MEPC adds to good news: Interim profits and dividend better than expected

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The Independent Online
MEPC, Britain's second-largest property company, yesterday continued the flow of good news from the sector by announcing better-than-expected profits and holding its interim dividend.

There was also some surprise that it had not followed rivals like Hammerson, Brixton Estates and British Land, which have taken advantage of investor enthusiasm for property to launch rights issues. But James Tuckey, MEPC's chief executive, was careful not to rule out a future issue.

'The board would be very foolish if it wasn't always looking at all the options for financing available to the group.' He added that debt is 'marginally lower' than in September, when it stood at pounds 1.4bn or 82 per cent of net assets, although that was after pounds 100m of property sales. A similar sum is likely to be raised in the second half.

MEPC's taxable profits for the six months to March fell 10.4 per cent to pounds 52.5m, ahead of the lowest estimates of pounds 40m. The drop was due to a rise in the interest bill from pounds 45.7m to pounds 52.5m as the amount charged to the cost of developments dropped from pounds 20.3m to pounds 9.6m. MEPC's development work is now complete and it will gradually stop capitalising interest as new developments are fully let.

Despite the better-than-expected performance, MEPC's shares dropped 5p to 443p. But this was largely due to consolidation after the 26p rise on Wednesday, when George Soros - the financier who made dollars 1bn by betting against sterling before its exit from the exchange rate mechanism - revealed he was putting pounds 284m into the property sector though a joint venture with British Land. That convinced the market that the property recovery was under way and sent the sector's share prices up 7 per cent, although most slipped yesterday.

Mr Tuckey said there has been an improvement in sentiment and an increase in property purchases, but that had not been accompanied by sustained demand for space from tenants. 'To say the market is rebuilding on solid foundations, you need that tenant demand.'

Earnings per share fell 2p to 10.4p but the interim dividend was held at 5.25p. MEPC refused to give any indication of the likely final payment. Some analysts are forecasting a cut in the total dividend from 20p to 15p. They are also expecting a further dip in net assets from 465p to 425p-430p.

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