REG - Palace Capital PLC - Interim Results
15/11/2023 07:00
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RNS Number : 4575T Palace Capital PLC 15 November 2023
15 November 2023
Palace Capital plc
("Palace Capital" or the "Company")
Interim Results for the six months ended 30 September 2023
FOCUSED ON MAXIMISING CASH RETURNS TO SHAREHOLDERS
Palace Capital (LSE: PCA) announces its unaudited results for the six months
ended 30 September 2023.
Steven Owen, Executive Chairman, commented:
"We continue to make good progress in achieving disposals at values ahead of
book enabling us to further reduce debt and leverage as we deliver on our
strategy of maximising cash returns to shareholders. Proactive balance sheet
management ensures Palace Capital is in a strong financial position, with net
debt currently at £7.7 million and leverage at 6.5%, both having been reduced
since the period end. This provides the Company with the flexibility and
optionality regarding the timing of future disposals and other strategic
initiatives, including various options for returning capital to shareholders.
The results below reflect the disposals strategy.
"At an operational level, the Company continues to make good progress with its
asset management activities notwithstanding the difficult and uncertain
conditions in financial and property markets.
"Since July 2022, we have returned £21.9 million of capital to shareholders
through share buybacks. It is expected that further progress regarding
disposals and options for returning capital, including a potential tender
offer, will be announced in a Trading Update during the first quarter of
2024."
Income Statement metrics Six months to Six months to Change
30 Sept 2023 30 Sept 2022
Adjusted profit before tax £2.3m £3.5m -34.3%
Adjusted earnings per share 5.5p 7.9p -30.4%
EPRA earnings £2.2m £2.1m +4.8%
IFRS loss before tax (£0.2m) (£12.4m)
Basic earnings per share (0.4p) (27.4p)
Dividends
Total dividend paid per share 7.5p 7.0p +7.1%
Balance Sheet and operational metrics 30 Sept 2023 31 March 2023 Change
EPRA NTA per share 294p 296p -0.7%
Net asset value £110.0m £128.5m -14.4%
Like-for-like portfolio valuation decrease (4.4%) (18.6%)
EPRA occupancy rate 87.6% 87.7%
Debt
Loan to value 9% 31%
Total drawn debt £20.2m £64.3m -68.6%
Average cost of debt 5.4% 5.8% -40bps
Average debt maturity 1.6 years 2.0 years
Financial highlights
· Adjusted profit before tax of £2.3 million (September 2022: £3.5
million) reflecting the reduction in income following disposals
· IFRS loss before tax for the period of £0.2 million (September
2022: £12.4 million loss) primarily due to the valuation deficit of £5.6
million offset by the profit on property disposals of £3.5 million
· Adjusted EPS of 5.5 pence (September 2022: 7.9 pence)
· 7.5 pence per share of dividends paid, an increase of 7.1%
(September 2022: 7.0p)
· Completed £15.2 million of share buybacks in the period, an 8.0
pence per share accretion to EPRA NTA
· EPRA NTA per share of 294 pence reduced by 0.7% (March 2023: 296
pence) and IFRS net assets of £110.0 million (March 2023: £128.5 million)
· Investment property portfolio valuation reduced by 4.4% on a
like-for-like basis
· Portfolio ERV growth over the half year was 2.6% on a like-for-like
basis
· LTV of 9% at 30 September 2023 (March 2023: 31%), which has reduced
further post period-end to 6.5%
· Gross debt reduced by £44.1m or 68.6% in the period to £20.2
million (March 2023: £64.3 million). Gross debt reduced by a further £6.2
million post period-end to £14.0 million
Operational highlights
· In the period to 30 September 2023, sale of 12 investment
properties for £66.9 million, 7% ahead of the 31 March 2023 book value
· Post period end, a further three investment properties have been
sold for £6.4 million, bringing the total sales year to date to £73.3
million, 6% ahead of the March 2023 book value
· Apartment sales at Hudson Quarter, York, have been slower,
reflecting the wider housing market but continue to progress. A further six
apartments have been sold since 31 March 2023 for a total of £2.6 million,
with aggregate proceeds of the 109 units sold totalling £40.1 million. Since
30 September two units are under offer for £1.2 million, leaving 16 units
remaining
· Portfolio WAULT resilient at 4.9 years (March 2023 4.8 years)
· An additional £1.1 million of annualised net rental income was
created during the half year through leasing and review activity and the
associated reduction in non-recoverable property costs which was, on average
3% ahead of the 31 March 2023 ERVs. Annualised net rental income lost from
lease expiries and breaks totalled £0.5 million resulting in a net additional
annualised increase of £0.6 million from active asset management activity.
Net rental income lost following disposals totalled £4.2 million per annum
resulting in a net loss in annualised net rental income of £3.6 million
· Rent collection for the first half of the financial year was 99%
(31 March 2023: 99%)
· EPRA occupancy remains stable at 87.6% (31 March 2023: 87.7%)
· Total Property Return of 2.4%, outperforming the MSCI UK Quarterly
Property Index benchmark performance of -0.5%.
Palace Capital plc
Steven Owen, Executive Chairman
info@palacecapitalplc.com (mailto:info@palacecapitalplc.com)
Financial PR
FTI Consulting
Dido Laurimore / Giles Barrie
Tel: +44 (0)20 3727 1000
palacecapital@fticonsulting.com (mailto:palacecapital@fticonsulting.com)
Cautionary Statement
This announcement does not constitute an offer of securities by the Company.
Nothing in this announcement is intended to be, or intended to be construed
as, a profit forecast or a guide as to the performance, financial or
otherwise, of the Company or the Group whether in the current or any future
financial year. This announcement may include statements that are, or may be
deemed to be, ''forward-looking statements''. These forward-looking statements
can be identified by the use of forward-looking terminology, including the
terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'',
''plans'', ''target'', ''aim'', ''may'', ''will'', ''would'', ''could'' or
''should'' or, in each case, their negative or other variations or comparable
terminology. They may appear in a number of places throughout this
announcement and include statements regarding the intentions, beliefs or
current expectations of the directors, the Company or the Group concerning,
amongst other things, the operating results, financial condition, prospects,
growth, strategies and dividend policy of the Group or the industry in which
it operates. By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on circumstances that
may or may not occur in the future and may be beyond the Company's ability to
control or predict. Forward-looking statements are not guarantees of future
performance. The Group's actual operating results, financial condition,
dividend policy or the development of the industry in which it operates may
differ materially from the impression created by the forward-looking
statements contained in this announcement. In addition, even if the operating
results, financial condition and dividend policy of the Group, or the
development of the industry in which it operates, are consistent with the
forward-looking statements contained in this announcement, those results or
developments may not be indicative of results or developments in subsequent
periods. Important factors that could cause these differences include, but are
not limited to, general economic and business conditions, industry trends,
competition, changes in government and other regulation, changes in political
and economic stability and changes in business strategy or development plans
and other risks.
Other than in accordance with its legal or regulatory obligations, the Company
does not accept any obligation to update or revise publicly any
forward-looking statement, whether as a result of new information, future
events or otherwise.
EXECUTIVE CHAIRMAN'S STATEMENT
Update on delivery of strategic objectives
At our Full Year results announced in June, it was noted that the year ahead
was likely to be further affected by continuing macroeconomic and
geo-political uncertainty although the inflation outlook in the UK was
expected to improve. Increased interest rates continue to adversely impact the
commercial property market in relation to general investment activity,
although the Company has had an active first half, disposing of £66.9 million
of investment properties at 7% above the 31 March 2023 valuation. This
includes the office building in Maidenhead sold after the Trading Update of 26
July 2023 for £9.0 million, 9.7% ahead of the March 2023 valuation.
Since 30 September 2023, three investment properties have been sold for £6.4
million, 2% above the March 2023 valuation: the long leasehold interest of a
residential block at HQ York for £1.5 million; Bank House, Leeds, for £2.65
million: and Princeton House, Farnborough, for £2.28 million. These take
total investment property sales in the year to date to £73.3 million, which
is 6% above the March 2023 valuation.
Unsurprisingly, activity in relation to residential sales at Hudson Quarter,
York, has been more muted with a further six apartment sales completed during
the half year period for £2.6 million and since 30 September two units are
under offer for £1.2 million, leaving 16 units remaining.
Total investment properties sold since the change of strategy in July 2022
amount to £84.4 million or £94.5 million including residential apartments.
Operationally, the business remains robust. The team has been proactive in
implementing asset management plans to increase income and reduce void costs
with lettings, renewals and rent reviews on average 3% ahead of the 31 March
2023 estimated rental values. During the first half, 14 lease events
comprising five new lettings, three lease renewals and six rent reviews were
completed across 129,000 sq ft of space providing £0.8 million of additional
annualised income. Including the associated reduction in non-recoverable
property costs of £0.3 million, an additional £1.1 million of annualised net
rental income was created during the first half.
There were two key lettings during the period:
Firstly, at 2 St James' Gate, Newcastle, where Orega, a premium, flexible,
serviced office workspace provider, entered into a 15 year management
agreement to take the second and third floors totalling 22,500 sq ft of the
seven storey, 82,500 sq ft building. Following a comprehensive refurbishment,
which is currently underway, the operation is expected to open shortly,
providing c.400 workstations. This letting significantly increased the
occupancy at the property, taking it from 65% as at 31 March 2023 to 88% as at
30 September 2023 and, together with the letting to Softcat plc in December
2022, are the first two major lettings at St James' Gate since the property
was acquired in 2017.
Secondly, at Broad Street Plaza, Halifax, where Calderdale and Huddersfield
NHS Foundation Trust entered into a new 15 year lease and took an additional
6,000 sq ft unit increasing their occupation to over 27,000 sq ft. The new
rent on the combined space is over £14 psf and is 41% higher than the March
2023 ERV. The NHS now accounts for over 16% of the net income from the
property and we believe that the letting was the key reason why the property
increased in value as at September 2023 compared with March 2023.
In terms of managing our own costs, Palace Capital continues to reduce its
level of administrative expenses in line with its strategy, with measures
implemented in the period saving £0.5 million and £0.9 million in the year
to date. This includes reducing headcount and relocating its head office to a
smaller office in Victoria, London on expiry of its current lease term on 1
December 2023. Annual occupancy costs of the Company's new premises will be
£0.25 million lower than those of its former offices in Bury Street, SW1.
During the half year period, the Company purchased 6.2 million shares for
£15.2 million, contributing an additional 8.0 pence to EPRA NTA. Since July
2022, cash returned to shareholders through the share buyback programmes to
date totals £21.9 million.
Overview of results
The Group's adjusted profit before tax reduced to £2.3 million (September
2022: £3.5 million) as a result of income lost through disposals. Investment
property sales during the half year period totalled £66.9 million, which
realised a profit of £3.4 million (September 2022: £0.9 million). Trading
profits from the sale of residential units realised a profit of £0.1 million
(September 2022: £0.1 million).
The whole portfolio was independently valued by CBRE as at 30 September 2023
at £124.5 million, a reduction of 4.4% on a like-for-like basis. The
valuation deficit of £5.6 million equates to 13.5 pence per share.
The investment portfolio (excluding residential properties held as trading
properties) was valued at £115.2 million and a net initial yield (NIY) of
8.1%. Within the investment portfolio the office and leisure assets, which
comprise 84% of the portfolio, were valued at NIYs of 7.4% and 11.0%
respectively.
The ERVs used by the valuers were, on the whole portfolio, 2.6% higher on a
like-for-like basis than as at 31 March 2023. Within the portfolio the ERV
growth for the office and leisure assets was 2.1% and 5.1% respectively.
EPRA NTA decreased by 2.0 pence per share or 0.7% to 294 pence (March 2023:
296 pence) during the period, principally as a result of the revaluation
deficit of £5.6 million or 13.5 pence per share offset by the 8.0 pence per
share share buyback accretion and the profit from the disposal of investment
properties, which contributed 8.2 pence per share. The excess of dividends
paid per share over adjusted earnings per share was -2.0 pence per share and
other items, principally the denominator effect of the reduced number of
shares at period end compared with the average for the period, was -2.7 pence
per share.
The Group's balance sheet remains strong with cash reserves of £8.9 million
as at 30 September 2023. Gross debt reduced by 68.6% in the period to £20.2
million (March 2023: £64.3 million), which has resulted in the loan to value
ratio reducing to 9% (March 2023: 31%). Since the half year end, gross debt
has reduced by a further £6.2 million and proforma LTV has reduced to 6.5%.
Directorate Change
Today, the Company has announced further progress in the delivery of its
strategy to focus on maximising cash returns to shareholders. In light of
this, Matthew Simpson, CFO and the Board have agreed that now is the right
time for Matthew to step down as a Director and from the Board. The Company's
financial circumstances (including cancellation of bank facilities and reduced
portfolio size) mean that the CFO role is significantly reduced and therefore
no longer requires the level of expertise and skillset that Matthew
contributes.
Matthew's CFO report is contained within this Half Year Report below.
Going forward, the financial operations of the Company will be managed by the
Financial Controller and Financial Planning Analyst with operational oversight
by myself as Executive Chairman and by the Audit and Risk Committee on behalf
of the Board. After a short handover, Matthew will leave the Company at the
end of this month.
Matthew leaves with the Board's best wishes and gratitude for his eight years
with the Company, latterly as CFO and prior to that as Financial Controller.
He has supported the Board in reshaping the Company over the last sixteen
months including returning cash to shareholders and reducing bank debt.
Dividend
The Group increased its paid dividends by 7.1% to 7.5 pence per share
(September 2022: 7.0 pence per share) in relation to the period ended 30
September 2023. The Company has declared an interim dividend of 3.75 pence per
share which will be paid on 29 December 2023 as a Property Income Distribution
(PID). The record date will be 24 November 2023.
As previously reported, the dividend policy is that the current level of
dividend is expected to be maintained and paid from adjusted profits including
trading profits. As the portfolio has been significantly repositioned and cash
returned to shareholders in the last 12 months, if this level of dividend
cannot be achieved then, as a minimum, the dividend payment is expected to be
set at the Property Income Distribution (PID) level.
AGM update
In line with best practice recommendations, the Company provides an update on
communication with shareholders on issues where there were significant votes
against a resolution at the AGM. In relation to the votes for the resolution
seeking approval of my own re-election, 77% of votes cast at the AGM were in
favour of the resolution. Mark Davies, Senior Independent Director contacted a
major shareholder who had voted against the resolution. That shareholder
subsequently confirmed that this had been an administrative error and that
they had intended to vote in favour of the resolution, as they had done with
all of the other resolutions proposed. Had this been correctly cast, the votes
in favour of the resolution would have been 91% instead of the 77% recorded.
We continue to communicate with our major shareholders on significant issues
affecting the Company and welcome constructive dialogue.
General Meeting
The Company has successfully used share buybacks as one method of returning
capital to shareholders. Accordingly, further authority is sought for the
Company to acquire its own shares, having fully utilised the authority for the
market purchase of its own shares previously provided by shareholders at the
AGM held on 26 July 2023. The Company will hold a General Meeting to consider
this resolution with the General Meeting being held in person at the offices
of CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street,
London EC4N 6AF at 1.00 p.m. on Monday 4 December 2023. The number of shares
subject to the proposal is 5,634,044 shares representing approximately 15% of
the issued ordinary share capital of the Company as at 14 November 2023. Full
details are contained in the Notice of General Meeting which will shortly be
available on the Company's website www.palacecapitalplc
(http://www.palacecapitalplc) .com. The Company is utilising the authority
provided by shareholders at the 2023 AGM to hold a general meeting on a
shorter timescale of 14 clear days' notice to provide the Company with the
appropriate flexibility, which is considered by the Directors to be in the
best interests of the Company.
Outlook
The commercial property market remains challenging but the disposals in the
current financial year to date represent a further significant step forward in
reducing debt and leverage and demonstrate continued progress in our strategy
of maximising cash returns to shareholders. The Company is in a strong
financial position and its current low leverage of 6.5% provides it with the
flexibility and optionality regarding the timing of further disposals and
other strategic initiatives, including various options for returning capital
to shareholders.
At an operational level, the Company continues to make good progress with its
asset management activities notwithstanding the difficult and uncertain
conditions in financial and property markets.
It is expected that further progress regarding disposals and options for
returning capital, including a potential tender offer, will be announced in a
Trading Update during the first quarter of 2024.
Steven Owen
Executive Chairman
CHIEF FINANCIAL OFFICER'S REPORT
Financial Overview
The Company's adjusted profit before tax reduced by 34.3% to £2.3 million
(September 2022: £3.5 million) and EPRA NTA per share by 0.7% to 294 pence
(March 2023: 296 pence). Against a backdrop of economic uncertainty, Palace
Capital continued to deliver at an operational level, by reducing gross debt
in a rising interest rate environment and making continued progress in
reducing administration costs. In line with the strategy of returning capital
to shareholders, the Company has increased the dividend paid by 7.1% in the
period compared with the previous half year and completed £15.2 million of
share buybacks in the period, which was accretive to EPRA NTA by 8.0 pence per
share. The summary of the Company's financial results are as follows:
Income Statement Summary
Income Statement 30 Sept 2023 30 Sept 2022
£m £m
Gross property income (excluding ECL provision) 6.9 8.7
Property operating expenses (1.5) (1.3)
Expected Credit Loss provision - (0.1)
Net property income (excluding trading profit) 5.4 7.3
Recurring administration expenditure (1.7) (2.0)
Finance income 0.2 -
Finance costs (1.6) (1.8)
Adjusted profit before tax 2.3 3.5
Tax - 0.1
Adjusted profit after tax 2.3 3.6
Payments to former Directors (including associated costs) - (1.4)
Share based payments (0.1) (0.1)
EPRA earnings 2.2 2.1
Loss on revaluations (5.6) (15.6)
Trading profit 0.1 0.1
Profit on disposal of investment properties 3.4 0.9
Change in fair value of interest rate derivatives - 0.2
Debt termination costs (0.3) -
IFRS earnings (0.2) (12.3)
Net property income in the period reduced to £5.4 million (September 2022:
£7.3 million) as result of the twelve investment property disposals in the
period, which were 7% ahead of the 31 March 2023 book value. Property
operating expenses have risen by £0.2 million as a result of inflationary
pressures on service charge and insurance costs on our void units. Rent
collection has remained consistently high at 99% throughout the period.
The Company has continued to reduce its cost base, with annualised cost
savings of £0.5 million in the period and £0.9 million in the year to date.
As a result of cost savings implemented in the prior year of £1.4 million,
total savings for FY23 and FY24 to date are £2.3 million. Recurring
administrative costs reduced by 15% to £1.7 million (September 2022: £2.0
million) for the period
Finance costs have reduced by 11.1% or £0.2 million to £1.6 million
(September 2022: £1.8 million) following the significant reduction in our
debt in the period, despite the increases in Bank of England base rates.
EPRA NTA Movement
EPRA NTA decreased by 2 pence per share or 0.7% to 294 pence (March 2023: 296
pence) during the period. The revaluation deficit of £5.6 million or 13.5
pence per share reduced EPRA NTA as a result of a 4.4% like-for-like reduction
in the property portfolio. This was offset by the £15.2 million of shares
purchased through the share buyback programme in the period, which was
accretive by 8.0 pence per share, and the profit from the disposal of
investment properties which contributed 8.2 pence per share. These disposals
were 7% ahead of the 31 March 2023 book value.
Adjusted earnings before tax of £2.3 million increased EPRA NTA by 5.5 pence
per share, this was offset by the dividends paid in the period of 7.5 pence
per share. Hudson Quarter trading profit (net of fair value adjustment to
trading properties) increased EPRA NTA by 0.1 pence per share, whilst other
movements contributed to a reduction of 2.8 pence per share.
£m No. of shares (diluted) Pence per share
EPRA NTA at 31 March 2023 129.3 43,728,212 296.0p
Share buyback (15.2) (6,160,000) 8.0p
EPRA NTA after share buyback 114.1 37,568,212 304.0p
Profit on sale of investment properties 3.4 8.2p
Adjusted earnings before tax 2.3 5.5p
Hudson Quarter trading profit 0.1 0.4p
Loss on revaluation of investment property (5.6) (13.5p)
Cash dividends paid (3.2) (7.5p)
Fair value adj. of trading properties (0.1) (0.3p)
Other movements* (0.4) (8,259) (2.8p)
EPRA NTA at 30 September 2023 110.6 37,559,953 294.0p
*Other movements include debt termination costs, shares purchased by EBT, the
denominator effect of the reduced number of shares at period end compared with
the average for the period and the effect of rounding.
FINANCING
The Company has made further significant progress in reducing its drawn debt
which has been reduced by £44.1 million, or 68.6% to £20.2 million (March
2023: £64.2 million). This includes the repayment of the Santander and Lloyds
debt facilities, which had drawn debt at 31 March 2023 of £11.8 million and
£6.8 million respectively. The repayment of these two facilities enabled the
release from charge of £34.0 million of property, giving the Group further
flexibility and optionality regarding the timing of the sales of such
properties.
The Company prioritises the efficient use of its capital, and the £44.1
million reduction in debt has resulted in an LTV of 9% at 30 September 2023
(March 2023: 31%) and reduced our average cost of debt to 5.4% (March 2023:
5.8%). The Company has remained compliant with all covenants on its bank
facilities in the period.
At 30 September 2023 cash and net debt was £8.9 million (March 2023: £5.5
million) and £11.3 million (March 2023: £58.8 million) respectively, with
the disposal proceeds from Hudson Quarter residential sales continuing to
enhance cash reserves, as this cash is unfettered and free from bank debt.
Since 30 September 2023, the Company has repaid a further £6.2 million of
drawn debt, resulting in a net debt of £7.7 million and an LTV of 6.5%. This
includes the full repayment of the NatWest term loan and the cancellation of
the undrawn Revolving Credit Facility of £20.0 million.
Set out below is a table showing the movement in drawn debt during the year:
£m
Drawn debt at 31 March 2023 64.3
Repayment of debt from disposals (43.2)
Amortisation of loans (0.9)
Drawn debt at 30 September 2023 20.2
Repayment of debt from disposals (5.9)
Amortisation of loans (0.3)
Drawn debt at 14 November 2023 14.0
At 30 September 2023 we held £8.4 million of fixed rate debt (March 2023:
£8.6 million) which was 42% of overall drawn debt (March 2023: 13%), as shown
in the table below:
DEBT AT 30 SEPTEMBER 2023
Fixed Floating Total drawn Years to
£m £m £m
maturity
Barclays - 5.9 5.9 0.7
NatWest - 5.9 5.9 0.9
Scottish Widows 8.4 - 8.4 2.8
8.4 11.8 20.2 1.6
Following the repayment of the NatWest facility the percentage of fixed rate
debt has increased to 60% from 42%.
The Company's key debt metrics are summarised in the table below:
DEBT METRICS
30 September 31 March
2023 2023
Net loan to value ratio 9% 31%
Debt drawn £20.2m £64.3m
Total fixed debt £8.4m £8.6m
Average cost of debt 5.4% 5.8%
Average debt maturity 1.6yrs 2.0yrs
NAV gearing 10% 46%
Matthew Simpson
CHIEF FINANCIAL OFFICER
14 November 2023
Statement of Principal Risks
We consider there has been no material changes to the Company's principal
risks, as set out in the Annual Report and Accounts for the year ended 31
March 2023 and summarised below. However, several risks continue to be
elevated as a result of the ongoing economic outlook for the UK.
This includes increased risks relating to Market Cycle, Economic and
Political, Liquidity and Valuation through increased economic uncertainty,
higher interest rates, inflation and energy costs which may negatively impact
revenues and costs for our tenants, for the commercial property market and the
Company. We are working with our tenants, banks and other stakeholders to
mitigate these risks.
01 02 03
MARKET CYCLE ECONOMIC AND POLITICAL CAPITAL STRUCTURE
Risk description Risk description Risk description
Failure to react appropriately to changing market conditions and adapt our Uncertainty in the UK economic landscape, global supply chain issues, An inappropriate level of gearing or failure to comply with debt covenants or
corporate strategy could negatively impact shareholder returns. inflation and interest rates, cost of energy crisis brings risks to the manage re-financing events could put pressure on cash resources and lead to a
property market, supply chains and to occupiers' businesses. This can funding shortfall for operational activities.
significantly impact market sentiment and our ability to extract value from
our properties resulting in lower shareholder returns, reduced liquidity and
increased occupier failure.
04 05 06
LIQUIDITY PORTFOLIO STRATEGY - ASSET MANAGEMENT
Risk description Risk Description Risk description
Increasing costs of borrowing due to increasing interest rates could affect An inappropriate investment strategy that is not aligned to overall corporate Failure to implement asset business plans and elevated risks associated with
the Company's ability to borrow or reduce its ability to repay its debts purpose objectives, economic conditions or tenant demand may result in lower refurbishment could lead to longer void periods, higher arrears and overall
investment returns investment performance, adversely impacting returns and cashflows.
07 08 09
VALUATION TENANT DEMAND BUSINESS CONTINUITY AND CYBER SECURITY
AND DEFAULT
Risk description Risk description Risk description
Decreasing capital and rental values could impact the Company's portfolio Failure to adapt to changing occupier demands and/or poor tenant covenants may Business disruption as a result of physical damage to buildings, Government
valuation leading to lower returns. result in us losing significant tenants, which could materially impact income, policy and social distancing measures implemented in response to pandemics,
capital values and profit. cyber attacks or other operational or IT failures or unforeseen events may
impact income and profits.
Rising inflation, interest rates and living costs could impact tenant
businesses, such as the leisure industry, as demand falls for discretionary
spending.
10 11 12
PEOPLE CLIMATE CHANGE REGULATORY AND TAX
Risk description Risk description Risk description
An inability to attract or retain staff with the right skills and experience Failure to anticipate and prepare for transition and physical risks associated Non-compliance with the legal and regulatory requirements of a public real
or failure to implement appropriate succession plans may result in significant with climate change including increasing policy and compliance risks estate company, including the REIT regime could result in convictions or fines
underperformance or impact the overall effectiveness of our operations. associated with existing and emerging environmental legislation could lead to and negatively impact reputation.
increased costs and the Company's assets becoming obsolete or unable to
attract occupiers.
Statement of Directors' Responsibilities
The Directors confirm that the condensed set of consolidated financial
statements have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the European Union
and that the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8, namely:
• an indication of important events that have occurred
during the first six months and their impact on the condensed interim
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
• material related-party transactions in the first six
months and any material changes in the related-party transactions described in
the last annual report.
The Directors of Palace Capital plc are listed on the Company website
www.palacecapitalplc.com
By order of the Board
Phil Higgins
Company Secretary
14 November 2023
Palace Capital plc
Condensed consolidated statement of comprehensive income
For the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
Notes £000 £000 £000
Revenue 3 12,108 14,340 32,973
Cost of sales 4 (6,551) (6,934) (17,147)
Movement in expected credit loss - - 327
Net property income 5,557 7,406 16,153
Administrative expenses (1,816) (3,529) (6,094)
Operating profit before gains and losses on property assets 3,741 3,877 10,059
Profit on disposal of investment properties 3,383 882 819
Loss on revaluation of investment properties 9 (5,613) (15,587) (42,900)
Operating profit/(loss) 1,511 (10,828) (32,022)
Finance income 176 2 26
Finance expense (1,552) (1,725) (3,970)
Debt termination costs (6)
(324) (15)
Changes in fair value of interest rate derivatives - 184 210
Loss before taxation (189) (12,373) (35,771)
Taxation 5 16 31 67
Loss after taxation for the period and total comprehensive loss attributable (173) (12,342) (35,704)
to owners of the Parent
Earnings per ordinary share
Basic 6 (0.4p) (27.4p) (80.2p)
Diluted 6 (0.4p) (27.4p) (80.2p)
The accompanying notes form an integral part of these condensed consolidated
interim financial statements.
Palace Capital plc
Condensed consolidated statement of financial position
For the six months ended 30 September 2023
Notes Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Non-current assets
Investment properties 9 111,337 213,928 176,504
Right of use asset 33 - 132
Property, plant and equipment 16 34 23
111,386 213,962 176,659
Current assets
Trading property 10 8,713 17,005 11,055
Trade and other receivables 11 8,079 8,191 8,550
Cash and cash equivalents 12 8,870 12,888 5,509
Derivative financial instruments 15 - 252 -
25,662 38,336 25,114
Total assets 137,048 252,298 201,773
Current liabilities
Trade and other payables 13 (6,962) (7,408) (8,339)
Borrowings 14 (11,951) (1,718) (8,545)
Lease liabilities for right of use asset (33) - (132)
Creditors: amounts falling due within one year (18,946) (9,126) (17,016)
Net current assets 6,716 29,210 8,098
Non-current liabilities
Borrowings 14 (8,078) (86,247) (55,129)
Deferred tax liability (61) (113) (76)
Lease liabilities for investment properties - (1,077) (1,077)
Net Assets 109,963 155,735 128,475
Equity
Called up share capital 16 4,639 4,639 4,639
Merger reserve 3,503 3,503 3,503
Capital redemption reserve 340 340 340
Treasury share reserve (22,457) (6,669) (7,343)
Capital reduction reserve 115,249 121,779 118,477
Retained earnings 8,689 32,143 8,859
Equity shareholders' funds 109,963 155,735 128,475
Basic NAV per ordinary share 7 293p 354p 294p
Diluted NAV per ordinary share 7 293p 354p 294p
EPRA NTA per ordinary share 7 294p 356p 296p
The accompanying notes form an integral part of these condensed consolidated
interim financial statements.
The condensed consolidated interim financial statements were approved by the
Board of Directors on 14 November 2023.
The accompanying notes form an integral part of these condensed consolidated
interim financial statements.
Palace Capital plc
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2023
Treasury Shares Capital reduction reserve
Share Reserve Other £000 Retained Earnings Total
Capital £000 Reserves £000 equity
£000 £000 £000
As at 31 March 2022 4,639 (717) 3,843 125,019 44,420 177,204
Total comprehensive loss for the period - - - - (12,342) (12,342)
Share based payments - - - - 100 100
Exercise of share options - 73 - - (73) -
Issue of deferred bonus share options - - - - 38 38
Dividends paid - - - (3,240) - (3,240)
Share buyback - (6,025) - - - (6,025)
As at 30 September 2022 4,639 (6,669) 3,843 121,779 32,143 155,735
Total comprehensive loss for the period - - - - (23,362) (23,362)
Share based payments - - - - 77 77
Exercise of share options - (2) - - 2 -
Issue of deferred bonus share options - - - - (1) (1)
Dividends paid - - - (3,302) - (3,302)
Share buyback - (672) - - - (672)
As at 31 March 2023 4,639 (7,343) 3,843 118,477 8,859 128,475
Total comprehensive loss for the period - - - - (173) (173)
Share based payments - - - - 68 68
Exercise of share options - 65 - - (65) -
Dividends - - - (3,228) - (3,228)
Share buyback - (15,179) - - - (15,179)
As at 30 September 2023 4,639 (22,457) 3,843 115,249 8,689 109,963
The accompanying notes form an integral part of these condensed consolidated
interim financial statements.
Palace Capital plc
Condensed consolidated statement of cash flows
For the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
Notes £000 £000 £000
Operating activities
Loss before taxation (189) (12,373) (35,771)
Finance income (176) (2) (26)
Finance expense 1,552 1,725 3,970
Changes in fair value of interest rate derivatives - (184) (210)
Loss on revaluation of investment property portfolio 9 5,613 15,587 42,900
Profit on disposal of investment properties (3,383) (882) (819)
Debt termination costs 324 6 15
Depreciation of tangible fixed assets 7 17 30
Amortisation of right of use asset 99 17 82
Share-based payment 68 100 177
Increase in trade and other receivables (680) (779) (1,140)
Decrease in trade and other payables (1,231) (1,411) (415)
Decrease in trading property 2,342 3,282 9,233
Net cash generated from operations 4,346 5,103 18,026
Interest received 176 2 26
Interest and other finances charges paid (1,818) (1,619) (3,427)
Corporation tax paid in respect of operating activities - (106) (171)
Net cash flows from operating activities 2,704 3,380 14,454
Investing activities
Capital expenditure on refurbishment of investment property 9 (2,657) (608) (1,371)
Proceeds from disposal of investment properties 9 65,835 4,692 15,410
Purchase of property, plant and equipment - (6) (8)
Cash flows from investing activities 63,178 4,078 14,031
Financing activities
Bank loan repaid (44,096) (13,037) (37,419)
Loan issue costs (18) (411) (461)
Dividends paid 8 (3,228) (3,240) (6,542)
Share buyback (15,179) (6,025) (6,697)
Cash flows from financing activities (62,521) (22,713) (51,119)
Net increase/(decrease) in cash 3,361 (15,255) (22,634)
Opening cash and cash equivalents 12 5,509 28,143 28,143
Closing cash and cash equivalents 12 8,870 12,888 5,509
Palace Capital plc
Notes to the condensed consolidated financial statements
For the six months ended 30 September 2023
1 General information
These financial statements are for Palace Capital plc ("the Company") and its
subsidiary undertakings (together "the Group").
The Company's shares are admitted to trading on the Main Market of the London
Stock Exchange. The Company is domiciled and registered in England and Wales
and incorporated under the Companies Act 2006. The address of its registered
office is Fora Victoria, 6-8 Greencoat Place, London, SW1P 1PL.
The nature of the Company's operations and its principal activities are that
of property investment in the UK.
Basis of preparation
The condensed consolidated financial information included in this half yearly
report has been prepared in accordance with the IAS 34 "Interim Financial
Reporting", as adopted by the European Union. The current period information
presented in this document is unaudited and does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006.
The interim results have been prepared in accordance with applicable
International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board
(IASB). These standards are collectively referred to as "IFRS".
The accounting policies and methods of computations used are consistent with
those as reported in the Group's Annual Report for the year ended 31 March
2023 and are expected to be used in the Group's Annual Report for the year
ended 31 March 2024.
The financial information for the year ended 31 March 2023 presented in these
unaudited condensed Group interim financial statements does not constitute the
Company's statutory accounts for that period but has been derived from them.
The Report and Accounts for the year ended 31 March 2023 were audited and have
been filed with the Registrar of Companies. The Independent Auditor's Report
on the Report and Accounts for the year ended 31 March 2023 was unqualified
and did not contain statements under s498(2) or (3) of the Companies Act 2006.
The financial information for the periods ended 30 September 2022 and 30
September 2023 are unaudited and have not been subject to a review in
accordance with International Standard on Review Engagements 2410, Review of
Interim Financial Information performed by the Independent Auditor of the
Entity, issued by the Auditing Practices Board.
The interim report was approved by the Board of Directors on 14 November 2023.
Copies of this statement are available to the public for collection at the
Company's Registered Office at Fora Victoria, 6-8 Greencoat Place, London,
SW1P 1PL and on the Company's website, www.palacecapitalplc.com
(http://www.palacecapitalplc.com) .
Going Concern
The Directors have made an assessment of the Group's ability to continue as a
going concern which included the current uncertainties around the economic
climate brought on by rising inflation and rising interest rates. In this
assessment, the Directors considered the impact on the Group's cash resources,
borrowing facilities (including impact on bank covenants), rental income,
disposals of investment and trading properties, committed capital and dividend
distributions. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are described in these financial statements.
As at 30 September 2023 the Group had £8.9m of unrestricted cash and cash
equivalents, a low gearing level of 9% and a fair value property portfolio of
£124.5m. The Directors have reviewed the forecasts for the Group taking into
account the impact of rising inflation and rising interest rates on trading
over the 12 months from the date of signing this report.
The Directors have a reasonable expectation that the Group have adequate
resources to continue in operation for at least 12 months from the date of
approval of the financial statements.
Accordingly, they continue to adopt the going concern basis in preparing the
Interim Report.
2 Segmental reporting
During the period, the Group operated in one business segment, being property
investment in the UK and as such no further information is provided.
3 Revenue
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Gross rental income 6,839 8,616 17,425
Dilapidations and other property related income 55 4 401
Insurance commission - - 68
Gross property income 6,894 8,620 17,894
Trading property income 2,584 3,523 4,974
Service charge income 2,630 2,197 10,105
Total revenue 12,108 14,340 32,973
4 Cost of sales
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Void costs 1,027 847 2,076
Legal, lettings and consultancy costs 457 458 502
Property operating expenses 1,484 1,305 2,578
Trading property costs of sales 2,437 3,432 4,974
Service charge expense 2,630 2,197 9,595
Total cost of sales 6,551 6,934 17,147
5 Taxation
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Deferred tax (16) (31) (67)
Tax credit (16) (31) (67)
As a result of the Company's conversion to a REIT on 1 August 2019, the Group
is no longer required to pay UK corporation tax in respect of property rental
income and capital gains relating to its property rental business.
6 Earnings per share
Basic earnings per share and diluted earnings per share have been calculated
on profit after tax attributable to ordinary Shareholders for the year (as
shown on the Consolidated Statement of Comprehensive Income) and for the
earnings per share, the weighted average number of ordinary shares in issue
during the period (see table below) and for diluted weighted average number of
ordinary shares in issue during the year (see table below).
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Loss after tax attributable to ordinary Shareholders for the year (173) (12,342) (35,704)
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
Weighted average number of shares for basic earnings per share 41,505,586 45,033,081 44,525,518
Dilutive effect of share options - 9,831 -
Weighted average number of shares for diluted earnings per share 41,505,586 45,042,912 44,525,518
Earnings per ordinary share
Basic (0.4p) (27.4p) (80.2p)
Diluted (0.4p) (27.4p) (80.2p)
The Group financial statements are prepared under IFRS which incorporates
non-realised fair value measures and non-recurring items. Alternative
Performance Measures ("APMs"), being financial measures, which are not
specified under IFRS, are also used by management to assess the Group's
performance. These include a number of European Public Real Estate Association
("EPRA") measures, prepared in accordance with the EPRA Best Practice
Recommendations reporting framework the latest update of which was issued in
November 2019. The Group reports a number of these measures (detailed in the
glossary of terms) because the Directors consider them to improve the
transparency and relevance of our published results as well as the
comparability with other listed European real estate companies.
EPRA Earnings is a measure of operational performance and represents the net
income generated from the operational activities. It is intended to provide an
indicator of the underlying income performance generated from the leasing and
management of the property portfolio. EPRA earnings are calculated taking the
profit after tax excluding investment property revaluations and gains and
losses on disposals, changes in fair value of financial instruments and
one-off finance termination costs. EPRA earnings is calculated on the basis of
the basic number of shares in line with IFRS earnings as the dividends to
which they give rise accrue to current Shareholders.
The Group also reports an adjusted earnings measure which is based on
recurring earnings before tax and the basic number of shares. This is the
basis on which the Directors consider dividend cover. This takes EPRA earnings
as the starting point and then adds back tax and any other fair value
movements or one-off items that were included in EPRA earnings. This includes
share-based payments being a non-cash expense, as well as payments to former
Directors, which is a one-off exceptional item. The corporation tax charge
(excluding deferred tax movements, being a non-cash expense) is deducted in
order to calculate the adjusted earnings per share, if the charge is in
relation to recurring earnings.
The earnings per ordinary share for the period is calculated based upon the
following information:
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Loss after tax attributable to ordinary shareholders for the period (173) (12,342) (35,704)
Adjustments:
Loss on revaluation of investment property portfolio 5,613 15,587 42,900
Profit on disposal of investment properties (3,383) (882) (819)
Trading property revenue and cost of sales (147) (91) (510)
Debt termination costs 324 6 15
Changes in fair value of interest rate derivatives - (184) (210)
EPRA earnings for the period 2,234 2,094 5,672
Share-based payments 68 100 177
Payments to former Directors (including associated costs) - 1,380 1,835
Adjusted profit after tax for the period 2,302 3,574 7,684
Tax excluding deferred tax on EPRA adjustments and capital gain charged (16) (31) (67)
Adjusted profit before tax for the period 2,286 3,543 7,617
EPRA and adjusted earnings per ordinary share
EPRA basic 5.4p 4.6p 12.7p
EPRA diluted 5.4p 4.6p 12.7p
Adjusted EPS 5.5p 7.9p 17.1p
7 Net asset value per share
The Company has adopted the new EPRA NAV measures which came into effect for
accounting periods starting 1 January 2020. EPRA issued new best practice
recommendations (BPR) for financial guidelines on its definitions of NAV
measures. The new NAV measures as outlined in the BPR are EPRA net tangible
assets (NTA), EPRA net reinvestment value (NRV) and EPRA net disposal value
(NDV). The Company has adopted these new guidelines and applies them in the 30
September 2023 Interim Report.
The Company considered EPRA Net Tangible Assets (NTA) to be the most relevant
NAV measure for the Company and we are now reporting this as our primary NAV
measure, replacing our previously reported EPRA NAV and EPRA NNNAV per share
metrics. EPRA NTA excludes the intangible assets and the cumulative fair value
adjustments for debt-related derivatives which are unlikely to be realised.
30 September 2023 (unaudited) 30 September 2022 (unaudited) 31 March 2023 (audited)
EPRA NTA (£000) EPRA NRV (£000) EPRA NDV (£000) EPRA NTA (£000) EPRA NRV (£000) EPRA NDV (£000) EPRA NTA (£000) EPRA NRV (£000) EPRA NDV (£000)
Net assets attributable to shareholders 109,963 109,963 109,963 155,735 155,735 155,735 128,475 128,475 128,475
Include:
Fair value adjustment of trading properties 587 587 587 1,390 1,390 1,390 730 730 730
Real estate transfer tax - 7,589 - - 14,347 - - 11,922 -
Fair value of fixed interest rate debt - - 929 - - 1,233 - - 863
Exclude:
Fair value of derivatives - - - (252) (252) - - - -
Deferred tax on latent capital gains and capital allowances 61 61 - 113 113 - 76 76 -
EPRA NAV 110,611 118,200 111,479 156,986 171,333 158,358 129,281 141,203 130,068
EPRA NAV per share 294p 315p 297p 356p 389p 360p 296p 323p 279p
Unaudited Audited
30 September 31 March
Unaudited 2022 2023
30 September
2023
Number of ordinary shares issued at the end of the period 37,559,953 44,027,014 43,718,381
Dilutive effect of share options - 9,831 9,831
Number of diluted ordinary shares for diluted and EPRA net assets per share 37,559,953 44,036,845 43,728,212
Net assets per ordinary share
Basic NAV 293p 354p 294p
Diluted NAV 293p 354p 294p
EPRA NTA 294p 356p 296p
8 Dividends
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 September 30 September 31 March
2023 2022 2023
Payment Date £000 £000 £000
Ordinary dividends paid
2022 Interim dividend: 3.25p per share 14 April 2022 - 1,504 1,504
2022 Final dividend: 3.75p per share 5 August 2022 - 1,736 1,736
2023 Interim dividend: 3.75p per share 14 October 2022 - - 1,651
2023 Interim dividend: 3.75p per share 13 January 2023 - - 1,651
2023 Interim dividend: 3.75p per share 14 April 2023 1,645 - -
2023 Final dividend: 3.75p per share 4 August 2023 1,583 - -
3,228 3,240 6,542
Proposed dividend
2024 Q1 interim dividend: 3.75p per share paid on 13 October 2023.
2024 Q2 interim dividend: 3.75p per share payable on 29 December 2023.
9 Property Portfolio
Freehold Investment properties Leasehold Investment properties Total investment properties
£000 £000 £000
At 1 April 2022 216,110 16,607 232,717
Additions - refurbishments 1,026 156 1,182
Loss on revaluation of investment properties (38,663) (4,237) (42,900)
Disposals (14,495) - (14,495)
At 31 March 2023 163,978 12,526 176,504
Additions - refurbishments 2,657 - 2,657
Reclassification of leasehold property to freehold property 3,000 (4,077) (1,077)
Loss on revaluation of investment properties (5,613) - (5,613)
Disposals (52,685) (8,449) (61,134)
At 30 September 2023 111,337 - 111,337
Investment properties Trading properties Total property portfolio
£000 £000 £000
At 1 April 2022 232,717 20,287 253,004
Additions - refurbishments 1,182 - 1,182
Additions - trading properties - 363 363
Loss on revaluation of properties (42,900) - (42,900)
Disposals (14,495) (9,595) (24,090)
At 31 March 2023 176,504 11,055 187,559
Additions - refurbishments 2,657 - 2,657
Additions - trading properties - 95 95
Reclassification of leasehold property to freehold property (1,077) - (1,077)
Loss on revaluation of properties (5,613) - (5,613)
Disposals (61,134) (2,437) (63,571)
At 30 September 2023 111,337 8,713 120,050
The property portfolio has been independently valued at fair value. The
valuations have been prepared in accordance with the RICS Valuation - Global
Standards July 2017 ("the Red Book") and incorporate the recommendations of
the International Valuation Standards and the RICS valuation - Professional
Standards UK January 2014 (Revised April 2015) which are consistent with the
principles set out in IFRS 13.
The valuer in forming its opinion makes a series of assumptions, which are
typically market related, such as net initial yields and expected rental
values, and are based on the valuer's professional judgement. The valuer has
sufficient current local and national knowledge of the particular property
markets involved and has the skills and understanding to undertake the
valuations competently.
At 30 September 2023, the Company's property portfolio was externally valued
by CBRE, a Royal Institution of Chartered Surveyors ("RICS") registered
independent valuer. A reconciliation of the valuations carried out by the
external valuer to the carrying values shown in the balance sheet was as
follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
CBRE (property portfolio) 124,455 235,620 192,355
Adjustment in respect of minimum payment
under head leases included as a liability - 1,077 1,077
Less trading properties at lower of cost and net realisable value (8,713) (17,005) (11,055)
Less lease incentive balance in accrued income (3,818) (4,374) (5,143)
Less fair value uplift on trading properties (587) (1,390) (730)
Carrying value of investment properties 111,337 213,928 176,504
Investment properties with a carrying value of £64,970,000 (31 March 2023:
£162,420,000) are subject to a first charge to secure the Group's bank loans
amounting to £20,238,000 (31 March 2023: £64,333,000). Trading properties
with a carrying value of £8,713,000 (31 March 2023: £11,055,000) are not
secured to the Group's bank loans and are therefore uncharged.
Valuation process - investment properties
The valuation reports produced by the independent valuers are based on
information provided by the Group such as current rents, terms and conditions
of lease agreements, service charges and capital expenditure. This information
is derived from the Company's financial and property management systems and is
subject to the Group's overall control environment.
In addition, the valuation reports are based on assumptions and valuation
models used by the independent valuers. The assumptions are typically market
related, such as yields and discount rates, and are based on their
professional judgment and market observations. Each property is considered a
separate asset, based on its unique nature, characteristics and the risks of
the property.
The Head of Investment is responsible for the valuation process verifies all
major inputs to the external valuation reports, assesses the individual
property valuation changes from the prior year valuation report and holds
discussions with the independent valuers. When this process is complete, the
valuation report is recommended to the Audit Committee, which considers it as
part of its overall responsibilities.
The key assumptions made in the valuation of the Company's investment
properties are:
• The amount and timing of future income streams;
• Anticipated maintenance costs and other landlord's liabilities;
• An appropriate yield; and
• For investment properties under construction: gross development value,
estimated cost to complete and an appropriate developer's margin.
Valuation technique - standing investment properties
The valuations reflect the tenancy data supplied by the group along with
associated revenue costs and capital expenditure. The fair value of the
commercial investment portfolio has been derived from capitalising the future
estimated net income receipts at capitalisation rates reflected by recent
arm's length sales transactions.
10 Trading property
Total
£000
At 1 April 2022 20,287
Costs capitalised 363
Disposal of trading properties (9,595)
At 31 March 2023 11,055
Costs capitalised 95
Disposal of trading properties (2,437)
At 30 September 2023 8,713
The Group has developed a large mixed-use scheme at Hudson Quarter, York. Part
of the approved scheme consisted of residential units which the Group held for
sale. As a result, the residential element of the scheme was classified as
trading property.
11 Trade and other receivables
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Current
Trade receivables 2,040 1,557 1,897
Prepayments and accrued income 4,139 4,879 5,563
Other taxes 255 116 97
Other debtors 1,645 1,639 993
8,079 8,191 8,550
12 Cash and cash equivalents
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Cash and cash equivalents 8,870 12,888 5,509
8,870 12,888 5,509
13 Trade and other payables
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Current
Trade payables 79 468 508
Accruals 2,077 1,473 2,342
Deferred rental income 2,285 3,485 3,359
Other taxes 798 740 646
Other payables 1,723 1,242 1,484
6,962 7,408 8,339
14 Borrowings
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Current borrowings
Bank loans 12,086 1,718 8,563
Unamortised lending costs (135) - (18)
11,951 1,718 8,545
Non-current borrowings
Bank loans 8,152 86,998 55,770
Unamortised lending costs (74) (751) (641)
8,078 86,247 55,129
Total borrowings
Bank loans 20,238 88,716 64,333
Unamortised lending costs (209) (751) (659)
20,029 87,965 63,674
The maturity profile of the Group's debt was as follows
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£000 £000 £000
Within one year 12,086 1,718 8,563
From one to two years 318 55,346 37,027
From two to five years 7,834 31,652 18,743
Total borrowings 20,238 88,716 64,333
Facility and arrangement fees
As at 30 September 2023 (unaudited)
Secured borrowings Facility drawn Unamortised facility fees Loan balance
All in cost Maturity £000 £000 £000
% date
Scottish Widows 2.90% July 2026 8,470 (74) 8,396
National Westminster Bank plc 7.29% August 2024 5,898 (106) 5,792
Barclays 7.14% June 2024 5,870 (29) 5,841
20,238 (209) 20,029
During the period, the Company repaid the Lloyds loan in full on 31(st) May
2023. The Group also repaid the Santander loan in full on 4(th) August 2023.
As at 31 March 2023 (audited)
Secured borrowings Facility drawn Unamortised facility fees Loan balance
All in cost Maturity £000 £000 £000
% date
Scottish Widows 2.90% July 2026 8,629 (71) 8,558
National Westminster Bank plc 6.28% August 2024 17,724 (171) 17,553
Barclays 6.13% June 2024 19,385 (62) 19,323
Santander Bank plc 6.38% May 2027 11,750 (337) 11,413
Lloyds Bank plc 6.13% Mach 2024 6,845 (18) 6,827
64,333 (659) 63,674
As at 30 September 2022 (unaudited)
Secured borrowings Facility drawn Unamortised facility fees Loan balance
All in cost Maturity £000 £000 £000
% date
Scottish Widows 2.90% July 2026 8,788 (82) 8,706
National Westminster Bank plc 4.29% August 2024 20,804 (180) 20,624
Barclays 3.29% June 2024 27,779 (95) 27,684
Santander Bank plc 4.39% May 2027 24,500 (377) 24,123
Lloyds Bank plc 4.14% March 2024 6,845 (17) 6,828
88,716 (751) 87,965
At 30 September 2023, the Company has unused loan facilities amounting to
£20,000,000 (31 March 2023: £20,000,000). A facility fee is charged on this
balance at a rate of 1.05% p.a. and is payable quarterly. This facility is
secured on the investment properties held by Property Investment Holdings
Limited, Palace Capital (Properties) Limited and Palace Capital (Leeds)
Limited as part of the NatWest loan.
Post period end, the NatWest term loan was fully repaid and the undrawn
Revolving Credit Facility of £20,000,000 cancelled.
15 Derivatives financial instruments
The Company adopts a policy of entering into derivative financial instruments
with banks to provide an economic hedge to its interest rate risks and ensure
its exposure to interest rate fluctuations is mitigated.
At 30 September 2023, the Company has no derivative financial instruments as
they all matured in the prior financial year. The Company continues to monitor
swap rates on an on-going basis.
Details of the interest rate swaps the Company has entered can be found in the
table below.
Bank Unaudited Unaudited 30 September 2022 Audited
30 September £000 31 March
Notional principal Contract rate % Valuation rate % 2023 2023
Expiry date £000 £000
Barclays Bank plc - - 1.34% - - 252 -
Santander plc - - 1.37% - - - -
- - 252 -
16 Share capital
Authorised, issued and fully paid share capital is as follows:
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
Share capital - £000 4,639 4,639 4,639
Ordinary 10p shares 46,388,515 46,388,515 46,388,515
Share capital - number of shares in issue 46,388,515 46,388,515 46,388,515
Movement in treasury shares is as follows:
Treasury shares at 31 March 2023 2,668,220
Share buybacks in the period 6,160,000
Treasury shares at 30 September 2023 8,828,220
Total number of shares in issue at 30 September 2023 (excluding shares held in 37,560,295
treasury)
17 Post balance sheet events
On 13 October 2023, Palace Capital completed the disposal of the Ground Floor,
Victoria at Hudson Quarter, York for a total consideration of £1.5 million.
The property was not charged to any loan facility.
On 20 October 2023, the Company completed the disposal of Bank House, Leeds
for a total consideration of £2.65 million. The property was charged against
the loan facility with NatWest plc and as a result, £2.5 million of the total
consideration was used to repay the loan facility on 23 October 2023.
On 6 November 2023, the Company completed the disposal of Princeton House,
Farnborough for a total consideration of £2.28 million. The Property was
charged against the loan facility with NatWest plc and, as a result, £0.9
million of the total consideration was used to repay the loan facility on 9
November 2023.
On 9 November 2023, the Company fully repaid the remaining loan facility with
NatWest plc of £2.5 million, and cancelled the undrawn Revolving Credit
Facility of £20.0 million.
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