Capital & Regional plc Capital & Regional plc 10 Lower Grosvenor Place, London SW1W 0EN T: 020 7932 8000 F: 020 7802 5600 www.capreg.com Annual Report 2000 Capital & Regional plc Annual Report 2000 Creating places that live Our retail and leis expertise is focus Centres, Retail Pa Capital & Regional is a specialist property company, owning and developing some of the most exciting and distinctive retail and leisure properties throughout the UK. The current portfolio value is over £800m of which 90% is retail and leisure, totalling over seven million sq ft. Capital & Regional’s objective is to use its in-house expertise to create value for tenants and shareholders through the innovative and dynamic management of property assets. Contents 39 Auditors’ Report 01 Highlights 40 Consolidated Profit and Loss Account 02 Chairman and Chief Executive’s Review 41 Note of Historical Cost Profits and Losses 06 Operating Review 41 Statement of Total Recognised Gains and Losses 08 Shopping Centres 41 Reconciliation of Movements in 14 Retail Parks Shareholders’ Funds 20 Xscape 42 Consolidated Balance Sheet 26 Principal Properties 43 Consolidated Cash Flow Statement 28 Board of Directors 44 Company Balance Sheet 30 Financial Review 45 Notes to the Financial Statements 34 Five Year Record 58 Directors’ Report 35 Report on Directors’ Remuneration 60 Notice of the Annual General Meeting 67 and Interests 67 Advisers and Corporate Information 38 Corporate Governance Statement 68 2001 Financial Calendar 01 Capital & Regional plc ure property ed on Shopping rks and Xscape Highlights Pre-tax profit up 5% to £13.4m (1999: £12.8m) Net rental income up 25% to £57m (1999: £45.5m) Earnings per share increased by 10% to 13.4p (1999: 12.2p) Fully diluted net assets per share decreased by 4% to 360p (1999: 376p) Dividends per share up 10% to 5.5p (1999: 5.0p) Disposals to date of £246m – £62m of trading and investment assets during year. This includes CenterPoint shares (£25m). – £184m since year end. This includes the industrial portfolio (£89.6m), Westway Shopping Park (£43.1m), St Andrew House (£19.6m) and Sauchiehall Centre (£31m). Capital & Regional’s management approach led to its shopping centre portfolio achieving 13.3% income and 5.2% rental value growth during year. Retail park portfolio in transitional phase focused on creating significant ‘destination’ schemes of over 150,000 sq ft, which attract Big Box anchor tenants requiring major units of up to 130,000 sq ft. Lettings of 750,000 sq ft, including 10 destination stores were agreed at year end. 02&03 Capital & Regional plc Chairman and Chief Executive’s Review We are confident satisfactory and returns to shareh years to come Viscount Chandos Chairman Martin Barber Chief Executive Dividends per share pence Net assets per share (diluted) pence Figures after 1996 assume conversion of the loan stock 6 400 5 300 4 3 200 2 100 1 0 96 97 98 99 00 0 96 97 98 99 00 of maintaining sustainable olders over the Results and dividend Capital & Regional owns properties, which At our centres, vacancies are at an all time Profit before tax increased by 5% to £13.4m attract consumer visits and spending. low. We are achieving good income and (1999: £12.8m). Fully diluted net assets per We are in the process of creating rental value growth and tenant demand share decreased by 4% to 360p from 376p. ‘destinations’, to become recognised is strong. It is therefore disappointing Fully diluted net assets per share, after brands and offer more than just shopping, that valuation yields have moved up and adjustments for deferred tax and debt but also leisure and entertainment; adversely affected capital values this year. valuation, are 323p against 330p last year. an ‘experience’ for the consumer. However, Capital & Regional strongly Earnings per share increased by 10% to Our focus on the retail and leisure sectors believes that the long-term benefits of 13.4p (1999: 12.2p). A final dividend of capitalises on our specialist skills and investing in this sector outweigh the short- 3.25p is proposed, making a total for the strong relationships with our tenants. term fluctuations in the investment market. year of 5.5p per share (1999: 5.0p), an We understand their requirements and increase of 10%. Over the past five years, are working with them to maximise Retail parks Capital & Regional has achieved compound opportunities and profitability. We have assembled a substantial portfolio net asset value growth of 14% per annum. of retail parks, originally developed when a Shopping centres more relaxed planning environment existed. Overview Within our shopping centre portfolio, Now, with strong tenant demand and Over the past 15 months, we have we have achieved a 13.3% income growth a planning regime that restricts further completed the disposal of £246m of and 5.2% growth in estimated rental value. out-of-town development, we are exploiting non-core assets. During the year, £62m our parks’ planning consents to provide the The centres are benefiting from our of trading and investment assets were sold, latest store formats required by retailers. management approach, which is to work including CenterPoint Trust shares and a in partnership with our retailers to generate The portfolio of approximately 1.4m sq ft further £184m of properties have been increased footfall and sales. Our properties is generating many opportunities for disposed of since the year end. are of a substantial size and are covered to redevelopment to include Big Box formats, This has almost completed our strategy to provide a controlled environment. They are thereby creating significant destination parks. transform Capital & Regional from a either dominant in a good catchment, or a This redevelopment includes complex generalist property company, to one which is good second centre in a major metropolitan planning consents or amendments to entirely focused on the retail and leisure area. We are able to increase market share planning, lease surrenders and land sectors, namely shopping centres, retail for our retailers through creative and acquisition. parks and Xscape. innovative marketing and promotion. 04&05 Capital & Regional plc Chairman and Chief Executive’s Review Our concentration repositioning our attract consumers building significa This held back financial performance and Capital strategy adversely influenced values last year. The disposal programme already outlined On completion of this transitional phase, we has also allowed us to reduce our level of envisage significant value creation over the gearing on a fully diluted basis from 134% next two years. at 25th December 1999 (159% at December 2000) to 110%, even after purchasing Our experienced out-of-town management 10% of the Company’s issued share capital, team is also proving successful, not only representing 9,541,500 Ordinary shares. in achieving planning consent on our existing We continue to note the disparity between parks, but also identifying and obtaining the valuation on our shares and the market control of sites where planning can be value of the underlying assets. gained. Examples of these are at Oldbury and Auchinlea in Glasgow, where major Therefore, at an Extraordinary General development schemes are being progressed. Meeting on 15th March 2001, shareholder approval was granted to purchase, for Xscape cancellation, a further 13,221,458 Ordinary The opening of Xscape at Milton Keynes shares, representing 14.9% of the was one of the highlights of the Company’s outstanding share capital. The Board will year. Around an exciting ‘real snow’ ski continue to review the Company’s share slope, a vibrant retail and leisure offer has purchases in light of the share price and been built, including a 16 screen multiplex level of gearing for the long-term interests cinema, family entertainment centre, ten-pin of shareholders. bowling, climbing walls and a mix of We are convinced that joint ownership restaurants and bars. is attractive for investors and Capital & Initial trading from our tenants has been Regional. Investor partners can harness most encouraging and we are pursuing our skills in these management-intensive three further projects in the UK and sectors of the property investment and Continental Europe. development market. Using this approach, on properties to and operators is nt value Capital & Regional leverages its equity and In addition, we have entered into an Outlook management to produce higher returns exclusivity agreement to form a 50:50 joint Capital & Regional is confident that our for shareholders. Over the years, Capital & partnership with Capital Shopping Centres, concentration on reshaping and repositioning Regional has had highly successful the leading regional shopping centre our properties, and following that process partnerships. business, to fund and develop the Xscape with intensive business management to concept at Braehead, Glasgow, subject to attract consumers and operators, is building We still believe there is a strong rationale the fulfilment of a number of conditions, significant value. for a specialist UK shopping centre operator including planning. of scale, working closely with occupiers With both private buyers and institutional to create exciting and lively places to visit, investors beginning to show interest again Management shop and be entertained. The Company will in shopping centre investments, we would Capital & Regional has created strength continue to explore opportunities to establish not expect yields this coming year to move and depth within its operating teams. partnerships in this area. out any further. We anticipate further rental Our people come from asset management, growth within our portfolio with positive Our Xscape scheme in Milton Keynes is construction, development, marketing and value increases. a joint venture project and we are pursuing retail backgrounds. partnership opportunities for the further As far as our retail park portfolio is They are using their expertise to drive the schemes anticipated.