U+I drives portfolio yield higher as conditions remain difficult

Specialist regeneration developer U+I reported £3.6m of development and trading gains in its first half on Wednesday, compared to £12.8m in the comparative period a year earlier.

The London-listed company said the balance of gains were targeted later in the second half, with its plan being to achieve between £35m and £45m of gains for the year ending 31 March 2020 through the flexibility of its substantial project portfolio, compared to full-year gains of £42.8m in the year ended 31 March 2019.

It recorded a loss before tax of £23.9m for the six months ended 30 September, widening from £4.2m a year earlier, while its basic net asset value was £327m, down from £356.2m.

The company’s basic net asset value per share was 263p, down from 284p, while basic losses per share totalled 18.3p, compared to 3.5p.

U+!’s board declared an interim dividend per share of 2.4p, in line with the distribution paid for the first half of the prior financial year.

On the strategic front, the company said it had submitted planning for the first phase of its £1.4bn scheme in Mayfield, Manchester, and expected an outcome for Landmark Court, 8 Albert Embankment and Mayfield in in the second half.

Its investment portfolio capital value was down £5.8m, which was a decline of 3.2% on a like-for-like basis, including its share of joint ventures, which the board said reflected the market decline in retail sector property values.

The company’s core portfolio initial yield as 7.0%, up from 6.6% year-on-year.

Since the half year ended, around £24m of assets were under offer, in line with the company's strategy to reduce its retail exposure and improve returns to achieve its medium-term 10% per annum total return target.

Impairment of £6.5m in the first half related to a forward-funded development where construction had completed and was in the process of being sold.

U+I said it anticipated recovering those costs in future periods.

Around £1m of annualised savings, representing 5% of the cost base, was achieved in the period as part of the £4m in annualised savings targeted over the three-year period to the 2022 financial year.

Marcus Shepherd was appointed chief financial and operating officer to drive that strategic objective

“Demand for affordable, convenient and vibrant mixed-use places remains strong,” said chief executive officer Matthew Weiner.

“Our proven track record and purpose-driven, sustainable approach to reinvent our towns and cities to become efficient and enjoyable places for everyone to benefit from is as relevant as ever.

“In terms of market outlook we, like many other businesses, continue to experience challenges.”

Weiner said that “unsurprisingly”, the political and economic uncertainties were delaying decision making, particularly within government and local authorities, with the general election the latest event to impact on market activity at a core time of the transactional year.

“We delivered £3.6m of development and trading gains in the first half through profits across three projects.

“This reflects the weighting of our projects, where the more significant planned gains remain scheduled for later in the second half.

“We continue to target £35m to £45m for the 2020 financial year through the projects outlined at the 2019 full-year, with the usual flexibility where we have identified other projects in our pipeline, such as Harwell, which has the potential to deliver gains earlier than anticipated.”

Weiner noted the firm was actively managing its investment portfolio to improve returns, targeting a 10% total annual return in the medium term.

Additionally, he said it was improving operational efficiency, targeting around £4m of annualised savings to the 2022 financial year, representing 20% of its overall cost base.

“We achieved around £1m of these savings in the first half.

“Our focus is on delivering value for all from our substantial existing pipeline.

“We will continue to deliver our valuable public private partnership pipeline and trading activities, while operating more efficiently, both to maximise returns for shareholders and to benefit in the long term those communities in which we work.”

At 1251 GMT, shares in U+I Group were up 2.25% at 145.6p.