CAPE TOWN - A FOCUS on essential service stores helped Capital & Regional, the UK owner of dominant in-town community shopping centres, to weather weak trading during the Covid-19 pandemic.
“Our strategy is now more relevant than ever as the structural changes in consumer habits that were already under way within the retail industry have been accelerated,” chief executive Lawrence Hutchings said on Friday at the release of the real estate investment trust’s (Reit’s) results for the six months to June 30.
Adjusted interim profit fell 69 percent to £4.6 million (R101.12m).
Net loan to value climbed to 57 percent over six months from 46 percent, and discussions were under way about long-term covenant relaxations. The share closed at R15.68 on Friday.
Like many Reits, Capital & Regional did not declare an interim dividend due to the uncertain Covid-19 environment.
Net asset value per share was 229 pence (R50.34) at June 30, well down from 361p on December 31, after a 16 percent drop in the valuation of its portfolio to £611.3m.
UK-based equity research house Peel Hunt issued a broker note on Friday reaffirming to reduce its investment rating on Capital & Regional and cutting its share price target to 60p from 100p. The share traded at 69p on Friday on the LSE.
“This community centre strategy over the past three years, combined with the investments we made in our operating platform, have helped us navigate these extraordinary times and ensured continued support from our key stakeholders,” said Hutchings.
He said cash of about £80m, largely from a recapitalisation last December, measures agreed with lenders, and the focus on local centres offering non-discretionary goods and services, would help the group navigate the short to medium term.
Growthpoint Properties chief executive Norbert Sasse said Capital & Regional’s operating metrics over the period were strong, considering the circumstances of Covid-19. Growthpoint took a 51 percent stake in Capital & Regional last December.
All of Capital & Regional’s seven shopping centres remained open throughout lockdown, while 605, or 96 percent, units were open. Occupancy remained high, at 95 percent, but slightly lower than 97.2 percent in December 2019.
About 20.7 million visits across the portfolio outperformed the national index by 2.6 percent, and visitor numbers were improving week on week.
About 76 percent of rent for the first half had been collected – more than half of the balance of rent outstanding was due from well-capitalised national retailers.
Net rental income fell to £16.2m (June 2019: £25.2m), largely as a result of Covid-19.
Initiatives progressed included the submission of a planning application to convert residential consent at Walthamstow, into Build to Rent, which would facilitate the introduction of a development partner.
Discussions had also been advanced with the National Health Service for the introduction of a new healthcare centre at Ilford.
BUSINESS REPORT