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Drop in asset value mars MEPC results

MEPC, the property group, yesterday announced a 14 per cent increase in annual pre-tax profits to pounds 140m but said that a write-down on a Los Angeles shopping mall had reduced its net asset value from 457p to 450p per share.

Investors were disappointed by the fall in the net asset value, resulting in a 12p drop in MEPC's share prices to 440.5p.

James Tuckey, chief executive, said: "We feel very confident about the whole of the profit statement. The only slight disappointment is on the net asset value side." Earnings per share rose 9 per cent to 22.9p and the total dividend was held at 20p.

Mr Tuckey said the drop in the net asset value reflected a marginal fall in values both in the UK and elsewhere. However, he added: "We feel that the performance of our UK portfolio, which accounts for 70 per cent of the group, is indeed where we would have expected it to be."

He said the valuation date for the portfolio was 31 August and there had been more activity and evidence of an improved market since then. "If we redid the valuation for 1 December, we would probably get a different answer."

The other factor which had brought the net asset value down was the pounds 31m write-down on the valuation of Northridge Mall in Los Angeles. The write- down is equivalent to 7.5p per share.

"We are convinced this is a temporary write-down because the centre is still getting back on its feet after the earthquake some three years ago.

"We are quite confident we will get that value back in the next two to three years as the centre re-establishes itself," Mr Tuckey said.

He defended MEPC's decision to give a target net asset value of 690p per share for 2001. "We're sticking our necks out. The portfolio is very, very different from what it was three years ago and what we're trying to do is give shareholders some feel of where we think the performance is going to be in five years' time," he said.

Mr Tuckey said the full impact of the change of strategy in MEPC's portfolio would take time but there would be progress towards the firm's targets each year.

He said there was a much firmer tone to the markets, particularly in Britain over the past few months. Apart from Northridge, the rest of the US portfolio had performed "extremely well".

MEPC plans to keep the lion's share of its portfolio in Britain, with the remainder in the US and Australia. It has wound down its European portfolio and has no plans to go back into continental Europe in the immediate future.

Mr Tuckey said the group was keen to make acquisitions with the proceeds of its European disposals, but there was a shortage of good stock available, particularly in Britain.

While MEPC has resolved to increase the dividend paid to shareholders, Mr Tuckey could not predict when it would be raised, although he pointed out that dividend cover had improved to 1.15 times from 1.05 a year before.