Bickell to leave Shaftesbury in the black

Farewell, Brian Bickell. In what is likely to be his last ever set of full-year results for Shaftesbury (SHB), it is as good a time as any to consider the legacy the chief executive of the retail landlord will leave behind. Bickell plans to retire from the business he helped create once its merger with Capital & Counties (CAPC) completes as expected in the first quarter of next year. He was a founder employee in 1986, joined the Shaftesbury board in 1987, and has been in the top job since 2011, so the results speak not just to what the company has done over the last year but over the last decade.

Focusing first on the 12 months to 30 September, the numbers are undoubtedly positive. The company swung back to a profit after two accounting years in the red and the numbers behind that profit are also strong. The company gained £99.5mn on property revaluation compared with last year’s £196.9mn loss while it also recorded a 28 per cent increase in net rental income – the rent it collects minus operating expenses. Meanwhile, Shaftesbury’s vacancy and rent collection levels have fallen back to pre-Covid levels.

Looking back over the decade, however, it becomes clear that Shaftesbury was a business on a certain trajectory that has veered off course. From 2011 to 2019, net rental income steadily increased from £66.6mn to £98mn while pre-tax profit tended to rise and fall depending on retail asset valuations. Since 2019, the two years of Covid have both battered that net rental income and those retail asset valuations so the question is whether the company can return to and then grow beyond 2019’s net rental income levels and whether its valuation will recover as well.

The looming recession makes both of those queries hard to answer. The results’ accounting period started with hopes of a post-Covid boom but the economic fallout from Russia’s invasion of Ukraine and rising interest rates have since upended that rosy forecast.

However, Bickell insists that the West End operates differently from the rest of the UK, observing that the landlord lost just one shop in the three worst years of the financial crisis due to the area’s stream of tourists and visitors. The West End, he says, can even benefit from tough economic times as a weak pound encourages more international customers. Bickell might be right about all that, but he might not - time will tell. Hold.

Last IC View: Hold, 582p, 24 May 2022