Chief Executive's Statement

It is a pleasure to be writing this statement, my first as Chief Executive of C&R after taking up the role in June 2017. I would like to take this opportunity to thank our former CEO, Hugh Scott-Barrett, for all his support and guidance during my transition into the role. Hugh’s continued involvement as chairman is welcome from my perspective.

We have been busy delivering on our 2017 business plans, where we have seen strong momentum in income and leasing with our accretive Capex projects, and implementing our new strategy. This was launched successfully in December 2017 and is designed to ensure that we capitalise fully on the continued evolution in physical retailing.

We believe that our centres are well placed to take advantage of important and ongoing changes in how we live, work, socialise and access goods and services, be it through the physical, online or combined “omnichannel” platforms.

Our renewed focus on better tailoring and aligning our retail and services to the local communities which we serve, coupled with ensuring that our centres are easier and more pleasurable to access and visit, will deliver continued income growth through improved footfall, sales, tenant demand and rents.

The success of the pilot projects completed in Q4 last year reinforces our confidence in our ability to redefine the community shopping centre in the UK, through our asset management masterplans which are fundamental to our ability to continue delivering underlying recurring income growth. 

Income growth continues to deliver performance

Net rental income within the wholly-owned portfolio grew 2.4% from £50.4 million to £51.6 million, or 1.9% on a like-for-like basis. Delivery of our capital expenditure (“Capex”) programme, which includes unlocking the potential of the former BHS stores, saw the Group invest £17.5 million of Capex during the year which helped drive income growth, and included:

  • Travelodge at Wood Green – £6.4 million total project spend (£4.2 million in 2017);
  • Conversion of the former BHS unit at Walthamstow into units for Lidl, The Gym and further leisure and retail space – £4.3 million total project investment (£3.9 million in 2017); and
  • A new Wilko store in Blackburn formed from the former BHS – £1.0 million total project spend, all of which was undertaken in the year under review.

With average rents currently at c. £15 psf, we will see further growth in income as the repositioning Capex is deployed during 2018 and 2019 to improve the productivity of our floor space while maintaining the rental affordability that makes our centres so attractive to retailers. We continue to adopt a conservative approach in assessing the return from our Capex projects and in the majority of cases exclude any “halo” impact across other parts of the centres from the works. These often involve new anchor retailers and significant changes to customer proposition which further increase the appeal of the centres to their communities.

Cost management and operating efficiencies

This focus on income is supported by a renewed approach to cost management as announced at our half year results. We are targeting efficiency savings of at least £1.8 million from our central cost base by the end of 2018, representing a saving of approximately 20% of the total 2016 central overhead. Pleasingly we have delivered over 60% of these savings as of year end, with the balance in varying stages of realisation. We believe that there are further efficiencies in our overhead as the operational restructuring is implemented and with decentralisation empowering the centre teams.

Leasing demand supports our strategy

Leasing activity has continued apace in 2017, with 79 new leases and renewals and 32 rent reviews together totalling £9.6 million in annual income, underlining demand for our centres from non-discretionary and value orientated retailers, service providers, hotels, cinemas, supermarkets and food catering. Importantly, our new leasing and renewals were completed at an average spread of 10.3%1 over previous passing rent and 8.4%1 over valuation ERVs. Occupancy improved to 97.3% from 95.4% at December 2016.

While retailing continues to evolve and is undoubtedly facing cyclical and structural headwinds, we have full confidence that our repositioning programme and rebased affordable occupancy costs will continue to allow our retailer customers to trade profitably in high footfall locations that are the engine room for their profits.


Lawrence Hutchings

Asset recycling

We remain committed to recycling where we believe that we have optimised the asset through active repositioning and are able to generate more accretive returns from either new acquisitions or additional capital investment in the rest of the portfolio.

As planned, the pace of asset recycling was slower in the second half of the year, after the successful sales of Camberley in late 2016 and the Buttermarket in Ipswich in February 2017. The proceeds of these sales supported the acquisition of The Marlowes, Hemel Hempstead in early 2016 and the Exchange, Ilford in March 2017. 

We believe that there will be increased potential for investment opportunities and that pricing may become more attractive to acquire assets as the importance of active, income driven, strategic, long-term management becomes more critical to the success of our type of assets. Our internal management structure and dedicated team of retail professionals provide us with a real competitive advantage, allowing us to unlock income growth from well-located community shopping centres that meet our criteria.

Balance sheet strength

The Group continues to benefit from the balance sheet restructuring and refinancing undertaken in January 2017, which covers five of the Group’s seven wholly-owned centres, as well as the subsequent new debt facility for Ilford and the renewal of the Group’s Revolving Credit Facility. The Group’s all-in cost of debt is now just 3.25%, allowing us to benefit from historically low interest rates, which have subsequently increased. It also provides us with the stability of a 6.7 year term increasing to 7.3 if all options are exercised.

Our capital expenditure programme is unique amongst our peers in that it comprises a majority of smaller projects, which are often capable of being completed within a 12–18 month period. This provides us with maximum flexibility to dynamically manage the balance sheet to react quickly to changes in market conditions and to new opportunities.


While retailing continues to evolve and is undoubtedly facing cyclical and structural headwinds, we have full confidence that our repositioning programme and rebased affordable occupancy costs will continue to allow our retailer customers to trade profitably in high footfall locations that are the engine room for their profits.

Our weighting to the London and Greater London economy, with its strong population growth and density, is creating demand from non-retail uses including residential, hotel and leisure with on flow benefits to our core retail business and customers. We are committed to maximising the value of the Group’s assets through strategic asset masterplans and delivering on behalf of our shareholders.

We are steadfast in our endeavours to improve the lives of the communities that we serve, through providing best in class environments for retail goods, leisure services, social interaction and facilitating click and collect fulfilment. In short we believe that the intersection of where product and services meet people remains very important.

The Board has announced a 7.4% increase in total dividend for 2017 and, while fully aware that recent occupier failures present some challenges to short-term results, believes that both the momentum we have carried through into 2018 and our strategic asset management masterplans, now established across our entire portfolio following the initial results seen at Ilford and Maidstone, underpin our objective of delivering annual dividend growth in a range of 5% to 8% over the medium term.

Finally, I would like to reinforce Hugh’s thanks and appreciation to all our staff both at the support office in London and in our centres. A significant amount has been achieved during the past nine months in delivering these results whilst creating and implementing our new strategy. These are the first exciting steps on our journey to be the best in class owner managers of community shopping centres.

Lawrence Hutchings
Chief Executive

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