St Modwen ‘well positioned for the future’

Rob Hudson

Developer St Modwen reassured shareholders today that the impact of COVID-19 on its business has not been as drastic as originally feared.

In a trading update for the period ended May 31, 2020, the group, which has a range of schemes throughout the North West and a regional office in Warrington, said it is well positioned for the future.

Outlining its current trading position, it said: “As we set out in our trading update on 25 March, we had a positive start to 2020, building on the growing momentum achieved during 2019.

“Since then, that momentum has, unsurprisingly, been affected by the COVID-19 crisis, although the impact to date has been less than we had assumed in our initial stress-testing.”

In industrial & logistics, occupier interest has remained resilient and even though the group has seen, as expected, some delays in construction and leasing, it has made good progress in leasing up its recent and committed developments.

As a result, 2019 completions are now 74% let or under offer (Feb 2020: 58%) and the 2020 pipeline is 53% let or under offer (Feb 2020: 18%), with around half of these new letting deals agreed during lockdown.

In St Modwen Homes, sales were tracking ahead of plan before the group decided to close its sites on March 24.

In line with Government guidelines, work restarted on sites in the middle of May and sales centres at the 22 sales-active sites have since reopened, but the delay in production means that the 280 completed unit sales for the half year were down 32% versus last year (H1 2019: 411 units).

However, customer demand so far has remained resilient, with overall private sales for the year to date, including units which are exchanged and reserved, down less than five per cent versus this time last year.

In strategic land & regeneration, the residual non-core retail and two retail regeneration assets have, as expected, been significantly impacted by the mandatory closing of non-essential shops.

To date, the group has received 61% of the £4m rent due in March, April and May, taking the overall rent received for the group over that period to 80%.

St Modwen has agreed to move to monthly payments on one per cent of SL&R rent, waive six per cent, defer 10% and continue to work closely with customers with regard to the remaining element.

Despite the inevitable delays to some disposals during lockdown, the group has agreed to sell £12m of non-core assets and £30m of surplus residential land since the start of the year.

St Modwen says its balance sheet and liquidity remain strong.

“Our decision to pause any uncommitted capex and exercise tight control of costs means that since our trading update on 25 March, see-through net borrowings increased by only £14m to the end of May to £360m, including our £35m share of the cash held on deposit in our NCGM JV.

“This means our portfolio could withstand a c.40% fall in value from November 2019 levels before we reach our closest LTV covenant.

“On a see-through basis, we had £157m of cash available at the end of May, excluding the cash held on deposit in our NCGM JV, and we have no debt maturities until December 2023, aside from a small JV facility, of which £2m is drawn (our share).”

Interim chief executive Rob Hudson, said: “We are pleased to have been able to restart activity on our sites safely and strengthen our liquidity and financial position, but the current economic disruption will, inevitably, have an impact on our financial results in the short term, as the pandemic continues to cause significant social and economic challenges.

“Whilst near-term visibility remains low, recent trading has been ahead of our expectations and the long-term structural growth drivers in our two key markets, residential and industrial/logistics, remain positive, so our strong financial base leaves us well positioned for the future.”

The company intends to announce its results for the half year on July 22.