Trading Statement
West Pioneer (AIM:WPR), a leading developer and operator of shopping malls in west and southern India, announces the following trading update to the market.
Like other countries around the world, India has been affected by global economic conditions. In particular, confidence within the retail industry is currently low, with investment decisions and new store openings being put on hold. However, the fundamentals of the Indian economy remain robust and the company is confident that it has the right strategy and team in place to meet its long term objective of having 4 million square feet of gross leasable area within the next 3-5 years.
Kalyan
West Pioneer is pleased to announce footfalls remain strong at the Company's Metro Junction Mall in Kalyan, in spite of the global economic downturn and the recent Mumbai terrorist attacks. More than 300,000 people visited the mall in December 2008. Importantly, retailers remain satisfied with sale conversion rates within their particular stores. The company has been working hard to develop the mall into a destination centre and has positioned itself to become a hub of activity within the community.
However, the Company announces that leasing at its mall has fallen from 70% to 54%. This is due to some retailers suspending all new store openings nationwide and therefore deciding not to take up occupation at the Company's Metro Junction Mall. Since the mall is not yet fully occupied, average rentals are currently below management expectations.
The directors are currently in negotiations with potential new tenants and expect to be able to update the market shortly.
Nashik & Aurangabad
The Company is pleased to announce that it has now signed an agreement with the Intercontinental Hotel Group ("IHG") to build 200 room hotels in both Nashik and Aurangabad. Subject to the finalisation of financing, the hotels are expected to complete by Q4 2013. West Pioneer will build and own the hotels and IHG will operate them under its Holiday Inn brand.
As previously announced all planning and design work for the malls in Nashik and Aurangabad has been completed, however the Company does not believe that in the current climate it will be prudent to commence construction activity at these sights until retailer confidence improves.
Outlook
Whilst 2008 proved to be a difficult year for the economy, particularly for the retail sector, we remain confident that 2009 will see progress. According to Reserve Bank of India figures, inflation has already decreased from its peak of 12.9% in August 2008 to 5.6%. Although there is an overriding sentiment of caution in the retail sector, India is anticipated to achieve at least GDP growth of 5.2% in 2009 making it the second fastest growing economy after China. Importantly for West Pioneer, organised retail penetration in India, is expected to continue to grow 9.52% by 2010 according to independent research by Crisil.
Amit Jatia, Chairman of West Pioneer Properties Limited, said: "The Indian economy, like other economies worldwide, has fallen over the past year, which naturally has had a knock-on effect on the retail sector. We are disappointed by the cancellation of a large tenant in Kalyan, but remain confident that Kalyan's unique position means that we will sign a new contract for a new tenant shortly. We are delighted to have signed a contract with IHG, one of the worlds leading hotel operators."
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