Developer remains bullish despite testing conditions

Developer St Modwen slipped to a half year loss, it announced today.

The group, which has a range of schemes across the North West and a regional office in Warrington, revealed a pre-tax loss of £158.1m for the six months to May 31, compared with a pre-tax profit of £28.1m.

Its unaudited results for the period also showed revenues of £120.5m, against £173.2m the previous year.

It said momentum has been rebuilt after the initial disruption of coronavirus, resulting in its operational performance being ahead of initial expectations, while positive structural trends in industrial/logistics have accelerated even further and residential demand has returned since lockdown.

With a solid financial base, this leaves the group well-placed for future growth, it said.

In industrial & logistics the group said it is on track to deliver 1.2m sq ft of new space this year, with 53% of associated £7.7m ERV let or under offer, up from 18% of committed pipeline at start of 2020, reflecting continued strong demand.

It is preparing to grow its committed pipeline to around 1.5m sq ft in 2021, with significant further potential in a 19m sq ft future pipeline and attractive yield of around eight per cent on cost and about nine per cent yield on incremental capital expenditure.

St Modwen Homes sold 280 units (2019: 411 units) reflecting a pause in build activity during lockdown, with margins down by a similar proportion to 10.7% (2019: 14.8%) as operating costs are spread over the lower number of sales.

Overall private sales, including reserved and exchanged units, were on par versus this time last year, with a sales rate of 0.8 per week since the end of March. The private order book is up 31%.

The strategic land & regeneration sector saw residual retail assets impacted by the mandatory closure of non-essential shops during lockdown, with 65% of the March rent received and, so far, 51% of June, ahead of this time last quarter.

The group exchanged contracts to sell £47m of residential land, £17m of which in July at pricing in line with pre-COVID levels, plus £12m of non-core assets, with around £200m of disposals planned for the next three years.

Today’s statement said the group has protected financial strength, with see-through cash of £157m and no group debt maturing until 2023.

A reduced cost base, resulted in around £6-7m savings this year, or about 15% of 2019 business unit operating and central administrative expenses.

St Modwen decided not to use the Government CJRS furlough support.

Rob Hudson, interim chief executive, said: “Whilst our results for the half year reflect the disruption of the crisis, our decisive actions have worked to rebuild the momentum achieved over recent years, with strong demand for industrial/logistics space and new homes.

“Although the wider economic outlook will remain uncertain for some time to come, structural growth trends in these key markets for us remain positive and, to an extent, have even accelerated further.

“With our proven strategy and solid balance sheet, we stand well-placed for future growth.”