REG - Panther Securities - Final results for the year ended 31 December 2023
17/05/2024 07:00
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RNS Number : 8139O Panther Securities PLC 17 May 2024
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of
this announcement, this information is now considered to be in the public
domain.
Panther Securities P.L.C.
("the Company" or "the Group")
Financial results for the year ended 31 December 2023
CHAIRMAN'S STATEMENT
I am pleased to present the results for the year ended 31 December 2023 which
show a profit before tax of £5,499,000 compared to a profit before tax of
£22,902,000 for the previous year ended 31 December 2022.
Both of the above figures are substantially affected by the movement in our
swap position amounting to a reduction of £1,962,000 in the swap value of the
balance sheet for 2023. Whilst the movement in our swap position affects our
stated profitability, it is important to note that this is a non-cash
item. Even with this reduction during 2023, the swap liability we have
carried on our balance sheet since 2008 continues to be an asset for the
second year running but reduced to £2,505,000. The change is mainly due
to the market expectation of lower interest rates, which are expected to be in
place over the life of the instruments, as at 31 December 2023 compared to the
position anticipated by the market as at 31 December 2022. Our swap
arrangements (detailed in the notes to the accounts) are very beneficial to
our Group.
Rents Receivable
It is pleasing to see the rents receivable growing to approaching
£14,500,000, almost a £1,050,000 increase. This was due in some part to
the acquisition of the Chorley Industrial Estate and the large Trowbridge
factory, both acquired in 2022 with 2023 benefitting from a full year's
income, but also benefitting from general growth in rentals.
Our profits were held back somewhat in 2023 by costs of repairs and both
reconfigurations and conversions of some of the larger properties which will
have helped to achieve re-lettings which are now taking place. However, we
also received about £750,000 from a number of dilapidation and surrender
settlements which go a long way to cover the costs of these repairs and other
works etc., which include monies being spent, and this is an ongoing
programme, to comply with higher standards of energy performance certificate
(EPC) requirements.
Disposal
Woodland Close, Torquay
A tired factory on a desirable industrial estate on the outskirts of Torquay
which had been owned since August 2007 but vacant for some time, was sold to
an adjoining owner at £950,000 which showed a good profit on its most recent
valuation. We retain the separate more modern factory almost adjoining this
property which was purchased at the same time as the previous property, and
which now shows an excellent return following a recent settlement of the rent
review.
Property Revaluation
The entire portfolio was revalued to a total of £185,000,000 as at 31
December 2023 compared to £177,000,000 as at 31 December 2022. The new
figures include the purchase cost of a freehold vacant warehouse in
Peterborough purchased for circa £3,000,000 which was let soon after, and a
freehold double shop in Cliftonville already let to Boots Plc. This shows the
pre-existing portfolio increasing in value by £5,500,000 after allowing for
the sale of the Torquay freehold for £950,000.
Acquisitions
Cliftonville
A freehold double shop with large residential upper parts at 192/194 Northdown
Road, Cliftonville, mainly let to Boots Plc at £25,000 pa, was purchased for
£464,000 in March 2023. This property adjoins the property we have long
owned in this location, and both have large rear gardens which may provide
some development potential in due course.
Peterborough
A 50,000 sq ft freehold single storey warehouse in Padholme Road East,
Peterborough on a site of 3.84 acres was acquired vacant in October 2023 for
£2,800,000 (including purchase costs) and soon after let for £345,000 pa to
AHF trading as Fabb, a regional furniture retailer. The Lessee was granted a
5-month rent free period and also a £120,000 capital contribution to upgrade
the unit to the standard they required. We understand the ingoing tenant
spent circa £400,000 on the property on top of our contribution. The
letting was a related party transaction, as covered in note 32 to the
accounts.
Developments
Peterborough
The former Beales store in Peterborough was vacated by New Start 2020 Limited,
trading as Beales, in February 2023. The store was uneconomical for them due
to high business rates applied to the trading area. We had made a planning
application for a mixed-use development of shops/offices and 124 residential
units. I am pleased to say full planning permission was granted on 18 July
2023. The Section 106 has been agreed and signed. The opportunity is on
the market for sale.
Swindon
I have previously reported on our two planning permissions on this central
Swindon site and the proposed new 250 year lease. As a reminder, the first
planning permission is for a leisure/restaurant two storey development and the
second planning permission is a ground floor leisure/restaurant only but with
a tower block with eight floors above, which would contain circa 68
residential units. I thought full permission and a lease extension agreement
was practically a 'fait accompli'. It was, but the buffers appeared due to a
new political council in control of the administration after council
elections. We awaited their proposals and due to their planning and legal
departments' enormously slow delays to all communications, our lease extension
was not completed and was delayed so long that the planning permission
lapsed. A new planning application, alongside other possibilities, is
currently being considered.
Barry Parade, Peckham Rye
Our original attractive scheme for this site was eventually rejected at
appeal. Whilst this application was made at appeal, we also submitted a
similar proposal with reduced residential units but higher commercial
elements. This is still going through planning and will be decided under
delegated powers, hopefully ensuring a positive outcome in due course.
Currently, we are negotiating the S.106 agreement which will include an
extortionate commuted sum in lieu of us providing affordable units (four
affordable units out of a nine unit scheme) . Due to the number of units and
the layout of the scheme, we are already aware that no affordable housing
providers would be interested, which is forcing us to pay the commuted sum.
Directors
We have two relatively new independent non-executive directors, the details
for whom have been previously mentioned but some of our newer shareholders may
have missed the earlier important announcements of their appointment.
Jonathan Rhodes - has over 35 years of experience in the property sector and
is a RICS Registered Valuer. He is currently the National Head of Valuation at
Cluttons LLP, having previously held the same position at GL Hearn. Prior to
these two roles he has been a valuation partner since the year 2000 at DTZ and
Donaldsons, having previously worked at Chesterton and Colliers. He joined us
in November 2022.
Paul Saunders - has over 40 years of experience at HSBC, predominately in
investment and development within the real estate sector. His most recent role
within HSBC was as a Director within the Real Estate Corporate Capital
Origination team from 2014 until 2022. He is an Associate of the Chartered
Institute of Bankers (ACIB) and joined us in January 2023.
Both Jonathan Rhodes and Paul Saunders have a wealth of experience added to
our Board, which should prove invaluable to our future growth, and their ideas
and advice are already benefitting our Group.
Post Balance Sheet Events
Our new loan facility, for which negotiations commenced in March 2023 was
completed as described below, of course, being most welcome as it removed a
small degree of uncertainty.
Loans
I am pleased to confirm that on 28 March 2024, the Group refinanced by
completing a new facility of £68 million, split between a £55 million term
loan and a £13 million revolving facility. The new facility has a four-year
term (with a further one-year option to extend subject to credit approval).
The interest rate payable is 2.3 per cent over three-month SONIA with a
ratchet that can take it to 2.5 per cent over three-month SONIA in certain
circumstances (compared to the previous facility which was 2.7 per cent over
SONIA). HSBC and Santander remain as the joint providers of the new
facility. £64,125,000 of the available facility is currently being utilised.
We are very pleased to continue our mutually beneficial 41 years and 14 year
relationships with HSBC and Santander respectively which we hope will continue
to grow.
The Group is in a fortunate position whereby it will continue to benefit from
its existing interest rate swap arrangements, which provide effective fixed
interest rate protection that is significantly below the current SONIA rates,
in relation to £60 million of the £68 million new facility. The Group's
interest rate swaps provide a fixed interest rate of 3.40 per cent. in
relation to £35 million of the new facility and a fixed interest rate of 2.01
per cent. in relation to £25 million of the new facility. The durations of
the Group's existing swaps are beyond the term of the new facility.
Future Progress
There is an election approaching which will probably bring change in a number
of areas, but I foresee many exciting opportunities because of the mayhem that
is caused by any change of political direction and different extra impositions
on the property and investment sector.
Charitable Donations
We continue to support a number of charities, especially if they are in areas
that we operate and have interests in.
Political Donations
At last year's AGM I proposed a resolution to donate £20,000 to the Reform UK
political party and this was successfully passed with over two to one of those
who voted, voting in favour. As previously, I will abstain voting my
personal holding. This year, being an election year, I am proposing the
donation be increased to £25,000.
The present Conservative government to my mind has lost the plot, i.e., the
values that many people hold about preferring a massive reduction in
immigration numbers. They also seem unable to provide low taxation or tax
policies that encourage employment and investment not realising that some
taxes being lowered will produce a larger tax take.
They have disallowed VAT rebates on expensive purchases by overseas tourists,
whereby many of these high spending tourists go to other equally delightful
major cities such as Paris, Milan or Barcelona for their shopping trips thus
delivering a bonus of extra tax receipts to these countries via loss of other
tourism spending on hotels etc., which is non-refundable.
The ridiculous inadequacies of the business rates that are currently charged
when the original rules worked well, before the gerrymandering of subsequent
governments. The increases in property taxation by way of constant changes
in stamp duty, thus creating complex advice needed for nearly every
transaction, charging extra stamp duty on second homes, then second homes
being charged double Council Tax for less services. Also having to suffer
higher Capital Gains Tax compared to commercial Capital Gains Tax when
profitably realised and yet they still have the cheek to call themselves a
Conservative government.
Despite the highest level of taxation since the last world war, we receive bad
and slow service from practically every bureaucratic department of
government. I can't stop my diatribe, so I have transferred some of my venom
to my Ramblings.
We have for some time paid a trade subscription of £7,500 to The Taxpayers
Alliance who are an independent association that watches over government
expenditure looking for waste and self-aggrandisement amongst the myriad of
council executives who are forever claiming council poverty and putting up
council tax charges but at the same time increasing their senior employees'
pay by unreasonable amounts. This was recently exposed by most national
newspapers via information researched and supplied by The Taxpayers
Alliance. Their website is taxpayersalliance.com. I recommend shareholders
who can, donate to this independent organisation who are looking out for the
interests of all taxpayers by helping to make wasteful expenditure and
unreasonable costs to become publicly known.
Dividends
The Directors have recommended a payment of a final dividend for the year
ended 31 December 2023 of 6p per share, following the special dividend which
was paid on 10 February 2023 of 10p per share, and an interim dividend which
was paid on 27 October 2023 of 6p per share. This year's final dividend of
6p per share will be payable on 17 July 2024 to shareholders on the register
at the close of business on 28 June 2024 (ex-dividend on 27 June 2024).
The full dividends for the year ended 31 December 2023 are therefore
anticipated to be 22p per share, subject to shareholder approval, being the 6p
interim per share paid, 10p special per share paid and the recommended final
dividend of 6p per share.
Finally, I repeat my thanks to our small but dedicated team of staff, growing
team of financial advisers, legal advisers, agents and accountants for all
their hard work during the past year.
Special thanks and good wishes are in order for our tenants many of whom are
comparatively small entrepreneurial businesses and I hope they are able to
continue to manage through the present troubled environment and make
profitable progress.
Andrew S Perloff
CHAIRMAN
16 May 2024
CHAIRMAN'S RAMBLINGS
Most people will have seen the TV production of Mr Bates vs The Post Office
which explains in much detail how the Post Office, led from the top,
prosecuted about 700 Post Office business owners for allegedly falsifying
their newly installed computer's records to defraud the Post Office and came
to favourable settlements for the Post Office with others by threats.
The initial owners sued said it was the computer making errors and changing
the figures. The Post Office experts denied this possibility and initially
told the first few complainants that they were the only case. The
programme implied that this was not true, but those in the hierarchy
insisted the PO franchisees were prosecuted with many going to prison.
One Post Office owner, Mr Bates, persisted in arguing that the computer system
was not only working wrongly but was capable of being interfered with by I.T.
specialists in Head Office who could adjust individual calculations the
machine made.
Some years later a sharp TV producer saw the merit in the stories and made a
TV series which collated the events in such a way as to seem to make it
obvious that there had been a massive cover up at the Post Office which
managed to send hundreds of Post Office owners to prison.
Besides showing our justice system's failure in a bad light, it caused
disastrous financial circumstances for hundreds of Post Office owners and
their families which has only just started to be remedied, if that is at all
possible. This story of the mendaciousness of some of our bureaucratic
masters is not yet over and will run for some time.
Individual Post Office managers/owners are entrepreneurs which are so
essential to any country. The United Kingdom is particularly lucky to have
so many working for themselves or in partnerships to make our country so full
of thriving businesses that are entrepreneurial organisations.
I was once asked to define an entrepreneur and, of course, I have a story to
suit.
One morning, as I was midway in my early swimming exercises, when I approached
the side of the pool, I saw a small spider (I shall call Henry) struggling in
the water. It was a type commonly called a 'money spider'. Feeling sorry
for Henry's predicament, I carefully cupped him in my hands and deposited him
about one foot away from the side of the pool.
I left Henry to dry out and expected him to run away thankful for his narrow
escape. I continued my swim and on my return to that side of the pool I saw
Henry struggling again in the pool. Obviously, he was still disorientated so
once again I picked him up and put him on the side.
When I returned from my next width to width, Henry was again struggling in the
water. Wondering why he could be so foolish I again put him on the side but
decided to stay and watch what happened. After about 30 seconds Henry shook
himself, then wandered to the very edge of the pool, bent all eight of his
tiny legs and to my surprise positively jumped into the pool.
I then realised that Henry was a new type of money spider, an 'entrepreneurial
spider'. Henry had realised that other insects will be caught in the water
and as Henry being a swimmer, could catch extra meal tickets, floating in what
to him was a vast expanse of food opportunities caught in the water.
This spider was an entrepreneur as it will try and try and try again until he
is successful in his aims to find food and is obviously prepared to take risks
to do so.
Food Banks
A month or so ago on the way to my office, whilst delayed at some traffic
lights, I noticed a long queue of people outside our local library. I was
not close enough to see exactly what attraction was on offer, but I suspected
it was a food bank.
My curiosity had been aroused so the next week whilst passing I noticed that
although no queue was outside, there were a few people inside. Being a
naturally 'nosey parker' I stopped and went and found half of the former
library is now a charity shop and that for two days a week they provided a
full, free food bank service, which was of course the cause of the huge queue
I had seen previously. I was informed that food was on offer free to all
comers, no questions asked. The food was provided by retail food companies
from end of date 'best before' labelled goods.
At the time of my inspection, they only had a small selection of foods, but I
noticed bags of attractive looking bread rolls at the front and a small
selection of various other food staples.
I certainly could not recall that the large queue of people I had previously
seen outside the charity shop contained any malnourished individuals, in fact,
quite the reverse.
As it happens, on the opposite side of the road to the library is the local
job centre. There was no queue for that building. In fact, no one went in
whilst I was in the area! A giant Tesco was about 300 yards away but I was
popping into our large local Morrissons about one mile away - not surprisingly
it was not busy.
I wonder if these 'food banks' are having some adverse side effects not yet
fully recognised.
Another story of our time.
For several years my private company used to own Beales Department Stores,
having survived for over 120 years. It failed eventually, almost entirely
due to the £4,000,000 a year business rates payable. Its losses were about
£2,000,000 a year. Before purchasing the group, we had calculated that the
upcoming rating revaluation should reduce rates payable by about £2,000,000
if the then current values were assessed for taxation. However, reductions
were only allowed at 5% per annum after new rules were brought in allowing
inflation increases of 3% per annum, i.e. a negligible deduction of about 2%
in overall cost. The result was inevitable after a further year or two of
subsidising the company we sold it to the management backed by a company with
deeper pockets and other potential benefits. Covid arrived soon after and
even they gave up.
This ramble is not the main reason for Beales stores inclusion, but it was a
pleasure to own the company. Most of the 2,000 people who worked in the
stores were happy, good workers and had made friends of their colleagues
including them in their social lives. It was mostly not strenuous work and
many were not well paid but liked being part of what many thought was a club
atmosphere.
Obviously, with a store card the group had records of those who were their
best customers and made sure they were alerted to any special offers or new
'sensations' coming to the store. These bigger spenders were known to the
managers and would usually be given special treatment whenever they arrived at
their local store.
For some years, one special treat was a well-presented fashion show which all
the special customers were invited to. This went down very well and was
successful for the business.
Our governments have no idea about running any business and thus they do the
exact opposite of cossetting their best customers who are of course the top
10% of taxpayers who provide about 60% of income tax receipts. They frighten
them abroad by excessive levels of top rate tax to people and families who are
easily mobile if they wish to move to financially more inviting countries,
thus our government receives less funds in total.
The tax office knows how much they are losing by their political gestures but
I consider that they mislead the population who only see the very selective
information released. It is so much easier to say they are raising the rate
of tax the rich pay and fail to tell us how many rich and successful taxpayers
leave the country and our country's income loss, so many people are
misinformed.
In my year end 31 December 2018 Ramblings, I included a diatribe against
excessive business rates and included a cartoon showing Great Britain as a
high street graveyard listing many companies that failed, mainly because of
excessive tax on retail property. It is now updated with the additional
failures in red as after six years the problems have not been addressed as
they have no idea what to do. Out of 10 grim reapers shown, only one has
been slightly amended (PAYE insurance reductions) but insufficiently to make
much difference.
Perhaps it is something to do with the 9.5 million people of working age who
are not working, of whom a large part exist on the beneficence of the state
who are of course supported by people who are working and thus obligatory
taxpayers and, in particular, the higher earners funded by those working
people who have not yet moved to a more favourable tax climate.
I believe that a significant proportion of the economically inactive people
are gaming the system . It is also regularly reported that our defence
abilities are sadly lacking in weapons and experienced soldiers. Perhaps
young people between 20 & 30 years old who have not had a job and
receiving state benefits for over one year should perform National service as
reservists in one of the Armed Forces and be trained for six months
sufficient to be considered useful fighting reserves and be called up if an
emergency arises. A 200,000 person a year call up would have a double effect
as many people would suddenly decide to find fulfilling jobs in the private
sector. All reservists would be paid, receive a good conduct medal and
certificate of qualifications, if deserved, and would then be welcomed into
private sector employment knowing that the reservists had been trained in
punctuality, neatness, ingenuity and made mentally fitter and healthier by
rigorous training. This would also make many of them happier knowing they
are useful, important and admired citizens of merit.
Yours
Andrew S Perloff
Chairman
16 May 2024
GROUP STRATEGIC REPORT
About the Group
Panther Securities PLC ("the Company" or "the Group") is a property investment
company quoted on the AIM market (AIM) since 2013. Prior to this the Company
was fully listed and included in the FTSE fledgling index, first being fully
listed as a public company in 1934. The Group currently owns and manages
over 900 individual property units within over 120 separately designated
buildings over the mainland United Kingdom. The Group specialises in mainly
commercial property investing in good secondary retail, industrial units and
offices, and also owns and manages many residential flats in several town
centre locations. The Group is a generalist investor, not specialising in
any sector or location in the UK and does the majority of its own management
and lettings in-house. The Group takes an entrepreneurial approach to
property investing assessing each opportunity on its merits as they arise.
Strategic objective
The primary objective of the Group is to maximise long-term returns for our
shareholders by stable growth in net asset value and dividend per share,
mainly via a consistent and sustainable rental income stream. The Group also
seeks out exceptional returns within its property portfolio and through
acquisitions looking for value adding opportunities.
Progress indicators
Progress will be measured mainly through financial results, and the Board
considers the business successful if it can increase shareholder return and
asset value in the long-term, whilst keeping acceptable levels of risk by
ensuring gearing covenants are well maintained.
Key ratios and measures
2023 2022 2021 2020
Gross profit margin (gross profit/ turnover) 54% 57% 65% 73%
Loan to value* 39% 39% 36% 38%
Interest cover (actual) * 317% 297% 281% 259%
Finance cost rate (finance costs excluding lease portion/ average borrowings
for the year)
6.7% 7.0% 7.5% 7.0%
Yield (rents investment properties/ average market value investment
properties)
8.4% 8.2% 7.9% 7.8%
Net assets value per share 640p 637p 553p 488p
Earnings per share - continuing 25.3p 96.6p 76.4p 14.9p
Dividend per share** 22.0p 12.0p 12.0p 12.0p
Investment property acquisitions £3.4m £8.9m £0.8m £5.5m
Investment property disposal proceeds £1.0m £1.2m £15.8m £0.7m
* As reported to the Lenders - based on charged property rents, borrowed funds
and bank valuations as appropriate.
** Based on those declared for the year.
Business review
The overall year was a good year for the Group with earnings being just over
25p per share fully covering the exception dividend paid in 2023. Growth was
driven by increased property values, being a £5.5 million increase, as well
as by rental growth (£1 million increase in annual turnover) but we saw the
valuations of the financial derivatives decrease by £2 million which had
substantially improved over the last two years (2022- £19.7 million and, 2021
- £16.8 million).
As mentioned above the Group's turnover grew in 2023 by £1,046,000, the big
increase here relates to Maldon, our largest letting by annual income at
£800,000 pa, it was only let for three quarters of 2022, so in 2023 we
received an extra £200,000. The increase also relates to the Chorley
and Trowbridge investment properties bought in 2022, but we did not benefit
from a full year's income, so in 2023 on these two properties we received an
extra circa £445,000 of income. The rest of the increase of circa £400,000
was driven through lettings of previous vacant space and rent reviews.
Disappointingly the overall gross profits were held back, as in 2022, by
higher costs, we still believe many of these items are non-recurring, which
should not be repeated, and we anticipate 2024 will be a more profitable year
due to lower costs. The Group cannot avoid all the rising costs that have
affected most organisations and individuals but at least the income has been
improved to compensate.
The finance costs even though consistent over the two comparison years, 2023
and 2022, it is worth noticing the split on the income statement, between
interest payable on the floating loan and the income back on our financial
derivatives (swaps). This financial income generated by our financial
derivatives (swaps) is quite considerable and expected to increase in 2024 and
the ongoing benefit is shown as a £2.5 million asset on the balance sheet.
The consolidated statement of cash flows in 2023, shows that cash improved by
£0.7 million in the year, pleasingly the cash flow from operating activities
(the trading) showed a £2.3 million cash contribution, after more normal
changes in working capital (than in 2022) - and this cash was generated with
what we believe to be higher than normal costs (as mentioned above).
In terms of the statement of financial position (balance sheet), the Group saw
its asset value pretty much stay static with the net asset value per share now
being 640p per share (2022 - 637p per share). The reason the asset value did
not improve further was that most of the profits for the year were paid out as
dividends due to the special dividend paid early in 2023. The Group
currently shows a very large discount when comparing its prevailing share
price to its current net asset value, and the board believes this is mainly
due to a lack of transactions in its shares.
Through the many downward economic cycles, such as the COVID-19 pandemic and
the more recent inflationary/ interest rate hike cycle (as a result of the
various things including the Ukraine war) being examples, the most important
plank within the Group's business plan is the balance within the portfolio
between different asset classes and the resulting diverse, resilient, income
streams these investments provide. Over the last five years industrial
properties and the secondary "local" retail investments have performed the
best in terms of growth in values and have shown resilient income
collection. We also benefit from having properties with residential elements
or planning potential - which provide back up value. Certain post COVID-19
changes have stuck with many more people still working from home which has
benefited our secondary retail with additional local footfall.
It is still our view, that secondary retail properties (which is a large part
of our portfolio - over half by value) will be less affected by the seismic
change in shoppers' habits. The average secondary retail parade has a higher
proportion of businesses which are providing non-retail offerings, even though
they are shops.
Our retail parades often include service providers, restaurants or take away
use, or convenience offerings, which are by their very nature less affected
than pure destination retail, or by ever changing consumer habits. In many
instances, the Web even provides additional opportunities i.e. being able to
offer take away services via Just Eat etc. Even our more traditional high
street or pure retail positions are mainly large blocks in the centre of towns
- which we believe will benefit from longer-term regeneration plans from the
Government and local councils for town centres. As such, if and when some
retail locations become less viable, we believe we can create value from these
sites with planning permission to eventually give them other uses or
purposes. In the meantime, they continue in the most part to be strong cash
contributors providing high returns on initial investment.
Going forward
We are experiencing rental growth, some of this is from renting long-term
vacant properties and the rest from improved rental terms. Going forward
over the next couple of years we still foresee the biggest issue being
controlling the holding and maintenance costs of our properties. In response
to this, we have brought in further controls and look to phase our works
programmes. However if we can control and/ or phase our costs more
effectively we have the ability with long term income rental streams and fixed
interest rate costs to be very profitable.
We still anticipate some potential additional costs of improving the energy
efficiency of our buildings to keep them in line, or even ahead of the EPC
("energy performance certificate") regime requirements which is constantly
being updated. However, we have negotiated no loan amortisation on our most
recent loan (completed in March 2024), for the first two years, which will
help give us an extra £500,000 cash flow in each year, to fund any changes
required.
We believe there are still further opportunities to unlock value within our
portfolio, some of this achieved in 2023, both in terms of letting more of the
vacant properties, through repurposing and some from planning schemes to
rebuild.
The economy is now in a higher interest rate environment but it looks like
inflation is finally under control. The Group has fixed its interest rate
swaps which will protect us from interest rate increases for many years to
come. The nature of property companies, gives us a natural hedge over
inflation, as property investments tend to increase in line with inflation,
whilst the real value of loans utilised effectively decreases.
There are always uncertainties which can affect property prices in the short
term, however the Board continues to believe we are protected by our
portfolio's diversity, experienced management team, ability to adapt and by
having access to funds. We have low gearing levels, supportive lenders and
cash reserves.
The Board is confident about the business going forward.
Financing
At the year end the Group's facilities were due to be repaid in July 2024 as
can be seen on the Statement of Financial Position.
After the year end in March 2024, the Group completed a new facility of £68
million, split between a £55 million term loan and a £13 million revolving
facility. The new facility has a four-year term (with a further one-year
option to extend subject to credit approval). The interest rate payable is 2.3
per cent. over three month SONIA with a ratchet that can take it to 2.5 per
cent over three month SONIA in certain circumstances, although both rates
within the agreement represent an improvement compared to the previous
facility. The Group is providing very similar covenants to the previous
facility. HSBC and Santander remain as the joint providers of the new
facility.
The Group at the year end had £5.15 million of cash funds, and in April 2024
it had the ability to draw an additional £4.35 million available within the
loan facility.
Financial derivative
The Group is in a fortunate position whereby it will continue to benefit from
existing interest rate swap arrangements, which provide effective fixed
interest rate protection that is significantly below the current SONIA rates,
in relation to £60 million of the £68 million new facility. The Group's
interest rate swaps provide a fixed interest rate of 3.40 per cent. in
relation to £35 million of the new facility and a fixed interest rate of 2.01
per cent. in relation to £25 million of the new facility. The durations of
the Group's existing swaps are beyond the term of the new facility.
We have seen a fair value loss (of a non-cash nature) in our long term
liability on derivative financial instruments of £1.96 million (2022: a gain
of £19.72 million). Following this loss the total financial derivative
balance is still an asset on our Consolidated Statement of Financial Position
of £2.5 million (2022: £4.5 million asset).
In February 2021 the Company paid £5,000,000 to vary a long-term swap
agreement. The agreement varied was an interest rate swap fixed at 5.06%
until 31 August 2038 on a nominal value of £35 million and had circa 17.5
years remaining. Following the variation, the Group's fixed rate dropped on
1 September 2023 to 3.40% saving the Group £581,000 p.a. in cash flow until
the end point of the instrument. We will see the full benefit of this annual
change in 2024.
These financial instruments (shown in note 27) are interest rate swaps that
were entered into to remove the cash flow risk of interest rates increasing by
fixing our interest costs. We have seen that in uncertain economic times
there can be large swings in the accounting valuations.
Small movements in the expectation of future interest rates can have a
significant impact on the fair value of these interest rate swaps; this is
partly due to their long dated nature.
Financial risk management
The Company and Group's operations expose it to a variety of financial risks,
the main two being the effects of changes in the credit risk of tenants and
interest rate movement exposure on borrowings. The Company and Group have in
place a risk management programme that seeks to limit the adverse effects on
the financial performance of the Company and Group by monitoring and managing
levels of debt finance and the related finance costs. The Company and Group
also use interest rate swaps to protect against adverse interest rate
movements with no hedge accounting applied. Mark-to-market valuations on our
financial instruments have been historically erratic due to current low market
interest rates and due to their long term nature. These large mark-to-market
movements are shown within the Income Statement.
However, the actual cash outlay effect is nil when considered alongside the
term loan, as the instruments have been used to fix the risk of further cash
outlays due to interest rate rises or can be considered as a method of locking
in returns (the difference between rent yield and interest paid at a fixed
rate).
Given the size of the Company and Group, the Directors have not delegated the
responsibility of monitoring financial risk management to a sub-committee of
the Board. The policies set by the Board of Directors are implemented by the
Company and Group's finance department.
Credit risk
The Company and Group have implemented policies that require appropriate
credit checks on potential tenants before lettings are agreed. In many cases
a deposit is requested unless the tenant can provide a strong personal or
other guarantee. The amount of exposure to any individual counterparty is
subject to a limit, which is reassessed annually by the Board. Exposure is
reduced significantly due to the Group having a large spread of tenants who
operate in different industries.
Price risk
The Company and Group are exposed to price risk due to normal inflationary
increases in the purchase price of the goods and services it purchases in the
UK. The exposure of the Company and Group to inflation is considered low due
to the low cost base of the Group and natural hedge we have from owning "real"
assets. Price risk on income is protected by the rent review clauses
contained within our tenancy agreements and often secured by medium or
long-term leases.
Liquidity risk
The Company and Group actively manage liquidity by maintaining a long-term
finance facility, strong relationships with many banks and holding cash
reserves. This ensures that the Company and Group have sufficient available
funds for operations and planned expansion or the ability to arrange such.
Interest rate risk
The Company and Group have both interest bearing assets and interest bearing
liabilities. Interest bearing assets consist of cash balances which earn
interest at fixed rate when placed on deposit. The Company and Group have a
policy of only borrowing debt to finance the purchase of cash generating
assets (or assets with the potential to generate cash). We also use
financial derivatives (swaps) where appropriate to manage interest rate
risk. The Directors revisit the appropriateness of this policy annually.
Principal risks and uncertainties of the Group
The successful management of risk is something the Board takes very seriously
as it is essential for the Group to achieve long-term growth in rental income,
profitability and value. The Group invests in long term assets and seeks a
suitable balance between minimising or avoiding risk and gaining from
strategic opportunities. The Group's principal risks and uncertainties are
all very much connected as market strength will affect property values, as
well as rental terms and the Group's finance, or term loan, whose security is
derived primarily from the property assets of the business. The financial
health of the Group is checked against covenants that measure the value of the
property, as a proportion of the loan, as well as income tests.
The two measures of the Group's finances are to check if the Group can support
the interest costs (income tests) and also the ability to repay (valuation
covenants).
The Group has a successful strategy to deal with these risks, primarily its
long lasting business model and strong management. This meant the Group has
had little or no issues as it navigated the many economic shocks it has had to
deal with over the last two decades including the 2008 banking crisis, Brexit,
the COVID-19 crisis, the high interest rate/ high inflationary effect post
covid-19/ Ukraine war consequences. The Group currently sits with low
gearing compared to historic levels.
Market risk
If we want to buy, sell or let properties there is a market that governs the
prices or rents achieved. A property company can get caught out if it
borrows too heavily on property at the wrong time in the market, affecting its
loan covenants. If loan covenants are broken, the Company may have to sell
properties at non-optimum times (or worse) which could decrease shareholder
value. Property markets are very cyclical and we in effect have three
strategies to deal with or mitigate the risk, but also take advantage of this
opportunity:
1) Strong, experienced management means when the market is strong we look to
dispose of assets and when it is weak we try and source bargains i.e. an
emergent strategy also called an entrepreneurial approach.
2) The Group has a diversified property portfolio and maintains a spread of
sectors over retail, industrial, office and residential. The other
diversification is having a spread regionally, of the different classes of
property over the UK. Often in a cycle not all sectors or locations are
affected evenly, meaning that one or more sectors could be performing
stronger, maybe even booming, whilst others are struggling. The stronger
performing investment sectors provide the Group with opportunities that can be
used to support slower sectors through sales or income.
3) We invest in good secondary property, which tends to be lower value/cost,
meaning we can be better diversified than is possible with the equivalent
funds invested in prime property. There are not many property companies of
our size that have over 900 individual units and over 120 buildings/
locations. Secondary property also, very importantly, is much higher
yielding which generally means the investment generates better interest cover
and its value is less sensitive to market changes in rent or loss of tenants.
Property risk
As mentioned above, we invest in most sectors in the market to assist with
diversification. Many commentators consider the retail sector to be in
period of severe flux, considerably affected by changing consumer habits such
as internet shopping as well as a preference for experiences over products.
Of the Group's investment portfolio, retail makes up the largest sector being
circa 60 to 65% by income generation. However, the retail sector is affected
to lesser degrees in what we would describe as neighbourhood parades, as
opposed to traditional shopping high streets. The large part of our retail
portfolio is in these neighbourhood parades, meaning we are less affected by
consumer habits and even benefit from some of the changes. Neighbourhood
parades provide more leisure, services and convenience retail.
For example we have undertaken a few lettings to local or smaller store
formats, to big supermarket chains, which would not have taken place many
years ago. Block policy is another key mitigating force within our property
risks. Block policy means we tend to buy a block rather than one off
properties, giving us more scope to change or get substantial planning
permission if our type of asset is no longer lettable. The obvious example
is turning redundant regional offices into residential. In addition by
having a row of shops, we can increase or reduce the size of retail units to
meet the current requirements of retailers.
Finance risk
The final principal risk, which ties together the other principal risks and
uncertainties, is that if there are adverse market or property risks then
these will ultimately affect our financing, making our lenders either force
the Group to sell assets at non-optimal times, or take possession of the
Group's assets. The management, business model and diversification factors
described above help mitigate against property and market risks, which as a
consequence mitigate our finance risk.
The main mitigating factor is to maintain conservative levels of borrowing, or
headroom to absorb downward movements in either valuation or income cover. The
other key mitigating factor is to maintain strong, honest and open
relationships with our lenders and good relationships with their key
competitors. This means that if issues arise, there will be enough goodwill
for the Group to stay in control and for the issues to resolve themselves and
hopefully
remedy the situation. As a Group we also hold uncharged properties and cash
resources, which can be used to rectify any breaches of covenants.
Other non-financial risks
The Directors consider that the following are potentially material
non-financial risks:
Risk Impact Action taken to mitigate
Reputation Ability to raise capital/ deal flow reduced Act honourably, invest well and be prudent.
Regulatory changes Transactional and holding costs increase Seek high returns to cover additional costs.
Lobby Government -"Ramblings". Use advisers when necessary.
People related issues Loss of key employees/ low morale/ inadequate skills Maintain market level remuneration packages, flexible working and training.
Strong succession planning and recruitment. Suitable working environment.
Computer failure Loss of data, debtor history External IT consultants, backups, offsite copies. Latest virus and internet
software.
Asset management Wrong asset mix, asset illiquidity, hold cash Draw on wealth of experience to ensure balance between income producing and
development opportunities. Continued spread of tenancies and geographical
location. Prepare business for the economic cycles.
Acts of God (e.g. COVID 19) Weather incidents, fire, terrorism, pandemics Where possible cover with insurance. Ensure the Group carry enough reserves
and resources to cover any incidents.
Section 172(1) statement
This is a reporting requirement and relates to companies defined as large by
the Companies Act 2006, this includes public companies as otherwise the Group
would not be considered large.
Each individual Director must act in the way he considers, in good faith,
would be the most likely to promote the success of the company for benefit of
its members as a whole, and in doing so the Directors have had regard to the
matters set out in section 172(1) (a) to (f) when performing their duty under
section 172.
The matters set out are:
(a) the likely consequences of any decision in the long term;
The longer term decisions are made at Board level ensuring a wealth of
experience and a breadth of skills. The value creation in the business is
mainly generated by buying the investments at the right time in the financial
cycles, whilst reducing risk by choosing assets that have alternative or back
up values to the current use, as well as initial values. It is also key that
long term decisions are made in respect of ensuring that property assets are
maintained, where economically viable. Other areas to ensure decisions are
in tune with long term consideration are making sure the best possible
financing of the Group to match the requirements of the long-term nature of
property ownership. The Board and management makes long term decisions such
as keeping a vigilant review of the changing nature of property usage and
tries where possible to diversify its income streams. Chorley and Trowbridge
are more recent purchases which are good examples of long-term decision
making, i.e. both industrial property investments - giving protection against
changing consumer habits within retail (which is a larger component of the
current portfolio) through diversification/ rebalancing the portfolio.
(b) the interests of the company's employees;
The Company makes investment in and the development of talent of its
employees, including paying for professional development, providing in house
updates and encouraging knowledge sharing. The Group has a strong track
record of promoting from within the business and in 2020 two surveyors were
promoted to Joint Head of Property both becoming RICS qualified whilst
employed at the firm with one of those getting qualified in May 2023, the
Group fully supported all of the training. In 2021 the Finance Director was
promoted to Chief Executive. The Group undertakes team building activities
to encourage cohesion and working together.
(c) the need to foster the company's business relationships with suppliers,
customers and others;
Being in the property industry the business is used to dealing with many types
of businesses as tenants from large multi-national businesses to small sole
traders - keeping good sound relationships with both is key. We also use
many small operators and suppliers and we ensure prompt payment, paying within
30 days in most instances to again foster good working relations. We
maintain weekly payment runs to support small suppliers.
(d) the impact of the company's operations on the community and the
environment;
The Group's investments by their very nature often have a significant impact
on local communities, providing services and convenience businesses, or places
for local enterprise or employment. By owning a parade of shops, we can
ensure where possible that these are viable locations by encouraging a variety
of offerings. The Group maintains and upkeeps its investment properties to a
viable level which benefits the local communities they provide accommodation
for, or seeks improvements in planning permission which can enhance local
areas. In 2023 a historic listed building in Liverpool was brought back into
use after many years of not being utilised, now being used by a leisure
operator. In 2024 we have brought in DocuSign for leases and other
agreements dealt with inhouse which will have a beneficial environmental
impact with less paper and carbon being produced on the delivery of the
documents. We also ensure we upgrade our units to the required EPC levels
which by its very nature reduces the longer term environmental impact of the
use of these units.
(e) the desirability of the company maintaining a reputation for high
standards of business conduct;
The Group maintains an appropriate level of Corporate Governance that is
documented within its own section within these Financial Statements and on the
Company's website. With a relatively small management team it is easier to
monitor and assess the culture and encourage the appropriate standards. The
Board strives to delegate and empower its management teams to ensure the high
standards are maintained at all levels within the business. In 2022 and 2023
we strengthened the Board the appointments of two non-executive directors with
current relevant external knowledge of banking and surveying/ valuation.
(f) the need to act fairly as between members of the company.
The Group has excellent communication with its members, actively encouraging
participation and discussion at its AGMs and also circulating letters of our
announcements to ensure older members or those not accessing the financial
news can keep up to date with relevant information. Our Chairman is unpaid,
his benefit or income from the Company is received via dividends pro-rata the
same as all members including minority shareholders.
The Group Strategic Report set out on the above pages, also includes the
Chairman's Statement shown earlier in these accounts and was approved and
authorised for issue by the Board and signed on its behalf by:
S. J. Peters
Company Secretary
Unicorn House
Station Close
Potters Bar
Hertfordshire EN6 1TL
16 May 2024
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2023
Notes 31 December 2023 31 December 2022
£'000 £'000
Revenue 14,457 13,411
Cost of sales (6,630) (5,749)
Gross profit 7,827 7,662
Other income 1,043 1,009
Administrative expenses (1,843) (1,638)
Bad debt expense (680) (702)
Operating profit 6,347 6,331
Profit on disposal of investment properties 305 461
Movement in fair value of investment properties 5,534 1,384
12,186 8,176
Finance costs - interest (5,586) (3,265)
Finance income/ (costs) - swap interest 757 (1,481)
Investment income 108 28
Loss on the disposal of investments (4) (278)
Fair value (loss)/ gain on derivative financial liabilities (1,962) 19,722
Profit before income tax 5,499 22,902
Income tax expense (1,076) (5,917)
Profit for the year 4,423 16,985
Continuing operations attributable to:
Equity holders of the parent 4,423 16,985
Profit for the year 4,423 16,985
Earnings per share
Basic and diluted - continuing operations 3 25.3p 96.6p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2023
Notes 31 December 2023 31 December 2022
£'000 £'000
Profit for the year 4,423 16,985
Items that will not be reclassified subsequently to profit or loss
Movement in fair value of investments taken to equity 19 (59)
Deferred tax relating to movement in fair value of
investments taken to equity (5) 15
Realised fair value on disposal of investments previously taken to equity
43 309
Realised deferred tax relating to disposal of investments previously taken to
equity
(10) (77)
Other comprehensive income for the year, net of tax 47 188
Total comprehensive income for the year 4,470 17,173
Attributable to:
Equity holders of the parent 4,470 13,663
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Company number 00293147
As at 31 December 2023
Notes 31 December 2023 31 December 2022
ASSETS £'000 £'000
Non-current assets
Plant and equipment 42 64
Investment properties 4 185,169 176,937
Derivative financial asset 6 2,505 4,467
Right of use asset 221 258
Investments 165 256
188,102 181,982
Current assets
Asset held for sale - 191
Stock properties 350 350
Investments 26 29
Trade and other receivables 3,250 3,178
Cash and cash equivalents (restricted) 954 4
Cash and cash equivalents 4,198 4,454
8,778 8,206
Total assets 196,880 190,188
EQUITY AND LIABILITIES
Capital and reserves
Share capital 4,437 4,437
Share premium account 5,491 5,491
Treasury shares (772) (772)
Capital redemption reserve 572 604
Retained earnings 102,144 101,467
Total equity 111,872 111,227
Non-current liabilities
Borrowings 5 - 58,807
Deferred tax liabilities 4,225 3,371
Leases 8,113 8,249
12,338 70,427
Current liabilities
Trade and other payables 8,528 7,869
Borrowings 5 64,101 500
Current tax payable 41 165
72,670 8,534
Total liabilities 85,008 78,961
Total equity and liabilities 196,880 190,188
The accounts were approved by the Board of Directors and authorised for issue
on 16 May 2024. They were signed on its behalf by:
A.S. Perloff, Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
Share Share Treasury Capital Retained Total
capital premium shares redemption earnings
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 4,437 5,491 604 87,464 97,783
(213)
Total comprehensive income - - - 17,173 17,173
-
Dividends - - - - (3,170) (3,170)
Treasury share purchase - - - - (559)
(559)
Balance at 1 January 2023 4,437 5,491 604
(772) 101,467 111,227
Total comprehensive income - - - 4,470 4,470
-
Dividends - - - - (3,844) (3,844)
Consolidation adjustment - - (32) 51 19
-
Balance at 31 December 2023 4,437 5,491 572
(772) 102,144 111,872
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2023
31 December 2023 31 December 2022
£'000 £'000
Cash flows from operating activities
Operating profit 6,347 6,331
Add: Depreciation 22 45
Rent paid treated as interest (680) (687)
Profit before working capital change 5,689 5,689
Decrease in assets held for resale 191 -
Increase in receivables (72) (182)
Increase/ (decrease) in payables 690 (1,149)
Cash generated from operations 6,498 4,358
Interest paid (3,856) (3,766)
Income tax paid (361) (662)
Net cash generated from/ (used in) operating activities
(70)
2,281
Cash flows from investing activities
Purchase of investment properties (3,449) (8,947)
Purchase of investments** (256) (66)
Purchase of plant and equipment - (300)
Proceeds from sale of investment property 950 1,176
Proceeds from sale of investments** 404 74
Dividend income received 14 21
Interest income received 94 7
Net cash used in investing activities
(8,035)
(2,243)
Cash flows from financing activities
Draw down of loan 5,000 8,500
Repayments of loans - (5,060)
Loan amortisation repayments (500) (500)
Purchase of own shares - (559)
Dividends paid (3,844) (3,170)
Net cash generated / (used) from financing activities 656 (789)
Net increase/ (decrease) in cash and cash equivalents 694 (8,894)
Cash and cash equivalents at the beginning of year* 4,458 13,352
Cash and cash equivalents at the end of year* 5,152 4,458
* Of this balance £954,000 (2022: £4,000) is restricted by the Group's
lenders i.e. it can only be used for purchase of investment property.
** Shares in listed and/or unlisted companies.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2023
1. General information
While the financial information included in this preliminary announcement has
been prepared in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply with IFRSs. The Group will publish full financial statements that
comply with IFRSs which will shortly be available on its website and are to be
posted to shareholders shortly.
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 31 December 2023 or 2022.
The financial information for the year ended 31 December 2023 is derived from
the audited statutory accounts for the year ended 31 December 2023 on which
the auditors have given an unqualified report, that did not contain a
statement under section 498(2) or 498(3) of the Companies Act 2006. The
statutory accounts will be delivered to the Registrar of Companies following
the Company's annual general meeting.
The accounting policies adopted in the preparation of this preliminary
announcement are consistent with those set out in the latest Group Annual
financial statements.
Going Concern
The Directors have prepared three detailed financial forecasts to December
2027 assuming a significant downward trend in its income base, inflation
leading to increasing costs, higher interest rates, worsening bad debts and no
major disposals. The forecasted worst-case scenario demonstrated the Group
is a going concern even if the business was subjected to a long downward
spiral in its business activities. In summary, the Group's forecasts show that
it has enough financial resources to survive to beyond December 2027.
The Group is strongly capitalised, has high liquidity together with a number
of long-term contracts with its customers many of which are household names.
The Group has a diverse spread of tenants across most industries and owns
investment properties based in many locations across the country.
The Group's main loans were renewed again in March 2024 for a new four year
term with the ability to extend for an additional year (subject to bank
approval). The Group always maintains excellent relations with its lenders.
The loan is made jointly by two lenders and has a low level of gearing which
both give the Group's finance situation more resilience.
The lenders' covenants (on the previous facility but which are similar to the
new facility) as at 31 December 2023 have been reviewed and significant
movements would be required before a covenant was breached such as a 29%
decrease in the secured portfolio valuation (a circa £46 million reduction)
or 53% decrease in its actual income cover being circa £6.4 million reduction
in income. The Group also currently has cash reserves (and available facility)
and other uncharged assets (including circa £12 million of investment
property).
The Directors believe the Group is very well placed to manage its business
risks successfully and have a good expectation that both the Company and the
Group have adequate resources to continue their operations for the foreseeable
future. For these reasons they continue to adopt the going concern basis
in preparing the financial statements.
2. Dividends
Amounts recognised as distributions to equity holders in the period:
2023 2022
£'000 £'000
Interim dividend for the year ended 31 December 2023 of 6p per share (2022: 6p
per share)
1,048 1,054
Final dividend for the year ended 31 December 2022 of 6p per share (2021: 6p
per share)
1,048 1,054
Interim dividend for the year ended 31 December 2021 of 6p per share
- 1,062
Special dividend for the year ended 31 December 2023 of 10p per share
1,748 -
3,844 3,170
The Directors recommend a payment of a final dividend for the year ended 31
December 2023 of 6p per share, following the special dividend of 10p per share
which was paid on 10 February 2023, and an interim dividend of 6p per share
which was paid on 27 October 2023. The final dividend of 6p per share will
be payable on 17 July 2024 to shareholders on the register at the close of
business on 28 June 2024 (Ex dividend on 27 June 2024).
The full ordinary dividend for the year ended 31 December 2023 is anticipated
to be 22p per share, subject to shareholder approval, being the 6p interim per
share paid, 10p special per share paid and the recommended final dividend of
6p per share.
3. Earnings per ordinary share (basic and diluted)
The calculation of profit per ordinary share is based on the profit, being a
profit of £4,293,000 (2022 - £16,985,000) and on 17,471,929 ordinary shares
being the weighted average number of ordinary shares in issue during the year
excluding treasury shares (2022 - 17,577,699). There are no potential
ordinary shares in existence. The Company holds 275,000 (2022 - 275,000)
ordinary shares in treasury.
4. Investment properties
Investment properties
£'000
Fair value
At 1 January 2022 167,384
Additions 8,947
Disposals (715)
Fair value adjustment on investment properties held on leases (63)
Revaluation increase 1,384
At 1 January 2023 176,937
Additions 3,449
Disposals (645)
Fair value adjustment on investment properties held on leases (106)
Revaluation increase 5,534
At 31 December 2023 185,169
Carrying amount
At 31 December 2023 185,169
At 31 December 2022 176,937
5. Bank loans
2023 2022
£'000 £'000
Bank loans due within one year 64,101 500
(within current liabilities)
Bank loans due after more than one year - 58,807
(within non-current liabilities)
Total bank loans 64,101 59,307
2023 2023 2023 2022
Analysis of debt maturity £'000 £'000 £'000 £'000
Interest* Capital Total Total
Bank loans repayable
On demand or within one year 1,802 64,101 65,903 4,126
In the second year - - - 60,904
In the third year to the fifth year - - - -
1,802 64,101 65,903 65,030
*based on the 3 month SONIA floating rate charged in March 24 - 5.19%.
Interest is only due to 16 July 2024 when the loan is due for repayment.
After the year end, on 28 March 2024, the Group refinanced by completing a new
facility of £68 million, split between a £55 million term loan and a £13
million revolving facility. The new facility has a four-year term (with a
further one-year option to extend subject to credit approval). The interest
rate payable is 2.3 per cent. over three month SONIA with a ratchet that can
take it to 2.5 per cent over three month SONIA in certain circumstances.
HSBC and Santander remain as the joint providers of the new facility.
The bank loans are secured by first fixed charges on the properties held
within the Group and floating asset over all the assets of the Company. The
lenders have also taken fixed security over the shares held in the Group
undertakings.
The estimate of interest payable is based on current interest rates and as
such, is subject to change.
The Directors estimate the fair value of the Group's borrowings, by
discounting their future cash flows at the market rate (in relation to the
prevailing market rate for a debt instrument with similar terms). The fair
value of bank loans is not considered to be materially different to the book
value. Bank loans are financial liabilities.
6. Derivative financial instruments
The main risks arising from the Group's financial instruments are those
related to interest rate movements. Whilst there are no formal procedures for
managing exposure to interest rate fluctuations, the Board continually reviews
the situation and makes decisions accordingly. Hence, the Company will, as far
as possible, enter into fixed interest rate swap arrangements. The purpose of
such transactions is to manage the cash flow risks associated with a rise in
interest rates but does expose it to fair value risk.
2023 2022
Bank loans £'000 £'000
Interest is charged as to: Rate Rate
Fixed/ Hedged
HSBC Bank plc* 35,000 6.10% 35,000 7.76%
HSBC Bank plc** 25,000 4.71% 25,000 4.71%
Unamortised loan arrangement fees (149) (443)
Floating element
HSBC Bank plc 4,250 (250)
Shawbrook Bank Ltd - -
64,101 59,307
Bank loans totalling £60,000,000 (2022 - £60,000,000) are fixed using
interest rate swaps removing the Group's exposure to fair value interest rate
risk. Other borrowings are arranged at floating rates, thus exposing the Group
to cash flow interest rate risk.
Financial instruments for Group and Company
The derivative financial assets and liabilities are designated as held for
trading.
Hedged amount Average rate Duration of contract remaining 2023 2022
Fair value Fair value
£'000 'years' £'000 £'000
Derivative Financial Asset/ (Liability)
Interest rate swap* 35,000 3.40% 14.69 347 1,236
Interest rate swap** 25,000 2.01% 7.92 2,158 3,231
2,505 4,467
Net fair value (loss)/ gain on derivative financial assets (1,962) 19,722
* Fixed rate came into effect in September 2008, following a variation made in
2021, in September 2023 the rate drops to 3.4% (previously 5.06%) for the
remaining term. ** This arrangement commenced in December 2021 but was
entered into as a future fixing in April 2018.
The rates shown includes a 2.7% margin (2022 - 2.7%). Neither contracts
include break options in the term but are repayable on a cessation of lending.
7. Events after the reporting date
In January 2024 the Group paid back £900,000 of the loan facility (using
disposal proceeds).
On 28 March 2024, the Group refinanced by completing a new facility of £68
million, split between a £55 million term loan and a £13 million revolving
facility. The new facility has a four-year term (with a further one-year
option to extend subject to credit approval). The interest rate payable is 2.3
per cent. over three month SONIA with a ratchet that can take it to 2.5 per
cent over three month SONIA in certain circumstances. HSBC and Santander
remain as the joint providers of the new facility. The £64,125,000 of the
available facility is currently being utilised.
8. Copies of the full set of Report and Accounts
Copies of the Company's report and accounts for the year ended 31 December
2023, which will be posted to shareholders shortly, will be available from the
Company's registered office at Unicorn House, Station Close, Potters Bar,
Hertfordshire, EN6 1TL and will be available for download on the Group's
website www.pantherplc.com (http://www.pantherplc.com) .
The 90th Annual General Meeting of Panther Securities P.L.C. is planned to be
held on 20 June 2024 in the Trueman Suite at Danubius Hotel Regents Park, 18
Lodge Road, NW8 7JT at 11.30 am.
Panther Securities PLC +44 (0) 1707 667 300
Andrew Perloff, Chairman
Simon Peters, CEO & Finance Director
Allenby Capital
Limited
+44 (0) 20 3328 5656
(Nominated Adviser and Joint Broker)
Alex Brearley
Piers Shimwell
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. END FR KZGMKNVZGDZMRecent news on Panther Securities
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