10th July 2006
St. Modwen Properties PLC - Interim results for the half year ended 31 May 2006
St. Modwen Properties PLC is a regeneration specialist. It has four particular areas of specialism: town centre regeneration; partnering industry in its restructuring; brownfield land renewal; and restoring heritage
* Profit before tax increased by 11% to £43.9m (2005: £39.6m)
* Earnings per share increased by 6% to 26.8p (2005: 25.2p)
* Net asset value per share increased by 20% since May 2005 to 289.4p
* Dividend increased by 17% to 3.4p (2005: 2.9p)
Anthony Glossop, Chairman, comments:
"The investment market continues to remain strong as does the market for residential land. The occupational market is more patchy, but there is business to be won on acceptable terms if the product and the price is right. We remain on course to grow in line with our long-term financial objective of doubling the net asset value per share of the company every five years and I look forward with confidence to a strong second half."
I am pleased to report on another strong first half performance by your company.
You will see that the results are presented in a very different format from that to which you have been accustomed. This arises from the introduction of International Financial Reporting Standards ("IFRS"), the principal effects of which, apart from purely presentational ones, are that revaluations are shown on
the face of the income statement and deferred tax provision on revaluations is included in both the income statement and the balance sheet.
In addition, the introduction of IFRS has led us to make a couple of other changes. In common with most other quoted property companies, we are now undertaking half-yearly revaluations and, as many of our schemes are now taking place over many years, we have reclassified a large part of our work-in-progress as investment properties which have, therefore, been included in the revaluation.
Prior year comparatives have been restated in the IFRS format and to reflect half-yearly revaluations and the work-in-progress reclassification so that the figures presented are on a like for like basis.
On the IFRS basis, the profit before tax has increased by 11% to £43.9m (2005: £39.6m) which includes an unrealised property valuation gain, including our share of joint venture gains, of £21.9m (2005: £22.2m). The net asset value of the company is £349.5m (2005: £290.9m), an increase of 20%. The increase in the first half alone is £25.5m, an increase of 8%. On the traditional accounting basis, the pre-tax profit would have been £23.0m (2005: £22.8m).
In the light of this strong performance and the prospects for the full year, the board has declared an interim dividend of 3.4p per ordinary share (2005: 2.9p), an increase of 17%, which will be paid on 1st September 2006 to shareholders on the register at 4th August 2006.
Richard Froggatt, who has been a main board executive director since 1995, has resigned to pursue other interests and will be leaving the company around the end of July. He has played a significant part in the growth of the hopper and I would like to thank him for his contribution and wish him well for the future.
We continue to be active in strengthening the team. Tim Seddon has joined us from Land Securities to be the London and South East Regional Director, and we have made significant new appointments in the regions, and in the construction team.
We will not be replacing Richard on a like for like basis. Much of his work has now been taken over by the regional teams, and we will be undertaking further recruitment to help us meet our demanding financial objectives.
The investment market continues to remain strong as does the market for residential land. The occupational market is more patchy, but there is business to be won on acceptable terms if the product and the price is right. We remain on course to grow in line with our long-term financial objective of doubling the net asset value per share of the company every five years and I look forward with confidence to a strong second half.
10 July 2006
We remain committed to our business model and strategy. We are at heart a property development company, the aim being that no property should be held unless significant value can be added to that property by the company's own efforts in a flat market over a five to fifteen year horizon.
The key to the strategy is the hopper, which is a bank of long-term development opportunities, broadly based, geographically spread, and focused upon regeneration. The opportunities are sourced by and serviced through a network of regional offices, and are often the outcome of working in partnership.
Development and performance of the business
An 11% increase in profit before tax was driven by a 13% increase in property disposals, including our share of joint ventures and a £0.8m improvement in other income. Twenty-six property disposals were completed in the period with 4 projects contributing profits of over £1m. Net rental income, again including our share of joint ventures, declined by 18% to £17.3m (2005: £21.2m). This was expected, and reflects the sales made last year and the reduced income on the Longbridge property.
Trentham Lakes, Stoke-on-Trent, saw considerable activity with the completion of a 437,000 sq ft warehouse for Glen Dimplex, the construction of a 64,000 sq ft warehouse let to Portmeiron which has been pre-sold, and an extension to the Pets at Home facility which has been pre-sold to Prudential together with a
number of smaller transactions.
At Centre 38, Burton-upon-Trent, our joint venture with Prologis, we completed and sold the 70,000 sq ft facility let to Intier. At Hilton, Derby, we are constructing a 70,000 sq ft facility for Daher Sawley which has been pre-sold, and at Quedgeley West, Gloucester, we are constructing a 95,000 sq ft facility for Prestoplan which has also been pre-sold.
The Edmonton and Wembley town centre schemes saw further progress in construction or site clearance and we took the opportunity of the strong investment market to sell two small investment properties in Urmston and London.
Two significant residential land sales took place in the period of 12 acres at Bestwood, north of Nottingham, and 11 acres at Hilton, Derby.
At Etruria Valley, Stoke-on-Trent, the first two buildings in the 45,000 sq ft office village scheme have been sold shortly after the end of the period, these being the units let to the Probation Service and the Crown Prosecution Service. The remaining building which is to be in multiple occupancy, is either let or in
solicitors' hands and should be available for sale in the second half.
This year we have introduced half-yearly valuations and have reclassified much of our work-in-progress as investment properties. This brings us into line with most other quoted property companies and reflects the long-term nature of most of our schemes. The impact of the reclassification of certain work in progress
was £24.4m, of which £6.8m related to the current period and £17.6m to earlier periods.
Our valuers continue to adopt a conservative approach to revaluations, particularly in the area of change of use where they do not tend to recognise increased value until some significant milestone, such as the actual grant of
planning permission or the signing of a development agreement, is achieved.
Marshalling (projects in active preparation)
We have continued to make good progress in marshalling projects for the second half of 2006 and beyond.
At Trentham Gardens, the construction of the major section of the second phase retail is well advanced and lettings are going well. An agreement for lease has also been exchanged with Golden Tulip Hotels for a 120
bedroom hotel and planning negotiations are at an advanced stage.
At Guiseley, a favourable planning resolution was obtained for eight acres of residential development subject to a Section 106 agreement.
Planning was obtained for a major mixed-use scheme at Norton Fitzwarren, Taunton. This will provide 550 homes and 170,000 sq ft of employment space. The development joint venture with AXA is in the process of
In Wolverhampton, a favourable planning resolution was obtained for the Goodyear site for 46 acres of residential development and 33,000 sq ft of new or refurbished employment space subject to signing a Section
In February, Nanjing Automotive Group UK Ltd took an assignment of the remaining 33 years on 105 acres of MG Rover's lease at Longbridge. This assignment is subject to a six month break clause aimed at giving Nanjing the time to complete its operational plans to restart motor manufacturing. This cleared the way for the masterplanning of the major employment-led mixed-use scheme on the remaining 238 acres on which we have been working closely with the two local authorities involved, and have commenced public consultation.
In Newham, we have exchanged a development agreement with the local authority for the scheme at Upton Park.
We are one of three parties short-listed by the London Borough of Southwark for the overall Elephant & Castle scheme. Phase 3 submissions in the selection process are expected to be required by this autumn. In the meantime, we are managing the shopping centre so as to maximise income whilst facilitating its future redevelopment and have, therefore, relaunched Hannibal House which was vacated by the Department of the Environment as a business centre.
We continued to add to the hopper with net acquisitions in the first half, increasing the hopper by 220 acres to 7,150 acres, of which some 4,900 acres are developable.
In addition to the acquisition at Melton Park, Hull, which was referred to in the 2005 Annual Report, we have acquired this year a 23.4-acre employment site in Worcester which will be launched as Great Western Business Park.
We have also acquired seven former Kwiksave properties from Somerfield. Apart from one in Hull which will be developed by our new Yorkshire office, the remainder were in the North West.
In addition, we have been selected as preferred developer by Ford and Coventry City Council for a 57.5 acre employment development at Whitley, Coventry. At Cannock, Staffordshire we have entered into a development agreement on an 8-acre site fronting the A5 suitable for car showrooms, a trade park or other high value uses.
We have also been selected as preferred developer for a 223,000 sq ft business park in Blackburn by Blackburn with Darwen Council and have entered into a development agreement with Knowsley Borough Council for a 12-acre business village in Prescot.
Most significantly, we have been selected with our partners Vinci plc as the MoD's preferred development partner for MoDEL which encompasses the £150m redevelopment of RAF Northolt and the marshalling and disposal of 250 acres of MoD's London Estate.
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