C&R ups capex plans for community malls strategy as pilots pay dividends

By Paul Norman - Thursday, March 08, 2018 11:18

Capital & Regional outlined a revised capital expenditure plan for the business following the success of two pilot projects as part of a recently launched new strategy, with opportunities for over 50 projects totalling over £100m at its malls.

Capital & Regional, the circa £1bn UK town community shopping centre portfolio owner, made the announcement as it posted "resilient" full-year results with adjusted profit up 8.6% to £29.1m and like-for-like Net Rental Income up 1.9%.

C&R said that in the face of a challenging retail environment the results pointed to the resilience of the existing portfolio together with the impact of key asset management initiatives at Walthamstow and Wood Green, in particular, which positively impacted income in 2017.

The year saw 79 new lettings and renewals were achieved at an average 10.3% premium to previous rents and an 8.4% premium to ERV. Passing rent was up 3% on a like-for-like basis.

Lawrence Hutchings, Chief Executive, said: “This is another strong set of results that provides me with further confidence in our decision to focus on serving the non-discretionary, value and "needs" based end of consumer demand through our portfolio of community shopping centres.

"I believe that C&R through our platform, quality portfolio, energy, insight and experience, can redefine and be recognised as the specialist owner/manager, driving strong returns in this high yielding sector. We have confidence that our repositioning programme and rebased affordable occupancy costs allow our retailer customers to trade profitably in these high footfall locations that have proven to be the engine room for their profits.

“The Board has announced a 7.4% increase in total dividend for 2017 and, while fully aware that recent occupier failures present some challenges to short term results, believes that both the momentum we have carried through into 2018 and our strategic asset management masterplans, underpin our objective of delivering annual dividend growth in a range of 5% and 8% over the medium-term.”

Adjusted Profit was up 8.6% to £29.1m (December 2016: £26.8m) while Adjusted Earnings per share were up 7.3% to 4.10p (December 2016: 3.82p).

Occupancy lifted to 97.3% (December 2016: 95.4%). Cost efficiencies delivered annual savings of £1.2m, on track for annualised savings of at least £1.8m by end of 2018.

C&R said there had been strong progress in its community shopping centre strategy since it was launched at its Capital Markets Day in December 2017.

It said its initial implementation of its Ilford and Maidstone pilot projects had contributed to an 0.5% increase in footfall in second half of 2017, significantly outperforming the national index at -2.9%.

The strategic asset management masterplans now implemented across the portfolio are focused on further enhancing and improving its shopping centres’ community offer and trading environments

Today it said it had a revised capex plan with opportunities for over 50 projects across the portfolio totalling over £100m.

Basic and EPRA NAV per share are "resilient", both at 67p (December 2016: both 68p).

The group cost of debt of 3.25% with average debt maturity of 7.3 years.

Hutchings said: "The continued solid peformance gives us a lot of confidence for the future. A key differentiator is the strength of the internal management platform and we are bringing in new team members with new skills to supplement our existing team. Important too is, particularly from the fourth quarter we have seen really good momentum in footfall growth which tells us  and our retailers that our locations are vibrant and sustainable."

C&R said its centres were protected against the spate of CVAs and retailer closures recently.

Hutchings said: "We think retailer challengers are driven by two things in the main. In some cases it is structural. In a category like fashion up to 45% of fashions is done online now. Importantly our business is increasingly not about fashion though and where it is then it is about value and retailers like Primark and TK Maxx doing very well for intance. We are keen to harnes technology and we have a very important role to play in terms of click and collect with retailers seeing our locations as very important in terms of last mile delivery and reverse returns."


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