# Capital & Counties Properties PLC Continuing rental income growth

- Link: https://www.directorstalkinterviews.com/capital-counties-properties-plc-continuing-rental-income-growth/412788567
- Published: 2019-07-25T07:48:51+01:00
- Author: Amilia Stone

**INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019 **

> **Henry Staunton, Chairman of Capco, commented:**
> “Capco has achieved significant growth since listing in 2010. Covent Garden in
> the heart of London’s West End is now of considerable scale, valued at over £2.6
> billion with an attractive long-term income profile. At Earls Court we have created
> one of London’s most important development opportunities. Against this successful
> execution of strategy for both assets, the Board has considered the structure 
> of the Group and believes that a separation of Covent Garden and Earls Court is
> in shareholders’ interests and offers significant benefits. As two distinct and
> focused businesses, with experienced management and growth prospects, Covent Garden
> and Earls Court can pursue independent strategies to deliver long-term shareholder
> value.”

> **Ian Hawksworth, Chief Executive of Capco, commented:**
> “Through the successful execution of our strategy, we have created two fantastic
> estates that could now stand alone as strongly positioned independent businesses.
> I am delighted that the Board’s long-term ambition of seeing Covent Garden become
> a focused REIT is reaching fruition. Having assembled a remarkable portfolio, 
> the business is now of a scale and quality to perform and grow in one of the world’s
> most exciting real estate markets, the West End in Central London and is well-
> positioned for continued long-term success.
> At Earls Court, we have created one of London’s most important mixed-use development
> opportunities, which has the ability to evolve with market dynamics and bring 
> forward much needed homes for London. Separation of the two estates would enhance
> strategic flexibility, and allow each business to pursue independent strategies
> and deliver long-term value for our shareholders.”

**Key financials**

–       Equity attributable to owners of the Parent £2.6 billion (Dec 2018: £2.7
billion)

–       EPRA NAV declined by 3.3 per cent to 315 pence per share (Dec 2018: 326 
pence per share)

–       Total property value of £3.2 billion, a decrease of 2.0 per cent (like-for-
like) (Dec 2018: £3.3 billion)

–       Proposed interim dividend of 0.5 pence per share (Jun 2018: 0.5 pence per
share)

**Covent Garden continued income growth and reversion capture**

–       Covent Garden total property value of £2.6 billion, 0.5 per cent increase(
like-for-like) (Dec 2018: £2.6 billion)

–       Net rental income up 7.0 per cent (like-for-like) or 9.8 per cent in absolute
terms against June 2018

–       Positive operational momentum; 40 new leases and renewals 2 per cent above
December 2018 ERV

–       ERV increased by 1.0 per cent (like-for-like) to £108 million (Dec 2018:
£108 million)

–       Positive trading environment, increase in footfall and tenant sales

–       Continuing to attract high quality brands

–       High occupancy, renewal rates and strong demand for office and residential
portfolio

**Earls Court investments**

–       Earls Court interests valued at £599 million, a decrease of 11.5 per cent(
like-for-like) (Dec 2018: £658 million)

–       Ongoing operational progress on ECPL land with railway track suppression
works progressing on schedule

–       ECPL land available for development; ongoing interest from potential investors
and occupiers

–       Lillie Square Phase 2 construction continues on schedule with first handovers
expected in H1 2020

**Strong financial position with significant financial flexibility**

–       Group loan to value ratio of 19 per cent (Dec 2018: 18 per cent)

–       Group undrawn facilities and cash of £845 million (Dec 2018: £854 million)

–       Capital commitments of £49 million (Dec 2018: £53 million)

–       Weighted average debt maturity of 5.5 years (Dec 2018: 6.0 years)

–       Weighted average cost of debt of 3.0 per cent (Dec 2018: 2.9 per cent)

**Intention to proceed with the demerger  **

–       Intention to launch Covent Garden as a central London focused REIT through
demerger from Capco

–       Through successful execution of strategy, Capco has created two central 
London estates that could now stand alone as independent businesses, Covent Garden
London and EC Properties

–       Covent Garden is now of a scale and income profile to be strongly positioned
as a central London focused REIT

–       EC Properties aims to optimise and realise the value of its Earls Court 
land interests over time

–       There has been a broad range of interest in Earls Court and in assessing
proposals from interested parties, the Board focuses on value and deliverability

–       Indicative pricing received is at a range of discounts to the balance sheet
value and the proposals are subject to differing levels of further due diligence
and a number of conditions, including third-party rights

–       No certainty that this will result in a sale transaction

–       The Board believes that separation of the two businesses is in shareholders’
interests and therefore intends to proceed with the demerger

–       Capco expects to publish shareholder documentation in September 2019

–      Completion of demerger, subject to shareholder approval, anticipated before
the end of 2019

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