Trading Update

RNS Number : 9454P

Quintain Estates & Development PLC

01 April 2009

 



1 April 2009

Quintain Estates and Development plc

('Quintain' / 'Company' / 'Group')

TRADING UPDATE

Quintain Estates and Development plc sets out below a trading update for the six months to 31 March, ahead of the full year results announcement which will be issued in June 2009.

Overview of Activity and Cash Preservation Programme

In the Interim Management Statement ('IMS') on 5 August 2008 the Company announced that, in order to create greater flexibility to withstand deteriorating conditions in the property sector, it was implementing a programme of measures. The Company is pleased to report that:

• The Group's banking facilities have been renegotiated, as detailed in the finance section below

• An active management approach has led to good progress with a 16% increase in the contracted rent roll and a resilient performance by the fund management business 

• £97.5 million of cash has been repatriated during the financial year against a target of £100 million. This programme will now be extended into the 2009 / 2010 financial year with a target of realising an additional £50 million by 31 March 2010 to provide further protection against falling property values

• The Company's current anticipated capital expenditure commitments are £53 million

• Expenditure on overheads during the last twelve months has been significantly curtailed, achieving cost savings in excess of 20% on an annualised basis. The budget for the current financial year increases this to 25%

As part of the Board's ongoing review of the Group's financial position an independent property valuation was recently undertaken. This showed that, after taking account of gains through planning, development and the agreement of new leases, the overall value of the Group's portfolio at 14 February 2009 was £1,203 million, compared to £1,314 million as at 30 September 2008. These valuations already take into account further residential price falls of 10% and 16% at Wembley and Greenwich respectively during 2009. The Company could accommodate further falls of up to 10% whilst remaining within its revised gearing limit. The total by which the Group's portfolio of directly held properties has now fallen from its peak to 14 February 2009, on a like for like basis, is 38%.

The combination of reduced overheads, the suspension of the dividend, the increase in annual income from rent, fees and operations from £46.7 million to £66.5 million and the £97.5 million of repatriated cash achieved through the programme outlined above has enabled the Company to enhance its financial position. In addition to these measures, however, the Board decided that, given the uncertainty of market conditions, it was prudent to seek an injection of new equity. Notwithstanding a very encouraging level of support shown by a number of major shareholders and new institutional investors, the Company is not in a position to announce an equity fundraising. The Board firmly believes in the long term value of its urban regeneration and fund management businesses and, with its advisers J.P. Morgan Cazenove and Lazard, will continue to take action to strengthen the Group's position and improve its financial stability.

Finance

During March the Company renegotiated its banking facilities, obtaining the option to relax its gearing covenant from 110% to 150% on all its medium and long term facilities, which has now been exercised. In addition, on the condition that the Group's gearing is at or below 110% on 31 March 2009, the £95 million Barclays facility would reduce to £35 million and mature on 30 April 2011, replacing the right for Barclays to require payment by 30 April 2010 and the Company will also have the option to increase gearing to 150% in line with the other bilateral facilities.  In the three months to 31 March 2009 the average cost of debt was 4.5% (Sept 2008: 5.3%) and the Group's net borrowings, excluding non-recourse debt within joint ventures, are currently around £540 million (Sept 2008: £556 million).

Business update

During the six months to 31 March 2009, three investment properties were sold for a combined total of £13.7 million against September 2008 valuations of £14.2 million, reflecting an aggregate discount of just 4%. A lease was also agreed with Network Rail regarding Hudson House, York, realising a 54% increase in rent from 25 December 2008 to £0.7 million per annum. 

The sale of private apartments within Forum House (W01) at Wembley City continues, with 56 completed to date. 141 apartments within the building were sold to Registered Social Landlords for affordable housing prior to the start of construction in 2006.  

Quintain's residential lettings business at Wembley City has managed the leasing of 32 apartments for private owners within Forum House since 1 October 2008 at rental levels consistently above those advertised for equivalent properties in the immediately surrounding area.

75% of residents within Forum House have now subscribed, on 12 month contracts, to Quintain's Velocity1 triple play service, launched in January, which includes access to the UK's first 100Mbs broadband service for consumers. 

New commercial lettings at Wembley City since 1 October 2008 amount to £479,000 per annum ensuring that, despite the demise of Land of Leather and MFI in January, income from the scheme increased during the period. Quintain's annual income from the scheme is now in excess of £17 million.

Transport for London exercised its option on an additional two floors of office space comprising 61,000 sq ft in January, taking its total lease at Greenwich Peninsula to 196,000 sq ft. It will become the sole occupant of the first commercial building on the scheme in July 2009. Ravensbourne College began construction of its academic facility in October, with a projected completion date of September 2010. Quintain's share of contracted income from Greenwich Peninsula has now increased to £3.4 million per annum.

As anticipated from the continued growth in student numbers, rental levels of rooms across the iQ student accommodation portfolio for the next academic year have been strong. Six months ahead of the start of the 2009 / 2010 academic year, 48% of rooms are already reserved at an average of 7.2% above 2008 / 2009 rental prices.  

In its fourth quarter to 31 December 2008, the Quercus healthcare fund experienced the strongest rental collection of its financial year and delivered a property level return over three years of 8.2% compared to its IPD benchmark of (4.7)%, thus securing a performance fee of £6.1million.

Adrian Wyatt, Chief Executive of Quintain, commented:

'In August we set out a programme of cash preservation measures adopted by the Board in response to the ongoing deterioration in market conditions. Through this programme we have reduced overheads by more than 20%, repatriated £97.5 million to the business and successfully re-negotiated all our financing agreements. In addition, despite the challenging environment across the property sector, we have continued to achieve good operational progress, most particularly within our Quercus healthcare fund, which delivered an 8.2% property level return over the three years to 31 December 2008, and by increasing our annualised contracted rent roll by 16% since 30 September.

'We are delighted with the support shown by our relationship banks and will continue to focus sharply on enhancing the financial stability of the business until market conditions improve and we are able to unlock the considerable long term value within the Group for our shareholders.'

For further information please contact:

Quintain Estates and Development plc

Rebecca Worthington / Cressida Eccleston

Tel:    [phone]

Financial Dynamics

Stephanie Highett / Dido Laurimore / Laurence Jones

Tel:    [phone]

J. P. Morgan Cazenove Limited ('J. P. Morgan Cazenove'), which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company and for no one else in relation to the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of J. P. Morgan Cazenove or for providing advice in relation to the contents of this announcement.

Lazard & Co., Limited ('Lazard'), which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company and for no one else in relation to the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Lazard or for providing advice in relation to the contents of this announcement.

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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