Bruntwood Bond 2 PLC October performance update

TIDMBRU2

Bruntwood Bond 2 PLC

25 October 2021

25th October 2021

BRUNTWOOD GROUP LIMITED

BRUNTWOOD BOND 2 PLC

OCTOBER 2021 UPDATE STATEMENT

Bruntwood Group Limited ("Bruntwood") today updates the market on the ongoing impact of the Covid-19 pandemic on its business and a summary of the latest rent collection position.

Chris Oglesby, CEO of Bruntwood, said

"We have had a strong year for lettings with 1.1 million square feet let or instructed with solicitors. We had a particularly strong last quarter seeing 440,000 square feet instructed across the Bruntwood Group. This has given us the confidence to accelerate the development of the next 220,000 square foot phase of Circle Square and we are also now actively pursuing acquisition opportunities, particularly in Manchester City Centre where vacancy is now below 7% which means that we now require further stock to facilitate the expansion of our valued customer base.

Across all locations, footfall in our buildings has demonstrated a positive trend in the last quarter and has increased from 40% of pre-pandemic levels to 60% in recent weeks as there is an increasing trend for people to return to office working for at least some of the working week. We know from engagement in the business communities in our cities the value that businesses are placing on their offices as places for people to collaborate, create and develop strong business cultures. There is a growing recognition about the impact of long term homeworking on colleagues mental wellbeing and career development both of which have major impacts on individuals and businesses"

Financial Position

On 30th September 2021 Bruntwood agreed a 12 month refinance and extension of its GBP240m loan facility with a syndicate of lenders out to March 2023. The Bruntwood Group is actively considering how to best fund its next stage of growth and therefore only a short term extension was sought at this time to avoid paying unnecessary fees in the event that the group's borrowing is restructured in the near future.

As at 20th October, the Group had GBP15.3m of cash reserves (compared to GBP30m on 21 July, the date of the last update), GBP57.5m of undrawn committed available facilities and GBP72m of unencumbered assets upon which further finance could be secured. In addition, the group has GBP19m of retained bonds which it could issue to the market.

The board are currently finalising the financial results for the year ended 30th September 2021, including full external revaluations of the portfolio. It is very pleasing to report that we have had a strong year in the circumstances. The trading losses which we budgeted for at the start of the year did not materialise and the investment market in our strong regional cities has held up meaning that we will be reporting positive valuation movement year on year. We will be releasing our full results nearer to Christmas but they are testament to our strong customer focussed ethic, the hard work of our colleagues and our market leading product.

Nevertheless, the Board continues to model various downside scenarios including reviewing estimated customer default rates, lower retention rates, higher concessions and valuation yield movement, but we are increasingly confident that such scenarios are unlikely to materialise. Based on the output of these models, the Board considers there to be sufficient income and valuation headroom across Bruntwood's debt facilities and does not expect Bruntwood to breach any terms relating to them. We have modelled the forecast covenant performance on each loan facility. Valuation covenant headroom is in excess of 25% across our facilities and likely to improve as a result of the latest external valuations. Income would have to fall by over 30% on all of our facilities before any interest cover covenants are breached. In addition, we would expect that the existence of GBP72m of unencumbered assets would provide the resources to remedy any breaches in such circumstances. The earliest major bank facility maturity is not until March 2023.

Impact on Operations

As of 20th October 2021, 86% of September rents had been collected. This is ahead of June / March / December quarters at a comparable point. We continue to speak with all our customers on a regular basis and work with every customer to support them as far as possible through what remains challenging times for some. We will continue to work closely with all customers and where support is required we will seek to reach a fair solution for everyone.

To date, 97% of June, over 97% of March and 98% of December rents have been collected with the balance being on payment plans or being actively pursued at the date of this announcement.

Strong cash collection and a focus on controlling non-essential expenditure has ensured that the business continues to stay cash positive before capital outlay is taken into account. Across the Bruntwood portfolio, retention levels at break and expiry are in excess of 70% and vacancy levels are currently 9.8%, showing a consistent positive trend across the year.

Headline rents remain consistent with previous run rates and rent free concessions and fit out contributions required to secure new lettings have been reasonably consistent over the last six months and are aligned with our forward plan assumptions.

ENDS

For further information, please see Bruntwood's website at https://bruntwood.co.uk/ or contact:

 
 Kevin Crotty (Chief Financial Officer)    [phone] 
 Sean Davies (Director of Financing 
  & Investment)                            [phone] 
  Patrick King (Peel Hunt)                  [phone] 
  Mark Glowery (Allia C&C)                  [phone] 
 

Forward-Looking Statements: This announcement contains certain forward-looking statements with respect to Bruntwood's expectations and plans, strategy, management objectives, future developments and performances, costs, revenues and other trend information. These statements are subject to assumptions, risk and uncertainty. Many of these assumptions, risks and uncertainties relate to factors that are beyond Bruntwood's ability to control or estimate precisely and which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. Certain statements have been made with reference to forecast process changes, economic conditions and the current regulatory environment. Any forward-looking statements made by or on behalf of Bruntwood are based upon the knowledge and information available to Directors on the date of this announcement. Accordingly, no assurance can be given that any particular expectation will be met and Bruntwood's bondholders are cautioned not to place undue reliance on the forward-looking statements. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority), Bruntwood does not undertake to update forward-looking statements to reflect any changes in events, conditions or circumstances on which any such statement is based. Past bond performance cannot be relied on as a guide to future performance. Nothing in this announcement should be construed as a profit forecast. The information in this announcement does not constitute an offer to sell or an invitation to buy securities in Bruntwood or an invitation or inducement to engage in any other investment activities.

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END

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October 25, 2021 03:00 ET (07:00 GMT)