Capital & Counties Properties Plc (CAPC), which is seeking consent for an 8 billion-pound ($13 billion) project in London’s Earls Court, said first-half profit fell 39 percent as its events business leased space to fewer exhibitors.
Adjusted earnings before asset revaluations and one-time items fell to 6.2 million pounds, or 1 penny a share, from 10.1 million pounds, or 1.6 pence, a year earlier, the company known as CapCo said in a statement today. Net asset value rose to 154 pence a share from 148 pence six months earlier.
Net rental income fell 4.2 percent to 36.7 million pounds as the faltering economic recovery deterred customers from taking space with the London-based company’s events and exhibitions business. A venture with Great Portland Estates Plc (GPOR) increased vacancies at some properties to allow for their redevelopment. In June, CapCo filed a planning application to renovate 77 acres (31 hectares) of Earls Court in west London.
“We expect the significant valuation uplifts from planning gains at Earls Court & Olympia to boost the net asset value strongly over the next 12-18 months,” said Carl Gough, an analyst at Matrix Securities, who has a “buy” rating on the shares. Further gains in net asset value will come from Covent Garden and CapCo’s partnership with Great Portland, he said.
CapCo fell 4.3 pence, or 2.3 percent, to 181.3 pence in London trading. The shares climbed 12 percent in the three months through Aug. 1, more than the 27 stocks in the FTSE All- Share Real Estate Investment & Services Index, which was little changed.
A rise in the value of CapCo’s real estate assets, chiefly those at Covent Garden in central London, helped lift net income to 68.5 million pounds from 54.3 million pounds a year earlier. CapCo said it will pay a first-half dividend of half a penny, unchanged from a year earlier.
The company owns about 50 properties in and around Covent Garden and has a partnership with Great Portland Estates for developing offices in the West End district, one the world’s most expensive business locations.
CapCo lifted net rental income at Covent Garden by attracting higher-paying tenants such as Apple Inc. Net rental income generated there totaled 13.1 million pounds, a 2.3 percent increase if acquisitions and disposals are excluded.
The company raised 100 million pounds in a share sale in May to buy more buildings in the neighborhood and today raised its target for potential annual rental income generated there to 50 million pounds.
The higher rental income led appraisers to increase the valuation of the Covent Garden properties by 140 million pounds in the first half to 780 million pounds.
Rental income from CapCo’s shops and offices owned elsewhere in London’s West End fell after it sold assets and created vacancies to upgrade buildings to attract higher-paying tenants.
The property company generates about half its rental income from its exhibitions and conference business, which leases space at the Olympia and Earls Court centers in west London and another location in the City of London financial district.
Demand from exhibitors at the three venues fell, causing earnings before interest, taxes, depreciation and amortization to drop 9 percent to 12 million pounds, the company said today.
CapCo signed a yearlong agreement last month with the Hammersmith & Fulham municipality to discuss the inclusion of the borough’s land in the company’s proposed redevelopment in Earls Court and West Kensington.
Councilors are currently examining the overall plan, drawn up by architect Terry Farrell, which would involve the construction of 8,300 homes, 2 million square feet of commercial space, a school, a library and health center.
Hawksworth said he expects CapCo will know whether its planning application will proceed in about a year.
To contact the reporter on this story: Simon Packard in London at firstname.lastname@example.org.