# St. Modwen Properties PLC delivers improving returns with focused growth strategy

- Link: https://www.directorstalkinterviews.com/st-modwen-properties-plc-delivers-improving-returns-with-focused-growth-strategy/412786638
- Published: 2019-07-02T07:35:47+01:00
- Author: Amilia Stone

> **Mark Allan, Chief Executive of St. Modwen, commented:** 
> “We have had a positive first half of 2019 and our expectations for the full year
> remain unchanged. Following our significant portfolio repositioning last year 
> through the sale of retail and other non-core assets, our focus has now shifted
> to growth, building on the substantial opportunities we have in our existing portfolio.
> This is reflected in a further increase in housebuilding volumes and industrial
> and logistics development activity, where the structural growth drivers remain
> positive despite the ongoing economic uncertainty. We continue to expect the delivery
> of this strategy to drive a meaningful improvement in return on capital and earnings
> over time.”

**Financial highlights**

| **Non-statutory measures**^(**(1)**) | **May
2019
 | Prior period^((2)) |   | Statutory measures | May 2019 | Prior period^((2)) | 
| EPRA NAV per share (pence)^((3)) | 492.5 |    484.0 |   | NAV per share (pence)^((3)) | 476.4 | 470.2 | 
| Total accounting return (%) | 2.2 | 2.0 |   | Interim dividend per share (pence) | 3.6 | 3.1 | 
| Adjusted EPRA earnings (£m) | 16.2 | 13.9 |   | Profit for the half year (£m) | 23.1 | 20.8 | 
| Adjusted EPRA EPS (pence) | 7.3 | 6.3 |   | Basic EPS (pence) | 10.5 | 9.4 | 
| See-through loan-to-value (%) | 20.7 | 16.9 |   | Group net debt (£m) | 326.1 | 274.3 |

 * NAV per share up 1.3% to 476.4 pence (Nov 2018: 470.2 pence)^((3)).

 * Total accounting return up to 2.2% (2018: 2.0%) despite a 1.2ppt drag from residual
   non-core retail.

 * Adjusted EPRA EPS up 15.9% to 7.3 pence (2018: 6.3 pence) notwithstanding major
   disposals during 2018.

 * Interim dividend up 16.1% to 3.6 pence (2018: 3.1 pence) reflecting solid growth
   in earnings.

 * See-through LTV up 3.8ppt to 20.7% (Nov 2018: 16.9%) due to reinvestment of disposal
   proceeds.

**Operational highlights**

Strong momentum in executing our growth-focused strategy, building on the substantial
opportunities in our existing portfolio across three sectors and areas with good
structural growth prospects.

 * Industrial & logistics: substantial growth and capturing ERV

– Continued to grow industrial & logistics exposure to 39% of total portfolio by
value (Nov 2018: 33%) driven by successful developments and underlying growth.

 – Delivered 0.3m sq ft of new space during the period, of which 97% will be retained,
with 91% of the associated £2.2m ERV let or under offer.

 – Grown committed pipeline from 1.5m sq ft to 1.6m sq ft since start of 2019, of
which 1.5m sq ft will be retained with an ERV of £10.4m (start of 2019: 1.3m sq 
ft and £9.2m), 14% of which is under offer.

 – Continued to progress total pipeline of over 15m sq ft, c. 60% of which already
has planning with an associated c. £60m ERV, providing clear opportunity to further
accelerate development activity.

 * St. Modwen Homes: continued growth in volumes and margins

 – Delivered 36% growth in volumes with 411 units sold in the first half (2018: 
302 units) and increased margins to 14.8% (2018: 14.6%), driving 37% growth in operating
profit to £15.2m (2018: £11.1m).

 – Continue to target up to 25% growth in volumes and a c. 0.5ppt improvement in
margins from last year’s 14.4% for the full year, with private order book up 25%
compared to this time last year.

 – Clear visibility and full control of pipeline to continue to grow volumes by 
up to 25% p.a. until 2021, with new outlets focused on more affordable locations
outside London and South East.

 * Strategic land & regeneration: monetising residential land and good progress 
   across major projects

 – Sold 374 residential plots to third-party housebuilders for £13m during the half
year (2018: £27m) and agreed terms for the sale of over 1,500 plots across two large
sites in South Wales via two separate deals which are currently being progressed.

 – Completed latest phase of 411 student beds at Swansea Bay Campus and commenced
latest phase of fully pre-let office development at Longbridge.

 – Sold £18m of non-core assets, leaving residual non-core assets of £143m including
£72m of retail, with c. 25% of the latter sold or under offer and a further c. 40%
in active negotiations.

 * Strong growth from existing pipeline and capital base expected to deliver meaningful
   improvement in return on capital and potential to broadly double adjusted EPRA
   EPS in medium term.

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