Half year profits boost for property group

Rupert Mucklow

Strong occupier demand allied with a steady stream of rental income has helped boost the half-year performance of Black Country property group, Mucklow.

For the six months ended December 31, 2017, the Halesowen-based group reported statutory pre-tax profit of £29.9m (H1 2016/17: £9.1m) – which included a revaluation surplus of £14.1m (H1 2016/17: £0.5m). EPRA net asset value per share rose by 7.4% in the six-month period to 506p.

Underlying pre-tax profit for the half year was £8m (H1 2016/17: £7.9m), while EPRA earnings per ordinary share increased by 2.7% to 12.88p (H1 2016/17: 12.54p). EPRA net asset value per ordinary share increased by 35p to 506p (June 30, 2017: 471p).

Shareholders’ funds rose to £318.9m (June 30, 2017: £296.7m), while net debt to equity gearing and loan to value (LTV) reduced to 23% and 18% respectively (June 30, 2017: 26% and 20%).

The directors declared an interim dividend of 10.18p per ordinary share, an increase of 3% over last year.

“Our property portfolio has continued to benefit from steady occupier demand and rental levels that are still growing,” said chairman Rupert Mucklow.

“Property values have also continued to improve on the back of strong investor interest and a shortage of available stock.”

The group’s vacancy rate at the end of December was 7.5% (June 30, 2017: 4.2%). The increase was mainly due to a lease expiry on a 110,000 sq ft warehouse at Worcester, just prior to the half-year end.

It said its vacancy rate was likely to reduce significantly in the second half year as over half its vacant space was currently under offer, including the Worcester property.

There were no acquisitions during the period, although in October it realised £13m from the sale of the Bull Ring Trading Estate in Birmingham. This was significantly above the £5.4m book value as of June 30, 2017.

The group also exchanged contracts to sell another industrial property at Camp Hill, Birmingham for £7m, which was previously valued at £5.3m. The sale of this property is expected to complete in April.

Mr Mucklow said the group’s 44,250 sq ft pre-let industrial development at i54 Wolverhampton was progressing well and is due to complete next month. The substantial refurbishment of its 25,190 sq ft office building at Trinity Central, close to Birmingham International railway station, should also complete in March and is now under offer to a single tenant.

Construction of a new trunk road by Birmingham City Council, alongside the 20-acre development site at Mucklow Park, Tyseley, is due to start in March, which the group hopes will enable it to actively start pursuing pre-lets for the proposed first phase of the development, which comprises 130,000 sq ft of space. The group is also actively marketing the remaining 11 acres of land at i54 Wolverhampton.

Cushman & Wakefield revalued the property portfolio at the end of December, with the investment properties and development land valued at £402.8m (June 30, 2017: £386.9m) – a revaluation surplus of £14.1m (3.6%).

Looking to the second half, Mr Mucklow said: “Market conditions for industrial and commercial property in the Midlands continue to look favourable for the second half year. Assuming all lettings currently under offer complete, the additional rental income we should receive from a reduction in vacant space, will comfortably offset the annual rental income lost from the £20m of property disposals agreed in the first half year. We remain optimistic about our prospects for the full year.”

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