The developer, part of the consortium delivering the £1bn Mayfield scheme in Manchester, has withdrawn financial guidance to investors on future schemes and said it expects further delays to its pipeline due to the pandemic.
The London Stock Exchange-listed firm has also temporarily suspended future dividend payments to shareholders pending greater clarity on the impact of the health crisis, enabling it to preserve £4.4m, and will make redundancies to cut overheads, it said in a trading update today.
“As previously stated, Brexit and then the general election impacted upon timing of several of our key projects by delaying deliveries and third party decision-making processes; in particular, these factors led to delays in securing planning consents due to the election purdah and also caused a slowdown in transaction timetables with capital partners,” the statement said.
“The unprecedented Covid-19 pandemic has compounded an already challenging market backdrop, with decision-making and economic activity grinding to a virtual halt in the final month of our financial year [ended 31 March 2020].”
Due to current market uncertainty, U+I said it is “suspending all financial guidance relating to expected future development and trading gains until clarity returns to the market”, and said its profits would be hit.
The company had already announced last month that it would likely miss its £35m earnings target for the full year 2020. Today, it said it expects to achieve around £16m of gross development and trading gains for the year, against that target. U+I’s share price was down 15% on Wednesday morning to 97.4p.
The Mayfield Partnership secured planning consent from Manchester City Council in February for the first phase of its £1.4bn regeneration of Mayfield Depot near Piccadilly Station, comprising 320,000 sq ft of offices and a park. The consortium was due to start work on site this year but today’s trading update did not mention plans for this project.
As well as its pipeline, U+I’s investment portfolio has been impacted by the virus outbreak, with only around 17% of U+I’s retail units and 23% of shopping centre units remaining open for trade at present and 51% of rent collected for the most recent quarter, according to the statement.
To mitigate the impact of the crisis, U+I said it has “accelerated” an efficiencies programme announced last October, which targeted £4m of cost savings by 2022 including a 20% reduction in overheads.
All “non-essential” development expenditure has been stopped or deferred, and the company will initiate an immediate redundancy programme to deliver annual savings of £1.4m. In addition, 17 members of staff have been furloughed. However, overall, U+I has a “strong balance sheet with good liquidity”, the statement added.
Chief executive Matthew Weiner said: “2020 started with a strong sense of confidence, which has been disappointingly short lived as we now experience the impact of Covid-19.
“U+I’s business model benefits from close relationships with Government, both central and local, due to the significant socioeconomic growth delivered by our £11.5bn portfolio of complex, mixed-use, community-focused regeneration projects.
“As such, our projects secure substantial grants and loans from government bodies and we expect will continue to attract such support in the medium to long term.
“In the short term, we have taken decisive action to preserve cash and mitigate the impact of Covid-19, on both our people and our projects. Over the coming months, these cost reductions will strengthen the fundamentals of the business and enable U+I to deliver on its pipeline through a more efficient approach.”