Quintain Estates: H1 results

7:20 a.m. Thu 08 Dec 2005

Quintain Estates posted a 56% decline in pre-tax profits for the half year to September 2005 after the company booked in a charge for discontinued operations. Pre-tax profits reduced to £2.1m (2004: £4.8m) after charge of £2.7m for discontinued operations at Wembley and £1.6m for marking to market of debt. Diluted NAV rose 18.4% to 424p per share.

The company has (wisely) signed a 15 year contract with a promoter to manage events at Wembley Arena, but the contract did result in the discontinued operations charge (mainly a write off of a building) referred to above. The contract removes operational risk, gives guaranteed revenue and a performance related profit share.

Turnover declined by 16%, to £23.4m due to disposals (of £45.6m) and a negative contribution from leisure operations as a result of the closure (for refurbishment) of the Wembley Arena. Administrative expenses rose by £3.3m due to higher staff costs (needed for a number of major projects) but finance costs fell by £3.3m as a result of paring down of debt levels, funded by disposals.

The company is optimistic in its outlook and expects growth to come from its major projects Wembly and Greenwich. The company has wisely taken the opportunity of the buoyant market to dispose of some of its main portfolio, and further disposals are planned during the rest of the year. Acquisitions have been selective and focused on regional offices where yields are still good.

In the long term, redevelopment at Wembly and Greenwich, will add greatly to NAV. Two housing projects (jointly with Countryside) are not as exciting and are vulnerable to the decline in the housing market. Short term prospects are similar to the sector and are not particularly good.

The share trades at 592p at a significant premium to its NAV. The yield is 1.7%.