1st December 2011
TRADING UPDATE - STRONG OPERATIONAL PROGRESS AND SUCCESSFUL EXTENSION OF FINANCING FACILITIES
St. Modwen Properties PLC (LSE: SMP), the UK’s leading regeneration specialist, today announces continued progress across all areas of its business for the financial year ended 30 November 2011.
As the Company enters its close period, St. Modwen is pleased to announce that the business has continued to perform well since its Interim Management Statement on 28 September 2011.
• Strong results anticipated for the full year, with rental income, trading profits and profits before tax ahead of 2010 and at the upper end of expectations
• Results expected to include realised profit in excess of £20 million from development activities
• Net asset growth for the year anticipated to be at the upper end of management expectations, as a result of successful asset management initiatives and progress of sites through planning and development processes
• Group share of net rental income increased by over 3% year-on-year
• Residential land sales of £72 million including £27 million to the Persimmon joint venture at or above book value. A further circa £50 million of land is targeted for sale to the joint venture in 2012
• Strong residential reservation rates achieved on four sites launched for sale in Q4 2011
• Extension of £119 million of existing corporate funding facilities completed with Lloyds and Barclays; all Group consolidated facilities now extend until at least 2014.
Continued Residential Progress
Our residential business has continued to perform strongly since the Interim Management Statement and we are confident that it is well positioned to generate significant value for the business in the coming years. Over 80% (more than 20,000 plots) of the portfolio has either planning permission or allocations within local plans, and we continue to create value from both planning and development. The work that we have put into progressing sites through the planning process is now being reflected in increased valuations. An increasing proportion of that value is also now being crystallised for the Company by building out residential schemes both in joint venture with partners and through our housebuilding arm, St. Modwen Homes.
Within our Persimmon joint venture, we have completed development agreements and received initial land payments on three sites during the course of 2011, with a combined agreed land value of over £27 million, plus an entitlement to 50% of the profits on house sales.
A further five sites have been identified for inclusion in the joint venture in 2012, with a land value in excess of £50 million. We have also sold further residential land to the value of £45 million during the course of the financial year. All these transactions have been agreed at or above book value and the interest shown in land marketed recently has continued to be good.
Our view that the residential market remains active is reinforced by the positive response to marketing of houses on the initial Persimmon JV sites at Goodyear in Wolverhampton and Glan Llyn in Newport, South Wales. In addition, our first St. Modwen Homes sites at Longbridge in Birmingham and Locking, Weston-Super-Mare, have also seen good initial levels of sales. On all of these sites, both the sales rates and prices achieved have been above our previous expectations, with a total of 46 reservations achieved across the four sites launched for sale in Q4 2011.
We have had a successful year of commercial development, with all projects completing on time and within budget and schemes under construction progressing well.
Major projects completed in the period include: Bournville College, Longbridge, Birmingham; Etrop Court, Wythenshawe, Manchester; and Venture Fields, Widnes. All have contributed to profits during the financial year.
Our ongoing projects for 2012 and beyond also continue to progress well, with contracts signed and development commenced on:
• An 85,000 sq. ft. foodstore for Sainsbury’s at Longbridge, Birmingham
• A new 135,000 sq. ft. office and production facility for Siemens at Lincoln
• An 85,000 sq. ft. foodstore for Tesco at Hednesford, Cannock
• A 20,000 sq. ft. office facility for Viridor at Firepool, Taunton.
Despite the difficult market, our teams continue to find opportunities to generate future value. For example, we are now in exclusive dialogue with Swansea University in respect of plans to develop a new science and innovation campus on our 50 acre site at Fabian Way. The first phase will include 300,000 sq ft of academic accommodation, 2,000 student residential units and associated retail space, with an estimated end value of circa £200 million.
We remain optimistic about our ability to continue to deliver consistent development profits to underpin the future growth of the group.
Continued Rental Income Growth
Rigorous active management of our portfolio has enabled us to increase the Group’s share of net rental income by over 3% compared to the previous financial year. Despite the difficult economic environment, we have maintained occupancy levels and have only experienced low levels of tenant losses as a result of financial problems. Consequently, rental income and other recurring income continues to be sufficient to service all of the Group’s cash overhead and interest costs.
We are pleased to have completed extended facilities with Lloyds for a £100 million facility extending until November 2014 and an extended £19 million Barclays facility for Trentham Gardens until September 2015. Both facilities are at a margin of 200bps, in line with our other corporate facilities. This now means that all our consolidated Group facilities of £484 million extend until at least 2014, leaving over £130 million of headroom against our expected year end debt position.
Bill Oliver, Chief Executive of St. Modwen, commented:
"As a result of our team’s hard work in managing our assets to maximise value and crystallise profit, we expect to report a strong performance this year, in spite of challenging market conditions. We continue to drive income growth across our portfolio through the intensive active management of our existing properties and by progressing potential new opportunities. Demand for residential land remains robust, and we have made excellent progress in our housing development programme, both in joint venture with Persimmon and under our own housebuilding arm, St. Modwen Homes.
"With a strong track record of delivery, regional and partnership expertise, strong asset management skills and the proven ability to secure new projects, we have confidence in our prospects for continued growth in the company for 2012 and beyond."
St. Modwen Properties PLC
Bill Oliver, Chief Executive
Michael Dunn, Group Finance Director
Menna Rees-Steer, PR Consultant
Tel: 0121 222 9400
Tel: 020 7831 3113
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