2019 Full Year Results
Full Year Results to 30 December 2019
Capital & Regional (LSE: CAL), the UK focused REIT with a portfolio of dominant in-town community shopping centres, today announces its full year results to 30 December 2019.
Lawrence Hutchings, Chief Executive, comments:
“2019 was a critical year of progress for Capital & Regional. Having completed the transaction with Growthpoint in December 2019 the business is on a sound footing with the support of a significant and well respected international business, enabling Capital & Regional to continue the roll out of our community centre asset management strategy and providing a platform for potential growth.
In an environment that is not without its challenges, we have continued to make good progress operationally. Across the year we completed 66 new lettings and renewals which have on average been secured at premiums to both previous rents and ERV, underscoring the appeal of our centres to retailers attracted to our convenience and necessity focus, as well as the affordability of our rents. Once again our footfall has consistently outperformed the national index. Major lettings have been secured to Matalan and Pure Gym at Maidstone and in Luton since the year end we have exchanged deals on c 16,000 sq ft of previously vacant office space and agreed terms on the introduction of a new supermarket into the scheme. Mindful of the ongoing pressures that retail property valuations have placed on leverage we continue to actively realise value from alternative use and residential opportunities. Shortly after the year end we received £5 million from the completion of the sale of non-core land at Wood Green and are working closely with a preferred partner for our residential plans at Walthamstow, with a view to crystallising the value of this opportunity around the end of the year. Of course, these types of opportunities will also benefit the centres in the future by increasing catchment and footfall.
I remain confident that our focus on needs based, non-discretionary merchandise and the urban bias of our real estate, with its close proximity to people and transport nodes provide an attractive opportunity for us to create additional value through mixed use development working alongside experienced partners. This ensures we are well positioned as a business to evolve, adapt and grow in tune with the rapidly evolving retail landscape.”
Robust leasing performance against tough operating backdrop
- 66 new lettings and renewals at a combined average premium of 20.9%1 to previous passing rent and a 7.3%1 premium to ERV
- Net Rental Income (NRI) down £2.6 million or 5.0% to £49.3 million (December 2018: £51.9million) as the positive leasing momentum was offset by a c. £3.0 million impact of CVAs and retailer restructurings
- Adjusted Profit2 down 10.2% to £27.4 million (December 2018: £30.5million)
- Stable occupier demand reflected in high occupancy at 97.2% (December 2018: 97.0%)
- There were 74.3 million shopper visits across the portfolio in 2019, reflecting a like-for-like decline of 3.2%3, substantially ahead of the national index, which was down by 4.9%
Significantly improved balance sheet security
- New equity injection of £77.9 million (before costs) reduced net LTV to 46% (December 2018: 48%) leaving the Group with significantly improved covenant headroom. This being against the backdrop of a 15.0% decline in our property values over 2019
- Basic and EPRA NAV per share, at 361 pence and 364 pence respectively (December 2018: 596 pence and 591 pence), reflecting the fall in property valuations and IFRS loss for the period of £121.0 million (2018: Loss of £25.6 million)5
- £5 million sale of non-core land at Wood Green completed in early 2020 and potential to crystallise value from Walthamstow around the end of 2020
- Group cost of debt of 3.26% with average debt maturity of 5.4 years4
- Proposed Final Dividend of 11 pence reflecting approximately 90% of second half Adjusted Profit (December 2018: 6 pence5) in line with both the policy stated in the prospectus supporting the Growthpoint transaction and the Company’s REIT requirements.
|Net Rental Income||£49.3m||£51.9m||£(2.6)m||(5.0)%|
|Adjusted Earnings per share1||36.7p||42.3p||(5.6)p||(13.2)%|
|IFRS (Loss)/Profit for the period||£(121.0)m||£(25.6)m||£(95.4)m|
|Basic Earnings Per Share5||(162)p||(35)p||(127)p|
|Total dividend per share5||21p||24.2p||-3.2p||(13.2)%|
|Net Asset Value (NAV) per share5||361p||596p||-235p||(39.4)%|
|EPRA NAV per share5||364p||591p||-235p||(38.4)%|
|Group net debt||£336.9m||£411.1m||£(74.2)m||(18.0)%|
|Net debt to property value||46%||48%||(2) pps|
In September 2019, the Company announced that it was in discussions with Growthpoint Properties Limited (“Growthpoint”), the largest real estate investment trust primary listed on the Johannesburg Stock Exchange, to make a substantial investment in the Company. A formal offer to acquire a majority stake was confirmed in October 2019 and approved by shareholders at a General Meeting on 26 November 2019.
Following this 311,451,258 new Capital & Regional shares were issued to Growthpoint at 25 pence per share on 9 December 2019 resulting in gross proceeds of approximately £77.9 million being received by the Company. On 23 December 2019 Growthpoint completed a partial offer to acquire a further 219,786,924 existing Capital & Regional plc shares at 33 pence per share for approximately £72.5 million resulting in a total investment of £150.4 million. The two transactions combined have resulted in Growthpoint holding 51.1% of the issued share capital of the Company.
Use of Alternative Performance Measures (APMs)
Throughout the results statement we use a range of financial and non-financial measures to assess our performance. A number of the financial measures, including Adjusted Profit, Adjusted Earnings per share and the industry best practice EPRA (European Public Real Estate Association) performance measures are not defined under IFRS, so they are termed APMs. Management use these measures to monitor the Group’s financial performance alongside IFRS measures because they help illustrate the underlying performance and position of the Group. All APMs are defined in the Glossary and further detail on their use is provided within the Financial Review.
1 For lettings and renewals (excluding development deals) with a term of five years or longer and which did not include a turnover element or service charge restriction.
2 Adjusted Profit and Adjusted Earnings per share are as defined in the Glossary. Adjusted Profit incorporates profits from operating activities and excludes revaluation of properties and financial instruments, gains or losses on disposal, exceptional items and other defined terms. A reconciliation to the equivalent EPRA and statutory measures is provided in Note 5 to the condensed financial statements.
3 Excludes Walthamstow from 22 July 2019 given impact of fire.
4 As at 30 December 2019, assuming exercise of all extension options.
5 Per share amounts are adjusted to reflect the impact of the 10 for 1 share consolidation that completed on 15 January 2020.