Quadrise Regulatory News (QED)

15 Aug 2007 07:01

Quintain Estates & Development PLC15 August 2007 15 August 2007 Quintain Estates and Development PLC ("Quintain"/"Company"/"Group") INTERIM MANAGEMENT STATEMENT Quintain announces a strong start to its financial year to 31 March 2008. Inparticular, the Company is delighted to report a number of commercialpartnerships and agreements with some of the world's leading organisations atits flagship project at Wembley and significant progress in its developmentpipeline elsewhere. Highlights to date include: • Supply chain, utility and fibre optic network deals agreed at Wembley, thereby securing progress towards Quintain's stated aim to 'run towns as businesses' • Detailed planning consent received for the BioRegional Quintain joint venture's first two residential blocks at Middlehaven • Detailed consent for the construction of Ravensbourne College in Greenwich, bringing 1,500 students a day to the Peninsula • Pipeline of student accommodation deals secured from developer Keyhaven, the first being a £26.5m development in Edinburgh • Amendment of banking covenants to increase liquidity; overall gearing of 36% ensures the Group has significant financial firepower. Adrian Wyatt, Chief Executive of Quintain, reporting on the period said, "We have once again demonstrated strong progress across the Group in the year todate. In particular I am pleased to announce the advancement of our concept of 'running towns as businesses' with deals in hand with Siemens, First MileNetworks and Scottish and Southern Energy. "Our major projects have huge potential and the amendment to our gearingcovenant in the period has materially increased liquidity, positioning Quintainstrongly to benefit from the considerable inherent value. "Since its flotation, Quintain has established an outstanding track record interms of value creation. Our innovative and synergistic approach has enabled usto ensure that the activities of our three divisions - Special Projects, FundManagement and Investment Portfolio - complement and reinforce each other. Acurrent example is at Wembley, where the provision of student accommodation willbe delivered by our specialist joint venture with The Wellcome Trust. "The diversity of our business, the potential of our major, long-term SpecialProjects and our Fund Management business and the significant growth of ourstrategic partnerships with a number of the world's leading organisations meansthat we are strongly positioned to outperform in current market conditions andcontinue our track record of creating shareholder value." For further information, please contact: Quintain Estates and Development PLCRebecca WorthingtonTel: +44 20 7478 9444 Financial DynamicsStephanie Highett/Dido LaurimoreTel: +44 20 7831 3113 Business Review Quintain's strategy continues to be to focus on the financial characteristics ofproperties to identify assets and special situations where we can use our skillsto create value. We seek opportunities and pricing anomalies in three areas: • Large scale urban regeneration • Specialist fund management • The UK secondary property investment market across all sectors. Our diversified business model, with its balance of mixed-use urbanregeneration, investment property and specialist fund management, ensures thatthe Group is well positioned to outperform in the years ahead, in terms of ourcore measure of total return. Market conditions Apart from London offices, the commercial property market, particularly forsecondary properties, is seeing yields drifting sideways or rising. By contrast,London residential is performing extremely well and, supported by netimmigration, household formation and wage inflation, this performance seems setto continue. Quintain is well positioned to benefit from these market conditions, with areduced exposure to investment properties, and diversification into nursinghomes and student accommodation where positive trends apply. Also, within urbanregeneration, we have consent for around 15,000 homes in London. A combinationof this strategic positioning and the scale and nature of our developmentpipeline means that we are well placed to perform both in absolute and relativeterms over the coming year. Special Projects Good progress continued to be made within our large urban regeneration projects. The concept of 'running towns as businesses' has made a significant step forwardwith initial deals being signed. On the supply chain side, we have signed aStrategic Partnership Agreement with Siemens to be our Technology Partner forthe provision of mechanical and electrical equipment across the Wembleydevelopment. For the commercial exploitation of Information and CommunicationTechnology fibre networks we have signed Heads of Terms with First Mile Networksto create 'Quintain Communications'. Heads of Terms are now also in place withScottish and Southern Energy to design, install and operate the site-wideutility network. This takes the form of a capital contribution and profitsharing arrangement. Over time, these and similar deals have the potential togenerate extremely valuable non-property income streams for the Company. At Greenwich we announced, during the period, exclusive negotiations with CrestNicholson on the first residential plot for the North East of the Peninsula. The1.1 acre site will provide approximately 295 apartments and 120 parking spaces,together with approximately 5,000 sq ft of retail space. A planning applicationwas submitted in July 2007 and construction is anticipated to start in Spring2008. In addition a planning application was submitted and detailed consent,subject to S106, given in the period for Ravensbourne College which, when built,will bring 1,500 students a day to the site. Detailed consent for the Bellwayplot in the South East corner of the site was also approved, releasing initialcash payments. Practical completion was achieved at our 140,000 sq ft distribution unit inRedditch and marketing has commenced. Within our BioRegional Quintain joint venture, detailed consent has beenreceived for the first two residential blocks at Middlehaven, one of ourexemplar sustainability schemes. We anticipate starting on site with ourmarketing suite next month and with the first residential block in January 2008. The Company's track record in the highly specialised field of major regenerationprojects ensures that we are continually assessing other similar schemes whereour skills and experience can be used to generate value for our shareholders. Quintain Fund Management In the quarter to 30 June 2007, Quercus, our healthcare fund, made acquisitionsof £45.5m at an average initial yield of 7.2%. Further fundraising has takenplace, with Quintain committing £10.3m to maintain its stake at 28.0%. In iQ, our student accommodation joint venture with The Wellcome Trust, the nexttwo schemes are due to achieve practical completion at the end of this month inpreparation for the start of the academic year, giving an additional 1,000income producing bed spaces. During the period we signed an agreement withKeyhaven to secure their development pipeline, the first deal being 314 beds atEdinburgh in a scheme worth £26.5m. Within Quantum, our specialist science park fund, planning is progressing at the800,000 sq ft science and technology park, SPark, at Emersons Green in Bristol.This should lead to a submission later this month for an amendment to themasterplan reconfiguring the layout of the site and a negotiated S106(infrastructure contribution and affordable content). Discussions have commencedwith a first potential tenant. Investment Portfolio During the period, we unconditionally exchanged on the sale of First NationalHouse, Harrow, for £6.5m, which after costs will be neutral in terms of theincome statement. This office building has been vacant since 2006 and, havingreviewed the potential profit on a refurbishment and the likelihood of a majorredevelopment, we have decided it does not offer an appropriate return for therisk profile. New lettings in the period amount to £218,000 of rental income of which £117,000relates to St Davids House, Cardiff. Capital Structure and Funding During the period, Quintain extended the maturity of its £475m corporatefacility by one year to five years and amended the gearing covenant. This waspreviously 110% of net assets less equity held in joint ventures. The reviseddefinition, which is 110% of net assets, is structurally important given thestrategy of the business to grow our funds under management whilst retainingequity in the funds and to build up our urban regeneration business bringing inspecialist partners in joint ventures. The critical element of our funding isthe flexibility it gives us. Given current gearing levels of 36%, the amendeddefinition gives us significant firepower to pursue our strategy, providing uswith sufficient headroom on gearing to meet all cash requirements withinexisting deals based on our latest proposals. On hedging, historically we have used swaps to give certainty of interest costsagainst relatively certain rental income receipts. Under current marketconditions with the business becoming less reliant on rental income, it wasappropriate to change the hedging mechanisms in place to caps, which cap ourmaximum interest cost, given less certainty of timings over developmentreceipts. Our strategy is to be between two thirds and 100% hedged on ourinterest exposure. During the period we cancelled all swaps giving rise to aprofit of £1.7m and replaced them with £225m of caps at 6.5%. Given netborrowings of £302m at 30 June 2007, this equated to 75% of debt being hedged.At this date the fair value of the caps was £3.2m, compared with a cost of£1.5m. At 30 June 2007 gearing of 36% was unchanged from the year end with receiptsfrom sales offsetting acquisitions and capital expenditure. During the period,acquisitions of £22.7m comprised the Stadium Retail Park at Wembley. Capitalexpenditure of £7.4m also mainly related to Wembley. Gearing including debt within joint ventures was 48%. Undrawn but committedfacilities at 30 June 2007 were £171m. Clarification of intentions by Quill Securities As shareholders are aware, Quintain is currently in an offer period as a resultof an announcement made on 16 July 2007 by Quill Securities Limited ("QuillSecurities"), a controlled undertaking of HBOS plc, that it was evaluating itsoptions in relation to Quintain. Following this announcement, and at ourrequest, the Takeover Panel has required Quill Securities to clarify itsintentions by 10 September 2007. Outlook The Company has made good progress across the business in the first quarter. Thedeals signed at Wembley and Greenwich with Siemens, First Mile Networks andScottish and Southern Energy illustrate the positive steps we are taking toachieve our strategy to create new towns and destinations and run them assignificant income-generating businesses. In addition, fund managementgenerates value across all areas in its own right in addition to realisingsynergies for the Group. This performance underpins the belief that we willcontinue to create and deliver excellent shareholder value in the future. - Ends- Forward Looking Statements This document may contain certain 'forward-looking' statements. By their nature,forward-looking statements involve risk and uncertainty because they relate tofuture events and circumstances. Actual outcomes and results may differmaterially from any outcomes or results expressed or implied by suchforward-looking statements. Any forward-looking statements made by or on behalf of Quintain speak only as atthe date they are made and no representation or warranty is given in relation tothem, including as to their completeness or accuracy or the basis on which theywere prepared. Quintain does not undertake to update forward-looking statementsto reflect any changes in Quintain's expectations with regard thereto or anychanges in events, conditions or circumstances on which any such statement isbased. Information contained in this document relating to the Company should not berelied upon as an indicator of future performance. This information is provided by RNS The company news service from the London Stock Exchange