TIDMSMP
RNS Number : 3440H
St. Modwen Properties PLC
07 June 2017
Date of issue: 7(th) June 2017
ST. MODWEN PROPERTIES PLC
("St. Modwen" or the "Company")
TRADING UPDATE
STRATEGIC REVIEW HIGHLIGHTS GROWTH AREAS FOR ST. MODWEN
AS BUSINESS CONTINUES TO DEMONSTRATE RESILIENCE
St. Modwen Properties PLC (LSE: SMP), the UK's leading
regeneration specialist, today provides a trading update for the
six months to 31(st) May 2017.
Overview
Since the start of the financial year, St. Modwen's diverse
portfolio and wider business has continued to perform in line with
the Board's expectations, demonstrating resilience in the face of
broader market uncertainties.
Additionally, following a six month strategic and portfolio
review, initiated by Chief Executive Mark Allan, the Company is
today hosting a Capital Markets Day for investors and analysts in
London that will include presentations on Group strategy. The
review has highlighted the significant opportunity to build on
existing strengths and the scale of potential within the Group's
asset base. It has established four strategic objectives against
which future performance and direction will be reported:
i. accelerating commercial development activity;
ii. growing our residential and housebuilding business;
iii. cementing and growing our regeneration reputation; and
iv. portfolio focus and capital discipline.
A copy of the presentation accompanying the Capital Markets Day
will be available on the Company's website later today.
Commercial development activity
Commercial development activity is proceeding in line with
expectations, with good ongoing levels of occupier demand across
the UK for both new and existing commercial space, particularly in
the industrial and logistics sector where rents have remained
robust. Various development completions and sales and lettings mean
that development profits for the first half are likely to be in
line with expectations and ongoing positive demand means that the
outlook for the full year is similar.
In the medium term, our commercial development pipeline is
concentrated on the industrial and logistics sector, which accounts
for approximately 70% of opportunity by value. In addition to
progressing existing developments on site, our focus has been and
will remain on, bringing forward these further opportunities in a
timely manner.
Residential activity
The UK housebuilding market has remained resilient to date in
2017, particularly in the regions, with continued robust demand for
new homes delivered by the Group's housebuilding business, St.
Modwen Homes, together with good levels of ongoing demand from
third party housebuilders for 'oven ready' land for
development.
St. Modwen Homes is currently active on 16 sites across the UK,
three of which were launched this year including a scheme of 85
homes at the Group's St. Andrew's Park development in Uxbridge,
Greater London. Sales volumes in the first half are expected to
increase by approximately 15% over the same period last year, with
the associated growth in profits at least offsetting the lower
profits from the Persimmon JV as its activity levels reduce, in
line with plan. We have also continued to build on our brand and
reputation, recently being awarded with a 5* customer service and
quality award from the Homebuilders Federation (HBF).
In response to ongoing appetite from third party housebuilders
we have continued to agree and complete sales of residential land
for prices at or above book value. Over the last six months,
including our share of joint ventures, we sold or agreed for sale
35 acres of land representing 500 units for proceeds of GBP17m.
We continue to pursue selectively high quality acquisition
opportunities and have recently signed a development agreement to
deliver a new 227-acre community including 1,500 homes in Wantage,
South Oxfordshire. St. Modwen Homes will deliver up to half of the
homes, with the remaining development plots awarded in tranches and
sold to other housebuilders. The entire site benefits from outline
planning consent and St. Modwen Homes has now submitted a detailed
planning application for the first phase of 150 homes for which,
subject to planning, we anticipate starting on site in the summer
2017.
Internal value creation
We continue to drive ongoing value creation by both progressing
our sites through planning and continuous asset management.
Highlights include securing planning permission for a 677,000 sq ft
industrial development at a 35-acre site in Tamworth, Staffordshire
for which we anticipate the first phase of works to start on site
in the second half of the year.
We have also renegotiated a number of leases across our
industrial portfolio, achieving good levels of rental growth,
including new leases at two major sites in the Midlands.
Investment portfolio and net debt
We anticipate continued resilience throughout the first half in
both our industrial and logistics income generating portfolio and
our student accommodation assets, reflecting robust yields and
modest rental growth as a result of the strength of ongoing
occupier demand in both sectors. Conversely and as previously
flagged, we expect to see some valuation weakness in our retail
portfolio across 2017 as inflation puts pressure on consumer
spending. The residential land market remains healthy, evidenced by
our ongoing sales activity at or above book value.
During the first half of the year our investment activities,
comprising both ongoing development capital expenditure as well as
site acquisitions, exceeded proceeds from asset sales and as a
result net debt is expected to increase by approximately GBP85m
over the six months. Debt levels in the second half are anticipated
to fall as a result of ongoing sales activity. In particular, we
are continuing to progress the sale of the Nine Elms square site at
New Covent Garden Market and have also now taken the decision to
pursue the disposal of our student accommodation assets at the Bay
Campus, Swansea University to take advantage of the strong
investment demand for student housing.
Mark Allan, Chief Executive, said:
"Over the last six months we have undertaken a detailed review
of the current portfolio and the existing opportunities within our
extensive asset base. The outcome of this review has been positive,
highlighting the strength and depth of opportunity within the
business and portfolio to create value through our regeneration,
commercial and residential expertise.
"Having experienced a positive start to the year that reflects
management expectations, we will now continue to refine the
strategy further and concentrate on those areas of our deep and
diverse portfolio that present genuine opportunities for value
generation and further business growth which will ultimately lead
to enhanced shareholder returns".
The Company intends to announce its half year results on 4(th)
July 2017.
For further details on today's Capital Markets Day, please
contact FTI Consulting.
-ENDS-
ENQUIRIES:
St. Modwen Properties PLC Tel: 0121 222 9400
Mark Allan, Chief Executive www.stmodwen.co.uk
Rob Hudson, Group Finance Director
Charlotte McCarthy, Head of PR and Communications
FTI Consulting Tel: 020 3727 1000
Dido Laurimore/ Tom Gough/ Ellie Sweeney stmodwen@fticonsulting.com
This information is provided by RNS
The company news service from the London Stock Exchange
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