Retail and leisure specialist Capital & Regional delivered an encouraging first-half operational performance despite being plunged into the red by troubles in its German portfolio.
The asset manager and investor posted a recurring pretax profit of £9.2m – up 5% from the middle of last year.
But its net asset value fell by 4.8% to 60p a share in the six months to 30 June, and the group made a pretax loss of £9.9m.
This was primarily as a result of its German portfolio 4 joint venture with AREA Property Partners. The portfolio, which comprises 20 small assets, dropped in value by €21.5m to €154.5m and its €157.9m debt breached its loan-to-value covenant.
JP Morgan analyst Harm Meijer said that although ”secondary shopping centres are not the flavour of the month”, the group “is performing a bit better than expected”.
He said that its like-for-like rental growth for shopping centres came in at -1.8%, retail parks at 4.8% and leisure at -0.7%, compared with JP Morgan’s full-year estimate of -2%, -1% and 0% respectively.
He added that “the story is not straightforward”, pointing to 54 units currently in administration in the UK portfolio and the loss in Germany, but said that plans to sell the Junction fund’s properties to Hammerson for £287m and stable shopping centre occupancy puts management “in control”.
The group’s property under management fell in value by £57m to £2.49bn.
As well as an £18m drop in Germany, values in the UK fell by 1.7%. The Mall fund’s shopping centres dropped by 3.8%, owing to a reduction in net income as a result of administrations, while the Junction fund’s retail parks dropped by 1.1% and the X-Leisure fund’s assets rose by 1.3%.
Group debt and off-balance sheet debt fell from 65% at the end of December to 63% or £430.5m at the end of the period.
Chief executive Hugh Scott-Barrett said that the company’s aim this year was “to make further significant progress in focusing C&R as a UK retail property investment company”, while degearing remained the immediate priority.
