St. Modwen Props - Final Results



Mark Allan, Chief Executive of St. Modwen, commented: 

"2018 has been another positive year for us. With £529m of disposals, we made substantial progress on our objective to focus our portfolio on sectors with the best structural growth prospects and reduce our borrowings, whilst we continued to grow housebuilding volumes and industrial and logistics development activity. Despite the ongoing uncertainty in the wider UK economy, structural growth drivers in these two key sectors remain positive, so following the significant repositioning over the past 18 months, we are now well placed to deliver a meaningful improvement in our return on capital and earnings in the coming years."


Financial highlights


Non-statutory measures(1)




Statutory measures



EPRA NAV per share (pence)




NAV per share (pence)



Total accounting return (%)




Total dividend per share (pence)



Adjusted EPRA earnings (£m)




Profit for the year (£m)



Adjusted EPRA EPS (pence)




Basic EPS (pence)



See-through loan-to-value (%)




Group net borrowings (£m)




·      NAV per share up 4.3% to 470.4 pence (2017: 450.9 pence).

·      Total accounting return stable at 6.0% (2017: 6.0%) despite significant de-leveraging.

·      Adjusted EPRA EPS up 7.5% to 14.3 pence (2017: 13.3 pence) despite major disposals.

·      Total dividend for the year up 13.1% to 7.1 pence (2017: 6.28 pence).

·      See-through LTV down 7.3ppt to 16.9% (2017: 24.2%).



Operational highlights

Strong progress in repositioning our portfolio towards sectors with the strongest growth prospects and in preparation to deliver further growth from the substantial opportunities in our pipeline.


·      Prepared business for future growth:

o  Sold £529m of assets, on average in line with book value, bringing total disposals since launch of new strategy 18 months ago to £814m; over 40% of initial portfolio.

o  Sold over half of retail portfolio for £177m, less than 1% below book value, plus £48m of small assets; nearly double the £100-150m initially targeted for the year.

o  Reduced see-through net borrowings by £151m to £237m, less than half the level it was 18 months ago (May 2017: £580m), reducing see-through LTV to 16.9% (2017: 24.2%).


·      Accelerated industrial and logistics development:

o  Increased committed pipeline from 1.0m sq ft to 1.5m sq ft since start of 2018, of which 87% will be retained with an ERV of £9.2m (start of 2018: £5.1m), 19% of which is let or under offer.

o  Delivered 0.9m sq ft of new space, of which 0.3m sq ft was pre-sold and 0.6m sq ft retained with an associated ERV of £4.5m, 0.4m sq ft of which is let or under offer.

o  Secured planning for 2.1m sq ft of new developments, taking total consented future pipeline to 8.1m sq ft with over £50m of ERV, providing clear opportunity to accelerate future development activity.


·      Grown residential and housebuilding business:

o  Delivered 22% growth in St. Modwen Homes volumes to 848 units sold (2017: 694 units) and increased margins to 14.4% (2017: 13.9%), in line with targets, driving 34.3% growth in operating profit to £31.3m (2017: £23.3m), with up to 25% volume growth and similar improvement in margins expected for 2019.

o  Sold 49 acres of residential land to third-party housebuilders for £53m (2017: £56m) with at least a similar volume of sales expected for 2019.


·      Leveraged regeneration activities:

o  Released £141m of capital out of first phases of development at Longbridge and Swansea and completed latest phases of Swansea student accommodation and academic facilities.

o  Prepared next phase of development at Swansea for delivery by 2021 and continue to enhance Longbridge vision ahead of employment-led next phase of development.

·      Well-placed to deliver strong growth from existing pipeline and capital base, with meaningful improvement in return on capital expected and potential to broadly double adjusted EPRA EPS in medium term.


In 2018, we delivered solid financial results for our shareholders and a measurable increase in momentum in delivering on our focused strategy, built around our core purpose, 'Changing places. Creating better futures.' This purpose captures our regeneration heritage and acts as an important reference point for all our activities. In delivering on our purpose we aim to create value for all our stakeholders, be it delivering high-quality homes for our customers; our investment in creating new, flourishing communities; or the investment in our people.

One of our main goals in the year was to realise certain non-core asset disposals to accelerate investment in the growth areas of St. Modwen Homes and industrial and logistics development. The momentum in this is illustrated by the sale of £529m of assets, including more than half of our retail portfolio, a 22% increase in St. Modwen Homes volumes and an increase in our committed industrial and logistics pipeline from 1.0m to 1.5m sq ft.

Our financial results included a 4.3% increase in NAV per share, a 7.5% increase in adjusted EPRA EPS and a 6.0% total accounting return. Pleasingly, we also reduced our see-through borrowings to £237m, reducing our see-through LTV to 16.9%. Based on the revised dividend policy we announced last year, we will distribute 50% of our adjusted EPRA EPS as dividend, resulting in a total dividend for the year of 7.1 pence per share; a 13.1% increase on the previous year.

Looking forward

Following the successful repositioning over the last 18 months, for St. Modwen 2019 is set to be a year of improved focus, growth and ongoing delivery against our three strategic objectives.

The wider political and economic environment is uncertain and this is unlikely to change in the near term. The UK's planned exit from the European Union is likely to have an impact on international trade and the uncertainty around the longer-term effects of this could affect consumer and business confidence, although evidence of this in our current trading activity so far is limited. As mentioned, we have reduced our exposure to potential short-term trade disruption by forward ordering the materials we import directly for most of our 2019 pipeline, and having more than halved our net borrowings and reduced our exposure to challenging sectors such as retail and London residential land by c. £400m over the last 18 months, we are well placed to weather this uncertainty.  

Meanwhile, our pipeline is focused on two sectors which continue to benefit from structural growth characteristics. Government policy remains supportive to continue to grow housebuilding in the UK and our focus on the regions, where affordability is much better than in and around London, leaves us in a good position, whilst industrial and logistics continues to benefit from structural changes in the way we work and shop. Combined with our strong balance sheet, this gives us confidence to continue to accelerate our development activity, although the short-cycle nature of our projects provides us with flexibility to adjust our pipeline should there be any unexpected changes in customer demand.

With clear visibility on the potential to drive a meaningful improvement in earnings and return on capital over time based on our existing pipeline of opportunities and capital base, without having to acquire, attract new capital or rely on a market upturn, we look forward to the next phase of our strategy with confidence. At this time, I would also like to thank our outgoing Chairman, Bill Shannon, on behalf of everyone at St. Modwen for his invaluable contribution to the company over the past eight years. His leadership, support and counsel have been instrumental in building St. Modwen into the focused, strong business it is today and he will leave the business in excellent shape when he retires at the upcoming AGM.