburn sale and Walthamstow
residential receipt.
· A £1.6 million gain within Other Items in respect of the Group's insurance
claim related to the 2019 Walthamstow fire. The "gain" represents the
difference between the final settlement and the carrying value in the Group's
books.
· The gain on financial instruments of £1.1 million (December 2021 - gain of
£5.9 million) is a result of the revaluation of interest rate swaps
reflecting movements in future interest rate expectations.
The profit for the period has resulted in growth of both NAV by 6.3% to
£179.1 million and EPRA Net Tangible Assets of 5.3% to £177.4 million
compared to December 2021 amounts of £168.4 million for both measures.
Basic NAV per share and EPRA NTA per share were 106p and 103p respectively,
representing increases of 4p and 1p respectively (December 2021: 102p for both
measures).
Having obtained shareholder support at the Company's Annual General Meeting on
19 May 2022, the Group completed a Capital Reduction which resulted in the
creation of distributable reserves. The Group has maintained provision for
any potential shortfall in the event that the minimum PID requirement for the
2021 financial year once finalised was not met by the distributions made in
2022 and/or alternative arrangements are not agreed with HMRC.
Property portfolio valuation
The valuation of the portfolio at 30 December 2022 was £322.75 million. On
a like for like basis, adjusting for the impact of the Walthamstow residential
receipt, the portfolio fell by 3.6% over the year. This broke down between a
1.5% increase in the first half of the year and a 5.0% decline in the second
half. The latter was driven by the general expansion of yields across the
property sector in response to the resetting of interest and gilt rates
despite valued rent and valuers ERV increasing in the second half of the year
by 0.6% and 1.5% respectively.
Property at independent valuation 30 December 2022 30 December 2021
£m NIY % NEY % £m NIY % NEY %
Maidstone 32.65 11.28% 11.49% 36.2 10.44% 11.22%
Walthamstow(1) 80.0 5.97% 7.00% 100.4 5.84% 6.55%
Wood Green 144.0 7.55% 7.38% 148.9 7.33% 6.88%
Hemel Hempstead 10.5 14.49% 17.49% 10.5 12.49% 18.20%
Ilford 55.6 5.04% 7.79% 56.4 5.86% 7.99%
Total 322.75 7.23% 8.59% 352.4 7.21% 8.29%
(1) At 30 December 2021 Walthamstow valuation included £17.7 million in
respect of the residential opportunity that was removed from the valuation
following the receipt of £21.6 million in July 2022.
Financing
The Group has taken a series of important actions in the last 18 months
enabling it to successfully bring down debt levels. This has involved a
series of steps:
· Reclassification as at 30 June 2021 of Luton and Hemel as Managed Assets, with
the former now deconsolidated as of May 2022 following the agreement to run a
consensual sale process and appointment of an independent director to the
Luton entities.
· Restructuring of The Mall debt facility with £100 million of debt acquired
for £81 million in November 2021, partially funded by an equity raise of £30
million and a new £35 million tranche of debt on the facility with TIAA.
· The sale of the Maidstone House office block in December 2021 for £7.1
million.
· The discounted buyback in May 2022 of the Hemel Hempstead loan facility where
liabilities of £24.0 million (including £1 million of accrued interest and
interest rate swap creditor) were settled for £11.8 million representing a
discount of approximately 51%. This was partially funded with a new £4.0
million loan facility that was subsequently drawn down in early July 2022.
· The disposal of The Mall, Blackburn that completed in August 2022 for net
proceeds of £39 million.
· The completion of the sale of the Walthamstow land for residential development
for £21.65 million in July 2022.
· In addition, in May 2022 the Group signed an amendment to its Ilford loan
facility agreeing a long-term package of loan waivers and covenant
improvements to help facilitate the TK Maxx relocation and creation of a new
NHS community healthcare centre.
The combined result of all of the above actions has been the continued
reduction in the Group's Net Loan to Value ratio from 72% as at 30 June 2021
and 49% at 30 December 2021 to 41% at 30 December 2022.
The Group's debt position as at 30 December 2022 is summarised in the table
below:
Debt(1) Cash(2) Net debt Loan to value (3) Net loan to value(3) Current interest rate Fixed Duration to loan expiry Duration with extensions
30 Dec 2022 (proforma) £m £m £m % % % % Years Years
The Mall 140.0 (10.3) 129.7 55% 51% 3.45% 100 4.1 5.1
Hemel Hempstead 4.0 (1.7) 2.3 38% 22% 9.04% 0.0 2.5 2.5
Ilford 39.0 (10.9) 28.1 70% 51% 3.51% 100 1.2 2.7
Central Cash - (29.2) (29.2) - - - - - -
On balance sheet debt 183.0 (52.1) 130.9 57% 41% 3.58% 97.8 3.4 4.5
(1) Excluding unamortised issue costs.
(2) Excluding cash beneficially owned by tenants.
(3) Debt and net debt divided by investment property at valuation.
The Mall
Following the £60 million of repayments made during the year the Mall
facility as at 30 December 2022 consisted of a single £140 million fixed rate
loan at 3.45%, held with TIAA.
The loan matures in January 2027 but has a one-year conditional extension
option.
As part of the November 2021 restructuring of the facility TIAA provided a
waiver of all financial covenants for two years until November 2023. The
facility is currently compliant with all covenants.
Hemel Hempstead
On 7 July 2022, the Group drew down a new £4 million facility with BC Invest,
a subsidiary of the Group's strategic residential partner, Far East
Consortium. The new debt has been provided for an initial period of three
years at a margin of 5.95% over SONIA. It is secured on the Marlowes Centre
on a non-recourse basis.
Ilford
The Group has a £39 million facility secured on the Ilford Exchange shopping
centre with Dekabank Deutsche Girozentrale that is due to mature in March
2024.
In May 2022, the Group signed a package of amendments to facilitate the
investment of approximately £10 million for the creation of the new NHS
community healthcare centre and anchor unit for TK Maxx. The amendment
provides an 18-month conditional extension option that can be triggered at the
end of 2023 to extend the loan maturity from March 2024 until September
2025 subject to meeting a debt yield and net loan to value covenant test.
The cost of debt is hedged until the date or original maturity (March 2024)
via an interest rate swap.
The amendments also provide for a waiver of covenants that ran until January
2023 and improvements to existing covenant terms to apply from January 2023
until the end of 2024. The all-in cost of the current loan is 3.51%.
Going Concern
Under the UK Corporate Governance Code the Board needs to report whether the
business is a going concern. In making its assessment of Going Concern, the
Group has considered the general risk environment and the specific risks that
relate to the Group and its sector. This has incorporated considering the
current macro-economic inflationary pressures as well as the ongoing impacts
and speed of recovery from Covid-19 as well as the structural trends that were
already under way in the retail industry.
At 30 December 2022, the Group had total cash at bank on balance sheet of
£52.1 million. Of the £52.1 million there was £28 million held centrally
outside of secured loan arrangements. This provides a significant cash
contingency to cover any reasonable disruption to operations in both the base
and reasonable worst case scenarios that have been modelled for at least the
period of the next 18 months that is considered for going concern purposes.
As part of the restructure of The Mall debt facility that completed in
November 2021, the lender provided covenant waivers that run until November
2023 and modifications to cash trap provisions that run until May 2023. The
Group is currently compliant with all covenant tests on the facility and hence
not reliant on the waivers or modifications. On the Ilford facility, as
noted, the Group had covenant waivers that ran until January 2023 and has
improved covenant terms that extend beyond the end of 2024. The Mall loan
facility matures in January 2027 with a one-year conditional extension
option. The Ilford loan matures in March 2024 with an 18-month conditional
extension option dependent upon meeting a debt yield and net loan to value
covenant test in Q4 of 2023.
On Hemel Hempstead, the Group drew down on a new £4 million loan facility in
early July 2022. The Group's forecasts demonstrate a reasonable level of
covenant headroom on the Loan to Value and Projected Interest Cover Ratio
tests that are relevant to the new agreement.
All of the Group's asset backed loan facilities are ring-fenced within their
own SPV structures with no recourse to Capital & Regional plc and no
cross-default provisions. The Group continues to work with the lenders on
its Luton loan facility on a disposal of the investment. While this is
likely to realise less than the value of the net debt outstanding, due to the
ring-fenced SPV structure, the net liability of Capital & Regional plc is
effectively capped at nil.
In making its assessment of Going Concern, the Group has run updated forecasts
on both a base case and downside basis. In the latter, the Group has
sensitised rent collection to 90% collection, reduced car park and ancillary
income by 10% and removed any contribution from Snozone to reflect how a
downturn in expected trading, such as might be caused by a further wave of
Government restrictions, could impact cashflows. The Group has also
considered a 15% reduction in property valuations. The Group's headroom on
The Mall and Hemel Hempstead is sufficient to withstand this level of
decline.
On Ilford, such a decline would breach the LTV covenant level however the cash
earmarked for capital expenditure investment into the asset would be
sufficient to theoretically cure although in such a scenario the Group would
seek to agree with the lender to invest the funds to develop the asset. The
same position applies in respect of the LTV condition that is required in
order to trigger the 18-month extension to the loan's maturity. Ultimately
given the ring-fenced nature of the loan facility if the Group decided not to
cure any breach and could not agree a compromise with the lender it could, in
extremis, effectively surrender the asset and not face any recourse to the
Group. The Group's cashflow forecasts over the period considered for Going
Concern purposes assume it is a net investor into Ilford to fund the
masterplan initiatives and hence such a scenario would not reduce the amount
of cash available to the Group.
In coming to its Going Concern conclusion, the Group has also considered, but
not relied upon, other options available to generate or conserve additional
cash, to reduce debt levels and to fund value accretive capital expenditure
and letting initiatives. These include but are not limited to: the potential
disposal of assets either in whole or part; the opportunity to reduce or
suspend dividend payments (or offer a Scrip alternative); and the potential
raising of additional funds.
Having due regard to all of the above matters and after making appropriate
enquiries, the Directors have a reasonable expectation that the Group and the
Company have adequate resources to continue in operational existence for the
foreseeable future. Therefore, the Board continues to adopt the Going Concern
basis in preparing the financial statements.
Viability Statement
In accordance with the 2018 revision of the UK Corporate Governance Code, the
Directors have assessed the prospect of the Company over a longer period than
the 12 months required by the "Going Concern" provision.
The Board conducted this review for a two-year period to December 2024. The
two-year period is covered by the Group's annual budget and business planning
process. It includes sensitivity analysis to consider adverse scenarios,
that could be caused by the principal risks and uncertainties outlined in the
Managing Risk section below. This incorporated the impact on cash and
covenant compliance of further significant falls in property valuations or
property income. Ilford is the only one of the Group's loan facilities that
is due to mature during the period but has a conditional 18-month extension
option available to the Group which would extend maturity to September 2025.
The Group has considered forecasts of the debt yield and LTV covenant tests
that are necessary to meet the conditions of the extension in Q4 2023 and
factored this into its analysis including the ability to support the LTV test
by injecting cash into the structure if necessary.
The considerations made by the Directors in concluding on viability mirror
those considered within the Going Concern conclusion as documented above.
Based on this and the resources and actions available the Directors have a
reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period to December 2024.
Dividend
Reflecting the stabilisation of operational results from the impacts of
Covid-19, the substantial progress made in reducing debt levels and the
Board's confidence in the future prospects, the Group resumed dividend
payments with the payment of an interim dividend of 2.5 pence per share on 7
October 2022.
The Directors recommend a final dividend of 2.75 pence per share, making a
total distribution for the year ended 30 December 2022 of 5.25 pence per share
(2021: nil). This satisfies the Group's policy of paying a dividend of at
least 90% of the Group's EPRA profits. The dividend will be paid entirely as
a Property Income Distribution (PID) and a Scrip dividend option will be
offered.
Subject to approval of shareholders at the Annual General Meeting (AGM) to be
held on 25 May 2023, the final dividend will be paid on Friday, 2 June 2023.
The key dates proposed are set out below:
· Confirmation of ZAR equivalent and Scrip dividend Friday, 31 March 2023
pricing
· Last day to trade on Johannesburg Stock Exchange (JSE) Tuesday, 11 April 2023
· Shares trade ex-dividend on the Wednesday, 12 April
JSE
· Shares trade ex-dividend on the Thursday, 13 April
LSE
· Record date for LSE and JSE and last election for Friday, 14 April 2023
Scrip
· AGM Thursday, 25 May
· Dividend payment date/New Scrip shares issued Friday, 2 June 2023
South African shareholders are advised that the 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 31 March 2023. Share
certificates on the South African register may not be dematerialised or
rematerialised between 12 April 2023 and 14 April 2023, both dates
inclusive. Transfers between the UK and South African registers may not take
place between 31 March 2023 and 14 April 2023, both dates inclusive.
Managing Risk
Risk management approach
The Audit Committee is delegated the authority for overseeing the
effectiveness of the risk management process by the Board and is accountable
for reporting on the identification of principle and emerging risks to the
business. Ultimate responsibility for the oversight of risk management
within the Group remains with the Board. The Board defines the risk appetite
of the Group, establishes a risk management strategy and is responsible for
maintaining a robust internal controls system. The Board formally reviews
and signs off the Group's risk register on a six monthly basis. Emerging
risks are considered as part of this process or on an ad hoc basis in
instances such as the outbreak of the Covid-19 pandemic where the risk is of
sufficient significance to require a separate discussion.
Risk management process
There are a number of risks and uncertainties which could have a material
impact on the Group's future performance and could cause results to differ
significantly from expectations.
At every half year and year end, the members of senior leadership undertake a
comprehensive risk and controls review involving interviews with relevant
management teams. This considers a review of both the existing identified
risks and any new or emerging risks that may have been identified during the
period. The output of this process is an updated risk map and internal
control matrix for each component of the business, which is then amalgamated
into the Group risk map and matrix that is reviewed by the senior leadership
team. Formal submission is then made to the Audit Committee for review, before
going to the Board for final sign off. The process for the half year and full
year 2022 review forms the basis for the disclosures made below.
This process clearly outlines the principal risks, considers their potential
impact on the business, the likelihood of them occurring and the actions being
taken to manage, and the individual(s) responsible for managing, those risks
to the desired level.
This risk matrix is also used in performing our annual assessment of the
material financial, operational and compliance controls that mitigate the key
risks identified. Each control is assessed or tested for evidence of its
effectiveness. The review concluded that all such material controls were
operating effectively during 2022.
Principal risks at 30 December 2022
A review was carried out for the 30 December 2022 year end. Amongst the main
factors considered were the impact of the current inflationary pressures being
experienced by consumers within the UK exacerbated by the impact that the
tragic war in Ukraine has had upon energy and commodity costs. Other matters
considered were the ongoing impact of, and speed of recovery from, the
Covid-19 pandemic and the continuing structural changes to UK retail although
in the case of this latter point it was noted that there is growing evidence
of online retail having begun to plateau in many areas.
The review concluded that while as a result of these combined factors the
profile of some risks, including economic environment, property investment
market risks and Treasury risks had changed, the ultimate nature of them had
not and therefore the principal risks to the Group broadly remain unchanged at
30 December 2022.
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
1. Property investment market risks
The weaker macro-economic environment and poor sentiment in commercial real Small changes in property market yields or future cash flow assumptions can Regularly monitoring market direction, comparable property valuations in the
estate markets has led to low transactional evidence across the industry with have a significant effect on valuations. market and recent transactions.
reduced investor confidence and a decline in valuations across all real estate
sectors.
The impact of leverage could magnify the effect on the Group's net assets and Adequate and timely forward planning of investment decisions.
the risk of breaching loan covenants with our lenders. This could result in
Valuations can be inherently subjective leading to a degree of uncertainty and the default of facilities and should we not be able to cure these, we run the
the risk that property valuations may not reflect the price received on sale. risk of security being enforced.
We engage multiple experienced, external valuers who understand the specific
properties and whose output is reviewed and challenged by internal
specialists.
Highly volatile trading environments have the potential to increase the
speculation on Property valuations and are open to a wider range of possible
outcomes.
Regular reviews and consideration of strategies to reduce debt levels, if
appropriate.
2. Impact of the economic environment
The Group is sensitive to tenant insolvency and distress, which can have Economic pressure on consumer spending will likely impact the levels of A key part of our Group strategy is to ensure a large, diversified tenant base
increased pressure on rent levels. There is also risk of prolonged low footfall across the centres and have a knock on effect on discretionary retail that is made up of primarily non-discretionary retail.
tenant demand for space. tenants.
Review of tenant covenants before new leases are signed.
Macroeconomic risks in relation to rising inflation, income tax and the Tenant failures and reduced tenant demand could adversely affect rental
volatility of the energy market (and associated costs of energy) are likely to income, lease incentive, void costs, cash and ultimately property valuations.
negatively impact consumer spending, which will impact retailing, particularly
The offering of long-term leases as standard and maintaining active and
discretionary spending. personable credit control processes that foster positive relationships with
tenants.
Rising inflation will also put pressure on the Group's cost base and operating
margins. Regular dialogue between the support office and general managers across the
portfolio, who have ad hoc discussions with tenants, to understand the issues
facing tenants and customers.
Managing void units though temporary lettings and other mitigation strategies.
Energy costs mitigated by measures undertaken to reduce energy consumption
such as introduction of LED lighting and utilising alternative sources of
energy such as the installation of solar panels at Snozone Madrid.
3. Treasury risk
The Group is at risk of not being able to fund the business or to refinance The Group may not be able to meet financial obligations when they come due, Ensuring that the Group maintains appropriate levels of cash reserves.
existing debt on economic terms, particularly during periods of low lending causing limitation on financial and operational flexibility.
market appetite.
Regular monitoring and projections of liquidity, gearing and covenant
The cost of financing could be prohibitive. compliance with regular reporting to the Board.
Breach of the assets loan covenants resulting in defaults on debt and the
potential for accelerated maturity and/or lenders taking control of secured
assets.
Unremedied breaches of loan covenants can trigger demand for immediate Maintain close relationships with lenders.
repayment of loan facilities.
Exposure to rising or falling interest rates, which could affect liabilities
on property sales and refinancing.
The Group has significantly reduced debt levels in the last two years through
If interest rates rise and are unhedged, the cost of debt facilities can rise a combination of asset sales and asset/debt restructuring.
and ICR covenants could be broken.
All the Group's facilities are non-recourse and held in SPV structures.
Hedging transactions used by the Group to minimise interest rate risk may
limit gains, result in losses or have other adverse consequences.
4. Tax & regulatory risks
Exposure to non-compliance with the REIT regime and changes in the form or Tax related liabilities and other losses could arise causing significant Constantly monitoring the Group's REIT compliance and consideration of the
interpretation of tax legislation. financial loss. effects of major decisions on REIT status.
Potential exposure to wider changes in tax legislation and potential tax Failure to comply with tax or regulatory requirements could result in loss of Expert advice is taken on tax positions and checks conducted on any unusual
liabilities in respect of historic transactions undertaken. REIT status, financial penalties, loss of business or reputational damage. matters that may arise.
Exposure to changes in existing or forthcoming property or corporate Maintaining regular dialogue with the tax authorities and business groups.
regulation.
Actively keep key staff up to date with regulation and ensure necessary
policies and procedures are in place.
Expert advice taken on complex regulatory matters.
5. People & Skills
As a small business, there is a relatively small number of key individuals The loss of key individuals or an inability to attract new employees with the Paying current and new employees market salaries and offering competitive
whose skills are depended on to operate the business effectively. Retaining appropriate expertise could compromise the business's ability to operate incentive packages, including the use of retention awards and incentive
these individuals cannot be guaranteed. efficiently. plans.
The attraction of new talent to the business with the right expertise cannot Promoting positive working environments and culture in line with staff
be guaranteed. expectations.
Effectively maintaining a succession plan for key positions and departments.
6. Development risk
The costs involved with development projects overrunning and delays leading to Increased costs and reputational damage which may lead to planned value not Use of experienced external project coordinators to oversee developments with
extended completion times past expected deadlines. being realised. staged execution to key milestones and updates to be monitored by steering
committees with the Group.
The threat to the Group's property assets of competing in town and out of town Competition with other schemes may reduce footfall and reduce tenant demand
retail and leisure schemes. for space and effect the levels of rents that can feasibly be achieved. Implemented well defined approval processes for new development projects and
guidance provided for setting key milestones.
Partnered with external agencies to raise awareness of new planning proposals,
which are fought, as necessary, in accordance with relevant planning laws.
Maintain close working relationships with local councils and promote
willingness to support the community.
Maintain the flexibility to invest in marketing strategies to continue
relevance in the market.
7. Business disruption from a major incident
Major incidents occur at any of the of the business's sites having a Such events could cause a reduction in earnings and additional costs. Trained operational personnel at all sites and documented major incident
significant impact upon trading.
procedures.
Exposure to reputational damage if the business acts, or is perceived to have
This includes specific incidents to a centre or trading location or a acted, in a negligent manner. Regular update meetings on operational procedures reflecting current threats
situation such as Covid-19 that impacts trading on a national scale.
and major incident testing runs.
The pandemic has had a significant impact on customer behaviour and habits.
There is a risk that consumer habits have permanently changed and will impact Regular liaison with the police and environmental health officers.
business KPIs, such as footfall and leasing.
Insurance for business disruption and rebuild is always maintained across the
portfolio.
Disaster recovery sites have been mapped and are maintained in the event of
immediate needs.
8. Environmental, Social & Governance
The Group's activities may have an adverse impact on the environment and the Failure to act on environmental and social issues could lead to reputational Issues and actions considered by the Board, through regular reports from the
communities in which we operate. damage, deterioration in relationships with customers and communities and ESG Committee and its designated sub committees.
limit investment opportunities.
Health and safety incidents could cause death or serious injury
Appointed ESG specialist to assist the business in mapping out its ESG roadmap
Failure to comply with relevant regulations could result in financial and key milestones.
exposure.
A risk that centres or specific retailers are identified as a 'hotspot' for
Covid-19 transmission.
Specialist health and safety consultancy support in place with internal
Health and safety incidents could result in reputational damage, financial bespoke health and safety system to enable incident reporting and monitoring
liability for the Group and potentially criminal liability for the directors.
EPC rating certificates are completed across the portfolio.
9. Customers & changing consumer trends
Further migration towards online shopping, multi-channel retailing, and Changes in consumer shopping habits towards online shopping and home delivery Strong location and dominance of shopping centres (portfolio is weighted to
increased spending on leisure may adversely impact consumer footfall in could reduce footfall and therefore potentially reduce tenant demand and the London and Southeast England).
shopping centres. levels of rents which can be achieved.
Strength of the community shopping experience with tailored relevance to the
Increased use of CVAs by retailers as a means of restructuring or cost Financial loss from tenants use and reliance on CVAs to both write off arrears local community.
reduction. and reset lease agreement terms.
Concentration on convenience and value offer which is less impacted by online
presence.
Increasing provision of "Click & Collect" within our centres.
Maintaining positive retailer relationships and providing for honest and open
dialogue.
Monitoring key business metrics such as footfall, retail trends and shopping
behaviour.
10. IT & Cybersecurity
Failure of, or, as a result of malicious attack on, the Group's information Loss of operating capacity, business time or reputational damage. IT Security Governance Policy in place aligned with ISO27001.
technology hardware and software systems.
Data breaches resulting in reputational damage, fines or regulatory penalties. Ongoing investment in technology infrastructure with key IT applications
Failure to continually keep up with best practice and invest in new
hosted offsite.
technology.
Systems in place to prevent and react to malicious attack.
Regular penetration testing carried out by a specialist security company.
Cyber Essentials Plus certified.
Information security training programmes in place to regularly upskill all
employees. A strong password policy is in place to keep employees safe.
Maintenance of a disaster recovery site in the event of critical systems
failures.
11. Climate-related
In light of the introduction of TCFD Disclosure requirements, the impact of The Group's failure to act on environmental issues could lead to reputational Environmental policy in place and consistent with ISO14001.
climate change has become a Board level issue. damage, deterioration in customer and community relationships, or limit
investment opportunities. Climate-related risks extend to the global supply
chain, business disruption from extreme weather events.
Management of and compliance with the Carbon Reduction Commitment and
As a result of COP26, the world stage is focussed on combatting climate change compliance with the Carbon Trust.
and businesses that fall behind on their efforts to mitigate their effect on
the climate run the risk of becoming non-investable. Failure to comply with regulations could result in financial exposure.
Engaged with external agency, JLL, to assist with setting out framework to
assess climate related risks.
Separate risk matrix on climate-related risks feeds into Group risk review and
ESG Committee reporting to the Board.
Nominated individual from SLT to take oversight responsibility of
climate-related issues.
Board has oversight of TCFD climate-related goals and targets through
quarterly ESG reporting.
12. Health & Safety
The risk that the Group's staff, customers or guests suffer illness, injury or If found to be as a result of failing processes or negligence the Group and/or Regular risk assessments
fatality at one of the Group's operations. individuals in management positions could face criminal charges, financial
loss and reputational damage.
Sharing of information with local Health & Safety Executive
Capacity limits agreed with Health & Safety Executive and reviewed with
external lawyers
Training for staff by Health & Safety Consultancy
Insurance review meetings with insurance brokers
Unaudited preliminary consolidated income statement
For the year to 30 December 2022
2022 2021
Restated(1)
Note £m £m
Continuing operations
Revenue 3 60.6 54.6
Other income 3 - 2.5
Expected credit loss 0.4 (4.1)
Cost of sales (32.8) (27.9)
Gross profit 28.2 25.1
Administrative costs (10.9) (12.7)
Loss on revaluation of investment properties 6a (19.6) (35.0)
Other gains and losses 15.6 14.0
Profit/(loss) on ordinary activities before financing 13.3 (8.6)
Finance income 1.1 4.6
Finance costs (9.4) (12.9)
Profit/(loss) before tax 5.0 (16.9)
Tax 4a 0.3 (3.1)
Profit/(loss) for the year from continuing operations 5.3 (20.0)
Profit/(loss) for the period from period from discontinued operations (Luton) 10 6.8 (6.4)
Profit/(loss) for the year 2a 12.1 (26.4)
Continuing operations
Basic earnings per share 3.2p (16.7)p
Diluted earnings per share 3.2p (16.7)p
Continuing and discontinued operations
Basic earnings per share 5a 7.3p (22.0)p
Diluted earnings per share 5a 7.2p (22.0)p
EPRA earnings per share
EPRA basic earnings per share 5a 5.3p 1.6p
EPRA diluted earnings per share 5a 5.3p 1.6p
(1)2021 comparative figures have been restated to present discontinued
operations separately. Discontinued operations are discussed in Note 10. 2021
comparative figures have also been restated for a prior year adjustment to the
treatment of rent concessions as explained in Note 1.
Unaudited preliminary consolidated statement of comprehensive income
For the year to 30 December 2022
2022 2021
£m £m
Profit/(loss) for the year 12.1 (26.4)
Other comprehensive income - -
Total comprehensive income/(expense) for the year 12.1 (26.4)
The results for the current and preceding year are fully attributable to
equity shareholders.
The EPRA alternative performance measures used throughout this report are
industry best practice performance measures established by the European Public
Real Estate Association (EPRA). They are defined in the Glossary to the
Financial Statements. EPRA Earnings and EPRA EPS are shown in Note 5 to the
Condensed Financial Statements. EPRA net reinstatement value (NRV), net
tangible assets (NTA) and net disposal value (NDV) are shown in Note 13 to the
Condensed Financial Statements. We consider EPRA NTA to be the most relevant
measure for our business.
Unaudited preliminary consolidated balance sheet
At 30 December 2022
2022 2021
Restated(1)
Note £m £m
Non-current assets
Investment properties 6 320.1 376.4
Plant and equipment 1.8 1.7
Right of use assets 7 21.6 24.5
Fixed asset investments - 0.1
Receivables 8 9.6 8.8
Total non-current assets 353.1 411.5
Current assets
Receivables 8 14.4 19.6
Cash and cash equivalents 9 55.5 58.5
Assets classified as held for sale 10 - 146.4
Total current assets 69.9 224.5
Total assets 2b 423.0 636.0
Current liabilities
Trade and other payables (31.0) (29.3)
Current tax (1.0) (1.1)
Lease liabilities (3.0) (2.8)
Liabilities directly associated with assets classified as held for sale 10 - (165.8)
Total current liabilities (35.0) (199.0)
Net current assets 34.9 25.5
Non-current liabilities
Bank loans 11a (181.8) (238.2)
Other payables - (0.3)
Lease liabilities (27.1) (30.1)
Total non-current liabilities (208.9) (268.6)
Total liabilities 2b (243.9) (467.6)
Net assets 179.1 168.4
Equity
Share capital 16.9 16.5
Share premium 1.7 266.1
Merger reserve 60.3 60.3
Capital redemption reserve - 4.4
Own shares reserve - -
Retained earnings 100.2 (178.9)
Equity shareholders' funds 179.1 168.4
Basic net assets per share 105.9p 101.8p
EPRA net reinstatement value per share 13 103.4p 101.6p
EPRA net tangible assets per share 13 103.4p 101.6p
EPRA net disposal value per share 13 115.1p 101.0p
(1)2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1.
Unaudited preliminary consolidated statement of changes in equity
For the year to 30 December 2022
Capital Own
Share Share Merger redemption shares Retained Total
capital premium(1) reserve(2) reserve(1) reserve(3) earnings equity
£m £m £m £m £m £m £m
Balance at 30 December 2020 11.2 244.3 60.3 4.4 - (153.1) 167.1
Loss for the year - - - - - (26.4) (26.4)
Other comprehensive income for the year - - - - - - -
Total comprehensive expense for the year - - - - - (26.4) (26.4)
Credit to equity for equity-settled share-based payments - - - - - 0.6 0.6
Dividends paid, net of scrip - - - - - - -
Shares issued, net of costs 5.3 21.8 - - - - 27.1
Balance at 30 December 2021 16.5 266.1 60.3 4.4 - (178.9) 168.4
Profit for the year - - - - - 12.1 12.1
Other comprehensive income for the year - - - - - - -
Total comprehensive income for the year - - - - - 12.1 12.1
Capital reduction(4) - (266.1) - (4.4) - 270.5 -
Credit to equity for equity-settled share-based payments - - - - - 0.5 0.5
Dividends paid, net of scrip - - - - - (4.0) (4.0)
Shares issued, net of costs 0.4 1.7 - - - - 2.1
Balance at 30 December 2022 16.9 1.7 60.3 - - 100.2 179.1
Notes:
1 These reserves are not distributable.
2 The merger reserve of £60.3 million arose on the Group's
capital raising in 2009 which was structured so as to allow the Company to
claim merger relief under section 612 of the Companies Act 2006 on the issue
of ordinary shares. The merger reserve is available for distribution to
shareholders.
3 Own shares relate to shares purchased out of distributable
profits and therefore reduce reserves available for distribution.
4 In June 2022 a capital reduction was completed transferring the
remaining reserves from share premium and the capital redemption reserve to
retained earnings.
Unaudited preliminary consolidated cash flow statement
For the year to 30 December 2022
2022 2021
Note £m £m
Operating activities
Net cash from operations 12 25.3 25.1
Distributions received from fixed asset investments - 0.7
Interest paid (8.0) (14.4)
Interest received - -
Income tax paid (0.1) (2.5)
Cash flows from operating activities 17.2 8.9
Investing activities
Disposal of investment properties 6 59.1 11.3
Purchase of plant and equipment (0.7) (0.4)
Capital expenditure on investment properties (10.6) (8.3)
Cash flows from investing activities 47.8 2.6
Financing activities
Dividends paid (net of scrip) including withholding tax (1.2) -
Bank loans drawn down 4.0 35.0
Bank loans repaid (70.8) (84.9)
Derivatives settled - (0.2)
Loan arrangement costs (1.6) (0.7)
Issue of ordinary shares (net of costs) - 27.1
Fixed payments under head leases (0.4) (1.4)
Cash flows from financing activities (70.0) (25.1)
Net decrease in cash and cash equivalents (5.0) (13.6)
Cash and cash equivalents at the beginning of the year 58.5 84.1
Cash and cash equivalents at the end of the year 53.5 70.5
Transfer from/(to) assets classified as held for sale 2.0 (12.0)
Cash and cash equivalents excluding assets classified as held for sale 9 55.5 58.5
( )
( )
( )
Notes to the unaudited preliminary financial statements
For the year to 30 December 2022
1 Significant Accounting Policies
General information
Capital & Regional plc is a public company limited by shares domiciled and
incorporated in England, United Kingdom under the Companies Act 2006.
The financial information set out in this announcement does not constitute the
Company's statutory financial statements for the years ended 30 December 2022
or 2021. The financial information for the year ended 30 December 2021 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 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 2022 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.
The address of the registered office is 22 Chapter Street, London, SW1P 4NP.
The Group is a specialist real estate investor and asset manager, focused on
dominant in-town community shopping centres. Further information on the
Group's operations is disclosed in Note 2a and the operating and financial
reviews.
Basis of accounting
These unaudited preliminary consolidated annual financial statements of
C&R are prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the United Kingdom.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
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 April 2023.
Accounting developments and changes
The accounting policies used in these financial statements are consistent with
those applied in the last annual financial statements, as amended where
relevant to reflect the adoption of new standards, amendments and
interpretations which became effective during the year.
In October 2022, the IASB finalised the agenda decision approved by the IFRS
Interpretation Committee (IFRS IC) on 'Lessor Forgiveness of Lease Payments
(IFRS 9 and IFRS 16)'. The agenda decision addresses the accounting from the
perspective of the lessor, and whether to apply the derecognition requirements
in IFRS 9 or the lease modification requirements in IFRS 16 when accounting
for the rent concession.
When the lease payments are forgiven, the Committee concluded that the lessor
should apply the derecognition requirements in IFRS 9 to the operating lease
receivables and apply the lease modification requirements in IFRS 16 to future
lease payments, including accrued lease payments, as discussed further below.
In applying the requirements in IFRS 9, the lessor should derecognise the
operating lease receivable, including any associated ECL allowance.
1 Significant Accounting Policies (continued)
Accounting developments and changes (continued)
In adopting the above treatment the Group has restated the 2021 results for a
prior year adjustment. This restatement derecognises the rent free debtor
associated with rent concessions granted specifically relating to Covid 19,
which has an associated knock-on impact on the investment properties balance,
given valuations are adjusted for such amounts. The following table summarises
the impact of the change in policy on the financial statements of the Group.
The total impact on net assets and profit for the period is £nil.
30 December 2021
£m
Consolidated income statement
Revenue (1.6)
Loss on revaluation of investment properties 1.6
Adjusted Profit (1.6)
Consolidated balance sheet
Investment properties 1.6
Receivables (1.6)
Basic earnings per share -
Diluted earnings per share -
New and revised standards issued but not yet effective
At the date of authorisation of these financial statements, the Group has not
applied the following new and revised IFRS Standards that have been issued but
are not yet effective:
IFRS 17 Insurance Contracts including Amendments to IFRS 17
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments
in Associates and Joint Ventures-Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
Amendments to IFRS 3-References to the Conceptual Framework
Amendments to IAS 16-Property, Plant and Equipment-Proceeds before Intended
Use
Amendments to IAS 37-Onerous Contracts-Cost of Fulfilling a Contract
Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 Annual Improvements to IFRS
Standards 2018-2020
Amendments to IAS 1-Classification of Liabilities as Current or Non-current
including Classification of Liabilities as Current or Non-current
Amendments to IAS 12-Deferred Tax related to Assets and Liabilities arising
from a Single Transaction
Amendments to IAS 1 and IFRS Practice Statement 2-Disclosure of Accounting
Policies
Amendments to IAS 8-Definition of Accounting Estimates
None of these standards are anticipated to have a material impact upon the
Group's results.
Critical accounting judgements
The preparation of financial statements requires the Directors to make the
following judgement that may affect the application of accounting policies.
Going concern
Under the UK Corporate Governance Code the Board needs to report whether the
business is a going concern. In making its assessment of Going Concern, the
Group has considered the general risk environment and the specific risks that
relate to the Group and its sector. This has incorporated considering the
current macro-economic inflationary pressures as well as the ongoing impacts
and speed of recovery from Covid-19 as well as the structural trends that were
already under way in the retail industry.
At 30 December 2022, the Group had total cash at bank on balance sheet of
£52.1 million. Of the £52.1 million there was £28 million held centrally
outside of secured loan arrangements. This provides a significant cash
contingency to cover any reasonable disruption to operations in both the base
and reasonable worst case scenarios that have been modelled for at least the
period of the next 18 months that is considered for going concern purposes.
As part of the restructure of The Mall debt facility that completed in
November 2021, the lender provided covenant waivers that run until November
2023 and modifications to cash trap provisions that run until May 2023. The
Group is currently compliant with all covenant tests on the facility and hence
not reliant on the waivers or modifications. On the Ilford facility, as
noted, the Group had covenant waivers that ran until January 2023 and has
improved covenant terms that extend beyond the end of 2024. The Mall loan
facility matures in January 2027 with a one-year conditional extension
option. The Ilford loan matures in March 2024 with an 18-month conditional
extension option dependent upon meeting a debt yield and net loan to value
covenant test in Q4 of 2023.
On Hemel Hempstead, the Group drew down on a new £4 million loan facility in
early July 2022. The Group's forecasts demonstrate a reasonable level of
covenant headroom on the Loan to Value and Projected Interest Cover Ratio
tests that are relevant to the new agreement.
All of the Group's asset backed loan facilities are ring-fenced within their
own SPV structures with no recourse to Capital & Regional plc and no
cross-default provisions. The Group continues to work with the lenders on
its Luton loan facility on a disposal of the investment. While this is
likely to realise less than the value of the net debt outstanding, due to the
ring-fenced SPV structure, the net liability of Capital & Regional plc is
effectively capped at nil.
1 Significant Accounting Policies (continued)
Going concern (continued)
In making its assessment of Going Concern, the Group has run updated forecasts
on both a base case and downside basis. In the latter, the Group has
sensitised rent collection to 90% collection, reduced car park and ancillary
income by 10% and removed any contribution from Snozone to reflect how a
downturn in expected trading, such as might be caused by a further wave of
Government restrictions, could impact cashflows. The Group has also
considered a 15% reduction in property valuations. The Group's headroom on
The Mall and Hemel Hempstead is sufficient to withstand this level of
decline.
On Ilford, such a decline would breach the LTV covenant level however the cash
earmarked for capital expenditure investment into the asset would be
sufficient to theoretically cure although in such a scenario the Group would
seek to agree with the lender to invest the funds to develop the asset. The
same position applies in respect of the LTV condition that is required in
order to trigger the 18-month extension to the loan's maturity. Ultimately
given the ring-fenced nature of the loan facility if the Group decided not to
cure any breach and could not agree a compromise with the lender it could, in
extremis, effectively surrender the asset and not face any recourse to the
Group. The Group's cashflow forecasts over the period considered for Going
Concern purposes assume it is a net investor into Ilford to fund the
masterplan initiatives and hence such a scenario would not reduce the amount
of cash available to the Group.
In coming to its Going Concern conclusion, the Group has also considered, but
not relied upon, other options available to generate or conserve additional
cash, to reduce debt levels and to fund value accretive capital expenditure
and letting initiatives. These include but are not limited to: the potential
disposal of assets either in whole or part; the opportunity to reduce or
suspend dividend payments (or offer a Scrip alternative); and the potential
raising of additional funds.
Having due regard to all of the above matters and after making appropriate
enquiries, the Directors have a reasonable expectation that the Group and the
Company have adequate resources to continue in operational existence for the
foreseeable future. Therefore, the Board continues to adopt the Going Concern
basis in preparing the financial statements.
Operating segments
Following the reclassification of Hemel Hempstead and Luton as 'Held for Sale'
as at 30 December 2021 the segment of Shopping Centres - Managed Assets that
included those assets in the prior year is no longer relevant. As a
consequence the Group's operating segments are now Shopping Centres, Snozone
and Group/Central. Shopping Centres includes the results of the Group's
centres at Ilford and Hemel Hempstead (from 11 April 2022 being the date an
agreement to buy back its loan was reached) and those centres within The Mall
loan facility, namely Blackburn (until it was sold on 9 August 2022),
Maidstone, Walthamstow and Wood Green. The Group deconsolidated its interest
in Luton on 20 May 2022 reflecting changes that took place on that date to
constitution of the Luton entities including the appointment of an independent
director with specific rights regarding the proposed sale process for the
asset.
Group/Central includes management fee income, Group overheads incurred by
Capital & Regional plc, Capital & Regional Property Management and
other subsidiaries and the interest expense on the Group's central borrowing
facility.
The Shopping Centres segments derive their revenue from the rental of
investment properties. The Snozone and Group/Central segments derive their
revenue from the operation of indoor ski slopes and the management of property
funds or schemes respectively. The split of revenue between these
classifications satisfies the requirement of IFRS 8 to report revenues from
different products and services. Depreciation and charges in respect of
share-based payments represent the only significant non-cash expenses. Prior
period comparatives have also been restated as a result.
Adjusted Profit
Adjusted Profit is the total of Contribution from wholly-owned assets, the
profit from Snozone and property management fees less central costs (including
interest, excluding non-cash charges in respect of share-based payments) after
tax. Adjusted Profit excludes revaluation of properties, profit or loss on
disposal of properties or investments, gains or losses on financial
instruments and adjusting one-off items for example gains from debt
repurchase. Results from Discontinued Operations are included in adjusted
profit up until the point of disposal or reclassification as held for sale.
Further detail on the use of Adjusted Profit and other Alternative Performance
Measures is provided within the Financial Review.
Adjusted profit within Snozone is EBITDA. Snozone EBITDA is an alternative
performance measure for the Snozone business. It excludes Depreciation,
Amortisation, (notional) Interest, Tax and non-operational one-off items. It
includes rent expense, based on contractual payments adjusted for rent free
periods. This provides a measure of Snozone trading performance which
removes the profiling impact of IFRS 16 that would otherwise see a
significantly higher charge in early years of a lease and significantly lower
net charge in later years.
A reconciliation of Adjusted Profit to the statutory result is provided in
Note 2a and, on a per share basis, in Note 5, where EPRA earnings figures are
also provided.
2a Operating segments
Shopping Centres Shopping
- Investment Assets Centres
- Managed
Assets
(discontinued operations)
Snozone Group/ Total
Central
Year to 30 December 2022 Note £m £m £m £m £m
Rental income from external sources 3b 34.7 - - - 34.7
Property and void costs(1) (11.2) - - - (11.2)
Net rental income 23.5 - - - 23.5
Net interest expense (9.3) - - - (9.3)
Snozone income/Management fees(2) 3b - - 13.0 3.3 16.3
Management expenses - - (11.6) (6.7) (18.3)
Depreciation - - - (0.3) (0.3)
Variable overhead - - - (1.6) (1.6)
Adjusted Profit/(loss) 14.2 - 1.4 (5.3) 10.3
Revaluation of properties (19.6) - - - (19.6)
Profit on disposal 1.5 - - - 1.5
Snozone depreciation and amortisation - - (2.1) - (2.1)
Notional interest (net of rent expense within EBITDA) - - 0.8 - 0.8
Gain on financial instruments 1.1 - - - 1.1
Long-term incentives (non-cash) - - - (0.5) (0.5)
Tax credit - - - 0.3 0.3
Other items 10 1.6 6.8 - (0.6) 7.8
Gain on debt repurchase 10 12.5 - - - 12.5
Profit/(loss) 11.3 6.8 0.1 (6.1) 12.1
Total assets 3b 365.5 - 27.1 30.4 423.0
Total liabilities 3b (210.6) - (28.9) (4.4) (243.9)
Net assets/(liabilities) 154.9 - (1.8) 26.0 179.1
(1) Includes expected credit loss.
(2) Asset management fees of £2.5 million charged from the Group's Capital
& Regional Property Management entity to wholly owned assets have been
excluded from the table above.
2a Operating segments (continued)
Shopping Centres Shopping
- Investment Assets Centres
- Managed
Assets(5)
Snozone Group/ Total
Central
Year to 30 December 2021 (Restated)(6) Note £m £m £m £m £m
Rental income from external sources 3b 34.1 14.0 - - 48.1
Property and void costs(1) (14.0) (6.7) - - (20.7)
Net rental income 20.1 7.3 - - 27.4
Net interest expense (10.8) (5.4) - (0.2) (16.4)
Snozone income/Management fees(2) 3b - - 6.8 2.4 9.2
Other income(4) - - 2.5 2.5
Management expenses - - (8.5) (6.5) (15.0)
Depreciation - - - (0.3) (0.3)
Variable overhead - - - (0.9) (0.9)
Adjusted Profit/(loss) 9.3 1.9 0.8 (5.5) 6.5
Revaluation of properties (27.8) (19.8) - - (47.6)
Loss on disposal (1.4) (1.1) - - (2.5)
Snozone depreciation and amortisation - - (2.5) - (2.5)
Notional interest (net of rent expense within EBITDA) - - 0.5 - 0.5
Gain on financial instruments 2.7 3.2 - - 5.9
Long-term incentives (non-cash) - - - (0.9) (0.9)
Tax charge - - 0.2 - 0.2
Prior period tax(3) - - 1.4 (3.3) (1.9)
Other items - - (0.7) (1.8) (2.5)
Gain on debt repurchase - - - 18.4 18.4
(Loss)/Profit (17.2) (15.8) (0.3) 6.9 (26.4)
Total assets 3b 425.6 146.4 29.0 35.0 636.0
Total liabilities 3b (267.9) (165.8) (31.2) (2.7) (467.6)
Net assets/(liabilities) 157.7 (19.4) (2.2) 32.3 168.4
(1) Includes expected credit loss.
(2) Asset management fees of £3.6 million charged from the Group's Capital
& Regional Property Management entity to wholly owned assets have been
excluded from the table above.
(3) £1.4 million in Snozone relates to a reclaim of VAT
(4) Other income includes £2.5 million insurance proceeds
(5) Shopping Centres - Managed Assets includes £(6.4) million from
discontinued operations
(6)2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1.
2b Reconciliations of reportable revenue, assets and liabilities
Year to Year to
30 December 30 December
2022 2021
Restated(1)
Revenue and other income Note £m £m
Rental income from external sources 2a 34.7 34.5
Other revenue 2a - 2.5
Service charge income 10.5 9.6
Management fees 2a 3.4 2.4
Snozone income 2a 13.0 6.8
Revenue for reportable segments 61.6 55.8
Elimination of inter-segment revenue (1.0) (1.2)
Revenue and other income per consolidated income statement 3 60.6 54.6
Revenue and other income by country
UK 57.1 52.5
Spain 3.5 2.1
Revenue and other income per consolidated income statement 60.6 54.6
(1)2021 comparative figures have been restated to present discontinued
operations separately. Discontinued operations are discussed in Note 16. 2021
comparative figures have also been restated for a prior year adjustment to the
treatment of rent concessions as explained in Note 1.
2022 2021
Note £m £m
Assets
Investment assets 365.5 425.6
Snozone 27.1 29.0
Group/Central 30.4 35.0
Assets classified as held for sale - 146.4
Total assets of reportable segments and Group assets 2a 423.0 636.0
Liabilities
Investment assets (210.6) (267.9)
Snozone (28.9) (31.2)
Group/Central (4.4) (2.7)
Liabilities directly associated with assets classified as held for sale - (165.8)
Total liabilities of reportable segments and Group liabilities 2a (243.9) (467.6)
Net assets by country
UK 177.8 167.8
Spain 1.3 0.6
Group net assets 179.1 168.4
3 Revenue
Year to Year to
30 December 30 December
2022 2021(1)
Note £m £m
Gross rental income 26.7 30.3
Car Park and ancillary income 8.0 7.1
Income from external sources 2a 34.7 37.4
Service charge income 2b 10.5 9.6
External management fees 2.4 0.8
Snozone income 2a 13.0 6.8
Other income 2a - 2.5
Revenue and other income per consolidated income statement 2b 60.6 57.1
( )
(1)2021 comparative figures have been restated to present discontinued
operations separately. Discontinued operations are discussed in Note 10. 2021
comparative figures have also been restated for a prior year adjustment to the
treatment of rent concessions as explained in Note 1. Management fees
represent revenue earned by Capital & Regional Plc and the Group's wholly
owned Capital & Regional Property Management subsidiary. Fees charged to
wholly owned assets have been eliminated on consolidation.
4 Tax
4a Tax credit/(charge)
Year to Year to
30 December 30 December
2022 2021
£m £m
Current tax
UK corporation tax (0.4) (1.0)
Adjustments in respect of prior years 0.4 (2.6)
Total current tax credit/(charge) - (3.6)
Deferred tax
Prior year adjustments - (0.1)
Origination and reversal of temporary timing differences 0.3 0.6
Total deferred tax 0.3 0.5
Total tax credit/(charge) 0.3 (3.1)
£nil (2021: £nil) of the tax charge relates to items included in other
comprehensive income.
4b Tax credit/(charge) reconciliation
Year to Year to
30 December 30 December
2022 2021
Restated(1)
Note £m £m
Profit/(loss) before tax on continuing operations 5.0 (16.9)
Expected tax (charge)/credit at 19% (2021: 19%) (1.0) 3.2
REIT exempt income and gains 2.1 (2.4)
Non-allowable expenses and non-taxable items (1.4) (0.1)
Excess tax losses - (0.3)
Other adjustments - (1.0)
Prior year adjustments 0.4 (2.7)
Effect of tax rate change on deferred tax 0.2 0.2
Actual tax credit/(charge) 4a 0.3 (3.1)
(1)2021 comparative figures have been restated to present discontinued
operations separately. Discontinued operations are detailed in Note 10.
4c Deferred tax
The Finance Act 2020 enacted provisions maintaining the main rate of UK
corporation tax at 19% for the years starting 1 April 2020 and 1 April 2021.
On 10 June 2021 Finance Act 2021 received Royal Assent and enacted provisions
maintaining the main corporation tax rate at 19% for the year commencing 1
April 2022 and increasing the rate to 25% for the year commencing 1 April
2023.
Consequently the UK corporation tax rate at which deferred tax is booked in
the Financial Statements is 25% (December 2021: 19%).
The Group has recognised a deferred tax asset of £1.1 million (30 December
2021: £0.7m). The group has recognised deferred tax assets for the non-REIT
profit entities in respect of head lease payments and capital allowances to
the extent that future matching taxable profits are expected to arise.
No deferred tax asset has been recognised in respect of temporary differences
arising from investments or investments in associates in the current or prior
years as it is not certain that a deduction will be available when the asset
crystallises.
The Group has £12.1 million (30 December 2021: £24.1 million) of unused
revenue tax losses, all of which are in the UK. No deferred tax asset has been
recognised in respect of these losses due to the unpredictability of future
taxable profit streams and other reasons which may restrict the utilisation of
the losses (30 December 2021: £nil). The Group has unused capital losses of
£24.2 million (30 December 2021: £24.9 million) that are available for
offset against future gains but similarly no deferred tax has been recognised
in respect of these losses owing to the unpredictability of future capital
gains and other reasons which may restrict the utilisation of the losses. The
losses do not have an expiry date.
4d REIT compliance
The Group converted to a group REIT on 31 December 2014. Therefore, the
Group does not pay UK corporation tax on the profits and gains from
qualifying rental business in the UK provided it meets certain conditions.
Non-qualifying profits and gains of the Group continue to be subject to
corporation tax as normal. In order to retain group REIT status certain
ongoing criteria must be maintained. The main criteria are as follows:
- at the start of each accounting year, the value of the assets of the property
rental business plus cash must be at least 75% of the total value of the
Group's assets;
- at least 75% of the Group's total profits must arise from the property rental
business; and
- at least 90% of the Group's UK property rental profits as calculated under tax
rules must be distributed.
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 2022 Year to 30 December 2021
Note Profit EPRA Adjusted Profit Loss EPRA Adjusted Profit
(Restated)(3) (Restated)(3)
Profit (£m)
Profit/(loss) for the year 12.1 12.1 12.1 (26.4) (26.4) (26.4)
Revaluation loss on investment properties (net of tax) 5b - 19.6 19.6 - 47.6 47.6
(Profit)/Loss on disposal (net of tax) 5b - (1.5) (1.5) - 2.5 2.5
Changes in fair value of financial instruments(1) 5b - (1.1) (1.1) - (5.9) (5.9)
Share-based payments 2a - - 0.5 - - 0.9
Other items(2) - (20.3) (19.3) - (15.9) (12.2)
Profit/(loss) (£m) 12.1(4) 8.8 10.3 (26.4) 1.9 6.5
Earnings per share (pence) 7.3 5.3 6.2 (22.0) 1.6 5.4
Diluted earnings per share (pence) 7.2 5.3 6.1 (22.0) 1.6 5.4
Weighted average number of shares (m) Note Year to 30 December 2022 Year to 30 December 2021
Ordinary shares in issue 166.3 119.9
Own shares held - -
Basic 166.3 119.9
Dilutive contingently issuable shares 2.4 0.3
and share options
Diluted 168.7 120.2
At the end of the year, the Group had nil (2021: nil) share options and
contingently issuable shares granted under share-based payment schemes that
could potentially dilute earnings per share in the future, but which have not
been included in the calculation because they are not dilutive or the
conditions for vesting have not been met.
(1) 2021 includes £0.2 million cost related to the termination of interest
rate swap liabilities within The Mall loan facility.
(2) Other Items in 2022 includes the £12.5 million gain on repurchase of
Hemel Hempstead debt at a discount and a £6.8 million gain on the
deconsolidation of Luton. Other items in 2021 includes the £18.4 million
gain on repurchase of debt at a discount and other non-operating transactional
costs.
(3) 2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1.
(4) £6.8 million (30 Dec 2021: £(6.4) million) of the current earnings
related to discontinued operations.
5 Earnings per share (continued)
5b Headline earnings per share
Headline earnings per share is an alternative performance measure as required
by the JSE Listing Requirements. It has been calculated and presented in
line with the JSE guidance.
Year to 30 December 2022 Year to 30 December 2021
(Restated)(1)
Basic Diluted Basic Diluted
Profit (£m)
Profit/(loss) for the year 12.1 12.1 (26.4) (26.4)
Revaluation loss on investment properties (including tax) 19.6 19.6 47.6 47.6
(Profit)/Loss on disposal (net of tax) (1.5) (1.5) 2.5 2.5
Other items (20.3) (20.3) (15.9) (15.9)
Headline earnings 9.9 9.9 7.8 7.8
Weighted average number of shares (m)
Ordinary shares in issue 166.3 166.3 119.9 119.9
Own shares held - - - -
Dilutive contingently issuable shares and share options - 2.4 - 0.3
166.3 168.7 119.9 120.2
Headline Earnings per share (pence) Basic/Diluted 6.0 5.9 6.5 6.5
(1)2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in note 1
6 Investment properties
6a Wholly owned properties
Freehold Leasehold Total
investment investment property
Note properties properties assets
£m £m £m
Cost or valuation
At 30 December 2020 280.1 256.0 536.1
Capital expenditure (excluding capital contributions) 1.6 7.3 8.9
Disposal(2) (13.3) - (13.3)
Valuation deficit(1) (31.1) (16.5) (47.6)
Transfer to held for sale 10 (10.2) (97.5) (107.7)
At 30 December 2021 (Restated)(3) 227.1 149.3 376.4
Capital expenditure (excluding capital contributions) 3.2 5.8 9.0
Disposals(2) - (54.9) (54.9)
Valuation gain/(deficit)(1) (3.8) (16.2) (20.0)
Remeasurement of head lease - (0.6) (0.6)
Transfer from held for sale 10 10.2 - 10.2
At 30 December 2022 236.7 83.4 320.1
( )
(1) £19.6 million per Income statement and Note 2a includes letting fee
amortisation adjustment of £(0.4) million (2021: £0.1million).
(2) This represents the net book value including tenant incentives
(3) 2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1
On 18 May 2022 the Group completed the acquisition of its debt in respect of
the Marlowes shopping centre in Hemel Hempstead as a consequence the Freehold
property was transferred back from held for sale. On 23 May 2022 the Group
exchanged on the sale of its Mall shopping centre in Blackburn and as such the
Leasehold property was transferred to held for sale at that date.
As part of the agreement to run a consensual sale process changes to the
constitution of the Luton entities were made including the appointment of an
independent director with specific rights regarding the sale process. These
changes took effect from 23 May 2022 and the effective loss of control that
they triggered have resulted in the Group deconsolidating its interest in
Luton from that date.
In May 2022, the Group exchanged contracts for the sale of The Mall, Blackburn
to the retail arm of the Adhan Group of Companies for £40 million,
representing a premium to the December 2021 valuation of £38.2 million. The
sale completed on 9 August 2022 delivering cash proceeds of £39.4 million.
On 11 July 2022, the Group completed the sale of land for residential
development at its 17&Central community shopping centre in Walthamstow to
Long Harbour for c.£21.65 million. The head lease at The Mall Walthamstow has
been remeasured as a result of an extension of the lease term effective 23
June 2022.
6 Investment properties (continued)
6b Property assets summary
30 December 2022 30 December 2021
(Restated)(1)
£m £m
Investment properties at fair value as reported by the valuer 322.8 380.1
Add back of lease liabilities 5.4 6.0
Unamortised tenant incentives on investment properties (8.1) (9.7)
IFRS Property Value 320.1 376.4
(11)2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1
As described in Note 1 summary of significant accounting policies, where the
valuation obtained for investment property is net of all payments to be made,
it is necessary to add back the lease liability to arrive at the carrying
amount of investment property at fair value.
6c Valuations
External valuations at 30 December 2022 were carried out on all of the gross
property assets detailed in the table above. The fair value was £322.8
million (2021: £380.1 million). External valuations were carried out on all
of the property assets detailed in the table above. The valuations at 30
December 2022 were carried out by independent qualified professional valuers
from CBRE Limited and Knight Frank LLP in accordance with RICS standards.
These valuers are not connected with the Group and their fees are charged on a
fixed basis that is not dependent on the outcome of the valuations.
Real estate valuations are complex and derived from data that is not widely
publicly available and involves a degree of judgement. For these reasons, the
valuations are classified as Level 3 in the fair value hierarchy as defined by
IFRS 13. The valuations are sensitive to changes in rent profile and yields.
The Group considers all of its investment properties to fall within "Level 3",
as defined in Note 1. The table below summarises the key unobservable inputs
used in the valuation of the Group's wholly owned investment properties at
30 December 2022:
Estimated rental value £ per sq ft Equivalent yield %
Market Value £m
Low Portfolio High Low Portfolio High
322.8 9.5 17.7 28.3 7.0 8.6 17.5
Sensitivities
The following table illustrates the impact of reasonably possible changes in
key unobservable inputs (in isolation) on the fair value of the Group's
properties:
Impact on valuations of 5% change in estimated rental value Impact on valuations of 25bps change in equivalent yield Impact on valuations of 50bps change in equivalent yield
Increase Decrease Increase Decrease Increase Decrease
£m £m £m £m £m £m
13.0 (12.8) (10.8) 11.8 (21.2) 24.3
Impact on valuations of 100bps change in equivalent yield
Increase Decrease
£m £m
Wholly owned assets (40.0) 52.3
7 Leases
30 December 30 December
2022 2021
Right of use Assets £m £m
Cost
At the start of the year 28.9 14.4
Additions - 3.3
Remeasurement (0.8) 11.2
At the end of the year 28.1 28.9
Accumulated depreciation
At the start of the year (4.4) (2.2)
Charge for the year (2.1) (2.2)
Disposals - -
At the end of the year (6.5) (4.4)
Carrying value
At the end of the year 21.6 24.5
Lease commitments relate to the leasing of the Group's registered office and
the leases of the Snozone business on its Castleford, Milton Keynes and Madrid
sites. The lease at Snozone Basingstoke expired as at 30 December 2022, the
leases at Milton Keynes and Castleford were revalued following the annual
lease payable review. During 2022 the Group signed an extension of its
registered office lease of one year. The lease liability was remeasured as a
result. During 2021 the group signed amendments to the lease agreements for
the Castleford and Milton Keynes sites within its Snozone business, resulting
in the remeasurement of the right of use asset and the related lease
liability. Additions for that year relate to the lease acquired on acquisition
of Snowzone Madrid.
8 Receivables
30 December 2022 30 December 2021
(restated)(1)
£m £m
Non current:
Non-financial assets
Deferred tax 1.1 0.7
Interest rate swap 1.7 -
Unamortised tenant incentives 2.1 2.1
Unamortised rent free periods 4.7 6.0
9.6 8.8
Current:
Financial assets
Trade receivables (net of allowances) 7.7 8.9
Other receivables - 4.2
Accrued income 1.5 0.9
Current financial assets 9.2 14.0
Non-financial assets
Prepayments 4.0 4.0
Unamortised tenant incentives 0.5 0.4
Unamortised rent free periods 0.7 1.2
Current non-financial assets 5.2 5.6
14.4 19.6
(11)2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1
8 Receivables (continued)
The creation and release of credit loss allowances have been included in cost
of sales in the income statement.
Credit losses are calculated at an amount equal to lifetime expected credit
losses. The expected credit losses on trade receivables are estimated using a
provision matrix by reference to past default experience of the debtor and an
analysis of the debtor's current financial position, adjusted for factors that
are specific to the debtor and an assessment of both the current as well as
the forecast direction of conditions at the reporting date.
There has been no change in the estimation techniques or significant
assumptions made during the current reporting period.
The group writes off a trade receivable when there is information indicating
that there is no realistic prospect of recovery. Changes in expected credit
loss allowance arise from increase in calculated expected credit loss, as well
as amounts written off. The group does not recognise revenue where
collectability is not reasonably expected. In the case of rental income this
relates to tenants who are insolvent and closed.
9 Cash and cash equivalents
30 December 30 December
2022 2021
£m £m
Cash at bank and in hand 52.1 53.7
Security deposits held in rent accounts 0.8 0.7
Other restricted balances 2.6 4.1
55.5 58.5
Cash at bank and in hand include amounts subject to a charge against various
borrowings and may therefore not be immediately available for general use by
the Group. Of the cash at bank and in hand £28.1 million was held on short
term deposit and immediately available free of any restrictions or conditions
at the year end date (30 December 2021 - £32.5 million). The remaining
balances are subject to meeting conditions or having passed through relevant
waterfall calculations within relevant loan facilities. All of the above
amounts at 30 December 2022 were held in Sterling other than £0.6 million
which was held in Euros (30 December 2021: £0.6 million).
10 Assets and liabilities held for sale
As at 30 December 2021, the Group concluded that Hemel Hempstead and Luton,
met the criteria to be reclassified as 'Held for Sale'. This conclusion was
reached as the Group, in conjunction with the respective lenders had decided
to seek to dispose of whole or part of the investments as at that date.
The Marlowes, Hemel Hempstead - on 11 April 2022 the Group reached agreement
with the respective lender to acquire its outstanding debt liabilities of £24
million for a discounted amount of £11.8 million. The acquisition
subsequently completed on 18 May 2022. The Group has reclassified its
interest in Hemel Hempstead from Held for Sale as of 11 April 2022. A book
value of £10.2 million was transferred back at this date being the fair value
of £10.5 million plus tenant incentives of £(0.3) million. The transaction
has resulted in an increase to Net Asset Value of approximately £12.5 million
being the amount of the discount less related transaction costs.
The Mall, Luton - The Group has been working closely with the lender on Luton
to explore a disposal of the investment or asset. This process remains
ongoing. As part of the agreement to run a consensual sale process changes
to the constitution of the Luton entities were made including the appointment
of an independent director with specific rights regarding the sale process.
Two existing directors were required to step down as part of the agreement.
These changes took effect from 23 May 2022 and the effective loss of control
that they triggered have resulted in the Group deconsolidating its interest in
Luton from that date. This has increased the Group's Net Asset Value by
£6.8 million being the net liability at the point of deconsolidation.
10 Assets and liabilities held for sale (continued)
The loss for the period from Luton up to the date of deconsolidation is broken
down as follows
Period to Year to
23 May 30 December
2022 2021
£m £m
Revenue 4.2 13.8
Expected Credit loss - (0.8)
Cost of sales (1.4) (5.5)
Gross profit 2.8 7.5
Loss on revaluation of investment properties (2.8) (12.6)
Other gains and losses (0.3) -
Loss on ordinary activities before financing (0.3) (5.1)
Finance income 1.7 3.1
Finance costs (1.7) (4.4)
Loss before tax (0.3) (6.4)
Tax credit/(charge) - -
Loss for the period (0.3) (6.4)
The gain on disposal as at 23 May 2022 is £6.8 million being the write off of
the liability held for sale as at 30 December 2021. The results related to
Luton have been reclassified to Discontinued Operations.
During the period, Luton Limited Partnership generated £2.5 million (2021:
£5.4 million) of net operating cash flows, paid £1.3 million (2021: £3.2
million) in respect of investing activities and paid £4.8 million (2021:
£1.0 million) in respect of financing activities.
11 Bank loans
11a Summary of borrowings
The Group's borrowings are arranged to ensure an appropriate maturity profile
and to maintain short-term liquidity. There were no defaults or other
breaches of financial covenants that were not waived under any of the Group
borrowings during the current year or the preceding year.
30 December 30 December
2022 2021
Borrowings at amortised cost Note £m £m
Secured
Fixed and swapped loans 179.0 239.0
Variable rate loans 4.0 -
Total borrowings before costs 183.0 239.0
Unamortised issue costs (1.2) (0.8)
Total borrowings after costs 181.8 238.2
Analysis of total borrowings after costs
Current - -
Non-current 181.8 238.2
Total borrowings after costs 181.8 238.2
On 7 July 2022, the Group drew down a new £4 million facility with BC Invest,
a subsidiary of the Group's strategic residential partner, Far East
Consortium. The new debt has been provided for an initial period of three
years at a margin of 5.95%. It is secured on the Marlowes Centre on a
non-recourse basis.
The movement of Secured loans in the year is summarised in the table below:
£m
Secured bank loans at 30 December 2021 239.0
Repayment of The Mall B2 loan facility (35.0)
Repayment of The Mall A loan facility (25.0)
Drawdown of new Hemel Hempstead loan facility 4.0
183.0
All loans are maintained in separate ring-fenced Special Purpose Vehicle (SPV)
structures secured against the property interests and other assets within each
SPV. There is no recourse to other Group companies outside of the respective
SPV and no cross-default provisions.
12 Reconciliation of net cash from operations
Year to Year to
30 December 30 December
2022 2021 (Restated)(1)
Note £m £m
Profit/(loss) for the year 12.1 (26.4)
Adjusted for:
Income tax (credit)/charge 4a (0.3) 3.1
Finance income (1.1) (7.6)
Finance expense 9.4 17.3
Finance lease costs (head lease) (0.3) (1.1)
Loss on revaluation of wholly owned properties 19.6 47.6
Depreciation of other fixed assets 0.3 0.5
Other gains (22.4) (14.0)
Decrease/(increase) in receivables 4.5 (2.5)
Increase in payables 3.0 7.8
Non-cash movement relating to share-based payments 0.5 0.4
Net cash from operations 25.3 25.1
(1)2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions. Loss on revaluation of investment
properties has been reduced by £1.6 million and the increase in receivables
has been reduced by the same amount as described in Note 1.
13 Net assets per share
30 Dec 2022 30 Dec 2021
EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV
£m £m £m £m £m £m
IFRS Equity attributable to shareholders 179.1 179.1 179.1 168.4 168.4 168.4
Exclude fair value of financial instruments (1.7) (1.7) - - - -
Include fair value of fixed interest rate debt - - 18.4 - - (1.0)
Net asset value 177.4 177.4 197.5 168.4 168.4 167.4
Fully diluted number of shares 171.6 171.6 171.6 165.7 165.7 165.7
Net asset value per share 103.4 103.4 115.1 101.6 101.6 101.0
The number of ordinary shares issued and fully paid at 30 December 2022 was
169,191,918 (30 December 2021:165,399,863). There have been no changes to the
number of shares from 30 December 2022 to the date of this announcement.
14 Dividends
The dividends shown below are gross of any take-up of Scrip offer.
Year to Year to
30 December 30 December
2022 2021
£m £m
Interim dividend per share for year ended 30 December 2022 of 2.5p 4.1 -
Amounts recognised as distributions to equity holders in the year 4.1 -
Proposed final dividend for year ended 30 December 2022 of 2.75p 4.7 -
15 Ultimate controlling party
Growthpoint Properties Limited ("Growthpoint") holds 61.5% of the issued share
capital of the Company. As such Growthpoint is the ultimate controlling party
of the Company and the largest group into which the results of the Company are
consolidated. The registered office of Growthpoint Properties Limited is The
Place, 1 Sandton Drive, Sandton, 2196, Johannesburg, South Africa. The
financial statements of Growthpoint are available at this address.
Glossary of terms
Adjusted Profit is the total of Contribution from wholly-owned assets and the Market value is an opinion of the best price at which the sale of an interest
Group's joint ventures and associates, Snozone EBITDA and property management in a property would complete unconditionally for cash consideration on the
fees less central costs (including interest but excluding non-cash charges in date of valuation as determined by the Group's external or internal valuers.
respect of long-term incentive awards) after tax. Adjusted Profit excludes In accordance with usual practice, the valuers report valuations net, after
revaluation of properties, profit or loss on disposal of properties or the deduction of the prospective purchaser's costs, including stamp duty,
investments, gains or losses on financial instruments and exceptional one-off agent and legal fees.
items. Results from Discontinued Operations are included up until the point of
disposal or reclassification as held for sale.
Net Administrative Expenses to Gross Rent is the ratio of Administrative
Expenses net of external fee income to Gross Rental income including the
Adjusted Earnings per share is Adjusted Profit divided by the weighted average Group's share of Joint Ventures and Associates
number of shares in issue during the year excluding own shares held.
Net assets per share (NAV per share) are shareholders' funds divided by the
C&R is Capital & Regional plc, also referred to as the Group or the number of shares held by shareholders at the year end, excluding own shares
Company. held.
CRPM is Capital & Regional Property Management Limited, a subsidiary of Net initial yield (NIY) is the annualised current rent, net of revenue costs,
Capital & Regional plc, which earns management and performance fees from topped-up for contractual uplifts, expressed as a percentage of the capital
the Mall assets and certain associates and joint ventures of the Group. valuation, after adding notional purchaser's costs.
Contracted rent is passing rent and the first rent reserved under a lease or Net debt to property value is debt less cash and cash equivalents divided by
unconditional agreement for lease but which is not yet payable by a tenant. the property value.
Contribution is net rent less net interest, including unhedged foreign Net interest is the Group's share, on a see-through basis, of the interest
exchange movements. payable less interest receivable of the Group and its associates and joint
ventures.
Capital return is the change in market value during the year for properties
held at the balance sheet date, after taking account of capital expenditure Net rent or Net rental income (NRI) Net Rental Income is rental income from
calculated on a time weighted basis. properties, less provisions for expected credit losses, property and
management costs. It is a standard industry measure.
Debt is borrowings, excluding unamortised issue costs.
Nominal equivalent yield (NEY) is a weighted average of the net initial yield
and reversionary yield and represents the return a property will produce based
upon the timing of the income received, assuming rent is received annually in
EPRA earnings per share (EPS) is the profit / (loss) after tax excluding gains arrears on gross values including the prospective purchaser's costs.
on asset disposals and revaluations, movements in the fair value of financial
instruments, intangible asset movements and the capital allowance effects of
IAS 12 "Income Taxes" where applicable, less tax arising on these items,
divided by the weighted average number of shares in issue during the year Occupancy cost ratio is the proportion of a retailer's sales compared with the
excluding own shares held. total cost of occupation being: rent, business rates, service charge and
insurance. Retailer sales are based on estimates by third party consultants
which are periodically updated and indexed using relevant data from the
C&R Trade Index.
EPRA net disposal value represents net asset value under a disposal
scenario, where deferred tax, financial instruments and certain other
adjustments are calculated to the full extent of their liability, net of any
resulting tax. Occupancy rate is the ERV of occupied properties expressed as a percentage of
the total ERV of the portfolio, excluding development voids.
EPRA net reinstatement value is net asset value adjusted to reflect the value
required to rebuild the entity and assuming that entities never sell assets. Passing rent is gross rent currently payable by tenants including car park
Assets and liabilities, such as fair value movements on financial derivatives profit but excluding income from non-trading administrations and any assumed
are not expected to crystallise in normal circumstances and deferred taxes on uplift from outstanding rent reviews.
property valuation surpluses are excluded.
Rent to sales ratio is Contracted rent excluding car park income, ancillary
EPRA net tangible assets is a proportionally consolidated measure, income and anchor stores expressed as a percentage of net sales.
representing the IFRS net assets excluding the mark-to-market on derivatives
and related debt adjustments, the mark-to-market on the convertible bonds, the
carrying value of intangibles as well as deferred taxation on property and
derivative valuations. REIT - Real Estate Investment Trust.
Estimated rental value (ERV) is the Group's external valuers' opinion as to Return on equity is the total return, including revaluation gains and losses,
the open market rent which, on the date of valuation, could reasonably be divided by opening equity plus time weighted additions to and reductions in
expected to be obtained on a new letting or rent review of a unit or property. share capital, excluding share options exercised.
ERV growth is the total growth in ERV on properties owned throughout the year Reversionary percentage is the percentage by which the ERV exceeds the passing
including growth due to development. rent.
Gearing is the Group's debt as a percentage of net assets. See through Reversionary yield is the anticipated yield to which the net initial yield
gearing includes the Group's share of non-recourse debt in associates and will rise once the rent reaches the ERV.
joint ventures.
Temporary lettings are those lettings for one year or less.
Interest cover is the ratio of Adjusted Profit (before interest, tax,
depreciation and amortisation) to the interest charge (excluding amortisation
of finance costs and notional interest on head leases).
Total property return incorporates net rental income and capital return
expressed as a percentage of the capital value employed (opening market value
plus capital expenditure) calculated on a time weighted basis.
Like-for-like figures, unless otherwise stated, exclude the impact of property
purchases and sales on year to year comparatives.
Total return is the Group's total recognised income or expense for the year as
set out in the consolidated statement of comprehensive income expressed as a
Leisure EBITDA or EBITDA is an alternative performance measure for the Snozone percentage of opening equity shareholders' funds.
business. It excludes Depreciation, Amortisation, (notional) Interest, Tax
and non-operational one-off items. It includes rent expense, based on
contractual payments adjusted for rent free periods. This provides a measure
of Snozone trading performance which removes the profiling impact of IFRS 16 Total shareholder return (TSR) is a performance measure of the Group's share
that would otherwise see a significantly higher charge in early years of a price over time. It is calculated as the share price movement from the
lease and significantly lower net charge in later years. beginning of the year to the end of the year plus dividends paid, divided by
share price at the beginning of the year.
Loan to value (LTV) is the ratio of debt excluding fair value adjustments for
debt and derivatives, to the Market value of properties. Variable overhead includes discretionary bonuses and the costs of awards to
Directors and employees made under the 2008 LTIP and other share schemes which
are spread over the performance period.
Portfolio information (Unaudited)
At 30 December 2022
Physical data(1)
Number of properties 5
Number of lettable units 547
Size (sq ft - million) 2.0
Valuation data
Properties at independent valuation (£m) 322.8
Adjustments for head leases and tenant incentives (£m) (2.7)
Properties as shown in the financial statements (£m) 320.1
Revaluation loss in the year (£m) £(19.6)m
Initial yield 7.2%
Equivalent yield 8.6%
Reversion 12.9%
Lease length (years)
Weighted average lease length to break 4.1
Weighted average lease length to expiry 6.9
Passing rent (£m) of leases expiring in:
2023 7.2
2024 1.7
2025-2027 6.6
ERV (£m) of leases expiring in:
2023 7.0
2024 1.9
2025-2027 6.7
Passing rent (£m) subject to review in:
2023 1.5
2024 0.8
2025-2027 1.9
ERV (£m) of passing rent subject to review in:
2023 1.1
2024 0.7
2025-2027 1.9
Rental Data
Contracted rent (£m) £31.5m
Passing rent (£m) £30.5m
ERV (£m per annum) £34.4m
ERV movement (like-for-like) 1.0%
Occupancy 94.1%
EPRA performance measures (Unaudited)
As at 30 December 2022
Note 2022 2021
Restated(2)
EPRA earnings (£m) 5a 8.8 1.9
EPRA earnings per share (diluted) 5a 5.3p 1.6p
EPRA reinstatement value (£m) 13 177.4 168.4
EPRA net reinstatement value per share 13 103p 102p
EPRA net tangible assets (£m) 13 177.4 168.4
EPRA net tangible assets per share 13 103p 102p
EPRA net disposal value (£m) 13 197.5 167.4
EPRA net disposal value per share 13 115p 101p
EPRA LTV 44.4% 64.1%
EPRA cost ratio (including direct vacancy costs) 48.6% 58.5%
EPRA cost ratio (excluding vacancy costs) 37.8% 49.6%
Like-for-like ERV growth (£m)(1) 1.0 1.1
EPRA vacancy rate 2022 2021
£m £m
Estimated rental value of vacant space 2.6 3.9
Estimated rental value of whole portfolio 33.4 53.8
EPRA vacancy rate 7.7% 7.2%
EPRA net initial yield and EPRA topped-up net initial yield 2022 2021
£m £m
Investment property 322.8 473.1
Completed property portfolio 322.8 473.1
Allowance for capital costs 16.8 (10.1)
Allowance for estimated purchasers' costs 21.9 31.4
Grossed up completed property portfolio valuation 361.4 494.4
Annualised cash passing rental income 30.5 56.2
Property outgoings (6.7) (13.7)
Annualised net rents 23.8 42.5
Add: notional rent expiration of rent free periods or other lease incentives 1.3 0.6
Topped up annualised rent 25.1 43.1
EPRA net initial yield 6.6% 8.1%
EPRA topped-up net initial yield 7.0% 8.3%
( )
(1) Like-for-like ERV growth is based on the Group's portfolio of five
properties with fair value of £322.8 million.
(2) 2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1
EPRA performance measures (continued) (Unaudited)
As at 30 December 2022
EPRA Cost ratios 2022 2021
(Restated)(1)
£m £m
Cost of sales (adjusted for IFRS head lease differential) 32.1 38.1
Administrative costs 10.9 12.7
Service charge income (10.5) (12.7)
Management fees (2.3) (0.8)
Snozone (indoor ski operation) costs (12.9) (8.5)
Less inclusive lease costs recovered through rent (1.5) (4.0)
EPRA costs (including direct vacancy costs) 15.8 24.8
Direct vacancy costs (3.5) (3.8)
EPRA costs (excluding direct vacancy costs) 12.3 21.0
Gross rental income 34.7 48.1
Less ground rent costs (0.7) (1.7)
Less inclusive lease costs recovered through rent (1.5) (4.0)
Gross rental income 32.5 42.4
EPRA cost ratio (including direct vacancy costs) 48.6% 58.5%
EPRA cost ratio (excluding vacancy costs) 37.8% 49.6%
EPRA vacancy rate 2022 2021
£m £m
Estimated rental value of vacant space 2.6 3.9
Estimated rental value of whole portfolio 33.4 53.8
EPRA vacancy rate 7.7% 7.2%
EPRA net initial yield and EPRA topped-up net initial yield 2022 2021
£m £m
Investment property 322.8 473.1
Completed property portfolio 322.8 473.1
Allowance for capital costs 16.8 (10.1)
Allowance for estimated purchasers' costs 21.9 31.4
Grossed up completed property portfolio valuation 361.4 494.4
Annualised cash passing rental income 30.5 56.2
Property outgoings (6.7) (13.7)
Annualised net rents 23.8 42.5
Add: notional rent expiration of rent free periods or other lease incentives 1.3 0.6
Topped up annualised rent 25.1 43.1
EPRA net initial yield 6.6% 8.1%
EPRA topped-up net initial yield 7.0% 8.3%
( )
(1) Like-for-like ERV growth is based on the Group's portfolio of five
properties with fair value of £322.8 million.
(2) 2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1
EPRA performance measures (continued) (Unaudited)
As at 30 December 2022
EPRA Cost ratios 2022 2021
(Restated)(1)
£m £m
Cost of sales (adjusted for IFRS head lease differential) 32.1 38.1
Administrative costs 10.9 12.7
Service charge income (10.5) (12.7)
Management fees (2.3) (0.8)
Snozone (indoor ski operation) costs (12.9) (8.5)
Less inclusive lease costs recovered through rent (1.5) (4.0)
EPRA costs (including direct vacancy costs) 15.8 24.8
Direct vacancy costs (3.5) (3.8)
EPRA costs (excluding direct vacancy costs) 12.3 21.0
Gross rental income 34.7 48.1
Less ground rent costs (0.7) (1.7)
Less inclusive lease costs recovered through rent (1.5) (4.0)
Gross rental income 32.5 42.4
EPRA cost ratio (including direct vacancy costs) 48.6% 58.5%
EPRA cost ratio (excluding vacancy costs) 37.8% 49.6%
(1)2021 comparative figures have been restated for a prior year adjustment to
the treatment of rent concessions as explained in Note 1.
Property related capital expenditure 2022 2021
Note £m £m
Acquisitions - -
Development 6 5.8 4.1
Investment properties:
Incremental letting space - -
No incremental letting space 6 3.2 4.8
Other - -
Total Capital expenditure 6 9.0 8.9
Conversion from accrual to cash basis 1.6 (0.6)
Total capital expenditure on cash basis 10.6 8.3
Capital tenant incentives of £0.9 million were paid during the year (2021:
£0.3 million). Amortisation of £0.6 million was recognised in the P&L
(2021: £0.4 million).
Capital expenditure
Refurbishment expenditure in respect of major works is capitalised. Renovation
and refurbishment expenditure of a revenue nature is expensed as incurred. Our
business model for developments is to use a combination of in-house staff and
external advisers. The cost of external advisers is capitalised to the cost of
developments. The cost of staff working on developments is capitalised subject
to meeting certain criteria related to the degree of time spent on and the
nature of specific projects. Staff costs amounting to £nil (2021: £nil) have
been capitalised as development costs during the year.
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