REG - Conygar Investmnt Co - Annual Results
17/12/2024 07:00
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RNS Number : 3076Q Conygar Investment Company PLC(The) 17 December 2024
17 December 2024
The information contained within this announcement is deemed by the Company to
constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as amended by the Market Abuse (Amendment) (EU Exit)
Regulations 2019. Upon the publication of this announcement via the Regulatory
Information Service, this inside information is now considered to be in the
public domain.
THE CONYGAR INVESTMENT COMPANY PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2024
SUMMARY
· Net asset value ("NAV") decreased in the year by £34.0 million to
£61.1 million (103.0p per share; 2023: 159.4p per share). This was derived
primarily from a £28.3 million write down in the carrying value of the
Group's properties. In addition, the Group incurred £4.3 million of net
operational, administrative and debt financing costs and wrote down its £1.4
million investment in the proposed residential development at the Fruitmarket
site in the St Philip's Marsh area of Bristol ("Bristol").
· Cash deposits amount to £4.7 million (7.8p per share) at 30
September 2024 boosted in the year from placing 5 million zero dividend
preference shares of £1 each (the "ZDP shares") and the drawdown of a £12
million loan facility from A.S.K. Partners Limited ("ASK").
· Construction completed in June 2024, on time and on budget, of
Winfield Court, the first phase 693-bed student accommodation development at
The Island Quarter in Nottingham ("TIQ").
· Winfield Court occupancy at 54% for the current academic year
generating net operating income, before debt financing costs, of £1.5
million.
· Credit approval received from Barclays Bank PLC ("Barclays"), after
the balance sheet date, to extend the development loan facility, secured
against Winfield Court, until December 2025. This will enable the further
letting and stabilization of the property over the coming year.
· Purchase completed of the long leasehold interest in the Virgin
Active gym at TIQ for a gross consideration, before taxes and fees, of £5.9
million reflecting an initial yield of 10.25%.
· Detailed planning application submitted in February 2024 for the
second phase of student accommodation at TIQ. This comprises a 383-bed scheme
to adjoin, and complement, Winfield Court for which we are anticipating a
positive determination in early 2025.
· Revenues and margins steadily increasing at our restaurant and events
venue at 1 The Island Quarter ("1 TIQ") as the reputation for this unique
local offering becomes more established.
Group net asset summary
2024 2023
Per share Per share
£'m p £'m p
Properties 117.9 197.7 113.2 189.8
Cash 4.7 7.8 2.7 4.5
Borrowings (55.9) (93.6) (17.2) (28.8)
ZDP shares (4.9) (8.3) - -
Other net liabilities (0.4) (0.6) (3.6) (6.1)
Net assets attributable to shareholders 61.4 103.0 95.1 159.4
Non-controlling interests (0.3) (0.5) - -
Net assets 61.1 102.5 95.1 159.4
Robert Ware, chief executive commented:
"Despite the recent change in the UK government impacting both consumer and
investor confidence, the improving economic outlook, as a result of lower
inflation and interest rates being on a downward trajectory, appears to be
slowly improving both the sentiment for, and activity in, the UK real estate
sector.
Whilst the market remains challenging and uncertain, and our cash flows remain
restrictive, these green shoots of optimism will enable the Group to
cautiously progress with a number of emerging opportunities as we seek to
maximise, over the coming years, the returns from our property portfolio."
Enquiries:
The Conygar Investment Company PLC
Robert Ware: 0207 258 8670
David Baldwin: 0207 258 8670
Panmure Liberum Limited (nominated adviser and broker)
Richard Lindley: 0203 100 2000
Jamie Richards: 0203 100 2000
Temple Bar Advisory (public relations)
Alex Child-Villiers: 07795 425580
Sam Livingstone: 07769 655437
Chairman's & chief executive's statement
Against a perpetually challenging backdrop we have continued to make steady
progress, in particular at our mixed-use development site at TIQ. However, the
delayed reduction of interest rates, compounded by a subdued investment
market, have materially impacted our further progression and results for the
year.
Progression
In June 2024, a significant milestone was reached at TIQ where practical
completion was achieved for Winfield Court, our first phase student
accommodation development. Given the inflationary pressures, economic
uncertainty and supply chain shortages experienced during the construction
period we are delighted to have completed this development on time and on
budget.
Winfield Court comprises 693-beds of high-quality student accommodation
incorporating a gym, cinema room and sky lounge. In addition, the development
has been awarded a WiredScore Platinum certificate for its digital
connectivity and is expected to achieve a "very good" classification under the
BREEAM green building sustainability rating system.
Following practical completion, the first 371 students have moved into the
property representing 54% of the total rooms available. The current occupancy
rate, and net operating income of approximately £1.5 million, are well below
our fully stabilised targets for this property but have arisen in this first
year from a combination of factors. These include much-publicised measures,
introduced in January 2024, to tighten the issue of student visas which has
materially impacted the number of overseas students attending UK universities
in the current year. Furthermore, competing local student accommodation
providers, also seeking to let their newly constructed developments for the
first time, were offering unexpectedly competitive rental and incentives
packages.
However, the underlying fundamentals for purpose-built student accommodation
remain strong. Continuing healthy demand for higher education and expectations
of rental growth support the anticipated uplift in investment activity for
this sector over the coming years. As such, we would anticipate a material
uplift in lettings and net operating income for the next academic year.
Furthermore, on 11 December 2024 we received credit approval from Barclays to
restructure and extend the development loan, secured against Winfield Court,
to enable its further letting and stabilisation over the current academic
year.
Elsewhere at TIQ
In February 2024, we submitted a detailed planning application for the
adjoining second phase of student accommodation. This phase, which has been
well supported by Nottingham City Council, comprises a 383-bed scheme, with a
positive determination anticipated from the planning committee early in 2025.
In May 2024, we acquired the long-leasehold interest of the site occupied by
Virgin Active gym, located at TIQ. The freehold of the site was already owned
by the Group, at a carrying value of £1.2 million, and the leasehold
purchased from Wood Pension fund for a gross consideration of £5.9 million.
Subsequent to the purchase, the Group granted a 25-year lease to Virgin Active
Health Clubs Limited at a passing rent of £600,000 per annum incorporating a
three-month rent-free period followed by 18 months at half rent.
Against a backdrop of squeezed household budgets and rising costs, compounded
by increases to the minimum wage, the Group's restaurant and event venue at 1
TIQ realised an EBITDAR in the year of £0.3 million. As a result of
increasing the capacity, in particular for our outdoor events, the provision
of a stretch tent cover, to enable the plaza's all-weathers use, and a more
expansive use of the venue from a very engaged local community, total revenues
increased by over 25% in the year to £5.4 million. This expansion,
supplemented by significant improvements in food, beverage and wage margins
since the start of the year, should enable the further enhancement of returns
in the coming year with gross revenues projected in excess of £6 million.
However, the recent changes announced in the UK Government's autumn statement
introducing an additional 6.7% uplift in the minimum wage, significant
increases to employer's national insurance contributions and reductions to
business rates relief can only further challenge the already stretched
hospitality sector.
Results summary
The Group incurred a loss in the year of £34.0 million substantially derived
from a £28.3 million reduction in the property carrying values for TIQ. Net
operational, administrative and debt financing costs amounted to £4.3 million
(including depreciation charges of £0.6 million and first year only
mobilisation costs at Winfield Court of £0.6 million) as we continue the
transition of our consented development plots at TIQ to income-producing
assets. We have also written down £1.4 million of costs incurred in
connection with the proposed residential project in Bristol to reflect the
transaction complexity and market conditions currently impacting the viability
and better progression of this project.
The reduction in values for both the developed and undeveloped plots at TIQ
arose primarily from lower rents having been achieved than were anticipated
and higher operating costs being payable at Winfield Court. This has been
further compounded by increased construction costs, following an extended
period of high inflation, and the softening in the year of yields, in
particular for the purpose-built student accommodation ("PBSA"), build to rent
("BTR") and life-science sectors. Whilst these write downs are unwelcome, such
valuations tend to be volatile and highly sensitive to small changes in the
underlying assumptions of key parameters, such as rental levels, net initial
yields, construction costs, finance costs and void periods. As the economic
situation improves and interest rates reduce, we would expect to see a rebound
in values.
Furthermore, with the restaurant and events venue at 1 TIQ becoming more
established and expanding its operations, in addition to Winfield Court now
income-generating, we are anticipating a material uplift in revenues for the
coming year to part offset the operational, administrative and debt financing
costs. In addition, the Board continues to closely monitor the Group's
overheads and have put into place arrangements for their further reduction in
the coming year.
Cash deposits and debt financing
The cash deposits of the Group have increased in the year from £2.7 million
at 30 September 2023 to £4.7 million at 30 September 2024 as a result of
placing 5 million ZDP shares and drawing down the £12 million loan facility
from ASK.
The ZDP shares, which were issued in October 2023 at a price of £1 per ZDP
share, have a life of five years and a final capital entitlement of 153.86
pence per ZDP share, equivalent to a gross redemption yield of 9% per annum on
the issue price. The Company also subscribed for a further 10 million ZDP
shares which it will look to place, subject to investor sentiment, during
their 5-year term to further boost the Group's cash reserves as required.
The loan facility from ASK is for an initial term of 2 years with interest
paid at the Bank of England base rate plus a margin of 5.9%. £6.4 million of
the net proceeds from the loan were utilised to enable the purchase of the
long-leasehold interest in the Virgin Active gym. The remainder, in addition
to the net proceeds from placing the ZDP shares, continue to be utilised in
the progression of TIQ whilst we advance discussions with potential investors
to enable the funding required to further progress this substantial mixed-use
development.
The credit approval received from Barclays in December will enable the
restatement and extension until December 2025, of the £47.5 million Barclays
development loan, secured against Winfield Court, to enable the further
stabilisation of this asset. The terms of the loan restatement allow for a
reduction to the interest rate from the currently payable 3.25% plus SONIA to
2.0% plus SONIA. However, the benefit of this reduced margin will be offset by
way of the inclusion of a £0.6m exit fee to be settled on repayment of the
loan.
Furthermore, the development loan facility includes a continuing provision for
net finance costs to be rolled up into the loan each quarter up to the £47.5
million facility limit with any surplus financing or other project costs
thereafter, estimated at £0.6 million, funded by the Group.
Other property assets
The acquisition of the Wylfa site on Anglesey by the former Conservative
government confirmed the potential and range of opportunities offered by our
Welsh sites, all ideally located to support any such future nuclear or other
renewables-derived developments. At the 203-acre brownfield site at Rhosgoch,
classified as a special area in the Anglesey freeport, we continue to receive
considerable interest from the renewables sector. However, while we await
future announcements from the new Labour government as to their intentions for
the Wylfa site, we do not anticipate making any firm commitments in this
regard.
At Holyhead Waterfront in Anglesey, we continue to await determination of the
much-delayed detailed application submitted in 2021, the cost of which was
fully written down in the previous year. Furthermore, in exchange for the
settlement of unpaid rent by a tenant at the waterfront site, we have acquired
freehold land plus an operational boatyard adjoining our development site.
Dividend
The Board recommends that no dividend is declared in respect of the year ended
30 September 2024. More information on the Group's dividend policy can be
found within the strategic report.
Share buy-back authority
The Board will seek to renew the buy-back authority of 14.99% of the issued
share capital of the Company at the forthcoming AGM as we consider the
buy-back authority to be a useful capital management tool and will continue to
use it, as our cash flows allow, when we believe the stock market value
differs too widely from our view of the intrinsic value of the Company.
Board change
We are pleased to announce, with effect from 1 January 2025, the appointment
of Christopher Ware as managing director for the Group. Christopher joined the
Company in 2012, was appointed property director in 2018, and has during that
time managed our former investment property portfolio and more recently been
instrumental in the progression of TIQ.
Outlook
Despite the recent change in the UK government impacting both consumer and
investor confidence, the improving economic outlook, as a result of lower
inflation and interest rates being on a downward trajectory, appears to be
slowly improving both the sentiment for, and activity in, the UK real estate
sector.
Whilst the market remains challenging and uncertain, and our cash flows remain
restrictive, these green shoots of optimism will enable the Group to
cautiously progress with a number of emerging opportunities as we seek to
maximise, over the coming years, the returns from our property portfolio.
N J
Hamway
R T E Ware
Chairman
Chief executive
Strategic report
The Group's strategic report provides a review of the business for the
financial year, discusses the Group's financial position at the year end and
explains the principal risks and uncertainties facing the business and how we
manage those risks. We also outline the Group's strategy and business model.
Strategy and business model
The Conygar Investment Company PLC ("Conygar") is an AIM quoted property
investment and development group dealing in UK property. Our aim is to invest
in property assets and companies where we can add value using our property
management, development and transaction structuring skills.
The business operates two major strands, being property investment and
property development. Assets are recycled to release capital as opportunities
present themselves and we will continue to buy-back shares where appropriate.
However, in order to progress our pipeline of development projects, in
particular at TIQ, we will need to raise substantial amounts either as debt,
through asset sales, or from joint ventures and are continuing our discussions
in that regard.
Position of the Group at the year end
The Group net assets as at 30 September 2024 may be summarised as follows:
2024 2023
Per share Per share
£'m p £'m p
Properties 117.9 197.7 113.2 189.8
Cash 4.7 7.8 2.7 4.5
Borrowings (55.9) (93.6) (17.2) (28.8)
ZDP shares (4.9) (8.3) - -
Other net liabilities (0.4) (0.6) (3.6) (6.1)
Net assets attributable to shareholders 61.4 103.0 95.1 159.4
Non-controlling interests (0.3) (0.5) - -
Net assets 61.1 102.5 95.1 159.4
The Group's balance sheet comprises property assets and cash deposits
totalling £122.6 million as at 30 September 2024, offset by borrowings and
other liabilities of £61.5 million. Borrowings comprise a development loan
from Barclays, secured against Winfield Court, which amounted to £44.24
million (net of prepaid finance costs) at the balance sheet date and £11.61
million (net of prepaid finance costs) from ASK secured against the remainder
of TIQ.
The Barclays development loan facility has enabled the Group to complete the
development of Winfield Court in the year, and its planned extension and
restructuring after the balance sheet date, will allow for the further letting
and stabilization of this asset over the coming academic year. Furthermore,
the net proceeds from the ASK loan in addition to the placing of 5 million ZDP
shares in the year have been incurred to date to enable, amongst other
projects, the purchase of the Virgin Active gym and submission of a detailed
application for the second phase of student accommodation at TIQ.
Key performance indicators
The key measures considered when monitoring progress towards the Board's
objective of providing attractive shareholder returns include the headway made
during the year on its development and investment property portfolio, the
returns from and occupancy levels achieved at its operational properties, the
movements in net asset value per share, levels of uncommitted cash and its
monitoring of and performance against its ESG targets.
The chairman's and chief executive's statement provides a summary on the
financial performance and progress made during the year on the Group's
property assets, further details of which are set out in this strategic
report. Matters considered by the audit committee and remuneration committee
are set out in the corporate governance section of the annual report. The
Board's approach and responsibilities in connection with environmental, social
and governance matters are set out in the ESG section of the annual report.
The other key performance measures are considered below.
Winfield Court, 1 TIQ and investment properties under construction
Winfield Court, 1 TIQ and the Group's investment properties under construction
were valued by Knight Frank LLP, in their capacity as external valuers, as set
out below:
2024 Per share 2023 Per share
£'m p £'m p
Winfield Court 70.5 118.2 65.6 110.0
1 TIQ 11.1 18.7 14.0 23.5
Land and buildings for future development 25.6 42.8 29.5 49.5
Total 107.2 179.7 109.1 183.0
As set out in the chief executive's and chairman's statement, we have
achieved, in the current year, practical completion of TIQ's first phase of
student accommodation and submitted an application for the second phase.
As a result of an unexpectedly competitive local lettings market,
incorporating offers of heavily discounted rents and abnormally high
incentives packages, compounded by a significant and unexpected reduction in
the number of international students attending UK universities possibly linked
to changes in the UK visa regime, the occupancy and net operating income
achieved for the current academic year is materially below that originally
anticipated. This shortfall, in addition to increased operating costs and
outward yield movements, led to a write down in the carrying value for
Winfield Court of £19 million as at 30 September 2024. However, given the
high-quality offering from this development, the completion of all
construction activity and the continuing strong investor sentiment for student
accommodation, we remain optimistic for its future prospects and are actively
progressing early lettings for the next academic year.
1 TIQ, which has now been operational for just over two years, continues to be
well received by the local community resulting in a £1.1 million increase in
revenue for the year to £5.4 million. Whilst the hospitality sector currently
faces many challenges, we have creatively continued to expand our operations
and offerings from this venue and materially improve the margins being
achieved such that the Group realised an EBITDAR for the year of £0.3
million. The reduction in value for 1 TIQ during the year reflects a lower
than previously projected EBITDAR for this venue over the coming years, partly
as a result of the wider TIQ site not having progressed as quickly as
previously envisaged, but also as a result of the higher employment taxes
resulting from the 2024 autumn statement.
Furthermore, higher construction costs and the softening of yields, in
particular for the PBSA, BTR and life-sciences sectors, have also negatively
impacted the residual values for the undeveloped land. This has resulted in a
valuation deficit of £6.6 million in the year, after allowing for other
incurred planning and site progression costs.
However, as a result of the slowly improving economic outlook, we are seeing a
marked increase to the number of enquiries and offers for further plot
development at TIQ and are in discussion with a number of operators in that
regard.
Development and trading properties
2024 Per share 2023 Per share
£'m p £'m p
Virgin Active gym, TIQ 7.50 12.6 - -
Rhosgoch 2.50 4.2 2.50 4.2
Parc Cybi 0.38 0.6 0.38 0.6
Holyhead boatyard 0.33 0.6 - -
Holyhead Waterfront - - - -
Total 10.71 18.0 2.88 4.8
In May 2024, the Group acquired the long-leasehold interest of the site
occupied by Virgin Active gym, located at TIQ. The freehold, valued at £1.2
million, was already owned by the Group, with the leasehold purchased from
Wood Pension fund. The leasehold purchase price of £5.9 million (£6.3
million including fees and taxes), was funded by way of the drawing down of
the second tranche of the ASK debt facility. Subsequent to the purchase, the
Group granted a 25-year lease to Virgin Active Health Clubs Limited at a
passing rent of £600,000 per annum incorporating a three-month rent-free
period followed by 18 months at half rent.
On 10 September 2024, the Group settled a claim for unpaid rent due from one
of its tenants whereby the arrears outstanding of £0.33m were settled by way
of a transfer to the Company of a boatyard and surrounding land adjoining our
development site in Holyhead. The boatyard is operational, currently storing
circa 120 boats, and generating gross annual rents, before operational costs,
of approximately £200,000 per annum. As part of the settlement agreement, the
Group has granted a 3-year lease of the boatyard, at a peppercorn rent, to the
same tenant whereby the funds generated over the 3-year term will be utilised
by the tenant in the removal and clean up of previously damaged pontoons. On
expiry of the lease, the Company will take occupation of and receive the full
benefit of the future income generated from the boatyard.
In March 2023, we announced the confirmation of the Anglesey Freeport as one
of the two newly established freeports in Wales. Included within this
location, as a special area, is our 203-acre brownfield site at Rhosgoch. Our
further site at Parc Cybi is also part of the freeport. These freeports will
form special zones with the benefit of simplified customs procedures, relief
on customs duties, tax benefits and development flexibility designed to
attract major domestic and international investment. The site at Rhosgoch
continues to attract considerable interest from the renewables sector and we
are in discussion with a number of parties in that regard.
As a result of the combined impact from planning delays, increased finance
costs and construction cost price inflation, particularly associated with the
marine infrastructure works, we fully wrote down our investment in Holyhead
Waterfront at 30 September 2023.
Financial review
Net asset value
The net asset value decreased in the year by £34.0 million to £61.1 million
at 30 September 2024 which equates to 103.0p per share (2023: 159.4p per
share). The primary movements were a net £28.3 million write down in the
carrying value of the Group's properties at TIQ, net operational and
administrative costs of £3.3 million, including depreciation charges of £0.6
million, £1.0 million of debt financing costs and £1.4m from writing down
the costs paid to date in connection with the proposed residential development
in Bristol.
Cash flow and financing
At 30 September 2024, the Group held cash deposits of £4.7 million.
Borrowings comprised £44.3 million drawn from Barclays out of the £47.5
million development loan facility and £12.0 million from ASK. In addition,
the Group had in issue 5 million ZDP shares of £1 each (2023: cash of £2.7
million and borrowings of £18.0 million).
During the year, the Group incurred £10.0 million on its operating
activities, including £6.3 million to acquire the long-leasehold interest in
the Virgin Active gym at TIQ. The other primary cash outflows were £26.2
million incurred on the Group's development and investment properties,
including £23.6 million of construction costs and professional fees to
complete the Winfield Court development and £1.0 million of fees in
connection with submission of the detailed planning application for the second
phase of student accommodation at TIQ. Other costs include £3.8 million of
debt financing fees and £0.3m to acquire plant and equipment for use at 1 TIQ
and Winfield Court.
These cash outflows were offset by cash inflows from bank borrowings, after
debt arrangement fees of £37.7 million, £4.3 million from the issue of ZDP
shares and £0.3 million of interest on cash deposits resulting in net cash
inflows for the year of £2.0 million.
Net income from operational property activities
This has been, and continues to be, a transitional period for the Group where,
having sold, over a number of years, the vast majority of our rent-producing
investment properties, to lock in, for the benefit of our shareholders, the
significant returns generated from those assets, we have utilised those funds
to progress the planning applications for, and construction of, both our owned
and targeted development projects. As such, the rental income for the Group
during the current and previous years has reduced from that historically
achieved. However, with 1 TIQ now more established and fully operational, in
addition to Winfield Court become rent-producing from September 2024, we would
anticipate a material uplift in rental and other income in the coming year.
2024 2023
£'m £'m
Rental income 0.5 0.1
Restaurant and events income 5.4 4.3
Direct costs of rental income (0.3) (0.5)
Property mobilisation costs (0.6) -
Direct costs of restaurant and events income (4.0) (3.9)
1.0 -
Proceeds from property sale - 9.6
Cost of property sale - (9.5)
Net income arising from operational property activities 1.0 0.1
Administrative expenses
The administrative expenses for the year were £4.6 million (2023: £4.8
million). Managing the substantially increased development and operations
teams, in particular at 1 TIQ, has required an increase in the Group's
overheads. However, the Board continues to closely monitor these costs and
have put into place arrangements for their further reduction in the coming
year.
Taxation
There is no current tax in the year as the Group is loss-making. However, the
results for the prior year include the reversal of a £1.7m deferred tax
provision following the write down in the property carrying values for TIQ at
30 September 2023.
Deferred tax is calculated at a rate of 25%, being the rate that has been
enacted or substantively enacted by the balance sheet date and which is
expected to apply when tax liabilities, resulting from unrealised chargeable
gains arising on revaluation of the Group's investment properties, are
projected to be settled.
Capital management
Capital risk management
The Board's primary objective when managing capital is to preserve the Group's
ability to continue as a going concern, in order to safeguard its equity and
provide returns for shareholders and benefits for other stakeholders, whilst
maintaining an optimal capital structure to reduce the cost of capital.
While the Group does not have a formally approved gearing ratio, the objective
above is actively managed through the direct linkage of borrowings to specific
property. The Group seeks, whenever possible, to ensure that secured borrowing
stays within agreed covenants with external lenders.
Treasury policies
The objective of the Group's treasury policies is to manage the Group's
financial risk, to secure as required the most cost-effective available
funding for the Group's operations and to minimise, for those matters it can
control, the adverse effects of fluctuations in the financial markets on the
value of the Group's financial assets and liabilities, reported profitability
and cash flows.
The Group finances its activities with a combination of bank loans, ZDP
shares, cash and short-term deposits. Other financial assets and liabilities,
such as trade receivables and trade payables, arise directly from the Group's
operations. The Group may also enter into derivative transactions to manage
its interest rate exposure. The main risks associated with the Group's
financial assets and liabilities are set out below, together with the policies
currently applied by the Board for their management.
The management of cash is monitored weekly with summary cash statements
produced on a monthly basis and discussed regularly in management and board
meetings. The approach is to provide sufficient liquidity to meet the
requirements of the business, and to fund potential developments and
acquisitions, with any surplus funds invested appropriately. At any point in
time, at least half of the Group's cash is held on instant access or
short-term deposit of less than 30 days.
Dividend policy
The Board recommends that no dividend is paid in respect of the year ended 30
September 2024 (2023: £nil).
Our dividend policy is consistent with the overall strategy of the business:
namely to invest in property assets and companies where we can add value using
our property management, development and transaction structuring skills. In
previous years, we used the surplus cash flow from the then much larger
investment property portfolio to enhance those properties by refurbishment,
re-letting and extending tenancies, fund the operations of the business,
create a medium-term pipeline of development opportunities, pay a modest
dividend and buy-back shares where appropriate.
The Board will continue to review the dividend policy each year. However, our
primary target is, and will continue to be where the real estate market
allows, the growth in net asset value per share.
Principal risks and uncertainties
Managing risk is an integral element of the Group's management activities and
a considerable amount of time is spent assessing and managing risks to the
business. Responsibility for risk management rests with the Board, with
external advisers used where necessary.
Strategic risks
Strategic risks are risks arising from an inappropriate strategy or through
flawed execution of a strategy that could threaten the future performance,
solvency or liquidity of the Group. By definition, strategic risks tend to be
longer term than most other risks and, as has been amply demonstrated in the
last few years, the economic and wider environment can alter quickly and
significantly. Strategic risks identified include global or national events,
regulatory and legal changes, market or sector changes and key staff
retention. All of which could impact the progression of and returns from our
property portfolio.
The Board continually monitors and discusses the potential impact that changes
to the environment in which we operate can have upon the Group. We are
confident we have sufficiently high-calibre directors and managers to manage
strategic risks.
Operational risks
Operational risks are essentially those risks that might arise from inadequate
internal systems, processes, resources or incorrect decision making. Clearly,
it is not possible to eliminate operational risk. However, by ensuring we have
the right calibre of staff and external support in place, we look to minimise
such risks, as most operational risks arise from people-related issues. Our
executive directors are very closely involved in the day-to-day running of the
business to ensure sound management judgement is applied.
Market risks
Market risks primarily arise from the possibility that the Group is exposed to
fluctuations in the values of, or income from, its cash deposits and other
financial instruments along with its properties and development projects. This
is a key risk to the principal activities of the Group and the exposures are
continuously monitored through timely financial and management reporting and
analysis of available market intelligence. Where necessary, management takes
appropriate action to mitigate any adverse impact arising from identified
risks and market risks continue to be monitored closely.
The Group is not currently party to any derivative transactions to fix the
interest rate payable in connection with its loans from Barclays and ASK. This
is due to the short-term nature of these loans in addition to the high entry
fees which have been payable in connection with such products over recent
years.
Furthermore, as a result of the improving economic outlook, the Bank of
England base rate is projected to reduce during the next financial year which
will help to mitigate interest rate risk in the short term.
As a result of the reduction in value of Winfield Court, the loan to value
("LTV") cover, as required by the Barclays development loan is in excess of
the covenant set out in the facility agreement. However, as at the date of
signing these financial statements, credit approval has been received from
Barclays for terms to restructure the loan and subject to completion of that
restructuring, rectify the LTV cover. As at the date of signing these
financial statements, the Group remains compliant with all of its other debt
covenants.
The measures, introduced in January 2024, to tighten the issue of student
visas has materially impacted the number of overseas students attending UK
universities in the current year such that lettings to date for Winfield Court
are below those originally anticipated. However, the Board is working closely
with its managing agent and other local and international agents to try and
mitigate the impact from these measures.
Estimation and judgement risks
To be able to prepare accounts according to generally accepted accounting
principles, management must make estimates and assumptions that affect the
asset and liability items and revenue and expense amounts recorded in the
accounts. These estimates are based on historical experience and various other
assumptions that management and the Board believe are reasonable under the
circumstances. The results of these considerations form the basis for making
judgements about the carrying value of assets and liabilities that are not
readily available from other sources.
The key sources of estimation uncertainty that have a significant risk of
causing material adjustment to the carrying amounts of assets and liabilities
within the next financial year are the following:
Investment properties and properties held under the revaluation model
The fair values of investment properties and owner-occupied properties held
under the revaluation model are based upon open market value and calculated
using a third-party valuation provided by an appropriately qualified external
valuer.
Development properties
The net realisable value of properties held for development or sale requires
an assessment of the value for the underlying assets using property appraisal
techniques and other valuation methods. Such estimates are inherently
subjective and actual values can only be determined in a sales transaction.
Financial assets and liabilities
The interest rate profile of the Group's cash deposits at the balance sheet
date was as follows:
30 Sep 24 30 Sep 23
£'000 £'000
Unsecured deposits 3,750 2,321
Performance bonds and other secured deposits 915 355
4,665 2,676
The Group's floating rate financial assets comprise cash, short-term
performance bonds and other secured deposits held with banks whose credit
ratings are acceptable to the Board. The interest rate profile of the Group's
bank borrowings is set out in note 19.
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty fails
to meet its contractual obligations.
The Group's principal financial assets include its financial interest in
property assets, cash deposits and trade and other receivables. The carrying
amount of financial assets recorded in the financial statements represents the
Group's maximum exposure to credit risk without taking account of the value of
any collateral obtained.
In the event of default by an occupational tenant, the Group will suffer a
rental shortfall and incur additional costs.
The Directors continually monitor tenant arrears in order to anticipate, and
minimise the impact of, defaults by occupational tenants and if necessary,
where circumstances allow, will apply rigorous credit control procedures to
facilitate the recovery of trade receivables.
Under IFRS 9, the Group is required to provide for any expected credit losses
arising from trade receivables. For all assured shorthold tenancies, credit
checks are performed prior to acceptance of the tenant. Regulated tenants are
incentivised through the benefit of their tenancy agreement to avoid default
on their rent and rent deposits are held where applicable.
The Directors have provided for rental and other arrears due from various
tenants which amounts to £5,000 at 30 September 2024 (2023: £273,000) and
which remain outstanding at the date of signing these financial statements.
The impaired receivables are based on a review of expected credit losses.
Impaired receivables and receivables not considered to be impaired are not
material to the financial statements and, therefore, no further analysis is
provided.
The credit risk on cash deposits is managed through the Company's policies of
monitoring counterparty exposure and the use of counterparties of good
financial standing. At 30 September 2024, the credit exposure from cash held
with banks was £4.7 million which represents 7.6% of the Group's net assets.
All cash deposits at the balance sheet date are placed with banks, whose
credit ratings are acceptable to the Board. Should the credit quality or the
financial position of the banks currently utilised significantly deteriorate,
unsecured cash deposits would be moved to alternative banks.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group seeks to manage its
liquidity risk by ensuring that sufficient cash is available to meet its
foreseeable needs. At the balance sheet date, the Group had cash deposits of
£4.7 million and will look to raise additional funds as required by way of
property leasing, asset sales, third party investment or other equity issues.
Section 172 statement
Directors' duty to promote the success of the Company under Section 172
Companies Act 2006
The strategic report is required to include a statement that describes how the
directors have had regard to the matters set out in section 172(1) (a) to (f)
of the Companies Act 2006 when performing their duty under section 172. Some
of the matters identified in Section 172(1) are already covered by similar
provisions in the QCA Code and have thus been previously reported by the
Company in the corporate governance statement, the corporate governance report
and the QCA statement of compliance on our website. In order to avoid
unnecessary duplication, the relevant parts of those documents are identified
below and are to be treated as expressly incorporated by reference into this
strategic report. Under section 172 (1) of the Companies Act 2006, 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 the benefit of its
members as a whole, and in doing so have regard (amongst other matters) to six
matters detailed in the section. In discharging their duties, the directors
seek to promote the success of Conygar for the benefit of members as a whole
and have regard to all the matters set out in Section 172(1), where applicable
and relevant to the business, taking account of its size and structure and the
nature and scale of its activities in the commercial property market. The
following paragraphs address each of the six matters in Section 172(1) (a) to
(f).
(a) The likely consequences of any decision in the long term: The commercial
property market is cyclical by nature. Investing in commercial property is a
long-term business. The decisions taken must have regard to long-term
consequences in terms of success or failure and managing risks and
uncertainties. The directors cannot expect that every decision they take will
prove, with the benefit of hindsight, to be the best one - external factors
may affect the market and thus change conditions in the future, after a
decision has been taken. However, the Group's investment decisions are
undertaken by a Board with a wide range of experience, over many years, in
both the property and finance sectors.
(b) The interests of the Company's and Group's employees: The Company has five
full-time employees, including the chief executive, two property directors and
the finance director. These executive directors sit on the Board with the
non-executive directors. The Group also has a growing workforce to support its
operations at TIQ, all of which are employed by a wholly-owned group company.
The commitment of the Board to its employees is set out in the ESG section of
the annual report.
(c) The need to foster the Company's business relationships with suppliers,
customers and others: The directors have regularly reported in the Company's
annual reports on the constructive relationships that Conygar seeks to build
with its tenants and the mutual benefits that this brings to both parties; and
this reporting has been extended over the past two years following Principle 3
of the QCA Code to include suppliers and others. This is therefore addressed
under Principle 3 in the QCA compliance statement. In recent years, it has
been vital to foster our business relationships with tenants given external
factors, such as political and economic
uncertainty.
(d) The impact of the Company's operations on the community and the
environment: This is also addressed under Principle 3 of the QCA Code in the
QCA compliance statement. Due to its size and structure and the nature and
scale of its activities, the Board considers that the impact of Conygar's
operations as a landlord on the community and the environment is low. With the
exception of 1 TIQ and Winfield Court, Conygar's assets are used by its
tenants for their own operations rather than by Conygar itself. In the past
year, the Company has not been made aware of any tenant operations that have
had a significant impact on the community or the environment. In relation to 1
TIQ and Winfield Court, as well as ongoing and future planned developments,
Conygar seeks to ensure that designs and construction comply with all relevant
environmental standards and with local planning requirements and building
regulations so as not to adversely affect the community or the environment. As
the Group's owner occupied and managed properties continue to expand, the
Board will continue to monitor its potential increased impact on the community
and the environment. Further details of this are set out in the ESG section of
the annual
report.
(e) The desirability of the Company maintaining a reputation for high
standards of business conduct: This is addressed under Principle 8 of the QCA
Code in the corporate governance statement and in the QCA compliance
statement. The Board considers that maintaining Conygar's reputation for high
standards of business conduct is not just desirable - it is a valuable asset
in the competitive commercial property market.
(f) The need to act fairly as between members of the Company: The Company has
only one class of Ordinary shares, thus those shareholders have equal rights
and, regardless of the size of their holding, every shareholder is, and always
has been, treated equally and fairly. Relations with shareholders are further
addressed under Principles 2, 3 and 10 of the QCA Code in the corporate
governance report and the QCA compliance statement. We have been reviewing how
we communicate with shareholders and are encouraging shareholders to adopt
electronic communications and proxy voting in place of paper documents where
this suits them, as well as to raise questions in writing if they are unable
to attend AGMs.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2024
Note Year ended Year ended
30 Sep 24 30 Sep 23
£'000 £'000
Rental income 12/14 549 141
Restaurant and events income 5,367 4,257
Other income 25 -
Proceeds on sale of development and trading properties - 9,650
Revenue 5,941 14,048
Direct costs of rental income 318 513
Direct cost of restaurant and events income 3,956 3,928
Property mobilisation costs 623 -
Costs on sale of development and trading properties - 9,524
Development costs written off 14 53 5,164
Other project costs written 16 1,414 -
off
Direct costs 6,364 19,129
Gross loss (423) (5,081)
Fair value adjustment of property 11 (2,704) (30)
Fair value adjustment of investment properties 12 (25,597) (21,546)
under construction
Administrative expenses (4,565) (4,775)
Operating 3 (33,289) (31,432)
loss
Finance 6 (994) -
costs
Finance 6 331 186
income
Loss before taxation (33,952) (31,246)
Taxation 8 - 1,714
Loss and total comprehensive charge for the year (33,952) (29,532)
Attributable to non-controlling interests (283) -
Attributable to shareholders of the Company (33,669) (29,532)
Basic and diluted loss per share 10 (56.46)p (49.52)p
All of the activities of the Group are classed as continuing.
CONSOLIDATED Statement of Changes in Equity
for the year ended 30 September 2024
Capital redemption reserve Non-
£'000
controlling interests
Share capital £'000 Retained earnings
£'000 Total equity £'000
£'000
Total
£'000
Changes in equity for the
year ended 30 September 2023
At 1 October 2022 2,982 3,928 117,694 124,604 - 124,604
Loss for the year - - (29,532) (29,532) - (29,532)
Total comprehensive - - (29,532) (29,532) - (29,532)
charge for the year
At 30 September 2023 2,982 3,928 88,162 95,072 - 95,072
Changes in equity for the
year ended 30 September 2024
At 1 October 2023 2,982 3,928 88,162 95,072 - 95,072
Loss for the year - - (33,669) (33,669) (283) (33,952)
Total comprehensive - - (33,669) (33,669) (283) (33,952)
charge for the year
At 30 September 2024 2,982 3,928 54,493 61,403 (283) 61,120
CONSOLIDATED BALANCE SHEET
at 30 September 2024
Note 30 Sep 2024 £'000 30 Sep 2023
£'000
Non-current assets
Property, plant and equipment 11 82,599 15,116
Investment properties under construction 12 25,550 96,350
Deferred tax asset 8 - -
108,149 111,466
Current assets
Development and trading 14 10,710 2,880
properties
Inventories 15 95 110
Trade and other 16 3,140 2,203
receivables
Tax asset 28 28
Cash and cash equivalents 4,665 2,676
18,638 7,897
Total assets 126,787 119,363
Current liabilities
Trade and other 17 4,876 7,091
payables
Bank borrowings 19 44,236 -
49,112 7,091
Non-current liabilities
Deferred tax liability 8 - -
Provision for liabilities and charge 18 - -
Bank borrowings 19 11,614 17,200
ZDP shares 20 4,941 -
16,555 17,200
Total liabilities 65,667 24,291
Net assets 61,120 95,072
Equity
Called up share 21 2,982 2,982
capital
Capital redemption reserve 3,928 3,928
Retained earnings 54,493 88,162
Equity attributable to shareholders of the Company 61,403 95,072
Non-controlling interests (283) -
Total equity 61,120 95,072
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 September 2024
Note Year ended 30 Sep 24 £'000 Year ended
30 Sep 23
£'000
Cash flows from operating activities
Operating loss (33,289) (31,432)
Fair value adjustment of investment properties held for construction 12 25,597 21,546
Fair value adjustment of property 11 2,704 30
Development costs written off 14 53 5,164
Other project costs written off 16 1,414 -
Profit on sale of development and trading properties - (126)
Depreciation of property 11 262 262
Depreciation of plant and equipment 11 366 333
Cash flows from operations before changes in working capital (2,893) (4,223)
Decrease / (increase) in inventories 15 (78)
Increase in trade and other receivables (2,659) (1,125)
Additions to development and trading properties (6,711) (294)
Net proceeds from sale of development and trading properties - 9,490
Increase in trade and other payables 2,243 1,207
Net cash flows (used in) / generated from operations (10,005) 4,977
Cash flows from investing activities
Additions to investment properties (26,209) (35,731)
Additions to plant, machinery and office equipment (315) (479)
Finance income 6 331 186
Cash flows used in investing activities (26,193) (36,024)
Cash flows from financing activities
Bank loan drawn 19 38,287 18,033
Bank loan arrangement fees (616) (924)
Gross proceeds from issue of ZDP shares 20 5,000 -
ZDP arrangement fees (660) (113)
Interest paid (3,824) (634)
Cash flows generated from financing activities 38,187 16,362
Net increase / (decrease) in cash and cash equivalents 1,989 (14,685)
Cash and cash equivalents at 1 October 2,676 17,361
Cash and cash equivalents at 30 September 4,665 2,676
NOTES TO THE ACCOUNTS
for the year ended 30 September 2024
1. The financial information set out in this announcement is abridged and
does not constitute statutory accounts for the year ended 30 September 2024
but is derived from the financial statements. The auditors have reported on
the statutory accounts for the year ended 30 September 2024, their report was
unqualified and did not contain statements under sections 498(2) or (3) of the
Companies Act 2006, and these will be delivered to the registrar of companies
following the Company's annual general meeting. The financial information has
been prepared using the recognition and measurement principle of IFRS.
2. The comparative financial information for the year ended 30 September
2023 was derived from information extracted from the annual report and
accounts for that period, which was prepared under IFRS and which has been
filed with the UK registrar of companies. The auditors have reported on those
accounts, their report was unqualified and did not contain statements under
section 498 (2) or (3) of the Companies Act 2006.
3. Operating LOSS
Operating loss is stated after charging: 30 Sep 24 30 Sep 23
£'000 £'000
Audit of the Company's consolidated and individual financial statements 50 50
Audit of subsidiaries, pursuant to legislation 84 60
Corporate finance advisory fees from the auditor * - 60
Depreciation of property, plant and equipment 628 595
* Cost in relation to the ZDP share issue included within trade and other
receivables at 30 September 2023.
4. PARTICULARS OF EMPLOYEES
The aggregate payroll costs were: Year ended 30 Sep 24 £'000 Year ended 30 Sep 23 £'000
Wages and salaries 3,551 3,815
Social security costs 312 347
Other pension costs 34 36
3,897 4,198
The weighted average monthly number of persons, including executive directors,
employed by the Group during the year was 119 (2023: 111) of which, 113 (2023:
104) are employed to operate and manage the restaurant and events venue at 1
TIQ.
5. DIRECTORS' EMOLUMENTS
Year ended Year ended
30 Sep 24 30 Sep 23
£'000 £'000
Basic salary and total emoluments 1,036 1,110
Emoluments of the highest paid director 400 400
The Board, being the key management personnel, comprises the only
persons having authority and responsibility for planning, directing and
controlling the activities of the Group.
6. FINANCE COSTS AND FINANCE INCOME
Year ended Year ended
Finance costs 30 Sep 24 30 Sep 23
£'000 £'000
Bank loan interest 3,803 347
Bank loan commitment fees 155 421
Bank loan management and monitoring fees 34 23
Accrued capital entitlement of ZDP shares 446 -
Amortisation of bank loan / ZDP shares arrangement fees 1,282 56
Total finance costs 5,720 847
Capitalisation of finance costs (note 12) (4,726) (847)
Net finance costs 994 -
Finance costs that are directly attributable to the construction of Winfield
Court or advancement of future phases at TIQ, comprising bank loan interest,
commitment fees, management fees, monitoring fees and amortised loan
arrangement fees, are capitalised as incurred into investment properties under
construction. Finance costs that are attributable to the operational
activities of the Group and income generating assets, including the Virgin
Active gym acquired in the year, are charged to the income statement.
Year ended Year ended
Finance income 30 Sep 24 30 Sep 23
£'000 £'000
Bank interest receivable 331 186
7. LEASES
Group as lessor:
The Group receives income from investment properties and existing
tenants located at several development sites. At 30 September 2024, the
minimum lease payments receivable under non-cancellable operating leases were
as follows:
30 Sep 24 30 Sep 23
£'000 £'000
Less than one year 3,312 144
Between one and five years 2,342 615
Over five years 12,029 1,169
17,683 1,928
The amounts above represent total rental income up to the next
tenant only break date for each lease.
Group as lessee:
IFRS 16 requires lessees to record all leases on the balance
sheet as liabilities, along with an asset reflecting the right of use of the
asset over the lease term, so long as they are not for a low value or less
than 12 months whereby the lease could be recognised as an expense on a
straight-line basis over the lease term.
The Group is party to a three-year lease for office premises with
rent payable at £99,100 per annum. The lease, which expires on 28 April 2026,
incorporates a break option on 28 April each year. As such, it is considered
to be of such a short term that the rent has been recognised as an expense in
the statement of comprehensive income on a straight-line basis.
8. TAX
Year ended Year ended
30 Sep 24 30 Sep 23
£'000 £'000
Current tax charge - -
Deferred tax credit - (1,714)
Total tax credit - (1,714)
The tax assessed on the loss for the year differs from the standard rate of
tax in the UK of 25% (2023: 19%). The differences are explained below:
Year ended Year ended
30 Sep 24 30 Sep 23
£'000 £'000
Loss before tax (33,952) (31,246)
Loss before tax multiplied by the standard rate of UK tax (8,488) (5,937)
Effects of:
Investment property revaluation not taxable 6,399 4,099
Property fair value adjustment not taxable 676 -
Other amounts not taxable 543 -
Utilisation of tax losses brought forward (11) (23)
Movement in tax losses carried forward 1,007 2,085
Expenses not deductible for tax purposes 24 27
Capital allowances utilised (150) (251)
Deferred tax credit - (1,714)
Total tax credit for the year - (1,714)
Deferred tax asset
Year ended Year ended
30 Sep 24 30 Sep 23
£'000 £'000
Deferred tax asset at the start of the year - 2,986
Deferred tax charge for the year - (2,986)
Deferred tax asset at the end of the year - -
The Group will recognise a deferred tax asset for tax losses, held by group
undertakings, where the directors believe it is probable that this asset will
be recovered.
As at 30 September 2024, the Group has further unused losses of £51.8 million
(2023: £48.1 million) for which no deferred tax asset has been recognised in
the consolidated balance sheet.
Deferred tax liability - in respect of
chargeable gains on properties Year ended Year ended
30 Sep 24 30 Sep 23
£'000 £'000
Deferred tax liability at the start of the year - 4,700
Deferred tax credit for the year - (4,700)
Deferred tax liability at the end of the year - -
The directors have assessed the potential deferred tax liability of the Group
as at 30 September 2024 in respect of chargeable gains that would be payable
if the properties were sold at their financial year end valuations. Based on
the unrealised chargeable gains of £nil (2023: £nil) no deferred tax
liabilities have been recognised in the current or prior years.
Prior year deferred tax assets and liabilities were calculated at a
corporation tax rate of 25% being the rate that had been enacted or
substantively enacted by that balance sheet date and which was projected to
apply when the liability was settled and the asset realised.
9. DIVIDENDS
No dividend will be paid in respect of the year ended 30
September 2024 (2023: nil).
10. LOSS PER SHARE
Loss per share is calculated as the loss attributable to
ordinary shareholders of the Company for the year of £33,669,000 (2023: loss
of £29,532,000) divided by the weighted average number of shares in issue
throughout the year of 59,638,588 (2023: 59,638,588). There are no diluting
amounts in either the current or prior years.
11. PROPERTY, PLANT AND EQUIPMENT
Property
30 Sep 24 30 Sep 23
£'000 £'000
At the start of the year 14,000 -
Additions 116 192
Depreciation (262) (262)
Fair value adjustment (2,704) (30)
Reclassification from investment properties under construction (note 12) 70,500 14,100
At the end of the year 81,650 14,000
As at 30 September 2024, the Group's then operational student accommodation at
Winfield Court was reclassified, at fair value, from an investment property
under construction to property, plant and equipment. The fair value on
reclassification was derived from the 30 September 2024 valuation, as provided
by Knight Frank LLP.
As at 1 October 2022, the Group's then operational restaurant, beverage and
events venue at 1 TIQ was reclassified, at fair value, from an investment
property under construction to property, plant and equipment. The fair value
on reclassification was derived from the 30 September 2022 valuation, as
provided by Knight Frank LLP.
Land and buildings, are stated at the revalued amounts less any depreciation
or impairment losses subsequently accumulated. Land is not depreciated.
Depreciation on revalued buildings is recognised using the straight-line basis
and results in the carrying amount, less the residual value, being expensed in
profit or loss over the estimated useful lives of 50 years.
As at 30 September 2024, Winfield Court and 1 TIQ were valued by Knight Frank
LLP in their capacity as external valuer. The valuations were prepared on a
fixed fee basis, independent of the property value and undertaken in
accordance with RICS Valuation - Global Standards on the basis of fair value,
supported by reference to market evidence of transaction prices for similar
properties. They assume a willing buyer and a willing seller in an arm's
length transaction and reflect usual deductions in respect of purchaser's
costs and SDLT as applicable at the valuation date. The independent valuer
made various assumptions including future rental income, operational costs and
the appropriate discount rate or yield. As such, the fair values have been
classified in all periods as Level 3 in the fair value hierarchy. Further
details of the valuation methodology are set out in note 12.
Plant and equipment
30 Sep 24 30 Sep 23
£'000 £'000
At the start of the year 1,116 991
Additions 199 458
Depreciation (366) (333)
At the end of the year 949 1,116
During the year, the Group acquired plant, machinery and
office equipment required to both operate the restaurant, beverage and events
venue at 1 TIQ and provide gym equipment for Winfield Court.
Depreciation is recognised so as to write off the cost of
these assets, over their estimated useful economic lives, using the
straight-line method at 25% per annum. As Winfield Court was only operational
from September 2024 no depreciation has been recognised in connection with the
£66,000 incurred on gym equipment in the year to 30 September 2024.
12. INVESTMENT PROPERTIES UNDER CONSTRUCTION
Freehold land and buildings
30 Sep 24 30 Sep 23
£'000 £'000
At the start of the year 96,350 93,000
Additions 21,771 39,545
Capitalisation of finance costs (note 6) 4,726 847
Reclassification under finance lease (note 14) (1,200) -
Fair value adjustments (25,597) (21,546)
Reclassification to property, plant and equipment (note 11) (70,500) (14,100)
Movement in introductory fee provision - (1,396)
At the end of the year 25,550 96,350
Investment properties under construction comprise freehold land and buildings
at TIQ which are held for current or future development as investment
properties and reported in the balance sheet at fair value.
Valuations of the Group's investment properties under construction are
inherently subjective as they are based on assumptions which may not prove to
be accurate and which, as a result, are subject to material uncertainty. This
is particularly true for TIQ given its scale, lack of comparable evidence and
the early-stage position of this substantial development. As such, relatively
small changes to the underlying assumptions of key parameters, such as rental
levels, net initial yields, construction costs, finance costs and void periods
can have a significant impact both positively and negatively on the resulting
valuation, as has been evidenced in the current and prior years.
In preparing their valuation, Knight Frank have utilised market and
site-specific data, their own extensive knowledge of the real estate sector,
professional judgement and other market observations as well as information
provided by the Company's executive directors. The resulting models and
assumptions therein have also been reviewed for overall reasonableness by the
Conygar Board. Inevitably in a complex model like this, and as noted above,
variations in assumptions can lead to widely differing values.
The valuation was prepared on a fixed fee basis, independent of the property
value and undertaken in accordance with RICS Valuation - Global Standards on
the basis of fair value, supported by reference to market evidence of
transaction prices for similar properties. It assumes a willing buyer and a
willing seller in an arm's length transaction and reflects usual deductions in
respect of purchaser's costs and SDLT as applicable at the valuation date. The
independent valuer makes various assumptions including future rental income,
anticipated void costs and the appropriate discount rate or yield.
The fair values for TIQ have been determined using an income capitalisation
technique whereby contracted rent and market rental values are capitalised
with a market capitalisation rate. This technique is consistent with the
principles in IFRS 13 and uses significant unobservable inputs, such that the
fair values have been classified in all periods as Level 3 in the fair value
hierarchy as defined in IFRS 13. For TIQ, the key unobservable inputs are the
net initial yields, construction costs, rental income rates, construction
financing costs and expiry void periods. Net initial yields have been
estimated for the individual units at between 4.4% and 7.0%. and debt
financing rates, including arrangement fees, estimated to average 6.5% over
the construction period. Principal sensitivities of measurement to variations
in the significant unobservable outputs are that decreases in net initial
yields, construction costs, financing costs and void periods will increase the
fair value whereas reductions to rental income rates would decrease the fair
value.
As at 1 October 2022, the Group's then operational restaurant, beverage and
events venue at 1 TIQ was reclassified, at fair value, from an investment
property under construction to property, plant and equipment. The fair value
on reclassification was derived from the 30 September 2022 valuation, as
provided by Knight Frank LLP.
As at 30 September 2024, the then operational, student accommodation at
Winfield Court was reclassified, at fair value, from an investment property
under construction to property, plant and equipment. The fair value on
reclassification was derived from the 30 September 2024 valuation, as provided
by Knight Frank LLP.
On 16 May 2024, a wholly owned subsidiary of the Company granted a 999-year
lease of the site occupied by the Virgin Active gym at TIQ to another
wholly-owned subsidiary at a premium of £1.2 million, being the market value
at the time of transfer. As the lease covers the major part of the building's
anticipated economic life, and the present value of the residual interest is
insignificant, the lease has been treated as a finance lease. As such, the
previously anticipated investment property has been reported as disposed of at
its carrying value of £1.2 million and reclassified, in these financial
statement, as a trading property being marketed for sale.
The historical cost of the Group's investment properties under construction as
at 30 September 2024 was £43,227,000 (2023: £89,198,000). The Group's
revenue for the year includes £228,000 derived from properties leased out
under operating leases (2023: £33,000).
13. INVESTMENT IN SUBSIDIARY UNDERTAKINGS
Listed below are the subsidiary undertakings of the Group
at 30 September 2024.
Country of % of
Company name Principal activity Registration equity held
Conygar Holdings Ltd** Holding company England 100%
Conygar ZDP PLC** Issuer of ZDP shares England 100%
Conygar Bristol Ltd** Property trading and development England 80%****
Conygar Haverfordwest Ltd** Property trading and development England 100%*
Conygar Holyhead Ltd** Property trading and development England 100%*
Conygar Nottingham Ltd** Property investment England 100%*
Nohu Limited** Property investment England 100%*
Parc Cybi Management Management company England 100%
Company Limited**
Conygar Developments Ltd** Dormant England 100%*
Conygar Wales PLC** Dormant England 100%*
The Island Quarter Student Property investment England 100%*
Property Company Ltd**
The Island Quarter Student Property operations England 100%*
Operating Company Ltd**
The Island Quarter Canal Turn Restaurant and events operations England 100%*
Operating Company Ltd**
The Island Quarter Dormant England 100%*
Management Company Ltd**
The Island Quarter Careers Ltd** Recruitment and human resources England 100%*
The Island Quarter Propco 3 Ltd** Dormant England 100%*
The Island Quarter Propco 4 Ltd** Dormant England 100%*
The Island Quarter Propco 5 Ltd** Dormant England 100%*
Lamont Property Holdings Ltd*** Holding company Jersey 100%*
Conygar Ashby Ltd*** Property investment Jersey 100%*
Conygar Cross Hands Ltd*** Property investment Jersey 100%*
* Indirectly owned.
** Subsidiaries with the same registered office as the
Company.
*** Subsidiaries incorporated in Jersey with a registered office at 3(rd)
Floor, 44 Esplanade, St Helier, Jersey JE4 9WG.
**** 20% of the issued share capital in Conygar Bristol Limited is owned by
Urban & City Limited.
14. DEVELOPMENT AND TRADING PROPERTIES
30 Sep 24 30 Sep 23
£'000 £'000
At the start of the year 2,880 17,137
Reclassification under finance lease (note 12) 1,200 -
Additions (1) 6,683 276
Disposals (2) - (9,369)
Development costs written off (3) (53) (5,164)
At the end of the year 10,710 2,880
1. On 16 May 2024, a wholly-owned subsidiary of the Company acquired the
long-leasehold interest of the site occupied by Virgin Active gym, located at
TIQ. The freehold of the site was already owned by the Group, with the
leasehold purchased from Wood Pension fund. The gross purchase price of £5.9
million (£6.3 million, including fees and taxes) was funded by way of the
drawing down of the second tranche of the ASK debt facility.
On 10 September 2024, the Group settled a claim for unpaid rent due from one
of its tenants whereby the arrears outstanding of £0.33m were settled by way
of a transfer to the Company of a boatyard and surrounding land adjoining our
development site in Holyhead. The boatyard is operational, currently storing
circa 120 boats, and generating gross rents, before operational costs, of
approximately £200,000 per annum. As part of the settlement agreement, the
Group has granted a 3 year lease of the boatyard, at a peppercorn rent, to the
same tenant whereby the funds generated over that 3 year period will be
utilised by the tenant in the repair of previously damaged pontoons. On expiry
of the 3 year lease, the Company will take occupation of and receive the full
benefit of the income generated from the boatyard.
2. The Group's development site at Haverfordwest, Pembrokeshire was sold
in March 2023.
3. The carrying value of Holyhead Waterfront was fully written down at 30
September 2023.
Development and trading properties are reported in the balance sheet at the
lower of cost and net realisable value. The net realisable value of properties
held for development requires an assessment of the underlying assets using
property appraisal techniques and other valuation methods. Such estimates are
inherently subjective as they are made on assumptions which may not prove to
be accurate and which can only be determined in a sales transaction.
The Group's revenue for the year includes £321,000 derived from properties
leased out under operating leases (2023: £104,000).
15. INVENTORIES
30 Sep 24 30 Sep 23
£'000 £'000
Food and drink 95 110
Inventories recognised as an expense in the year total £1,463,000 (2023:
£1,411,000).
16. TRADE AND OTHER RECEIVABLES
30 Sep 24 30 Sep 23
£'000 £'000
Trade receivables 2,471 139
Other receivables 122 1,432
Prepayments and accrued income 547 632
3,140 2,203
Trade and other receivables are measured on initial recognition at fair value,
and subsequently measured at amortised cost using the effective interest rate
method, less any impairment. Impairment is calculated using an expected credit
loss model.
Trade receivables, as at 30 September 2024, includes £2.4m of rent charged
annually in advance, to the tenants at Winfield Court, to be collected by 4
instalments over the current academic year. Other receivables, as at 30
September 2023, included £1.2 million paid in connection with the proposed
acquisition of the site in Bristol which, in addition to a further £0.2
million paid in the year have been fully written down at 30 September 2024.
17. TRADE AND OTHER PAYABLES
30 Sep 24 30 Sep 23
£'000 £'000
Social security and payroll taxes 139 156
Trade payables 518 5,996
Other payables 413 -
Accruals and deferred income 3,806 939
4,876 7,091
Trade and other payables are recognised initially at fair value, and
subsequently measured at amortised cost using the effective interest rate
method.
Deferred income, as at 30 September 2024, includes £3.1m of deferred rent,
charged annually in advance to the tenants at Winfield Court, to be collected
by 4 instalments over the current academic year. Trade payables, as at 30
September 2023, primarily comprised costs payable at that date to the
contractor and other professionals in connection with the Winfield Court
student accommodation development.
18. PROVISION FOR LIABILITIES AND CHARGES
30 Sep 24 30 Sep 23
£'000 £,000
At the start of the year - 1,396
Movement in provision in the year - (1,396)
At the end of the year - -
The Group is party to a services agreement in connection with TIQ. The date
for calculation of any fee payable under this agreement has been extended
until 30 June 2025. The provisions at 30 September 2024 and 30 September 2023
have been calculated by reference to the value of TIQ at each balance sheet
date after allowing for a priority return and applicable costs. The reduction
in value of the Group's residual land at 30 September 2023 resulted in the
full reversal of this provision.
19. BORROWINGS
Current
Barclays
30 Sept 2024 30 Sept 2023
Drawn £'000 Undrawn £'000 Total £'000 Drawn £'000 Undrawn £'000 Total £'000
At the start of the year 18,033 29,467 47,500 - - -
Drawdown in the year 26,287 (26,287) - - - -
At the end of the year 44,320 3,180 47,500 - - -
Less unamortised arrangement fees (84) - (84) - - -
44,236 3,180 47,416 - - -
On 23 December 2022, the Group entered into a development loan facility with
Barclays Bank PLC for up to £47.5 million to enable the development and
subsequent letting of Winfield Court. Security for the loan is provided by way
of the developed property in addition to guarantees from the Company as set
out below.
As at the balance sheet date, the maximum term of the Barclays development
loan was 27 months to expire on 23 March 2025. As such, the loan was repayable
in less than one year as at 30 September 2024 and so has been reclassified
from non-current to current.
As a result of the reduction in value of Winfield Court, the loan to value
("LTV") cover, as required by the Barclays development loan, is in excess of
the covenant set out in the facility agreement. However, as at the date of
signing these financial statements, credit approval has been received from
Barclays for terms to restructure the loan and subject to completion of that
restructuring, rectify the LTV cover. As at the date of signing these
financial statements, the Group remains compliant with all of its other debt
covenants.
The terms of the loan restructuring enable the extension of the final
repayment date from 23 March 2025 to 23 December 2025 but require the
inclusion of other property assets owned by the Group as further security. In
addition, the interest rate payable on the loan will be reduced from the
currently payable 3.25% plus SONIA to 2.0% plus SONIA. However, the benefit of
this reduced margin will be offset by way of the inclusion of a £0.6m exit
fee to be settled on repayment of the loan.
Furthermore, the development loan facility includes a continuing provision for
net finance costs to be rolled up into the loan each quarter up to the £47.5
million facility limit with any surplus financing or other project costs
thereafter, estimated at £0.6 million, funded by the Group.
The Company has provided cost overrun and interest shortfall guarantees of up
to £5 million in connection with the development facility. A capital
guarantee is also in place which could increase the guarantee by £2.5 million
if certain covenants are not met or the development facility is not repaid
when due.
Non-current
ASK Barclays
30 Sept 2024 30 Sept 2023
Drawn £'000 Undrawn £'000 Total £'000 Drawn £'000 Undrawn £'000 Total £'000
At the start of the year - - - - - -
New facility in the year 12,000 - 12,000 - - -
Drawdown in the year - - - 18,033 29,467 47,500
At the end of the year 12,000 - 12,000 18,033 29,467 47,500
Less unamortised arrangement fees (386) - (386) (833) - (833)
11,614 - 11,614 17,200 29,467 46,667
On 16 November 2023, the Group entered into a £12 million loan facility with
ASK. The loan is for an initial term of two years with interest paid at the
Bank of England base rate plus a margin of 5.9 per cent. The funds have and
will continue to be utilised primarily to further progress TIQ, including the
acquisition in the year of the long-leasehold interest in the Virgin Active
gym.
Reconciliation of liabilities to cash flows from financing activities
30 Sep 24 30 Sep 23
£'000 £'000
Bank borrowings at the start of the year 17,200 -
Cash flows from financing activities:
Bank borrowings drawn 38,287 18,033
Loan arrangement fees paid (616) (889)
Non-cash movements:
Amortisation of loan arrangement fees 1,013 56
Movement in loan arrangement fee liabilities (34) -
Total bank borrowings at the end of the year 55,850 17,200
Comprised of:
Current bank borrowings - Barclays 44,236 -
Non-current bank borrowings - ASK / Barclays 11,614 17,200
Total bank borrowings at the end of the year 55,850 17,200
20. ZDP SHARES
30 Sep 24 30 Sep 23
£'000 £,000
At the start of the year - -
Net proceeds from the issue of 5 million ZDP shares 4,226 -
Amortisation of issue costs 269 -
Accrued capital 446 -
At the end of the year 4,941 -
On 3 October 2023, the Group placed 5 million ZDP shares, at a price of £1.00
per ZDP share (the "issue price"). The ZDP shares have a life of five years
and a final capital entitlement of 153.86 pence per ZDP share payable on 4
October 2028 (the "ZDP repayment date"), equivalent to a gross redemption
yield of 9.0 per cent. per annum on the issue price.
The accrued capital entitlement of each ZDP share was 108.93p as at 30
September 2024.
The ZDP shares were admitted to the Official List of The International Stock
Exchange on 4 October 2023. The ISIN number of the ZDP Shares is GB00BMGBHD21
and the SEDOL code is BMH6RG9.
The fair value of the ZDP shares at 30 September 2024, based on the quoted bid
price at that date, was £5,155,000.
The ZDP shares do not carry the right to vote at general meetings of the
Company, although they carry the right to vote as a class on certain proposals
which would be likely to materially affect their position.
As a result of the reduction in value of the Group's properties the 2 times
cover requirement, as defined in the ZDP shares listing document, has fallen
to 1.92 times. As such, were the Group to propose a further drawdown of its
bank loan facilities after the date of signing these financial statements, and
the cover at that time expected to have remained below 2 times then a special
resolution would need to be passed by the ZDP shareholders to enable those
future drawdowns.
21. SHARE CAPITAL
Authorised share capital: 30 Sep 24 30 Sep 23
£ £
140,000,000 (2023: 140,000,000) Ordinary shares of 5p each 7,000,000 7,000,000
Allotted and called up:
No £'000
As at 30 September 2024 and 30 September 2023 59,638,588 2,982
22. CAPITAL COMMITMENTS
As at 30 September 2024, the Group had contracted capital commitments, not
provided for in the financial statements, of £1,877,000 (2023: £19,795,000)
in connection with the construction, development or enhancement of the Group's
properties which are expected to be incurred in the next financial year.
£1,766,000 relates to the remaining costs, including the section 106
contribution and contractor's retention, payable in relation to Winfield Court
which are to be funded by way of further drawdowns from the remaining Barclays
development loan.
23. RELATED PARTY TRANSACTIONS
On 27 September 2023, The Group entered into a subscription and
shareholders' agreement, with Conygar Bristol Limited and Urban & City
Limited, which sets out the commercial terms and profit-sharing arrangements
in connection with the possible acquisition, redevelopment and sale of the
land at St Philips Marsh. The agreement includes a requirement to pay an
introductory fee of £400,000, settled in October 2023, to Lavignac Securities
Limited for it having introduced this opportunity. Mr G S Miller-Cheevers, who
is a director of Conygar Bristol Limited, owns the entire issued share capital
and is the sole director of both Urban & City Limited and Lavignac
Securities Limited.
During the year Lavignac Securities Limited also charged £168,333 of fees to
the Group, in connection with services provided to progress TIQ and Bristol,
of which £15,000 is included within accruals as at 30 September 2024 and was
paid in November 2024.
24. FINANCIAL INSTRUMENTS
The following tables set out the Group's financial assets and
liabilities. The tables have been drawn up based on the undiscounted cash
flows of financial liabilities, based on the earliest date on which the Group
can be required to pay.
Financial assets - due within one year
30 Sep 24 30 Sep 23
£'000 £'000
Cash and cash equivalents 4,665 2,676
Trade receivables and accrued income 2,694 167
Other receivables (excluding VAT) 122 1,282
7,481 4,125
Trade receivables, as at 30 September 2024, includes £2.4m of rent charged
annually in advance, to the tenants at Winfield Court, to be collected by 4
instalments over the current academic year.
Financial liabilities:
30 Sep 24 30 Sep 23
£'000 £'000
Amounts payable within one year:
Floating rate borrowings - Barclays 44,236 17,200
Trade payables and other accrued expenses 1,989 7,053
46,225 24,253
Amounts payable between one and two years:
Floating rate borrowings - ASK 11,614 -
Amounts payable between two and five years:
ZDP shares 4,941 -
62,780 24,253
Trade payables, as at 30 September 2023, primarily comprised costs payable at
that date to the contractor and other professionals in connection with
Winfield Court. These costs were incurred by 30 September 2023 but not paid
until October 2023 and funded by way of the Barclays loan facility.
25. EVENTS AFTER THE BALANCE SHEET DATE
Credit approval was received from Barclays on 11 December 2024 to restructure
the terms of the development loan provided in connection with Winfield Court.
Further details of the approved terms are set out in note 19.
The report and accounts for the year ended 30 September 2024 will shortly be
available via the Company's website www.conygar.com (http://www.conygar.com)
or, as required, posted to shareholders and copies may be obtained free of
charge for at least one month following their posting by writing to the
company secretary, The Conygar Investment Company PLC, 1 Duchess Street,
London W1W 6AN.
The Company's annual general meeting will be held at 11:00am on Tuesday, 28
January 2025 at the offices of The Conygar Investment Company PLC, First
Floor, Suite 3, 1 Duchess Street, London W1W 6AN.
The directors of Conygar accept responsibility for the information contained
in this announcement. To the best of the knowledge and belief of the directors
of Conygar (who have taken all reasonable care to ensure that such is the
case) the information contained in this announcement is in accordance with the
facts and does not omit anything likely to affect the import of such
information.
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