Capco shareholders left waiting for post-Covid recovery

At best, Capital & Counties’ (CAPC) half-year results are a mixed bag for the West End landlord which has been hammered by Covid-19. At worst, they indicate that the company has still not figured out how to function in the post-pandemic world.

Starting with the good news, the company has narrowed its pre-tax loss for the six months to 30 June almost to breakeven, and there has been a 4.5 per cent increase in the value of the portfolio, which the company puts down to an increase in leasing activity. Just 2 per cent of the landlord’s assets are vacant.

However, it is there that the good news ends – and even some of this positivity comes with a caveat. While a 2 per cent vacancy rate is impressive, shareholders should question what ways and means Capco has used to achieve such a high number of lets. The fact that its revenue has fallen compared with the same period last year implies that the lease terms with its tenants are quite generous at the moment. What’s more, falling revenue is in of itself a red flag for a company which shareholders would rather see in post-Covid recovery mode.

To make matters worse, the company is currently collecting 95 per cent rent owed when most listed office and industrial landlords are back to 100 per cent collections after the turmoil of the pandemic. It should worry shareholders that a company which is likely offering discount leases at the moment still has some tenants not paying what they owe.

The forthcoming merger with Shaftesbury (SHB) may help with some of these issues, but being a bigger company could also just intensify problems. Sell.

Last IC view: Sell, 167p, 23 February 2022