U+I to miss earnings target on coronavirus

The developer, part of the consortium delivering the £1bn Mayfield scheme in Manchester, said it would likely miss its financial targets in the coming year due to market slowdown from Brexit and coronavirus.

Pipeline schemes are unlikely to contract out and start on site, or even secure planning consent, by 31 March 2020, impacting the full-year earnings and prompting the company to reduce its cost base in the months ahead, it said.

“Brexit, the related slowdown in decision-making and the only recently resolved political uncertainty in the UK have continued to impact upon timing of some of our projects,” U+I wrote in a stock market update today.

“In particular, this has led to delays in securing planning consents following the election purdah and a further slowdown in transaction timetables.

“This has recently been dramatically exacerbated by the impact of Covid-19 on the decision-making process, business sentiment and economic activity.

“The rapidly accelerating impact of the Covid-19 crisis on transactional activity and central and local government policy means that there is currently no reliable way to predict, with certainty, the timing or value of transactions.”

Based on the projects for which U+I had certainty, “the aggregate amount of our development and trading gains number is currently materially below that £35m target for the full year”, the statement said.

The £35m figure is at the lower end of the target. U+I said it expects some of the deferred projects to be realised in the full year 2021 and “will provide further detail of these in our full-year results”.

In the meantime, the company is working to manage its cost base and “will be proactively reducing its operating expenses and all non-essential capital expenditure in the current climate, with regular discussions to review these key areas and help mitigate risk.”

The company may also access credit facilities to manage its liquidity and use any currently uncharged assets as security.

It is also still pursuing a £240m stake sale of the Harwell science and technology campus near Oxford, and “remains in advanced legal negotiations” over this and several other projects within the development portfolio, U+I added.

“If successfully concluded, these could have a material impact on our reported end of year total gains, albeit we expect that amount would still be below the £35m lower end target.”

The company plans to issue a further statement in early April updating the market.