When Mark Allan became chief executive of St Modwen Properties (SMP) in December 2016, one of his first moves was to initiate a strategic review on the company's portfolio and business strategy. This process is now complete, and the principal message is that there will be a steady recycling of smaller assets and greater focus on larger-sized industrial and logistics properties such as distribution centres.
As part of this process, it is selling its stake in Nine Elms Square, at the New Covent Garden Market, for a gross £190m; and its Bay Campus student accommodation assets in Swansea which are expected to generate over £90m. The review has also identified 93 smaller value assets comprising 6 per cent of the total portfolio that will be sold over the next few years, and this is expected to generate a further £100m.
St Modwen has a 17.3m sq ft pipeline of opportunities capable of delivery in the medium term, of which 7.5m comprises high quality industrial and logistics projects, and the whole pipeline could generate profits of around £115m. Realised profits on the commercial side nearly halved to £11.5m as activity slowed sharply in the wake of the EU referendum, although activity in the second half is expected to pick up, helped by around 400,000 sq ft of commercial space delivered in the first half.
On the housebuilding side, there are three revenue streams; selling plots 'oven ready' to other housebuilders, as well as St Modwen Homes and a joint venture with Persimmon. The latter is slowly maturing as building concludes on a majority of sites, but this has been more than offset by a 14 per cent increase in sales volumes at St Modwen Homes. Overall housebuilding generated profits of £13.4m, up from £12.9m a year earlier, while St Modwen Homes sales grew from 202 units to 230, with average private sale prices up 21 per cent at £262,000.
Net borrowing increased by £85m to £611.2m, reflecting an excess of development capital expenditure over proceeds from assets, and giving a loan-to-value ratio of 33.1 per cent. However, after adjusting for the Nine Elms sale, this will come down to just 25 per cent.
Analysts at Peel Hunt forecast adjusted net asset value (NAV) of 481.7p at the year ending November 2017 (from 460.5p a year earlier).
|ST MODWEN PROPERTIES (SMP)|
|ORD PRICE:||356.9p||MARKET VALUE:||£792m|
|TOUCH:||356.3-357.2p||12-MONTH HIGH:||372p||LOW: 218p|
|DIVIDEND YIELD:||1.7%||DEVELOPMENT PROP:||£299m|
|DISCOUNT TO NAV:||19%|
|INVESTMENT PROP:||£1.35bn*||NET DEBT:||62%|
|Half-year to 31 May||Net asset value (p)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
Ex-div: 10 Aug
Payment: 5 Sep
*Includes joint ventures