Interim Management Statement

RNS Number : 4414W

Quintain Estates & Development PLC

29 July 2009

 



29 July 2009 

Quintain Estates & Development plc

('Quintain' / 'Company' / 'Group')

FIRST QUARTER INTERIM MANAGEMENT STATEMENT

Highlights

• Delivery of three new schemes within iQ, generating additional income from September 2009

• £241,000 of new leases agreed since 1 April 2009

• £11m of cash repatriated since 1 April 2009, taking total repatriated since 1 April 2008 to £108.5m 

• Re-negotiation of short term facility to extend maturity from 2010 to 2013  

• Ongoing progress with operational cost reductions, achieving savings of 25% against original budget for the year to 31 March 2010

Adrian Wyatt, Chief Executive of Quintain, commented: 

'We continue to make good progress in positioning the business appropriately for the current market conditions. We are making strong headway with our cash repatriation and cost reduction programmes, whilst pursuing a financing strategy that is designed to reduce the Company's gearing and ensure interest cover remains at a healthy level. 

'Quintain's diversification of sector investment and development, which includes healthcare, urban regeneration, student  accommodation, science parks and a high yielding secondary property portfolio, has provided resilience in light of significant falls in some areas of the market. Our RPI-linked stocks have demonstrated their defensive qualities. The valuation of the major projects at Greenwich and Wembley are prudent, already assuming further short term falls in the valuation of residential property. Falling construction prices further underpin these valuations. Nevertheless, we continue to implement a financing strategy and management initiatives that will further enhance the Company's position through this cycle, whilst reviewing the many options before us that will enable Quintain to maximise the opportunities that are beginning to emerge.'

Finance

Although further deterioration within the general property market has been recorded since 1 April 2009, the rate of valuation decline has significantly reduced and some sectors are showing initial signs of improvement. Notwithstanding this, we will continue to manage the business in line with the priorities announced in the Interim Management Statement of 5 August 2008. These are:

• Firm management of risk

• Strengthened focus on preserving cash

• Selective exploitation of the strongest value-creating opportunities.

During April we completed an important step in the financing strategy, removing the option of Barclays to require repayment of the short-term facility in April 2010 and so extending the maturity to April 2013. As detailed in the Annual Report and Accounts, as part of the re-negotiation the commitment will be reduced to £35m by April 2011 and the gearing covenant, margin and fees have been amended in line with the Company's other bi-lateral facilities. At 30 June 2009 net borrowings were £547m. This debt remains 100% hedged, with 73% covered by swaps and the remainder by caps. The average cost of debt for the three months was 4.1%.

As a result of the measures taken over the past twelve months to strengthen Quintain's financial standing, including the increased gearing limit of 150% for the Company's banking covenants, and the effect of the mitigating actions taken by management the Group's financial position is materially improved. The Board will, however, continue to review the many financing options that are available as the market cycle continues.

Key Events

Quintain's underlying operational business remains sound, with annualised contracted rent at 30 June 2009, including our share of joint ventures, of £44.1m, a good level of reservations across the iQ student accommodation portfolio and progress across all major urban regeneration schemes.

Despite ongoing challenging market conditions, rental collection remains strong at 99.5% prior to the June quarter day, compared with 99.7% at the same point last year. There has also been no change in the level of voids since 31 March 2009. Due to MFI going into administration, the bad debt provision at 30 June 2009 stood at £580,000 (30 June 2008: £291,000). However, new leases worth £241,000 per annum have been agreed since 1 April 2009 at Tolworth, Leamington Spa, Sheffield, Leeds and Bristol. 

The adoption in June by the London Borough of Brent of a revised masterplan for the Wembley regeneration area, within which Quintain is the major landowner, supports all the Company's key aspirations for the second and third phases of the Wembley City scheme. The Council's masterplan endorses Quintain's plan to create a new retail street running north from Wembley Arena to Wembley Park Tube Station and the location of a new Civic Centre at the heart of the scheme on Engineer's Way, opposite Arena Square. It also supports the creation of further hotels, conferencing facilities, cafes, bars and offices as well as new large scale visitor attractions and the location of coach parking for the Stadium to the east of the scheme. This is a major step forward in the scheme's evolution and clears the way for an application from Quintain for outline planning consent for Phase Two, which is anticipated during the second half of the financial year.

We are also pleased to announce that heads of terms have been agreed with a major operator regarding Wembley City's ten screen cinema. This 2,000-seat facility will be located in the heart of the scheme's retail core, adjacent to Wembley Arena and the National Stadium, and has already stimulated expressions of interest from associated restaurant brands. Completion of the deal is anticipated during this financial year.

In April, the creation of a joint venture with Summit Hotels for the development on the site of Malcolm and Fulton Houses at the north of the scheme not only repatriated an immediate £2m of cash to Quintain but secured the early animation of this northern gateway to Wembley City. Detailed planning consent has been granted for the hotel and it is anticipated that Summit will begin construction of the scheme this autumn.

The sale of homes within Forum House at Wembley continues, with 63 now complete and a further 12 reserved since 1 April 2009. Further lettings have also been achieved by our Wembley City Estates Ltd business, taking the total number of let units to 54 at yields between 4% and 7%. The premium secured on these properties compared to equivalent homes in the immediately surrounding area is between 15% and 20%. Velocity1, Quintain's triple play package offering broadband, digital TV and IP telephone services, is operational within the building and is now the first facility to deliver BSkyB content over an independent network, demonstrating the versatility and strong appeal of the product.

At Greenwich Peninsula the first commercial building, 14 Pier Walk, achieved practical completion in July and was officially opened by the Mayor of London, Boris Johnson. Under their 20 year lease, Transport for London will occupy the entire building from this autumn, bringing up to 1,900 employees to the Peninsula. Discussions continue with prospective tenants regarding the second commercial building, construction of which is due to complete later this year and, as detailed in the Annual Report, heads of terms have been agreed on two of the retail units available in this first phase of commercial development adjacent to The O2.

Earlier this month, the Homes and Communities Agency announced that it was committing funding of £2m to the Bellway residential scheme in the south east of the Peninsula to ensure construction can begin this year. This will deliver the first 229 homes to the Peninsula and establish the infrastructure for this new residential district.  Bellway is expected to re-commence work on this plot in the autumn.

Ticket sales at The O2 remain strong. In the unlikely event that none of this year's cancelled dates from the Michael Jackson tour are replaced with other acts it is projected that revenue will still exceed the level required to deliver the maximum rental payment to Meridian Delta Dome Ltd, of which Quintain holds a 49% interest. Exclusive negotiations continue with a preferred bidder for the disposal of the Group's interest.

On our regional schemes, sales of residential units have accelerated at our first zero carbon development, One Brighton, which is being created in joint venture with Crest Nicholson. Contracts have been exchanged on 33 of the 118 private homes and an additional nine are currently reserved. At City Park Gate, Birmingham, we agreed the sale of plot 4 to La Tour Hotels in May. The planning application, on which completion of the sale depends, will be determined in August. We are now actively marketing Island House, a period building on the site which is non-core to Quintain's scheme and offers a good stand-alone re-development proposition. We have also secured planning consent for a car park on our land at this site which, when operational later this year, is expected to generate up to £400,000 per annum of revenue.

Within the Fund Management business, reservations of beds across the iQ student accommodation portfolio are in line with expectations at 63%, four weeks prior to the announcement of A Level results. The fund is opening three new schemes this summer, which takes the total number of revenue-generating beds to 3,618. Quercus, our long-term healthcare fund, also continues to deliver a robust performance with rental collection at 93% 20 days after the June quarter day (2008: 89%). £34.7m of disposals have been achieved from Quercus since 1 April 2009.

Outlook 

Initial signs of yield stabilisation are starting to emerge in some specific parts of the property sector, although secondary and vacant assets remain under pressure. Against this mixed background, it is prudent that we continue to manage the business to withstand possible further falls in valuation, whilst implementing proactive asset management initiatives to enhance future value and generate income. 

The Board remains highly focused on cash preservation and risk management, whilst continuing to deliver a strong operational performance.

For further information please contact:

Quintain Estates & Development plc

Rebecca Worthington / Cressida Eccleston

Tel:    [phone]

Financial Dynamics

Dido Laurimore / Laurence Jones / Stephanie Highett 

Tel:    [phone]

Forward looking statements

This document may contain certain forward looking statements. By their nature forward looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes of results expressed or implied by such forward looking statements.

Any forward looking statements made by or on behalf of Quintain speak only as at the date they are made and no representation or warranty is given in relation to them, including as to their completeness for accuracy or the basis on which they were prepared. Quintain does not undertake to update forward looking statements to reflect any changes in Quintain's expectations with regard thereto or any changes in events, conditions or circumstance on which any such statement is based.

Information contained in this document relating to the Company should not be relied upon as an indicator of future performance.

 

END

 

 

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