St Modwen Properties has continued its focus on the thriving logistics property sector, which now accounts for 49% of its portfolio.
In full year results to the end of November 2020, the company said this had grown from 39% a year previously and would accelerate growth.
The group also has a strong focus on the housebuilding sector, which makes up 27% of its portfolio. These two sectors, where structural demand is growing, will make up 90% of its portfolio within three years, it said.
It expects this strategy to increase adjusted EPAR earnings per share (EPS) to around 28 pence (9.9 pence at November 2020) and improve its total accounting return to 9%-10% in the medium term.
The group’s full year results were hampered by the impact of COVID-19 on its portfolio. Net asset value per share was down 11.7% over the year to 427.7p.
The disruption of income caused by the pandemic saw its EPRA EPS fall from 17.4p in November 2019 to 9.9p. The group paid a dividend for the year of 5p, up on the 3.6p it paid in 2019.
Its balance sheet remains stable, with a loan to value of 20.2% (2019: 19.6%) after non-core disposals.
Logistics portfolio
The group’s income producing logistics portfolio saw 6.1% like-for-like rental growth in the year and robust rent collection figures of 97.9%.
During the year the company completed 1.2m sq ft of new warehouse development (2019: 0.9m sq ft), with 81% of the space let or under offer.
This year it is on track to deliver a further 1.5m sq ft of new developments, with 27% pre-let or under offer. It expects to generate a 7.5% yield on cost on the developments.
It has a long-term pipeline of 19m sq ft of warehouse developments, which it said would grow the logistics portfolio to over £1bn by 2023.
St Modwen Homes
The company sold 948 units (2019: 1,060) at an average of £259,000, with 12.4% operating margin (2019: 14.8%). This was despite 10 weeks of lost production at the height of the pandemic in spring 2020.
The group said it was on track to grow completions by up to 25% in 2021 with margin expected to recover to around 14.5%, supported by a strong order book covering 47% of targeted private sales.
Its 5,900-plot pipeline provides visibility to grow volumes to around 1,500 units by 2023, with clear pathway identified to grow margins to around 16-17% by 2023 it added.
Land and regeneration portfolio
St Modwen has sold £125m of non-core assets from this portfolio during 2020, with a further £7m sold post-period, which once completed will reduce its exposure to land and regeneration portfolio to 22%.
By 2023, the land and regeneration portfolio will solely be focused on sourcing land for logistics and residential development. The group’s intention is to sell a further £180m-£200m of assets by 2023, reducing it to less than 10% of the overall portfolio.
Sarwjit Sambhi, chief executive, said:
“Our strategy is focused on two sectors, logistics and housebuilding, where structural demand is growing, acknowledging that the economic outlook is uncertain. These sectors make up 78% of our portfolio today and will represent over 90% within three years. In both, momentum is strong, and we have an attractive pipeline to accelerate growth.”
SMP : St Modwen ramps up logistics exposure