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Capital Shopping First-Half Profit Rises on Rent Income Gain

July 26 (Bloomberg) -- Capital Shopping Centres Group Plc, the U.K.’s biggest shopping-mall owner, said first-half profit excluding items rose on higher rental income.

Profit excluding changes to asset values and one-time items climbed to 70 million pounds ($108 million), from 66 million pounds a year earlier, the London-based company said in a statement today. Adjusted earnings per share increased to 8.1 pence from 8 pence. Analysts expected 8.5 pence a share, according to the average of four estimates compiled by Bloomberg.

While the U.K. economy entered its second recession in three years in the first quarter, retailers are favoring large malls that attract crowds with global brand names. That allowed Capital Shopping to offset tenant failures by signing leases with new brands at higher rents.

“Our prime U.K. regional shopping centers have continued to show considerable resilience, with robust operating metrics supporting sound financial results,” Capital Shopping Chief Executive Officer David Fischel said in the statement.

Net rental income increased to 182 million pounds from 178 million pounds a year earlier. Like-for-like net rental income fell 2.3%. Net income dropped to 78.9 million pounds from 181.9 million pounds as year-earlier gains on acquisitions and property revaluation weren’t repeated.

The company’s shopping center income performed worse than other U.K. real estate investment trusts with the decline in comparable net rental income and a 1 percent decrease in footfall, Mike Prew and Robert Duncan, analysts at Jefferies Group Inc. in London, said in a note today.

“The operating data was generally weaker than its peers” and Capital Shopping’s leverage “is still too high given the group’s grandiose development plans,” they said.

Capital Shopping fell 1 percent in London trading at 324.4 pence as of 9:22 a.m. The stock has gained 3.9 percent this year, less than the FTSE All-Share Real Estate Investment Trust Index, which is up 18 percent.

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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