10 Nov 2009 11:30
A & J Mucklow Group plc
INTERIM MANAGEMENT STATEMENT
10 NOVEMBER 2009
A & J Mucklow Group plc, the Midlands based Real Estate Investment Trust, announces its Interim Management Statement for the period from 1 July 2009 to 10 November 2009, to coincide with its Annual General Meeting this morning.
Rupert Mucklow, Chairman, will comment:
We have made a satisfactory start to the financial year, making good progress on funding, lettings and a trading disposal.
Industrial property values appear to have improved since our last valuation on 30 June. Subsequent property indices have shown positive signs of capital growth, on the back of a rise in the number of investment transactions. Investor confidence has returned and there has been a large influx of cash buyers, chasing a limited supply of opportunities. This has created some frenzied bidding, causing property yields to fall to levels last seen over 12 months ago.
It is difficult to say how long this trend will continue, or what impact it might have on our next valuation in December. Our property investment portfolio now looks conservatively valued, compared with prices currently being paid for similar properties. However, the basic investment fundamentals have not changed. The occupier market is still weak, rental levels remain under pressure and the outlook for next 12 months has not improved.
The letting market has been subdued in the first quarter, particularly for older properties. Enquiry levels have slowed and most active requirements have been for medium sized, better quality accommodation. Industrial stock availability is increasing and strong competition between landlords is forcing down rents. Despite these challenging times, we have managed to reduce our vacancy rate during the period from 9.5% to 8.3%, mainly due to the lettings of two modern industrial units at Middlemarch, Coventry (26,000 sq ft) and Tyseley, Birmingham (27,500 sq ft). Rent collection for September was similar to June.
On the trading side, we have completed the sale of a residential development site at Wolverley Park, Kidderminster for £2.13m. The land has been sold to a local Housing Association and has generated a trading profit of £1.7m over historic book value.
We acquired our first investment property in July this year for £1.9m, as previously mentioned in our Report and Accounts. The property is in a prime location, close to the Aston Expressway, Birmingham and comprises a modern, 35,000 sq ft industrial unit, let on a long lease to BSS Group, at a passing rent of £195,000 pa.
We are actively looking to acquire further, quality, long term investment properties, but may have to wait until the supply of investment stock increases and the current aggressive demand abates. We shall continue to be selective and buy prudently.
Favourable tender prices have now been received for our 130,000 sq ft development, at Torrington Avenue, Coventry and we hope to start on site early in the New Year. The property has been pre-let to Costco, on a long lease at an initial rent of £1.3m pa. Completion is anticipated for September 2010.
Legal documentation for our new £65m banking facilities with HSBC should be finalised this week. The £20m five year term loan will be drawn down immediately, repaying existing revolving credit draw downs in full. The balance of the term loan, the new £40m five year revolving credit facility and £5m overdraft will provide us with around £50m to fund our pre-let development at Coventry and to acquire suitable investment opportunities.
The Group's balance sheet remains strong, with gearing (net of cash) of 24% at 31 October 2009. The Group remains in compliance with all of its banking covenants.
Other than stated above, there has been no significant change in the Group's financial position since 30 June 2009.
For further information contact:
Rupert Mucklow
Chairman
Main line: 0121 550 1841
Direct line: 0121 504 2121
Mobile: 07815 151254
David Wooldridge
Finance Director
Main line: 0121 550 1841
Direct line: 0121 504 2108
Mobile: 07788 686414