Capital & Regional resumes dividend after strong first half

Capital & Regional reported improved income and profitability in its half-year results on Thursday, with net rental income on its investment assets up 23% year-on-year to £12.2m.

The London-listed firm said that was driven by improved occupancy and rent collection, with statutory revenue totalling £28.4m for the six months ended 30 June, compared to £27.4m a year earlier.

It said the improvement in net rental income flowed through to adjusted profit, which increased 87% to £5.8m, while adjusted earnings per share saw growth of 25% to 3.5p.

IFRS profit for the first half totalled £26.8m, swinging from a loss of £41.3m in the same period last year, which the board put down to the adjusted profit of £5.8m, a revaluation gain of £1.2m, and £12.3m and £6.8m gains from the discounted purchase of the Hemel Hempstead debt facility and deconsolidation of Luton, respectively.

Property valuations on investment assets increased 1.7% over the period to £358.5m on a like-for-like basis, while the net asset value and EPRA net tangible assets per share increased to 118p and 116p, respectively, both from 102p at the end of December.

The directors said that, reflecting the “stabilisation” of the company’s operating markets post-Covid and continued stabilisation of its valuations, together with “substantial progress” in reducing debt, they were resuming dividend payments with a proposed Interim dividend of 2.5p per share.

“Our team has had an exceptionally productive six months both in terms of driving a strong operational performance and return to profitability and in building on the restructuring of the Mall debt facility and capital raise that we completed in November last year,” said chief executive Lawrence Hutchings.

“The combination of the Blackburn sale above book value, completing the £21m Walthamstow residential disposal, securing the Ilford lettings to the NHS and TK Maxx at Ilford which enabled a positive loan amendment, and the acquisition of our Hemel Hempstead debt at a significant discount, and supported by a new debt facility, have put the company on a solid footing to look to the future.

“Not only have these initiatives refocused our portfolio towards our London and south east assets, they have also enabled us to further reduce debt to a sustainable level, with net loan-to-value on a proforma basis improving considerably to 40% from 72% a year ago.”

Hutchings said that while the company was “buoyed” by its first half performance, it was also aware of the current economic environment and inflationary pressures.

“However, the actions that we have taken, together with our well-located, affordable, needs-based community shopping centres, combined with defensive average yields and stabilising values, evidenced by a third set of valuations in the last 12 months, leave us well positioned to withstand these cyclical pressures as we continue to invest in our necessity and convenience focused community strategy and customer proposition.”

Operationally, Capital & Regional reported 55 new lettings and renewals achieved in the year at a combined average premium of 34.1% to previous rent and 17.8% to estimated rental value.

Two key new lettings were completed, including a 25 year lease agreement with the NHS for a new community healthcare centre and the upsizing and relocation of TK Maxx, both at Ilford.

The firm said its occupancy improved to 93.7%, from 92.7% on 31 December and 89.7% at the end of June last year, while 29 million shopper visits were made to its properties during the six months, with footfall up 58% on the first half of 2021.

Rent collection was said to be back in line with historic pre-pandemic levels, with 97.3% collected for the year to date.

“We have outperformed in occupancy and leasing, with lettings achieved at strong average premiums to passing rent and ERV which have helped drive a near doubling of adjusted profit,” Lawrence Hutchings said.

“Furthermore, rent collection has returned to pre-Covid levels.

“Reflecting this and the Board's confidence in the company's future prospects, we are pleased to confirm the resumption of dividend payments with a proposed interim dividend of 2.5p per share.”

At 0919 BST, shares in Capital & Regional were up 12.5% at 66.6p.

Reporting by Josh White at Sharecast.com.