Wt Wner Usd Regulatory News (WNER)

14 Aug 2008 07:00



Warner Estate Holdings PLC ("Warner Estate" or "Group")

Interim Management Statement

Warner Estate announces that its recurring profit for the year to date is ahead of the equivalent period in 2007 and in line with expectations for the current year.

The main highlights of this period have been:

Ashtenne Industrial Fund (AIF) and our management contract extended to 2016.

Four disposals during the year to date, totalling £10million, averaged 96% of 31 March 2008 values;

Cash collection remains strong with 98% of rents collected within 28 days of the June quarter end;

£60million of revolving borrowing facilities renewed for three years and the loan to value covenant on a further £100million of facilities increased to 80%; 

Annualised savings now running at £1.5million p.a. against £0.7million reported in June.

Business Review:

As with the rest of the property sector we cannot ignore the challenges that the business faces from deteriorating property values.  But, we are managing actively all those aspects which are within our control. 

The Group's profitability is in line with expectations and cash collection remains strong.  This is being driven by active asset management, cost savings and other profit initiatives. Since March, void units have been let at 4% above ERV at £2million p.a. which has replaced leases which have expired and not been renewed of £1.95million p.a. Rent reviews and lease renewals have been concluded at £4.16million p.a., 3.7% above ERV, and 8.3% above the previous rent. Cost savings and other initiatives have also improved profitability and we now anticipate annualised savings of £1.5million p.a. against £0.7million reported at the 2008 Full Year Results' presentation in June. These annualised savings represent over 10% of the Group's 2008 asset management and administrative expenses.  

Cash collection remains strong with 98% of rents collected within 28 days of the June quarter end.  This ensures that the Group has and continues to have a strong cash flow with which to meet its obligations and service its debt.  Whilst the deterioration in the general economy may impact on future profitability, the strength and breadth of our business is such that we are not exposed to any particular sector or tenant. 

With continuing pressure on valuations, action has been and is being taken to ensure that any potential impact is addressed within the Group, Joint Ventures and the Funds, all of which remain compliant with their loan to value covenants.

Property:

In July, the investors in AIF formally approved the extension of this fund and of our management contract for a further five years to 2016. 

Against a background of uncertainty, our focus remains on delivering the asset management basics. This is something which is, we believe, a key strength of Warner Estate.  Expansion of our asset management business remains an objective and we are engaged in discussions on our joint ventures with third party investors.

Rental income and void rates remain in line with our expectations. Our proximity to our tenants has allowed us to increase our cash collection rates and manage voids with no material increase in tenant defaults. In line with our budget, we have found voids relating to retail tenants, arising from short term lettings, more challenging to fill during the period.

We continue with our selective disposal programme of both property and other assets.

Agora Max, our joint venture with HBoS, has received notice from Birmingham City Council to compulsory purchase the Pallasades Shopping Centre.

Finance:

Although net borrowings at £352million are marginally higher than 31 March 2008 (£347million), this follows an injection of £7million into the Group's joint venture, Agora Max, and a significant reduction in creditors of £8million.  Furthermore, the borrowing does not reflect disposal proceeds, currently due, of over £8million.

In addition to renewing some £60million of Group revolving facilities and increasing the loan to value covenant on another £100million of facilities to 80%, the Group has hedged out a further £25million of debt at 4.4% for 25 years on three year calls commencing in December 2008.  In the Apia Regional Office Fund, the loan to value covenant has been increased by 5% to 65%.

- ends - 

Date: 14 August 2008