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St. Modwen Properties returns to profit in H1 as real estate investors regain appetite

In its half-yearly report, brownfield redevelopment specialist St. Modwen Properties (LON:SMP) said that real-estate investor appetite has been gradually returning, and as a result the company has reversed some of the significant negative valuations experienced during the downturn. The company swung-back into profits in H1, reporting a £26.7m pretax profit compared with a £98.3m loss in H109.

“Investor appetite has improved, house-builder activity is returning, and we have secured a number of schemes which will contribute to future periods' profits,” the group said.

For the six-months ended 31 May, St Modwen reported a significant improvement to its property valuations, which rose by £20.1m (H109: £97.6m decline), and the company’s net asset value (NYSE:NAV) grew by 6.8% (H109:20.1% decline year-on-year) to 214p per share.“With the confidence generated from this improvement in our financial performance, we are also pleased to be able to announce the resumption of dividend payments, with an interim dividend of 1p per share.”

"As anticipated in our March trading update, I am delighted to be able to report a significant improvement in our trading performance for the half year, which has produced an NAV increase of 6.8% in the period and enabled us to resume the payment of dividends", St Modwen chairman Anthony Glossop said.

Through the company’s three-stage strategy, it aims to double NAV every 5 years. St Modwen acquires developable brown-field assets, marshalls’ the projects through the planning and development processes, and ultimately comes the project delivery, through asset sales, once no further significant value can be added. The proceeds are then recycled and r-invested back into brownfield assets and the three-stage process begins again.

St Modwen’s portfolio of undeveloped brownfield sites currently stands at over 5,600 acres, after an additional 167 developable acres were acquired for a combined £36m during the period.
Through the 'marshalling’ stage, St Modwen highlighted that, during the period it has obtained planning consent for 500 residential homes, 300 holiday homes and 1 million square feet of employment uses at Long Marston, Stratford-upon-Avon.

It has also submitted planning applications for the redevelopment of two former MoD sites totalling 191 acres at Uxbridge and Mill Hill in the London Boroughs of Hillingdon and Barnet; submitted a planning application for the Bay Science and Innovation Campus for the University of Swansea; And submitted application for an 85,000 sq ft, pre-sold Tesco site at Hednesford & 250 residential units on a 17 acre former glassworks site in Sunderland.

In terms of the ‘delivery’ stage the company said it “remains active across all of our regions, delivering a range of mainly pre-sold and pre-let schemes. We are also continuing to see signs of recovery in the residential land market”.

St Modwen completed the sales of two shopping centres, above book value - Catford in Lewisham for £11.5 million and The Malls in Basingstoke for £15.3m. The company also noted that a number of large, pre-sold construction projects are progressing well.

In terms of its outlook, St Modwen stated: “Although the occupier market remains challenging, we have recently seen an upturn in the number of design and build enquiries for future development projects. We therefore feel confident of a continued improvement in both NAV and profit terms, which is evidenced by the restoration of the interim dividend.”