The board expects FY19 results in line with its, and we believe the market’s, expectations. Like-for-like passing rents increased by 2.6% with overall occupancy at 96%, a similar level to H119 and up from 95% at end-FY18. The car parking operation, CitiPark, continued to grow revenues and profits. With a lack of exposure to the big high street names in its retail portfolio, and a tenant profile that includes a number of strong covenants (including Waitrose and Morrisons), TCS has avoided the worst of the retail sector problems. The fast re-letting of most of the vacated properties, on favourable terms, is a positive indicator for the quality of the portfolio. We leave our recurring earnings forecasts unchanged but trim our NAV by c 3% in line with continued market weakness in retail valuations. 

As a family run business, TCS has a strong focus on dividends and has increased or maintained DPS in each of the last 58 years, while investing for growth. To achieve this, it recycles capital and actively manages its assets and in the past two to three years has significantly repositioned the portfolio to reduce income risk, particularly in relation to retail exposure, and unlock value from development opportunities. By H119 retail and leisure assets had fallen to 52% of the total (2016: 70%) and management signals it will continue this process. An extensive pipeline of potential development projects from within the existing portfolio represents a substantial growth opportunity for which the company continues to explore funding options. The estimated gross value, once funded and developed, is now estimated by management at more than £600m. 

TCS has a strong dividend focus while continuing to invest for growth. Our forecast FY19 DPS represents a yield of almost 6%, fully covered by recurring earnings. The share price discount to EPRA NAV is more than 40%.