Mucklow (A & J) has announced its annual results for the year ended 30 June 2016. During the year, the company’s EPRA earnings per share increased by 7.5% to 23.88p (2015: 22.21p) whilst its EPRA NAV per share increased by 4.4% to 446p (2015: 427p). The period also saw the companies underlying pre-tax profit increase by 7.9% to £15.0m (2015: £13.69m) whilst the total dividend has increased by 3.0% to 21.47p per share (2015: 20.84p). Shareholders’ funds (total net assets) rose to £280.6m (2015: £268.6m), while borrowings, net of cash, amounted to £71.2m (2015: £69.0m). The company’s debt to equity gearing reduced to 25% (2015: 26%) and loan to value ratio remained at 20%. The company’s chairman, Rupert Mucklow, says that the company’s vacancy rate has reduced to a historic low of 3.2% (2015:5.4%) and that, during the year, Midlands industrial property continued to benefit from strong rental growth, as a consequence of steady occupational demand and a diminishing supply of modern space. He says that, since the company’s year-end and post the EU referendum, the regional property market has remained buoyant and, so far, does not appear to have been affected by the (Brexit) decision. Arguably reflecting this development, the company’s vacancy rate has since fallen to below 3.0%.
The company says that, with effect from October 2016, the Board has decided to increase the frequency of dividend payments and move to quarterly dividends. It says that, reflecting this decision, part of the final dividend that would have been paid in January 2017 is being brought forward to October 2016. The dividends consist of a quarterly dividend of 5.00p per Ordinary share to be paid on 17 October 2016 and a final dividend of 6.88p per Ordinary share, if approved by shareholders at the AGM, to be paid on 16 January 2017 to Shareholders on the register at the close of business on 16 December 2016. Both dividends will be paid as Property Income Distributions (PIDs).
In terms of the company’s portfolio, the chairman says that the number of active requirements for Midlands industrial property has been maintained at a similar level to the previous 12 months and has continued post the EU referendum result. Furthermore, he says that a declining supply of quality industrial space has enabled us to continue to grow rental levels on new lettings and lease renewals, which in turn has also provided higher reversionary rental evidence for future lease events and property valuations.
The company completed 32 new lettings and 26 lease renewals during the year, representing 8.9% of its property portfolio by area. The company says that rental growth from new lettings and lease renewals averaged around 10.0%, approximately 5.0% higher than its estimated rental values that were set in the previous year. Two investment properties were bought during the financial year at a total cost of £4.0m: a 19,200 square foot retail warehouse in Leicester City centre and a 17,000 square foot industrial unit in Halesowen, West Midlands. The company says that the combined rental income for the two properties was £0.27m. The company has also agreed terms to acquire a pre-let development at Grove Park, Leicester for £4.7m, on a forward commitment basis. It says that the property will comprise 20,620 square foot of high quality offices with 112 car parking spaces. The company says that the development is progressing well and is due to be completed in December 2016. It says that the initial rent will be £0.35m per annum.
The company’s chairman says that the regional investment market remained stable throughout the year, with only a limited number of suitable buying opportunities available and very little change in property yields. However, he thinks that uncertainty, caused by the EU referendum result, may provide the company with some additional institutional stock, but he also says that the early signs are that quality investment properties are still in high demand and will continue to be well supported by investors.
The chairman says that a shortage of vacant industrial property in the Midlands is creating some opportunities for pre-let development and that the company entered into an option agreement with Wolverhampton City Council and Staffordshire County Council to promote and develop a prime 15 acre industrial site adjacent to the new Jaguar Land Rover engine manufacturing facility at i54 in Wolverhampton. The land can reportedly accommodate up to 275,000 square feet of advanced manufacturing spaceand the company says it is currently in detailed discussions on the first proposed pre-let building of 43,000 square feet.
The company says that marketing of our 20 acre industrial site at Tyseley, Birmingham is still on hold, while it waits for Birmingham City Council to resolve a few technical issues on the procurement of a new link road. The company says that there remains a real shortage of land around Birmingham which can accommodate buildings over 50,000 square feet.
In terms of finance, the company’s total net borrowings, at 30 June 2016, were £71.2m (2015: £69.0m), whilst its undrawn banking facilities totalled £27.0m. However, since the company’s year end, it has renewed its £64m banking facilities with HSBC for a further 5 years through to 2021 at a reduced margin.
In terms of outlook, the chairman says that high occupancy levels and steady letting enquires for quality industrial property are expected to continue for some time, given the lack of supply in the local Midlands market. He says that this is despite the anticipated uncertainty caused by the referendum decision. He also says that it is too early for us to understand what longer term impact leaving the EU will have on the UK economy and the company, however, he believes it is extremely well placed to respond to any market changes.
Mucklow’s vacancy rate falls to all time flow of 3.2% : MKLW