Ian Hawksworth, Chief Executive of Capco, commented:
“Capco has had an active start to the year across its two prime central London estates. At Covent Garden we delivered another period of strong performance and an increase in value, with excellent demand across all uses driving 21 per cent overall growth in net rental income. At Earls Court, the consented land is now ready for development and we have realised significant proceeds over the last twelve months from the sale of the Empress State Building and continued sales at Lillie Square.
Capco has achieved significant growth since listing, with long-term value creation across the business. Covent Garden has been transformed into a leading global retail and dining destination, attracting a vibrant mix of British, independent and international brands, while at Earls Court, we have created one of central London’s most important mixed-use development opportunities. Against this backdrop, the Board is considering the structure of the Group and constructive early steps have been taken in preparing for a possible demerger.
Whilst the broader macroeconomic outlook remains uncertain, Capco is backed by a strong balance sheet and remains focused on creating long-term value for shareholders. Our two prime central London estates are well placed for long-term success.”
Key financials
- Equity attributable to owners of the Parent £2.8 billion (Dec 2017: £2.8 billion).
- EPRA NAV maintained at 334 pence per share (Dec 2017: 334 pence per share).
- Total property value of £3.3 billion, a decrease of 0.4 per cent (like-for-like) (Dec 2017: £3.3 billion adjusted for the sale of the Empress State Building).
- Proposed interim dividend of 0.5 pence per share (Jun 2017: 0.5 pence per share).
Continued income growth at Covent Garden
- Covent Garden total property value of £2.6 billion, a 1.6 per cent increase (like-for-like) (Dec 2017: £2.5 billion).
- Net rental income up 11.6 per cent (like-for-like) or 21.2 per cent in absolute terms against June 2017.
- Positive operational momentum; 26 new leases and renewals 8.9 per cent above December 2017 ERV.
- ERV increased by 1.9 per cent (like-for-like) to £107 million (Dec 2017: £105 million).
- Development of Floral Court complete; 75 per cent of lettable space contracted.
- Tiffany recently launched new concept store on James Street.
Realising value at Earls Court
- Earls Court interests valued at £707 million, a decrease of 7.0 per cent (like-for-like) (Dec 2017: £759 million adjusted for the sale of the Empress State Building).
- ECPL land available for development; ongoing interest from potential partners and end users.
- Sale of the Empress State Building for £250 million, a £30 million premium to the Dec 2017 valuation – Lillie Square.
- Delivery of Phase 1 substantially complete, £123 million cash proceeds received (Capco share).
- Over 80 per cent of Phase 2 now reserved or exchanged and main construction has commenced.
Strong financial position with significant financial flexibility
- Group loan to value ratio of 17 per cent (Dec 2017: 21 per cent).
- Group undrawn facilities and cash of £886 million (Dec 2017: £691 million).
- Capital commitments of £82 million (Dec 2017: £61 million).
- Weighted average maturity of 6.5 years (Dec 2017: 6.9 years).
- Weighted average cost of debt of 2.9 per cent (Dec 2017: 2.8 per cent).
Preparation for possible demerger
- Constructive early steps taken in preparing for a possible demerger and further announcements will be
made in due course.
Outlook
The two prime central London estates have had an active first half, making good operational progress. Capco’s strategy remains focused on driving long-term value creation from both estates. Capco has achieved significant growth since listing, driving value creation from Covent Garden and Earls Court. Backed by a strong balance sheet, with an experienced and professional management team, Capco is well-positioned to support the current capital requirements of its two prime estates, both of which have positive long-term growth prospects and distinct investment characteristics.
Against this backdrop, the Board is considering the structure of the Group in order to realise the potential of these two prime central London estates and enhance shareholder value. Constructive early steps have been taken in preparing for a possible demerger.
Under Capco’s stewardship, Covent Garden has been transformed into a world-class retail and dining destination, with a vibrant mix of global, independent and British brands. Covent Garden is well-positioned to continue to drive income growth and total returns from the estate. Capco is focused on enhancing the customer environment through creative asset management and making strategic investments to expand its ownership of the estate.
Recent introductions including The Shop at Bluebird, Alkemistry and Petersham Nurseries represent a positive start to the repositioning of Floral Street as a fashion and lifestyle destination. As capital initiatives come to completion, the pedestrian flow of the estate continues to change allowing for further repositioning opportunities.
The estate remains well-placed for continued success and ERV progression towards the target of £125 million by December 2020. At Earls Court, Capco has created one of the most important mixed-use development opportunities in central London through the company’s strategy of planning, land assembly, land enablement works and selective development. The focus remains on creating and realising the value of the investment as recently demonstrated through the sale of the Empress State Building for £250 million, at a £30 million premium to the December valuation and continued sales at Lillie Square. With the Earls Court Partnership Limited land now available for development, there is ongoing interest from potential partners and end users.
Capco together with its partner Transport for London (“TfL”) will seek to optimise the value of the land which has the flexibility to be brought forward on a phased basis through the introduction of third-party capital and selective development across various uses.
Whilst the broader macroeconomic outlook remains uncertain, Capco remains focused on creating long-term value for shareholders from its two prime central London estates which are well-placed for long-term success
