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St. Modwen upbeat on strategy shift impact

By Paul Norman - Tuesday, February 06, 2018 9:27

St Modwen said the shifting of its portfolio towards a “new, more focused strategy” was delivering significant improvements in earnings and return on capital.

Reporting full year results to end of December St. Modwen said NAV per share was up 4.6% to 450.9p (2016: 431.0p) while total accounting return was up 0.4ppt to 6% (2016: 5.6%).

Trading profit was up 15.2% to £64.6m (2016: £56.1m). Total dividend was up 4.7% to 6.28p per share (2016: 6p per share).

The see-through loan to value was down 6.3ppt to 24.2% (2016: 30.5%).

St Modwen said the period had seen it refinance the majority of its debt facilities with a new £475m unsecured facility post year end, providing “greater flexibility and longer debt maturity at lower cost”.

St Modwen said the year had seen good progress in shifting its portfolio mix by increasing exposure to income producing assets to 51% (2016: 45%), with intention to further increase this over time.

It sold the Nine Elms Square land for £190m net proceeds, £27m small assets, Swansea student housing for £87m net proceeds post year end and it intends to sell £100-150m retail and small assets in 2018, with terms agreed on circa £40m of this.

It has also accelerated its commercial development activity.

It delivered 1.4m sq ft of new space with total GDV of £216m, including 0.9m sq ft industrial and logistics of which it will retain £66m, with an 1.6m sq ft committed pipeline at start of 2018 expected to grow further during the year. Up from 800,000 sq ft a year ago and 40% is prelet or presold both up on last year.

St. Modwen said its pipeline will deliver continued growth in 2019 and 2020 subject to tenant demand, with a 7.5m sq ft medium term A1 industrial and logistics pipeline which has a GDV of circa £700m and ERV of circa £45m of which it expects to retain the majority.

Housebuilding activity saw a 43% increase in the number of units sold in 2017 with management targeting up to 25% growth in volumes for 2018. 

It also announced today that it had sold its stake in 11.88 acres of serviced residential land in Mill Hill, North London, as part of The Inglis Consortium to a Chinese group. The company’s share of net proceeds is £16.1m reducing the group's holdings in residential land in London.

Mark Allan, chief executive of St. Modwen, said: “2017 has been a positive year for us. Having established our new, more focused strategy, we started to shift our portfolio towards sectors with better structural growth characteristics, we increased commercial development activity, grew housebuilding profits and reduced net borrowings. This will continue in 2018 and beyond, so despite continuing uncertainty in the external environment, the significant potential in our existing pipeline means we expect to deliver a meaningful improvement in earnings and return on capital in the medium term.”

Allan added: "This is about momentum. We set out the strategy in the summer and are seeing some early wins."

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