Stonegate -comment

Stonegate reported FY22 numbers (to September 22) yesterday, roughly in line with our own projections. Leased and tenants performed in line with Managed and Operated outperforming, albeit offset by higher central costs. This is likely to be inflation driven, but may be due to cost allocation. Stonegate drew a further £30m on their RCF due to higher CAPEX figures. Despite some positive comments on the call, management have reduced the CAPEX spend for FY23, targeting 100 conversions this year (a 50% reduction from previous plan). Additionally, Stonegate highlighted the current energy prices in the market, with the current price below the energy cap price. Despite this, they are still seeing inflationary pressures from labour and wages. The annual valuation was completed, and disposals continue to achieve prices in excess of book value (or 14.8x pre-covid EBITDA). We will update our model shortly.