Press Release
SHAFTESBURY CAPITAL PLC
("SHAFTESBURY CAPITAL" OR "THE COMPANY")
AUDITED PRELIMINARY RESULTS FOR
THE YEAR ENDED 31 DECEMBER 2023
29 February 2024
Delivering on our
strategy
Ian Hawksworth, Chief Executive, commented:
"It has been an excellent start for Shaftesbury Capital, with
positive metrics delivered across the business. We set clear
priorities and are pleased with the pace and performance over the
first year with significant rental income growth and cost savings
driving financial performance. There is strong leasing activity and
pipeline across all uses with 526 leasing transactions
completed at rents on average 10 per cent ahead of December 2022
ERV.
Despite geopolitical and macroeconomic uncertainty, our
portfolio has demonstrated its exceptional qualities with a stable
portfolio valuation. There is a broad pool of investors attracted
to prime West End real estate as demonstrated by recent sales
totalling £145 million at a premium to valuation.
Backed by our strong balance sheet, unique portfolio and
talented team, we are confident of delivering further rental growth
and attractive returns in the years ahead as the leading central
London mixed-use REIT."
Overview
·
Excellent leasing activity across all uses; 526
leasing transactions were completed, representing £37.0 million of
rent, 10.0 per cent ahead of 31 December 2022 ERV ("Estimated
Rental Value") and introducing 68 new retail and hospitality brands
and concepts
·
Annualised gross income increased 10.4 per cent
like-for-like to £192.8 million (pro forma Dec 22: £174.7 million).
ERV growth resulting in 6.9 per cent like-for-like increase to
£236.9 million (pro forma Dec 22: £221.4 million)
·
Valuation movement of wholly-owned portfolio -0.8
per cent on a like-for-like basis at £4.8 billion (pro forma Dec
2022 £4.9 billion) with ERV growth offset by equivalent yield
movement of 26 basis points to 4.34 per cent (pro forma Dec 2022:
4.08 per cent)
·
EPRA NTA of 190 pence per share (Dec 2022
reported pre-merger and June 2023: 182 pence per share and
194 pence per share
respectively)
·
Low vacancy: 2.1 per cent of ERV available to
let
·
£145 million of asset disposals completed to
date, 8 per cent ahead of valuation, with several other assets
under offer
·
Strong balance sheet with access to £486 million
of liquidity and EPRA LTV of 31 per cent (Dec 2022: 28 per cent).
Completion of refinancing of merger loan facility through a new
£200 million secured loan and £350 million senior unsecured loan
facility
·
Rental growth, cash conversion and cost control
resulting in strong earnings performance. Proposed final dividend
of 1.65 pence per share and a full-year dividend of 3.15 pence per
share (H1: 1.5 pence; H2: 1.65 pence)
·
Excellent progress on integration; renewed
purpose and values which form the basis of how we
operate
Medium-term targets and outlook
·
Over the medium-term we are targeting rental
growth of 5-7 per cent per annum. With stable cap rates, this would
result in average total property returns of 7-9 per cent and total
accounting returns of 8-10 per cent
·
Despite the uncertain geopolitical and
macroeconomic backdrop, our strong performance and leasing pipeline
together with positive trading conditions across our West End
locations provide us with confidence in the growth prospects for
our exceptional portfolio
Highlights
Key financials
·
Total equity value of £3.5 billion (Dec 2022
reported pre-merger: £1.6 billion)
·
2023 total property return 2.2 per cent;
Total accounting return 5.8 per cent; Total
shareholder return 33.1 per cent
·
Underlying earnings of £60.4 million, equivalent
to 3.7 pence per share (Jun 2023: £27.5 million)
·
Adjusted EPRA cost ratio 40 per cent, targeting a
significant reduction towards 30 per cent over the medium-term
through income growth and cost control
Excellent operational momentum delivering income and rental
growth
·
High footfall and strong trading conditions
across our prime West End portfolio, customers reporting sales in
aggregate 10 per cent above 2022 levels
·
526 leasing transactions completed in 2023 with
contracted rent of £37.0 million, comprising:
-
188 commercial lettings and renewals: £24.2
million, 11.2 per cent ahead of 31 Dec 2022 ERV; 13.0 per cent
ahead of previous passing rents; and
-
338 residential lettings and renewals: £12.8
million, 11.7 per cent above previous passing rents
·
Annualised gross income up 10.4 per cent
like-for-like to £192.8 million (pro forma 2022: £174.7
million)
·
Portfolio reversionary potential of £44.1
million, with current ERV 23 per cent ahead of annualised gross
income
Wholly-owned portfolio valuation
·
Portfolio valuation movement of -0.8 per cent on
a like-for-like basis to £4.8 billion (pro forma Dec 2022 £4.9
billion)
- H1: +0.2 per cent, H2: -1.0 per
cent
·
Portfolio ERV up 6.9 per cent on a like-for-like
basis to £236.9 million (pro forma Dec 2022: £221.4
million)
- H1: +3.3 per cent, H2: +3.6 per
cent, reflecting strong leasing demand across all uses
·
Equivalent yield: +26 basis points to 4.34 per
cent (pro forma Dec 2022: 4.08 per cent)
- H1: +10 basis points, H2: +16
basis points
·
Equivalent yield on commercial portfolio
(excluding residential) of 4.58 per cent
Robust and flexible balance sheet
·
Liquidity of £486 million (cash of £186 million
and £300 million undrawn facilities)
·
Net debt of £1.5 billion (pro forma Dec 2022:
£1.5 billion) and EPRA loan-to-value ratio of 31 per cent (Dec 22:
28 per cent)
·
Completion of early refinancing of merger loan
facility through a new long-term secured loan of £200 million and
medium-term unsecured bank facility of £350 million
·
Additional hedging put in place in December 2023
for £250 million of notional value for 2025 which collars SONIA
between 2.0 and 3.0 per cent, in addition to existing caps for £350
million in 2024 at 2.3 per cent
·
The current weighted average cash cost of drawn
debt is 4.2 per cent (Jun 2023: 4.3 per cent) which reduces taking
into account interest income on cash deposits and the benefit of
interest rate hedging to an effective cash cost of 3.4 per
cent
·
Weighted average maturity of drawn debt of 5
years (Jun 2023: 4 years)
·
Modest capital commitments of £24.8
million
Commitment to environment, sustainability and supporting our
local communities
·
Combined 2030 Net Zero Carbon Pathway published
based on our approach of future proofing our heritage
properties
·
Sustainable refurbishment activity continues
across the portfolio enhancing the energy performance credentials;
80 per cent EPC rating of A-C, up 12 percentage points during the
year
·
Continued support of community-led initiatives
and charities which work with organisations active in the West
End
KEY FINANCIALS
|
As at
31
December
2023
|
As
at
31
December 2022
|
Total
equity1
|
£3,480.2m
|
£1,561.6m
|
Total equity per
share1
|
190.3p
|
183.2p
|
Total accounting return
|
5.8%
|
(13.6)%
|
EPRA net tangible
assets1
|
£3,479.4m
|
£1,552.2m
|
EPRA net tangible assets per
share1
|
190.3p
|
182.1p
|
Total property return
|
2.2%
|
2.8%
|
Property portfolio market
value2
|
£4,795.3m
|
£1,743.7m
|
|
For the year
ended
31
December
2023
|
For the
year ended
31
December
2022
|
Gross profit
|
£141.9m
|
£57.3m
|
Profit/(loss) for the
year3
|
£750.4m
|
£(211.8)m
|
Basic earnings/(loss) per
share1
|
45.5p
|
(24.9)p
|
Headline earnings/(loss) per
share1
|
0.6p
|
(24.8)p
|
EPRA earnings per
share1
|
2.7p
|
6.7p
|
Underlying earnings per
share1
|
3.7p
|
2.2p
|
Dividend per
share4
|
3.15p
|
2.5p
|
Total shareholder
return
|
33.1%
|
-35.9%
|
1. Refer to note 2 'Performance
Measures' on page 42.
2. Refer to note 10 'Property
Portfolio' on page 48.
3. Refer
to the 'Income Statement' on page 33.
4. Refer
to note 8 'Dividends' on page 46.
Presentation of information
The all-share merger of Capital
& Counties Properties PLC ("Capco") and Shaftesbury PLC to
create Shaftesbury Capital PLC ("Shaftesbury Capital") completed on
6 March 2023. The financial information included within the annual
results presents the results of Shaftesbury Capital with the
consolidated income statement reflecting the standalone performance
of Capco for the period 1 January 2023 to
6 March 2023 and the performance of the merged business,
Shaftesbury Capital, between that date and 31 December 2023. The 31
December 2023 balance sheet reflects the position of the combined
Group as at 31 December 2023. The 2022 comparative information
relates to Capco only.
Pro forma information has been
included for certain metrics primarily on the balance sheet to
provide relevant comparative information. More information on pro
forma data, and reconciliation to reported numbers, is included on
page 59. Where pro forma information has been included within the
results this is noted as pro forma.
Refer to Glossary of terms on
pages 69 to 72.
Enquiries:
Shaftesbury Capital PLC
|
|
+44 (0)20 3214 9150
|
Ian Hawksworth
|
Chief Executive
|
|
Situl Jobanputra
|
Chief Financial Officer
|
|
Sarah Corbett
|
Director of Commercial Finance and
Investor Relations
|
|
Media enquiries:
UK: Hudson Sandler
UK: RMS Partners
|
Michael Sandler
Simon Courtenay
|
+44 (0)20 7796 4133
+44 (0)20
3735 6551
|
SA: Instinctif
|
Frederic Cornet
|
+27 (0)11 447 3030
|
A presentation to analysts and
investors will take place today at 8:30am (UK time) at the offices
of UBS, 5 Broadgate, London, EC2M 2QS. The presentation will also
be available to analysts and investors through a live audio call
and webcast and after the event on the Group's website at
www.shaftesburycapital.com
A copy of this announcement is
available for download from our website at
www.shaftesburycapital.com
About Shaftesbury Capital
Shaftesbury Capital PLC
("Shaftesbury Capital") is the leading central London mixed-use
REIT and is a constituent of the FTSE-250 Index. Our property
portfolio, valued at £4.8 billion at December 2023, extends to 2.9
million square feet of lettable space across the most vibrant areas
of London's West End. With a diverse mix of shops, restaurants,
cafés, bars, residential and offices, our destinations include the
high footfall, thriving neighbourhoods of Covent Garden, Carnaby,
Soho and Chinatown, together with holdings in Fitzrovia. Our
properties are close to the main West End Underground stations and
transport hubs for the Elizabeth Line. Shaftesbury Capital shares
are listed on the London Stock Exchange ("LSE") (primary) and the
Johannesburg Stock Exchange ("JSE") (secondary) and the A2X
(secondary).
Our purpose
Investing to create thriving
destinations in London's West End where people enjoy visiting,
working, and living.
Our values
We have a set of values that are
fundamental to our behaviour, decision making and the delivery both
of our purpose and strategy: Act with integrity; Take a creative
approach; Listen and collaborate; Take a responsible, long-term
view; and Make a difference.
CHIEF EXECUTIVE
STATEMENT
Overview
London and particularly our West End
portfolio continues to display its enduring appeal and resilience
as a leading global destination with strong leasing demand across
all uses. It has been an excellent start as Shaftesbury Capital,
with good progress on integration and positive metrics delivered
across the business.
We set clear priorities and are
delighted with the pace and performance over the first year with
rental growth, leasing transactions well ahead of ERV and cost
savings above our initial ambitions. We have completed the sale of
a number of properties ahead of valuation and successfully
completed the early refinancing of the unsecured loan arranged at
the time of the merger. Our active approach, informed by a deep
knowledge of the West End, positions the business to deliver rental
growth through converting the portfolio's reversionary potential
into contracted income and cash flow, whilst establishing new
rental tones. We continue to take a responsible approach, operating
in an environmentally sustainable manner and reconfirmed our
commitment to Net Zero Carbon by 2030 publishing a combined
pathway. Despite macroeconomic uncertainty our portfolio has
demonstrated its exceptional qualities with a stable portfolio
valuation, in a market characterised by widened yields.
People, purpose, culture and values
Integration is well advanced with
the business and the team is now located in a single office in
Covent Garden. Our people have a shared passion for the West End
and are one of our key strengths. I'd like to thank everyone at
Shaftesbury Capital for their dedication and hard work through a
period of significant change. The team is delivering excellent
operational performance and creating an environment that is
exciting to work in. I am proud of the energy and enthusiasm shown
and the Company we are building. We have a professional, inclusive
and entrepreneurial culture, reflective of our business strategy
where creativity and innovation are encouraged.
Our purpose is investing to create
thriving destinations in London's West End where people enjoy
visiting, working and living. Engaging with our senior leadership
team, we have reviewed our purpose and values and rolled these out
across the business. These important commitments form the basis of
how we operate. Our people conduct their day-to-day activities
guided by these values which are to: Act with integrity; Take a
creative approach; Listen and collaborate; Take a responsible,
long-term view; and Make a difference.
We continue to invest in our
people's personal development and have introduced a number of
initiatives to support our colleagues and leadership team,
providing greater career development
opportunities over time. Furthermore, we have established the
Employee Engagement Forum attended by Charlotte Boyle on behalf of
the Board. This forum aims to establish a meaningful platform for
communication and collaboration between the Board and
employees.
Strategy and priorities
Our strategy is to deliver long-term
income and value growth from our unique portfolio of properties
through investment, curation and responsible stewardship,
benefitting all stakeholders and contributing to the success of the
West End. We place our customer at the heart of the business to
deliver best in class service and leverage our deep understanding
of customers and consumers. We take a creative and active approach
to our portfolio investing in our remarkable locations, refreshing
the offer through a dynamic leasing and asset management strategy
and delivering high quality public realm. We believe in responsible
stewardship and working in partnership with the wider
community.
The merger has already begun
unlocking both immediate and longer-term benefits including greater
efficiencies, cost and operational synergies, a more diverse
portfolio of scale with a stronger operational platform and
enhanced access to capital and greater equity market liquidity. We
are seeing delivery of broader benefits, including the use of data
insights, active asset management, cross location marketing and
leasing activity for customers across different parts of the
portfolio and other incremental revenue opportunities.
Our priorities are to grow rents,
earnings and dividends and realise the long-term potential of our
real estate. As we move beyond the initial stage of integration we
are seeking to accelerate operating efficiencies whilst providing
excellent service to our customers. As announced in November
2023, we are targeting a significant
reduction in the EPRA cost ratio towards 30 per cent over the
medium-term. Shaftesbury Capital is
financially strong and we have access to £486 million of liquidity.
We are well-progressed in our plan to rotate five per cent of the
portfolio value initially, allocating capital towards accretive
investments. We will seek to manage the absolute level of finance
costs to ensure efficient conversion of income to earnings. We are
committed to reducing the impact of our operations on the
environment, whilst engaging and collaborating with our wide range
of stakeholders which is integral to our strategy and
values.
There is significant potential from
each of our locations. By fulfilling our Company priorities, and
assuming stable cap rates, we are targeting to deliver a total
property return of 7-9 per cent and total accounting return of 8-10
per cent over the medium-term. Individual components of the
portfolio have different investment characteristics.
We see Covent Garden which represents 53 per cent
portfolio value as the most immediate area of opportunity as we
enhance adjacencies through marketing Covent Garden as one
district. There is an opportunity to evolve and improve Carnaby |
Soho which is a vibrant mixed-use district, with iconic shopping
and a strong day-to-night restaurant scene over the medium-term to
enhance returns. Europe's premier Chinatown, located in the heart
of the West End's entertainment district, leading to high
occupancy, providing resilience and growing cash flows.
Growth in rents, earnings and dividends
Shaftesbury Capital's total
shareholder return for the year, which comprises share price
performance plus dividends paid during the year, was 33.1 per cent,
and total accounting return for the year was 5.8 per cent. EPRA NTA
increased by 4 per cent over the year to 190 pence per share
(Dec 2022: 182 pence per share). Annualised gross income increased
by 10.4 per cent (like-for-like) to £192.8 million. ERV
increased by 6.9 per cent (like-for-like) to £236.9 million,
23 per cent above annualised gross income.
526 new leases and renewals
representing £37.0 million of rental income, 10.0 per cent ahead of
December 2022 ERV, completed in the year. EPRA vacancy was 4.9 per
cent (pro forma Dec 2022: 4.9 per cent) with 2.1 per cent available
to let and the balance being under offer.
There have already been significant
cost savings across the business as we progress towards an
effective and efficient organisational structure and cost base.
Underlying administration costs were £39.3 million for
the year. Total annualised recurring cost savings are expected to
be over £16 million, which is well ahead of the initial target of
£12 million within two years. Underlying earnings for the
year are £60.4 million, equivalent to 3.7 pence per
share and the Board has proposed a final dividend of 1.65
pence per share taking the total dividend for the year to 3.15
pence per share, reflecting the progression in underlying and cash
earnings.
We maintain a strong balance sheet
with a focus on flexibility and efficiency. EPRA LTV is 31 per cent
and the interest cover ratio is 2.1 times, with significant
headroom against debt covenants. During the year, we successfully
completed the early refinancing of the unsecured loan arranged at
the time of the merger. The Group has access to £486 million of
liquidity, ensuring it is well-positioned to act on market
opportunities.
Strong leasing demand delivering rental
growth
The occupational market increasingly
demonstrates strong polarisation of demand and a flight to quality.
Our West End portfolio continues to attract target brands and concepts. There is
strong demand for good quality, sustainable space with high amenity
value. The West End, and particularly our portfolio, is a
destination of choice for both market entry and expansion. It is a
strong retail leasing market with units often attracting interest
from multiple occupiers. Availability of restaurant and leisure
space is very limited given the strong trading prospects together
with constrained planning and licensing policies.
The office portfolio is performing
well, with robust demand for well-fitted new space. During the
year, we completed a significant office refurbishment pipeline with
rents for well-fitted, high-quality space regularly achieving more
than £100 per square foot. We rolled out our 'Assemble' product
across the Group which provides for more flexible office packages
and brings the offer under one brand. Our residential offer
continues to appeal to a broad range of occupiers, delivering
rental growth and limited vacancy. Any available space is typically
let within a matter of days.
We are implementing our marketing
strategy across the portfolio and are taking advantage of cross
location promotional opportunities. Our digital engagement and
followers continued to grow across all destinations, with more than
1.2 million followers across all social platforms. Through events
and brand collaborations, there is potential to increase revenue
from our non-leased income activities, whilst working with
stakeholders to benefit the wider West End. We had a very
successful Christmas period with a programme of festive events and
shopping evenings. With a robust leasing pipeline and positive
trading conditions across our West End portfolio, we are confident
in its growth prospects.
Portfolio valuation
The valuation movement of the
wholly-owned property was -0.8 per cent (like-for-like) in the year
to £4.8 billion, implying a capital value equivalent to
approximately £1,680 per square foot on average. ERV increased
across all uses, 6.9 per cent overall (like-for-like) and the
equivalent yield was 4.34 per cent, reflecting 26 basis points of
outward movement over the year. The equivalent yield for the
commercial portfolio (excluding residential) is approximately 4.58
per cent. Total property return for the year was +2.2 per cent
versus the MSCI Total Return Index which recorded -0.1 per
cent.
Higher interest rates and inflation
have impacted the broader investment market, however investment
yields in prime West End, which comprise predominantly freehold
properties and often smaller lot-sizes, remain relatively
resilient. There is a broad pool of domestic and international
investors attracted to prime West End real
estate, where investment can provide the
prospect of high occupancy, good demand for space and reliable
growth in long-term cash flows as demonstrated by recent sales
above valuation.
Investment activity
We maintain an active and
disciplined approach to capital allocation. Having identified the
opportunity to recycle five per cent of the portfolio, to date we
have completed the sale of 8 properties, for £145 million, 8 per
cent ahead of valuation, with several other assets under
offer.
Our priority is to realise the
long-term potential from our assets. Active asset management and
refurbishment initiatives continue to enhance value and
environmental performance across the portfolio. Capital expenditure
of approximately 1 per cent of portfolio value per annum is
expected. The Group successfully completed a number of
refurbishments this year, including several office schemes,
establishing rental tones in excess of £100 per square
foot.
Acquisition opportunities have
remained limited, with the West End's existing owners typically
private, equity rich investors reluctant to sell their scarce
assets. However, there are some opportunities currently under
review. Our focus is on buildings which add to and complement our
existing ownership and have the potential to generate sustainable
long-term growth in income and capital values.
Sustainable approach
Our sustainability strategy is
founded in future proofing our heritage buildings, and creating
sustainable and healthy places which people enjoy visiting, working
and living. During the year, we reconfirmed our commitment to
becoming a Net Zero Carbon business by 2030 and published a
combined Net Zero Pathway. We have already made great progress in
reducing our carbon emissions and, working with our customers, will
continue to decarbonise energy where practical by replacing gas
with electricity.
We continue to improve the energy
efficiency of our buildings to meet energy performance standards
and customers' expectations though our ongoing refurbishment
programme. Approximately 80 per cent of our portfolio by ERV has
EPC ratings of A-C and we target at a minimum a B rating with new
refurbishments. Key sustainability activities include investment in
our buildings, prioritising pedestrians where possible through
initiatives to enhance the public realm, improving air quality and
our extensive greening programme. As we look ahead, we will utilise
our data, technology and innovation to enhance our activities and
continue to collaborate closely with our customers and other
stakeholders to help deliver our shared sustainability
goals.
Ongoing community engagement
As a responsible, long-term
investor, community engagement and collaboration are integral to
our strategy and activities. Being a good neighbour is important to
us. We value the communities that make our places thrive. With our
experience and knowledge of the West End, we make an important
contribution to safeguarding its long-term appeal and
prospects.
We continue to work with our local
authorities and residents to make public realm enhancements which
improve the experience and appeal of our vibrant destinations for
visitors, workers, residents, businesses and communities. Our
community programme prioritises initiatives and charity partners in
the boroughs of Westminster and Camden. This includes financial
support, the provision of space at reduced rates and staff
volunteering. Our active approach includes supporting charities
which work with local young people, the homeless, military
veterans, food banks and the elderly as well as hospitality,
cultural and retail foundations.
Outlook
Excellent future prospects; well-positioned to drive total
returns
Shaftesbury Capital has had an
excellent start following completion of the merger in March
2023. Despite the challenging geopolitical and macroeconomic
environment, we have delivered strong performance with growth in
cash rents and ERV. We are confident in the growth prospects of the
West End which continues to demonstrate its enduring appeal and our
portfolio is well-positioned to outperform.
We are already seeing the benefits
of the merger with excellent levels of activity and a strong
leasing pipeline. Footfall within our portfolio is high, customer
sales are tracking well ahead of 2022 levels and there is limited
vacancy across the portfolio. We are focused on delivering on our
priorities in order to achieve our targets of an annualised total
property return of 7-9 per cent and accounting return of 8-10 per
cent over the medium-term. Shaftesbury Capital has a strong balance
sheet, significant liquidity and benefits from enhanced access to
capital. Our aim is to generate sustained growth in income whilst
managing costs appropriately to deliver a progressive
dividend.
As long-term responsible owners, we
are committed to implementing our Environmental, Sustainability and
Community strategy, particularly achieving Net Zero Carbon by
2030. With our ambitious and talented
team, Shaftesbury Capital is positioned to drive total returns and
meet our important sustainability objectives as the leading central
London mixed-use REIT.
Ian Hawksworth
Chief Executive
28 February 2024
OPERATING AND PORTFOLIO
REVIEW
Overview
Shaftesbury Capital owns an
impossible to replicate portfolio and extends to 2.9 million square feet of lettable space across
the most vibrant areas of London's West End. The Group's portfolio
of adaptable mixed-use buildings provides diversified income
streams. With a diverse mix of shops, restaurants, cafés, bars,
residential and offices, our destinations include the high
footfall, thriving neighbourhoods of Covent Garden, Carnaby, Soho
and Chinatown, together with holdings in Fitzrovia. Our properties
are located at the heart of the West End's entertainment and
cultural attractions, benefitting from excellent connectivity
through close proximity to the main West End Underground stations
and transport hubs for the Elizabeth Line.
Covent Garden (53% of portfolio value)
Covent Garden is a world-class
global destination in the heart of the West End, steeped in history
with a rich heritage, made up of unique neighbourhoods including
the iconic Piazza, Market Building and surrounding streets,
together with Seven Dials, a seventeenth-century network of streets
and courtyards.
Covent Garden offers unique shopping
and dining experiences complemented by offices and a high-quality
residential neighbourhood. These sit alongside historic
architecture and cultural institutions including the world-renowned
Royal Opera House and more than half of London's West End theatres,
attracting both domestic and international visitors
alike.
This exceptional mixed-use portfolio
of approximately 1.5 million square feet provides a broad range of
unit sizes, attracting a wide spectrum of retail and hospitality
customers.
Carnaby | Soho (31% of portfolio value)
Carnaby | Soho is an internationally
renowned vibrant mixed-use district with a bustling day-to-night
restaurant scene. The portfolio comprises approximately 0.9 million
square feet.
Carnaby offers a critical mass of
global flagships to one-off concept stores, and independent brands.
There are over 100 hospitality concepts across our Carnaby | Soho
portfolio which are a key ingredient to the vibrancy within the
area.
Our portfolio in central Soho,
focused on Berwick, Beak and Broadwick Street offers a diverse
array of creative and independent businesses, iconic restaurants
and entertainment venues. This is a renowned hub for the creative
sector which adds to the unique character of the area.
Chinatown (14% of portfolio value)
Europe's premier Chinatown is in the
heart of the West End's entertainment district. Its twelve
predominately pedestrianised and interconnected streets, lined with
iconic red lanterns, offer an exceptional concentration of
restaurants with a wide range of Chinese and East Asian dining
choices.
Equally thriving day and night, the
area's restaurants, bars, shops and cafés, as well as its unique
mix of oriental supermarkets and authentic Asian retail stores,
attract large numbers of Londoners, tourists, Asian students and
local workers.
Portfolio valuation
The valuation movement of the
wholly-owned property portfolio was -0.8 per cent to £4.8 billion,
equivalent to approximately £1,680 per square foot on average (pro
forma Dec 2022: £1,705 per square foot) (H1: +0.2 per cent; H2:
-1.0 per cent). ERV increased across all uses by 6.9 per cent
blended (like-for-like) and the equivalent yield was 4.34 per cent,
reflecting 26 basis points of outward movement. Total property
return for the year was +2.2 per cent versus the MSCI Total Return
Index which recorded -0.1 per cent.
Whilst continuing economic
uncertainties have led to greater caution among investors and lower
transaction volumes, London remains attractive to international and
domestic investors. This is particularly so in the West End, where
investment provides the prospect of high occupancy, low capital
requirements and reliable growing long-term cash flows.
Independent valuations of the wholly
owned portfolio undertaken by CBRE and Cushman & Wakefield
represent the aggregated value of predominantly freehold
properties. There is no reflection of any premium which some
potential investors may ascribe to the comprehensive ownership of
retail, hospitality and leisure properties in adjacent, or
adjoining, locations in London's West End where there is a long
record of demand exceeding availability of space. In certain market
environments, this may lead prospective purchasers to regard parts
of the portfolio, for example by street, to have a greater or lower
value than the aggregate of the individual property values. Such
parties may consider a combination of some, or all, parts of the
portfolio to command a premium or discount than currently reflected
in the valuation, which has been prepared in accordance with Royal
Institution of Chartered Surveyors guidelines.
Portfolio by use as at 31 December
2023
|
Retail
|
Hospitality and
leisure
|
Offices
|
Residential
|
Wholly
-owned
portfolio
|
Valuation
(£m)1
|
1,605.0
|
1,621.7
|
879.1
|
687.4
|
4,793.2
|
Annualised gross income
(£m)
|
64.8
|
72.7
|
31.5
|
23.8
|
192.8
|
ERV (£m)
|
78.4
|
82.0
|
50.2
|
26.3
|
236.9
|
Net initial yield
|
3.6%
|
4.2%
|
3.1%
|
2.2%
|
3.5%
|
Topped up net initial
yield
|
4.0%
|
4.4%
|
3.6%
|
n/a
|
3.8%
|
Equivalent yield
|
4.4%
|
4.7%
|
4.8%
|
2.8%
|
4.3%
|
L-f-L valuation movement
(H2)
|
-0.8%
|
-1.1%
|
-0.8%
|
-1.6%
|
-1.0%
|
L-f-L valuation movement
(FY)
|
-0.5%
|
-0.8%
|
-0.5%
|
-1.8%
|
-0.8%
|
L-f-L ERV movement (H2)
|
+3.8%
|
+4.4%
|
+2.3%
|
+1.7%
|
+3.6%
|
L-f-L ERV movement (FY)
|
+6.7%
|
+8.4%
|
+5.1%
|
+6.1%
|
+6.9%
|
WAULT (years)
|
3.3
|
8.3
|
2.7
|
1.3
|
4.6
|
Area (sq. ft. m) 2
|
0.7
|
1.0
|
0.7
|
0.5
|
2.9
|
1. Excludes £2.1 million of Group
properties primarily held in Lillie Square Holdings (a wholly-owned
subsidiary).
2. Excluding long-leasehold
residential interests.
|
Portfolio by location as at 31 December
2023
|
Covent
Garden
|
Carnaby |
Soho
|
Chinatown
|
Fitzrovia
|
Wholly-owned
portfolio
|
Valuation
(£m)1
|
2,521.6
|
1,482.2
|
689.5
|
99.9
|
4,793.2
|
Annualised gross income
(£m)
|
97.4
|
59.0
|
31.2
|
5.2
|
192.8
|
ERV (£m)
|
122.3
|
76.1
|
33.0
|
5.5
|
236.9
|
Net initial yield
|
3.4%
|
3.4%
|
4.0%
|
4.5%
|
3.5%
|
Topped up net initial
yield
|
3.7%
|
3.9%
|
4.1%
|
4.7%
|
3.8%
|
Equivalent yield
|
4.3%
|
4.5%
|
4.2%
|
4.7%
|
4.3%
|
L-f-L valuation movement
(H2)
|
+0.0%
|
-2.0%
|
-0.7%
|
-11.8%
|
-1.0%
|
L-f-L valuation movement
(FY)
|
+0.3%
|
-1.6%
|
-0.2%
|
-17.4%
|
-0.8%
|
L-f-L ERV movement (H2)
|
+4.2%
|
+1.9%
|
+5.1%
|
+0.0%
|
+3.6%
|
L-f-L ERV movement (FY)
|
+8.7%
|
+4.2%
|
+7.6%
|
+0.7%
|
+6.9%
|
WAULT (years)
|
4.9
|
3.9
|
5.5
|
4.9
|
4.6
|
Area (sq. ft. m) 2
|
1.5
|
0.9
|
0.4
|
0.1
|
2.9
|
1. Excludes £2.1 million of Group properties primarily held in Lillie Square
Holdings (a wholly-owned
subsidiary).
2. Excluding long- leasehold residential interests.
|
Covent Garden generated ERV growth
of 8.7 per cent primarily driven by leasing and asset management
activity across retail and hospitality space. 84 new commercial
leases and renewals were agreed 10.1 per cent ahead of ERV. Across
Carnaby | Soho, ERV growth was 4.2 per cent during the year, as a
result of 78 new commercial leases and renewals agreed 12.9 per
cent ahead of ERV, primarily driven by office letting and asset
management activity. During the year, 17 new commercial leases and
renewals were agreed in Chinatown, 10.1 per cent ahead of ERV. ERV
growth in Chinatown was 7.6 per cent over the year. In Fitzrovia, 9
new commercial leases were agreed 5.5 per cent ahead of ERV. The
ERV growth was 0.7 per cent during the year which reflected the
small volume of transactions together with the less consolidated
nature of our holdings, compared with our other
locations.
Retail and hospitality and leisure
ERVs are currently 17 per cent and 3 per cent, respectively, below
pre-pandemic levels. Overall portfolio ERV value is 5 per cent
lower than 2019 levels on a like-for-like basis.
Our interests comprise a combination
of properties which are wholly-owned and a 50 per cent share of
property held in the Longmartin associate investment and the Lillie
Square joint venture. The consolidated financial statements,
prepared under IFRS, include the Group's interest in the associates
and joint ventures as one-line items in the Income Statement and
Balance Sheet. Investments in associates and joint ventures account
for an additional £224.1 million of property interests (our 50 per
cent share).
Excellent leasing momentum across all uses
There is 2.9 million square feet of
lettable space, comprising 1.7 million square feet of retail,
hospitality and leisure space together with 0.7 million square feet
of offices and over 700 residential apartments.
Operational performance across the
portfolio has been strong with rental growth and low vacancy
underpinned by sustained demand. 68 new brands and concepts were
introduced during the year, reflecting the enduring appeal of our
West End portfolio. Store productivity is an important measure of
retail and hospitality success, and we target categories and brands
across the price spectrum and market our locations to enhance sales
densities and performance.
During the year 526 leasing
transactions were concluded with a combined rental value of £37.0
million, comprising:
· 188
commercial lettings and renewals: £24.2 million, 11.2 per cent
ahead of 31 Dec 2022 ERV and 13.0 per cent ahead of previous
passing rents; and
· 338
residential lettings: £12.8 million, 11.7 per cent above previous
passing rents.
Leasing transactions concluded during the
year
Use
|
Transactions
|
New contracted rent
(£m)
|
% above Dec-2022
ERV
|
Retail
|
84
|
11.6
|
9.3
|
Hospitality &
leisure
|
37
|
4.7
|
14.1
|
Offices
|
67
|
7.9
|
12.4
|
Residential
|
338
|
12.8
|
7.9
|
Total
|
526
|
37.0
|
10.0
|
In addition, 69 commercial rent
reviews with a rental value of £15.8 million were concluded on
average 9.1 per cent ahead of previous passing rents.
Retail (33 per cent of the portfolio by
ERV)
The portfolio includes 415 shops
with an average ERV of £108 per square foot, located primarily in
Covent Garden and Carnaby | Soho with a broad range of unit sizes
and rental tones on offer. We cater for a variety of retailers and
provide flexibility for expansion within our portfolio. There is
strong demand from British, independent and global brands ranging
from start-ups to established retailers seeking global flagships,
which are attracted by the seven-days-a-week footfall and trading
environment.
The occupational and investment
market continues to demonstrate polarisation of demand to the
strongest locations. Retailers place greater emphasis on global
locations, consumer experience, service and flagship retailing with
better digital engagement. The West End, and particularly our
portfolio, remains a preferred destination for market entry and
retail expansion, reflecting its enduring appeal and significance
in the retail landscape.
Retail demand is strong, with
various units continuing to attract interest from multiple
customers. Trading conditions are positive with particularly strong
performance in certain categories such as performance wear, premium
and health and beauty.
As part of our strategy to unify
the Covent Garden district including the Piazza with Seven Dials,
the brand mix of Seven Dials is evolving to expand its consumer and
leasing range whilst preserving its unique character. There have
been a number of new signings on Neal Street, a key gateway into
Seven Dials not only from Covent Garden but from the Elizabeth Line
at Tottenham Court Road. These include premium shoe brand Loake and
the first UK store for Horace. On Earlham Street, the streetwear
offer has been strengthened with the signing of Axel Arigato, a
flagship Soho brand which has taken space on the Dial anchoring
this important street. Marking their first permanent
bricks-and-mortar stores, independent British retailer Odd Muse and
contemporary jewellery brand Missoma have opened debut flagship
locations on Monmouth Street.
Following its success on Long
Acre, performance outdoor brand Arc'teryx has upsized with a new
flagship store on King Street, joining footwear and apparel brand
Hoka which opened its first European retail location on James
Street. We continue to strengthen the luxury and jewellery offering
with the introduction of Messika, Hublot, Girard Perregeaux and
Omega in the Royal Opera House Arcade and as well as Tissot which
opened its debut flagship boutique on James
Street.
Building on the strong brand
line-up, there is an opportunity to evolve the retail offer on
Carnaby Street paying particular attention to brand selection and
categories that provide higher productivity, whilst taking
inspiration from the area's rich history and ever-evolving retail
scene of its surrounding Soho streets. A number of new retailers
joined the offering including Hollister and OG Kicks opening on
Foubert's Place. Award-winning cult make-up concept Sculpted by
Aimee opened its new UK flagship while eyewear brand Oakley opened
on Carnaby Street joining premium outerwear concept Jott. Farah
relocated across the portfolio to Berwick Street, joined by the UK
flagship for Wolf and Badger which brings a unique retail
experience to the Soho portfolio with its collection of
brands.
Reflecting strong demand during
the year, we completed 84 retail lettings and renewals with a
rental value of £11.6 million. Rents, on average, were 9.3 per cent
above December 2022 ERV.
· H1
2023: 37 lettings and renewals: £5.1 million, 6.0 per cent ahead of
31 Dec 2022 ERV; and 11.9 per cent ahead of previous passing
rents
· H2
2023: 47 lettings and renewals: £6.5 million, 6.4 per cent ahead of
30 Jun 2023 ERV; and 19.3 per cent ahead of previous passing
rents
Rent reviews with rental value of
£2.7 million were concluded, 7.9 per cent ahead of previous passing
rents.
Hospitality and leisure (35 per cent of the portfolio by
ERV)
Our portfolio offers a diverse
range of food concepts, from accessible casual to premium dining.
Across the portfolio, we continue to introduce high quality,
innovative food concepts, which in our experience, provides a halo
effect on footfall, increases dwell time, and drives improved
trading. Customers across the portfolio have reported strong
trading. Competition for available hospitality accommodation has
been strong throughout the year. With availability being
constrained by strong trading prospects together with local
planning and licensing policies, we are also seeing a high rate of
renewals from existing customers.
During the year, Covent Garden
welcomed 13 new hospitality offerings, ranging from independent to
international operators. These operators provide a variety of
cuisines and price points, bringing something different to the
evolving dining mix, reflecting its position as one of the West
End's most popular dining destinations. Highlights include
Parisian-inspired rotisserie style restaurant, Story Cellar, from
two Michelin Star Chef Tom Sellers; British independent favourite,
The Breakfast Club; top chef Phil Howard's pasta bar NOTTO; and
internationally renowned GAUCHO.
2023 marked a decade of dining at
Kingly Court and it continues to be one of our best trading
hospitality locations with strong sales and low rent to sales
ratios on all levels. Following the success of its 2021 opening,
Imad's Syrian Kitchen has upsized into larger space on the upper
floor, alongside Darjeeling Express and newly opened critically
acclaimed Filipino concept Donia. The opening of Bébé Bob in Soho,
located opposite the flagship Bob Bob Ricard, marked a new concept
for restaurateur Leonid Shutov.
Chinatown is a sought-after
location in the heart of the West End's entertainment district. The
continually evolving line-up welcomed Pan-Asian restaurant concept,
YiQi, while Japanese restaurant High Yaki launched its unique take
on Japanese barbecue in Newport Place, joining an unmatched
collection of authentic regional Chinese and pan-Asian
restaurants.
Fitzrovia has introduced four UK
dining debuts, including the recently launched 64 Goodge Street by
Woodhead Restaurant Group, Ukrainian-born Spanish concept, Boca a
Boca, July, a brand-new Alsace-inspired dining concept, and
Mealtime Malatang, a Sichuanese street food operator.
37 hospitality and leisure leasing
transactions completed with a rental value of £4.7 million, 14.1
per cent ahead of December 2022 ERV. Rent reviews totalled £11.6
million, 9.8 per cent above previous passing rents.
· H1
2023: 18 lettings and renewals: £1.7
million, 4.3 per cent ahead of 31 Dec 2022 ERV; and 4.7 per cent
ahead of previous passing rents
· H2
2023: 19 lettings and renewals: £3.0
million, 12.8 per cent ahead of 30 Jun 2023 ERV; and 9.8 per cent
ahead of previous passing rents
Office (21 per cent of the portfolio by
ERV)
The portfolio offers 0.7 million
square feet of office space across 418 office suites with a broad
range of floorplates. Typically, office accommodation is occupied
by media, creative, technology and professional services
businesses. With a wide range of office suites, we cater to a broad
range of customer needs and provide opportunity for
expansion.
There is a growing number of
customers relocating to the West End from other central London
locations as employers continue to recognise the importance of a
vibrant atmosphere in attracting and retaining staff. The Carnaby
and Covent Garden development pipeline is well-positioned to
capture this demand, with their high amenity value and excellent
environmental credentials.
There is a flight to quality with
a preference for fully fitted space and low-density use, provided
on flexible lease terms. We have developed our fully fitted
offering through our 'Assemble' brand to capture this demand,
delivering rental growth. Demand for office space is robust across
the West End with recent lettings commanding a rental tone of
approximately £100 per square foot.
During the year, 67 office leasing
transactions with a rental value of £7.9 million were concluded
12.4 per cent ahead of December 2022 ERV. Rent reviews with rental
value of £1.5 million completed, 5.8 per cent ahead of previous
passing rents.
· H1
2023: 34 lettings and renewals: £3.7
million, 6.8 per cent ahead of 31 Dec 2022 ERV; and 9.8 per cent
ahead of previous passing rents
· H2
2023: 33 lettings and renewals:
£4.2 million, 12.8 per cent ahead of 30
Jun 2023 ERV; and
13.9 per cent ahead of previous passing
rents
Residential (11 per cent of the portfolio by
ERV)
The central London residential
letting market was positive throughout 2023. There continues to be good leasing demand for residential
accommodation across the portfolio of 709 residential
apartments. Our proposition of
characterful period buildings with modern specification located in
vibrant, well-managed areas attracts interest from a broad range of
customers.
The sustained strong demand
throughout the year resulted in any available space typically being
let within a matter of days, often involving competitive
bidding.
During the year 338 residential
lettings and renewals with a rental value of £12.8 million
completed 11.7 per cent ahead of previous passing rents and, at 31
December 2023 only 6 units were available to let.
· H1
2023: 131 residential lettings and
renewals: £4.6 million, 4.7 per cent ahead of 31 Dec 2022 ERV; and
8.9 per cent ahead of previous passing rents
· H2
2023: 207 residential lettings and
renewals: £8.2 million, 7.7 per cent ahead of 30 Jun 2023 ERV; and
13.3 per cent ahead of previous passing rents
Active consumer engagement through brand partnerships and
activations
Unique consumer experiences are
offered across our predominantly pedestrianised destinations.
We work closely with our customers to enhance operating metrics
such as footfall, conversion and spend which in turn support our
rental growth prospects.
We have rolled out a holistic
marketing and brand partnership strategy. We have direct access to
over 1.2 million consumers across our social media channels and
have launched portfolio-wide digital collaborations. During the
year, our level of engagement and number of followers continued to
grow across all destinations.
We had a successful Christmas
period across the portfolio with a programme of festive events and
shopping evenings. Covent Garden unveiled a new Christmas scheme,
the first in nearly a decade, while the vibrant Carnaby Universe
Christmas campaign offered a series of events and collaborations
including working with our important charity partner, Choose
Love.
Chinatown continues to see
engagement and growth across both its Chinese and Western social
media channels. The annual Chinese New
Year parade, the largest outside of Asia, took place in February 2024 celebrating the year of the
Dragon throughout a 15-day celebration
period.
Important marketing initiatives
across the portfolio include:
· American Express spend incentive campaign across Covent
Garden and Carnaby | Soho, driving spend,
brand loyalty and data insights
· In
celebration of the Coronation of King Charles III, a variety of
activities took place across the portfolio, including
welcoming Their Majesties King Charles III
and Queen Camilla to the Covent Garden estate
· A
sculpture trail linking the enlarged
Covent Garden portfolio, in aid of conversation charity
Tusk
· Celebrations to mark Pride and Earth
Day
· Brand partnerships included Wimbledon Screenings, pop ups
from Lego, Marc Jacobs, MaxMara and
Formula E
· An
installation of handcrafted parasols in Chinatown
· Immersive dining campaigns across Carnaby |
Soho
· Extensive Christmas campaigns across our
portfolio
· Brand partnership with Paul Smith illuminating the Market
Building
Annualised gross income and ERV
At 31 December 2023, annualised
gross income had increased by 10.4 per cent (like-for-like) to
£192.8 million. ERV was £236.9 million, up 6.9 per cent over the
year (like-for-like).
A key priority is to deliver
growth in cash rents, capturing the reversion between annualised
gross income and the valuers' ERV as well as generating sustained
rental growth in line with our medium-term target of 5-7 per cent.
Our active approach is informed by a broad base of experience and
deep knowledge of the West End. This enables the business to
deliver rental growth through converting the portfolio's
reversionary potential into contracted income and cash flow, whilst
establishing new rental tones, the benefit of which is often
compounded across nearby buildings.
As at 31 December 2023, the
portfolio's reversion was £44.1 million, with the opportunity to
grow annualised gross income by 22.9 per cent before taking into
account any further ERV growth. The components of this reversion
are set out below.
Components of the reversion
|
31 December
2023
£m
|
Annualised gross income
|
192.8
|
Contracted
|
17.3
|
Under offer
|
6.2
|
Available-to-let
|
4.7
|
Under refurbishment
|
13.9
|
Net under-rented
|
2.0
|
ERV
|
236.9
|
High occupancy
At 31 December 2023, EPRA vacancy
(including units under offer) was 4.9 per cent of portfolio ERV;
2.8 per cent was under offer and 2.1 per cent was
available-to-let.
Under offer
Use
|
% of portfolio
ERV
|
ERV
(£m)
|
Area
('000 sq.
ft.)
|
Retail
|
0.3
|
0.7
|
5.6
|
Hospitality &
leisure
|
0.9
|
2.0
|
18.2
|
Offices
|
1.5
|
3.3
|
35.3
|
Residential
|
0.1
|
0.2
|
4.2
|
Total
|
2.8
|
6.2
|
63.3
|
Available-to-let space
Use
|
% of portfolio
ERV
|
ERV
(£m)
|
Area
('000 sq.
ft.)
|
Retail
|
0.6
|
1.3
|
17.9
|
Hospitality &
leisure
|
0.6
|
1.4
|
20.6
|
Offices
|
0.8
|
1.8
|
25.1
|
Residential
|
0.1
|
0.2
|
4.0
|
Total1
|
2.1
|
4.7
|
67.6
|
1. Includes 5
units let on a temporary basis (ERV: £0.7 million).
Refurbishment activity
Active asset management and
refurbishment initiatives continue to unlock income and value as
well as enhance environmental performance. During the year,
refurbishments with an ERV of £10.6 million completed, of which
£9.0 million is contracted or under offer including 72 Broadwick
Street representing £3.6 million.
On average, we expect
approximately one per cent of portfolio value to be invested per
annum in refurbishment, asset management and repositioning
opportunities, including actions to improve energy performance.
This year, £35.1 million of capital expenditure has been incurred,
and capital commitments amount to £24.8 million as at 31 December 2023.
The ERV of space under
refurbishment amounts to £13.9 million across 0.2 million square
feet, representing 5.8 per cent of portfolio ERV (30 June 2023: 6.7
per cent).
Under refurbishment
Use
|
% of portfolio
ERV
|
ERV
(£m)
|
Area
('000 sq.
ft.)
|
Retail
|
1.0
|
2.4
|
17.8
|
Hospitality &
leisure
|
1.5
|
3.6
|
61.4
|
Offices
|
2.9
|
6.9
|
86.7
|
Residential
|
0.4
|
1.0
|
18.9
|
Total
|
5.8
|
13.9
|
184.8
|
Active capital recycling
In 2023, we completed the sale of
seven properties for gross proceeds of £88.1 million, 11.8 per cent
ahead of the latest valuation (before sale costs). Subsequent to
year end, a further £57 million disposals completed bringing total
disposals to £145 million, 8 per cent ahead of valuation, and with
a total ERV of £9.0 million.
We are well-positioned with access
to significant liquidity to act on appropriate market
opportunities. Assets remain tightly held in the area,
however there are acquisition opportunities under
review which meet our criteria to deliver
attractive long-term rental growth and total returns. During the
year we completed the lease regear of the Royal Opera House Arcade
in Covent Garden and acquired a residential apartment in Seven
Dials.
Joint ventures and associates
We own 50 per cent of Longmartin
and Lillie Square and in the summaries that follow, all figures
represent our 50 per cent share.
Longmartin
At 31 December 2023, Longmartin's
long leasehold property was valued at £158.8 million (2022: £160.3
million). After allowing for capital expenditure, the valuation
decrease for the year was 1.3 per cent. Like-for-like, ERVs
increased 9.4 per cent, of which 5.8 per cent was recorded in the
second half of the year. At 31 December 2023, the equivalent yield
was 4.86 per cent, an increase of 38 basis points over the year (31
December 2022: 4.48 per cent).
Pursuant to the terms of the
Longmartin investment (forming 3 per cent of the Group's property
portfolio), the merger triggered the right for The Mercers' Company
(the "Mercers") to require the Company to offer to sell its shares
in the Longmartin investment to them (or to a third-party purchaser
identified by them). The Mercers have elected to consider acquiring
the Company's shares in the Longmartin investment and discussions
are ongoing. There is no certainty that a transaction relating
to the Company's investment in Longmartin will be
agreed.
Lillie Square
Shaftesbury Capital owns 50 per
cent of the Lillie Square joint venture, a residential estate and
remaining development phases located in West London. The property
valuation as at 31 December 2023 was £65.3 million, 10.3 per cent
lower (like-for-like) than the 31 December 2022 valuation of £77.0
million. In addition, Shaftesbury Capital owns £1.8 million of
other related assets adjacent to the Lillie Square
estate.
In total, 355 Phase 1 and 2
residential apartments have been sold. 65 units are available and
32 units have been leased on a short-term basis. The sale of 4
units completed during the year representing £6.8 million of value.
(Shaftesbury Capital share: £3.4 million). The joint venture is in
a cash position of £15.9 million (£7.9 million Shaftesbury Capital
share).
Sustainability and environmental
stewardship
We are committed to reducing the
impact of our operations on the environment, whilst engaging and
collaborating with our wide range of stakeholders is integral to
our strategy and values. As a long-term, responsible investor,
sustainability has always been an important aspect of delivering
our strategy. It is our ambition to become a UK leader in
sustainability for heritage properties, and we will continue to
re-use, re-purpose and improve our buildings to enhance energy
performance and meet the evolving needs of our
customers.
We adopt a low-carbon approach to
future-proofing our heritage buildings, minimising additional
embodied carbon and air pollution which comes from demolition and
construction, whilst improving their energy performance at modest
financial outlay. We estimate the cost of sustainability
improvements to meet our commitments, included in our capital
expenditure estimates, is on average approximately 0.1 per cent of
portfolio value annually. Approximately 80 per cent of our
portfolio by ERV now has EPC ratings of A-C, up 12 percentage
points relative to 2022. We target a minimum rating of B on all new
refurbishment projects.
We are committed to be Net Zero
Carbon for our scope 1 & 2 emissions by 2025, and across the
whole business (scopes 1, 2 & 3 emissions) by 2030. In November
2023, a combined Net Zero Carbon Pathway by 2030 was published
which recognises that our heritage buildings represent substantial
long-term carbon stores. Green leases, which encourage greater
collaboration on data to enhance energy performance, are standard
for new customers across the portfolio.
We are committed to transparent
reporting through recognised indices. Following the merger and the
subsequent name change from Capco to Shaftesbury Capital, both
Capco and Shaftesbury's submissions to relevant indices during 2023
relate only to their individual activities and approach. The 2023
submissions, to be made during 2024, will be based on the Company's
combined activities and approach. We are proud to have increased
our CDP rating to A- putting us in the leadership category and
reflecting the additional work done to improve our climate risk
management and reporting.
Following the successful pilot of
Carbon Risk Real Estate Monitor ("CRREM") analysis on a number of
properties in the Covent Garden portfolio, we are currently
carrying out detailed energy efficiency audits on a larger sample
of buildings across the portfolio.
Stakeholder and community engagement
Community engagement and
collaboration are integral to our strategy and activities. We are
committed to engaging with and supporting the vibrant communities
that make our places thrive.
With our experience and knowledge
of the West End, we make an important contribution to safeguarding
its long-term appeal and prospects. Our stakeholders include local
authorities, neighbouring owners and business improvement
districts, industry groups, residents, and charitable
organisations.
We continue to work with our local
authorities and residents to make public realm enhancements to
improve both air quality and the experience and appeal of our
vibrant and thriving places for visitors, workers, residents,
businesses and communities. These include pedestrianisation,
streetscape improvements, providing outdoor seating and schemes to
reduce traffic congestion and pollution.
During the year, we have continued
to support community-led initiatives which work with local people
in Camden and Westminster providing support for, and engagement
with, local charities to address needs in our local communities. We
provide financial support, subsidised space and staff volunteering.
This support includes sponsorship of a student at Westminster
University through our Scholar Programme, Young Westminster
Foundation's Brighter Futures
Fund, Young Camden Foundation's
Heads Up Mental Health Fund and the Covent Garden Community Trust. Pop up space was
provided to Smartworks, a UK charity which harnesses fashion for
good, focusing on getting out of work women back into the
workplace.
Our portfolio is located close to
major cultural attractions. We continue our support of culture and
the arts, including the patronage of the Donmar Theatre in Seven
Dials, as well as partnerships with the Society of London Theatres,
British Fashion Council, British Beauty Council and London &
Partners.
FINANCIAL REVIEW
Presentation of information
The all-share merger of Capital
& Counties Properties PLC ("Capco") and Shaftesbury PLC to
create Shaftesbury Capital PLC ("Shaftesbury Capital") completed on
6 March 2023. The financial review sets out the results of
Shaftesbury Capital with the consolidated income statement
reflecting the standalone performance of Capco for the period 1
January to 6 March and the performance of the merged business,
Shaftesbury Capital, between the completion date of 6 March 2023
and 31 December 2023. The balance sheet as at 31 December 2023
reflects the position of the combined Group. The 2022 comparative
information relates to Capco pre-merger.
Reflecting the Company's focus
primarily on the wholly-owned portfolio, all information is
presented on an IFRS basis, with Group share (which included the
share of joint ventures and associates on a proportionally
consolidated basis) no longer being presented. Key performance
metrics have been restated to reflect this change. Pro forma
information has been included for the balance sheet to provide
relevant comparative information. Further details on pro forma
information, and reconciliation to reported numbers, is included on
page 59.
Financial highlights
Shaftesbury Capital has had an
excellent 2023 characterised by operational momentum across our
portfolio, with strong leasing demand across all uses resulting in
rental growth. Footfall trends across the West End are positive,
buoyed by increasing international visitor numbers, contributing to
growth in sales for our retail and hospitality customers. Against a
backdrop of geopolitical and macroeconomic uncertainty, the
resilient performance over the year demonstrates the exceptional
qualities of our portfolio, which has generated growth in
annualised income and ERV as well as a stable property valuation,
particularly in a market characterised by widened
yields.
Underlying earnings for the year
were £60.4 million, equivalent to 3.7 pence per share based on the
weighted average number of shares during the year. Net rental
income has increased in the year, offset in part by higher finance
costs and administration expenses. The Directors have declared a
final dividend of 1.65 pence per share, which when combined with
the interim dividend of 1.5 pence results in a total dividend per
share in respect of the year of 3.15 pence per share.
The wholly-owned portfolio has
been independently valued at £4,795.3 million, reflecting a -0.8
per cent like-for-like movement relative to the pro forma 31
December 2022 valuation of £4,857.8 million. ERV increased by 6.9
per cent (like-for-like) to £236.9 million and the equivalent yield
was 4.34 per cent, reflecting outward movement of 26 basis
points.
The sale of seven properties was
completed in the year for total proceeds of £88.1 million, 11.8 per
cent ahead of the latest valuation. Subsequent to year end a
further property has been sold for £56.5 million bringing total
disposals to £145 million, 8 per cent ahead of
valuation.
Overall EPRA NTA (net tangible
assets) per share increased by 4.5 per cent in the year from 182.1
pence at 31 December 2022 to 190.3 pence. Combined with the 3.15
pence per share dividend paid to shareholders during the year, the
total accounting return for the year is 5.8 per cent. Total
shareholder return for the year was 33.1 per cent, reflecting
dividends paid and the increase in the share price from 106.5 pence
to 138.1 pence per share.
Significant progress has been made
on cost savings across the business, well ahead of the phasing
included in the merger documentation, which set out a run rate of
£12.0 million within two years, of which £6.0 million would be
achieved within a year of completion. Total annualised savings are
expected to amount to over £16 million, primarily in administration
costs, the majority of which relate to actions or decisions already
taken. A number of broader benefits from the merger have also been
identified, including incremental revenue opportunities. We
continue to work towards an effective and efficient organisational
structure, with the EPRA cost ratio (which measures property-level
and administration costs relative to gross rental income) targeted
to reduce towards 30 per cent over the medium-term.
The Group has a strong balance
sheet with a focus on resilience, flexibility and efficiency. The
EPRA loan to value ratio at year end was 31 per cent. There is
significant headroom against debt covenants and access to
liquidity, comprising cash and undrawn facilities, of £485.7
million (31 December 2022: £416.5 million).
During the year, £550 million of
debt was raised comprising a £200 million 10-year loan facility,
secured against a portfolio of assets within the Carnaby portfolio,
and an unsecured medium term bank financing of £350 million
(upsized from £300 million) comprising a term loan and a revolving
credit facility. The proceeds, together with the Group's cash
resources, were used to repay the loan facility which was drawn
down in full in April 2023 to fund redemption of the Chinatown and
Carnaby bonds for £575 million. Priorities over the forthcoming
period are to refinance the 2026 debt maturities as well as
consideration of longer-term financing options to evolve our
capital structure, taking advantage of the Group's enhanced credit
profile.
As set out in the November 2023
investor event, we are targeting average annual rental growth of
5-7 per cent and, assuming stable cap rates, total property returns
of 7-9 per cent and total accounting returns of 8-10 per cent over
the medium-term.
Accounting implications of the merger
As detailed in note 1 'Principal
accounting policies' under 'Critical accounting judgements and key
sources of estimation uncertainty', from an accounting perspective,
Capco was the deemed acquirer of Shaftesbury. The book value of
Shaftesbury's net assets has been adjusted to reflect their fair
value at the completion date of 6 March 2023, in accordance with
IFRS 3.
The major adjustments required by
IFRS 3 included:
· the
derecognition of Shaftesbury tenant lease incentives and deferred
letting fees of £42.0 million held within 'Other receivables'. The
balance would have been amortised to net rental income on a
straight-line basis over the remaining term of the lease to the
earlier of break or expiry. As a result of this adjustment, net
rental income for the Shaftesbury assets from 6 March 2023 reflects
amortisation of new tenant lease incentives and deferred letting
fees only.
· £959.8 million nominal of fixed rate debt held by Shaftesbury
was fair valued at £889.0 million, resulting in a £70.8 million
fair value movement. The Group's 50 per cent share of the
Longmartin debt was fair valued at £56.6 million, £3.4
million lower than nominal value of £60 million, leading to a total
fair value difference of £74.2 million. £24.6 million of this
difference has been derecognised through other finance costs on
redemption of the Chinatown and Carnaby bonds. The remainder will
be amortised as a charge to other finance costs over the remaining
term of the debt facilities, with a £5.2 million charge being
recorded in the year. At 31 December 2023 the unamortised balance
of the fair value adjustment was £44.4 million, equivalent to 2.4
pence per share in EPRA NTA.
Consideration issued on completion
of the merger was in the form of 3.356 Capco shares for each
Shaftesbury share, with a total of 1,096 million shares being
issued (including 128.4 million shares issued to a Capco-controlled
entity in respect of secured Shaftesbury shares previously held as
collateral for the exchangeable bonds). The Shaftesbury Capital
share price was trading at a 32 per cent discount to EPRA NTA on 6
March 2023, which in turn results in the deemed value of the
consideration being at a discount to the fair value of
Shaftesbury's net assets on completion. This discount, referred to
under IFRS as a 'bargain purchase' gain, amounted to £805.5 million
and has been recognised under the IFRS 3 completion accounting in
the consolidated income statement.
Prior to the merger, Capco-owned
25.2 per cent of Shaftesbury shares with the investment held as a
"financial asset at fair value through profit and loss". The
investment was revalued on 3 March 2023 based on the closing share
price of 421.6 pence resulting in a fair value gain of £52 million
during the period. Following the merger, Shaftesbury is fully
consolidated with no separate investment held.
Accounting policies have been
aligned following the merger. As a result, tenant lease incentives
and deferred letting fees, which were previously amortised to lease
expiry within Capco, have been amended to be amortised on a
straight-line basis to the earlier of the lease break date and
expiry. This change has led to a £5.1 million reduction in net
rental income in the current year with a corresponding reduction in
other receivables. As tenant lease incentives and deferred letting
fee balances are deducted from the market value of investment
property to calculate the portfolio carrying value, this adjustment
is also reflected through investment property carrying value and
the revaluation movement, and consequently it does not impact net
asset value or profit for the year.
In addition, for legacy Capco,
letting fees deferred on the balance sheet and amortised to
property costs on a straight-line basis had not been previously
deducted from the market value of investment property. Since the
related leases are included in the valuation, the investment
property carrying value has been reduced by £4.1 million, being the
balance of deferred letting fees carried on the balance sheet at 1
January 2023. This adjustment is included within the valuation
movement for the year.
Alternative performance measures
As is usual practice in the real
estate sector, alternative performance measures ("APMs") are
presented for certain indicators, including earnings, earnings per
share and EPRA net tangible assets, making adjustments set out by
EPRA in its Best Practice Recommendations. These recommendations
are designed to make the financial statements of public real estate
companies more comparable across Europe, enhancing the
transparency, comparability and coherence of the sector.
One of the key performance
measures which the Group uses is underlying earnings. The
underlying earnings measure reflects the underlying financial
performance of the Group's core West End property rental business
and is a relevant metric in determining dividends. The measure
aligns with the main principles of EPRA earnings which excludes
valuation movements on the wholly-owned, joint venture and
associate properties, fair value changes of financial instruments
and listed investments, cost of early close out of debt, gain on
bargain purchase and IFRS 3 merger-related transaction costs. In
calculating underlying earnings, additional adjustments are made to
exclude items considered to be non-recurring or significant by
virtue of size and nature. Consistent in the calculation for both
years is the removal of the financial performance of the Lillie
Square joint venture, associated tax adjustments and the interest
receivable on the loan issued to the joint venture by the Group.
Lillie Square is not considered to be a core part of the operations
of the Group and therefore its results are not included in
underlying earnings. The fair value movement of the option
component of the exchangeable bond is also adjusted from underlying
earnings as such movements do not reflect the true nature of the
performance of the Group.
Following the completion of the
all-share merger on 6 March 2023, the following new adjustments
have been made to underlying earnings:
· A
fair value exercise was performed on the Shaftesbury balance sheet,
with the debt (including an adjustment to the investment in
Longmartin arising from the fair value adjustment of the underlying
debt in the associate) adjusted to be held at a fair value of
£945.6 million compared to the nominal value of £1,019.8 million.
The balance of the fair value adjustments will be amortised to
other finance costs over the remaining term of the debt facilities.
In the current year, EPRA earnings has been adjusted by £24.6
million, to reflect the accelerated unwind of the fair value
adjustment following the early redemption of the Chinatown and
Carnaby bonds in April 2023. The current year amortisation of the
fair value adjustment for the other debt facilities of £5.2 million
has been adjusted from underlying earnings within other finance
costs.
· £8.7
million of merger-related integration and other non-underlying
costs have been incurred. These costs are non-recurring as they
relate to significant transactions outside the core operations of
the Group.
· A
£5.1 million reduction to gross profit has been reported as a
result of the alignment of accounting policies following the
merger. Details are set out in note 1 'Principal accounting
policies' under 'Changes in accounting policies'. The alignment was
considered immaterial and not adjusted retrospectively. The
cumulative impact as at 1 January 2023 was adjusted against gross
profit and as such has been adjusted from underlying earnings to
reflect the true performance of the business for the current
year.
Further details on APMs used,
including details on pro forma information, and how they reconcile
to IFRS, are set out on page 58.
FINANCIAL PERFORMANCE
SUMMARY INCOME
STATEMENT
The 2023 summary income statement
represents the standalone performance of Capco for the period to 6
March 2023 and that of the combined Group from that date to 31
December 2023. The comparative information for 2022 relates to the
previously reported results of Capco.
|
|
2023
£m
|
2022
£m
|
Gross profit
|
|
141.9
|
57.3
|
Loss on revaluation and profit on
sale of investment property
|
|
(65.0)
|
(0.8)
|
Change in fair value of listed
equity investment
|
|
52.0
|
(239.5)
|
Other income
|
|
2.7
|
13.5
|
Administration
expenses1
|
|
(83.8)
|
(40.6)
|
Net finance
costs2
|
|
(51.9)
|
(24.6)
|
Profit from joint ventures and
associates
|
|
0.2
|
-
|
Taxation
|
|
(0.2)
|
(6.0)
|
Other3
|
|
(51.0)
|
28.9
|
|
|
(55.1)
|
(211.8)
|
Gain on bargain
purchase
|
|
805.5
|
-
|
Profit/(loss) for the
year
|
|
750.4
|
(211.8)
|
|
|
|
|
Basic earnings/(loss) per
share
|
|
45.5p
|
(24.9)p
|
EPRA
earnings4
|
|
45.0
|
57.3
|
EPRA earnings per
share4
|
|
2.7p
|
6.7p
|
Underlying
earnings4
|
|
60.4
|
18.6
|
Underlying earnings per
share4
|
|
3.7p
|
2.2p
|
Weighted average number of
shares5
|
|
1,648.9m
|
851.3m
|
|
|
|
| |
1. Administration expenses include £44.5 million of non-underlying costs (2022: £14.6 million),
substantially related to merger-related transaction and integration
costs, which are considered non-recurring in nature.
2. Excludes other finance income and costs and change in fair
value of derivative financial instruments
(included in 'Other' above).
3. Includes impairment of other receivables, other finance income and costs including the change in fair
value of derivatives and amortisation of merger adjustments for the
fair value of Shaftesbury debt adjustment on merger.
4. Further details regarding EPRA and Underlying earnings are
disclosed in note 2 'Performance
measures'.
5. In
total, 1,953.2 million shares are in issue
as at 31 December 2023. Following the issuance of 1,095.6 million
shares on 6 March 2023, the weighted average number of shares for
the 12 months ended 31 December 2023 is 1,648.9 million. The
weighted average number of shares excludes 128.4 million own shares
held as collateral for the exchangeable bond and 3.1 million shares
held by the Group's approved Employee Benefit Trust, both of which
are included in the total number of shares in issue of 1,953.2
million.
Gross profit
|
|
2023
£m
|
2022
£m
|
Rent receivable
|
|
171.9
|
61.5
|
Straight lining of tenant lease
incentives1
|
|
3.9
|
6.3
|
Service charge income
|
|
19.3
|
6.3
|
Revenue
|
|
195.1
|
74.1
|
|
|
|
|
(Provision for)/reversal of
expected credit loss
|
|
(2.0)
|
1.6
|
Property
expenses1
|
|
(31.1)
|
(10.2)
|
Service charge expenses
|
|
(19.3)
|
(6.3)
|
Impairment of tenant lease
incentives
|
|
(0.8)
|
(1.9)
|
Gross profit
|
|
141.9
|
57.3
|
|
|
|
| |
1. 2023
includes £5.1 million reduction for the
change in accounting policy to adjust the amortisation period for
tenant lease incentives and deferred letting fees. £4.1 million
adjustment is recorded through straight lining of tenant lease
incentives and £1.0 million in property expenses.
Rent receivable income has
increased by 13.2 per cent like-for-like compared with December
2022 reflecting the positive letting activity across the
portfolio.
Straight lining of tenant lease
incentives, after a non-cash charge of £4.1 million reflecting the
change in accounting policy noted above, has increased revenue by
£3.9 million in the year. Excluding the change in accounting
policy, the impact of straight lining tenant lease incentives would
have increased income by £8.0 million, reflecting the large volume
of new leases signed in the year.
Reflecting the normalisation of
cash collection levels, as at 31 December 2023 the balance sheet
provision for expected credit losses for rent receivable was £4.8
million representing 26 per cent of the rent receivable balance. As
at 31 December 2022 the legacy Capco provision was £4.0 million
representing 33 per cent of the rent receivable balance.
Loss on revaluation and profit on
sale of investment property
The market valuation of the
wholly-owned portfolio has decreased by 0.8 per cent like-for-like
between December 2022 (pro forma) and December 2023 to £4,795.3
million. ERV increased by 6.9 per cent (like-for-like) to £236.9
million and the equivalent yield was 4.34 per cent, reflecting
outward movement of 26 basis points. The equivalent yield on the
commercial portfolio (excluding residential assets) was
approximately 4.58 per cent.
The loss on revaluation of £68.5
million recorded in the income statement, and revaluation gain of
£1.8 million recorded in the statement of comprehensive income, is
based on carrying value of the property portfolio after adjustments
for lease incentives and capital
expenditure and takes into account valuation movements on
the Shaftesbury investment property
between the fair value on completion of the merger and the
valuation at 31 December 2023.
Seven properties have been
disposed during the year for gross proceeds of £88.1 million. Based
on the opening book value and sale costs, overall profit of £3.5
million has been recognised.
Other income
Dividend income of £2.6 million
was received from the 25.2 per cent shareholding in Shaftesbury on
15 February 2023 in relation to the final quarter of
2022.
Administration
expenses
|
|
2023
£m
|
2022
£m
|
Depreciation
|
|
0.4
|
0.2
|
Other administration
expenses
|
|
38.9
|
25.8
|
Underlying administration
expenses
|
|
39.3
|
26.0
|
|
|
|
|
Merger-related transaction
costs
|
|
35.8
|
14.6
|
Merger-related integration
and non-underlying administration expenses
|
|
8.7
|
-
|
Administration expenses
|
|
83.8
|
40.6
|
|
|
|
| |
Underlying administration expenses
of £39.3 million, is considerably below the combined previously
reported administrative expenses by each separate company, prior to
the merger.
In addition to underlying
administration expenses of £39.3 million, merger-related
transaction costs of £35.8 million have been incurred during the
year, with the majority related to successful completion of the
merger.
One-off merger-related integration
and other costs of £8.7 million have been incurred. Delivering
recurring cost synergies and other merger benefits continues to be
a priority for the Group with total annualised cost savings
expected to be over £16 million, which represents significant
progress ahead of the phasing included in the merger documentation
(which set out a run rate of £12.0 million within two years, of
which £6.0 million would be achieved within a year of
completion).
Over the medium-term the Group
is targeting an improvement in the EPRA
cost ratio towards 30 per cent from its current level of 39.9 per
cent, driven by growth in rental income and rigorous management of
irrecoverable property costs and administration expenses.
Net finance costs
Following the merger, the £576
million loan facility was drawn in full in April 2023 to fund the
redemption of the £575 million Chinatown and Carnaby bonds. In
August 2023, a £200 million 10-year loan
facility, secured against a portfolio of assets within the Carnaby
portfolio, was drawn and used to repay part of the £576 million
loan facility. The remainder was repaid in December 2023 using
Group cash and the proceeds of the new £350 million unsecured loan
facility.
Net finance costs of £51.9 million
include interest on the additional £385 million of fixed rate debt
secured on Shaftesbury assets acquired on completion of the
merger.
Finance income increased by £13.0
million to £15.6 million during the year, comprising £6.3 million
interest earned on cash held on deposit and £9.3 million in
relation to interest rate hedging arrangements. Protection is in
place in relation to the interest rate exposure on all of the
Group's drawn variable rate debt until the end of 2025 through caps
and collars. The average cash balance held through the year was
approximately £135 million.
Profit from joint ventures and associates
Our share of Longmartin's post-tax
profit was £0.2 million for the period 6 March to 31 December 2023.
Our share of the revaluation deficit was £1.0 million. Excluding
the revaluation and fair value adjustment on debt and including the
£0.4 million interest received on the interest-bearing loan
provided to the associate, our share of underlying earnings from
Longmartin was £2.1 million. £1.5 million dividends were received
during 2023.
Taxation
The Group continues to satisfy the
requirements to qualify for REIT status. Therefore, as its income
is substantially derived from qualifying property rental business
activities within the REIT regime, the majority of its income is
exempt from tax. There is a tax charge of £0.2 million in the year
(2022: £nil), relating to non-REIT activity, mainly arising in
respect of finance income.
Dividends
The Board has declared a final
dividend of 1.65 pence per share, bringing the total dividend to
3.15 pence per share reflecting progression in underlying earnings
and cash generation. The total gross dividend payable is £32.2
million of which £2.1 million relates to the Group entity which
holds 128.4 million shares as security under the terms of the
exchangeable bonds. The entity has provided an undertaking not to
exercise its voting rights in respect of such ordinary shares but
will receive the declared dividend, the majority of which should
subsequently be retained by the Group following the dividend
threshold test as set out in the exchangeable bond conditions. In
addition, the dividend will not be paid in relation to the 3.1
million shares held by the Group's approved Employee Benefit
Trust.
The dividend is to be paid 0.65
pence as a PID and 1.0 pence as a non-PID, on 31 May 2024 to
shareholders on the register at 26 April 2024.
During the first half, in respect of
the period pre-merger, Capco paid a second interim dividend of 1.7
pence per Capco share and Shaftesbury paid a dividend of 2.7 pence
per Shaftesbury share to their respective shareholders.
SUMMARY BALANCE SHEET
The 31 December 2022 balance sheet
reflects the Capco standalone position. The pro forma balance sheet
has been included in order to provide additional information for
comparative purposes.
|
31 December
2023
£m
|
30 June
2023
£m
|
Pro forma1
31 December
2022
£m
|
31 December 2022
£m
|
Property
portfolio2
|
4,760.4
|
4,865.2
|
4,829.2
|
1,715.1
|
Investment in joint ventures and
associates
|
83.4
|
84.4
|
86.8
|
0.2
|
Financial assets at fair
value
|
-
|
-
|
-
|
356.9
|
Net debt3
|
(1,499.1)
|
(1,553.5)
|
(1,488.2)
|
(633.5)
|
Other assets and
liabilities
|
135.5
|
157.6
|
98.6
|
122.9
|
Net assets
|
3,480.2
|
3,553.7
|
3,526.4
|
1,561.6
|
EPRA net tangible
assets
|
3,479.4
|
3,541.3
|
3,526.4
|
1,552.2
|
EPRA net tangible assets per share
(pence)
|
190.3p
|
193.8p
|
192.8p
|
182.1p
|
Adjusted, diluted number of
shares4
|
1,828.8m
|
1,827.2m
|
1,828.8m
|
852.3m
|
1. Pro forma information is explained
in further detail on page 59.
2. 31 December 2023 includes £20.2
million accounted for as owner-occupied property.
3. Net debt based on nominal value
of debt drawn less cash, excluding tenant deposits of £14.5 million
(30 June 2023: £14.4 million; 31 December 2022 and pro forma: £13.4
million).
4. Number
of shares as at pro forma 31 December 2022, 30 June 2023 and 31
December 2023 excludes 128.4 million
shares held as collateral for the exchangeable bond and 3.1 million
within an approved Employee Benefit Trust. Total shares in
issuance, including these components, was 1,953.2 million shares as
at 30 June and 31 December 2023.
EPRA NTA
The EPRA NTA movement reflects the
effect of merger completion and the portfolio valuation movement.
As referred to earlier, through the completion accounting, the
Shaftesbury debt, including the debt in relation to our share of
the Longmartin investment, which had an overall nominal value of
£444.8 million, was fair valued and was held at £400.4 million as
at 31 December 2023. This difference of £44.4 million, or 2.4 pence
in terms of EPRA NTA per share, will reverse as the balance sheet
value of the debt accretes to nominal value over the remaining term
of the debt. The impact of this unwind is excluded from underlying
earnings.
Property portfolio
The carrying value of the
wholly-owned portfolio as at 31 December 2023 is £4,760.4 million,
including £20.2 million reflected as owner occupied in the year.
During the year, seven properties have been sold with an opening
carrying value of £83.2 million for gross proceeds of £88.1
million.
In 2023 the Group acquired the
remaining interest in the Royal Opera House Arcade and a long
leasehold residential unit in Neals Yard was purchased in September
2023. Subsequent capital expenditure during the year was £35.1
million.
The valuation of the wholly-owned
property portfolio of £4,795.3 million was 0.8 per cent lower on a
like-for-like basis compared with the December 2022 pro forma
position of £4,857.8 million. ERV increased across all uses by 6.9
per cent overall (like-for-like) to £236.9 million and the
equivalent yield was 4.34 per cent, reflecting 26 basis points of
outward movement over the year. The MSCI Capital Return for the
year was -5.6 per cent.
Total property return for the year
was 2.2 per cent. The MSCI Total Return Index recorded negative
performance of 0.1 per cent reduction for the year resulting in 2.3
per cent outperformance.
Investment in joint ventures and
associates
The figures below in relation to
the Longmartin and Lillie Square investments
represent our 50 per cent
share.
Longmartin
At 31 December 2023, Longmartin's
long leasehold property was valued at £158.8 million (Dec 2022:
£160.3 million). After allowing for capital expenditure, the
valuation decrease was 1.3 per cent. ERVs increased by 9.4 per cent
and at 31 December 2023, the equivalent yield was 4.86 per cent, an
increase of 38 basis points over the year (Dec 2022: 4.48 per
cent).
Longmartin has a £60.0 million
fixed-rate term loan maturing in 2026. As at 31 December 2023, net
debt, based on nominal value, was £58.1 million resulting in LTV of
36.6 per cent.
Lillie Square
The property valuation as at 31
December 2023 was £65.3 million, a 10.3 per cent like-for-like
decline against the 31 December 2022 valuation of £77.2 million. In
total, 355 Phase 1 and 2 units have been sold. 65 units are
available and 32 units have been leased on a short-term basis. The
sale of 4 units completed during the year representing £3.4 million
gross proceeds. Our share of net cash in the joint venture was £7.9
million and there is no external debt.
Debt and gearing
The Group maintains a strong
financial position, with diversified sources of funding,
significant headroom against debt covenants, access to liquidity,
modest capital commitments, substantial unencumbered asset value
and finance costs are protected against interest rate movements
until December 2025.
The Group's cash and undrawn
committed facilities as at 31 December 2023 were £485.7 million
(pro forma: £521.6 million).
|
31 December
2023
£m
|
30 June
2023
£m
|
Pro forma1
31 December
2022
£m
|
31 December 2022
£m
|
Cash and cash
equivalents2
|
185.7
|
157.3
|
221.6
|
116.5
|
Undrawn committed
facilities
|
300.0
|
300.0
|
300.0
|
300.0
|
Cash and undrawn committed
facilities
|
485.7
|
457.3
|
521.6
|
416.5
|
Commitments
|
(24.8)
|
(22.8)
|
(35.6)
|
(1.7)
|
Available resources
|
460.9
|
434.5
|
486.0
|
414.8
|
1. Pro
forma information is explained in further detail on page
59.
2. Excludes tenant deposits of £14.5 million (30 June 2023:
£14.4 million; Pro forma and 31 December 2022: £13.4
million).
As at 31 December 2023, the Group
had capital commitments of £24.8 million.
The gearing measure most widely used
in the industry is loan-to-value ("LTV") which at 31 December 2023
was 31.3 per cent. This is comfortably within the Group's limit of
no more than 40 per cent. EPRA LTV was 30.9 per cent.
|
31 December
2023
£m
|
30 June
2023
£m
|
Pro forma1
31 December 2022
£m
|
31 December 2022
£m
|
Cash and cash
equivalents
|
185.7
|
157.3
|
221.6
|
116.5
|
Debt at nominal value
|
(1,684.8)
|
(1,710.8)
|
(1,709.8)
|
(750.0)
|
Net debt
|
(1,499.1)
|
(1,553.5)
|
(1,488.2)
|
(633.5)
|
|
|
|
|
|
Loan-to-value
|
31.3%
|
31.7%
|
30.6%
|
36.3%
|
EPRA loan-to-value
|
30.9%
|
30.8%
|
n/a
|
28.0%
|
Interest cover
|
212.7%
|
199.5%
|
n/a
|
182.1%
|
Weighted average debt maturity -
drawn facilities
|
5.0 years
|
4.2 years
|
n/a
|
4.5 years
|
Weighted average cost of debt -
gross2
|
4.2%
|
4.3%
|
n/a
|
2.7%
|
Weighted average cost of debt -
net
|
3.4%
|
3.4%
|
n/a
|
1.5%
|
Drawn debt with interest rate
protection3
|
100%
|
100%
|
n/a
|
100%
|
1. Pro forma information is
explained in further detail on page 59.
2. As at 31 December 2023 the
weighted average cost of debt reduces to an effective running cash
cost of 3.4 per cent taking account of interest on cash deposits
and interest rate caps and collars.
3. Taking account of interest on
cash deposits and interest rate caps and collars.
At 31 December 2023, Group net
debt was £1.5 billion.
During the year, £550 million of
debt was raised, with the proceeds being used towards repayment of
the £576 million loan facility drawn on completion of the merger to
fund the redemption of the £575 million Carnaby and Chinatown
bonds.
In August 2023, a £200 million
10-year loan facility, secured against a portfolio of assets within
the Carnaby portfolio, was agreed with Aviva Investors. The
facility sits alongside the existing secured term loans with Aviva
of £130 million and £120 million maturing in 2030 and 2035
respectively. The annual cash interest rate in respect of the
overall amount of £450 million of secured term loans with Aviva
Investors is 4.7 per cent.
In December 2023, a £350 million
unsecured loan agreement comprising a term loan of £200 million and
revolving credit facility of £150 million was signed. The agreement
has an initial maturity of three years, with the option to extend
the term by a further two periods of one year each, subject to
lender approval. The facility includes a £125 million uncommitted
accordion feature which may allow the Company to increase the total
revolving facility commitments.
Following the refinancing activity
in the year, the weighted average maturity of the Company's drawn
debt has been extended to over 5 years. The current weighted
average cost of debt is 4.2 per cent, which reduces taking into
account interest income on cash deposits and the benefit of
interest rate hedging to an effective cash cost of 3.4 per
cent.
All of the Group's drawn debt is
at fixed rates or currently has interest rate protection in place
until the end of 2025. Interest rate collars were already in place
for £200 million of notional value through to December 2024, capped
at 1.23 per cent. Additional interest rate hedging was put into
place in April 2023, capping SONIA exposure at 3.75 per cent for a
further £300 million of notional value for 2023 and £150 million of
notional value for 2024, at a total cost of £3.4 million (resulting
in £500 million of hedging for 2023 at an effective 2.7 per cent
and £350 million for 2024 at an effective 2.3 per cent). In
December 2023, further hedging was put in place for £250 million of
notional value of SONIA exposure for 2025, at a cost of £1.6
million, which provides for a cap of 3.0 per cent and a floor of
2.0 per cent.
CASH FLOWS
Movement in cash flow
|
£m
|
Cash, excluding tenant deposits,
as at 31 December 2022
|
116.5
|
Cash acquired on merger
|
118.1
|
|
234.6
|
Operating inflow
|
63.3
|
Investing inflow
|
36.4
|
Financing outflow
|
(37.8)
|
Dividends paid
|
(41.9)
|
Non-underlying
|
(68.9)
|
Cash, excluding tenant deposits,
as at 31 December 2023
|
185.7
|
Taking into account cash acquired
as part of the merger, the overall balance of cash decreased by
£48.9 million to £185.7 million as at 31 December 2023. This is
largely due to:
·
Operating cash inflows of £63.3 million
reflecting growing net rental income and continuing positive cash
collections, partly offset by administrative and finance
costs.
·
Investing cash inflows of £36.4 million, included
£88.1 million gross proceeds from the sale of seven properties
offset by £33.8 million capital expenditure and £17.4 million for
the Royal Opera House Arcade lease regear and long leasehold
residential unit. £4.2 million has been received from the
Longmartin investment in the year comprising a dividend of £1.5
million and £2.7 million loan repayment.
·
Of the £37.8 million financing outflow, £25
million relates to the net movement in facilities drawn and repaid
following the £550 million raised in the year to fund the
redemption of the £575 million Carnaby and Chinatown bonds. £7.8
million of costs have been incurred on facility arrangement fees,
following the refinancing activities during the year. The remaining
£5.0 million movement reflects payments in relation to the
additional interest rate hedging (£3.4 million in April 2023 and
£1.6 million in December 2023).
·
Total dividends paid in the year excludes the
£1.9 million paid to the Group entity which holds 128.4 million
shares as security under the terms of the exchangeable bonds.
Following the dividend threshold test, as set out in the
exchangeable bond conditions, the full dividend was subsequently
retained by the Group.
·
Non-underlying movements represent payment of
merger-related transaction and integration costs. Certain
merger-related transaction costs were included in the Shaftesbury
acquisition balance sheet but have been paid after the merger date
and, therefore, reflect the difference between the costs included
in the income statement of £44.5 million and the statement of cash
flows.
Going concern
Further information on the going
concern assessment is set out in note 1 'Principal accounting
policies'.
The Company has a strong balance
sheet with EPRA loan-to-value of 30.9 per cent, group interest
cover of over two times and access to cash and undrawn facilities
of £485.7 million as at 31 December 2023. There remains sufficient
liquidity and debt covenant headroom even in a downside "severe but
plausible" scenario.
There continues to be a reasonable
expectation that the Group will have adequate resources to meet
both on-going and future commitments for at least 12 months from
the date of signing these financial statements. Accordingly, the
Directors consider it appropriate to adopt the going concern basis
of accounting in preparing the 2023 Annual Report.
Situl Jobanputra
Chief Financial Officer
28 February 2024
PRINCIPAL RISKS AND UNCERTAINTIES
effective Risk
management
Risk management
The Board has overall
responsibility for Group risk management. It determines its risk
appetite and reviews principal risks and uncertainties regularly,
together with the actions taken to mitigate them. The Board has
delegated responsibility for the review of the adequacy and
effectiveness of the Group's internal control framework to the
Audit Committee.
Risk is a standing agenda item at
management meetings. This gives rise to a more risk-aware culture
and consistency in decision-making across the organisation in line
with the corporate strategy and risk appetite. All corporate
decision-making takes risk into account, in a measured way, while
continuing to drive an entrepreneurial culture.
The Executive Committee is
responsible for the day-to-day commercial and operational activity
across the Group and is, therefore, responsible for the management
of business risk. The Executive Risk Committee, comprising the
Chief Executive, Chief Financial Officer, members of the Executive
Committee, General Counsel, Joint Group Financial Controllers and
Head of Sustainability, is the executive level management forum for
the review and discussion of risks, controls and mitigation
measures. The corporate and business division risks are reviewed on
a regular basis by the Executive Risk Committee, so that trends and
emerging risks can be identified and reported to the
Board.
Senior management from each part
of the business identify and manage the risks for their area or
function on a day-to-day basis and maintain a risk register. The
severity of each risk is assessed through a combination of each
risk's likelihood of an adverse outcome and its impact. In
assessing impact, consideration is given to financial, reputational
and regulatory factors, and risk mitigation plans are established.
A full risk review is undertaken annually in which the risk
registers are aggregated and reviewed by the Executive Risk
Committee. The Directors confirm that they have completed a robust
assessment of the principal and emerging risks faced by the
business, assisted by the work performed by the Executive Risk
Committee.
Risk appetite
statement
The Group risk appetite statement
is designed to set the right tone at the top for the Group and
support decision-making at a strategic level by the Board and the
Executive Committee. This statement provides guiding principles to
support decision-making at both a Board and senior management
level. The Group's risk appetite statement is reviewed and updated
by the Board at appropriate intervals and, in any event, on an
annual basis. The Group's risk appetite statement has been
communicated to senior management who are responsible for
incorporating the identified principles in decision-making. The
Group's risk appetite statement is as follows:
"We invest to create thriving
destinations in London's West End where people enjoy visiting,
working and living. We use our expertise in property investment and
our commitment to a strong balance sheet to take commercial risks
in a measured way, so that we are able to deliver sustainable
growth and long-term returns for our shareholders.
We are risk averse in relation to
the impact of our business on the environment and on the health and
safety of our people and the public, and it is a key priority for
us that our business operates in compliance with laws, regulations
and our contractual commitments."
Investing in one location presents
an inherent geographic concentration risk and there are certain
external factors which the Group cannot control. However, in
executing the Group's strategy, we seek to minimise exposure to
operational, reputation and compliance risks, recognising that our
appetite to risk varies across different elements of the strategy.
Recognising that risk appetite is not an "absolute", the Group may
move higher or lower on the risk curve, as circumstances
dictate.
Assessing risk
Risks are considered in terms of
the likelihood of occurrence and their potential impact on the
business. In assessing impact, a number of criteria are considered,
including the effect on our strategic objectives, operational or
financial matters, our reputation, sustainability, stakeholder
relationships, health and safety and regulatory issues. Risks are
assessed on both gross (assuming no controls are in place) and
residual (after mitigation) bases.
To the extent that significant
risks, failings or control weaknesses arise, appropriate action is
taken to rectify the issue and implement controls to mitigate
further occurrences. Such occurrences are reported to the Audit
Committee. The Group's processes and procedures to identify,
assess, and manage its principal risks and uncertainties were in
place throughout the year and remained in place up to the date of
the approval of the 2023 Annual Report.
Internal controls
The main elements of the Group's
internal control framework are set out below:
· Clear remit, terms of reference and schedule of matters for
the Board and its Committees
· Close involvement of the Executive Committee in the
day-to-day operations of the business, with regular meetings with
senior management
· Delegated authority limits
· Daily monitoring of risks and controls by
management
· Formal assessment by the Executive Risk Committee of
strategic and emerging risks and the related controls or
mitigations, with reporting to the Audit Committee
· Regular Board updates on operations, IT systems and cyber
security
· Transparent tax strategy, published on the Group's website,
which sets out the approach to tax risk management and
governance
· Whistleblowing policy and hotline procedures, where employees
and third parties may raise any matters of concern confidentially,
are reviewed by the Audit Committee annually
Specific controls relating to
financial reporting and consolidation process include:
· Appropriately staffed management structure, with clear lines
of responsibility and accountability
· A
comprehensive budgeting and review system
· Board and Audit Committee updates from the Chief Financial
Officer and Joint Group Financial Controllers, which include
forecasts, performance against budget and financial
covenants
· Formal reviews of the effectiveness of financial, operational
and compliance controls by management and external advisers are
reported to the Audit Committee
· BDO
LLP ("BDO"), appointed as internal auditor of the Group, conducts
regular audits of the Group's control procedures and reports its
findings to the Audit Committee
Risk outlook
During 2023, there has been strong
operational performance across the portfolio, reflecting the
benefits of the Group's active asset management, together with the
exceptional qualities and long-term resilience of the West End.
Strong leasing demand continued across all uses, leading to high
occupancy levels and strong rent collection. The long-term impact
of the pandemic alongside broader macroeconomic factors, in
particular evolving inflationary pressures and interest rates, on
the future demand for, and use of, lettable space, evolution of
consumer behaviour and travel patterns remain a consideration and
the Board continues to monitor this.
Despite the recovery in the
operating environment and trading conditions, risk remains
heightened, reflecting the current macroeconomic and geopolitical
backdrop, manifesting in, amongst other things, inflation and
increased borrowing rates which may have an impact on property
valuations, availability and cost of funding, our customers'
profitability and consumer behaviour.
Many of the Group's customers are
exposed to the changes and challenges facing the retail and
hospitality sectors, including macroeconomic factors, such as
availability and cost of credit for customers and their businesses,
the potential for the level of consumer spending to be impacted by
cost-of-living pressures, business and consumer confidence,
inflation rates, energy costs, supply chain disruption, labour
shortages and other operational costs.
If current global or UK
macroeconomic conditions continue to deteriorate, or there is a
further increase in geopolitical uncertainty, this could impact UK
real estate markets, resulting in downward pressure on the
valuation of the Group's properties and gross rental
income.
The Group's operations may be
adversely affected if it fails to comply with climate and
environmental regulation or its own environmental, social or
governance standards. Operations may also be adversely affected by
climate and environment related risks, which could lead to
significant costs to mitigate environmental impacts.
Following completion of the
merger, operational and business risks were assessed. These were
aligned across both businesses; however, the principal risks have
been refined following the merger. Performance of the Group is
dependent in part on its ability to deliver the benefits of the
merger. There has been very good progress through the year, and
further activity will continue over the coming years as we work
towards an effective and efficient organisational structure and
cost base.
Emerging risks
The Group monitors emerging risks
to identify and assess those risks that may potentially impact upon
its strategic plans. These risks are circumstances or trends which
are often evolving rapidly which could significantly impact on the
Group's financial strength, competitive position or reputation
within the next three years or over the longer term. Generally, the
impact and probability of occurrence are not yet fully understood
and, consequently, necessary mitigations have not yet fully
evolved.
The Group conducts a horizon
scanning exercise to identify potential risks and emerging trends
which may be impactful in the future. Based on this exercise, the
most relevant emerging risks and opportunities are assessed to
establish relevance and identify any additional remediation
required. The prioritised emerging risks are further reviewed and
validated by senior management to gain a better understanding of
their impact and to develop strategies to address them. A
non-exhaustive list of emerging risks is outlined below.
Emerging risks with a
one-to-three-year time horizon include:
· UK
political uncertainty and evolving geopolitical
conditions;
· UK
corporate reform and landlord/tenant legislation
changes;
· Building Safety Act and changes to UK property valuation
methodologies and practices;
· Green energy and sustainability priorities; and
· Disruptive technological advancements, which may include
areas such as artificial intelligence, blockchain and
metaverse.
Emerging risks with a longer-term
horizon include:
· Changes in social dynamics, demographic shifts and trends in
space usage, urbanisation and consumption and travel
patterns;
· Longer-term climate change impacts;
· Consumer behaviour;
· Impact of digital currencies on consumer behaviour;
and
· Residential rent control and regulatory tax
changes.
Principal risks and
uncertainties
The Group's principal risks and
uncertainties, which are set out on the following pages, are
reflective of where the Board has invested time during the year.
Following a detailed review of the principal risks post-merger,
certain risks have been disaggregated in the current year to
clearly align the mitigating actions to the respective risks. This
is reflected below. These principal risks are not exhaustive. The
Group monitors a number of additional risks and adjusts those
considered 'principal' as the risk profile of the business changes.
See also the risks inherent in the compilation of financial
information, as disclosed in note 1 'Principal accounting policies'
within 'Critical accounting judgements and key sources of
estimation and uncertainty'.
2023 Risk
|
Change in the
year
|
Economic and
political1
|
Increase
|
Portfolio1
|
Stable
|
Operational
resilience1
|
Stable
|
Leasing and asset
management
|
Stable
|
People
|
Stable
|
Climate change
|
Stable
|
Compliance with law and
regulations
|
Stable
|
1. These
risks were previously reported as one risk 'Economic, political and
operating conditions' in 2022.
Risk
|
Impact on Strategy
|
Mitigation
|
Economic and political
|
|
Impact of 'higher for longer'
interest rates and lack of availability or increased cost of debt
or equity funding
Inflationary pressures on
operating costs, including energy and the cost-of-living
crisis
Adverse impact on business and
consumer confidence, increased material costs, prolonged supply
chains and reduced labour supply
Decline in real estate valuations
due to macroeconomic conditions
Persistent significant discount in
the share price relative to EPRA NTA
Uncertain political climate and/or
changes to legislation and policies
|
Reduced property return
Reduced rental income and/or
capital values as customers could suffer staff shortages, increased
costs, longer lead times and lower availability of
inventory
Higher operating and finance
costs
Reduced financial and operational
flexibility
|
Maintain appropriate liquidity to
cover commitments
Target longer and staggered debt
maturities, and diversified sources of funding
Early refinancing of debt
maturities
Covenant headroom monitored and
stress tested
Fixed rate financing and
derivative contracts to provide interest rate protection
Monitoring proposals and emerging
policy and legislation, with industry lobbying where
appropriate
Engagement with key stakeholders
and local authorities
|
Change in 2023:
Increased
Context and actions
taken:
The Group focuses on prime assets
in the West End of London which historically have proved to be
economically resilient.
The Group has had a long-term
focus on maintaining a strong balance sheet, with sufficient
liquidity, to ensure it is able to withstand market volatility and
take advantage of opportunities. During the year, the Group raised
£550 million of debt, with proceeds being used to repay the £576
million loan facility drawn post completion of the
merger.
Extensive forecasting, stress
testing and modelling of various scenarios has been undertaken,
including sensitivities arising from the current macroeconomic
environment, to help plan for future impacts on the
business.
Funding, debt and treasury metrics
are monitored on a continual basis with a focus on preserving
liquidity and capital.
A downside scenario has been
analysed in connection with the going concern assessment, details
of which are set out in note 1 'Principal accounting policies'
within 'Going concern'. The financial statements have been prepared
on a going concern basis.
We remain in close dialogue with
local authorities to understand future plans and work
constructively to position the estate in the best possible
manner.
|
Portfolio
|
Inability of the Group to adopt
the appropriate strategy or to react to changing market conditions
or changing consumer behaviour (including, but not limited to,
structural changes in the office and retail sectors)
Portfolio concentration
Volatility in the investment
market
|
Inability to deliver business plan
or a structural change to the business plan impacting returns or
capital values
|
Focus on prime assets, locations
and uses where, in normal conditions, there is a structural
imbalance between availability of space and demand
Establish asset clusters to
provide the opportunity to drive long-term growth and
returns
Regular assessment of investment
market conditions including bi-annual external
valuations
Regular strategic analysis with
focus on creating mixed-use destinations and residential districts
with unique attributes
Reconfigure and repurpose space to
respond to, and anticipate, changing customer demand
|
Change in 2023: Stable
Context and actions
taken:
The Group focuses on prime assets
in the West End of London primarily in the retail and hospitality
sector. The value of control over areas brings the ability to
curate and drive growth over the long term. We actively promote our
areas to drive footfall and curate areas to maintain places that
are popular.
Sustained customer demand has led
to low vacancy levels. Strong footfall and spend improving, with
customer sales on average in excess of 2019 levels.
Through regular dialogue with
potential and current customers and regular assessments of the
market, we are able to better understand market demand and
reconfigure space as appropriate.
|
Operational resilience
|
Misconduct or poor operational or
sustainability standards
Poor performance from one of the
Group's third-party advisers
Inability to effectively integrate
people, systems and processes
Catastrophic event such as a
terrorist attack, natural disaster, health pandemic or cyber
security crime
|
Reduced rental income, higher
operating costs, and/or reduced capital values
Reduced financial and operational
flexibility
Diminishing London's
status
Business disruption or damage to
property
Reputational damage
|
Supplier procurement policy and
regular monitoring of external advisers
Engagement with key stakeholders
and local authorities
Building reinstatement, loss of
rent and terrorist insurance
Detailed business continuity and
crisis communication plans in place
On-site security and cyber
security in place
Health and safety policies and
procedures
Close liaison with police,
National Counter Terrorism Security Office (NaCTSO) and local
authorities
|
Change in 2023: Stable
Context and actions
taken:
Whilst being invested in one area
is a risk, the Group's ownership in prime West End real estate is
also a strength and an opportunity, providing control and allowing
curation of the area to maintain places that are
popular.
Given the high-profile nature of
the Group's assets, the risk of an external event is inevitably
heightened. It is therefore important that the Group maintains
recommended levels of insurance and implements effective security
and health and safety policies.
Business continuity
plans for both employees and service providers,
including introduction of external resources, if required, and
other policies have been reviewed together with HR policies,
technology and communication where appropriate. IT security systems
that support data security and disaster recovery are in
place.
Cyber security and its impact on
data and IT infrastructure, including both widespread risks such as
state-sponsored cyber-attacks and those targeted directly at our
systems and data continues to be a key focus, especially during
this year as we integrated systems and processes. This was led by
the Integration Committee, with support from external advisers,
including specialist consultants, to ensure appropriate controls
and security protocols are in place. Employees are provided with
regular cyber security and phishing training.
|
Leasing and asset
management
|
Inability to achieve target rents
or to attract target customers due to market conditions
Competition from other
locations/formats
Unfavourable planning/licensing
policy, legislation or action impacting on the ability to secure
approvals or consents
|
Decline in customer demand for the
Group's properties
Reduced income and increased
vacancy
Reduced return on investment and
development property
|
High quality customer
mix
Strategic focus on creating
mixed-use destinations with unique attributes
Engagement with local and national
authorities
Pre-application and consultation
with key stakeholders and landowners
Regular assessment of market
conditions and development strategy
Business strategy based on
long-term returns
|
Change in 2023: Stable
Context and actions
taken:
The Group takes measured risks by
using its expertise in place-making and creative and active asset
management to deliver long-term value through rental growth and
attracting new customers. During 2023, leasing activity remained
strong, with high occupancy levels reflecting the strength of
demand for prime central London real estate.
The impact on customer demand and
supply chains as well as inflationary pressures is kept under
review.
The Group looks for opportunities
to create or enhance value in the portfolio through the planning
process, cognisant of the risks but using our experience and skill
to deliver our objectives.
The Group has a focused leasing
and marketing strategy, ensuring the business is well-positioned.
The Group regularly engages with suppliers to understand their
ability to meet our requirements and standards.
|
People
|
Inability to retain, integrate and
recruit the right people and develop leadership skills within the
business
Key person risk as
the Group has a
relatively limited headcount
|
Inability to execute strategy and
business plan
Constrained growth, lost
opportunities
Pressure on corporate
costs
|
Succession planning, performance
evaluations, training and development
Long-term and competitive
incentive rewards
Flexible and modern working
practices
|
Change in 2023: Stable
Context and actions
taken:
The success of the business is
down to a dedicated team of skilled and
talented individuals working collaboratively together. The health
and well-being of our people is of the utmost importance including
the ability to create a culture and environment that allows each
person to grow, develop and perform to the best of their
abilities.
There remains a risk of illness or
absence across employees, management or service providers which
would disrupt the day-to-day activities of
the Group's business and running of the estate. Team communication
strategies have been implemented to ensure managers can adequately
supervise and support employees working from home.
Recruiting and on-boarding
policies have been adjusted where necessary to ensure that the
business is able to continue to attract, develop and retain the
best possible resources.
We continue to monitor closely
employees' mental and physical well-being and the health and safety
of our employees and service providers remains a top priority with
regular seminars and webinars from external experts.
|
Climate change
|
Physical impact on our assets from
rising temperatures or other extreme climate-related event such as
flooding
Transitional challenge of
increasing and more onerous compliance and reporting requirements,
as well as retrofitting, insuring or leasing our assets in a
heritage environment on an appropriate whole life carbon
basis
Inability to keep pace with
customer and consumer demand for proactive action to manage and
mitigate climate-related risk
|
Reduced income, capital values or
business disruption
Increased operating costs to meet
reporting and target metrics and compliance
Increased capital costs of
retrofitting, or inability to resolve listed building or planning
challenges, leads to buildings becoming carbon stranded
Reduced income through lower rents
and longer void periods due to reduced customer demand
|
Company manages climate-related
risks and opportunities and sustainability team in place
Net Zero Carbon commitment by 2030
backed by Net Zero Carbon Pathway, re-committed post-merger. For
more detail on the mitigation measures in place for climate risk,
please refer to the Group's TCFD disclosures in the 2023 Annual
Report as well as the Group's Net Zero Carbon Pathway
Active management plan with
external reporting via recognised indices and benchmarks, including
EPRA, CDP, MSCI and GRESB
Continued engagement with
stakeholders in order to preserve heritage buildings, while
enhancing environmental performance
Pro-active customer and consumer
engagement programme and setting of appropriate climate-related
targets on both development and operations
|
Change in 2023: Stable
Context and actions
taken:
The Group believes in taking a
responsible and forward-looking approach to environmental issues
and the principles of sustainability. The Group recognises the
urgent responsibility to tackle climate change and this is
reflected in its 2030 Net Zero Carbon target. As a long-term
steward of the West End, the Group understands the benefits of a
strong track record of restoring and celebrating the heritage of
the area through considered refurbishments
and developments.
Following the merger, the Group
re-committed its Net Zero Carbon Pathway, confirming the scope, and
taking into account minor differences in pre-merger approaches,
enhancements to best practice and changes in regulation. The Group
has made material progress in the decarbonisation of the portfolio,
as reported in November. With seven years remaining until 2030, we
are at a critical point for action and will continue our efforts in
2024 to reduce greenhouse gas emissions in our buildings and
operations. This requires more innovative and sustainable ways of
working, and includes our supply chain partners across development
and operational disciplines, our customers, as well as our
corporate actions.
|
Compliance with law and
regulations
|
Breach of legislation, regulation
or contract
Inability to monitor or anticipate
legal or regulatory changes, including potential changes to the
Landlord and Tenant Act or other associated reforms
Accidents causing loss of life or
very serious injury to employees, contractors, customers and
visitors to the Group's properties; or near misses of the
same
Exit from REIT regime due to
non-compliance with REIT requirements
|
Prosecution for non-compliance
with legislation
Litigation or fines, reputational
damage
Distraction of
management
|
Appointment of external advisers
to monitor changes in law or regulation
Members of staff attend external
briefings to remain cognisant of legislative and regulatory
changes
Health and safety procedures,
training and governance across the Group
Appointment of reputable
contractors
Adequate insurance held to cover
the risks inherent in property ownership and construction
projects
|
Change in 2023: Stable
Context and actions
taken:
Compliance with law and
regulations, including health and safety, remains a key priority
for the Board.
Protocols are in place and
communicated across the various stakeholder groups to ensure
everyone is aware of new legislation and requirements.
The health and safety of our
people and the public is a key priority. The Group works closely
with its stakeholders to mitigate health and safety
risks.
We remain in communication with
HMRC regarding our REIT status, the Group's ability to comply with
the requirements and the approach which HMRC will take in relation
to any breach of the REIT conditions.
|
|
|
|
|
| |
DIRECTORS' RESPONSIBILITIES
Statement of Directors'
responsibilities
The statement of Directors'
responsibilities below has been prepared in connection with the
Group's full Annual Report for the year ended 31 December 2023.
Certain parts of the Annual Report have not been included in this
announcement as set out in Note 1 to the condensed financial
information.
The Directors consider that the
Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group and Company's position and
performance, business model and strategy.
Each of the Directors, whose names
and functions are listed in the Governance section of the Annual
Report confirm that, to the best of their knowledge:
- the
Group and Company financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give
a true and fair view of the assets, liabilities and financial
position of the Group and Company, and of the profit of the Group;
and
- the
Strategic report includes a fair review of the development and
performance of the business and the position of the Group and
Company, together with a description of the principal risks and
uncertainties that it faces.
The responsibility statement was
approved by the Board of Directors on 28 February 2024 and signed
on its behalf by:
Ian Hawksworth
Chief Executive
28 February 2024
Situl Jobanputra
Chief Financial Officer
28 February 2024
CONSOLIDATED INCOME
STATEMENT
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
Revenue
|
3
|
195.1
|
74.1
|
Costs1
|
3
|
(53.2)
|
(16.8)
|
Gross profit
|
3
|
141.9
|
57.3
|
Other income
|
|
2.7
|
13.5
|
Administration expenses
|
4
|
(83.8)
|
(40.6)
|
Loss on revaluation and profit on
sale of investment property
|
|
(65.0)
|
(0.8)
|
Change in value of investments and
other receivables
|
|
(12.5)
|
(7.9)
|
Change in fair value of financial
assets through profit or loss
|
15
|
52.0
|
(239.5)
|
Operating profit/(loss)
|
|
35.3
|
(218.0)
|
|
|
|
|
Finance income
|
5
|
15.6
|
2.6
|
Finance costs
|
6
|
(67.5)
|
(27.2)
|
Other finance income
|
5
|
4.1
|
3.5
|
Other finance costs
|
6
|
(31.3)
|
(6.5)
|
Change in fair value of derivative
financial instruments
|
15
|
(11.3)
|
39.8
|
Net finance
(costs)/income
|
|
(90.4)
|
12.2
|
Operating loss after finance
costs
|
|
(55.1)
|
(205.8)
|
|
|
|
|
Profit from joint ventures and
associates
|
11
|
0.2
|
-
|
Gain on bargain
purchase
|
9
|
805.5
|
-
|
Profit/(loss) before
tax
|
|
750.6
|
(205.8)
|
|
|
|
|
Taxation
|
7
|
(0.2)
|
(6.0)
|
Profit/(loss) for the
year
|
|
750.4
|
(211.8)
|
|
|
|
|
Earnings/(loss) per
share
|
|
|
|
Basic earnings/(loss) per
share
|
2
|
45.5p
|
(24.9)p
|
Diluted earnings/(loss) per
share
|
2
|
45.3p
|
(24.9)p
|
1. Included in costs is £2.0
million provision (2022: £1.6 million reversal) of expected credit
loss in relation to rent receivables.
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
Profit/(loss) for the year
|
|
750.4
|
(211.8)
|
Other comprehensive income
|
|
|
|
Items that will not be reclassified to profit or
loss
|
|
|
|
Revaluation gain on owner-occupied
property
|
10
|
1.8
|
-
|
Total comprehensive income/(expense) for the
year
|
|
752.2
|
(211.8)
|
|
|
|
|
CONSOLIDATED Balance sheet
As at 31 December 2023
|
Note
|
2023
£m
|
2022
£m
|
Non-current assets
|
|
|
|
Investment property
|
10
|
4,740.2
|
1,715.1
|
Property, plant and
equipment
|
|
24.0
|
0.6
|
Investments in joint ventures and
associates
|
11
|
83.4
|
0.2
|
Financial assets at fair value
through profit or loss
|
15
|
-
|
356.9
|
Derivative financial
instruments
|
|
1.4
|
12.1
|
Trade and other
receivables
|
12
|
116.1
|
115.6
|
|
|
4,965.1
|
2,200.5
|
Current assets
|
|
|
|
Trade and other
receivables
|
12
|
42.7
|
20.8
|
Derivative financial
instruments
|
|
8.3
|
-
|
Cash and cash
equivalents
|
13
|
200.2
|
129.9
|
|
|
251.2
|
150.7
|
|
|
|
|
Total assets
|
|
5,216.3
|
2,351.2
|
|
|
|
|
Non-current liabilities
|
|
|
|
Borrowings
|
14
|
(1,534.8)
|
(738.3)
|
Lease liabilities
|
|
(2.7)
|
(5.4)
|
Derivative financial
instruments
|
15
|
(7.2)
|
(3.3)
|
|
|
(1,544.7)
|
(747.0)
|
Current liabilities
|
|
|
|
Borrowings
|
14
|
(94.9)
|
-
|
Lease liabilities
|
|
(0.3)
|
(0.7)
|
Tax liabilities
|
|
(0.2)
|
-
|
Trade and other
payables
|
|
(96.0)
|
(41.9)
|
|
|
(191.4)
|
(42.6)
|
|
|
|
|
Total liabilities
|
|
(1,736.1)
|
(789.6)
|
|
|
|
|
Net assets
|
|
3,480.2
|
1,561.6
|
|
|
|
|
Equity
|
|
|
|
Share capital
|
16
|
488.2
|
212.8
|
Other components of
equity
|
|
2,992.0
|
1,348.8
|
Total equity
|
|
3,480.2
|
1,561.6
|
CONSOLIDATED STATEMENT OF changes
in equity
For the year ended 31 December
2022
|
Note
|
Share
capital
£m
|
Share
premium
£m
|
Own
shares
£m
|
Capital redemption
reserve
£m
|
Merger
Reserve1
£m
|
Share-based payment reserve
£m
|
Other
reserves
£m
|
Retained
earnings
£m
|
Total
equity
£m
|
At 1 January 2022
|
|
212.8
|
232.5
|
-
|
1.5
|
293.7
|
7.7
|
(0.3)
|
1,038.9
|
1,786.8
|
Loss and total comprehensive
expense for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(211.8)
|
(211.8)
|
Ordinary shares issued
|
|
0.4
|
-
|
-
|
(0.4)
|
-
|
-
|
-
|
1.7
|
1.7
|
Share buyback
|
|
(0.4)
|
-
|
-
|
0.4
|
-
|
-
|
-
|
(1.7)
|
(1.7)
|
Dividends
|
8
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(15.3)
|
(15.3)
|
Realisation of share-based payment
reserve on issue of shares
|
|
-
|
-
|
-
|
-
|
-
|
(0.2)
|
-
|
(0.1)
|
(0.3)
|
Fair value of share-based
payment
|
|
-
|
-
|
-
|
-
|
-
|
2.3
|
-
|
-
|
2.3
|
Realisation of cash flow
hedge
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
-
|
(0.1)
|
Balance at 31 December
2022
|
|
212.8
|
232.5
|
-
|
1.5
|
293.7
|
9.8
|
(0.4)
|
811.7
|
1,561.6
|
1. Represents non-qualifying
consideration received by the Group following the share placing in
May 2014, and previous share placements. The amounts taken to
the merger reserve do not currently meet the criteria for
qualifying consideration and therefore will not form part of
distributable reserves.
For the year ended 31 December
2023
|
Note
|
Share
capital
£m
|
Share
premium
£m
|
Own
shares1
£m
|
Capital redemption
reserve
£m
|
Merger
Reserve2
£m
|
Share-based payment reserve
£m
|
Other
reserves
£m
|
Retained
earnings
£m
|
Total
equity
£m
|
At 1 January 2023
|
|
212.8
|
232.5
|
-
|
1.5
|
293.7
|
9.8
|
(0.4)
|
811.7
|
1,561.6
|
Profit for the year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
750.4
|
750.4
|
Other comprehensive income for the
year
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1.8
|
1.8
|
Total comprehensive income for the
year
|
|
|
|
|
|
|
|
|
752.2
|
752.2
|
Completion of all-share
merger3
|
9
|
273.9
|
-
|
(32.1)
|
-
|
962.3
|
-
|
-
|
-
|
1,204.1
|
Dividends4
|
8
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(41.9)
|
(41.9)
|
Issue of shares and realisation of
share-based payment reserve on issue of employee share
options5
|
|
1.5
|
-
|
(0.8)
|
-
|
-
|
(9.8)
|
-
|
11.9
|
2.8
|
Fair value of share-based
payment
|
|
-
|
-
|
-
|
-
|
-
|
1.3
|
-
|
-
|
1.3
|
Realisation of cash flow
hedge
|
|
-
|
-
|
-
|
-
|
-
|
-
|
0.1
|
-
|
0.1
|
Balance at 31 December
2023
|
|
488.2
|
232.5
|
(32.9)
|
1.5
|
1,256.0
|
1.3
|
(0.3)
|
1,533.9
|
3,480.2
|
1. Represents the nominal value of
128,350,793 shares issued to a controlled entity in respect of
secured shares previously held as collateral for the exchangeable
bonds and 3,146,886 shares held by the Group's Employee Benefit
Trust in respect of employee share awards.
2. Represents non-qualifying
consideration received by the Group following the share placing in
May 2014 and previous share placements. Current year amount
represents non-qualifying consideration received following the
all-share merger with Shaftesbury completed on 6 March 2023. The
amounts taken to the merger reserve do not currently meet the
criteria for qualifying consideration and therefore will not form
part of distributable reserves as they form part of linked
transactions.
3. Represents share capital issued
and non-qualifying consideration received following the all-share
merger with Shaftesbury completed on 6 March 2023.
4. Excludes £1.9 million dividend
paid to a controlled entity, Capco Investment London (No.7)
Scottish Limited Partnership, in respect of 128,350,793 shares held
as collateral for the exchangeable bonds. The entity has provided
an undertaking not to exercise its voting rights in respect of such
ordinary shares but will receive the declared dividend, all of
which was retained by the Group following the dividend threshold
test as set out in the exchangeable bond conditions.
5. Represents the issue of
6,170,629 new shares and subsequent realisation of the outstanding
share-based payment reserve on the close out of the Capco share
scheme prior to completion of the all-share merger. Following the
vesting, 3,146,886 shares were purchased by the Group's Employee
Benefit Trust.
CONSOLIDATED STATEMENT OF cash
flowS
For the year ended 31 December
2023
|
Note
|
2023
£m
|
2022
£m
|
|
|
|
|
Cash flows from operating
activities
|
|
|
|
Cash generated from
operations
|
19
|
29.8
|
33.5
|
Finance costs paid
|
|
(59.5)
|
(29.7)
|
Interest received
|
|
16.1
|
2.7
|
Tax received
|
|
-
|
0.5
|
Net cash (outflow)/inflow from
operating activities
|
|
(13.6)
|
7.0
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
Purchase and development of
property
|
|
(51.2)
|
(11.1)
|
Purchase of fixed
assets
|
|
(3.4)
|
-
|
Sale of property
|
|
88.1
|
-
|
Cash acquired in a business
combination
|
9
|
118.1
|
-
|
Dividends received from
associates
|
|
1.5
|
-
|
Loans to joint ventures and
associates repaid
|
|
2.7
|
18.2
|
Net cash inflow from investing
activities
|
|
155.8
|
7.1
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
Issue of shares
|
|
-
|
1.7
|
Share buyback
|
|
-
|
(1.7)
|
Borrowings repaid
|
|
(1,151.0)
|
(200.0)
|
Borrowings drawn
|
|
1,126.0
|
-
|
Acquisition of derivative
financial instruments
|
|
(5.0)
|
-
|
Cash dividends paid
|
8
|
(41.9)
|
(15.3)
|
Net cash outflow from financing
activities
|
|
(71.9)
|
(215.3)
|
|
|
|
|
Net movement in cash and cash
equivalents
|
|
70.3
|
(201.2)
|
Cash and cash equivalents at 1
January
|
|
129.9
|
331.1
|
Cash and cash equivalents at 31 December
|
13
|
200.2
|
129.9
|
Notes to the accounts
1 PRINCIPAL ACCOUNTING
POLICIES
General Information
Shaftesbury Capital PLC (formerly
Capital & Counties Properties PLC) (the "Company"), was
incorporated and registered in England and Wales and domiciled in
the United Kingdom on 3 February 2010 under the Companies Act 2006
as a public company limited by shares, registration number 7145051.
The registered office of the Company is Regal House, 14 James
Street, London, WC2E 8BU, United Kingdom. The principal activity of
the Company is to act as the ultimate parent company of Shaftesbury
Capital PLC Group (the "Group"), whose principal activity is the
investment and management of property.
Following the all-share merger
("the merger") on 6 March 2023 of Capital & Counties Properties
PLC ("Capco") with Shaftesbury to form Shaftesbury Capital, the
Group's assets principally comprise investment property within the
West End of London, including Covent Garden, Chinatown, Carnaby,
Soho and Fitzrovia.
Basis of preparation
The financial information set out
in this announcement has been extracted from the Company's
consolidated financial statements for the year ended 31 December
2023, and does not constitute statutory accounts within the meaning
of section 434 of the Companies Act 2006.
The consolidated financial
statements and this announcement were approved by the Board of
Directors on 28 February 2024. The auditors have reported on the
consolidated financial statements for the year ended 31 December
2023 under section 495 of the Companies Act 2006. The auditors'
report is unqualified and does not contain a statement under
section 498(2) or (3) of the Companies Act 2006. The Company's
statutory financial statements for the year ended 31 December 2022
have been filed with the Registrar of Companies and those for the
year ended 31 December 2023 will be filed following the Company's
Annual General Meeting.
The Group's consolidated financial
statements are prepared in accordance with United Kingdom-adopted
international financial accounting standards ('UK-adopted IFRS' or
'IFRS'), and the applicable legal requirements of the Companies Act
2006. While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of international accounting standards
("IAS") in conformity with the requirements of the Companies Act
2006 and UK-adopted IFRS and complies with the disclosure
requirements of the Listing Rules of the UK Financial Conduct
Authority, this announcement does not itself contain sufficient
information to comply with IASs and IFRSs. The Group expects to
publish full financial statements that comply with IFRS in March
2024.
The consolidated financial
statements have been prepared on a going concern basis under the
historical cost convention as modified for the revaluation of
property, derivative financial instruments and equity investments
held at fair value through profit or loss.
Going concern
The Directors have considered the
appropriateness of adopting the going concern basis in preparing
the financial statements. The Group's going concern assessment
covers the period to 30 June 2025 (the "going concern period"),
being at least 12 months from the date of authorisation of these
consolidated financial statements.
Footfall across the West End is
strong, particularly in our portfolio. There are high occupancy
levels across the portfolio and trading activity is positive with
customer sales up 10 per cent year on year.
The West End continues to attract
target brands and concepts. There is strong leasing demand across
all uses delivering rental growth. There continues to be
macroeconomic and political uncertainty, including as to the
prospects for interest rates and inflation as well as geopolitical
risks. The West End and the Group's unique portfolio of prime
investments are not completely insulated, however they have
demonstrated remarkable resilience.
The Group maintains a strong
balance sheet with a focus on resilience, flexibility and
efficiency. There is significant headroom against debt covenants
and access to significant liquidity, £486 million as at 31 December
2023. In preparing the assessment of going concern, the Directors
have considered projections of the Group's liquidity, committed
capital expenditure, income, costs, cash flows and debt
covenants.
The Directors have assessed a base
case and a "severe but plausible" downside scenario.
As at the year end, the Group had
net debt of £1.5 billion, an EPRA LTV ratio of 31 per cent and
Group interest cover of 2.1 times. The Group is projected to have
sufficient cash reserves and undrawn facilities to meet debt
maturities during the going concern period. Drawn debt is at fixed
rates or currently has interest rate protection in place. Interest
rate hedging is in place which caps SONIA exposure at an average of
2.3 per cent on £350 million of notional value to December 2024 and
3.0 per cent on £250 million for 12 months to December
2025.
The Group's debt matures between
August 2024 and 2037. Debt maturities during the going concern
assessment period relate to the £95 million of private placement
loan notes maturing in the second half of 2024, which are expected
to be funded through cash reserves and undrawn
facilities.
The Group's financial resources
are expected to be sufficient to cover its commitments over the
going concern period.
Relative to the Group's base case
forecast, the severe but plausible downside scenario includes the
following key assumptions:
· Substantial reduction in forecast rental income due to a
combination of extended voids and tenant failures;
· Elevated SONIA rates in excess of current market
expectations; and
· Declines in rental values, along with a widening of valuation
yields, resulting in reduced asset values.
The near-term impact of climate
change risks within the going concern period have been considered
in the severe but plausible downside scenario and are expected to
be immaterial.
Under the severe but plausible
downside scenario, the Group is expected to remain in compliance
with the loan-to-value and interest cover covenants of its
individual financing arrangements.
In addition to considering a
severe but plausible downside scenario, the Board has also
undertaken reverse stress testing, which indicates that the Group
could withstand a decrease of 38 per cent in income and valuations,
before breaching its debt financial covenants.
Based on their analysis, the
Directors are satisfied that there is a reasonable expectation that
the Group will be able to meet its ongoing and future commitments
for at least 12 months from the date of approval of the financial
statements and have therefore resolved that the Group's financial
statements be prepared on a going concern basis.
Critical accounting judgements and key sources of estimation
and uncertainty
The preparation of consolidated
financial statements in accordance with IFRS requires the Directors
to make judgements, estimates and assumptions that affect the
reported amounts of assets, liabilities, equity, income and
expenses from sources not readily apparent. Although these
estimates and assumptions are based on management's best knowledge
of the amount, historical experiences and other factors, actual
results ultimately may differ from those estimates. The estimates
and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that
period.
The most significant area of
estimation uncertainty is in respect of the valuation of the
property portfolio, including the merger date valuation of the
investment properties acquired in the business combination, where
external valuations are obtained.
The fair value of the Group's
investment and trading property (trading property included within
the Lillie Square joint venture) at 31 December 2023 was determined
by independent, appropriately qualified external valuers CBRE and
Cushman & Wakefield for the wholly-owned property portfolio,
JLL for the Lillie Square joint venture and Knight Frank for the
Longmartin associate. The valuations conform to the Royal
Institution of Chartered Surveyors ("RICS") Valuation Professional
Standards.
As various inputs used in the
valuation calculations are based on assumptions, property
valuations are inherently subjective and subject to a degree of
estimation uncertainty. The Group's external valuers have made a
number of assumptions including, but not limited to, market yields,
ERVs and void periods. These assumptions are in accordance with the
RICS Valuation Professional Standards, however, if any prove to be
incorrect, it may mean that the value of the Group's properties
differs from their valuation reported in the financial statements,
which could have a material effect on the Group's financial
position. The key unobservable inputs used in the valuation models
are those in respect of equivalent yields and ERV, which are
summarised on page 66. Further information on the approach taken by
the valuers in valuing the property portfolio and a sensitivity
analysis on equivalent yields and ERV, which are the most
significant assumptions impacting the fair values, is set out in
note 10 'Property portfolio'.
Other areas of estimation in the
financial statements (which are not considered critical) include
REIT compliance, the impairment of and expected credit loss
allowance on trade receivables, share-based payments and the fair
value estimation of the remaining assets acquired, and liabilities
assumed in the business combination and the likelihood of
contingent liabilities resulting in future liabilities for the
Group.
The significant judgement in the
preparation of these financial statements included determining the
accounting acquirer in the business combination. As set out in IFRS
3 'Business Combinations', one of the combining entities is
required to be identified as the acquirer and one as the acquiree.
In a business combination effected primarily by exchanging equity
interests, the acquirer is usually the entity that issues its
equity interests. The pertinent facts and circumstances of the
merger have been reviewed and considered by management and it is
the Directors' view that although on completion, Shaftesbury
shareholders (excluding the existing Capco shareholding in
Shaftesbury) owned approximately 53 per cent of the combined Group,
having regard to a number of factors, Capco was the acquirer for
IFRS 3 accounting purposes. The transaction, whilst implemented
through an offer, was effectively structured as a merger with the
economic terms having regard to relative NTAs and market
capitalisations.
Upon merger Capco was the entity
issuing its equity interests and already held a 25.2 per cent
shareholding in Shaftesbury held since 2020. The balance of the
Board, Executive Directors and Executive Committee in the combined
Group was also assessed. Following completion of the merger in
March 2023 the Board comprised six Shaftesbury and four Capco
directors. The three Executive Directors comprised two Capco
directors, the Chief Executive and Chief Financial Officer, and one
Shaftesbury director, the Chief Operating Officer. Following
completion of the merger, an Executive Committee, comprising three
Capco and two Shaftesbury leadership team members, was established
and was responsible for the day-to-day management and operation of
the Group. In December 2023 the Chief Operating Officer stepped
down from the Board and left the Company, as did three
Non-executive Directors in January 2024. Following these
departures, the Board now includes two Executive Directors being
the Chief Executive and Chief Financial Officer, both former Capco
directors. The Executive Committee now comprises three Capco and
one Shaftesbury leadership team members, and continues to be
responsible for the day-to-day management and operation of the
Group.
New accounting policies
In the current year, the Group has
applied the below amendments to IFRS Standards and Interpretations
issued by the International Accounting Standards Board that are
effective for annual periods that begin on or after 1 January 2023.
Their adoption has not had any material impact on the disclosures
or on the amounts reported in these consolidated financial
statements.
· IAS
1 'Presentation of Financial Statements' and IFRS Practice
Statement 2 (amendment) (Disclosure of Accounting
Policies)
· IAS
8 'Accounting Policies, Changes in Accounting Estimates, and
Errors' (amendment) (Definition of Accounting
Estimates)
· IAS
12 'Income Taxes' (amendment) (Deferred Tax related to Assets and
Liabilities arising from a Single Transaction)
· IFRS
10 'Consolidated Financial Statements' and IAS 28 'Investments in
Associates and Joint Ventures' (amendment) (Sale or contribution of
assets between an investor and its associate or joint
venture)
· IFRS
17 'Insurance contracts'
· International Tax Reform - Pillar Two Model Rules (Amendments
to IAS 12)
At the date of approval of the
consolidated financial statements the following standards and
interpretations which have not been applied in these consolidated
financial statements were in issue but not effective, and in some
cases have not been adopted for use under UK-adopted international
accounting standards:
· IAS
1 'Presentation of Financial Statements' (amendment)
(Classification of Liabilities as Current or
Non-Current)
· IAS
1 'Presentation of Financial Statements' (amendment) (Non-current
Liabilities with Covenants)
· IAS
7 and IFRS 7 'Statement of Cash Flows and Financial Instrument
Disclosure' (amendment) (Supplier Finance Arrangements)
· IFRS
16 'Leases' (amendment) (Lease liability in a sale and
leaseback)
The Group has assessed the impact
of these new standards and interpretations and does not anticipate
any material impact on the consolidated financial
statements.
Changes in accounting policies
Following the merger an alignment
of accounting policies has been conducted leading to the following
amendments:
Tenant lease incentives and
deferred letting fees - change in lease term
Under IFRS 16 "Leases" the lease
term is defined as the non-cancellable period of a lease, together
with both periods covered by an option to extend or terminate the
lease if the lessee is reasonably certain to exercise that
option.
Previously, in the Capco (now
Shaftesbury Capital) financial statements, the Group amortised
tenant lease incentives and deferred letting fees on a
straight-line basis over the lease term to lease expiry as the
assumption was that lessees were reasonably certain not to exercise
their option at break date. This has been amended such that all
lease incentives are amortised over the non-cancellable period of
the lease.
The comparative financial
information has not been restated to reflect this change in
accounting policy as the adjustment is not material and would have
no impact on net assets nor profit for the period and has instead
been adjusted prospectively. As a result, the straight-lining of
lease incentives has been reduced by £4.1 million and deferred
letting fees have been reduced by £1.0 million in the consolidated
income statement, with a reduction of £5.1 million within other
receivables in the balance sheet. As tenant lease incentives and
deferred letting fees are deducted from the market value of
investment property to reach the carrying value, the adjustment is
also reflected through investment property on the balance sheet and
revaluation of investment property in the consolidated income
statement.
Adjustment to investment
property for deferred letting fees
Previously in the Capco (now
Shaftesbury Capital) financial statements the Group accounted for
deferred letting fees in the consolidated balance sheet and
amortised to property costs on a straight-line basis over the lease
term without a corresponding deduction from the market value of
investment property due to this not being material. Deferred
letting fees are considered initial direct costs and are deducted
from the market value of investment property to calculate the
carrying value. A £4.1 million adjustment has been made, reflecting
the balance as at 1 January 2023, as a deduction from investment
property and there is a corresponding revaluation loss. The
adjustment is not material and therefore has not been applied
retrospectively.
The following new accounting
policies have been applied within the 2023 consolidated financial
statements.
Business
combinations
The acquisition of subsidiaries is
accounted for using the acquisition method (at the point the Group
gains control over a business as defined by IFRS 3 "Business
Combinations").
The cost of an acquisition is
measured as the aggregate of the consideration transferred, which
includes the cash paid and the aggregate of the fair values, at the
date of exchange, of other assets transferred, liabilities incurred
or assumed, and equity instruments issued by the Group in exchange
for control of the acquiree, and the amount of any non-controlling
interests in the acquiree.
Acquisition-related costs are
expensed as incurred. The acquiree's identifiable assets,
liabilities and contingent liabilities that meet the conditions for
recognition under IFRS 3 Business Combinations are recognised at
their fair value at the acquisition date.
Goodwill represents the excess of
the cost of acquisition of a business combination over the fair
value of the identifiable net assets of the business acquired at
the date of acquisition. In the case that the fair value of the
identifiable net assets acquired is greater than the total
consideration paid, negative goodwill arises on the acquisition.
The negative goodwill is recognised as a gain on bargain purchase
in the consolidated income statement.
Owner-occupied
property
Owner-occupied property comprises
property held for use in the production or supply of goods or
services or for administrative purposes. Investment property is
transferred to owner-occupied on commencement of entering into a
lease for material elements of the property. The property is
transferred and subsequently carried at market value, which is
determined in the same manner as investment property. Revaluation
gains are recognised in equity. A revaluation loss will reverse any
previous revaluation gain recorded in equity with the residual
recognised in profit or loss.
Segmental reporting
IFRS 8 requires operating segments
to be reported in a manner consistent with the internal financial
reporting reviewed by the chief operating decision maker. The chief
operating decision maker of the Group is the Executive Committee.
The Executive Committee is responsible for regularly reviewing the
Group's internal reporting in order to assess performance and
for allocation of resources, and consists
of the Chief Executive, Chief Financial Officer and the two
Executive Directors.
Previously, the Group determined
the operating segments to be organised into the following
divisions:
· Covent Garden;
· Other, which comprised the Shaftesbury Investment, the Group
interest in Innova and other head office companies and investments;
and
· Lillie Square, which represents the Group's interests in the
Lillie Square joint venture and a number of smaller properties in
the adjacent area.
Following the merger, the
information reviewed by the Executive Committee is prepared on a
basis consistent with these financial statements. That is, the
information is provided and monitored at a Group level and includes
the IFRS reported results, EPRA and underlying measures (previously
the information provided was on a Group share basis). The
management information previously presented for the Lillie
Square and Other segments is no longer
separately reported to the Executive Committee, as it makes up a
small proportion of the combined Group post-merger, or in the case
of the Shaftesbury Investment which is no longer in place. These
former segments no longer meet the requirements under IFRS 8 to be
separately reported.
In assessing the identification of
operating segments, the Group considers the activities of the chief
operating decision maker including decision making authorities for
allocation of resources and the information they regularly receive.
This consideration also factors that performance measures are set
and only monitored at a single Group level. The Annual Report
includes additional operational information on the property
portfolio grouped by village and use. This information is used
within certain levels of the business and is also considered useful
for readers of the Annual Report, but is not used by the chief
operating decision maker for monitoring performance or the
allocation of resources.
2 PERFORMANCE
MEASURES
The Group has applied the
European Securities and Markets Authority guidelines on alternative
performance measures ("APMs") in these annual results. An APM is a
financial measure of historical or future financial performance,
position or cash flow of the Group which is not a measure defined
or specified in IFRS. Details of all APMs used by the Group are set
out in the APM section on page 58.
As is usual practice in the
sector, the Group presents APMs for certain indicators, including
earnings, earnings per share and net tangible assets, making
adjustments as set out by EPRA in its Best Practice
Recommendations. These recommendations are designed to make the
financial statements of public real estate companies more
comparable across Europe, enhancing the transparency, comparability
and coherence of the sector.
One of the key performance
measures which the Group uses is underlying earnings. The
underlying earnings measure reflects the underlying financial
performance of the Group's core West End property rental business
and is used for the calculation of dividends. The measure aligns
with the main principles of EPRA earnings which excludes valuation
movements on the wholly-owned, joint venture and associate
properties, fair value changes of financial instruments and listed
investments, cost of early close out of debt, gain on bargain
purchase and IFRS 3 merger-related transaction costs.
In calculating underlying
earnings, additional adjustments are made to exclude items
considered to be non-recurring or significant by virtue of size and
nature. Consistent in the calculation for both years is the removal
of the financial performance of the Lillie Square joint venture,
associated tax adjustments and the interest receivable on the loan
issued to the joint venture by the Group. Lillie Square is not a
core part of the operations of the Group and therefore its results
are not included in underlying earnings. The fair value movement of
the option component of the exchangeable bond is also adjusted from
underlying earnings as such fair value movements do not reflect the
true nature of the performance of the Group.
Following the completion of the
all-share merger on 6 March 2023, the following new adjustments
have been made to underlying earnings:
·
A fair value exercise was performed on the
Shaftesbury balance sheet, with the debt (including an adjustment
to the investment in Longmartin arising from the fair value
adjustment of the underlying debt in the associate) adjusted to be
held at a fair value of £945.6 million compared to the nominal
value of £1,019.8 million. The fair value adjustments will be
amortised to other finance costs over the remaining term of the
debt facilities. In the current year, EPRA earnings has been
adjusted by £24.6 million, to reflect the accelerated unwind of the
fair value adjustment following the early redemption of the
Chinatown and Carnaby Bonds in April 2023. The current year
amortisation of the fair value adjustment for the other debt
facilities of £5.2 million has been adjusted from underlying
earnings within other finance costs.
·
£8.7 million of merger-related integration and
other non-underlying administrative expenses have been incurred.
These costs are non-recurring as they relate to significant
transactions outside the core operations of the Group.
·
A £5.1 million reduction to gross profit has been
reported as a result of the alignment of accounting policies
following the merger. Details are set out in note 1 'Principal
accounting policies' under 'Changes in Accounting Policies'. The
alignment was considered immaterial and therefore no retrospective adjustment has been made and the
cumulative impact as at 1 January 2023 was adjusted against gross
profit in the current year. This impact has been adjusted from
underlying earnings to reflect the true performance of the business
for the current year.
A summary of the number of
shares, on a basic and diluted basis, in issue at the year end, and
on a weighted average basis for the year, is set out in the table
below:
Number of shares
|
2023
|
2023
|
2022
|
2022
|
|
Weighted average
million
|
In issue
million1
|
Weighted average
million
|
In issue
million
|
Ordinary shares
|
1,757.0
|
1,953.2
|
851.3
|
851.5
|
Own shares - employee benefit
trust
|
(2.6)
|
(3.1)
|
-
|
-
|
Own shares - collateral for
exchangeable bond
|
(105.5)
|
(128.4)
|
-
|
-
|
Number of
shares - basic2
|
1,648.9
|
1,821.7
|
851.3
|
851.5
|
Dilutive effect of contingently
issuable share option awards
|
6.5
|
6.5
|
0.8
|
0.8
|
Dilutive effect of contingently
issuable deferred share awards
|
0.6
|
0.6
|
-
|
-
|
Number of
shares - diluted3
|
1,656.0
|
1,828.8
|
852.1
|
852.3
|
1. The
settlement of share options under the employee benefit scheme prior
to the merger, and the all-share merger completing on 6 March 2023,
resulted in, 1,101.7 million shares issued in the year.
2. Weighted average number of
ordinary shares used as the denominator in calculating basic
earnings per share.
3. Weighted average number of
ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings and net assets per
share.
Earnings per share - IFRS
|
|
2023
£m
|
2022
£m
|
Basic
earnings/(loss)
|
|
750.4
|
(211.8)
|
Basic earnings/(loss) per share
(pence)
|
|
45.5p
|
(24.9)p
|
Diluted earnings/(loss) per share
(pence)
|
|
45.3p
|
(24.9)p
|
Earnings per share - EPRA and Underlying
earnings
|
Note
|
2023
£m
|
2022
£m
|
Basic
earnings/(loss)
|
|
750.4
|
(211.8)
|
EPRA Group adjustments:
|
|
|
|
Loss on revaluation and profit on
sale of investment property
|
10
|
65.0
|
0.8
|
Change in value of investments and
other receivables
|
|
12.5
|
7.9
|
Change in fair value of financial
assets at fair value through profit or loss
|
15
|
(52.0)
|
239.5
|
Change in fair value of financial
instruments - interest rate derivatives
|
15
|
7.4
|
(11.0)
|
Gain on bargain
purchase
|
9
|
(805.5)
|
-
|
Accelerated unwind of unamortised
finance costs and interest on early close out of
debt1
|
6
|
26.8
|
6.0
|
Merger-related transaction
costs
|
4
|
35.8
|
14.6
|
Deferred tax
adjustments
|
|
(0.1)
|
(0.1)
|
EPRA joint venture and associate
adjustments:
|
|
|
|
Profit on sale and transfer of
trading property
|
|
(5.1)
|
-
|
Loss on revaluation of investment
property
|
|
3.3
|
(0.9)
|
Write down of trading
property
|
|
6.6
|
12.3
|
Deferred tax adjustment
|
|
(0.1)
|
-
|
EPRA earnings
|
|
45.0
|
57.3
|
EPRA earnings per share
(pence)
|
|
2.7
|
6.7
|
Underlying earnings adjustments:
|
|
|
|
Impact of change in accounting
policy on gross profit
|
|
5.1
|
-
|
Other finance
costs2
|
|
5.2
|
0.5
|
Merger-related integration and
other non-underlying administration costs
|
4
|
8.7
|
-
|
Change in fair value financial
instruments - exchangeable bond option
|
15
|
3.9
|
(28.8)
|
Taxation
|
|
-
|
4.7
|
Joint venture adjustment - Lillie
Square3
|
|
(7.5)
|
(14.9)
|
Other
|
|
-
|
(0.2)
|
Underlying earnings
|
|
60.4
|
18.6
|
Underlying earnings per share (pence)
|
|
3.7
|
2.2
|
1. On
early redemption of the Carnaby and Chinatown bonds in April 2023
the unamortised fair value adjustment of £24.6 million that arose
on completion of the merger was accelerated. In addition, the
unamortised costs on the loan facility of £2.2 million was
accelerated on early repayment during the year. The prior year
adjustment relates to the non-recurring costs in connection with
the early repayment of £75 million of private placement notes and
the repayment of the £125 million secured loan.
2. Includes the unwind of the fair value adjustments on the
remaining debt facilities acquired on merger (including the fair
value unwind of our share of the Longmartin debt of £0.7 million).
£4.5 million is recorded through other finance costs and £0.7
million within the profit from Longmartin. The prior year
adjustment related to the cost of entering the loan facility during
the prior year.
3. The
Lillie Square joint venture is not considered part of the core
underlying business of the Group and therefore its results are
excluded from underlying earnings. The adjustment includes £3.7
million (2022: £3.5 million) interest receivable by the Group on
the interest-bearing loans issued to the joint venture and £3.8
million (2022: £11.4 million) of adjustments made to EPRA for
profit on sale and transfer of trading property, loss on
revaluation of investment property and write down of trading
property.
Net assets per share
|
2023
|
2022
|
|
EPRA NRV
£m
|
EPRA NTA
£m
|
EPRA NDV
£m
|
EPRA NRV
£m
|
EPRA NTA
£m
|
EPRA NDV
£m
|
IFRS total
equity1
|
3,480.2
|
3,480.2
|
3,480.2
|
1,561.6
|
1,561.6
|
1,561.6
|
Unrecognised surplus on trading
property - joint venture
|
1.7
|
1.7
|
1.7
|
7.1
|
7.1
|
7.1
|
Fair value of financial
instruments - interest rate derivatives2
|
(9.7)
|
(9.7)
|
-
|
(12.1)
|
(12.1)
|
-
|
Fair value adjustment of
exchangeable bond3
|
2.0
|
2.0
|
-
|
(4.8)
|
(4.8)
|
-
|
Real Estate Transfer
Tax
|
332.2
|
-
|
-
|
116.0
|
-
|
-
|
Excess fair value of debt over
carrying value4
|
-
|
-
|
29.8
|
-
|
-
|
121.4
|
Deferred tax
adjustments
|
5.2
|
5.2
|
-
|
0.4
|
0.4
|
-
|
NAV
|
3,811.6
|
3,479.4
|
3,511.7
|
1,668.2
|
1,552.2
|
1,690.1
|
NAV per share (pence)
|
208.4
|
190.3
|
192.0
|
195.7p
|
182.1p
|
198.3p
|
1.
IFRS total equity of 190.3 pence per share (2022:
183.2 pence per share).
2.
This relates to the fair value of interest rate
derivatives.
3.
Adjustment to remove the exchangeable bond option
fair value and include the exchangeable bond liability at nominal
value of £275 million.
4.
Excludes fair value of exchangeable bond option
component included under derivative liabilities as disclosed in
note 15 'Classification of financial assets and
liabilities'.
Headline earnings per
share
Headline earnings per share is
calculated in accordance with Circular 1/2023 issued by the South
African Institute of Chartered Accountants, a requirement of the
Group's Johannesburg Stock Exchange secondary listing. This measure
is not a requirement of IFRS.
|
|
2023
£m
|
2022
£m
|
Basic
earnings/(loss)
|
|
750.4
|
(211.8)
|
Group adjustments:
|
|
|
|
Gain on bargain
purchase
|
|
(805.5)
|
-
|
Loss on revaluation and profit on
sale of investment property
|
|
65.0
|
0.8
|
Headline
earnings/(loss)
|
|
9.9
|
(211.0)
|
Basic headline earnings/(loss) per share
(pence)
|
|
0.6p
|
(24.8)p
|
Diluted headline earnings/(loss) per share
(pence)
|
|
0.5p
|
(24.8)p
|
3 GROSS PROFIT
All revenue has been generated
from operations within the United Kingdom.
|
2023
£m
|
2022
£m
|
Rental receivable
|
171.9
|
61.5
|
Straight-lining of tenant lease
incentives1
|
3.9
|
6.3
|
Service charge income
|
19.3
|
6.3
|
Revenue
|
195.1
|
74.1
|
|
|
|
(Provision for)/reversal of
expected credit loss
|
(2.0)
|
1.6
|
Property
expenses1
|
(31.1)
|
(10.2)
|
Service charge expenses
|
(19.3)
|
(6.3)
|
Impairment of tenant lease
incentives
|
(0.8)
|
(1.9)
|
Costs
|
(53.2)
|
(16.8)
|
|
|
|
Gross profit
|
141.9
|
57.3
|
1. Included in the current period
charge is £5.1 million relating to the alignment of accounting
policies on completion of the merger. £4.1 million of the
adjustment is recognised through the straight lining of tenant
lease incentives and £1.0 million in property expenses. Details of
the change in accounting policy is set out in note 1 'Changes in
accounting policies'.
4 ADMINISTRATION EXPENSES
|
2023
£m
|
2022
£m
|
Depreciation
|
0.4
|
0.2
|
Employee costs
|
25.1
|
17.7
|
Head office administration
expenses
|
13.8
|
8.1
|
Merger-related transaction
costs1
|
35.8
|
14.6
|
Merger-related integration
costs1
|
7.9
|
-
|
Non-underlying administration
expenses
|
0.8
|
-
|
Administration expenses
|
83.8
|
40.6
|
1. Costs relate to transaction
fees and expenses in respect of the merger and subsequent costs of
integrating the combined business. Details of transaction costs are
set out in note 9 'Gain on bargain purchase'.
5 FINANCE INCOME
|
2023
£m
|
2022
£m
|
Finance income:
|
|
|
On deposits and current
accounts
|
6.3
|
1.4
|
On interest rate
derivatives
|
9.3
|
1.2
|
Finance income
|
15.6
|
2.6
|
|
|
|
Other finance income:
|
|
|
On loans to joint ventures and
associates
|
4.1
|
3.5
|
Other finance income
|
4.1
|
3.5
|
6 FINANCE COSTS
|
2023
£m
|
2022
£m
|
On bank facilities and loan
notes
|
40.3
|
18.2
|
On exchangeable
bonds1
|
8.4
|
8.3
|
On mortgage
bonds2
|
1.8
|
-
|
On secured loans
|
16.5
|
-
|
On obligations under lease
liabilities
|
0.5
|
0.7
|
Finance costs
|
67.5
|
27.2
|
|
|
|
Other finance costs:
|
|
|
Non-underlying finance
charges3
|
31.3
|
6.5
|
Other finance costs
|
31.3
|
6.5
|
1. On 30 November 2020 the Group
issued £275 million of secured exchangeable bonds maturing in March
2026. The notes were originally exchangeable into cash or ordinary
shares of Shaftesbury, but following the all-share merger are
convertible into Shaftesbury Capital shares. The net proceeds
received from the issue of the exchangeable bonds have been split
between the financial liability element and an option component.
The debt component is accounted for at amortised cost and, after
taking into account transaction costs, accrues interest at an
effective interest rate of 3.1 per cent, of which 2 per cent (£5.5
million) represents the cash coupon on the bond.
2. Interest incurred on the £575
million Chinatown and Carnaby bonds from 6 March 2023 up to their
redemption in April 2023.
3. Non-underlying finance charges
have been excluded from the calculation of underlying earnings as
these are non-recurring costs and do not represent the underlying
performance of the business. The current year charge relates to the
unwind of the fair value adjustment of the debt on completion of
the merger as discussed in note 9 'Gain on bargain purchase'. It is
comprised of £24.6 million for the unwind on the early redemption
of the Chinatown and Carnaby bonds and £4.5 million on the
remaining facilities. The current year amount further includes £2.2
million accelerated amortisation on the early settlement of the
loan facility during the year. In the prior year the costs were in
connection with the early repayment of £75.0 million of private
placement notes, the repayment of the £125.0 million secured loan
and the cost of entering the loan facility.
7 TAXATION
|
2023
£m
|
2022
£m
|
Current income tax:
|
|
|
Current income tax
charge
|
0.2
|
-
|
Current tax on profits
|
0.2
|
-
|
Deferred income tax:
|
|
|
On accelerated capital
allowances
|
0.1
|
0.1
|
On Group losses
|
(1.4)
|
4.7
|
On other temporary
differences
|
1.3
|
1.2
|
Deferred tax on profits
|
-
|
6.0
|
Total taxation charge in the
consolidated income statement
|
0.2
|
6.0
|
As a UK REIT, the Group is exempt
from UK corporation tax on income and gains from qualifying
activities. Non-qualifying activities are subject to UK corporation
tax.
The main corporation tax rate
increased from 19 to 25 per cent with effect from 1 April 2023. As
a result of this change in tax rate, a blended rate of 23.5 per
cent will be applicable to the Group for the year ending 31
December 2023.
8 DIVIDENDS
|
Pence
per share
|
|
2023
£m
|
2022
£m
|
|
|
PID
|
Non-PID
|
|
Date
paid
|
|
|
Ordinary shares
|
|
|
|
|
|
|
|
For the year ended 31 December
2021:
|
|
|
|
|
|
|
|
Final dividend of 1.0 pence per
share
|
0.5
|
0.5
|
|
8 July
2022
|
-
|
8.5
|
|
For the year ended 31 December
2022:
|
|
|
|
|
|
|
|
First interim dividend of 0.8
pence per share
|
0.8
|
-
|
|
19 Sept
2022 (SA) and 20 Sept 2022 (UK)
|
-
|
6.8
|
|
Second
interim dividend of 1.7 pence per share
|
0.7
|
1.0
|
|
20
March 2023
|
14.5
|
-
|
|
For the
year ended 31 December 2023:
|
|
|
|
|
|
|
|
Interim
cash dividend of 1.5 pence per share
|
-
|
1.5
|
|
18
September 2023
|
29.3
|
-
|
|
Dividend expense1
|
|
|
|
|
43.8
|
15.3
|
|
|
|
|
|
|
|
|
|
| |
1. Includes £1.9 million paid to a
controlled entity, Capco Investment London (No.7) Scottish Limited
Partnership, in respect of 128,350,793 shares held as collateral
for the exchangeable bonds. The entity has provided an undertaking
not to exercise its voting rights in respect of such ordinary
shares but will receive the declared dividend, all of which was
retained by the Group following calculation of the dividend
threshold test as set out in the exchangeable bond conditions. The
Groups dividend expense recorded in the consolidated statement of
cash flows is £41.9 million.
As a UK REIT, Shaftesbury Capital
must distribute at least 90 per cent of the Group's income profits
from its tax-exempt property rental business, and 100 per cent of
the Group's UK REIT investment profits, by way of a PID.
These distributions can be subject
to withholding tax at 20 per cent. Dividends from profits of the
Group's taxable residual business are ordinary dividends
and will be taxed as an ordinary dividend.
On 28 February 2024, the Directors
proposed a final cash dividend of 1.65 pence per ordinary share (of
which 0.65 pence per ordinary share will be paid as a PID and 1.0
pence per ordinary share as a non-PID), bringing the total dividend
for 2023 to 3.15 pence per ordinary share. The proposed 2023
final cash dividend is subject to approval at Shaftesbury Capital's
Annual General Meeting, to be held on 23 May 2024. If approved, the
final cash dividend will be paid on 31 May 2024 to all shareholders
on the register on 26 April 2024.
9 GAIN ON BARGAIN
PURCHASE
The all-share merger between Capco
and Shaftesbury completed on 6 March 2023, with the Company being
renamed to Shaftesbury Capital PLC on this date. The merger brought
together two real estate companies, with properties mainly located
in the West End, to create the leading central London mixed-use
REIT.
Prior to the all-share merger, Capco
held a 25.2 per cent shareholding in Shaftesbury which was
accounted for at fair value through profit and loss. On the
completion date, the fair value of Shaftesbury shares was 421.6
pence per share and Capco's 25.2 per cent interest, consisting of
96,971,003 Shaftesbury shares, was valued at £408.8 million. Of
this shareholding, 38,245,171 shares were held as collateral in
respect of the £275 million exchangeable bonds, issued in
2020.
Upon the merger becoming effective,
Shaftesbury Shareholders received 3.356 Shaftesbury Capital shares
for each Shaftesbury share held, totalling 1,095,549,228 shares
(including 128,350,793 shares issued to a Capco controlled entity
in respect of secured shares previously held as collateral for the
exchangeable bonds).
The table below sets out the fair
values of the identifiable net assets acquired, and consideration
transferred on the completion date. As the fair value of the
identifiable net assets acquired was greater than the total
consideration paid, due to the Shaftesbury Capital share price
trading at a 32 per cent discount to the last reported net asset
value, and as a result of the exchange ratio referred to above, a
gain on bargain purchase has been recognised in the consolidated
income statement for the year.
|
Book value
as at
6 March
2023
£m
|
Fair value adjustments1
£m
|
Fair value
as at
6
March
2023
£m
|
Assets
|
|
|
|
Investment
property2
|
3,099.0
|
42.0
|
3,141.0
|
Investment in
associate2
|
82.3
|
2.4
|
84.7
|
Property, plant and
equipment
|
0.2
|
-
|
0.2
|
Trade and other
receivables
|
72.0
|
(42.0)
|
30.0
|
Cash and cash
equivalents3
|
118.1
|
-
|
118.1
|
Total assets
|
3,371.6
|
2.4
|
3,374.0
|
Liabilities
|
|
|
|
Borrowings
|
(954.0)
|
65.0
|
(889.0)
|
Trade and other
payables
|
(66.6)
|
-
|
(66.6)
|
Total liabilities
|
(1,020.6)
|
65.0
|
(955.6)
|
Net assets acquired
|
2,351.0
|
|
|
Fair value of net assets
acquired
|
|
|
2,418.4
|
|
|
|
|
Consideration
transferred:
|
|
|
|
Issue of 1,095,549,228 ordinary
share of 25 pence per share4
|
|
|
1,363.9
|
Shares previously held by
Capco
|
|
|
(159.8)
|
Consideration: fair value of shares issued
|
|
|
1,204.1
|
Fair value of shares previously
held
|
|
|
408.8
|
Fair value of consideration and shares previously
held
|
|
|
1,612.9
|
|
|
|
|
Gain on bargain purchase
|
|
|
805.5
|
Merger-related transaction
costs5
|
|
|
(35.8)
|
Total gain on business combination recognised in the
consolidated income statement
|
|
|
769.7
|
1. Details of completion date fair
value adjustments required under IFRS 3 are set out in the
paragraphs below.
2. Investment property, including
the Group's share of investment property held within the Longmartin
investment in associate, was externally valued and reported at
market value on the merger date.
3. No cash consideration was paid
on completion of the transaction. The cash acquired on completion
of the merger, as included within the consolidated statement of
cash flows, represents the cash held by Shaftesbury on 6 March
2023.
4. The calculation of
consideration transferred is based on the Capco closing share price
of 124.5 pence per share on 3 March 2023. Shaftesbury shares,
excluding the 25.2 per cent shareholding previously held by Capco,
were exchanged for Capco shares at a ratio of 3.356 shares per
Shaftesbury share.
5. Merger-related transaction
costs of £35.8 million (2022: £14.6 million) incurred in connection
with the all-share merger have been recorded within administration
expenses in the consolidated income statement.
Details of completion date fair
value adjustments required under IFRS 3:
·
Investment properties and trade and other
receivables - The carrying value of investment properties and trade
and other receivables has been adjusted to derecognise £42.0
million of tenant lease incentives and deferred letting fees held
prior to completion of the merger.
·
Investment in associate - The fair value of the
investment in associate includes investment property and borrowings
at fair value. The Group's £60.0 million (our share) fixed rate
debt held in the associate, was fair valued at £56.6 million,
resulting in a £3.4 million fair value adjustment of the debt due
to the current interest rate environment. An offsetting tax
adjustment of £0.8 million was recognised on this fair value
adjustment. Capitalised issue costs associated with the debt of
£0.2 million (our share) were derecognised on completion and the
fair value of the debt and corresponding deferred tax adjustment
will be amortised over the remaining term of the debt
facility.
·
Borrowings - Fixed rate debt with a nominal value
of £959.8 million was fair valued at £889.0 million, a £70.8
million difference due to the current interest rate environment.
The fair value adjustment is offset by £5.8 million of capitalised
issue costs associated with the debt which were derecognised on
completion. The fair value adjustment will be amortised to other
finance costs over the remaining term of the debt facilities.
Following completion of the merger and the redemption of the
Carnaby and Chinatown bonds in April 2023, £24.6 million of the
amortisation of the fair value adjustment relating to the bonds was
accelerated and recognised in other finance costs in the period.
£41.7 million of the £70.8 million (wholly owned) adjustment
remains at 31 December 2023, which will be amortised over the
remaining term of the debt facilities.
The revenue and loss before tax of
the Shaftesbury Group are set out in the table below.
|
|
|
1 January 2023 to
5 March 2023
£m1
|
6 March 2023 to
31 December 2023
£m2
|
Pro-forma
Shaftesbury
Group
£m
|
Revenue (including service charge
income)
|
|
|
24.9
|
121.9
|
146.8
|
Loss before
tax3
|
|
|
(1.7)
|
(64.3)
|
(66.0)
|
1. Shaftesbury Group revenue
and loss before tax for the period 1 January 2023 - 5 March 2023
(pre-merger) was obtained from internal management accounts and
have not been adjusted for accounting policy alignments or fair
value adjustments.
2. Shaftesbury Group revenue
and loss before tax for the period 6 March 2023 - 31 December 2023
(post-merger) are included in the Group consolidated income
statement and take into account adjustments relating to accounting
policy alignments and the unwind of the fair value adjustments on
the borrowings and related deferred tax in Longmartin.
3. Loss before tax for the
periods 1 January 2023 - 5 March 2023 and 6 March 2023 - 31
December 2023 includes revaluation movements and merger-related
transaction and integration costs. Excluding these items, estimated
underlying earnings before tax for the period 1 January 2023 - 5
March 2023 were £5 million.
The pro forma information is
provided for illustrative purposes only and is not necessarily
indicative of the results that the combined Group would have
reported had the merger completed at the beginning of the financial
year, or indicative of future results of the combined
Group.
10 PROPERTY PORTFOLIO
|
2023
£m
|
2022
£m
|
At 1 January
|
1,715.1
|
1,705.6
|
Investment property acquired on
merger at 6 March 2023 fair value
|
3,141.0
|
-
|
Additions from
acquisitions
|
17.4
|
-
|
Additions from subsequent
expenditure
|
35.1
|
10.3
|
Disposals
|
(81.5)
|
-
|
Transfer to owner-occupied
property
|
(18.4)
|
-
|
Loss on revaluation
|
(68.5)
|
(0.8)
|
Carrying value of investment property
|
4,740.2
|
1,715.1
|
Adjustment in respect of fixed
head leases
|
(3.0)
|
(6.1)
|
Adjustment in respect of tenant
lease incentives and deferred letting fees
|
37.9
|
34.7
|
Market value of investment property
|
4,775.1
|
1,743.7
|
|
|
|
|
2023
£m
|
2022
£m
|
The investment property valuation
comprises:
|
|
|
Freehold properties
|
3,791.3
|
971.2
|
Leasehold properties
|
983.8
|
772.5
|
Market value of investment
property
|
4,775.1
|
1,743.7
|
Market value of property portfolio
|
2023
£m
|
2022
£m
|
Market value of investment
property
|
4,775.1
|
1,743.7
|
Market value of owner-occupied
property1
|
20.2
|
-
|
Market value of wholly-owned property
portfolio
|
4,795.3
|
1,743.7
|
1. Owner-occupied property is included in property, plant and
equipment at market value.
Revaluation (loss)/gain of property
portfolio
|
2023
£m
|
2022
£m
|
Revaluation loss reported in
consolidated income statement
|
(68.5)
|
(0.8)
|
Revaluation gain reported in
consolidated statement of comprehensive income
|
1.8
|
-
|
Total revaluation loss of wholly-owned property
portfolio
|
(66.7)
|
(0.8)
|
Valuation process
The fair value of the Group's
wholly-owned investment property and owner-occupied property at 31
December 2023 was determined by independent, appropriately
qualified external valuers, CBRE and Cushman & Wakefield. The
valuations conform to the Royal Institution of Chartered Surveyors
("RICS") Valuation Professional Standards. Fees paid to valuers are
based on fixed price contracts.
Each year the Company appoints the
external valuers. The valuers are selected based on their
knowledge, independence and reputation for valuing assets such as
those held by the Group.
Valuations are performed
bi-annually and are performed consistently across all properties in
the Group's portfolio. At each reporting date appropriately
qualified employees of the Group verify all significant inputs and
review computational outputs. Valuers submit and present summary
reports to the Group's Audit Committee, with the Executive
Committee reporting to the Board on the outcome of each valuation
round.
Net zero carbon and EPC compliance
The Group published its Net Zero
Carbon Pathway in November 2023 and has set 2030 as its target date
to achieve this, aligning to a 1.5˚C pathway and the aim to be
carbon neutral for scope 1 & 2 emissions by 2025. A key element
in achieving this will come from carbon efficiencies created
through developments and refurbishments of the Group's property
portfolio. During 2023, the Group's additions from subsequent
expenditure were £35.1 million (year ended 31 December 2022: £10.3
million). This included both capital works, which enhanced the
environmental performance of assets, and design stage work aimed at
delivering environmental enhancements. While new ground-up
developments form a limited part of the Group's activity, the
design stage work on refitting and refurbishment of units,
particularly in heritage buildings, is equally important to deliver
Whole Life Carbon Efficiency.
The Net Zero Carbon Pathway also
highlights the aim for 75 per cent of commercial units to have a
"B" or above EPC compliance rating by 2027 and for all commercial
units to have a "B" or above and residential units a "C" or above
rating by 2030. Any committed capital expenditure has been included
in note 17 'Capital commitments'.
Valuation techniques
Valuations are based on what is
determined to be the highest and best use. When considering the
highest and best use a valuer will consider, on a
property-by-property basis, its actual and potential uses which are
physically, legally and financially viable. Where the highest and
best use differs from the existing use, the valuer will consider
the cost and the likelihood of achieving and implementing this
change in use in arriving at its valuation.
The fair value of the Group's
investment properties has primarily been determined using a market
approach, which provides an indication of value by comparing the
subject asset with similar assets for which price information is
available. The external valuers use information provided by the
Group, such as tenancy information and capital expenditure
expectations. In deriving fair value, the valuer also makes a
series of assumptions, using professional judgement and market
observations. These assumptions include, but are not limited to,
market yields, ERVs and void periods. The critical key assumptions
are the equivalent yields and estimated future rental income
(ERVs), as set out within the Analysis of Property Portfolio on
page 66. Equivalent yields are based on current market prices,
depending on, inter alia, the location, condition and use of the
properties.
ERVs are calculated using a number
of factors which include current rental income, market comparatives
and local occupancy levels. Whilst there is market evidence for the
key inputs, and recent transaction prices for similar properties,
there is still a significant element of estimation and judgement.
As a result of adjustments made to market observable data, these
significant inputs are deemed unobservable.
Non-financial assets carried at
fair value, as is the case for investment property held by the
Group, are required to be analysed by level depending on the
valuation method adopted under IFRS 13 'Fair Value Measurement'
("IFRS 13").
The different valuation levels are
defined as:
Level 1: valuation based on quoted
market prices traded in active markets;
Level 2: valuation based on inputs
other than quoted prices included within Level 1 that maximise the
use of observable data either directly or from market prices or
indirectly derived from market prices; and
Level 3: where one or more inputs
to valuation are not based on observable market data. Valuations at
this level are more subjective and therefore more closely managed,
including sensitivity analysis of inputs to valuation
models.
When the degree of subjectivity or
nature of the measurement inputs changes, consideration is given as
to whether a transfer between fair value levels is deemed to have
occurred. Unobservable data becoming observable market data would
determine a transfer from Level 3 to Level 2. All investment
properties held by the Group are classified as Level 3 in the
current and prior year.
Sensitivity to changes in key assumptions
As noted in the critical
accounting judgements and key sources of estimation and uncertainty
section in note 1 'Principal accounting policies', the valuation of
the Group's property portfolio is inherently subjective. As a
result, the valuations are subject to a degree of uncertainty and
are made on the basis of assumptions which may not prove to be
accurate, particularly in periods of volatility or low transaction
flow in the commercial property market.
The sensitivity analysis below
illustrates the impact on the fair value of the Group's properties,
from changes in the key assumptions:
|
|
Change
in ERV
|
|
|
-10%
|
-5%
|
+5%
|
+10%
|
|
|
£m
|
£m
|
£m
|
£m
|
(Decrease)/increase in fair
value
|
|
(406.0)
|
(204.0)
|
210.0
|
421.6
|
|
|
Change
in Yield
|
|
|
-50bp
|
-25bp
|
+25bp
|
+50bp
|
|
|
£m
|
£m
|
£m
|
£m
|
Increase/(decrease) in fair
value
|
|
656.0
|
306.0
|
(271.2)
|
(512.1)
|
The table above shows movements in
key assumptions in isolation. These key unobservable inputs are
interdependent. All other factors being equal, a higher equivalent
yield would lead to a decrease in the valuation, and an increase in
estimated rental value would increase the capital value, and vice
versa. However, there are interrelationships between the key
unobservable inputs which are partially determined by market
conditions, which would impact these changes.
At 31 December 2023, the Group was
contractually committed to £24.8 million (31 December 2022: £1.7
million) of future expenditure for the purchase, construction,
development and enhancement of investment property. Refer to note
17 'Capital commitments' for further information on capital
commitments.
11 INVESTMENT IN JOINT VENTURES
AND ASSOCIATES
Investments in joint ventures and
associates are measured using the equity method. All the Group's
joint ventures and associates are held with other investors on a
50:50 basis. At 31 December 2023, investments comprised the
Longmartin associate ("Longmartin") and the Lillie Square joint
venture ("LSJV"). The Group disposed of its interest in Innova
Investment joint venture ("Innova") on 15 May 2023.
Longmartin
Longmartin is as a joint venture
arrangement with The Mercers' Company. This 50:50 investment owns a
long leasehold interest in a number of mixed-use buildings, centred
on St Martin's Courtyard in Covent Garden, which offers a range of
hospitality, leisure and retail concepts, alongside over 100,000
square feet of office space and 75 apartments.
Pursuant to the terms of the
Longmartin investment (forming 3 per cent of the Group's property
portfolio), the merger triggered the right for The Mercers' Company
(the "Mercers") to require the Company to offer to sell its shares
in the Longmartin investment to them (or to a third-party purchaser
identified by them). The Mercers have elected to consider acquiring
the Company's shares in the Longmartin investment and discussions
are ongoing. As a result, it has been
determined joint control is no longer demonstrated, however it
remains a 50 per cent investment with significant influence
demonstrated, therefore the investment is now reflected as an
investment in an associate. There is no certainty that a
transaction to sell the Company's shares in the Longmartin
investment will be agreed and should the discussions conclude
without agreement, the investment would revert to a joint
venture.
The summarised income statement
and balance sheet of Longmartin are presented below.
Summarised income
statement
|
|
6 March 2023 to
31 December 2023
£m
|
Revenue
|
|
14.9
|
Gross profit
|
|
10.6
|
Administration expenses
|
|
(0.2)
|
Loss on revaluation of investment
property
|
|
(1.9)
|
Net finance costs
|
|
(7.5)
|
Taxation
|
|
(0.6)
|
Profit for the period after
taxation
|
|
0.4
|
|
|
|
Dividends paid
|
|
3.0
|
Summarised balance
sheet
|
|
2023
£m
|
Investment property
|
|
327.2
|
Cash and cash
equivalents
|
|
3.8
|
Other non-current
assets
|
|
2.4
|
Other current assets
|
|
1.6
|
Non-current borrowings
|
|
(114.4)
|
Amounts payable to
partners1
|
|
(23.1)
|
Other non-current
liabilities
|
|
(21.9)
|
Other current
liabilities
|
|
(8.8)
|
Net assets
|
|
166.8
|
|
|
|
Capital commitments
|
|
0.1
|
1. During the period, Longmartin repaid £5.3
million to its partners following the return of £5.3 million cash
previously held on deposit as a waiver guarantee with its external
lender.
Investment properties owned by
Longmartin have been valued at 31 December 2023 by professionally
qualified external valuers, Knight Frank LLP, who are members of
the Royal Institution of Chartered Surveyors. Adjustments are made
to the fair value of Longmartin's investment properties to arrive
at the book value at 31 December 2023, as set out below:
Fair value of properties as valued
by Knight Frank LLP
|
|
|
|
|
317.4
|
Finance lease asset
|
|
|
|
|
11.2
|
Lease incentives and costs
included in receivables
|
|
|
|
|
(1.4)
|
Carrying value of investment
property
|
|
|
|
|
327.2
|
LSJV
LSJV was established as a joint
venture arrangement with the Kwok Family Interests ("KFI") in
August 2012. The joint venture was established to own, manage and
develop land interests at Lillie Square. LSJV comprises Lillie
Square LP, Lillie Square GP Limited, acting as general partner to
the partnership, and its subsidiaries. All major decisions
regarding LSJV are taken by the Board of Lillie Square GP Limited,
through which the Group shares strategic control.
The summarised income statement
and balance sheet of LSJV are presented below.
Summarised income
statement
|
2023
£m
|
2022
£m
|
Revenue
|
7.3
|
6.8
|
Gross loss
|
(0.5)
|
(0.3)
|
Loss on revaluation of investment
property
|
(4.8)
|
-
|
Proceeds from the sale of trading
property
|
7.0
|
6.6
|
Profit on transfer of trading
property to investment property
|
9.0
|
0.6
|
Cost of sale of trading
property
|
(5.6)
|
(5.3)
|
Agent, selling and marketing
fees
|
(0.2)
|
(0.1)
|
Write down of trading
property
|
(12.9)
|
(24.7)
|
Administration expenses
|
(0.4)
|
(0.2)
|
Net finance costs1
|
(6.8)
|
(7.0)
|
Loss for the year after
taxation
|
(15.2)
|
(30.4)
|
1. Net finance costs include £7.4
million (2022: £7.0 million) interest payable on the interest
bearing loans issued to the joint venture by the Group and KFI.
Finance income receivable by the Group from LSJV of £3.7 million
(2022: £3.5 million) is recognised in the consolidated income
statement within other finance income.
Summarised balance
sheet
|
2023
£m
|
2022
£m
|
Investment property
|
46.8
|
8.8
|
Trading property
|
80.3
|
131.0
|
Cash and cash
equivalents
|
15.9
|
11.8
|
Other non-current
assets
|
5.6
|
5.5
|
Other current assets
|
1.5
|
1.9
|
Amounts payable to joint venture
partners1
|
(224.9)
|
(217.5)
|
Other current
liabilities
|
(1.7)
|
(3.1)
|
Net liabilities
|
(76.5)
|
(61.6)
|
|
|
|
Capital commitments
|
-
|
1.6
|
|
|
|
Carrying value of investment and
trading property
|
127.1
|
139.8
|
Unrecognised surplus on trading
property2
|
3.3
|
14.2
|
Market value of investment and
trading property2
|
130.4
|
154.0
|
1. Amounts payable to joint
venture partners include working capital facilities advanced by the
Group and KFI of £29.0 million (2022: £28.2 million) and an
interest bearing loan of £163.0 million (nominal value) advanced by
the Group and KFI to the joint venture. The carrying value of the
loan before impairment, including accrued interest was £180.2
million (2022: £172.9 million). Recoverable amounts receivable by
the Group, net of impairments, are recognised on the consolidated
balance sheet within non-current trade and other
receivables.
2. The unrecognised surplus on
trading property and the market value of LSJV's property portfolio
are shown for informational purposes only and are not a requirement
of IFRS. Trading property continues to be measured at the lower of
cost and net realisable value.
Reconciliation of investments in
joint ventures and associates
The table below reconciles the
opening to closing carrying value of investments in joint ventures
and associates as presented on the consolidated balance
sheet.
|
Longmartin
£m
|
LSJV
£m
|
Innova
£m
|
Total
£m
|
At 1 January 2022
|
-
|
-
|
0.2
|
0.2
|
At 31 December 2022
|
-
|
-
|
0.2
|
0.2
|
Investments in associate acquired
at fair value on completion of merger
|
84.7
|
-
|
-
|
84.7
|
Share of profit/(loss) for the
year1
|
0.2
|
(7.6)
|
-
|
(7.4)
|
Losses
restricted1
|
-
|
7.6
|
-
|
7.6
|
Dividend received
|
(1.5)
|
-
|
-
|
(1.5)
|
Disposal of joint
venture
|
-
|
-
|
(0.2)
|
(0.2)
|
At 31 December 2023
|
83.4
|
-
|
-
|
83.4
|
1. The
loss from the Lillie Square joint venture for the year of £7.6
million has been restricted in accordance with the requirements of
IAS 28. Restricted losses represent the
Group's share of loss in LSJV in the year of £7.6 million (31
December 2022: £15.2 million) allocated to the cumulative losses
which exceed the Group's investment in the joint venture.
Cumulative losses of £38.4 million have been restricted to date (31
December 2022: £30.8 million) and as a result the carrying value of
the investment in LSJV is nil (31 December 2022: nil). The Group
holds £76.0 million (2022: £84.0 million) of recoverable loans from
LSJV within note 12 'Trade and other receivables'.
12 TRADE AND OTHER
RECEIVABLES
|
2023
£m
|
2022
£m
|
Non-current
|
|
|
Prepayments and accrued
income1
|
28.5
|
31.6
|
Amounts receivable from joint
ventures2
|
76.0
|
84.0
|
Amounts receivable from
associates3
|
11.6
|
-
|
Trade and other
receivables
|
116.1
|
115.6
|
Current
|
|
|
Rent
receivable4
|
13.6
|
8.0
|
Other
receivables5
|
12.0
|
2.6
|
Prepayments and accrued
income1
|
17.1
|
10.2
|
Trade and other
receivables
|
42.7
|
20.8
|
1. Includes tenant lease
incentives and deferred letting fees of £37.9 million (2022: £34.7
million).
2. Amounts receivable from joint
ventures represents an interest-bearing loan of £90.1 million (31
December 2022: £86.4 million) provided to LSJV. The loan bears
interest at 4.25 per cent per annum and is repayable on demand. As
it is not the intention of the Group to call on the loan
in the next 12 months it has been presented as non-current.
The loan has been impaired by £14.1 million (31 December 2022: £2.4
million) to date. Included within current trade and other
receivables is working capital funding of £29.0 million due from
LSJV (31 December 2022: £28.2 million) that has been fully
impaired.
3. Amounts receivable from
associates represents a loan of £11.6 million (31 December 2022:
nil) provided to Longmartin. As it is not the intention of the
Group to call on the loan in the next 12 months it has been
presented as non-current.
4. Rent receivable is shown net of
an expected credit loss provision of £4.8 million (31 December
2022: £4.0 million).
5. Other receivables include £7.0
million of restricted cash held on deposit as security for the
secured term loans and bank facilities with certain conditions
restricting the use.
13 CASH AND CASH
EQUIVALENTS
|
2023
£m
|
2022
£m
|
Cash at hand
|
10.4
|
2.1
|
Cash on short-term
deposits
|
175.3
|
114.4
|
Cash
|
185.7
|
116.5
|
Tenant
deposits1
|
14.5
|
13.4
|
Cash and cash equivalents
|
200.2
|
129.9
|
1. Tenant deposits included above
relate to cash held on deposit as security against tenant rent
payments which are subject to certain restrictions and therefore
not available for general use by the Group. The deposits are held
in bank accounts administered by Group Treasury and therefore
included within cash and cash equivalents in the consolidated
balance sheet. Cash deposits against tenants' rent payment
obligations totalling £18.9 million (31 December 2022: nil) are
held in bank accounts administered by the Group's managing agents
which are not included within the consolidated balance
sheet.
14 BORROWINGS
|
2023
|
|
Carrying
value
£m
|
Secured
£m
|
Unsecured
£m
|
Fixed
rate
£m
|
Floating
rate
£m
|
Fair
value
£m
|
Nominal
value
£m
|
Current
|
|
|
|
|
|
|
|
Loan notes (USPPs)
|
94.9
|
-
|
94.9
|
94.9
|
-
|
93.0
|
95.0
|
|
94.9
|
-
|
94.9
|
94.9
|
-
|
93.0
|
95.0
|
Non current
|
|
|
|
|
|
|
|
Bank loans
|
345.9
|
-
|
345.9
|
-
|
345.9
|
350.0
|
350.0
|
Loan notes (USPPs)
|
379.2
|
-
|
379.2
|
379.2
|
-
|
340.7
|
380.0
|
Secured loans
|
539.9
|
539.9
|
-
|
539.9
|
-
|
569.5
|
584.8
|
Exchangeable
bonds1
|
269.8
|
269.8
|
-
|
269.8
|
-
|
256.9
|
275.0
|
|
1,534.8
|
809.7
|
725.1
|
1,188.9
|
345.9
|
1,517.1
|
1,589.8
|
Total borrowings
|
1,629.7
|
|
|
|
|
|
1,684.8
|
Cash, excluding tenant
deposits
|
|
|
|
|
|
|
(185.7)
|
Net debt
|
|
|
|
|
|
|
1,499.1
|
|
2022
|
|
Carrying
value
£m
|
Secured
£m
|
Unsecured
£m
|
Fixed
rate
£m
|
Floating
rate
£m
|
Fair
value
£m
|
Nominal
value
£m
|
Non current
|
|
|
|
|
|
|
|
Bank loans
|
(2.5)
|
-
|
(2.5)
|
-
|
(2.5)
|
-
|
-
|
Loan notes (USPPs)
|
473.9
|
-
|
473.9
|
473.9
|
-
|
393.4
|
475.0
|
Exchangeable
bonds1
|
266.9
|
266.9
|
-
|
266.9
|
-
|
228.9
|
275.0
|
Total borrowings
|
738.3
|
266.9
|
471.4
|
740.8
|
(2.5)
|
622.3
|
750.0
|
Cash, excluding tenant
deposits
|
|
|
|
|
|
|
(116.5)
|
Net debt
|
|
|
|
|
|
|
633.5
|
|
|
|
|
|
|
|
| |
1. Fair value of the
exchangeable bonds includes the fair value of the option component
of £7.2 million (2022: £3.3 million).
£584.8 million (nominal value) of
the Group's borrowings are secured by fixed charges over certain
investment properties held by subsidiaries, with a market value of
£1,624.2 million (31 December 2022: nil), and by floating charges
over the assets of certain subsidiaries.
There are currently no
restrictions on the remittance of income from investment
properties. The Group has complied with the financial covenants of
all its borrowings during both periods presented.
The Group has a £300 million
revolving credit facility, which is undrawn at 31 December
2023.
Undrawn facilities and cash
attributable to the Group, excluding tenant deposits, at 31
December 2023 were £485.7 million (31 December 2022: £416.5
million).
The fair value of the Group's
borrowings has been estimated using the market value for floating
rate borrowings, which approximates nominal value, and are
classified as Level 2 fair values as defined by IFRS 13. The fair
values of fixed rate borrowings have been determined by using a
discounted cash flow approach, using a current borrowing
rate. The loans are classified as Level 3 fair value
measurements as defined by IFRS 13 due to the use of unobservable
inputs, including own credit risk. The different valuation levels
are defined in note 10 'Property Portfolio'.
15 CLASSIFICATION OF FINANCIAL
ASSETS AND LIABILITIES
The table below sets out each
class of financial asset and financial liability at 31 December
2023 and 31 December 2022:
|
|
2023
|
2022
|
|
Note
|
Carrying
value
£m
|
Gain/(loss)
to income statement
£m
|
Carrying
value
£m
|
Gain/(loss)
to income statement
£m
|
Derivative financial
assets1
|
|
9.7
|
(7.4)
|
12.1
|
11.0
|
Total held for trading
assets
|
|
9.7
|
(7.4)
|
12.1
|
11.0
|
Cash and cash
equivalents
|
13
|
200.2
|
-
|
129.9
|
-
|
Other financial assets2
|
12
|
113.2
|
-
|
94.6
|
-
|
Total cash and other financial
assets
|
|
313.4
|
-
|
224.5
|
-
|
Investment held at fair value
through profit or loss3
|
|
-
|
52.0
|
356.9
|
(239.5)
|
Total investment held at fair
value through profit or loss
|
|
-
|
52.0
|
356.9
|
(239.5)
|
Derivative financial
liabilities4
|
|
(7.2)
|
(3.9)
|
(3.3)
|
28.8
|
Total held for trading
liabilities
|
|
(7.2)
|
(3.9)
|
(3.3)
|
28.8
|
Borrowings
|
14
|
(1,629.7)
|
-
|
(738.3)
|
-
|
Lease liabilities
|
|
(3.0)
|
-
|
(6.1)
|
-
|
Other financial
liabilities5
|
|
(78.5)
|
-
|
(26.5)
|
-
|
Total borrowings and other
financial liabilities
|
|
(1,711.2)
|
-
|
(770.9)
|
-
|
1. Represents non-traded
derivative instruments held by the Group to manage its exposure to
interest rate risk. Interest rate derivatives are currently in
place for £350 million of notional value for 2024 and £250 million
for 2025 (31 December 2022: £200 million).
2. Includes rent receivable,
amounts due from joint ventures and associates, tax assets and
other receivables.
3. Financial assets at fair value
through profit or loss previously comprised the 97.0 million shares
held in Shaftesbury. Following the completion of the all-share
merger on 6 March 2023 the investment was derecognised. A fair
value gain of £52.0 million (31 December 2022: loss of £239.5
million) has been recognised in the period reflecting the movement
in the share price from 368 pence at 31 December 2022 to 421.6
pence on 3 March 2023.
4. Represents the fair value of the option component of the
exchangeable bond.
5. Includes trade and other payables (excluding rents in
advance) and tax liabilities.
Fair value estimation
Financial instruments carried at
fair value are required to be analysed by level depending on the
valuation method adopted under IFRS 13. The different valuation
levels are defined in note 10 'Property portfolio'.
The table below present the
Group's financial assets and liabilities recognised at fair value
at 31 December 2023 and 31 December 2022. There were no transfers
between levels during the year.
|
2023
|
2022
|
|
Level 1
£m
|
Level 2
£m
|
Level 3
£m
|
Total
£m
|
Level 1
£m
|
Level 2
£m
|
Level 3
£m
|
Total
£m
|
Financial assets at fair value
through profit or loss
|
|
|
|
|
|
|
|
|
Listed equity
investment
|
-
|
-
|
-
|
-
|
356.9
|
-
|
-
|
356.9
|
Held for trading assets
|
|
|
|
|
|
|
|
|
Derivative financial
assets
|
-
|
9.7
|
-
|
9.7
|
-
|
12.1
|
-
|
12.1
|
Total assets
|
-
|
9.7
|
-
|
9.7
|
356.9
|
12.1
|
-
|
369.0
|
Held for trading
liabilities
|
|
|
|
|
|
|
|
|
Derivative financial
liabilities
|
-
|
(7.2)
|
-
|
(7.2)
|
-
|
(3.3)
|
-
|
(3.3)
|
Total liabilities
|
-
|
(7.2)
|
-
|
(7.2)
|
-
|
(3.3)
|
-
|
(3.3)
|
The fair values of derivative
financial instruments are determined from observable market prices
or estimated using appropriate yield curves at 31 December each
year by discounting the future contractual cash flows to the net
present values. Listed equity investments as at 31 December 2022
are carried at fair value on the consolidated balance sheet and
representing Level 1 fair value measurement. The fair value of
listed equity investments are based on quoted market prices traded
in active markets.
The fair values of the Group's
cash and cash equivalents, other financial assets carried at
amortised cost and other financial liabilities are not materially
different from those at which they are carried in the consolidated
financial statements.
16 SHARE CAPITAL AND SHARE
PREMIUM
|
Transaction
date
|
Issue price
(pence)
|
Number
of shares
|
Share
capital
£m1
|
Share
premium
£m
|
At 1 January 2023
|
|
|
851,450,638
|
212.8
|
232.5
|
Issued to satisfy employee share
scheme awards2
|
March
|
25
|
6,170,629
|
1.5
|
-
|
Issued on completion of all-share
merger3
|
March
|
25
|
1,095,549,228
|
273.9
|
-
|
At
31 December 2023
|
|
|
1,953,170,495
|
488.2
|
232.5
|
1.
Nominal value of share capital of 25 pence per
share.
2.
On 2 March 2023, 6,170,629 (2022: 177,966) new
shares were issued to satisfy employee share scheme
awards.
3.
On completion of the all-share merger on 6 March
2023, 1,095,549,228 new shares were issued (including 128,350,793
shares issued to a Shaftesbury Capital controlled entity in respect
of secured shares previously held as collateral for the
exchangeable bonds). See note 9 'Gain on bargain purchase' for
further details.
17 CAPITAL COMMITMENTS
At 31 December 2023, the Group was
contractually committed to £24.8 million (31 December 2022: £1.7
million) of future expenditure for the purchase, construction,
development and enhancement of investment property.
The Group's share of joint
ventures and associates capital commitments arising on LSJV amounts
to nil (2022: £0.8 million) and Longmartin amount to £0.1
million.
18 CONTINGENT
LIABILITIES
The Group has contingent
liabilities in respect of legislation, sustainability targets,
legal claims, guarantees and warranties arising from the
ordinary course of business. There are no contingent liabilities
that require disclosure or recognition in the consolidated
financial statements.
19 CASH FLOW FROM OPERATING
ACTIVITIES
|
Note
|
2023
£m
|
2022
£m
|
Profit/(loss) before
tax
|
|
750.6
|
(205.8)
|
Adjustments:
|
|
|
|
Loss on revaluation and profit on
sale of investment property
|
|
65.0
|
0.8
|
Gain on bargain
purchase
|
9
|
(805.5)
|
-
|
Change in value of investments and
other receivables
|
|
12.5
|
7.9
|
Change in fair value of financial
assets at fair value through profit or loss
|
15
|
(52.0)
|
239.5
|
Depreciation
|
4
|
0.4
|
0.2
|
Amortisation of tenant lease
incentives and other direct costs
|
|
0.1
|
(2.6)
|
Provision for/(reversal of) for
expected credit loss
|
3
|
2.0
|
(1.6)
|
Profit from joint ventures and
associates
|
11
|
(0.2)
|
-
|
Share-based payment
|
|
7.9
|
2.4
|
Finance income
|
5
|
(15.6)
|
(2.6)
|
Other finance income
|
5
|
(4.1)
|
(3.5)
|
Finance costs
|
6
|
67.5
|
27.2
|
Other finance costs
|
6
|
31.3
|
6.5
|
Change in fair value of derivative
financial instruments
|
|
11.3
|
(39.8)
|
Change in working capital:
|
|
|
|
Change in trade and other
receivables
|
|
(27.1)
|
2.0
|
Change in trade and other
payables
|
|
(14.3)
|
2.9
|
Cash generated from
operations
|
|
29.8
|
33.5
|
20 RELATED PARTY
TRANSACTIONS
Transactions between the Group
and its joint ventures and associates
Transactions during the year
between the Group and its joint ventures and associates, which are
related parties, are disclosed in notes 11 'Investment in joint
ventures and associates', 12 'Trade and other receivables' and 17
'Capital commitments'. During the year the Group received
management fees of £0.1 million (2022: nil) that were charged on an
arm's length basis.
Property purchased by Directors
of the Company
A related party of the Group,
Lillie Square GP Limited, entered into the following related party
transactions as defined by IAS 24 'Related Party
Disclosures':
Each of Henry Staunton, Chairman
of Capco up to 6 March 2023, and Situl Jobanputra, Chief Financial
Officer of Shaftesbury Capital, either solely or together with
family members, own apartments (and, where applicable, car park
space) in the Lillie Square development. The disclosures in respect
of these purchases were included in previous financial
statements.
As owners of apartments and car
park space in the Lillie Square development, the Directors are
required to pay annual ground rent and insurance premium fees and
bi-annual service charge fees. During 2023, £13,922.28 had been
paid to a related party of the Shaftesbury Capital Group, Lillie
Square GP Limited, in relation to these charges. Certain payments
in relation to these charges were made in advance, equating to
£54.35. A further £1,289 had been invoiced as at the date the
Director retired from the Company, but was not yet due for
payment.
The above transactions with
Directors were conducted at fair and reasonable market price based
upon similar comparable transactions at that time. Where
applicable, appropriate approval has been provided. Lillie Square
GP Limited acts in the capacity of general partner to Lillie Square
LP, a joint venture between the Group and KFI.
21 EVENTS AFTER THE REPORTING
DATE
In January 2024 the Group disposed
of an investment property for gross proceeds of £56.5 million. The
proceeds, together with Group cash, were used to paydown the
revolving credit element (£150 million) of the £350 million
unsecured loan.
ALTERNATIVE PERFORMANCE MEASURES
(UNAUDITED)
The Group has applied the European
Securities and Markets Authority guidelines on alternative
performance measures ("APMs") in these results. An APM is a
financial measure of historical or future finance performance,
position or cash flow of the Group which is not a measure defined
or specified in IFRS. Set out below is a summary of the
APMs.
Many of the APMs included are
based on the EPRA Best Practice Recommendations reporting
framework, a set of standard disclosures for the property industry,
which aims to improve the transparency, comparability and relevance
of published results of public real estate companies in
Europe.
The Group also uses underlying
earnings, property portfolio and financial debt ratio APMs.
Financial debt ratios are supplementary ratios which we believe are
useful in monitoring the capital structure of the Group.
Additionally, loan-to-value and interest cover are covenants within
many of the Group's borrowing facilities.
APM
|
Definition of measure
|
Nearest IFRS measure
|
Explanation and
reconciliation
|
2023
|
20221
|
Underlying earnings
|
Profit/(loss) for the year
excluding items deemed non-recurring or significant by virtue of
size or nature
|
Profit/(loss) for the
year
|
Note 2
|
£60.4m
|
£18.6m
|
Underlying earnings
per share
|
Underlying earnings per weighted
number of ordinary shares
|
Basic earnings/(loss) per
share
|
Note 2
|
3.7p
|
2.2p
|
EPRA earnings
|
Recurring earnings from core
operational activity
|
Profit/(loss) for the
year
|
Note 2
|
£45.0m
|
£57.3m
|
EPRA earnings per share
|
EPRA earnings/(loss) per weighted
number of ordinary shares
|
Basic earnings/(loss) per
share
|
Note 2
|
2.7p
|
6.7p
|
EPRA NTA
|
Net asset value adjusted to
include properties and other investment interests at fair value and
to exclude certain items not expected to crystallise in a long-term
investment property business model
|
Net assets attributable to
shareholders
|
Note 2
|
£3,479.4m
|
£1,552.2m
|
EPRA NTA per share
|
EPRA NTA per the diluted number of
ordinary shares
|
Net assets attributable to
shareholders per share
|
Note 2
|
190.3p
|
182.1p
|
Market value of property
portfolio
|
Market value of wholly-owned
property portfolio
|
Investment properties
|
Note 10
|
£4,795.3m
|
£1,743.7m
|
Interest cover
|
Underlying operating profit
divided by net underlying finance costs
|
N/A
|
N/A
|
212.7%
|
182.1%
|
Loan-to-value2
|
Net debt, at nominal value and
excluding tenant deposits, divided by market value of property
portfolio
|
N/A
|
N/A
|
30.9%
|
36.3%
|
Gross debt with interest rate
protection
|
Proportion of gross debt with
interest rate protection
|
N/A
|
N/A
|
100%
|
100%
|
Weighted average cost of
debt3
|
Cost of debt weighted by the drawn
balance of external borrowings
|
N/A
|
N/A
|
4.2%
|
2.7%
|
Cash and undrawn committed
facilities
|
Cash and cash equivalents,
excluding tenant deposits, plus undrawn committed
facilities
|
N/A
|
Financial Review
|
£485.7m
|
£416.5m
|
1. Prior period comparatives have
been restated based on changes to the definition following the
all-share merger with Shaftesbury and the Board focus on the
wholly-owned portfolio. Due to the fair value exercise performed on
merger, and the Shaftesbury debt accounted for at fair value, net
debt metrics have been adjusted to be based on nominal value rather
than carrying value.
2. The 31 December 2022
loan-to-value represents the Capco only calculation which excludes
the £356.9 million, 25.2 per cent shareholding held in Shaftesbury
but includes the exchangeable bond which was secured by collateral
on the shareholding. The net debt to gross assets ratio was 27.9
per cent.
3. As at 31 December 2023 the
weighted average cost of debt reduces to an effective running cash
cost of 3.4 per cent taking account of interest on cash deposits
and interest rate caps and collars.
PRO FORMA INFORMATION (UNAUDITED)
The all-share merger of Capco and
Shaftesbury to create Shaftesbury Capital completed on 6 March
2023. Pro forma information has been included for the balance sheet
to provide relevant comparative information. The table below
details the summary pro forma information and reconciliation on how
the information has been calculated.
APM
|
Definition of measure
|
Nearest IFRS measure
|
Explanation and
reconciliation
|
Pro forma
31 December 2022
|
EPRA NTA
|
Net asset value adjusted to
include properties and other investment interests at fair value and
to exclude certain items not expected to crystallise in a long-term
investment property business model
|
Net assets attributable to
shareholders
|
Table 1
|
£3,526.4m
|
EPRA NTA per share
|
EPRA NTA per the diluted number of
ordinary shares
|
Net assets attributable to
shareholders per share
|
Table 1
|
192.8p
|
Market value of investment
property
|
Market value of wholly-owned
investment property portfolio
|
Investment properties
|
Table 2
|
£4,857.8m
|
Net debt
|
Total borrowings, at nominal
value, less cash and cash equivalents, excluding tenant
deposits
|
N/A
|
Table 3
|
£1,488.2m
|
Loan-to-value
|
Net debt divided by market value
of investment property
|
N/A
|
Table 4
|
30.6%
|
Cash and undrawn committed
facilities
|
Cash and cash equivalents,
excluding tenant deposits, plus undrawn committed
facilities
|
N/A
|
Table 5
|
£521.6m
|
Commitments
|
Capital commitments of the Group
as at the reporting date
|
N/A
|
Table 6
|
£35.6m
|
The table below details the
summary pro forma information and
reconciliation for rental income for the year ended 31 December
2022 and 2023. This information has been provided to calculate EPRA
like-for-like rental growth.
APM
|
Definition of measure
|
Nearest IFRS measure
|
Explanation and
reconciliation
|
Pro forma
31 December 2023
|
Pro forma
31 December 2022
|
Rental income
|
Rental income generated by the
combined Group
|
Revenue, excluding service charge
income
|
Table 7 and 8
|
£196.5m
|
£178.2m
|
Table 1 - Pro forma balance sheet and EPRA
NTA
A pro forma balance sheet and EPRA
NTA have been provided to reflect the combined position of both
companies as at 31 December 2022 property valuation and assumed all
merger-related transaction costs have been incurred.
Capco and Shaftesbury had
different reporting year ends being
December and September respectively. In providing pro forma
information the latest reported results of each Company were used,
adjusted for property valuations as at 31 December 2022 and all
merger-related transaction costs paid or accrued.
|
Capco
31 December
20221
£m
|
Capco
adjustments2
£m
|
Shaftesbury 30 September
20223
£m
|
Shaftesbury
adjustments4
£m
|
Pro forma
2022
£m
|
Investment property at carrying
value
|
1,715.1
|
-
|
3,144.4
|
(30.3)
|
4,829.2
|
Investments in joint ventures and
associates
|
0.2
|
-
|
86.6
|
-
|
86.8
|
Financial assets at fair
value
|
356.9
|
(356.9)
|
-
|
-
|
-
|
Net debt
|
(633.5)
|
(13.0)
|
(804.6)
|
(37.1)
|
(1,488.2)
|
Other assets and
liabilities
|
122.9
|
(1.4)
|
32.1
|
(55.0)
|
98.6
|
Net assets
|
1,561.6
|
(371.3)
|
2,458.5
|
(122.4)
|
3,526.4
|
Group adjustments:
|
|
|
|
|
|
Unrealised surplus trading
property - joint venture
|
7.1
|
-
|
-
|
-
|
7.1
|
Fair value of derivative financial
instruments and exchangeable bond
|
(16.9)
|
-
|
-
|
-
|
(16.9)
|
Dilutive effect of share
options
|
-
|
-
|
0.5
|
-
|
0.5
|
Deferred tax adjustment
|
0.4
|
-
|
8.9
|
-
|
9.3
|
EPRA net tangible
assets
|
1,552.2
|
(371.3)
|
2,467.9
|
(122.4)
|
3,526.4
|
EPRA net tangible assets per share
(pence)
|
|
|
|
|
192.8p
|
Adjusted, diluted number of
shares5
|
|
|
|
|
1,828.8m
|
1. Capco 31
December 2022 reflects the summarised IFRS information and EPRA NTA
as reported in the Capco 2022 Annual Report.
2. The
following adjustments have been made to the Capco 31 December 2022
reported numbers on a pro forma basis:
-
Financial assets at fair value as at 31 December
2022 represents the 25.2 per cent investment in Shaftesbury held by
Capco. On completion of the merger no separate investment is
held.
-
Net debt has been increased by £13.0 million to
reflect merger-related transaction costs paid between 31 December
2022 and completion of the merger.
-
Other assets and liabilities have been adjusted
by £1.4 million to reflect merger-related transaction costs accrued
at merger date.
3.
Shaftesbury 30 September 2022 reflects the summarised IFRS
information and EPRA NTA as reported in the Shaftesbury 30
September 2022 Annual Report.
4. The
following adjustments have been made to the Shaftesbury 30
September 2022 reported numbers on a pro forma basis:
-
Investment property has been adjusted to reflect
the 31 December 2022 valuation, as determined by external valuers
and included in the Shaftesbury trading update announced on 30
January 2023. Due to the fair value exercise performed on
completion, the tenant lease incentives and deferred letting fees
were derecognised. An offsetting adjustment is included in other
assets and liabilities and the impact of the adjustment on net
assets is therefore neutral.
-
Net debt has been increased by £37.1 million for
working capital and merger-related transaction costs paid between
30 September 2022 and completion of the merger.
-
Other assets and liabilities have been adjusted
by £11.3 million to reflect merger-related transaction costs
accrued on merger date and £43.7 million tenant lease incentives
and deferred letting fees derecognised on completion.
5.
Adjusted, dilutive number of shares is based on
31 December 2023 issued share capital, which excludes 128.4 million
shares held as collateral for the exchangeable bond and 3.1 million
held within an approved Employee Benefit Trust, adjusted for
dilutive effect of contingently issuable share option and deferred
share awards. Total share capital in issuance, including these
components, is 1,953.2 million shares as at 31 December 2023.
1,095.5 million shares were issued on 6 March 2023 in relation to
the merger.
Table 2 - Market value investment property
To provide a consistent metric on
the performance of the portfolio, like-for-like valuation movements
are included in the annual results. The
movement is based on the market value of investment property, with
the opening position based on the 31 December 2022 external
valuations. A reconciliation between reported carrying value and
market value has been provided below.
|
Capco
31 December
20221
£m
|
Capco adjustments
£m
|
Shaftesbury 30 September
20222
£m
|
Shaftesbury
adjustments3
£m
|
Pro forma
2022
£m
|
Carrying value investment
property
|
1,715.1
|
-
|
3,144.4
|
(30.3)
|
4,829.2
|
Adjustment in respect of head
leases, tenant lease incentives and deferred letting
fees
|
28.6
|
-
|
43.7
|
(43.7)
|
28.6
|
Market value of investment
property as at 31 December 2022
|
1,743.7
|
-
|
3,188.1
|
(74.0)
|
4,857.8
|
1. As reported in the Capco 31
December 2022 Annual Report.
2. As reported in the Shaftesbury
30 September 2022 Annual Report.
3. Reflects the 31 December 2022
valuation, as determined by external valuers included in the
Shaftesbury trading update announced on 30 January 2023. Due to the
fair value exercise performed on completion, the tenant lease
incentives and deferred letting fees are derecognised.
Estimated rental value as at 31
December 2022 for both companies has been obtained from the
external valuation reports prepared by CBRE and Cushman &
Wakefield. ERV is a key assumption determined by the external
valuers and included the Capco 2022 Annual Report and in the
Shaftesbury trading update announced on 30 January
2023.
Annualised gross income is the sum of the last reported number
of both companies.
2019 ERV and annualised gross
income amounts are stated as the sum of 30 September 2019
Shaftesbury and 31 December 2019 Capco balances as previously
reported, adjusted for disposals.
Table 3 - Net debt
|
Capco
31 December
20221
£m
|
Capco
adjustments3
£m
|
Shaftesbury 30 September
20222
£m
|
Shaftesbury
adjustments3
£m
|
Pro forma
2022
£m
|
Cash
|
116.5
|
(13.0)
|
155.2
|
(37.1)
|
221.6
|
Debt at nominal value
|
(750.0)
|
-
|
(959.8)
|
-
|
(1,709.8)
|
Net debt
|
(633.5)
|
(13.0)
|
(804.6)
|
(37.1)
|
(1,488.2)
|
1. As reported in the Capco 31
December 2022 Annual Report. Numbers reported on IFRS basis and not
Group share.
2. As reported in the Shaftesbury
30 September 2022 Annual Report.
3. Reflects working capital and
merger-related transaction costs paid prior to completion of the
merger. The adjusted cash for Shaftesbury of £118.1 million is
consistent with the cash acquired within the Consolidated Statement
of Cash Flows.
Table 4 - Loan-to-value
|
|
|
|
|
Pro forma
2022
£m
|
Net debt at nominal
value
|
Table 3
|
|
|
|
(1,488.2)
|
Market value of investment
property as at 31 December 2022
|
Table 2
|
|
|
|
4,857.8
|
Loan-to-value
|
|
|
|
|
30.6%
|
Table 5 - Cash and undrawn facilities
|
Capco
31 December
20221
£m
|
Capco
adjustments3
£m
|
Shaftesbury 30 September
20222
£m
|
Shaftesbury
adjustments3
£m
|
Pro forma
2022
£m
|
Cash
|
116.5
|
(13.0)
|
155.2
|
(37.1)
|
221.6
|
Undrawn committed
facilities4
|
300.0
|
-
|
-
|
-
|
300.0
|
Cash and undrawn committed
facilities
|
416.5
|
(13.0)
|
155.2
|
(37.1)
|
521.6
|
1. As reported in the Capco 31
December 2022 Annual Report. Numbers
reported on IFRS basis and not Group share.
2. As reported in the Shaftesbury
30 September 2022 Annual Report.
3. Reflects working capital and
merger-related transaction costs paid prior to completion of the
merger. The cash for Shaftesbury of £118.1 million agrees to the
cash acquired within the Consolidated
Statement of Cash Flows.
4. The Group has a £300 million
RCF, which was undrawn at 31 December 2022 and remains undrawn at
31 December 2023.
Table 6 - Commitments
|
|
|
Capco
31 December
20221
£m
|
Shaftesbury 30 September
20222
£m
|
Pro forma
2022
£m
|
Commitments
|
|
|
1.7
|
33.9
|
35.6
|
1. As reported in the Capco 31
December 2022 Annual Report.
2. As reported in the Shaftesbury
30 September 2022 Annual Report.
Table 7 - 2023 rental income
|
|
|
Shaftesbury Capital
31 December
20231
£m
|
Shaftesbury
1 January to 5 March
20232
£m
|
Pro forma
2023
£m
|
Rent receivable
|
|
|
171.9
|
21.2
|
193.1
|
Straight-lining of tenant lease
incentives
|
|
|
3.9
|
(0.5)
|
3.4
|
Rental income
|
|
|
175.8
|
20.7
|
196.5
|
1. As
reported in note 3 'Gross
profit'. Represents the standalone results of Capco for the 1
January to 6 March 2023 and that of the combined Group from 6 March
to 31 December 2023.
2. Reflects the rental income for
Shaftesbury for the period 1 January to 5 March 2023 obtained from
internal management accounts of Shaftesbury. The amounts have not
been adjusted for accounting policy alignments or fair value
adjustments.
Table 8 - 2022 rental income
|
|
|
Capco
31 December
20221
£m
|
Shaftesbury 30 September
20222
£m
|
Pro forma
2022
£m
|
Rent receivable
|
|
|
61.5
|
113.3
|
174.8
|
Straight-lining of tenant lease
incentives
|
|
|
6.3
|
(2.9)
|
3.4
|
Rental income
|
|
|
67.8
|
110.4
|
178.2
|
1. As reported for the 12 months
ended 31 December 2022 in the Capco 31 December 2022 Annual
Report.
2. As reported for the 12 months
ended 30 September 2022 in the Shaftesbury 30 September 2022 Annual
Report.
EPRA measures
(unaudited)
EPRA Net Reinstatement Value
("EPRA NRV"), EPRA Net Tangible Assets ("EPRA NTA") and EPRA Net
Disposal Value ("EPRA NDV") are alternative performance measures
that are calculated in accordance with the Best Practices
Recommendations of the European Public Real Estate Association
(EPRA) to provide a transparent and consistent basis to enable
comparison between European property companies. EPRA NTA is
considered to be the most relevant measure for the Group's
operating activity and is the primary measure of net asset
value.
The following is a summary of EPRA
performance measures and key Group measures. The measures are
defined in the Glossary.
EPRA measure
|
Definition of measure
|
Table
|
2023
|
2022
|
EPRA earnings
|
Recurring earnings from core
operational activity
|
Note 2
|
£45.0m
|
£57.3m
|
EPRA earnings per share
|
EPRA earnings per share based on
the weighted number of ordinary shares
|
Note 2
|
2.7p
|
6.7p
|
EPRA NTA
|
Net asset value adjusted to
include properties and other investment interests at fair value and
to exclude certain items not expected to crystallise in a long-term
investment property business model
|
Note 2
|
£3,479.4m
|
£1,552.2m
|
EPRA NTA per share
|
EPRA NTA per diluted number of
ordinary shares
|
Note 2
|
190.3p
|
182.1p
|
EPRA NDV
|
EPRA NTA amended to include the
fair value of financial instruments and debt
|
Note 2
|
£3,511.7m
|
£1,690.1m
|
EPRA NDV per share
|
EPRA NDV per diluted number of
ordinary shares
|
Note 2
|
192.0p
|
198.3p
|
EPRA NRV
|
EPRA NTA amended to include real
estate transfer tax
|
Note 2
|
£3,811.6m
|
£1,668.2m
|
EPRA NRV per share
|
EPRA NRV per diluted number of
ordinary shares
|
Note 2
|
208.4p
|
195.7p
|
EPRA net initial yield
|
Annualised rental income less
non-recoverable costs as a percentage of market value plus assumed
purchaser's costs
|
1
|
3.8%
|
3.5%
|
EPRA topped-up initial
yield
|
Net initial yield adjusted for the
expiration of rent-free periods
|
1
|
4.2%
|
4.0%
|
EPRA vacancy
|
ERV of un-let units (including
those under offer) expressed as a percentage of the ERV of the
wholly-owned property portfolio excluding units under
development
|
2
|
4.9%
|
2.5%
|
Capital expenditure
|
Capital expenditure on acquisition
and development of investment property portfolio
|
3
|
£53.8m
|
£12.0m
|
EPRA cost ratio
|
Total costs as a percentage of
gross rental income (including direct
vacancy costs)
|
4
|
65.6%
|
75.7%
|
|
Total costs as a percentage of
gross rental income (excluding direct vacancy costs)
|
4
|
60.8%
|
71.0%
|
Adjusted Company cost
ratio
|
Total adjusted costs as a
percentage of adjusted gross rental income (including direct
vacancy costs)
|
4
|
39.9%
|
53.9%
|
|
Total adjusted costs as a
percentage of adjusted gross rental income (excluding direct
vacancy costs)
|
4
|
35.2%
|
49.3%
|
EPRA LTV
(Loan-to-Value)
|
Ratio of adjusted net debt,
including net payables, to the sum of the net assets, including net
receivables, of the Group, its subsidiaries, joint ventures and
associates, all on a proportionate basis, expressed as a
percentage
|
5
|
30.9%
|
28.0%
|
Like-for-like rental
growth1
|
Rental income for properties which
have been owned throughout both years without significant capital
expenditure in either year, so income can be compared
on a like-for-like basis
|
6
|
13.2%
|
22.3%
|
1. EPRA Net initial yield and
EPRA 'topped-up' net initial yield
|
2023
£m
|
2022
£m
|
Investment property -
wholly-owned
|
4,795.3
|
1,743.7
|
Investment property - share of
joint ventures and associates
|
182.2
|
4.4
|
Trading property (including share
of joint venture)
|
41.8
|
72.6
|
Less: developments
|
(284.1)
|
(245.8)
|
Completed property
portfolio
|
4,735.2
|
1,574.9
|
Allowance for estimated purchasers'
costs
|
316.8
|
105.3
|
Gross up completed property
portfolio valuation (A)
|
5,052.0
|
1,680.2
|
Annualised cash passing rental
income
|
202.7
|
62.1
|
Property outgoings
|
(10.6)
|
(3.5)
|
Annualised net rents (B)
|
192.1
|
58.6
|
Add: notional rent expiration of
rent periods or other lease incentives
|
18.2
|
8.8
|
Topped-up net annualised rent
(C)
|
210.3
|
67.4
|
EPRA Net Initial Yield
(B/A)
|
3.8%
|
3.5%
|
EPRA 'topped-up' Net Initial Yield
(C/A)
|
4.2%
|
4.0%
|
The EPRA Net Initial Yield and
EPRA 'topped-up' Net Initial Yield are calculated based on EPRA
guidelines and includes the wholly-owned property portfolio and the
Group's share of Lillie Square and Longmartin.
2. EPRA VACANCY RATE
|
2023
£m
|
2022
£m
|
Estimated rental value of vacant
space
|
10.9
|
1.9
|
Estimated rental value of the
portfolio less development and refurbishment estimated rental
value
|
223.0
|
76.0
|
EPRA vacancy rate
|
4.9%
|
2.5%
|
EPRA vacancy rate is disclosed
only for the wholly-owned property portfolio. This includes units
under offer, net of which vacancy relating to units available to
let is 2.1 per cent. Investment properties held within the joint
venture at Lillie Square and the Longmartin associate totalling
£182.2 million (our share) (2022: £4.4 million (our share)) is not
included in the vacancy rate above.
3. PROPERTY RELATED
CAPEX
|
20231
|
2022
|
|
|
|
Group
(excluding joint ventures and
associates)
£m
|
Joint ventures and associates
£m
|
Total Group £m
|
Group (excluding joint ventures
and associates)
£m
|
Joint ventures and associates
£m
|
Total Group £m
|
Acquisitions
|
17.4
|
-
|
17.4
|
-
|
-
|
-
|
Development
|
-
|
0.8
|
0.8
|
-
|
0.6
|
0.6
|
Investment property
|
|
|
|
-
|
-
|
-
|
Incremental lettable
space
|
5.1
|
-
|
5.1
|
-
|
-
|
-
|
No incremental lettable
space
|
28.5
|
0.5
|
29.0
|
9.0
|
-
|
9.0
|
Tenant lease incentives
|
1.5
|
0.3
|
1.8
|
1.3
|
-
|
1.3
|
Total CapEx
|
52.5
|
1.6
|
54.1
|
10.3
|
0.6
|
10.9
|
Conversion from accrual to cash
basis
|
(1.3)
|
1.0
|
(0.3)
|
0.8
|
0.3
|
1.1
|
Total CapEx on cash
basis
|
51.2
|
2.6
|
53.8
|
11.1
|
0.9
|
12.0
|
|
|
|
|
|
|
|
| |
1. The property-related capex related
to the standalone performance of Capco for the period to 6 March
2023 and that of the combined Group from that date to 31 December
2023.
4. EPRA COST RATIO
|
2023
£m
|
2022
£m
|
Administrative expenses
|
83.8
|
40.6
|
Total property outgoings
|
51.2
|
18.4
|
Provision for/(reversal of)
expected credit loss
|
2.0
|
(1.6)
|
Less: Service charge
expense
|
(19.3)
|
(6.3)
|
Management fee
|
(0.1)
|
-
|
Share of joint ventures and
associates expenses
|
3.5
|
0.6
|
Exclude:
|
|
|
Ground rent cost
|
(0.8)
|
(1.0)
|
EPRA Cost (including direct vacancy
costs) (A)
|
120.3
|
50.7
|
Direct vacancy costs
|
(8.9)
|
(3.1)
|
EPRA Costs (excluding direct
vacancy costs) (B)
|
111.4
|
47.6
|
Gross Rental Income less ground
rent costs
|
194.3
|
73.1
|
Less: Service charge
income
|
(19.3)
|
(6.3)
|
Share of joint ventures and
associates property income
|
8.3
|
0.2
|
Adjusted gross rental income
(C)
|
183.3
|
67.0
|
|
|
|
EPRA Cost Ratio (including direct
vacancy costs) (A/C)
|
65.6%
|
75.7%
|
EPRA Cost Ratio (excluding direct
vacancy costs) (B/C)
|
60.8%
|
71.0%
|
|
|
|
Company specific
adjustments:
|
|
|
Non-underlying administrative
expenses1
|
(44.5)
|
(14.6)
|
Impact of change in accounting
policy on property outgoings2
|
(1.0)
|
-
|
Company specific adjustments for costs (D)
|
(45.5)
|
(14.6)
|
|
|
|
Adjusted Company Cost (including
direct vacancy costs) (E = A+D)
|
74.8
|
36.1
|
Adjusted Company Cost (excluding
direct vacancy costs) (F = B+D)
|
65.9
|
33.0
|
|
|
|
Impact of change in accounting
policy on rental income2
|
4.1
|
-
|
Adjusted Company gross rental
income (G)
|
187.4
|
67.0
|
|
|
|
Adjusted Company Cost ratio
(including direct vacancy costs) (E/G)
|
39.9%
|
53.9%
|
Adjusted Company Cost ratio
(excluding direct vacancy costs) (F/G)
|
35.2%
|
49.3%
|
1. Company specific adjustment
relates to non-underlying administrative expenses and do not
represent the recurring, underlying performance of the Group.
Details of non-underlying expenses are set out in note 4
'Administration expenses'.
2. Company specific adjustment
relates to the impact on the change in accounting policies as
discussed in note 1 'Principal accounting policies'.
£0.3 million (2022: nil) of
administrative expenses were capitalised during the
year.
5. EPRA LTV
|
2023
|
|
Group
£m
|
Share of joint ventures and
associates
£m
|
Total
£m
|
Borrowings from financial
institutions
|
1,409.8
|
60.0
|
1,469.8
|
Exchangeable bond
|
275.0
|
-
|
275.0
|
Net payables
|
(62.6)
|
80.4
|
17.8
|
Exclude:
|
|
|
|
Cash and cash
equivalents1
|
(200.2)
|
(9.9)
|
(210.1)
|
Net debt (B)
|
1,422.0
|
130.5
|
1,552.5
|
Investment properties at fair
value
|
4,775.1
|
182.2
|
4,957.3
|
Owner-occupied property at fair
value
|
20.2
|
-
|
20.2
|
Properties under
development
|
-
|
41.8
|
41.8
|
Total property value
(A)
|
4,795.3
|
224.0
|
5,019.3
|
EPRA LTV (B/A)
|
|
|
30.9%
|
1. Includes tenant deposits of
£14.5 million held as security against tenant rent payments which
are subject to certain restrictions and therefore not available for
general use by the Group.
|
2022
|
|
Group
£m
|
Share of joint ventures and
associates
£m
|
Total
£m
|
Borrowings from financial
institutions
|
475.0
|
-
|
475.0
|
Exchangeable bond
|
275.0
|
-
|
275.0
|
Exclude:
|
|
|
|
Cash and cash
equivalents1
|
(129.9)
|
(6.1)
|
(136.0)
|
Net debt (B)
|
620.1
|
(6.1)
|
614.0
|
Investment properties at fair
value
|
1,743.7
|
4.4
|
1,748.1
|
Properties under
development
|
-
|
72.6
|
72.6
|
Net receivables
|
94.5
|
(75.8)
|
18.7
|
Financial assets
|
356.9
|
-
|
356.9
|
Total property value
(A)
|
2,195.1
|
1.2
|
2,196.3
|
EPRA LTV (B/A)
|
|
|
28.0%
|
1. Includes tenant deposits of
£13.4 million held as security against tenant rent payments which
are subject to certain restrictions and therefore not available for
general use by the Group.
6. LIKE-FOR-LIKE RENTAL
GROWTH
The like-for-like rental growth is
presented for the wholly-owned property portfolio, where all assets
are located in the West End of London.
|
|
2023
£m
|
Rental income in current year
|
Table 7 pro forma
|
196.5
|
Adjusted for impact of:
|
|
|
Change in
accounting policy1
|
|
4.1
|
Acquisitions
|
|
(0.4)
|
Disposals
|
|
(4.1)
|
Like-for-like rental income in current year
(A)
|
|
196.1
|
Rental income in previous year
|
Table 8 pro forma
|
178.2
|
Adjusted for impact of:
|
|
|
Acquisitions
|
|
(0.1)
|
Disposals
|
|
(4.8)
|
Like-for-like rental income in prior year
(B)
|
|
173.3
|
Like-for-like growth in rental income
((A-B)/B)
|
|
13.2%
|
1. As set out in note 1 'Changes
in accounting policies', there is a £4.1 million reduction to 2023
straight-lining of tenant lease incentives as a result of the
alignment of accounting policies following the merger. The
alignment was considered immaterial and therefore no retrospective
adjustment has been made, and the cumulative impact as at 1 January
2023 was adjusted in the current year.
Analysis of property portfolio (unaudited)
1. PROPERTY VALUATION ANALYSIS
The like-for-like valuation and
ERV growth has been prepared on a pro forma basis reflecting the
movement from 31 December 2022 to 31 December 2023. The valuation
information as at 31 December 2022 reflects the external valuations
performed by both companies as announced within the Capco 2022
Annual Report and Shaftesbury 2022 trading update announced on 30
January 2023.
Wholly-owned portfolio valuation by use
31 December 2023
|
Retail
|
Hospitality and leisure
|
Offices
|
Residential
|
Wholly-owned portfolio
|
Fair value
(£m)1
|
1,605.0
|
1,621.7
|
879.1
|
687.4
|
4,793.2
|
% of total fair value
|
34%
|
34%
|
18%
|
14%
|
100%
|
L-f-L valuation
movement
|
-0.5%
|
-0.8%
|
-0.5%
|
-1.8%
|
-0.8%
|
Annualised gross income
(£m)
|
64.8
|
72.7
|
31.5
|
23.8
|
192.8
|
% of annualised gross
income
|
34%
|
38%
|
16%
|
12%
|
100%
|
ERV (£m)
|
78.4
|
82.0
|
50.2
|
26.3
|
236.9
|
L-f-L ERV movement
|
+6.7%
|
+8.4%
|
+5.1%
|
+6.1%
|
+6.9%
|
% of ERV
|
33%
|
35%
|
21%
|
11%
|
100%
|
Average
ERV (£ psf)
|
108
|
82
|
74
|
59
|
83
|
Net initial yield
|
3.6%
|
4.2%
|
3.1%
|
2.2%
|
3.5%
|
Topped up net initial
yield
|
4.0%
|
4.4%
|
3.6%
|
n/a
|
3.8%
|
Equivalent yield
|
4.4%
|
4.7%
|
4.8%
|
2.8%
|
4.3%
|
WAULT (years)
|
3.3
|
8.3
|
2.7
|
1.3
|
4.6
|
Area (sq. ft. m) 2
|
0.7
|
1.0
|
0.7
|
0.5
|
2.9
|
Units2
|
415
|
423
|
418
|
709
|
1,965
|
1. Excludes £2.1 million of Group properties primarily held in
Lillie Square Holdings (a wholly-owned subsidiary).
2. Excludes long-leasehold
residential interests.
Wholly-owned portfolio valuation by
location
31 December 2023
|
Covent Garden
|
Carnaby | Soho
|
Chinatown
|
Fitzrovia
|
Wholly-owned portfolio
|
Fair value
(£m)1
|
2,521.6
|
1,482.2
|
689.5
|
99.9
|
4,793.2
|
% of total fair value
|
53%
|
31%
|
14%
|
2%
|
100%
|
L-f-L valuation
movement
|
+0.3%
|
-1.6%
|
-0.2%
|
-17.4%
|
-0.8%
|
Annualised gross income
(£m)
|
97.4
|
59.0
|
31.2
|
5.2
|
192.8
|
% of annualised gross
income
|
51%
|
31%
|
16%
|
2%
|
100%
|
ERV (£m)
|
122.3
|
76.1
|
33.0
|
5.5
|
236.9
|
L-f-L ERV movement
|
+8.7%
|
+4.2%
|
+7.6%
|
+0.7%
|
+6.9%
|
% of ERV
|
52%
|
32%
|
14%
|
2%
|
100%
|
Net initial yield
|
3.4%
|
3.4%
|
4.0%
|
4.5%
|
3.5%
|
Topped up net initial
yield
|
3.7%
|
3.9%
|
4.1%
|
4.7%
|
3.8%
|
Equivalent yield
|
4.3%
|
4.5%
|
4.2%
|
4.7%
|
4.3%
|
WAULT (years)
|
4.9
|
3.9
|
5.5
|
4.9
|
4.6
|
Area (sq. ft. m) 2
|
1.5
|
0.9
|
0.4
|
0.1
|
2.9
|
Units2
|
850
|
664
|
350
|
101
|
1,965
|
1. Excludes £2.1 million of Group
properties primarily held in Lillie Square Holdings (a wholly-owned
subsidiary).
2. Excludes long-leasehold
residential interests.
DIVIDENDS
The Directors of Shaftesbury Capital
have proposed a final cash dividend of 1.65 pence per ordinary
share (ISIN GB00B62G9D36) payable on Friday, 31 May
2024.
Dates
The following are the salient
dates for payment of the proposed 2023 final cash
dividend:
Proposed 2023 final dividend
announced
|
|
Thursday,
29 February 2024
|
Sterling/Rand exchange rate
struck
|
|
Monday,
15 April 2024
|
Sterling/Rand exchange rate and
dividend amount in Rand announced by 11:00am (South African
time)
|
|
Tuesday,
16 April 2024
|
Last day to trade
cum-dividend*
|
|
Tuesday,
23 April 2024
|
Ordinary shares listed ex-dividend
on the Johannesburg Stock Exchange
|
|
Wednesday, 24 April 2024
|
Ordinary shares listed ex-dividend
on the London Stock Exchange
|
|
Thursday,
25 April 2024
|
Record date for the 2023 final
dividend in UK and South Africa
|
|
Friday,
26 April 2024
|
Deadline for submission of
declaration of eligibility to receive gross PID payment to UK
registrar (COB)
|
|
Friday,
26 April 2024
|
Annual General Meeting
|
|
Thursday,
23 May 2024
|
Dividend payment date for
shareholders
|
|
Friday,
31 May 2024
|
The proposed 2023 final cash
dividend is subject to approval at the Company's Annual General
Meeting, to be held on Thursday, 23 May 2024.
*South African shareholders should
note that, in accordance with the requirements of Strate, the last
day to trade cum-dividend will be Tuesday, 23 April 2024. No
dematerialisation of shares will be possible from Wednesday, 24 April
2024 to Friday, 26 April 2024 inclusive. No transfers between the UK and South
Africa registers may take place from close of business on Tuesday,
16 April 2024 to Friday, 26 April 2024 inclusive.
The above dates are proposed and
subject to change.
The Property Income Distribution
("PID") element (being 0.65 pence) will be subject to a deduction
of a 20 per cent UK withholding tax unless exemptions apply. The
non-PID element (being 1.0 pence) will be treated as an ordinary UK
company dividend.
Information for
shareholders
The information below is included
only as a general guide to taxation for shareholders based on
Shaftesbury Capital's understanding of the law and the practice
currently in force. Any shareholder who is in any doubt as to their
tax position should seek independent professional
advice.
UK shareholders -
PIDs
Certain categories of
shareholders may be eligible for exemption from the 20 per cent UK
withholding tax and may register to receive their dividends on a
gross basis. Further information, including the required forms, is
available from the 'Investor Information' section of the Company's
website
(https://www.shaftesburycapital.com/en/investors/investor-information.html),
or on request from our UK registrars, Link Group. Validly completed
forms must be received by Link Group no later than the dividend
Record Date, as advised; otherwise the dividend will be paid after
deduction of tax.
South African shareholders
The proposed 2023 final cash
dividend declared by the Company is a foreign payment and the funds
are sourced from the UK.
PIDs: A 20 per cent UK withholding
tax is applicable to a PID. South African shareholders may apply to
HMRC after payment of the PID element of the proposed 2023 final
cash dividend for a refund of the difference between the 20 per
cent UK withholding tax and the UK/South African double taxation
treaty rate of 15 per cent.
The PID element of the proposed
2023 final cash dividend will be exempt from income tax but will
constitute a dividend for Dividends Tax purposes, as it will be declared in
respect of a share listed on the exchange operated by the JSE. SA
Dividends Tax will therefore be withheld from the PID element of
the proposed 2023 final cash dividend at a rate of 20 per cent,
unless a shareholder qualifies for an exemption and the prescribed
requirements for effecting the exemption are in place by the
requisite date. Certain shareholders may also qualify for a
reduction of SA Dividends Tax liability to 5 per cent, (being the
difference between the SA dividends tax rate and the effective UK
withholding tax rate of 15 per cent) if the prescribed requirements
for effecting the reduction are in place by the requisite
date.
Non-PID: The non-PID element of
the proposed 2023 final cash dividend will be exempt from income
tax but will constitute a dividend for SA Dividends Tax purposes,
as it will be declared in respect of a share listed on the exchange
operated by the JSE. SA Dividends Tax will therefore be withheld from the non-PID
element of the proposed 2023 final cash dividend at a rate of 20
per cent, unless a shareholder qualifies for an exemption and the
prescribed requirements for effecting the exemption are in place by
the requisite date.
Other overseas shareholders:
Other non-UK shareholders may be
able to make claims for a refund of UK withholding tax deducted
pursuant to the application of a relevant double taxation
convention. UK withholding tax refunds can only be claimed from
HMRC, the UK tax authority.
Additional information on PIDs can
be found at
https://www.shaftesburycapital.com/en/investors/investor-information/reit.html
Glossary
Alternative Performance Measure
(APM)
A financial measure of historical
or future financial performance, position or cash flows of the
Group which is not a measure defined or specified in
IFRS.
Annualised gross
income
Total annualised actual and
"estimated income" from leases at a valuation date. It includes
sundry non-leased income and estimated turnover related rents. No
rent is attributed to leases which were subject to rent free
periods at that date. It does not reflect any head rents and
estimated irrecoverable outgoings at the valuation date. "Estimated
income" refers to gross ERVs in respect of rent reviews outstanding
at the valuation date and, where appropriate, ERV in respect of
lease renewals outstanding at the valuation date where the fair
value reflects terms for a renewed lease.
Contracted income
Includes rent frees and contracted
rent increases.
Capco
Capco represents Shaftesbury
Capital PLC, formerly Capital & Counties Properties PLC, (also
referred to as "the Company") and all its subsidiaries and group
undertakings, collectively referred to as "the Group".
Cash and undrawn committed
facilities
Cash and cash equivalents,
excluding tenant deposits, plus undrawn committed
facilities.
CDP
Carbon Disclosure Project
Worldwide, a global not-for-profit sustainability disclosure
system. Shaftesbury Capital participates in the CDP Climate Change
Programme, which measures progress on climate change
disclosure.
Combined Group
The Capco Group and Shaftesbury
Group following merger completion.
Energy Performance Certificate
(EPC)
An asset rating setting out how
energy efficient a building is, rated by its carbon dioxide
emission on a scale of A to G, with A being the most energy
efficient.
EPRA
European Public Real Estate
Association, the publisher of Best Practice Recommendations
intended to make financial statements of public real estate
companies in Europe clearer, more transparent and
comparable.
EPRA earnings per
share
Profit or loss for the year
excluding valuation movements on the wholly-owned, joint venture
and associate properties, fair value changes of financial
instruments and listed investments, cost of early close out of
debt, gain on bargain purchase and IFRS 3 merger-related
transaction costs, divided by the weighted average number of shares
in issue during the year.
EPRA loan-to-value
(LTV)
Ratio of net debt, including net
payables, to the sum of the total property value, including net
receivables, of the Group, its subsidiaries, joint ventures and
associates, all on a proportionate basis, expressed as a
percentage. The calculation includes trading properties at fair
value and debt at nominal value.
EPRA net disposal value (NDV) per
share
The net assets as at the end of
the year including the excess of the fair value of trading property
over its cost, revaluation of other non-current investments and the
fair value of fixed interest rate debt over their carrying
value, divided by the diluted number of ordinary
shares.
EPRA net tangible assets (NTA)
per share
The net assets as at the end of
the year including the excess of the fair value of trading property
over its cost and revaluation of other non-current investments,
excluding the fair value of financial instruments and deferred tax
on revaluations, divided by the diluted number of
ordinary shares.
EPRA net reinstatement value
(NRV) per share
The net assets as at the end of
the period including the excess of the fair value of trading
property over its cost and excluding the fair value of financial
instruments, deferred tax on revaluations and diluting for the
effect of those shares potentially issuable under employee share
schemes plus a gross up adjustment for related costs such as Real
Estate Transfer Tax, divided by the diluted number of ordinary
shares.
EPRA vacancy
ERV of unlet units (including
those under offer) expressed as a percentage of the ERV of the
wholly-owned property portfolio
excluding units under development.
Estimated rental value
(ERV)
The external valuers' estimate of
the open market rent which, on the date of valuation, could
reasonably be expected to be obtained on a new letting or rent
review of the property.
GRESB
The Global Real Estate
Sustainability Benchmark, a sustainability index. Shaftesbury
Capital participates in the GRESB Real Estate
Assessment.
Headline earnings per
share
Headline earnings per share is
calculated in accordance with Circular 1/2023 issued by the South
African Institute of Chartered Accountants ("SAICA"), a requirement
of the Group's JSE listing. This measure is not a requirement of
IFRS.
Innova
Innova Investment Limited
Partnership was the former 50 per cent joint venture between the
Group and Network Rail Infrastructure Limited. The Group disposed
of its interest on 15 May 2023.
Kwok Family Interests
(KFI)
Joint venture partner in the
Lillie Square development.
Leasing activity
The rental value secured from
lettings, rent reviews and lease renewals during a
period.
Like-for-like
property
Property which has been owned
throughout both years, without significant capital expenditure in
either year, so income can be compared on a like-for-like basis.
For the purposes of comparison of capital values, this will also
include assets owned at the previous balance sheet date but not
necessarily throughout the prior year.
Loan-to-value (LTV)
LTV is calculated on the basis of
net debt divided by the market value of the wholly-owned property
portfolio.
Longmartin
The Longmartin associate is a 50
per cent investment arrangement between Shaftesbury Capital and The
Mercers' Company.
LSJV
The Lillie Square joint
venture is a 50 per cent joint venture
between the Group and Kwok Family
Interests.
MSCI
Producer of an independent
benchmark of property returns.
NAV
Net Asset Value.
Net initial yield
The net initial income at the
valuation date expressed as a percentage of the gross valuation.
Yields reflect net income after deduction of any ground rents, head
rents and rent charges and estimated irrecoverable outgoings at the
valuation date.
Net debt
Total borrowings, at nominal
value, less cash and cash equivalents, excluding tenant
deposits.
Net Zero Carbon
When there is a balance between
the amount of GHG emissions produced and the amount removed from
the atmosphere targeting initially reduction in GHG emissions
resulting from our buildings and operations and then offsetting of
any unavoidable residual emissions.
Nominal equivalent
yield
Effective annual yield to a
purchaser on the gross market value, assuming rent is receivable
annually in arrears, and that the property becomes fully occupied
and that all rents revert to the current market level (ERV) at the
next review date or lease expiry.
Pro forma
Pro forma information has been
included for selective measures and for the 31 December 2022
Combined Group balance sheet to provide relevant comparative
information. Further details on pro forma information, and
reconciliation to reported numbers, is included on page
59.
Property income distributions
(PIDs)
Distribution under the REIT regime
that constitutes at least 90 per cent of the Group's taxable income
profits arising from its qualifying property rental business, by
way of dividend. PIDs can be subject to withholding tax at 20 per
cent. If the Group distributes profits from its non-qualifying
business, the distribution will be taxed as an ordinary dividend in
the hands of the investors.
Real estate investment trust
(REIT)
A REIT is exempt from corporation
tax on income and gains of its property rental business (qualifying
activities) provided a number of conditions are met. It remains
subject to corporation tax on non-exempt income and gains
(non-qualifying activities) which would include any trading
activity, interest income and development and management fee
income.
Real Estate Transfer
Tax
Purchasers' cost as included
within the independent valuation of investment and trading
properties.
Reversionary potential
The amount by which ERV exceeds
annualised gross income, measured at a valuation date.
RICS
Royal Institution of Chartered
Surveyors.
Shaftesbury PLC
Shaftesbury represents Shaftesbury
PLC and all its subsidiaries and Group undertakings, collectively
referred to as the Shaftesbury Group.
Shaftesbury Capital
PLC
With effect from 6 March 2023,
Capital & Counties Properties PLC changed its name to
Shaftesbury Capital PLC (also referred to as "the Company" or
"Shaftesbury Capital"), and all its subsidiaries and Group
undertakings, collectively referred to as "the Group".
Sterling Overnight Interbank
Average Rate (SONIA)
The average overnight Sterling
risk-free interest rate, set in arrear, paid by banks for unsecured
transactions.
Tenant lease
incentives
Any incentives offered to tenants
to enter into a lease. Typically incentives are in the form of an
initial rent-free period and/or a cash contribution to fit-out the
premises. Under International Financial Reporting Standards the
value of incentives granted to tenants is amortised through the
consolidated income statement on a straight-line basis to the
earlier of break or lease expiry.
Topped-up net initial
yield
Net initial yield adjusted for the
expiration of rent-free periods.
Total accounting return
(TAR)
The movement in EPRA NTA per share
plus dividends per share paid during the year.
Total property return
(TPR)
Capital growth including gains and
losses on disposals plus rent received less associated costs,
including ground rent.
Total shareholder return
(TSR)
The movement in the price of an
ordinary share plus dividends paid during the year assuming
re-investment in ordinary shares.
Underlying administrative
costs
Administrative expenses excluding
merger-related transaction and integration costs and non-underlying
administrative expenses. The items are excluded as considered to be
non-recurring or significant by virtue of size and
nature.
Underlying earnings
Underlying earnings reflects the
underlying financial performance of the Group's core West End
property rental business. The measure aligns with the main
principles of EPRA earnings. Additional adjustments are made to
exclude items considered to be non-recurring or significant by
virtue of size and nature.
Underlying earnings per share
(EPS)
Underlying earnings divided by the
weighted average number of shares in issue during the
period.
Valuation
growth/decline
The valuation movement and
realised surpluses or deficits arising from the Group's investment
property portfolio expressed as a percentage return on the
valuation at the beginning of the period adjusted, on a time
weighted basis, for acquisitions, disposals and capital
expenditure. When measured on a like-for-like basis, the
calculation excludes those properties acquired or sold during the
period.
Weighted average unexpired lease
term (WAULT)
The unexpired lease term to the
earlier of break or lease expiry weighted by ERV for each
lease.
Zone A
A means of analysing and comparing
the rental value of retail space by dividing it in to zones
parallel with the main frontage. The most valuable zone, Zone A,
falls within a 6m depth of the shop frontage. Each successive zone
is valued at half the rate of the zone in front of it. The blend is
referred to as being 'ITZA' ("In Terms of Zone A").
Important notices
This press release contains
"forward-looking statements" regarding the belief or current
expectations of Shaftesbury Capital PLC, its Directors and other
members of its senior management about Shaftesbury Capital PLC's
businesses, financial performance and results of operations. These
forward-looking statements are not guarantees of future
performance. Rather, they are based on current views and
assumptions and involve known and unknown risks, uncertainties and
other factors, many of which are outside the control of Shaftesbury
Capital PLC and are difficult to predict, that may cause actual
results, performance or developments to differ materially from any
future results, performance or developments expressed or implied by
the forward-looking statements. These forward-looking statements
speak only as at the date of this press release. Except as required
by applicable law, Shaftesbury Capital PLC makes no representation
or warranty in relation to them and expressly disclaims any
obligation to update or revise any forward-looking statements
contained herein to reflect any change in Shaftesbury Capital PLC's
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
The information contained in this press release does not purport to
be comprehensive and has not been independently
verified.
Any information contained in this
announcement on the price at which shares or other securities in
Shaftesbury Capital PLC have been bought or sold in the past, or on
the yield on such shares or other securities, should not be relied
upon as a guide to future performance. No statement in this press
release is intended to be a profit forecast and no statement in
this press release should be interpreted to mean that earnings per
share of Shaftesbury Capital PLC for the current or future
financial years would necessarily match or exceed the historical
published earnings per share of Shaftesbury Capital PLC.
Certain industry and market data
contained in this press release has come from third party sources.
Third party publications, studies and surveys generally state that
the data contained therein have been obtained from sources believed
to be reliable, but that there is no guarantee of accuracy or
completeness of such data.