REG - Palace Capital PLC - Final Results & Notice of AGM <Origin Href="QuoteRef">PCA.L</Origin> - Part 3

Palace CapitalAnnouncement

06/06/2017 07:06

- Part 3: For the preceding part double click  ID:nRSF2073Hb 

(2016: £8,576,000). The income statement would be affected by
£112,000 (2016: £80,000) by a one percentage point change in floating interest
rates on a full year basis. 
 
The Group has loans amounting to £53,684,000 (2016: £72,678,000) which have
interest payable at rates linked to the three month Libor interest rates or
bank base rates. A 1% increase in the Libor or base rate will have the effect
of increasing interest payable by £536,840 (2016: £726,780). 
 
The Group is therefore relatively sensitive to changes in interest rates. The
Directors regularly review its position with regard to interest rates in order
to minimise the Group's risk. 
 
Credit risk management 
 
Credit risk refers to the risk that a counter-party will default on its
contractual obligations resulting in financial loss to the Group. 
 
The Group has its cash held on deposit with four large banks in the United
Kingdom. At 31 March 2017 the concentration of credit risk held with Barclays
Bank plc, the largest of these banks, was £7,770,015 (2016: £7,138,979).
Credit risk on liquid funds is limited because the counterparty is a UK bank
with a high credit rating assigned by international credit rating agencies. 
 
Credit risk also results from the possibility of a tenant in the Group's
property portfolio defaulting on a lease. The largest tenant by contractual
income amounts to 6.7% (2016: 6.2%) of the Group's anticipated income. The
Directors assess a tenants' credit worthiness prior to granting leases and
employ professional firms of property management consultants to manage the
portfolio to ensure that tenants debts are collected promptly and the
directors in conjunction with the property managers take appropriate actions
when payment is not made on time. 
 
The carrying amount of financial assets (excluding cash balances) recorded in
the financial statements, net of any allowances for losses, represents the
Group's maximum exposure to credit risk without taking account of the value of
any collateral obtained. The carrying amount of these assets at 31 March 2017
was £951,000 (2016: £2,521,000). The details of the provision for impairment
are shown in note 13. 
 
Liquidity risk management 
 
The Group's policy is to hold cash and obtain loan facilities at a level
sufficient to ensure that the Group has available funds to meet its
medium-term capital and funding obligations, including organic growth and
acquisition activities, and to meet certain unforeseen obligations and
opportunities. The Group holds cash to enable the Group to manage its
liquidity risk. 
 
The Group monitors its risk to a shortage of funds using a monthly cash
management process. This process considers the maturity of both the Group's
financial investments and financial assets (e.g. accounts receivable, other
financial assets) and projected cash flows from operations. 
 
The Group's objective is to maintain a balance between continuity of funding
and flexibility through the use of multiple sources of funding including bank
loans, term loans, loan notes, overdrafts and finance leases. 
 
The table below summarises the maturity profile of the Group's financial
liabilities based on contractual undiscounted payments: 
 
                           On demand£'000  0 - 1 years£'000  1 to 2 years£'000  2 to 5 years£'000  > 5 years£'000  Total£'000  
 As at 31 March 2017                                                                                                           
 Interest bearing loans    -               4,190             4,293              65,678             14,325          88,486      
 Finance leases            -               122               122                366                12,131          12,741      
 Trade and other payables  1,894           -                 -                  -                  -               1,894       
                           1,894           4,312             4,415              66,044             26,456          103,121     
                                                                                                                               
                           On demand£'000  0 - 1 years£'000  1 to 2 years£'000  2 to 5 years£'000  > 5 years£'000  Total£'000  
 As at 31 March 2016                                                                                                           
 Interest bearing loans    -               4,529             19,967             57,234             -               81,730      
 Finance leases            -               130               130                386                12,831          13,477      
 Trade and other payables  2,521           -                 -                  -                  -               2,521       
                           2,521           4,659             20,097             57,620             12,831          97,728      
 
 
Derivative financial instruments 
 
The Group does not currently use derivative financial instruments as hedging
is not considered necessary. Should the Group identify a requirement for the
future use of such financial instruments, a comprehensive set of policies and
systems, as approved by the Directors, will be implemented. 
 
In accordance with IAS 39, "Financial instruments: recognition and
measurement", the Group has reviewed all contracts for embedded derivatives
that are required to be separately accounted for if they do not meet specific
requirements set out in the standard. No material embedded derivatives have
been identified. 
 
The directors consider that the fair value of the Group's financial
instruments are not materially different to their carrying value. This view
was formed on the basis that, as indicated in note 16 of the financial
statements, the majority of bank loans and the loan notes attracted a variable
rate of interest and that the cash deposits, and trade payables and
receivables, are short-term in nature. Consequently, in accordance with
paragraph 29(a) of IFRS 7, no fair value information has been disclosed and
the information in paragraph 97 of IFRS 13 is not required. 
 
GLOSSARY 
 
Adjusted EPS: Is Adjusted profit before tax less corporation tax charge
(excluding deferred tax movements) divided by the average basic number of
shares in the period. 
 
Adjusted profit before tax: Is the IFRS profit before taxation excluding
investment property revaluations, gains/losses on disposals, acquisition
costs, fair value share-based payments, one-off finance termination costs and
one-off surrender premiums received. 
 
Assets under Management (AUM): Is a measure of the total market value of all
properties owned by the Group. 
 
Balance sheet gearing: Is the balance sheet net debt divided by IFRS net
assets. 
 
Dividend cover: Adjusted Earnings per share divided by dividend per share
declared in the period. 
 
EPRA: Is the European Public Real Estate Association. 
 
EPRA diluted EPS: Is EPRA earnings divided by the average diluted number of
shares in the period. 
 
EPRA earnings: Is the IFRS profit after taxation excluding investment property
revaluations and gains/losses on disposals. 
 
EPRA EPS: Is EPRA earnings divided by the average basic number of shares in
the period. 
 
EPRA net assets (EPRA NAV): Are the balance sheet net assets excluding the
mark to market on effective cash flow hedges and related debt adjustments,
deferred taxation on revaluations and diluting for the effect of those shares
potentially issuable under employee share schemes. 
 
EPRA NAV per share: Is EPRA NAV divided by the diluted number of shares at the
period end. 
 
Equivalent yield: Is the net weighted average income return a property will
produce based upon the timing of the income received. In accordance with usual
practice, the equivalent yields (as determined by the external valuers) assume
rent received annually in arrears and on values before deducting prospective
purchaser's costs. 
 
Estimated rental value (ERV): Is the external valuers' opinion as to the open
market rent which, on the date of valuation, could reasonably be expected to
be obtained on a new letting or rent review of a property. 
 
IAS/IFRS: Is the International Financial Reporting Standards issued by the
International Accounting Standards Board and adopted by the EU. 
 
Interest cover: Is the number of times net interest payable is covered by
underlying profit before net interest payable and taxation. 
 
LIBOR: Is the London Interbank Offered Rate, the interest rate charged by one
bank to another for lending money. 
 
Like-for-like net rental income: Is the change in net rental income on
properties owned throughout the current and previous periods under review.
This growth rate includes revenue recognition and lease accounting adjustments
but excludes properties held for development in either period, properties with
guaranteed rent reviews, asset management determinations and surrender
premiums. 
 
Like-for-like valuation: Is the change in the carrying value of properties
owned throughout the entire year. This excludes properties acquired during the
year and disposed of during the year. 
 
Net Loan to Value (LTV): Is the ratio of gross debt less cash, short-term
deposits and liquid investments to the aggregate value of properties and
investments. 
 
Net asset value (NAV) per share: Is the equity attributable to owners of the
Group divided by the number of Ordinary Shares in issue at the period end. 
 
Net equivalent yield: Is the weighted average income return (after adding
notional purchaser's costs) a property will produce based upon the timing of
the income received. In accordance with usual practice, the equivalent yields
(as determined by the external valuers) assume rent is received annually in
arrears. 
 
Net initial yield: Is the current annualised rent, net of costs, expressed as
a percentage of capital value, after adding notional purchaser's costs. 
 
Net rental income: Is the rental income receivable in the period after payment
of net property outgoings. Net rental income will differ from annualised net
rents and passing rent due to the effects of income from rent reviews, net
property outgoings and accounting adjustments for fixed and minimum contracted
rent reviews and lease incentives. 
 
Reversionary yield: Is the anticipated yield, which the initial yield will
rise to once the rent reaches the estimated rental value. 
 
Tenant (or lease) incentives: Are any incentives offered to occupiers to enter
into a lease. Typically the incentive will be an initial rent-free period, or
a cash contribution to fit-out or similar costs. Under accounting rules the
value of lease incentives given to tenants is amortised through the Income
Statement on a straight-line basis to the lease expiry. 
 
Total Accounting Return (TAR): Is the increase or decrease in EPRA NAV per
share plus dividends paid, and this can be expressed as a percentage of EPRA
NAV per share at the beginning of the period. 
 
Total Shareholder Return (TSR): Is calculated by the growth in capital from
purchasing a share in the Company assuming that the dividends are reinvested
each time they are paid. 
 
Weighted average debt maturity: Is measured in years when each tranche of
Group debt is multiplied by the remaining period to its maturity and the
result is divided by total Group debt in issue at the period end. 
 
Weighted average unexpired lease term (WAULT): Is the average lease term
remaining to first break, or expiry, across the portfolio weighted by rental
income. This is also disclosed assuming all break clauses are exercised at the
earliest date, as stated. 
 
This information is provided by RNS
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