Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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July 24, 2023

Inland Homes, SigmaRoc, Urban Logistics REIT | INL, SRC, SHED

Company news

Inland Homes (INL, shares suspended)

Leading brownfield developer, housebuilders and partnership housing group, focused on South and South East. Appointment of new CEO, Board changes and proposed acquisition. Jolyon Harrison appointed CEO. With over 50 years of housebuilding experience, he was CEO of MJ Gleeson (GLE) from 2014 to 2019. He has a beneficial holding of 4.94% in Inland. Richard Padley to join its board as Non-executive Director following completion of regulatory director due diligence.  He is a chartered accountant with property experience.  He is Commercial Director of G W Padley Holdings.  His family interests have a holding of 4.54% in Inland. CFO and acting CEO Nishith Malde, who was one of the founding shareholders of the group in 2005, has advised the Board of his intention to retire and step down as a director of Inland, after an appropriate handover period following Mr Harrison’s appointment.  He will remain available in an advisory capacity to the business on a consultancy basis for a period of 12 months. Mr Harrison, 75, intends to establish his own executive team, including the recruitment of a new CFO. The Board also announces that it has agreed Heads of Terms for the acquisition of NorthCountry for a consideration of £4m, to be settled by the issue of 40 million new ordinary shares in Inland Homes [current share capital, 274.4 million shares]. Jolyon Harrison is Executive Chairman and 51% shareholder in NorthCountry;  G W Padley Holdings Limited and G W Padley Property 2 between them hold the balance of 49%.  The proposed acquisition is subject to legal and financial due diligence, agreement of a formal sale agreement, the obtaining of any required shareholder and regulatory approvals, restoration to trading on AIM of Inland Homes’ existing shares and the admission to trading of the new ordinary shares to be issued for the proposed acquisition. Mr Harrison said: “Inland has a valuable consented land bank in the South and South East of England and has a number of similarities with where I was in 2009.  We will be expanding the low cost homes business model of NorthCountry in the North of England, based in Wakefield and developing the Inland brownfield and strategic land business in the South where land values are high, as well as completing Inland’s existing construction commitments.  In due course it is proposed to rebrand the business to reflect its focus on housebuilding in the north of England.  The Group will remain headquartered in Beaconsfield, Buckinghamshire for the foreseeable future.  I look forward to the Inland team helping me to turn the business round which will take a while, but we are looking forward to a profitable future”.

SigmaRoc (SRC, 62p, £433m mkt cap)

Heavy construction materials group active in the UK, Channel Islands and Benelux. HY (Jun) trading update.

Guidance: “Entering the second half of FY 23, the Board is mindful that trading conditions are likely to remain challenging in a number of the group’s markets. Against this backdrop, however, we expect that our diversified end market exposure, geographic spread, and decentralised operating model will continue to deliver a resilient performance. As such, the Board’s expectations for the full year remain unchanged”.

Trading: Rev +17% (+13% LFL), £290m; u-lying EBITDA +15%, £55m; u-lying EPS +11%, 4.0p. Adj leverage ratio, 1.7x (HY 22, 2.2x). Acquisition and investment programme launched in February 2023 now fully committed, with acquisitions expected to contribute c. £8m annualised EBITDA at an effective multiple of 3.9x; organic growth investments expected to contribute a further c. £2m once fully operational, at an effective multiple of 3.3x; divestment of four non-core assets generating £11m at an effective multiple of 12.9x (includes land holdings with no earnings impact).

Outlook: “The full impact of the acquisition programme will manifest over the course of H2, strengthening the group’s competitive position in several local markets, while adding to our geographic diversification in others. Many of these end markets are underpinned by longer term structural growth dynamics, including infrastructure investment, sustainability, energy transition and the increasing use of limestone in various industrial production processes which should enable the group to accelerate its growth momentum as conditions improve”.

Urban Logistics REIT (SHED, 123p, £579m)

Specialist UK ‘last mile’ logistics real estate investment trust. Trading update.

Trading: Four new lettings signed in the period, generating over £0.85m of additional rental income; two rent reviews settled in the period, at a weighted average uplift of 20% generating an additional £0.3m of rental income; two assets sold in the period for gross proceeds of £15m, representing a 3.4% premium to March 23 valuations.

Outlook: “Against a backdrop of a challenging economic and equity market environment our focus is on delivering strong operational and financial performance. The market for assets in the company lot size remains robust and over the coming months we intend to recycle additional assets, further validating our net asset value. The Board consistently reviews the best use of capital and, where appropriate, will use the funds to selectively acquire assets which have compelling value accretive asset management opportunities to deliver strong income and total returns”.

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