SMP.L Regulatory News (SMP)

Date of issue: 25 March 2020

LEI: 213800WMV4WVES8TQH05

ST. MODWEN PROPERTIES PLC

("St. Modwen" or "the Company")

St. Modwen announces intention to adjourn AGM and provides update on current trading

Intention to adjourn AGM and payment of final dividend

As previously announced, the Annual General Meeting ("AGM") of St. Modwen was due to be held at 10.00am on Friday 27 March 2020 at Gowling WLG (UK) LLP, Two Snowhill, Birmingham, B4 6WR. However, in response to the rapidly evolving COVID-19 crisis and the limitations this imposes on travel and gatherings of people, the Board of St. Modwen intends to adjourn the Company's AGM. Accordingly, the Company urges any shareholders, and other interested parties, not to attend the venue on the date and time above, but instead to attend the reconvened AGM, details of which will be provided as soon as possible. Proxy votes received for the AGM will be valid for the reconvened AGM unless revoked. As the Company's proposed final dividend for 2019 of 5.1 pence per share, which was due to be paid on 3 April 2020, requires approval at the AGM, the adjournment of the AGM means the payment of this final dividend to shareholders on the register as at 6 March 2020 will be adjourned accordingly, until approved by shareholders at the reconvened AGM.

Balance sheet, liquidity and covenants

Following the significant strategic repositioning of our business since mid-2017, our financial position is strong. In line with our expectations, see-through net borrowings have increased from £291m at the end of November 2019 to £346m as of this week due to the investments in our pipeline, including £37.5m of cash held on deposit in our NCGM JV. On a pro-forma basis, based on November 2019 valuations, this implies our see-through LTV currently stands at a modest 22.8% (Nov 2019: 19.6%). The short-cycle nature of our developments allows us to dial down activity quickly in the current environment, so our residual committed expenditure is to a meaningful extent covered by contracted cash receipts from disposals. Stress-testing our assumptions, we estimate our portfolio could currently withstand a c. 40% fall in value before we reach our closest LTV covenant, prior to any potential mitigating actions, such as disposals.

As a precautionary approach to future planning, we have also stress-tested our interest cover covenants for a scenario of a severe and prolonged downturn. We believe the areas of income which are most at risk in such a scenario are housebuilding profits and retail rents. Whilst this is not a forecast, in a stress-test scenario including a very significant fall in housing sales for the remainder of the year and a substantial and sustained fall in retail rental income, we believe that with a number of already identified mitigating measures we would have enough headroom before our interest cover covenants are threatened for the next 12 months. Meanwhile, our liquidity position is strong. On a see-through basis, we currently have £169m cash available following the drawdown of our facilities, excluding the abovementioned cash held on deposit in our NCGM JV, and we have no debt maturities until December 2023, aside from a small JV facility, of which £2m is drawn (our share).

Update on current trading

Building on the growing momentum across our three business units in 2019, St. Modwen had a positive start to 2020. However, the unprecedented recent events related to COVID-19 have started to cause significant disruption to the global and UK economy. The duration and magnitude of this disruption and hence the impact on our financial results are impossible to predict at present, so our current focus is on making sure our employees and customers are safe, our balance sheet remains strong and our liquidity remains high. Our strategic repositioning since mid-2017, which resulted in the disposal of the vast majority of our non-core retail assets and London residential land and a substantial reduction in our borrowings, means the business is robust. Moreover, the long-term drivers for our key sectors, industrial/logistics and residential, which make up nearly 90% of our assets, remain positive, so we are confident that St. Modwen is well positioned for the future.

In Industrial & Logistics leasing momentum has remained strong since we announced our FY19 results in February and we have seen continued positive progress against all key indicators. Occupier interest has remained generally strong in recent weeks as well, although we do anticipate some inevitable delay in both development activity and leasing as a result of the restrictive measures in place. In order to preserve our strong financial position, we have therefore taken the decision to pause any new development commitments for the moment, including two projects in our committed pipeline where we had yet to start on site. Consequently, we now expect to complete 1.2m sq ft of new space in 2020, instead of 1-5-1.7m sq ft, and retain 1.1m sq ft. Our decision to pause new projects means residual committed capex on our pipeline is modest, at £49m, whilst the healthy 7.6% yield on cost provides substantial headroom to absorb any softening in market conditions.

In St Modwen Homes, trading was strong following our FY19 results, such that by mid-March year-to-date unit sales were ahead of our expectations. However, in the last few days we have seen a marked slowdown in both footfall and net reservations and we anticipate this to persist until measures around social distancing are lifted and customers are confident in their job security. In order to protect the health and safety of our employees and customers, we have taken the decision to temporarily close all our sales offices and construction sites, save for some works today to make sure the sites are safe and secure.

In Strategic Land & Regeneration we have paused all uncommitted capex, in line with the rest of the business, and we are focused on working closely in partnership with our tenants across our residual non-core retail assets and at our two retail-led regeneration projects, Trentham Gardens and Wythenshawe, to help support their businesses. Combined these assets generated net rent and other income of £9.0m last year, which we would expect to be meaningfully negatively impacted for as long as current conditions persist.

Our priority at this difficult time remains the health, safety and well-being of our staff, customers and partners, while also seeking to ensure that our business emerges from the COVID-19 crisis in as strong a condition as possible. We therefore welcome the scale and speed of the Government's actions to support the economy and are committed to playing our part in tackling both the societal and economic challenges presented by the COVID-19 crisis.

The Company will provide further updates on its trading performance as and when appropriate.

- ENDS -

This announcement contains certain forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. Forward-looking statements by their nature, involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of the Company are made in good faith based on the information available at the time the statement is made; no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. The Company does not undertake to update forward looking statements to reflect any changes in its expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Nothing in this announcement should be construed as a profit forecast.