Town Centre Securities (LON: TOWN) provided a pleasant surprise with a 1.75p a share interim dividend. This indicates the confidence of management even though revenues have declined due to Covid-19.
Town Centre has collected 85% of rents since last March and 3% more relates to deferral agreements. Some high street retailers remain unwilling to pay rents, although Boots has started to pay after threatened legal action.
The reduction of exposure to retail and leisure properties continues and they currently account for 39% of the portfolio – pure retail is 26%. A further £1.4m of sales are planned.
This has also helped to cut borrowings to a more acceptable level. Net debt has fallen to £148m and loan-to-value is a more comfortable 48.6%. There are available debt facilities of £13m.
The focus of the portfolio is Leeds and Manchester. There is £600m of gross value in potential development schemes. Town Centre will need to find the finance to progress these developments.
Covid-19 is estimated to have knocked £2.3m from car park income – down to £0.9m – and £900,000 from other income. Gross revenues were one-third lower at £10.4m. There was a small profit, but not enough to cover the dividend.
There was a 0.8% decline in the valuation of the property portfolio to £331m. The value of the largest asset, the Merrion Centre, fell by 3.7%. The developments increased in value.
The NAV was 286p a share at the end of December 2020.
Peel Hunt has increased its June 2021 NAV estimate from 268p a share to 271p a share. The current share price is 119.5p. That represents a recovery over the past six months, but it appears unduly low.
There is a 56% discount to forecast NAV. A sharp fall in property values would be required for that to be fair. Once car park income improves the profit will recover and the value of the asset base is likely to increase as well.
A forecast full year dividend of 3.5p a share, provides a yield of nearly 3%, with the potential for a return to much higher dividend levels.
The income is an attraction, while investors wait for the medium-term recovery in the share price.