1st Aug 2014 10:46
LONDON (Alliance News) - Capital & Counties Properties PLC Friday said its net asset value per share has increased almost 10%, even though profit dipped in the first half on lower valuation gains on its portfolio.
The London-focused property investor and developer posted pretax profit of GBP139.8 million for the six months ended June 30, down from GBP211.1 million a year earlier. The company said valuation gains were GBP134.4 million during the period, compared with GBP187.9 million a year earlier. Its results in the previous year were also boosted by GBP6.4 million in profit from its share of joint ventures which did not reoccur in 2014.
Revenue crept up to GBP54.2 million, from GBP51.1 million, as rental income rose to GBP51.4 million from GBP42.2 million a year earlier.
However, the company said its EPRA adjusted diluted net asset valuer per share - a key metric - rose 9.5% to 272 pence, from 249 pence at the end of December. The company's EPRA adjusted net asset value rose to GBP2.31 billion, from GBP1.91 billion at December 31. EPRA is the European Public Real Estate Association, the industry body for European REITs.
The company also achieved a 9.9% total return during the period. The total return is the growth in EPRA adjusted, diluted net asset value per share plus dividends per share paid during the period.
Capco said its total return property value increased to GBP2.55 billion, from GBP2.25 billion at December 31.
"The key metric for us is the valuation, because that drives the net asset value of the company which is what our shareholders are buying," Chief Executive Ian Hawksworth said in a telephone interview.
"So our NAV for the period is up 9.5% which is a very significant increase and that is because the valuers believe the rental growth prospects of Covent Garden are very significant. So the investment that we are making today will grow underlying income over a period a time. And because of the quality of that potential income growth that is reflected in the valuation," he added.
Capco's strategy is focused on growing and creating value at its two major London assets, in Earls Court and Covent Garden. Revenue for the Covent Garden estate fell to GBP25.1 million, from GBP30.6 million a year earlier, however, this was offset by an increase in revenue for the Earls Court portfolio to GBP9.9 million, from GBP6.1 million.
The Covent Garden estate was valued at GBP1.33 billion, up from GBP1.16 billion in December, while the Earls Court estate was valued 10% higher at GBP522 million compared with GBP453 million at the end of December.
At an operating level, Capco said it signed 38 lettings representing GBP5.8 million of rental income a year at its Covent Garden estate.
The company said demand for retail space is strong from both existing and new tenants, while the residential estate continues to make strides. A total of six new properties were added to the Covent Garden estate for a total cash consideration of GBP76 million.
"Covent Garden is in a very good position," Hawkworth said. "We have almost a million square feet there now and it's going through a transformation into a retail and residential district which is more appropriate for the current and future consumer market in central London. We are very confident of rental growth there in the future and very confident about our valuations."
At Earl's Court, the company said its redevelopment masterplan for the site is moving forward and several milestones have been achieved in the context of the scheme.
The re-development of Earls Court is currently one of the most high-profile property schemes in London. The scheme, which could take a decade or more to complete, involves the redevelopment of the Earls Court 1 and 2 exhibition centres, as well as a much broader area around the centres.
In May, the group entered into a GBP130 million four year construction facility to fund its Lillie Square development near West Brompton tube station.
Once completed, Lillie Square will be one of the largest residential developments in London, transforming what is currently a 7.5 acre car park on Seagrave Road into 808 high-end homes set around a new garden square.
The first phase of Lillie Square, which comprises 237 apartments, was launched in March and over 90% of this phase is now exchanged or reserved.
On the back of its performance the company maintained its interim dividend at 0.5 pence per share.
"Shareholders in a company like ours are looking for capital return rather than income return. So generally for London property companies the income return profiles are quite low because we are all investing in creating future value, but changing places. We just happen to be doing it in a concentrated way through two wonderful estates," Hawksworth said.
Capital & Counties shares were quoted down 1.0% at 317.80 pence Friday morning.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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