UK community developer St Modwen said that is has made “considerable progress” in repositioning its portfolio towards sectors with better long-term growth prospects and accelerating the delivery of our substantial development pipeline.
It pointed to “portfolio focus and capital discipline” as it revealed its latest results.
These include that it sold £350m of assets since the end of 2017, bringing total disposals since announcement of new strategy a year ago to £635m, driving significant improvement in portfolio mix.
It expects to exceed full year target to sell £100-150m of retail and small assets, with the sale of 28% of our retail portfolio for £95m during the half year and a further c. £70m of retail and small assets under offer.
St Modwen is recycling capital out of existing assets into industrial/logistics pipeline to drive significant pick-up in income, reduction in costs and improvement in growth prospects in medium term.
It also plans to accelerate commercial development activity, with increased committed industrial/logistics pipeline from 1.0m sq ft to 1.3m sq ft since start of the year, of which approximately two-thirds will be retained, with an ERV of £6.1m.
St Modwen has obtained consent for 1.2m sq ft at key strategic sites at Chippenham Gateway and Copthorne, Gatwick with combined ERV of over £8m.
It has also prepared its industrial/logistics pipeline for future growth; over 10m sq ft development potential across key strategic sites with ERV of over £60m deliverable over 5-8 years, partly subject to planning, plus over 5m sq ft development potential on smaller sites with over £30m ERV.
RPA Perspective In a major repositioning, RPA reported recently, St Modwen is growing its residential and housebuilding business and delivered 31% growth in S. Modwen Homes’ volumes with 302 units sold in the first half (2017: 230 units), delivering a 23.3% increase in profit to £11.1m reflecting the low level of affordable completions during the previous period. Expectation of up to 25% volume growth and 0.5ppt margin improvement for full year remains unchanged.
It also sold 21 acres of residential land to third party housebuilders for £27m (2017: £14m), in line with book value, well on track versus our target to sell at least £56m this year.
The company also aims to cement and grow its regeneration reputation and released £141m of capital out of first phases of development at Longbridge and Swansea to bring forward significant residual development opportunities.
It is preparing next phase of student housing and academic facilities at Swansea for delivery by 2021 and enhancing Longbridge vision ahead of employment-led next phase.
Mark Allan, Chief Executive of St Modwen, said: “We have had a good start to 2018. Our expectations for the full year remain unchanged and we are firmly focused on executing the new strategy we established a year ago. We have sold £635m of assets since then, improving our portfolio mix and allowing us to reduce borrowings, whilst accelerating the delivery of our substantial industrial/logistics and regional housebuilding pipeline. Despite ongoing uncertainty in the external environment, structural growth drivers in both sectors remain positive, so we anticipate delivering a meaningful improvement in earnings and return on capital in the medium term.”