Capco shares plummet to decade low as UK tax cuts spook investors
Retail-focused property company stands to be hit hard after the British government’s move, which will be funded by further borrowing, ignites fears of recession
27 September 2022 - 18:23
byAndries Mahlangu
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Capco’s Covent Garden in London, Britain. Picture: SUPPLIED
Capital & Counties Properties (Capco) shares plunged to the lowest in more than a decade on Tuesday after the pound’s slump raised the risks of even higher inflation and interest rates in the UK and an accompanying decline in consumer spending.
The stock, which is listed on the JSE and in London, reached a low of R19.69 and closed at R19.73, down 3.2% on the day — the lowest level since August 2011 and stretching its year-to-date loss to 45% — dealing a potential body blow to the company’s attempts to recover from the devastating effects of the pandemic and Brexit.
Capco’s flagship asset is Covent Garden, a popular shopping and tourist site in London. It’s also pursuing a merger with UK peer Shaftesbury that will own swathes of the West End, home to the city’s major tourist attractions, shops, businesses, government buildings and entertainment venues.
The UK government announced the biggest tax cuts in 50 years which the Treasury said would wipe £45bn ($50bn) off government revenue over the next five years. The cuts, which will be funded by a sharp increase in borrowing, came a day after the Bank of England warned that the economy was already probably in recession, unsettling investors already concerned that the country is spending beyond its means.
“Capco at the end of the day is basically a consumer company, renting out shops to consumer companies,” said Anthony Clark, an independent analyst at Small Talk Daily.
While Capco’s portfolio is desirable as a long-term asset play, Shaftesbury’s assets are “much shabbier” and needed much renovation work in what could be a long-term integration process, Clark said.
“So now we have a company not just battling itself because of the economic conditions in the UK [it is now] now taking on a huge merger in a declining economic environment in the UK,” he added.
Capco went public in 2010 when it listed on the JSE and the London Stock Exchange after its unbundling from Liberty International, which was founded by the late SA businessman Donald Gordon. Institutional shareholders include the Public Investment Corp (PIC), which administers government workers’ pension funds.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Capco shares plummet to decade low as UK tax cuts spook investors
Retail-focused property company stands to be hit hard after the British government’s move, which will be funded by further borrowing, ignites fears of recession
Capital & Counties Properties (Capco) shares plunged to the lowest in more than a decade on Tuesday after the pound’s slump raised the risks of even higher inflation and interest rates in the UK and an accompanying decline in consumer spending.
The stock, which is listed on the JSE and in London, reached a low of R19.69 and closed at R19.73, down 3.2% on the day — the lowest level since August 2011 and stretching its year-to-date loss to 45% — dealing a potential body blow to the company’s attempts to recover from the devastating effects of the pandemic and Brexit.
Capco’s flagship asset is Covent Garden, a popular shopping and tourist site in London. It’s also pursuing a merger with UK peer Shaftesbury that will own swathes of the West End, home to the city’s major tourist attractions, shops, businesses, government buildings and entertainment venues.
The UK government announced the biggest tax cuts in 50 years which the Treasury said would wipe £45bn ($50bn) off government revenue over the next five years. The cuts, which will be funded by a sharp increase in borrowing, came a day after the Bank of England warned that the economy was already probably in recession, unsettling investors already concerned that the country is spending beyond its means.
“Capco at the end of the day is basically a consumer company, renting out shops to consumer companies,” said Anthony Clark, an independent analyst at Small Talk Daily.
While Capco’s portfolio is desirable as a long-term asset play, Shaftesbury’s assets are “much shabbier” and needed much renovation work in what could be a long-term integration process, Clark said.
“So now we have a company not just battling itself because of the economic conditions in the UK [it is now] now taking on a huge merger in a declining economic environment in the UK,” he added.
Capco went public in 2010 when it listed on the JSE and the London Stock Exchange after its unbundling from Liberty International, which was founded by the late SA businessman Donald Gordon. Institutional shareholders include the Public Investment Corp (PIC), which administers government workers’ pension funds.
mahlangua@businesslive.co.za
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