Capital & Regional : Resumption in dividend payments following strong operational performance

11 August 2022

Capital & Regional plc

("Capital & Regional" or "C&R" or "the Company" or "the Group")

Resumption in dividend payments following strong operational performance

and successful debt restructuring initiatives

Capital & Regional (LSE: CAL), the UK focused REIT with a portfolio of dominant in-town community shopping centres, announces its half year results to 30 June 2022.

Lawrence Hutchings, Chief Executive, comments:

"Our team has had an exceptionally productive six months both in terms of driving a strong operational performance and return to profitability and in building on the restructuring of The Mall debt facility and capital raise that we completed in November last year. The combination of the Blackburn sale above book value, completing the £21 million Walthamstow residential disposal, securing the Ilford lettings to the NHS and TK Maxx at Ilford which enabled a positive loan amendment, and the acquisition of our Hemel Hempstead debt at a significant discount, and supported by a new debt facility, have put the Company on a solid footing to look to the future. Not only have these initiatives refocused our portfolio towards our London and SE assets, they have also enabled us to further reduce debt to a sustainable level, with net LTV on a proforma basis improving considerably to 40% from 72% a year ago.

"While we are buoyed by the first half performance, we are aware of the current economic environment and inflationary pressures. However, the actions that we have taken, together with our well-located, affordable, needs- based Community shopping centres, combined with defensive average yields and stabilising values, evidenced by a third set of valuations in the last 12 months, leave us well positioned to withstand these cyclical pressures as we continue to invest in our necessity and convenience focused community strategy and customer proposition.

We have outperformed in occupancy and leasing, with lettings achieved at strong average premiums to passing rent and ERV which have helped drive a near doubling of Adjusted Profit. Furthermore, rent collection has returned to pre-Covid levels. Reflecting this and the Board's confidence in the Company's future prospects, we are pleased to confirm the resumption of dividend payments with a proposed interim dividend of 2.5p per share. Finally, I would like to thank our teams and stakeholders for their hard work and support over the last 18 months as we have worked tirelessly to return the company to stability."

Resilient operational performance

• 55 new lettings and renewals achieved during the year at a combined average premium of 34.1% to previous rent3and 17.8% to ERV3. Two key new lettings completed include a 25 year lease agreement with the NHS for a new community healthcare centre and the upsizing and relocation of TK Maxx, both at Ilford.
• Occupancy has improved to 93.7% (December 2021: 92.7%; June 2021: 89.7%).
• 29 million shopper visits during the six months with footfall up 58% on H1 2021.
• Rent collection back in line with historicpre-Covid levels, with 97.3% collected for the year to date.
• Snozone's EBITDA1for the year of £0.8 million (2021: £0.8 million - including £2.5 million business continuity insurance receipt) with trading improving as the year progresses.
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Refocus, Restructure and Recapitalise

• The combined impact of transactional activity has reduced the Group's Net Loan to Value ratio from 49% at 30 December 2021 and 30 June 2022 (and 72% at 30 June 2021) to 40% on a proforma basis, adjusting for the Walthamstow residential and Blackburn sale proceeds received post the period end.
• Debt maturity of 4.1 years with average cost of debt of 3.54% with 98% fixed.
• In August 2022, the £40 million disposal of The Mall, Blackburn completed at a c. 5% premium to the December 2021 valuation.
• In May 2022, the Group secured ownership of the Marlowes centre in Hemel Hempstead when it completed the buyback of the loan facility held against the asset for £11.8 million, representing a discount of 51%, which also increased Group Net Asset Value by approximately £12.3 million.
• Signed package of amendments to the £39 million Ilford loan in May 2022, facilitating the investment of approximately £10 million for the creation of the new community healthcare centre and anchor unit for TK Maxx.
• Proposed disposal of the majority or all of the Group's investment in The Mall, Luton remains ongoing and is expected to reach a conclusion in the next few months. The Group's investment in Luton has now been deconsolidated resulting in an increase to Net Asset Value of £6.8 million.
• In July 2022, the Group completed the sale of land for residential development at its 17&Central community shopping centre in Walthamstow to Long Harbour for c.£21.65 million. The first phase of the development will see the creation of 495 Build to Rent residential apartments in two residential towers.

Improved profitability supporting resumption of dividend

• Net Rental Income1(NRI) on Investment Assets increased 23% to £12.2 million (June 2021: £9.9 million)
  driven by improved occupancy and rent collection. Statutory revenue was £28.4 million (June 2021: £27.4 million).
• The improvement in NRI flowed through to Adjusted Profit1,2which increased 87% to £5.8 million (June 2021: £3.1 million2).
• 25% growth in Adjusted earnings per share to 3.5p (June 2021: 2.8p).
• IFRS Profit for the period of £26.8 million (June 2021: Loss of £41.3 million) due primarily to the Adjusted Profit of £5.8 million, a revaluation gain of £1.2 million and £12.3 million and £6.8 million gains from the discounted purchase of the Hemel Hempstead debt facility and deconsolidation of Luton respectively.
• Property valuations on Investment Assets increased by 1.7% in the first half of 2022 to £358.5 million at year end (30 December 2021: £352.4 million) on a like for like basis.
• Net Asset Value per share and EPRA NTA per share increased to 118p and 116p respectively (December 2021: 102p and 102p).
• Reflecting the stabilisation of operating markets postCovid-19 and continued stabilisation of our valuations, together with the substantial progress made in reducing debt, the Group is resuming dividend payments. Proposed Interim dividend of 2.5 pence per share.

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	6 months to	6 months to	Year to
	June 2022	June 2021	Dec 2021
Revenue 2	£28.4m	£27.4m	£56.2m
Net Rental Income - Investment Assets	£12.2m	£9.9m	£21.5m
Adjusted Profit 1, 2	£5.8m	£3.1m	£8.1m
Adjusted Earnings per share 1, 2	3.5p	2.8p	6.8p
IFRS Profit/(Loss) for the period	£26.8m	£(41.3)m	£(26.4)m
Basic earnings/(loss) per share	16.2p	(36.9)p	(22.0)p
Total dividend per share 5	2.5p	-	-
Net Asset Value	£195.3m	£126.7m	£168.4m
Net Asset Value (NAV) per share	118p	113p	102p
EPRA NTA per share	116p	117p	102p
Group net debt 4	£136.5m	£348.0m	£185.3m
Net debt to property value 4	40%	72%	49%

Notes

1. Adjusted Profit, Adjusted Earnings per share, Net Rental Income, Net Debt and the new Snozone EBITDA metric are as defined in the Glossary. Adjusted Profit incorporates profits from operating activities and excludes revaluation of properties and financial instruments, gains or losses on disposal, and othernon-operational items. A reconciliation to the equivalent EPRA and statutory measures is provided in Note 6 to the condensed financial statements.
2. 2021 Revenue has been restated to remove Luton given its reclassification as a Discontinued Operation. Adjusted Profit for the six months to June 2021 has been restated to reflect the introduction of the Snozone EBITDA performance measure during 2021.
3. For lettings and renewals (excluding development deals and CVA variations) with a term of 5 years or longer which do not include turnover rent or service charge restrictions.
4. On a proforma basis, adjusted for the Walthamstow residential land and Blackburn disposal proceeds which were received post 30 June 2022. Net debt to property value was 49% at 30 June 2022 on an unadjusted basis.
5. Represents dividends declared post period end but related to the period in question.

Use of Alternative Performance Measures (APMs)

Throughout the results statement we use a range of financial and non-financial measures to assess our performance. A number of the financial measures, including Net Rental Income, Adjusted Profit, Adjusted Earnings per share, Net Debt and the industry best practice EPRA (European Public Real Estate Association) performance measures are not defined under IFRS, so they are termed APMs. APMs are not considered superior to the relevant IFRS measures, rather Management use them alongside IFRS measures to monitor the Group's financial performance because they help illustrate the trading performance and position of the Group. All APMs are defined in the Glossary and further detail on their use is provided within the Financial Review.

For further information:
Capital & Regional:	Tel: [phone]
Lawrence Hutchings, Chief Executive
Stuart Wetherly, Group Finance Director
FTI Consulting:	Tel: [phone]
Richard Sunderland, Maria Saud, Katie Hughes	Email: [e-mail]

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Notes to editors:

About Capital & Regional

Capital & Regional is a UK focused retail property REIT specialising in shopping centres that dominate their catchment, serving the non-discretionary and value orientated needs of the local communities. It has a strong track record of delivering value enhancing retail and leisure asset management opportunities across a portfolio of in-town shopping centres. Capital & Regional is listed on the main market of the London Stock Exchange (LSE) and has a secondary listing on the Johannesburg Stock Exchange (JSE).

Using its in-house expert property and asset management platform Capital & Regional owns and / or manages shopping centres in Hemel Hempstead, Ilford, Luton, Maidstone, Redditch, Walthamstow and Wood Green.

For further information see capreg.com.

South African secondary listing

Capital & Regional maintains a primary listing on the London Stock Exchange (LSE) and a secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa. At 30 June 2022, 7,538,020 of the Company's total of 165,399,863 shares were held on the South African register representing 4.56% of the total issued share capital. Java Capital acts as JSE Sponsor for the Group.

Forward looking statements

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of government regulators and other risk factors such as the Group's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this document. The Group does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Group should not be relied upon as a guide to future performance.

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Operating review

New lettings, renewals and rent reviews

We enjoyed another strong period of leasing momentum during the first half, completing 55 new lettings and renewals during the period, at a combined annual rent of £2.4 million, representing an average premium to previous rent of 34.1%1(30 June 2021 - 54 new lettings and renewals for a combined annual rent of £1.4 million).

Highlights include signing an agreement for lease with the NHS for a new community healthcare centre at Ilford on a 25-year lease term. This will be a flagship project providing a new 20,000 sq ft purpose-built facility that is expected to open to the public in 2024. At Wood Green the diagnostics centre is due to open imminently and we are in advanced discussions on another lease to extend the space further. Both these initiatives demonstrate our continued implementation of our strategy of extending the range of necessary goods and services we provide to the local community. These further embed our centres at the heart of their local communities, helping drive footfall to the benefit of the other retailers while providing all in one convenience to our customers.

Also at Ilford, we signed an agreement to relocate and upsize TK Maxx into a new 35,000 sq ft store occupying the first floor of what was the former Debenhams unit. This will enable remerchandising of the existing TK Maxx unit which sits at the entrance next to Ilford station, which will benefit from the full opening of the new Elizabeth Line next year.

	6 months to	6 months to
New Lettings1	June 2022	June 2021
Number of new lettings	41	30
Rent from new lettings (£m)	£1.9m	£1.1m
Renewals settled1
Renewals settled	14	24
Total resulting annual rent (£m)	£0.5m	£0.3m
Combined new lettings and renewals1
Comparison to previous rent2	+34.1%	+36.3%
Comparison to ERV at December 20212	+17.8%	+19.3%

1. Includes transactions for Hemel Hempstead, Ilford, Maidstone, Walthamstow, Wood Green, Blackburn and Luton.
2. For lettings and renewals (excluding development deals and CVA variations) with a term of 5 years or longer which do not include turnover rent or service charge restrictions.

Rental income and occupancy

		30 June 2022		30 December	30 June
					2021	2021
	Investment	Held for		Total
	Assets1	sale/Other1
Occupancy (%)	93.8%	93.4%		93.7%	92.8%	89.7%
Contracted rent (£m)	31.5	19.1		50.6	50.9	51.1
Passing rent (£m)	30.8	18.4		49.2	48.2	50.2

1Investment Assets include the Group's centres at Hemel Hempstead, Ilford, Maidstone, Walthamstow and Wood Green. Held for sale/Other consists of Blackburn and Luton.

Occupancy at 93.7% has increased by 0.9% since 30 December 2021 and by 4% since 30 June 2021.

Contracted rent is broadly in line with the December 2021 level. This excludes more than £0.6 million of rent where deals have exchanged but completion remains subject to planning or other conditions.

Passing rent has improved by £1.0 million since 30 December 2021 with the largest contributors being the lettings to the Department for Work and Pensions for Job Centres at Blackburn and Ilford commencing cash rent payments during the period.

Operational performance

In total there were 29 million shopper visits across the seven assets in the first half of 2022, an increase of 58% from 2021. This increase is 2.2% lower than the growth in the national index, reflecting relatively weaker comparatives in a number of centres within the national pool during the first few months of 2021 when non- essential retailers were unable to open.

Footfall for the month of June outperformed the national index by 4% and was equivalent to approximately 82.5% of 2019 levels, compared to 79% for the half year. Anecdotal evidence from our retailers suggests that while footfall has been slower to recover, sales have bounced back at a higher rate reflecting more efficient use of visits.

Car park income in the first six months of the year was £3.8 million for the Group's Investment Assets, 66% higher than the same period in 2021.

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