REGIONAL developer St Modwen reported “important signs of improvement” in the property market – despite wider annual losses.
The firm, which specialises in town centre regeneration and bringing former industrial sites back into use, posted pre-tax losses of £119.4m for the year to November 30 against a deficit of £73.1m the previous year.
But St Modwen said that prices had stabilised after a 20% decline in assets over the year – and predicted a return to profit growth despite uncertain market prospects and “fragile” business confidence.
St Modwen is working on town centre regeneration schemes in Farnborough, Skelmersdale in Lancashire, and Wembley, north London,.
It is also involved in large-scale renewal projects such as the former Llanwern steelworks in South Wales.
Shares in the Birmingham-based firm rose after it also grew rental income in “very challenging” conditions, with asset sell-offs and tenant failures more than offset by new lettings and income from newly-completed developments.
Most of the firm’s losses were taken in the first half when the recession was at its worst, but the performance of the business has “significantly improved” since then.
The group raised £101.6m to cut debts and has scaled back development activity to weather the downturn. It has also cut costs through a pay freeze and by closing its final salary pension scheme.
But St Modwen also had an “excellent year” for acquisitions, despite the financial pressure on the business, taking advantage of depressed prices to spend £13m on 705 acres of developable land for its land bank.
The group bought sites in Doncaster and Sunderland as well as a portfolio of 566 sites from oil firm BP, mainly in South Wales.
St Modwen also signed development agreements with local authorities for schemes in Taunton, Exeter and Weston Super Mare.
Numis analyst Chris Millington said: “Whilst the group is yet to benefit from the uplift in commercial property values seen elsewhere, with yields on its portfolio approaching 10% and the rent roll actually increasing over 2009, we feel this is a matter of time.
“When this potential is considered alongside the around 20,000 plots of residential land we feel that St Modwen offers the investor a unique mix of residential and commercial exposure.”
