News

MEPC signals better results

News

Estates Gazette

06 December 1997

by Erica Billingham

MEPC has started to hit back at its critics this week with the first signs of long-awaited improved performance in its annual results.

Chief executive James Tuckey described the company as “new MEPC” following a major overhaul of strategy over the past year.

This includes a U-turn on overseas assets, which are being sold; slashing costs by contracting out property and facilities management, and selling £300m of small properties.

Analysts said that the company has at last started to tackle the problems which have dogged it. “They have made huge strides and it’s beginning to come through,” one commented.

After five years of lagging the property sector, MEPC’s shares have this year performed in line with the market.

But the next test will be the sale of MEPC’s Australian and US businesses, worth around £400m.

Finance director James Dundas said that the company was making progress on the sales. “We have just gone to the market in Australia and are about to go in the US,” he said.

MEPC’s net asset value increased 10% to 497p per share for the year to September 30 – the lower end of City forecasts. The NAV was held back by a £43m provision for costs the company is expecting when it sells the US and Australian portfolios.

The UK portfolio increased from £2.36bn to £3.04bn, which included a 12% valuation uplift. MEPC bought £546m and sold £176m of property during the year.

Retail was the best performing sector, showing a valuation increase of 18%. MEPC’s £333m industrial portfolio also produced 12.5% rise.

But the office portfolio still suffers from over-rented property in central London, which held back growth to 6%.

Pretax profit, down 40% to £84m, was hit by a one-off cost of unwinding unfavourable interest rate swaps. Stripping this out, company profits rose 10% to £144m as the benefits of lower interest charges came through. Property sales generated £25m over their book value.

MEPC, which bought PSIT this year for £250m, is expected to continue the hunt for corporate acquisitions, but target private companies rather than quoted ones.

by Erica Billingham MEPC has started to hit back at its critics this week with the first signs of long-awaited improved performance in its annual results. Chief executive James Tuckey described the company as “new MEPC” following a major overhaul of strategy over the past year. This includes a U-turn on overseas assets, which are being sold; slashing costs by contracting out property and facilities management, and selling £300m of small properties. Analysts said that the company has at last started to tackle the problems which have dogged it. “They have made huge strides and it’s beginning to come through,” one commented. After five years of lagging the property sector, MEPC’s shares have this year performed in line with the market. But the next test will be the sale of MEPC’s Australian and US businesses, worth around £400m. Finance director James Dundas said that the company was making progress on the sales. “We have just gone to the market in Australia and are about to go in the US,” he said. MEPC’s net asset value increased 10% to 497p per share for the year to September 30 – the lower end of City forecasts. The NAV was held back by a £43m provision for costs the company is expecting when it sells the US and Australian portfolios. The UK portfolio increased from £2.36bn to £3.04bn, which included a 12% valuation uplift. MEPC bought £546m and sold £176m of property during the year. Retail was the best performing sector, showing a valuation increase of 18%. MEPC’s £333m industrial portfolio also produced 12.5% rise. But the office portfolio still suffers from over-rented property in central London, which held back growth to 6%. Pretax profit, down 40% to £84m, was hit by a one-off cost of unwinding unfavourable interest rate swaps. Stripping this out, company profits rose 10% to £144m as the benefits of lower interest charges came through. Property sales generated £25m over their book value. MEPC, which bought PSIT this year for £250m, is expected to continue the hunt for corporate acquisitions, but target private companies rather than quoted ones.