Capital & Regional raises dividend after strong first half

Shopping centre real estate investment trust Capital & Regional reported a strong set of first-half financial results on Thursday, marked by a 17.1% increase in net rental income (NRI) to £13.7m.

The London-listed firm said the growth was driven by robust occupier demand, reflected in 48 new lettings and renewals, up from 42 in the same period last year, with rents achieved at an average premium of 8.8% to previous levels and 14.1% above estimated rental value (ERV).

Its portfolio saw a slight increase in like-for-like valuations by 0.8% to £374.9m, with occupancy improving to 93.9%, up from 93.4% in December.

The improvement was aided by the re-letting of three former Wilko units to B&M, contributing to strong operational metrics, including 21.1 million shopper visits in the first half and a rent collection rate of 99.2%, up from 98.4% in the same period last year.

Capital & Regional's adjusted profit increased 17.1% to £8.2m, reflecting the successful integration of the Gyle shopping centre acquisition, which contributed to a 21% increase in statutory revenue to £34.5m.

The company also reported a 19% growth in Snozone's EBITDA to £1.9m, driven by revenue growth in both its UK and Madrid operations.

Despite the gains, IFRS profit for the period was £4.5m, down from £6.1m in the first half of 2023, primarily due to valuation movements.

However, the company continued to invest in its portfolio, with a net investment of £3.1m during the period, including the completion of a new NHS community healthcare centre in Ilford and the remerchandising of the former WH Smith in Wood Green, creating new units for tenants like Pure Gym, Wendy's, and Wingstop.

The company's net asset value (NAV) increased to £203.9m from £202m at the end of 2023.

However, the net asset value per share and EPRA net tangible assets per share decreased slightly to 88p and 85p, respectively, due to an increased number of shares in issue following the June scrip dividend.

Capital & Regional maintained a secure debt position with a long average debt maturity of 3.6 years and an average cost of debt of 4.25%, with about 80% of its debt hedged for the next two and a half years.

The group's net loan-to-value (LTV) ratio improved to 43%, down from 44% at the end of 2023.

Capital & Regional said it also made significant progress in its sustainability initiatives, achieving an 83% reduction in Scope 1 natural gas and a 20% reduction in Scope 2 electricity consumption since 2019.

The EPC rating of Snozone Milton Keynes improved from 'C' to 'B', and all shopping centres and Snozone venues now operated on 100% renewable energy.

Reflecting its performance, Capital & Regional announced a 3.6% increase in its proposed interim dividend to 2.85p per share, up from 2.75p per share a year ago.

“We have delivered another positive set of results during the first half of 2024, with our proven community strategy continuing to support our progress,” said chief executive officer Lawrence Hutchings.

“Against what at times has been a challenging economic backdrop our team has been able to capitalise on the continued strong levels of demand from retailers for space within our centres, particularly those in London.

“This is reflected in the strong leasing momentum we have maintained.”

Hutchings said that over the six months to the end of June, the company completed more lettings and renewals than over the same period last year and achieved them at both a higher average rent per lease and average premium to the previous rent.

“The rapid re-leasing of all three of our former Wilko units to B&M in the first few months of 2024 is one of the most notable examples of the demand for space in our centres from retailers that need to be at the heart of local communities, which is further evidenced by the strong start we have made to the second half of the year.

“We also continue to make significant progress on our repositioning masterplan in Ilford where we have agreed terms on two major leases encompassing 44,000 square feet of floor space, generating approximately £0.5m of additional income.

“The expanded and relocated TK Maxx is trading well and our NHS community healthcare centre is now open on the upper level.”

Lawrence Hutchings said Capital & Regional had seen a further period of stable valuations and successfully integrated the Gyle shopping centre into its portfolio, where the initiatives undertaken since acquisition in September had led to a 5% increase in value.

“Notwithstanding the previously announced and ongoing corporate activity, Capital & Regional remains well placed to continue to deliver on its successful community strategy to drive income growth and value in support of progressive shareholder dividends.”

At 1102 BST, shares in Capital & Regional were up 2.59% at 66.68p.

Reporting by Josh White for Sharecast.com.