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Shaftesbury swings back to profit as West End recovers

The West End landlord has posted a positive set of results, but there are challenges ahead
Shaftesbury swings back to profit as West End recovers
  • Rent collecting is near pre-pandemic levels
  • Brian Bickell stepping down as chief executive
IC TIP: Hold

When Brian Bickell retires from Shaftesbury (SHB), he can do so knowing that he helped to guide the real estate investment trust through a pandemic and out the other side. He can also reflect that – in what might be his last interim results as chief executive – he swung the company from a loss to a profit.

“This is the most upbeat investor presentation we’ve done since November 2019,” he noted.

Bickell stated that he would step down on completion of Shaftesbury’s planned merger with Capital & Counties (CAPC) after 36 years at the firm and 11 years at the helm, while executive directors Simon Quayle and Tom Welton, who have also been with the company for over 30 years, will also leave the business.

This changing of the guard could see the new company go in a different direction, but although management is a big factor in the success of any company, the real driver of Shaftesbury’s fortunes is the return of London's West End. Without punters, the retail, hospitality and leisure businesses that make up 66 per cent of the landlord’s estimated rental value (ERV) struggle to pay rent.

People are coming back, although not as fast as Bickell or other West End landlords would like. The Heart of London Business Alliance calculates that footfall is 27 per cent down for the week commencing 16 May compared with the same week in 2019.

Despite this, Shaftesbury has been able to push its rent collection up and its vacancy rate down. The vacancy rate, on a European Public Real Estate Association basis, is 4.7 per cent of estimated rental value, which the landlord says is more or less at pre-Covid levels, while rent collection is at 95 per cent, which remains a little off the near-100 per cent rent collection it used to receive and hopes to get back to in time.

Yet, while a return to its pre-pandemic form would no doubt be welcomed by shareholders, the underlying issues for both Shaftesbury and the wider retail and leisure sector remain. Add in looming inflationary pressures impacting both discretionary spending and the cost of doing business, and the possibility of rental increases driving up revenue any time soon begin to dwindle. 

The company is currently trading at a 14.2 per cent discount to net asset value (NAV), but even back in 2019 when Bickell was delivering his “upbeat” investor presentation it was trading at a 4 per cent discount to NAV. We recommended hold then, and we will recommend the same again. Hold.

Last IC View: Hold, 625.5p, 1 Dec 2021

SHAFTESBURY (SHB)   
ORD PRICE:582pMARKET VALUE:£2,236mn
TOUCH:581-582.5p12-MONTH HIGH:669pLOW: 528p
DIVIDEND YIELD:3.7%TRADING PROP:Nil
DISCOUNT TO NAV:-14.2%NET DEBT:-29%
INVESTMENT PROP:£3.2bn*   
Half-year to 31 MarNet asset value (p)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
2021**583.0-338.5-93.1nil
2022678.0247.664.415.40
% change+16--169-
Ex-div: 09 Jun   
Payment: 01 Jul   
*As valued by Cushman & Wakefield in March 2022 according to takeover regulations **EPRA NTA