Splash reports loss but Bloxham remains buoyant

Paul Unger

Urban Splash made a loss of £43.4m in the year to the end of September 2014 after charges of £30.4m for goodwill impairment, which revalued the business below historical levels, and a £14.9m hit due to interest rate swap losses.

Taking out the one-off charges the debt-laden Manchester-based business, refinanced by Pears Group last year, made a pre-tax profit of £7.6m. Turnover was £44.4m.

Urban Splash says its refinancing of nearly £200m of debt has been completed and debt of £128.8m repaid.

Urban Splash received commercial income during the period of £11.6m and has a residential portfolio of over 840 rented homes with an occupancy of 97%.

Chairman Tom Bloxham said: “The challenges and demands of the last five years are now behind us and we are pleased to be firmly focused on growing our business once again.”

Read in full below Tom Bloxham’s Chairman’s statement to accompany the results, which have not yet been published at Companies House

This, our first full year of trading as a restructured and refinanced group, has been one of the busiest, most complex but most successful periods in the group’s 21 year history. Last year’s successful restructure has proved a key turning point in the group’s fortunes and has provided the platform to significantly reduce our debt exposure whilst growing our business and providing us the ability to pursue the many new opportunities which a recovering market has presented.

Since the restructure of the group and at the time of writing this report, in aggregate we have completed over £289.5m of transactions covering debt refinance of £195.9m and property sales of £93.6m, we have firmly established new joint ventures with Places for People and The Pears Group, have repaid £134.9m of debt and have restructured all our historic debt. These have all contributed to restoring a sound financial position and provide a strong strategic base to take the business forward.

We are starting new projects all around the country. In partnership with Places for People, we are on site developing another phase at Park Hill Sheffield and are shaping our thoughts on the development of the remainder of the scheme. We have secured planning at the first phase of Smiths Dock in North Shields and are hoping to start on site with the second phase of the Lakeshore development in Bristol towards the end of 2015. We are also actively looking at a number of new projects with Places for People.

On our own account, we have started on site with new development projects at Stubbs Mill in New Islington, continued the development of further phases of Royal William Yard in Plymouth and started the redevelopment of New Hall in Liverpool. We are also progressing our residential scheme at Springfield Lane in Salford which we hope to commence on site in the near future.

21 years ago when we started the development of loft apartments and helped bring city centre living back to Liverpool and Manchester, no one knew if our ideas would work or not but I had a sense of excitement and butterflies in my stomach thinking we were on to something big. I have exactly the same sense of excitement and anticipation about our hoUSe project. This is our family housing concept we have launched in New Islington and we are now on site. We have been very encouraged with the response. We are actively pursuing new sites around the country to grow this part of our business. We firmly believe our use of contemporary design and generous space standards together with the ability for our customers to have a significant input into the design and specification of their homes prior to purchase will prove popular in the market. The modular and volumetric construction methodology and our partnership model with land owners should provide good growth opportunities in the short and medium term, helping to relieve the country’s serious housing shortage and also provide an alternative choice to the major house builders.

Our commercial property portfolio remains a very important part of our business and has performed well during the period. Working with our partners, The Pears Group, we have made strategic disposals such as Fort Dunlop in Birmingham and Smithfield Buildings in Manchester and are refurbishing a number of properties across the North West. Our wholly owned assets at the Royal William Yard, Plymouth, which are fully let, continue to perform very well. This has enabled us to re-invest significant capital to develop new car parking and bring more flexible work and restaurant space into use. We have also recently agreed to acquire the 175,000 sq ft Civic Centre in Plymouth, making Plymouth a key part of our commercial activities.

We continue to manage a portfolio of over 840 rented homes and our 10 years’ experience of working in the private rented sector coupled with our management systems, in-house sales, management and maintenance teams has allowed us to maintain very high occupancy levels which are currently in excess of 97%. We are actively progressing a pipeline of a further 2,000 units to bring under our management.

Our annualised investment income was £11.6m and the portfolio recorded revaluation gains of £9.8m.

It is also very pleasing to see that our schemes and hard work continue to be recognised by our peers and others with another 24 awards received during the period, taking our total number of awards to 369.

Turning to the numbers, I am very pleased to report a good set of trading figures. Turnover was £44.4m for the period and profit before interest, tax and goodwill amortisation was £7.6m. Perhaps more importantly, the group significantly reduced its debt exposure by repaying £128.8m of bank debt and net cash at the end of the period was £3.7m.

The reported loss of £43.4m appears to conflict with the positive statements above, however this figure incorporates two large charges to the profit and loss account (£30.4m goodwill impairment and £14.9m amortisation of swap losses) these relate to the way the group was historically funded and how that debt was restructured and refinanced. The charges, which did not have any cash outflows, do not affect the current operations of the group and specifically the newly formed companies which comprise the bulk of the group’s trading activity. After adjusting for these items, the group made a profit.

The restructure brought with it a much more complicated corporate structure and the required accounting treatment makes meaningful financial reporting more difficult. We have produced “pro forma” statements in the Strategic Report which we hope better explains our financial position.

The challenges and demands of the last 5 years are now behind us and we are pleased to be firmly focussed on growing our business once again. We might be older and hopefully a little wiser (and with a bit less hair!) but we have not lost any of our energy, creativity and determination to make a difference and deliver award winning, design-led and innovative regeneration schemes across the country – with our partners, our brand and our staff alongside us, we are well placed to do exactly that.

Finally, and as always, my thanks go to all our partners, consultants, funders and above all my colleagues who have helped to steady the ship and have now turned it around. I am excited as I ever have been to be leading this great business.

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They thought they were something special but just rode to the hubristic “rising market” thermal like everyone else and got too close to the sun. Lucky for them state of the housing market and underlying value combined with constrained supply means they can now ride the private market rent resurgence back to a sustained business model. They’ll make a good private landlord – even it is by accident. What doesn’t kill you makes you stronger – or stranger – I forget which… Let’s face it though, Bloxham doesn’t lead his business anymore (if you have to explain it you’ve ‘lost’) – it’s their senior lender who holds the leash and it will likely be short.

By Sceptic