LXB Retail Properties Plc Trading Update - Further Guidance (0585U)

TIDMLXB

RNS Number : 0585U

LXB Retail Properties Plc

19 October 2017

19 October 2017

LXB Retail Properties Plc

(the "Company" or the "Group")

Trading Update - Further Guidance

LXB Retail Properties Plc, the Jersey resident closed-ended real estate investment company focused on edge of town and out of town retail assets, provides this trading update following the announcement on 6 October 2017 which promised a more detailed assessment of NAV impact within 14 days. The Board now provides more detail on the issues which lead to a re-appraisal of ultimate NAV. However, as explained below, the Board is not yet in a position to refine its guidance.

There are two main drivers of the re-assessment; Stafford Riverside and Rushden Lakes.

Stafford Riverside

At Stafford, this 102,000 sq ft investment has been offered for sale in line with the mandate from shareholders. Whilst no transaction has yet been agreed, it is clear from discussions with potential purchasers that the recent hardening of sentiment towards the retail sector is likely to mean that the value realised from this investment will be below the Board's expectations when it issued NAV guidance on 14 June 2017.

Rushden Lakes

At Rushden Lakes, the toughening of the lettings market is certainly having an impact on the terms which can be achieved when letting new space to retailers and restaurant operators. Notwithstanding that, the Group continues to achieve success with a number of lettings signed recently. More detail on this will be provided with the Full Year Results Announcement later in November 2017. However, the more significant issue impacting NAV at Rushden Lakes relates to recently notified significant potential cost over-runs in connection with the highways works associated with this major new retail and leisure destination.

Highways England acts on behalf of the Secretary of State for Transport as the highway authority for the Strategic Road Network, which includes the A45 trunk road at Rushden. Any changes to this network require an agreement (under section 278 of the Highways Act 1980) in addition to agreements needed for works to local roads controlled by Northamptonshire County Council.

The planning permission for the Rushden Lakes scheme required the Group to deliver a range of highways improvement works including significant amendments to the A45 roundabout and slip roads as well as an overbridge. As the developer, LXB contracted with Highways England under its standard 'single agreement' process for Highways England to undertake the work as project manager using its own contractors. Consequently, LXB had no contractual role in the contractor's appointment or performance. This is a normal approach with Highways England required to provide access to all reasonable information and ensure adequate project management and supervision of its contractor so as to ensure an efficient outcome.

At the end of September 2017, Highways England advised the Group of a number of unbudgeted cost items which it considers are recoverable from LXB. These include several matters where the costs are not yet quantified or explained. Having analysed the initial Highways England claim, the Group's lawyers have advised Highways England formally that many of their claims are contested and that LXB does not consider it has any liability for them. A meeting with the key Highways England personnel was requested, but it has not been possible to arrange that until later this week.

Even though there is uncertainty about the outcome of the Highways England claim, the Board has taken the view that the potential implications, particularly in conjunction with the indicative pricing relating to the Stafford Riverside investment, were such that shareholders should be advised of the Board's revised view on potential NAV. It is likely that the discussions with Highways England will take some time to resolve. The Board is scheduled to meet in the second half of November 2017 and, as well as considering the Results for the year to 30 September 2017, it will receive an update on the Highways England situation.

Commenting on the position, Phil Wrigley Chairman of LXB Retail Properties Plc, said:

"Of course it was disappointing to have to announce a possible reduction in NAV, however the Board has always committed to an open dialogue with shareholders about its views on value. Having returned virtually the whole of the capital raised by its IPO and subsequent share issues (net of issue costs and shares bought back for cancellation) the Group now has a relatively modest balance sheet so any adjustment in the anticipated value of any of our remaining investments inevitably has a greater relative impact on NAV. In the circumstances, the Board considers it is even more important to maintain that policy of full openness about anticipated value now, as we continue to prepare detailed proposals for shareholders to consider at a forthcoming Extraordinary General Meeting.

"A further RNS update will be made as soon as it is appropriate, although shareholders will understand that there can only be limited disclosure whilst commercially sensitive matters such as these remain under discussion and the preciseness of the position is still unclear."

For further information please contact:

   LXB Adviser LLP                                                Tel: [phone] 

Tim Walton, CEO

Brendan O'Grady, FD

   J.P. Morgan Cazenove (NOMAD)              Tel: [phone] 

Bronson Albery/Paul Hewlett

   Buchanan                                                            Tel: [phone] 

Charles Ryland/Victoria Hayns

This information is provided by RNS

The company news service from the London Stock Exchange

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October 19, 2017 04:00 ET (08:00 GMT)