No Capco dividend after income plunges
• Value of property company’s iconic London retail development Covent Garden falls 27% in the year to end-December as customers stay at home
Property investment and development company Capital & Counties (Capco), which was scarred by Brexit in 2016 and now by the fallout from the Covid-19 pandemic, has opted not to declare a final dividend as the value of its coveted property shrunk, underscoring the challenging operating environment in the UK.
Capco, which was spun out of the late businessman and philanthropist Donald Gordon’s Liberty International, owns the iconic UK retail development Covent Garden, the value of which has plunged 27% to £1.8bn in the year to endDecember, as many customers stay at home due to fear of contracting the virus.
The early market reaction was muted, suggesting the bad news could already be priced in.
The share price, which traded at R80 just before Brexit in 2016, was 0.86% down to R37.35 on the JSE at 10.07am, giving it a market value of R31bn.
Chair Henry Staunton said on Tuesday that 2020 “was an extraordinary year, with significant market uncertainty and challenging trading conditions for Capco and many of its customers due to the pandemic”.
Net rental income was down 74% to £16m and underlying net rental income was down 30% to £44m, the company said. Underlying loss per share stood at 0.7 pence, from 1.0p.
CEO Ian Hawksworth said the enduring appeal of Covent Garden would drive a recovery in foot traffic and trade in 2021 and 2022. “Operating conditions will remain difficult for our customers, which is anticipated to lead to enhanced levels of vacancy and further adjustments in valuation and rental levels.”
Hawksworth said 30%-40% of annual foot traffic at Covent Garden, a retail and dining destination in London, is accounted for by overseas tourists in a normal year and Capco is waiting in anticipation for Covid-19 flight restrictions to be eased.
“London has largely been empty even as restrictions ease. On the plus side, many UK residents have rediscovered Covent Garden, having been unable to travel abroad.
“We are optimistic that as about a quarter of the UK population has been vaccinated so far, we will see people return to London as the economy is opened in phases,” he said.
By June 12, all restrictions are expected to have been lifted in the UK.
Capco also owns £100m worth of residential property at Lillie Square and may develop more residential property in future. During the reporting period, it bought a stake in Shaftesbury, a UK real estate investment trust (Reit) that owns 600 buildings around London’s West End. Capco paid 517p a share for 97-million shares, or 25.2% in two tranches, in a deal worth £501.5m. Shaftesbury’s shares closed at 628p a share on Tuesday.
Hawksworth said the deal represents a compelling investment and entry point at an implied value of about £1,200 per square foot and is consistent with Capco’s strategy of investing in complementary opportunities in or near Covent Garden.
NET RENTAL INCOME WAS DOWN 74% AND UNDERLYING NET RENTAL INCOME WAS DOWN 30%