SHB.L Share News (SHB)

(Sharecast News) - West End-focussed property investment company Shaftesbury reported a recovery in leasing activity in its first half on Tuesday, with "encouraging levels" of enquiries.
The FTSE 250 real estate investment trust said it made 94 commercial and 144 residential leasing transactions across 211,000 square feet in the six months ended 31 March, with a rental value of £14m completed during the period, down slightly from £15m in the first half of the prior year, but up from £8.6m in the second half.

Momentum had continued since the period end, Shaftesbury said, with 47 lettings and renewals concluded across 41,000 square feet at a rental value of £2.1m.

It said the EPRA vacancy stood at 11.9% of estimated recovery value as at 31 March, falling to 11.3% six weeks later.

During the period, available-to-let space decreased by 0.7% to 8.4%, with a further decrease to 7.2% in the six weeks since the period ended.

Space under offer was up 2.4% over the six months to 3.5%, which the board said reflected improved occupier demand, with the figure increasing further to 4.1% in following six weeks.

Shaftesbury said 50% of contracted rents were now collected for the 12 months to 31 March, with a collection rate in the six months ended March standing at 43%.

The board said Covid-19 restrictions were still having a material impact on its results for the first half, with net property income down 42.6% to £26.5m due to occupier support, reduced rent collections and increased vacancy.

It reported a 19.4% like-for-like decrease in rental income, as well as charges for expected credit losses and impairments of £10.6m, up from £3.9m a year earlier, as well as increased irrecoverable service charges and vacancy-related property costs.

Shaftesbury reported a loss after tax of £338.5m for the period, widening from a £287.6m loss a year earlier, with the decrease primarily due to £342.6m of revaluation deficits.

EPRA earnings were down 91.7% to £2.1m, and EPRA net tangible assets fell 21/5% to £5.83 per share, due to revaluation deficits and the company's equity raise in November.

The board declared an interim dividend of 2.4p, however, having declared nil distribution for the first half of the 2020 financial year as the Covid-19 pandemic took hold.

Shaftesbury said the dividend fulfilled its property income distribution requirements for the year ended 30 September.

It added that it was continuing its liquidity preservation measures as pandemic-related uncertainty persisted and operating cash flows were still reduced, although it did intend to resume dividend payments as soon as it considered prudent, maintaining its policy of sustainable dividend growth over the long term.

Shaftesbury said it had maintained a "strong" financial base, positioning itself to return to long-term growth, with the November equity raise strengthening our base and reducing its finance risks.

Available resources at period end stood at £337.2m, with capital commitments of £25.2m, and the company said it had the financial capacity to weather the pandemic and return to long-term growth as the recovery gathered momentum.

Its loan-to-value stood at 25.4%, compared to a proforma of 22.1% at the start of the period, with the increase primarily put down to the company's property valuation decline.

Interest cover covenant waivers were extended in the period, with the earliest waiver expiry being July 2021, and discussions to extend that planned although cash cure alternatives were available.

Shaftesbury's weighted average maturity of debt facilities stood at 8.5 years, with the earliest maturity being its £100m facility in February 2023.

"After more than a year of unprecedented disruption, a revival in the West End's broad-based economy is now underway," said chief executive officer Brian Bickell.

"Since the start of re-opening on 12 April, we are seeing an encouraging increase in demand for space and lettings and a return of footfall and spending across our locations.

"Forecasts point to a sharp rebound in the UK economy but there remains the risk that the recovery could encounter delays and setbacks in the period ahead."

Bickell said the company expected occupier demand to improve further as businesses were seeking to be located in the company's "lively, holistically-curated villages".

"Importantly, the inherent flexibility in our portfolio, and our culture of innovation, will ensure we can continue to adapt our buildings to meet the fast-changing expectations of our occupiers.

"Growing footfall, prosperity and occupier demand will improve our cash income and earnings and stabilise investment yields."

As the global pandemic receded, Bickell said Shaftesbury was confident that the "unique appeal and features" of London and the West End would continue to attract businesses and visitors on a scale matched by few other cities, underpinning the long-term prospects of its portfolio.

"With our proven, ever-evolving strategy, guided by our experienced, enthusiastic and entrepreneurial team, and supported by a strong financial base, Shaftesbury is well placed to return to sustainable long-term growth."

At 0934 BST, shares in Shaftesbury were down 0.58% at 595p.