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Conygar crumples on housing market and Brexit writedown

14 May 2019

Housing slowdown hits Conygar Investment Company with AIM-listed property developer forced to slash value of construction project in Pembrokeshire.

The housing market slowdown has hit Conygar Investment Company (CIC) with the AIM-listed property developer forced to slash the value of a long-standing construction project in Pembrokeshire.

Shares in Conygar tumbled 13p or 8.5% to 140p, at a 14% discount below net asset value (NAV), after the company reported ‘much weaker than expected’ demand from house builders and buyers for the first phase of development on 86 acres of land near Haverfordwest town centre it bought in 2010.

‘Accordingly, we have re-evaluated our investment which has resulted in a write-down of £18.5 million,’ said Robert Ware, chairman and chief executive of the £79 million company.

The slump in the retail sector and a shortage of workers caused by Brexit were also to blame for the reduction in the project’s carrying value to £7.4 million, Ware said.

Analysts at Liberum described the writedown – equivalent to knocking 33p or 16% off NAV per share – as ‘disappointing’.

Half-year results today showed that Conygar also suffered from Hitachi’s decision in January to pull out of the construction of a nuclear power station at Wylfa Newydd, Anglesey after failing to agree funding with the government.

‘Hitachi has cancelled the option agreement covering our 203-acre site at Rhosgoch but the option agreement at Parc Cybi, enabling them to instruct us to build a logistics centre on the 6.9 acre site, is still in place,’ the company said.

The interim results reported an 11.3% fall in NAV per share from 201.3p to 178.6p in the six months to 31 March. The smaller decline reflected £5.3 million in revaluation gains, mostly from the higher value ascribed to the Cross Hands retail park in Wales, which is mostly let and where Conygar is building a 23,000 sq ft store for Lidl.

Since the half-year end Conygar has gained planning permission from Nottingham Council for a mixed-use development on 37 acres near the city centre.

Despite the setbacks at Haverfordwest and Rhosgoch, Ware said the outlook for the business ws positive, claiming the outline planning permission at Nottingham could be ‘transformational’.

‘With our cash balances of £46 million and no debt, we are positioned to deliver our projects and to take advantage of increasing market volatility,’ he said.

Liberum’s Conor Finn agreed, saying ‘the Nottingham project has the potential to generate material profits for Conygar and we note the current book value does not reflect planning milestones achieved to date.’

The key question, he said, was how it brought forward the development whether through land sales or joint ventures.

Investment company news brought to you by Citywire Financial Publishers Limited.

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