Commercial property development is an inherently risky business, dependent on demand withstanding the years it takes for construction to complete. U and I (UAI), which made trading profits of just £3.6m during the first half of the year, is counting on favourable planning decisions on some of its public private partnership schemes to hit a target profit range of £35m-£45m for the 2020 financial year.
Perhaps investors should take comfort from the series of share purchases made by the group’s chief development officer, Richard Upton. Most recently, Mr Upton kicked off 2020 by topping up his holding by a further tranche worth £30,000, part of an aggregate £0.32m outlay on shares in the regeneration specialist.
Those purchases have been accompanied by steady gains in the share price since the start of November, which has risen by almost a quarter during that time. Admittedly, that is partly representative of a broader post-election rally in UK real estate shares.
The cost of funding developments – which included the Arts Building and Kensington Church Street in London – meant the loan-to-value ratio of the group’s portfolio rose to 47.1 per cent over the first half of the year, just under a ceiling target of 50 per cent. However, management said it expected that level to reduce by the March 2020 year-end as planning decisions are received.
