City Lofts Group PLC

City Lofts Group PLC

October 05, 2005 02:00 ET

City Lofts Group PLC: Trading Update

LONDON, UNITED KINGDOM--(CCNMatthews - Oct. 5, 2005) - City Lofts Group PLC ("City Lofts" or "the Group") (AIM:CTF), a leading developer of urban mixed-use property schemes, primarily focused on residential apartments, today announces a Trading Update in relation to the half year ended 30 September 2005. The Group's Interim Results will be announced on Tuesday, 6 December 2005.

City Loft Developments

Developments under construction:

The following developments under construction are all progressing well on site:

- Springfield Mill, Nottingham (105 apartments with a GDV of Pounds Sterling 16.4 million)

- Quayside Lofts, Newcastle (66 apartments with a GDV of Pounds Sterling 14.9 million)

- 1 Princes Dock, Liverpool (162 apartments with a GDV of Pounds Sterling 38.7 million)

- Robert's Wharf, Leeds (198 apartments with a GDV of Pounds Sterling 38.2 million)

- Admiral House, Cardiff (167 apartments with a GDV of Pounds Sterling 29.2 million)

- Salford Quays, Manchester (203 apartments with a GDV of Pounds Sterling 45.6 million)

In aggregate, the Gross Development Value ("GDV") of these schemes totals Pounds Sterling 183 million. Building completions are expected to commence progressively from March 2006 through to July 2007.

As stated in the June 2005 Preliminary Results statement, "Shareholders should note that there will not be any new sales from them (existing developments currently under construction) until early 2006 and, as a result, none will be reported as sales completions in the half year ending 30 September 2005" and in the new financial period of nine months ending 31 December 2005.

Forward Sales Position

The current forward sales position, analysed by development, is as follows:

GDV Exchanged Reserved
(Pounds (Pounds (Pounds
Sterling m)/ Sterling m)/ Sterling m)/
Total No. of No. of No. of
Apartments Apartments Apartments

Quayside Lofts, Pounds Sterling Pounds Sterling Pounds Sterling
Newcastle 14.9m 8.1m 1.2m
66 45 4
Roberts Wharf, Pounds Sterling Pounds Sterling Pounds Sterling
Leeds 38.2m 34.0m 0.3m
198 187 2
1 Princes Dock, Pounds Sterling Pounds Sterling -
Liverpool 38.7m 27.1m
162 118 -
Admiral House, Pounds Sterling Not yet launched Pounds Sterling
Cardiff 29.2m for sale 3.4m
167 20

Springfield Mill, Pounds Sterling Pounds Sterling -
Nottingham 16.4m 15.5m
105 95 -
Salford Quays, Pounds Sterling Pounds Sterling Pounds Sterling
Manchester 45.6m 16.3m 2.2m
203 82 7
Total on site being Pounds Sterling Pounds Sterling Pounds Sterling
constructed 183.0m 101.0m 7.1m
901 527 33
St Paul's Square, Pounds Sterling Not yet launched
Sheffield 59.9m for sale

Brassington Av., Pounds Sterling Not yet launched
Sutton Coldfield 79.4m for sale

Total Pounds Sterling Pounds Sterling Pounds Sterling
322.3m 101.0m 7.1m
1,518 527 33

59% (46% as at May 2005) by value of developments currently under construction have been pre-sold.

New development projects:

Park Point, Sutton Coldfield, West Midlands

Contracts were completed in August 2005 to acquire a site in the centre of Sutton Coldfield from Cala Homes (Midlands). The site received a planning consent in March 2005 for a mixed-use 9 storey scheme involving 295 apartments, 63,500 sq ft of retail/leisure space and car parking. The forecast GDV of the scheme is around Pounds Sterling 79.4 million. It is expected to start construction in spring 2006 with phased building completions between November 2007 and May 2008.

At the present time six other potential development schemes are nearing close of negotiations/legal due-diligence. The combined gross GDV of these schemes (before any joint venture partner interests) is approximately Pounds Sterling 460 million involving the development of around 2,550 apartments. It is anticipated that exchange of contracts on the initial site acquisitions for these schemes will take place over the next few months.

Market Overview

In July 2005, the Centre for Economics and Business Research ("CEBR") published their "Housing Futures 2025" report and forecast that the private rented sector will grow by 40% over the next ten years and that the sector is set to rise by 1 million households to 3.5 million over the next eight years. They also forecast that the number of apartments in the UK will grow by 32% from 5.6 million to 7.4 million between now and 2025.

Despite a falling away by small 'one-off' investors during the course of the year, serious investors still take a medium to long term view and remain active. According to the RICS, residential rents in the last four years grew at their fastest rate in the three months to July 2005 and ARLA have recently reported rental yield improvements this year.

Underlying market demographics and continuing interest in city centre living continue to support the City Lofts' strategy. Single person households represent 30% of all households and are forecast to grow to 40% by 2021. Employment of key professionals in the important financial and business service sectors in major cities is predicted by Business Strategies to increase from 18% to 22% by 2011.

Vivacity Residential Management ("Vivacity")

In June 2005, the Group announced that it had launched Vivacity to provide a comprehensive range of residential investment and asset management services to City Lofts' investor customers. In addition to marketing this product to its investor customer base, it has also been exploring various opportunities afforded by the proposed changes in legislation allowing Self Invested Personal Pensions ("SIPP") to invest directly in residential property from April 2006.

Agreement has been reached with Yorkshire Investment Group ("YIG"), an IFA and financial services group, for the development and launch of a wrapped Vivacity SIPP product which will allow existing and new SIPP investor clients to acquire residential investments with YIG providing all the regulatory and administrative services and Vivacity providing the residential management services.

Current Period Results:

Given that the timing of sales completions from the current projects under construction (GDV of Pounds Sterling 183 million) do not commence until March 2006, the trading result for the half year ended 30 September 2005 will show a loss before tax of around Pounds Sterling 2.5 million, essentially representing the cost of administrative expenses incurred in the period. These circumstances will continue in the results for the nine months ending 31 December 2005.

Based on the anticipated building completion programme of these developments, sales turnover for the year ending 31 December 2006 is expected to be between Pounds Sterling 100 million and Pounds Sterling 120 million, with the balance occurring in the following year.

Stuart Wright, Group Chief Executive, commented:

"Whilst, as previously reported, completed sales from current developments in construction will not be reported until the next 2006 financial year, the Group has been very active in lengthening and expanding the future development project pipeline, introducing measures to drive down build costs, broadening the activities of Vivacity and strengthening its customer care operation. With a good forward sales position and continuing favourable market fundamentals, we remain confident about the future."

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