Despite announcing a sharp increase in profits for the first half of the year, Green Property's share price fell sharply yesterday, following the disclosure that a team led by some of the group's directors are considering a possible management buyout of the group.
The shares fell 18 cents to €6.82 following the announcements valuing the group at €760 million (£600 million).
While confirming no proposal has been received from any source, chairman Mr Ray MacSharry said "a team led by certain executive directors has, however, indicated to the board that it is investigating the possibility of making a proposal which may or may not lead to an offer being made for the company". If a proposal is made, he said, "there can be no assurance that any formal offer will be made or that it will be recommended by the board to shareholders". Green said it has established a committee of non-executive members of the board to consider any proposals which may be made.
The company has not identified the directors involved in the potential MBO. However, managing director, Mr Stephen Vernon, who has been responsible for the recent expansion at the group, is known to be particularly frustrated at the reaction of institutional investors to small capitalisation companies.
In June he told The Irish Times the group is not big enough to be considered by the European institutions and is being ignored by the Irish institutions. In the UK, it is lumped with "the rest".
There has been speculation about a possible MBO since last June. This has been prompted by the low share price relative to the net asset backing. The net asset value per share rose by 11.2 per cent to €9.04 at the end of June. This puts the share price at a 25 per cent discount. Green's latest results announcing an 86 per cent rise in profit before tax from €20.45 million to €37.99 million in the six months ended June 30th 2000, said it expected this year to benefit from strong Irish rents growth and buoyant conditions in its British operations. Income rose from €34.4 million to €45.9 million. There was a share of profit of €22.1 million on the disposal of properties and a loss of €1.2 million on the disposals. Group interest payments rose from €17.3 million to €21.7 million. Earnings per share increased from 13.71 cents to 25.06 cents.
The shareholders are to benefit from the results with a 14.6 per cent increase in the interim dividend to 2.75 cents. Gearing is virtually unchanged at 67 per cent. The buoyant conditions in the Irish property market "have produced a significant uplift in value in the Irish investment portfolio and have contributed to the surplus arising on certain development properties being included as investment properties for the first time", the interim report said. "The UK investment portfolio showed only a slight uplift in value". However, Green noted that "very substantial trading profits were realised in that market".
In the Republic, the development of Hatch Street, Dublin, has been completed and is now fully let. Construction of the office developments at Sandyford is proceeding.
The first phase of development at Fonthill Road, Dublin, has been completed which is now producing an annualised rent roll of €2.5 million. In the UK, the office development in Watford was sold and a site was acquired in Brentford where construction has begun on a 113,000 sq ft office development. Rationalisation of the investment portfolio of Trafford Park Estates has continued.
