GREEN Property, and its managing director, Mr Stephen Vernon, have something to celebrate this week. With the opening of Green's Blanchardstown Shopping Centre, on schedule, with no financing difficulties, it represents a landmark.
But taking ignoring the hype that accompanies such developments, how has Green developed under the leadership of Mr Vernon? More importantly, what sort of a financial contribution will the centre make to Green?
Earlier this year, the board renewed Mr Vernon's three year contract. Although not announced by the group, the new terms involve a two year rolling contract. His original £150,000 a year salary was adjusted for inflation, so he is now earning somewhere in excess of £160,000.
When he was appointed three years ago he was given a set of targets but regrettably these were never published. Achievement of these unspecified targets were required before a valuable share option scheme could be implemented. Mr Vernon told The Irish Times that all the targets have been achieved.
He has options over 586,000 shares, at a weighted average price of 99p per share (some of which were granted last year at a higher price). These are exercisable now but can come into play anytime over a 10 year period. When he was granted the option, the shares were trading at around 112p. The shares are now being traded at around 252p which gives him a paper capital profit of £896,580.
Under his stewardship, Green has moved ahead in Ireland and in Britain. Funding was never a problem and last June the group had little difficulty in raising £30 million, in a rights issue of one for three, at a price of 200p per share.
Green was capitalised at a mere £10 million three years ago. Today, it is capitalised at £150 million. Most of that, however, reflected acquisitions. The dividend growth at an estimated 26 per cent has been more pedestrian.
And the latest results only showed a marginal growth in pretax profit to £2.94 million, in the six months to June 30th 1996. This was mainly due to the absence of dealing profits. But because of a sharp increase in tax - from £180,000 to £466,000 - earnings per share fell from 5.97p to 5.40p.
So is all this a poor augury for the future? The straight answer is no. Indeed, some of the relevant ratios are moving sharply northward.
The Irish profits are sheltered by an investment in the IFSC so there should be no Irish corporation tax. What taxes there are will be from its British operations. While there should be a lower tax rate in the second six months, earnings per share will be lower in the full year but the decline will not be significant.
It looks as if profits for the full year will rise from £6.4 million to around £7.1 million. But the most significant change will be in its balance sheet as it takes in a dealing profit on its Blanchardstown Shopping development. The value of net assets per share (NAV), the life blood of any property company, has been very slow to move but is now ready to spurt ahead. It was just 172p in 1993, 177p in 1994, and 194p (unadjusted for rights) in 1995. Putting in a value for Blanchardstown should now boost this to 255p. And that only takes phase one into account.
The profit and loss account will not benefit from this development until 1997 when rental income of some £2 million (after financing costs) should come through. But the full income of some £3 million will not come through until 1998.
Further benefits should flow from Blanchardstown. The group is now planning phase two which involves a further 170,000 square feet. Then there is a 31 acre site adjoining the development, 20 acres of which may go on a Regional Technical College (RTC) but 11 acres would be available for further development. And what about rent reviews? The rents for zone A vary from £60 to £63 per square foot and reviews take place in five years time. But if the centre proves to be a success - the new 3Com Ireland computer networking company which plans to employ 775 at its Blanchardstown headquarters is a plus - rents should start to move up which should increase the centre's value in the balance sheet from year three onwards.
