UK focused REIT Capital & Regional has published its half year results to June 2022, resuming dividend payments with a proposed interim dividend of 2.5 pence 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”, comments CEO, Lawrence Hutchings.
“The combination of the Blackburn sale above book value, completing the £21 million 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 SE assets, but they have also enabled us to further reduce debt to a sustainable level, with net LTV on a proforma basis improving considerably to 40% from 72% a year ago”.
“While we are buoyed by the first half performance, we are 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”.
“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. 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”.
Operational performance
The REIT achieved 55 new lettings and renewals during the period at a combined average premium of 34.1% to previous rents. Two key new lettings completed include 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.
Occupancy has improved to 93.7% (December 2021: 92.7%; June 2021: 89.7%) with 29 million shopper visits during the six months with footfall up 58% on H1 2021.
Rent collection is back in line with historic pre-Covid levels, with 97.3% collected for the year to date.
Refocus, restructure, and recapitalise
The combined impact of transactional activity has reduced the Group’s Net Loan to Value (LTV) ratio from 49% at 30 December 2021 (and 72% at 30 June 2021) to 40% on a proforma basis at 30 June 2022, adjusting for the Walthamstow residential and Blackburn sale proceeds received post the period end.
- Debt maturity of 4.1 years with average cost of debt of 3.54% with 98% fixed.
- In August 2022, the £40 million disposal of The Mall, Blackburn completed at a c. 5% premium to the December 2021 valuation.
- In May 2022, the Group secured ownership of the Marlowes centre in Hemel Hempstead when it completed the buyback of the loan facility held against the asset for £11.8 million, representing a discount of 51%, which also increased Group Net Asset Value by approximately £12.3 million.
- Signed package of amendments to the £39 million Ilford loan in May 2022, facilitating the investment of approximately £10 million for the creation of the new community healthcare centre and anchor unit for TK Maxx.
- Proposed disposal of the majority or all of the Group’s investment in The Mall, Luton remains ongoing and is expected to reach a conclusion in the next few months. The Group’s investment in Luton has now been deconsolidated resulting in an increase to Net Asset Value of £6.8 million.
- In July 2022, the Group completed the sale of land for residential development at its 17&Central community shopping centre in Walthamstow to Long Harbour for c.£21.65 million. The first phase of the development will see the creation of 495 Build to Rent residential apartments in two residential towers.
Improved profitability supporting resumption of dividend
The REIT’s Net Rental Income (1) (NRI) on Investment Assets increased 23% to £12.2 million (June 2021: £9.9 million) driven by improved occupancy and rent collection. Statutory revenue was £28.4 million (June 2021: £27.4 million).
- The improvement in NRI flowed through to Adjusted Profit (1,2) which increased 87% to £5.8 million (June 2021: £3.1 million (2)).
- 25% growth in Adjusted earnings per share to 3.5p (June 2021: 2.8p).
- IFRS Profit for the period of £26.8 million (June 2021: Loss of £41.3 million) due primarily to the Adjusted Profit of £5.8 million, a revaluation gains of £1.2 million and £12.3 million and £6.8 million gains from the discounted purchase of the Hemel Hempstead debt facility and deconsolidation of Luton respectively.
- Property valuations on Investment Assets increased by 1.7% in the first half of 2022 to £358.5 million at year end (30 December 2021: £352.4 million) on a like for like basis.
- Net Asset Value per share and EPRA NTA per share increased to 118p and 116p respectively (December 2021: 102p and 102p).
