- Valuations were up 2.6 per cent
- Rent collections remain at elevated levels
Capital & Regional (CAL) continues to trade at a sizeable discount to net assets. That’s unsurprising given the unfavourable trading backdrop. The Reit’s tenant base is largely comprised of retailers, so the fall in discretionary income in the economy has provided an ongoing challenge. There are signs that inflation is moderating, so sentiment towards the sector is likely to improve in the near term, but the group’s preliminary final statement gives some idea of the challenges faced through 2023.
Group chairman David Hunter noted that “retailer failures were much reduced in 2023”, but the collapse of the Wilko chain into administration during the second half of the year highlights the dangers posed by tenant insolvency. In the event, terms with B&M were rapidly put in place for the three Capital & Regional sites affected by the collapse. Wilko can be viewed as something of an outlier in that value-focused chains have generally fared better than upscale retailers during the inflationary surge. Capital & Regional’s intensified focus on this corner of the market appears prescient on this basis and is reflected in the underlying metrics, even if the share price has faltered since the final quarter of 2023.
Valuations were up by 2.6 per cent, while net rental income increased by 5 per cent, both on a like-for-like basis. And despite wider financial pressures, rent collections remain at elevated levels. On the debit side of the ledger, net debt increased slightly as a proportion of overall property value, while the group continues to struggle with an “ongoing legacy from the pandemic”, specifically the reduced use of car parks. Work is underway to develop a range of alternative uses to support car park income.
The discount to net asset value is by no means unusual across the sector. And though market conditions should continue to improve, the impact of rising debt costs on business and consumer confidence has yet to fully play out. Hold.
Last IC View: Hold, 191p, 09 Mar 2020
| CAPITAL & REGIONAL (CAL) | ||||
| ORD PRICE: | 51p | MARKET VALUE: | £115mn | |
| TOUCH: | 49-52p | 12-MONTH HIGH: | 61p | LOW: 49p |
| DIVIDEND YIELD: | 11.1% | TRADING PROP: | NIL | |
| DISCOUNT TO NAV: | -42.9% | NET DEBT: | 93% | |
| INVESTMENT PROP: | £370mn | |||
| Year to 30 Dec | Net asset value (p) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 361 | -121 | -162 | nil |
| 2020 | 157 | -204 | -189 | nil |
| 2021 | 102 | -16.9 | -16.7 | nil |
| 2022 | 106 | 5.00 | 3.20 | 5.25 |
| 2023 | 90.0 | 0.10 | 2.00 | 5.70 |
| % change | +4 | -98 | -38 | +9 |
| Ex-div: | 11 Apr | |||
| Payment: | 07 Jun |
