St Modwen interims disappoint despite optimism

Developer St Modwen Properties increased its dividend 4.1% as net asset value grew in the first half of the year but profits shrank slightly.

The FTSE 250 company, which after a strategic review last month said it would accelerate commercial development activity and grow its residential and housebuilding business, reported an EPRA NAV up 1.7% to 468.4p, with statutory NAV per share up 2.0% to 439.6p in the six months to 31 May.

PBT was down 11% to £31.6m on a statutory basis, with earnings per share up 2.5% to 12.1p and the interim dividend increased by 4.1% to 2.02p per share.

Underlying profit before tax slipped 2% to £29.3m in what the company said was a more stable valuation environment, with trading profit down 23% to £26.4m.

The residential arm performed well, with operating profits of £13.4m up 3% supported by excellent progress from St Modwen Homes grew profits 55% to offset the winding down of the Persimmon joint venture.

Commercial was said to have delivered a "resilient" performance with approximately 400,000 square feet of commercial space signed in the first half.

Chief executive Mark Allan said: "The business continued its resilient performance across the first six months of the year, despite an uncertain market environment, with all parts of the group contributing positively.

"We also concluded our strategy and portfolio review, which has confirmed the significant potential present in our business and pipeline and we are now focused on realising these opportunities in the months and years ahead."

Since the second half began, St Modwen agreed the sale of Nine Elms Square in Battersea to Chinese buyers for £190m.

Of the proceeds from the sale, St Modwen said £70m will be held in a restricted development account to fund its share of future obligations in respect of completion of 500,000 square feet of new purpose-built market facilities and associated infrastructure.

The remainder will be used by St Modwen to reduce debt and "pursue strategic opportunities".

On the wider outlook, Allan said: "We remain in uncertain times, particularly politically, and consequently we will maintain an agile approach to delivering our strategy, ensuring that we can adapt quickly if the circumstances demand.

"However, our strategy and portfolio is underpinned by dynamics that go beyond simple political and economic considerations; the UK housing shortage, the need for a sustainable approach to brownfield regeneration and the significant shift in how consumers and businesses buy and behave are all clear, longer-term trends that we are well positioned to benefit from. As a result, we feel optimistic about the future."

Shares in the company fell 1.1% to 356.9p in early trade on Tuesday, though in recent months have hit all-time highs around 370p.

Broker Numis said the result was "robust" and highlighted the benefits of its diversified asset platform.

Analysts left estimates unchanged, "but this disguises an increase in cash backed trading profit and the introduction of a non-cash charge".

"With St Modwen making good progress against its strategic targets we expect the outlook to be characterised by falling leverage and improving returns driven by the group's residential and commercial development activities."