TIDMSMP
RNS Number : 7307V
St. Modwen Properties PLC
05 December 2019
Date of issue: 5 December 2019
LEI: 213800WMV4WVES8TQH05
This announcement contains inside information
ST. MODWEN PROPERTIES PLC
("St. Modwen" or "the Company")
Trading update for the period ended 30 November 2019
St. Modwen delivers continued progress on focused growth
strategy
Mark Allan, Chief Executive of St. Modwen, commented:
"Following the major repositioning of our business through the
successful disposal of over 40% of our assets in the preceding 18
months, our focus in 2019 has been firmly on delivering the deep
pipeline of opportunities in our existing portfolio. We have made
strong progress on this during the year in each of our three
business units and, supported by our solid capital base, we are
confident that the continued delivery on this strategy will drive a
meaningful improvement in return on capital and earnings over
time."
Overview
Whilst the external environment remains uncertain and the
prospects for parts of the UK property market continue to be
challenging, the outlook for our two key sectors,
industrial/logistics and regional housebuilding, remains
underpinned by structural growth characteristics. This is reflected
in continued strong growth in our St. Modwen Homes and Industrial
& Logistics business units during 2019, whilst our Strategic
Land & Regeneration business has made good progress in
monetising the value in our residential land bank and residual
non-core assets and in progressing the longer-term opportunities in
its pipeline. As a result, the underlying performance of the
business has been in line with expectations. However, we expect to
recognise an exceptional provision for a potential claim related to
a historical development project which is expected to reduce our
NAV for 2019 by around 8 pence per share.
St. Modwen Homes: surpassed 1,000 homes in the year; on track to
deliver further growth
We continue to see good demand for the high-quality homes we
build. St. Modwen Homes' sales volumes increased 25% to 1,060 units
(2018: 848 units), at the top end of our objective to grow volumes
by up to 25% p.a., and we are currently sales active on 24 outlets,
with additional sites launching early in the new year. Operating
margins improved largely in line with our plans and we expect to
make further progress towards our c. 16-17% medium-term target
during 2020. Having more than doubled St. Modwen Homes sales
volumes over the last three years, the annual rate of volume growth
is bound to moderate slightly as the business grows, yet the better
affordability in the regions, where the bulk of our activity is
focused, leaves us well-placed to continue to grow volumes in line
with our medium-term target. Reflecting this, our forward order
book is up 33% compared to this time last year.
Industrial & Logistics: growing our pipeline and leasing
activity
Our substantial industrial and logistics pipeline continues to
drive strong growth. Our committed pipeline stands at 1.6m sq ft,
up from 1.5m sq ft this time last year. We completed 0.9m sq ft of
space during the year (2018: 0.9m sq ft), of which we plan to
retain 99% (2018: 69%), with a further 0.5m sq ft of completions
due early in the new year. We have seen momentum in leasing build,
meaning 53% of the ERV we completed during the year is already let
or under offer, up from 39% of our 2018 completions this time last
year, whilst 14% of our committed pipeline is pre-let (2018: 0%).
Looking forward, we continue to expect that the recycling of
capital from our non-core asset disposals into our sizeable
pipeline will drive strong development upside and growth in
income.
Strategic Land & Regeneration: recycling capital; driving
major regeneration schemes
We have seen continued progress against the key objectives for
our Strategic Land & Regeneration business. We agreed the
disposal of GBP30m of residential land during the period (2018:
GBP53m) and are in advanced legal discussions on the sale of over
1,500 plots across our two large sites in South Wales for over
GBP50m. Assuming these deals complete, the transfer of this land
would be phased but including the next phase for St. Modwen Homes,
this would leave c. 40% of these two sites completed, under
construction or controlled by housebuilders for near term
development.
We also sold GBP65m of non-core assets during the period,
slightly ahead of the target we set at the start of the year,
including the sale of just over half of our residual non-core
retail assets for GBP34m announced last week. In addition, we sold
a range of other non-core assets for GBP31m in total, on average
slightly above book value. Combined with the disposal of GBP177m of
retail assets at a less than 1% discount to book value during 2018,
non-core retail has reduced to only 2% of our portfolio by value,
down from 16% two years ago.
We continue to focus on the delivery of the substantial
opportunities at our existing regeneration projects. At Swansea Bay
Campus we completed the latest phase of 411 student beds which we
sold for GBP38m, as announced earlier this week, releasing capital
for future phases of development at this successful scheme. At
Longbridge, momentum has continued to pick up and we anticipate a
further increase in development activity during 2020, whilst we
have continued to actively progress other longer-term mixed-use
opportunities in our pipeline.
Financing
Following the significant reduction in borrowings due to our
disposals during 2018, see-through net borrowings increased during
the first half of 2019, in line with our plans. Whilst we indicated
with the half year results that we expected a further increase in
borrowings in the second half of 2019, our successful capital
recycling since then means see-through net borrowings have reduced
slightly in the second half of the year (May 2019: GBP304.9m). As a
result, our see-through LTV remains comfortably below our mid 20's
percent target.
Exceptional item
Whilst the underlying performance of the business is in line
with expectations, we expect to recognise a provision for a
potential claim against the Company for a legacy project the Group
developed and sold approximately 15 years ago as an exceptional
item in our 2019 results, which is expected to reduce our NAV for
2019 by around 8 pence per share. To date, no detailed claim has
been made by any of the parties involved and as such there is no
certainty around the potential amount and timing of any future cash
outflow. We anticipate we will be able to recover a meaningful part
of any potential claim but as IFRS places a lower threshold on the
recognition of potential future obligations than the recognition of
potential future reimbursements, we cannot recognise any
anticipated recoveries at this stage and will therefore only
recognise the provision element in our 2019 results. We are
confident this is a one-off historical issue which is not expected
to have any impact on our strategy or medium-term return
expectations.
Full year results
The Company intends to announce its results for the full year on
4 February 2020.
- ENDS -
Enquiries:
St. Modwen Properties PLC
Mark Allan, Chief Executive Tel: 0121 222 9400
Rob Hudson, Chief Financial Officer www.stmodwen.co.uk
Tom Gough, Head of External Communications and
Stakeholder Relations
FTI Consulting
Dido Laurimore Tel: 020 3727 1000
Ellie Sweeney stmodwen@fticonsulting.com
This announcement contains certain forward-looking statements.
Forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "anticipates", "expects", "intends", "plans", "goal",
"target", "aim", "may", "will", "would", "could" or "should" or, in
each case, their negative or other variations or comparable
terminology. These forward-looking statements include all matters
that are not historical facts. Forward-looking statements by their
nature, involve risk and uncertainty because they relate to future
events and circumstances. Actual outcomes and results may differ
materially from any outcomes or results expressed or implied by
such forward-looking statements. Any forward-looking statements
made by or on behalf of the Company are made in good faith based on
the information available at the time the statement is made; no
representation or warranty is given in relation to them, including
as to their completeness or accuracy or the basis on which they
were prepared. The Company does not undertake to update forward
looking statements to reflect any changes in its expectations with
regard thereto or any changes in events, conditions or
circumstances on which any such statement is based. Nothing in this
announcement should be construed as a profit forecast.
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END
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