St Modwen Properties has predicted it will post a significant reduction in housebuilding profit and retail rent for the first half of 2020, as the Covid-19 crisis bites.
Adjusted EPRA earnings are expected to reduce to between £4m and £5m, compared with £16.2m during the same period in 2019.
St Modwen also said it expected a decrease in the valuation of its residual retail assets and surplus residential land. It will focus on recycling capital mainly into its industrial and logistics pipeline, as one of the “higher-returning” parts of its business.
The group, which collected 80% of rent owed during the three months to May, is able to withstand a 40% fall in value from November 2019 levels before it breaches its closest LTV covenant.
The developer said that although “not fully insulated” from Covid-19’s impact, half-year valuations in its industrial and logistics arm are “expected to be more resilient”.
Although it has paused new developments in industrial and posted delays in leasing, St Modwen said its 2019 completions are 74% let or under offer, and its 2020 pipeline is 53% let or under offer, and that around half of these deals were agreed during lockdown.
Within industrial and logistics, the developer has received 94% of the £5.4m rent due in March, April and May.
Home sales fell 32% year-on-year to 280 completed sales. However, its private forward order book has risen 27%, with average sale prices “generally holding up”.
Since the end of March, the firm has posted an average sales rate of 0.7 per week.
In the firm’s land and regeneration business, it highlighted that its non-core retail and two retail regeneration assets produced 61% of £4m rent due in the three months to May.
St Modwen noted that momentum has been affected by the Covid-19 crisis, but that its impact on business has been “less than assumed” in its initial stress testing.
Rob Hudson, interim chief executive, said: “While 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.”
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