REG-Panther Securities: Final results for the year ended 31 December 2020
26/05/2021 07:05
26 May 2021
Prior to publication, the information contained within this announcement was
deemed by the Company to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of
this announcement, this information is now considered to be in the public
domain.
Panther Securities P.L.C. (“the Company” or “the Group”)
Final results for the year ended 31 December 2020
CHAIRMAN’S STATEMENT
I am pleased that I am able to present the results for the year ended 31
December 2020, which, by anybody’s view, has been a most unusual year.
Most of our tenants have had a torrid time due to the Covid-19 pandemic and
the numerous changing government actions, rules, and regulations brought in to
protect its citizens often in ways not easily understood by the majority, and
often the minutiae of the rules not seemingly logical.
The restricted number of businesses deemed essential that were allowed to open
their doors for trade may have done much better than normal, and many of those
that had to close, even temporarily, have had financial problems.
The government stepped up to the mark with numerous financial reliefs, loans,
and even paying furloughed employees wages to an average wage limit so that
the country’s private sector did not go bankrupt, but of course, they could
not and did not deal with all eventualities. In particular, this caused the
majority of landlords to be left to fend for themselves to deal with many
tenants who either did not receive any help or more likely insufficient help
to overcome the financial effects of forced closure. Thus our results, to my
mind, have shown a remarkable resilience when you consider the year’s
problems.
The profit for the year ended 31 December 2020 was £2,573,000 before tax,
compared to a loss before tax of £4,963,000 for the previous year.
Our rental receivable amounted to £13,051,000 compared to the previous
year’s £14,226,000 and as so often is the case, the profit or loss figure
is accentuated by the non-cash valuation movements.
The independent revaluation of our charged portfolio, the majority of which
was carried out by Messrs Carter Jonas, showed an improved value of
£6,146,000 largely bolstered by the increased value of our industrial
investments and properties with residential development value, whereas some
retail properties have fallen in value.
The swap liability has risen by £5,498,000 due to future expected interest
rates having fallen further as at the year-end. Our profit figures have also
taken into account an increase of circa £1,100,000 to the bad debt provision,
which was considered prudent by the Board whilst the pandemic and restrictions
are still running, and its financial effects not fully known.
During the year, we gave about 67 different tenants concessions, totalling
about £315,000 in rent waivers. Additionally, we gave a number of
concessions by way of deferred payment arrangements and also allowed some
tenants to utilise part of their deposits that we hold towards current rent
due.
All concessions were independently negotiated to suit the particular
individual circumstances of our large variety of tenants.
It is of course irritating that our own freehold landlords, being mainly
Councils who receive about £675,000 per annum in ground rent and separately
but in addition business rates from us, even on vacant properties, have failed
to give us the slightest concession, even when government issued a formal code
of conduct saying they should!
To harass landlords’ further the government has made it illegal for
landlords to take legal action to collect rents.
If a shop trader is forced to close because of an emergency government edict,
even when they are relieved of business rates under a Covid-19 concession and
circumstances are still so bad that the trader vacates the premises the
business rates fall back onto the landlord who then has to pay full business
rates. Is this not an obvious abuse of the rules of fairness in taxation?
Disposals
55 West Street Southport
We sold a small freehold warehouse in West Street, Southport, formerly used by
Beales Southport store, for £250,000 which showed a small profit.
5 Hall Road Maldon
This small freehold factory was sold to the tenant for £350,000 showing a
profit on book value.
43/45 Main Street Coatbridge
This property was destroyed by a fire in 2015, and shortly thereafter we
received insurance claim proceeds to its then full value, which has been
accounted for in previous accounts. However, the remaining freehold of the
cleared site was sold to the local council for £112,500 well in excess of its
book value.
Acquisitions
Bedford
In April 2020 we purchased under a previous long-term agreement, the freehold
of 26-36 & 3-5 Harpur Street, Bedford, a former Beales store, situated in the
best position in Bedford. The cost was £3,475,000 including the excessive
stamp duty payable. We consider the rental value is about £250,000 p.a. for
the ground floor alone and have planning consultants working on the planning
applications needed to convert the upper parts for up to thirty two flats.
Wickford
We were able to buy back a block of four dilapidated long leasehold factory
units in Wickford, totalling 20,000 sq.ft. for a total cost of £320,000. We
already owned the freeholds being part of our Wickford Industrial estate,
which totals 25 units. These four units were part of a separate 1.5 acre
freehold site on which we had previously obtained planning permission for
residential development, but this planning permission required the acquisition
of two adjoining freehold units owned by different owners, which is now
regarded as unlikely.
We now have the ability to rebuild modern warehouse/industrial units totalling
about 30,000 sq.ft. on this site for which there is strong demand. This is
expected to be a profitable scheme as industrial rentals have risen
considerably since our original residential proposals.
Developments
Broadstairs
During this account period we show £1,746,000 development costs in
Broadstairs, the ground floor of which has been pre-let as a Tesco Express
store for £55,000 p.a. We intend to hold the property as a long-term
investment, thus the twelve newly built flats above, some of which have sea
views will be let after completion. Progress on this site progressed
surprisingly well. In my last interim statement, I expected completion of
the developments at the end of January 2021. This has been delayed by the
Council’s sensible requirement that all three utilities should be dealt with
at the same time so as to disturb the recently renewed road surface as little
as possible, and also demanding a large payment for resurfacing after the
works completion. Of course, the Council had known about the development for
approaching 18 months and could have delayed their works until near
completion. However, completion should happen soon. When fully let and
occupied, this entire property should produce an additional £160,000 p.a.
rents receivable for the Group.
Swindon
We are pleased that at long last our subsidiary company, CJV Properties Ltd
has received two separate planning permissions one for a leisure/restaurant
two storey development and the other ground floor retail/leisure units and 8
floors above in a tower block with 68 residential units, which is subject to
agreeing any Section 106 payments that may be required. This property is
held on a medium term leasehold from the local authority at a ground rent, but
to facilitate this development the Council have agreed terms for a new 250
year lease at a percentage of the rental income from the commercial part of
the scheme. Solicitors are already instructed and dealing with this lease
extension.
Tenant Activity
There has been a considerable amount of activity with our tenants with 18
residential tenants vacating against 24 new lettings. The commercial
tenancies provided 57 tenants vacating with 52 new lettings or tenancy
renewals.
The effect of this considerable activity was that there will be about
£210,000 income loss on an annualised basis. Now that retail lockdown has
ended, we are hopeful there will be a surge in trade that encourages an army
of entrepreneurs to take premises for new enterprises. This does not include
the cost of Covid-19 concessions or loss of income from Beale’s in which the
liquidator offered leases for surrender but they have not yet been accepted to
save holding costs.
Beales Stores
Many people, including surveyors, valuers, banks and accountants have been
fearful of the problems of vacant properties and have given cautious and low
valuations on these type of properties. However, we see this differently as
at their reduced values, with proper care and attention, they have potentially
much bigger scope for appreciation as and when they are brought back into full
use, probably after different trades are implemented and occupied on rental or
otherwise. Thus the early results on this minor group of our property
portfolio is already beginning to show promise.
Included in these figures is a new letting of the Beale’s former Lumley
Road, Skegness store to a rent that rises to £150,000 at the fifth year.
Subsequent to our year-end, a section of the former Beale’s store at
Keighley has been let to the Department of Work and Pensions as a Job Centre
at £55,000 per annum. We still have the major part of the vacant space
available for letting within this Keighley store, which is part of the
town’s main shopping centre.
We expect to make further headway in replacing the £890,000 p.a. rent lost
from our former tenant, Beale’s. I have previously mentioned the car parks
attached to Beale’s and these should in due course, produce a good income
but the various lockdowns prevented them producing their full potential. There
are, of course, a number of negotiations continuing for many of the other
former department stores.
Post Balance Sheet Events
In January 2021, we exchanged contracts to purchase a substantial freehold
factory and warehouse of approximately 96,000 sq.ft. of usable space situated
in approximately six acres of industrial land. The contract price agreed is
£3,300,000 with a delayed completion of between 15 and 30 months until the
completion of the vendors’ new building. Should it be necessary for a
further delay, the vendors will pay a rent of £340,000 per annum until they
vacate.
This purchase will tilt our portfolio towards more industrial investment.
Staff
The Covid-19 pandemic presented difficulties with running our office and its
usual smooth management operations, and we thus implemented the furlough
scheme for a number of our staff.
At the beginning of 2019, we took on a new software management system
specially designed for property companies. In using this system more
intensely we found that we could manage with three fewer staff. We wish them
every success for their future careers. Additionally, Hyam Harris who had
been with us for 32 years has moved to part-time and, additionally, Ram Patel
has retired after twenty-nine loyal years. I would like to thank them all
for their diligence and excellent company spirit throughout their time with
us.
It is intended that Simon Peters, who has been Finance Director for over
fifteen years, and played a major part in keeping the Group on a steady
course, will step up to be Chief Executive Officer as from 1 January 2022 thus
relieving me of some of my responsibilities, despite numerous requests for me
to fully retire, entirely from my wife, which seemed to cease towards the end
of the first lockdown. Thus I will be able to continue to work for similar
hours concentrating on all matters that are most appropriate to my skills as
Executive Chairman.
Loans
We are at an advanced stage of renewing our current facilities which,
following a three-month extension, expire in July 2021. All terms for a
three-year £66 million term loan are agreed and credit approval has been
obtained, but finalisation is now dependent on the speed of action of our
respective solicitors. We maintain a strong cordial relationship with our
longstanding club lenders and will update shareholders when the new facility
is in place in due course.
Swap restructuring
Subsequent to our year end in February 2021 the Group paid £5 million to vary
a long-term swap agreement. The agreement varied was an interest rate swap
fixed at 5.06% until 31 August 2038 on a nominal value of £35-million and has
circa 17.5 years remaining. Following the Group’s variation, the Group’s
fixed rate will drop on 1 September 2023 to 3.40%, saving the Group £581,000
pa in cash flow until the end-point of the instrument.
At 30 April 2021, there was a swap liability reduction compared to that shown
at the year-end of £15.6 million due to the combination of our purchase of
the variation of this swap and also an upward spike in medium and long term
interest rates, thus improving our net asset value by 71p per share (after
taking account of the tax effect) which, of course, will continue to
fluctuate.
Cash
We have collected circa 80% of our pre Covid-19 rental income level since the
first lockdown. This is more than sufficient to pay all current interest
charges and other running costs. We had been conserving cash, which stood at
over £9 million at the year-end and therefore, we are still prepared to
consider property proposals that offer above average secure income
prospects. I suspect there will be many possibilities in these unprecedented
times.
Dividends
We paid a final dividend of 6p per share in respect of the financial year
ended 31 December 2019 on 7 September 2020. As announced in May 2021, the
Directors have declared a 6p interim dividend for the year ended 31 December
2020, payable on 2 July 2021, and proposed a final dividend for 2020 of 6p per
share, payable on 14 October 2021, subject to shareholders’ approval at the
AGM.
Finally, I would like to thank our small but dedicated team of staff, growing
team of financial advisers, legal advisers, agents and accountants for all
their hard work during the past year. Special thanks and good wishes to our
tenants and I hope they are able to overcome the present troubled environment
and make a full recovery when business is back to normal.
Andrew S Perloff
CHAIRMAN
25 May 2021
CHAIRMAN’S RAMBLINGS
My first proper business was a stamp approval business I started in my early
teens. I was already a collector and a regular visitor to our tiny local
stamp dealer’s shop that was run solely by an old man, and another shop
nearby selling old railway magazines and railway memorabilia specialist shop,
which fortuitously as a side line sold stamps as well.
Due to my frequent purchases, I became friendly with both traders and they
would often tempt me with offers of job lots both more interesting and at much
cheaper prices than individual stamp prices.
I decided to try trading myself and bought some small notebooks, stuck stamps
in with some sort of order using stamp hinges and with the help of a couple of
old Stanley Gibbons stamp catalogues and a pencil, would price each stamp
individually underneath, my pricing being about one quarter of the catalogue
price.
My first advert was in the Exchange & Mart in the collectors section under
“Star Stamp Approvals at a quarter of the catalogue price” began to
receive a number of enquiries. I then posted a booklet of stamps to about
eight people and relied on trust that they would take the stamps they
wanted/needed, tot up the prices and send their payment by cheque, postal
order or cash and hopefully request another booklet or two.
I was doing quite well, probably making over £10 per week profit and thus
expanded my buying from my two shop sources, school friends and junk shops.
About 4 months after I had started becoming more confident I began examining
the other advertisers to see what opportunities were on offer. One day I
noticed an advert for a large box of mixed stamps, still mostly on envelopes
or stuck to the paper. This excited me so after phoning the advertiser to
discuss the size of the box, etc., I wrote sending my £25 in payment.
I was so excited when the box arrived. It was about the size of four
shoeboxes and indeed full of stamps. However, there were about 25 different
of the most common world stamps in their many hundreds of each. This was a
puzzlement for me, as obviously I knew I could only put out a small number in
my booklet before my customers would discontinue requesting my approval
booklets.
Having pondered this situation I decided the best option was to make up
packets in small cellophane envelopes and stuff them full with about 3-4 of
each of the 25 or so different types. I priced each packet at 6p, then took
them to my two friendly dealers and suggested that if they took a box of 100
envelopes, they could have them at 4p each on a sale or return basis. I
would check their sales each week and top up to the 100 and they would only
pay me for sales made.
This went on for about three months when inevitably they said all their
regular customers had exhausted their interest in these run of the mill
stamps. I may have received about £15 back. Elsewhere the stamp approval
business was still doing well.
I told my father about my silly mistake and he told me a story of his own.
Throughout the war and for some years afterwards there was rationing of many
things, especially food, and although rationing gradually reduced, there was
often ‘special offers’ to be had by knowledgeable job lot traders.
One of his friends was such a person who would buy job lots of practically
anything then sell to his trader clients (maybe 30) who would then sell on the
items in even smaller parcels to their own clients.
One day he told my father about a large quantity of wooden boxes each
containing 1 gross (144) tins of sardines. He had purchased over 200 boxes
at the equivalent price of 1p per sardine tin. He then sold them to his
sub-trader customers at 2p per tin, some he said then sold them in smaller
quantities (but whole boxes only) to actual market traders at the equivalent
of 3p per tin who opened the boxes up and sold them at 4p per single tin from
their stalls.
Within a week, my father’s friend was inundated with calls from the market
traders whose customers were complaining the sardines were off. His reply to
these traders was “The sardines are for buying and selling, NOT FOR
EATING!”
My father then told me this was a lesson to remember and to view and test what
you buy before actually paying for anything.
This advice was taken to heart and remembered when some ten years later when
(as a self-employed estate agent just starting to buy properties on my own
behalf) I saw an advert in the Exchange & Mart (once again) for a property
with land for sale.
Advertised as 4 acres of land close to the sea adjoining the beach with eight
holiday cabins situated upon it, some in need of repairs. It was on the Isle
of Wight, priced at £8,000 for the entire freehold estate, which, at that
time, we could just afford, and seemed very cheap. With the confidence of
youth and my complete lack of knowledge of the location, the Isle of Wight
property market and also complete lack of understanding of building repairs,
was confident I could renovate and let or sell individual cabins at a profit.
It was my first time visiting the Isle of Wight and thus I set off driving
with great expectations, excitedly taking the ferry across from Southampton,
and eventually finding the site and cabins.
There were indeed eight cabins and probably about 4 acres of land very close
to the beach – a little too close. The land was originally on cliffs
overlooking the beach but the cliffs had eroded and slipped down even nearer
the beach so that most of the land was at about a 60 degree angle to the
beach! Whilst I have often voiced that I like property with angles,
certainly not that type! All of the cabins were built on concrete bases,
four of which had broken in half and sloped down towards the beach. The
others mostly had signs of cracking and looked like they too would finish up
like the first group – unrestorable and likely to join the mermaids in a few
years’ time!
After a short lunch to overcome my disappointment about this disastrous
property expedition I drove back to London, never forgetting that you should
always investigate any property purchase before paying out substantial funds.
These few memories have always remained with me and if a proposition looks too
good to be true, instinct tells me it’s probably not true!
In one of my ramblings I seem to recall writing about the Weimar Republic in
Germany after the First World War whose financial circumstances made them
print vast amounts of extra paper money that was not backed by any real assets
or reserves.
There was monumental inflation meaning all prices rose to meet the increased
volume of paper money.
At that time I felt there was likely in due course to be high inflation due to
our government’s quantitative easing, i.e., printing money. It did not
happen then but now I notice in some areas of the economy it has. Many of
the industries of the future, i.e., high tech companies, are valued at
extremely high, almost unbelievable valuations, many not yet making a profit
and often open to new competition.
I will mention just two for illustrative purposes, one a form of currency,
Bitcoin, which is traded and used over the internet where each person’s
holding is protected by a personal digital code. This pseudo currency is
valued at about one trillion pounds in total, is unregulated and relies on
people to buy into its value without a government guarantee of any form, no
known reserves of gold or currency and no access to any country’s taxpayers
to underwrite it if it were in trouble. Definitely an asset very useful to
criminals due to the anonymity of its transaction, open to complete loss of
value if you lose or forget your code. Probably open to fraud even easier
than our present banking system. Like the sardines only suitable for buying
and selling, not for investing.
Its value is solely derived from some bigger or richer mug than yourself
buying into the system.
To top it all, the second example is an exciting, ‘newish’ car
manufacturer producing a range of attractive but expensive electric cars borne
out of the world’s most recent fad to save the planet from carbon emissions.
The company may have just started to make a profit, and is valued at about
1,000 times a year’s earnings, making the creator of this company on and off
the world’s richest person. The company, having amassed huge sums from new
investors, not profits, was able to buy 1.5 billion dollars’ worth of
‘Bitcoins’ thus creating further exciting interest in this imaginary
currency. I believe the richest man in the world has titled himself the
‘Techno-King’.
This reminded me of one of Aesop’s fables penned many years ago. I won’t
give you the whole story as most of you will know it as “The Kings New
Clothes” where two confidence tricksters convinced a gullible and
self-important but powerful King they could make him the most magnificent
outfit for a forthcoming special occasion.
The King gave them gold and silver to buy all the very rare materials they
said they required and they took an inordinate time making these clothes with
many fittings where nothing was visible. They convinced the King and
courtiers that only clever and wise people would be able to see the clothes
and material so no-one dared to say anything to the all-powerful King. Word
got around the kingdom about the wonderful but invisible clothes that looked
so magnificent but only to the cleverest people.
The procession for the country’s celebration came and the streets were lined
with most of the population whilst the King strode down the streets proudly
showing off what he believed was his magnificent new outfit and all the
population ‘oohed and aahed’ the King’s new clothes. However, one
small boy looked at the King and shouted out “Look, the King has got no
clothes, I can see his willy” and laughed uproariously. Then everyone else
realised that they were seeing this truth and also started laughing.
The King never caught the tailors as they were long gone from the principality
with their loot and the King became the laughing stock forever more.
I believe the made up currencies sometime soon will collapse, as will many
tech companies, share valuations and there will be a huge loss of real money.
When big losses happen, whether by fraud or disaster, or government
incompetence, people are often forced to sell the good and reliable assets to
cover their losses which creates a downward spiral in all asset values.
So when I see the massive increases in some companies’ share price or the
huge values the market places on make believe currency, I remember the box of
stamps, the cabins slipping down the cliff and the stinky sardines that no-one
could eat!
Yours
Andrew S Perloff
Chairman
25 May 2021
p.s. My Ramblings were prepared in January/ February 2021 but due to COVID
delays my predictions appear to be starting to be realised.
GROUP STRATEGIC REPORT
About the Group
Panther Securities PLC (“the Company” or “the Group”) is a property
investment company quoted on the AIM market (AIM). Prior to 31 December 2013
the Company was fully listed and included in the FTSE fledgling index. It
was first fully listed as a public company in 1934. The Group owns and
manages over 900 individual property units within over 150 separately
designated buildings over the mainland United Kingdom. The Group specialises
in property investing and managing of good secondary retail, industrial units
and offices, and also owns and manages many residential flats in several town
centre locations.
Strategic objective
The primary objective of the Group is to maximise long-term returns for our
shareholders by stable growth in net asset value and dividend per share, from
a consistent and sustainable rental income stream.
Progress indicators
Progress will be measured mainly through financial results, and the Board
considers the business successful if it can increase shareholder return and
asset value in the long-term, whilst keeping acceptable levels of risk by
ensuring gearing covenants are well maintained.
Key ratios and measures
2020**** 2019**** 2018**** 2017
Gross profit margin (gross profit/ turnover) 73% 76% 71% 71%
Gearing (debt*/(debt* + equity)) 42% 41% 39% 45%
Interest cover** 1.34 times 2.14 times 4.17 times 2.37 times
Finance cost rate (finance costs excluding lease portion/ average borrowings for the year) 7.0% 7.1% 6.6% 6.4%
Yield (rents investment properties/ average market value investment properties) 7.8% 8.8% 7.7% 7.1%
Net assets value per share 488p 480p 532p 516p
Earnings/ (loss) per share – continuing 14.9p (23.1)p 39.9p 120.2p
Dividend per share 12.0p 12.0p 27.0p*** 22.0p***
Investment property acquisitions £5.5m £8.1m £3.9m £8.9m
Investment property disposal proceeds £0.7m £1.1m £40.8m £2.2m
* Debt in short and long term loans, excluding any liability on financial
derivatives
**Profit before taxation excluding interest, less movement on investment
properties and on financial instruments and impairments, divided by interest
(excluding lease portion)
*** Includes 2018:15p (2017:10p) per share special dividend
**** IFRS 9 and 15 have only been reflected in these figures the 2017 prior
year figure not restated. IFRS 16 has only been reflected in 2019 and 2020,
the 2017 and 2018 prior year figures not restated.
Business review
The Group’s underlying performance was very much affected by the COVID-19
pandemic and also the demise of its tenants, JE Beale Ltd (“Beales”) in
January 2020 (which provided circa £887,000 of annual income). The lower
income and three times larger bad debt charge during 2020 led to Operating
Profit dropping by £2.34 million, circa £1 million of this is unlikely to be
repeated in future years, as bad debts should return to normal levels, as the
effects of COVID-19 diminish and we hopefully have no more lockdowns.
The property values held up following the independent valuations and perhaps
the directors were slightly negative in the last two announced director
valuations, but both were very much prepared in the thick of the pandemic (May
and October 2020). The final notable impact on the income statement was
the worsening of the swap liability by £5.5 million, but post year end there
has been a large reduction in this, one via our actions of paying for a
variation (explained later), but also a change in market expectations of
higher future interest rates (leading to a lower liability).
On review of the cash flow statement, which the valuation movements on the
financial derivatives or the investment properties do not impact, even in the
pandemic with the loss of a major tenant the business still generated a
healthy £2.6m of cash flow from its operating activities (included in this
was a refund of overpaid tax of 0.4m).
In terms of the statement of financial position the Group saw improvement in
its asset value with the net asset value per share now being 488p (2019 –
480p per share). The investment property valuation has benefited from the
growth in the value of industrial properties, which now account for almost 30%
of the portfolio by value. The properties with residential elements or
planning potential, mainly in the south-east have also showed strong growth.
There was more of a mixed situation on the retail properties. However we can
see that the secondary local shopping parades have held up well in the
pandemic, as the traders have managed to survive and some even flourish as
even though lockdowns meant closures, many were considered essential, and most
benefited from more local footfall whilst people were not commuting into major
towns or city centres. We could see our smaller tenants adapted better and
were more flexible in their approach, as well as the government help being
more meaningful for covering their fixed costs.
We feel the pandemic has proven that our business model of investing in a
diversified selection of property investments rather than specialising is the
correct one and provided adequate income for all our requirements.
It is still our view, as the economy opens up, that secondary retail
properties (which is a large part of our portfolio – approximately 55% by
value) will be less affected by the seismic change to shopper’s habits.
The average secondary retail parade has a higher proportion of businesses
which are providing non-retail offerings even though they are shops. This
includes things such as service providers, restaurants or take away use, or
convenience offerings, which are by their very nature less affected than pure
destination retail, by changing consumer habits, and in many instances the Web
even provides additional opportunities i.e. being able to offer their take
away services via Just Eat etc. Even our pure retail positions are mainly
large blocks in the centre of towns – which we believe will benefit from
longer term regeneration plans from the Government and local councils for town
centres. As such, if and when some retail locations no longer work, we
believe we can create value from these sites with planning permission to
eventually give them other uses or purposes. In the meantime, they continue
in the most part to be strong cash contributors providing high returns on
initial investment.
Going forward
We highlighted two issues that would impact 2020 in the 2019 report and
accounts being COVID-19 and demise of Beales. These two issues will continue
to be the largest factors in 2021. However the former Beales properties
provide a lot of potential upside and should be considered an opportunity.
The down side is reflected in their valuations, so we believe we can do well
on this low base, adding additional long-term income, and making some capital
profits on disposal. We believe the external valuation was prudent but time
will be the true judge.
The Chairman’s statement already explains some success on the former Beales
properties, and this was achieved in a pandemic. We have less funds than we
originally were expecting on the renewal of our facility, as Lenders are less
confident after realising losses on certain large shopping centres and in our
view are not differentiating between different parts of retail. Our
experience is that there is more of a nuance that lies in this sector, with
many different types of “retail” property investment and many locations
will continue to do well even with traditional destination retail. Therefore
future added value within the business, will be proportionally be more home
grown as we have less finance to make wise acquisitions over the next three
years. The Group will have to unlock the value contained within the
portfolio, such as by obtaining planning permissions on those with residential
value and through lettings of vacant space, including the former Beales
properties, which was difficult in 2020 with little economic activity due to
COVID-19. This is something we of course always push for but there will be
less distractions from potential acquisitions and will be more important to
bring these existing opportunities forward.
COVID-19
In 2019 report and accounts we stated “this has been a much more
challenging, wide spread and fast changing situation than the business has
ever faced before. We believe for our size and within the property sector,
we have one of the most diverse and robust income streams. We have such an
array of tenants, spread over different geographic locations, in different
sectors, and lots of sizes of traders, from sole traders to large
multinational corporates. One of the key characteristics of the business
that we have developed over many decades, in fact since it recovered from the
1970s property crash, is ensuring a strong diversified cash flow and this is
reflected in our investment decisions, which often show high returns,
generated from a spread of tenants. …... We do have tenants such as
supermarkets, chemists, takeaways, flat tenants, convenience stores and
certain industrial uses still open for business who hopefully will pay their
full rent” even in lockdowns.
There are always uncertainties and COVID-19 was an extreme example,
uncertainties can affect property prices in the short term, however the board
continues to believe we are protected by our portfolio’s diversity,
experienced management team, ability to adapt and by having access to funds.
We have low gearing levels, supportive lenders and cash reserves.
During the pandemic, since the first lockdown from 23 March 2020, the Group
has had an improving trend in terms of rent collection. Of the invoices
issued since that date we have managed to collect circa 80% of the invoiced
income, which is decent performance by most measures.
The Government has issued a clear stepped plan back to “normality” and
this should only assist the future prospects of the Group.
Financing
The Group had a three month extension agreed to its existing loan that would
have expired in April 2021, to July 2021. The new terms have been agreed and
credit approval has been obtained. We see no reason for this loan to not be
in place by the expiry of the current extension. The new facility is a £66
million facility and has a three year term.
At the Statement of Financial Position date the Group had £9.2m of cash
funds, £12m available within the loan facility.
Financial derivative
We have seen a fair value loss (of a non-cash nature) in our long term
liability on derivative financial instruments of £5.498m (2019: £0.997m fair
value loss). Following this loss the total derivative financial liability on
our Consolidated Statement of Financial Position is £32.0m (2019:
£26.5m).
These financial instruments (shown in note 3) are interest rate swaps that
were entered into to remove the cash flow risk of interest rates increasing by
fixing our interest costs. We have seen that in uncertain economic times
there can be large swings in the accounting valuations.
Small movements in the expectation of future interest rates can have a
significant impact on their fair value; this is partly due to their long dated
nature. These contracts were mostly entered into in 2008 when long term
interest rates were significantly higher. In a hypothetical world if we
could fix our interest at current rates and term we would have much lower
interest costs. Of course we cannot undo these contracts that were entered
into historically, without a significant financial cost, but for accounting
purposes these financial instruments are compared to current market rates,
with the additional liability compared to the market rates, as shown on our
Statement of Financial Position.
In 2018 the Company entered into a new 10 year fixed interest rate swap
agreement, with a £25,000,000 nominal value which commences on 1 December
2021. The swap’s interest rate is 2.131% which will come into existence
when the Company’s current £25,000,000 swap with a rate of 4.63% ends,
resulting in an annual saving of circa £625,000. By entering this
transaction, the Company will have certainty that its interest costs from
December 2021 will be significantly lower compared to its current costs.
However much of this benefit will be lost as the new facility we are entering
into has higher margin which takes away most of the benefit gained.
In February 2021 the Company paid £5,000,000 to vary a long-term swap
agreement. The agreement varied was an interest rate swap fixed at 5.06%
until 31 August 2038 on a nominal value of £35m and has circa 17.5 years
remaining. Following the variation, the Group’s fixed rate will drop on 1
September 2023 to 3.40% saving the Group £581,000pa in cash flow until the
end point of the instrument.
Financial Risk Management
The Company and Group operations expose it to a variety of financial risks,
the main two being the effects of changes in credit risk of tenants and
interest rate movement exposure on borrowings. The Company and Group have in
place a risk management programme that seeks to limit the adverse effects on
the financial performance of the Company and Group by monitoring and managing
levels of debt finance and the related finance costs. The Company and Group
also use interest rate swaps to protect against adverse interest rate
movements with no hedge accounting applied. Mark-to-market valuations on our
financial instruments have been erratic due to current low market interest
rates and due to their long term nature. These large mark-to-market movements
are shown within the Income Statement.
However, the actual cash outlay effect is nil when considered alongside the
term loan, as the instruments have been used to fix the risk of further cash
outlays due to interest rate rises or can be considered as a method of locking
in returns (difference between rent yield and interest paid at a fixed rate).
Given the size of the Company and Group, the Directors have not delegated the
responsibility of monitoring financial risk management to a sub-committee of
the Board. The policies set by the Board of Directors are implemented by the
Company and Group’s finance department.
Credit risk
The Company and Group have implemented policies that require appropriate
credit checks on potential tenants before lettings are agreed. In many cases
a deposit is requested unless the tenant can provide a strong personal or
other guarantee. The amount of exposure to any individual counterparty is
subject to a limit, which is reassessed annually by the Board. Exposure is
reduced significantly due to the Group having a large spread of tenants who
operate in different industries.
Price risk
The Company and Group are exposed to price risk due to normal inflationary
increases in the purchase price of the goods and services it purchases in the
UK. The exposure of the Company and Group to inflation is low due to the low
cost base of the Group and natural hedge we have from owning “real”
assets. Price risk on income is protected by the rent review clauses
contained within our tenancy agreements and often secured by medium or
long-term leases.
Liquidity risk
The Company and Group actively manage liquidity by maintaining a long-term
finance facility, strong relationships with many banks and holding cash
reserves. This ensures that the Company and Group have sufficient available
funds for operations and planned expansion or the ability to arrange such.
Interest rate risk
The Company and Group have both interest bearing assets and interest bearing
liabilities. Interest bearing assets consist of cash balances which earn
interest at fixed rate when placed on deposit. The Company and Group have a
policy of only borrowing debt to finance the purchase of cash generating
assets (or assets with the potential to generate cash). The Directors
revisit the appropriateness of this policy annually.
Principal risks and uncertainties of the Group
The successful management of risk is something the Board takes very seriously
as it is essential for the Group to achieve long-term growth in rental income,
profitability and value. The Group invests in long term assets and seeks a
suitable balance between minimising or avoiding risk and gaining from
strategic opportunities. The Group’s principal risks and uncertainties are
all very much connected as market strength will affect property values, as
well as rental terms and the Group’s finance, or term loan, whose security
is derived primarily from the property assets of the business. The
financial health of the Group is checked against covenants that measure the
value of the property, as a proportion of the loan, as well as income tests.
The two measures of the Group’s finances are to check if the Group can
support the interest costs (income tests) and also the ability to repay
(valuation covenants).
The Group has a successful strategy to deal with these risks, primarily its
long lasting business model and strong management. This meant the business
had little or no issues during the 2008 financial crisis, which some
commentators say was the worst financial crisis since the Great Depression of
the 1930s. The current COVID-19 crisis also showed the resilience of the
investments income stream and the good management in particular the disposals
degearing the business made in 2018.
Market risk
If we want to buy, sell or let properties there is a market that governs the
prices or rents achieved. A property company can get caught out if it
borrows too heavily on property at the wrong time in the market, affecting its
loan covenants. If loan covenants are broken, the Company may have to sell
properties at non-optimum times (or worse) which could decrease shareholder
value. Property markets are very cyclical and we in effect have three
strategies to deal with or mitigate the risk, but also take advantage of this
opportunity:
1) Strong, experienced management means when the market is strong we look to
dispose of assets and when it is weak we try and source bargains i.e. an
emergent strategy also called an entrepreneurial approach.
2) The Group has a diversified property portfolio and maintains a spread of
sectors over retail, industrial, office and residential. The other
diversification is having a spread regionally, of the different classes of
property over the UK. Often in a cycle not all sectors or locations are
affected evenly, meaning that one or more sectors could be performing
stronger, maybe even booming, whilst others are struggling. The strong
investment sectors provide the Group with opportunities that can be used to
support slower sectors through sales or income.
3) We invest in good secondary property, which tends to be lower value/cost,
meaning we can be better diversified than is possible with the equivalent
funds invested in prime property. There are not many property companies of
our size who have over 850 individual units and over 120 buildings/
locations. Secondary property also, very importantly, is much higher
yielding which generally means the investment generates better interest cover
and its value is less sensitive to market changes in rent or loss of tenants.
Property risk
As mentioned above we invest in most sectors in the market to assist with
diversification. Many commentators consider the retail sector to be in
period of severe flux, considerably affected by changing consumer habits such
as internet shopping as well as a preference for experiences over products.
Of the Group’s investment portfolio, retail makes up the largest sector
being circa 60 to 65% by income generation. However, the retail sector is
affected to lesser degrees in what we would describe as neighbourhood parades,
as opposed to traditional shopping high streets. The large part of our
retail portfolio is in these neighbourhood parades, meaning we are less
affected by consumer habits and even benefit from some of the changes.
Neighbourhood parades provide more leisure, services and convenience retail.
For example we have undertaken a few lettings to local or smaller store
formats, to big supermarket chains, which would not have taken place many
years ago. Block policy is another key mitigating force within our property
risks. Block policy means we tend to buy a block rather than one off
properties, giving us more scope to change or get substantial planning if our
type of asset is no longer lettable. The obvious example is turning
redundant regional offices into residential. In addition by having a row of
shops, we can increase or reduce the size of retail units to meet the current
requirements of retailers.
Finance risk
The final principal risk, which ties together the other principal risks and
uncertainties, is that if there are severe adverse market or property risks
then these will ultimately affect our financing, making our lender either
force the Group to sell assets at non-optimal times, or take possession of the
Group’s assets. We describe the above factors in terms of management,
business model
and diversification to help mitigate against property and market risks which
as a consequence mitigate our finance risk.
The main mitigating factor is to maintain conservative levels of borrowing, or
headroom to absorb downward movements in either valuation or income cover. The
other key mitigating factor is to maintain strong, honest and open
relationships with our lenders and good relationships with their key
competitors. This means that if issues arise, there will be enough goodwill
for the Group to stay in control and for the issues to resolve themselves and
hopefully
save the situation. As a Group we also hold uncharged properties and cash
resources, which can be used to rectify any breaches of covenants.
Other non-financial risks
The Directors consider that the following are potentially material
non-financial risks:
Risk Impact Action taken to mitigate
Reputation Ability to raise capital/ deal flow reduced Act honourably, invest well and be prudent.
Regulatory changes Transactional and holding costs increase Seek high returns to cover additional costs. Lobby Government -“Ramblings”. Use advisers when necessary.
People related issues Loss of key employees/ low morale/ inadequate skills Maintain market level remuneration packages, flexible working and training. Strong succession planning and recruitment. Suitable working environment.
Computer failure Loss of data, debtor history External IT consultants, backups, offsite copies. Latest virus and internet software.
Asset management Wrong asset mix, asset illiquidity, hold cash Draw on wealth of experience to ensure balance between income producing and development opportunities. Continued spread of tenancies and geographical location. Prepare business for the economic cycles.
Acts of God (e.g. COVID 19) Weather incidents, fire, terrorism, pandemics Where possible cover with insurance. Ensure the Group carry enough reserves and resources to cover any incidents.
Section 172(1) statement
This is a reporting requirement and relates to companies defined as large by
the Companies Act 2006, this includes public companies as otherwise the Group
would not be considered large.
Each individual Director must act in the way he considers, in good faith,
would be the most likely to promote the success of the company for benefit of
its members as a whole, and in doing so the Directors have had regard to the
matters set out in section 172(1) (a) to (f) when performing their duty under
section 172.
The matters set out are:
(a) the likely consequences of any decision in the long term;
The longer term decisions are made at board level ensuring a wealth of
experience and a breadth of skills. The value creation in the business is
mainly generated by buying the investments at the right time in the financial
cycles, whilst reducing risk by choosing assets that have alternative or back
up values to the current use, as well as initial values. It is also key that
long term decisions are made in respect of ensuring that property assets are
maintained, where economically viable. Other areas to ensure decisions are
in tune with long term consideration are making sure the best possible
financing of the Group to match the requirements of the long-term nature of
property ownership. The board and management makes long term decisions such
as keeping a vigilant review of the changing nature of property usage and
tries were possible to diversify its income streams. Caerphilly and
Gateshead were relatively more recent purchases are good examples of long term
decision making, i.e. choosing offices and a leisure led retail scheme – as
such giving some protection against changing consumer habits in more general
retail arena.
(b) the interests of the company’s employees;
The company makes investment in and the development of talent of its
employees, including paying for professional development, providing in house
updates and encouraging knowledge sharing. The Group has a strong track
record of promoting from within the business and in 2020 two surveyors were
promoted to Joint Head of Property. The Group undertakes team building
activities to encourage cohesion and working together.
(c) the need to foster the company’s business relationships with suppliers,
customers and others;
Being in the secondary property industry the business is used to dealing with
many types of businesses as tenants from large multi-national businesses to
small sole traders – keeping good sound relationships with both is key. We
also use many small operators and suppliers and we ensure prompt payment,
paying within 30 days in most instances to again foster good working
relations. We set a purchase order system in 2018 and this has been refined
over the next two years to streamline and speed up payments supporting small
suppliers.
(d) the impact of the company’s operations on the community and the
environment;
The Group’s investments by its very nature often have a significant impact
on local communities, providing services and convenience businesses, or places
for local enterprise or employment. Owning a parade of shops, we can ensure
where possible that these are viable locations by encouraging a variety of
offerings. The Group maintains and upkeeps its investment properties to a
viable level which benefits the local communities they provide accommodation
for or seeks improvements with planning which can enhance local areas. The
Group also ensures it recycles much of its head office paper and is moving
towards less paper communication; since 2019 up to date our invoices have been
emailed as standard to our tenants and we also encourage the receipt of
electronic invoices. We have had a renewed push in 2021 to push our last few
tenants away from cheque payments. We also ensure we upgrade our units to the
required EPC levels which by its very nature reduces the longer term
environmental impact of the use of these units.
(e) the desirability of the company maintaining a reputation for high
standards of business conduct;
The Group maintains an appropriate level of Corporate Governance that is
documented within its own section within these Financial Statements. With a
relatively small management team it is easier to monitor and assess the
culture and encourage the appropriate standards. The board strives to
delegate and empower its management teams to ensure the high standards are
maintained at all levels within the business.
(f) the need to act fairly as between members of the company.
The Group has excellent communication with its members, actively encouraging
participation and discussion at its AGMs and also circulating letters of our
announcements to ensure older members or those not accessing the LSE financial
news can keep up to date with relevant information. Our CEO and Chairman is
unpaid, his benefit or income from the company is pro-rata the same as all
members including minority shareholders.
The Group Strategic Report set out on the above pages, also includes the
Chairman’s Statement and was approved and authorised for issue by the Board
and signed on its behalf by:
S. J. Peters
Company Secretary
Unicorn House
Station Close
Potters Bar
Hertfordshire EN6 1TL
25 May 2021
CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2020
Notes 31 December 2020 31 December 2019
£’000 £’000
Revenue 13,051 14,226
Cost of sales (3,482) (3,429)
Gross profit 9,569 10,797
Other income 467 443
Administrative expenses (1,703) (1,676)
Bad debt expense (1,629) (524)
Operating profit 6,704 9,040
Profit on disposal of investment properties 150 515
Movement in fair value of investment properties 4 6,146 (8,832)
13,000 723
Finance costs – interest (2,283) (2,469)
Finance costs – swap interest (2,726) (2,437)
Investment income 41 112
Profit on disposal of fixed assets 1 -
Profit (realised) on the disposal of investments 38 105
Fair value loss on derivative financial liabilities 5 (5,498) (997)
Profit/ (loss) before income tax 2,573 (4,963)
Income tax income 71 870
Profit/ (loss) for the year 2,644 (4,093)
Continuing operations attributable to:
Equity holders of the parent 2,644 (4,093)
Profit/ (loss) for the year 2,644 (4,093)
Earnings/ (loss) per share
Basic and diluted – continuing operations 3 14.9p (23.1)p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2020
Notes 31 December 2020 31 December 2019
£’000 £’000
Profit/ (loss) for the year 2,644 (4,093)
Items that will not be reclassified subsequently to profit or loss
Movement in fair value of investments taken to equity (354) (225)
Deferred tax relating to movement in fair value of
investments taken to equity 67 38
Realised fair value on disposal of investments previously taken to equity - 48
Realised deferred tax relating to disposal of investments previously taken to equity - (8)
Other comprehensive loss for the year, net of tax (287) (147)
Total comprehensive income/ (loss) for the year 2,357 (4,240)
Attributable to:
Equity holders of the parent 2,357 (4,240)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION Company number 00293147 As at 31 December 2020
Notes 31 December 2020 31 December 2019
ASSETS £’000 £’000
Non-current assets
Investment properties 4 180,975 169,340
Deferred tax asset 3,810 3,304
Right of use asset 335 373
Investments 614 927
185,734 173,944
Current assets
Stock properties 350 350
Investments 29 168
Current tax asset - 601
Trade and other receivables 3,925 3,389
Cash and cash equivalents (restricted) 1,052 2,299
Cash and cash equivalents 8,166 7,186
13,522 13,993
Total assets 199,256 187,937
EQUITY AND LIABILITIES
Capital and reserves
Share capital 4,437 4,437
Share premium account 5,491 5,491
Treasury shares (213) (213)
Capital redemption reserve 604 604
Retained earnings 75,923 74,627
Total equity 86,242 84,946
Non-current liabilities
Long-term borrowings 6 51 58,955
Derivative financial liability 5 32,009 26,511
Leases 8,339 7,912
40,399 93,378
Current liabilities
Trade and other payables 9,361 8,541
Short-term borrowings 6 63,066 1,072
Current tax payable 188 -
72,615 9,613
Total liabilities 113,014 102,991
Total equity and liabilities 199,256 187,937
The accounts were approved by the Board of Directors and authorised for issue
on 25 May 2021. They were signed on its behalf by:
A.S. Perloff
Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Share Share Treasury Capital Retained Total
capital premium shares redemption earnings
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2019 4,437 5,491 (213) 604 83,710 94,029
Total comprehensive loss - - - - (4,240) (4,240)
Other movement - - - - (68) (68)
Dividends - - - - (4,775) (4,775)
Balance at 1 January 2020 4,437 5,491 (213) 604 74,627 84,946
Total comprehensive income - - - - 2,357 2,357
Dividends - - - - (1,061) (1,061)
Balance at 31 December 2020 4,437 5,491 (213) 604 75,923 86,242
CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2020
31 December 2020 31 December 2019
£’000 £’000
Cash flows from operating activities
Operating profit 6,704 9,040
Loss on current asset investments 87 15
Transfer stock to investment properties - (141)
Rent paid treated as interest (687) (651)
Profit before working capital change 6,104 8,263
Increase in current asset investments*** - (168)
(Increase)/ decrease in receivables (536) 1,507
Increase/ (decrease) in payables 783 (1,802)
Cash generated from operations 6,351 7,800
Interest paid (4,160) (4,091)
Income tax refunded/ (paid) 420 (3,303)
Net cash generated from operating activities 2,611 406
Cash flows from investing activities
Purchase of investment properties (5,538) (8,138)
Purchase of investments** (633) -
Purchase of current asset investments*** (2,804) (3,996)
Proceeds of current asset investments*** 2,855 3,981
Proceeds from sale of fixed assets 1 -
Proceeds from sale of investment property 700 1,065
Proceeds from sale of investments** 631 851
Dividend income received 32 76
Interest income received 9 36
Net cash used in from investing activities (4,747) (6,125)
Cash flows from financing activities
Repayments of loans (1,070) (1,071)
Draw down of loan 4,000 1,000
Dividends paid (1,061) (4,775)
Net cash generated from / (used in) financing activities 1,869 (4,846)
Net decrease in cash and cash equivalents (267) (10,566)
Cash and cash equivalents at the beginning of year* 9,485 20,050
Cash and cash equivalents at the end of year* 9,218 9,485
* Of this balance £1,052,000 (2019: £2,299,000) is restricted by the
Group’s lenders i.e. it can only be used for purchase of investment
property.
** Shares in listed and/or unlisted companies. *** Shares in listed
companies held for trading purposes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020
1. General information
While the financial information included in this preliminary announcement has
been prepared in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply with IFRSs. The Group will publish full financial statements that
comply with IFRSs which will shortly be available on its website and are to be
posted to shareholders shortly.
The financial information set out in the announcement does not constitute the
Company’s statutory accounts for the years ended 31 December 2020 or 2019.
The financial information for the year ended 31 December 2019 is derived from
the statutory accounts for that year, which were prepared under IFRSs, and
which have been delivered to the Registrar of Companies. The auditor’s
report on those accounts was unqualified but did include a reference to
matters to an emphasis of matter on the impact of COVID-19 which the auditors
drew attention to without qualifying their report and did not contain a
statement under either Section 498(2) or Section 498(3) of the Companies Act
2006 and did not include references to any matters to which the auditors drew
attention by way of emphasis.
The financial information for the year ended 31 December 2020 is derived from
the audited statutory accounts for the year ended 31 December 2020 on which
the auditors have given an unqualified report, that did not contain a
statement under section 498(2) or 498(3) of the Companies Act 2006. The
statutory accounts will be delivered to the Registrar of Companies following
the Company’s annual general meeting.
The accounting policies adopted in the preparation of this preliminary
announcement are consistent with those set out in the latest Group Annual
financial statements.
Going concern
The Group’s business activities, together with the factors likely to affect
its future development, performance and position are set out in the
Chairman’s Statement and Group Strategic Report. The financial position of
the Group, including key financial ratios, is set out in the Group Strategic
Report. In addition, the Directors’ Report includes the Group’s
objectives, policies and processes for managing its capital; the Group
Strategic Report includes details of its financial risk management objectives;
and the notes to the accounts provide details of its financial instruments and
hedging activities, and its exposures to credit risk and liquidity risk.
The Group is strongly capitalised, has high liquidity together with a number
of long term contracts with its customers many of which are household names.
The Group has a diverse spread of tenants across most industries and
investment properties based in many locations across the country.
The Group has a strong track record of obtaining long term finance and expects
this to continue as it has supportive lenders. The Group always maintains
excellent relations with its lenders.
The COVID-19 pandemic has provided a much harder set of circumstances for all
businesses. The Directors have prepared a detailed financial forecast
assuming a continued “lock down” scenario that demonstrates the Group is a
going concern even if the business effects of the lock down resulting from the
COVID-19 pandemic continues to December 2021 (further details within the
Strategic Report). This forecast takes account of a level of minimal income
from businesses and trades that remain open (even in the lock down e.g. banks
and supermarkets). It also takes account of the Group’s extensive cash
reserves (and available facility – some already drawn at the announcement
date) and shows the Group has enough financial resources to survive to beyond
December 2021 – even with the current lock down and its effects
continuing.
The Group’s loan was up for renewal in April 2021, however the Directors
have agreed a short term renewal to July 2021 and also have credit approval
for a new term loan which is currently being worked on and will be in place
prior to the short term extension. The Group has strong relationships with
its lenders and is confident the new term loan facility will be in place
shortly.
The Directors believe the Group is very well placed to manage its business
risks successfully and have a good expectation that both the Company and the
Group have adequate resources to continue their operations for the foreseeable
future, even with the current COVID-19 situation. For these reasons they
continue to adopt the going concern basis in preparing the financial
statements.
1. Dividends
Amounts recognised as distributions to equity holders in the period:
2020 £’000 2019 £’000
Special dividend for the year ended 31 December 2018 of 15p per share - 2,653
Final dividend for the year ended 31 December 2019 of 6p per share (2018: 6p per share) 1,061 1,061
Interim dividend for the year ended 31 December 2019 of 6p per share - 1,061
1,061 4,775
The Directors recommend a payment of a final dividend for the year ended 31
December 2020 of 6p per share (2019 – 6p), following the interim dividend to
be paid on 2 July 2021 of 6p per share (2019 – 6p). The final dividend of
6p per share will be payable on 14 October 2021 to shareholders on the
register at the close of business on 3 September 2021 (Ex dividend on 2
September 2021).
The full ordinary dividend for the year ended 31 December 2020 is anticipated
to be 12p per share, subject to shareholder approval, being the 6p interim per
share paid and the recommended final dividend of 6p per share.
The calculation of profit/ (loss) per ordinary share is based on the profit/ (loss), being a profit of £2,644,000 (2019 – loss of £4,093,000) and on 17,683,469 ordinary shares being the weighted average number of ordinary shares in issue during the year excluding treasury shares (2019 – 17,683,469). There are no potential ordinary shares in existence. The Company holds 63,460 (2019 - 63,460) ordinary shares in treasury.
1. Investment properties
Investment properties
£’000
Fair value
At 1 January 2019 170,236
Additions 8,138
Transfer from stock properties 239
Disposals (550)
Fair value adjustment on investment properties held on leases 109
Revaluation decrease (8,832)
At 1 January 2020 169,340
Additions 5,538
Disposals (550)
Fair value adjustment on investment properties held on leases 501
Revaluation increase 6,146
At 31 December 2020 180,975
Carrying amount
At 31 December 2020 180,975
At 31 December 2019 169,340
1. Derivative financial instruments
The main risks arising from the Group’s financial instruments are those
related to interest rate movements. Whilst there are no formal procedures for
managing exposure to interest rate fluctuations, the Board continually reviews
the situation and makes decisions accordingly. Hence, the Company will, as far
as possible, enter into fixed interest rate swap arrangements. The purpose of
such transactions is to manage the cash flow risks associated with a rise in
interest rates but does expose it to fair value risk.
2020 2019
Bank loans £’000 £’000
Interest is charged as to: Rate Rate
Fixed/ Hedged
HSBC Bank plc* 35,000 7.01% 35,000 7.01%
HSBC Bank plc** 25,000 6.58% 25,000 6.58%
Unamortised loan arrangement fees - (159)
Floating element
HSBC Bank plc 3,000 -
Shawbrook Bank Ltd 117 186
63,117 60,027
Bank loans totalling £60,000,000 (2019 - £60,000,000) are fixed using
interest rate swaps removing the Group’s exposure to fair value interest
rate risk. Other borrowings are arranged at floating rates, thus exposing the
Group to cash flow interest rate risk.
Financial instruments for Group and Company
The derivative financial assets and liabilities are designated as held for
trading.
Hedged amount Average rate Duration of contract remaining 2020 Fair value 2019 Fair value
£’000 ‘years’ £’000 £’000
Derivative Financial Liability
Interest rate swap 35,000 5.06% 17.69 (26,577) (22,209)
Interest rate swap 25,000 4.63% 0.92 (1,100) (1,792)
Interest rate swap 25,000 2.13% 10.00 (4,332) (2,510)
(32,009) (26,511)
Net fair value loss on derivative financial assets (5,498) (997)
* Fixed rate came into effect on 1 September 2008. Rate includes 1.95%
margin. The contract includes mutual breaks, the first potential one was on
23 November 2014 (and every 5 years thereafter). ** This arrangement came into
effect on 1 December 2011 when HSBC exercised an option to enter the Group
into this interest swap arrangement. The rate shown includes a 1.95%
margin. This contract includes a mutual break on the fifth anniversary and
its duration is until 1 December 2021.
1. Bank loans
2020 2019
£’000 £’000
Bank loans due within one year 63,066 1,072
( within current liabilities )
Bank loans due after more than one year 51 58,955
( within non-current liabilities )
Total bank loans 63,117 60,027
2020 2020 2020 2019
Analysis of debt maturity £’000 £’000 £’000 £’000
Interest* Capital Total Total
Trade and other payables** - 5,995 5,995 5,172
Bank loans repayable
On demand or within one year 317 63,066 63,383 2,633
In the second year 1 51 52 59,592
In the third year to the fifth year - - - 43
318 69,112 69,430 62,268
*based on the year end 3 month LIBOR floating rate – 0.05%, and bank rate of
0.10%.
** Trade creditors, other creditors and accruals
On 19 April 2016 the Group renewed its £75,000,000 loan facility by entering
into a 5 year term loan with HSBC and Santander. The Group has agreed a
short term extension to July 2021 in order to give time to extend the
facility. A new facility has been agreed and credit approved with a 3 year
term and a total facility of £66,000,000. The paper work should complete in
the next two to three months.
A Shawbrook bank loan of £117,000 at the year end is repayable over its life
to September 2022.
The bank loans are secured by first fixed charges on the properties held
within the Group and floating asset over all the assets of the Company. The
lenders have also taken fixed security over the shares held in the Group
undertakings.
The estimate of interest payable is based on current interest rates and as
such, is subject to change.
The Directors estimate the fair value of the Group’s borrowings, by
discounting their future cash flows at the market rate (in relation to the
prevailing market rate for a debt instrument with similar terms). The fair
value of bank loans is not considered to be materially different to the book
value. Bank loans are financial liabilities.
7. Events after the reporting date
In late January 2021, the Group exchanged contracts to purchase an industrial
building in Trowbridge for £3.3m, paying a 5% deposit. Completion is at a
time of the seller’s option with the earliest date being 15 months and the
latest being 30 months from exchange. The seller also has the ability to
take a leaseback at completion at a market rent. The industrial unit is well
located and is a 96,000sq ft building on circa six acres of land.
The Group has paid £5m in February 2021 to vary a long-term swap agreement.
The agreement varied was an interest rate swap fixed at 5.06% until 31 August
2038 on a nominal value of £35m and has circa 17.5 years remaining.
Following the variation, the Group’s fixed rate will drop on 1 September
2023 to 3.40% saving the Group £581,000pa in cash flow until the end point of
the instrument.
1. Copies of the full set of Report and Accounts
Copies of the Company’s report and accounts for the year ended 31 December
2020, which will be posted to shareholders shortly, will be available from the
Company’s registered office at Unicorn House, Station Close, Potters Bar,
Hertfordshire, EN6 1TL and will be available for download on the Group’s
website www.pantherplc.com.
1. Annual General meeting
Arrangements for the 2021 Annual General Meeting (AGM) in light of COVID-19.
The 87th Annual General Meeting of Panther Securities P.L.C. is planned to be
held on 30 June 2021 at Unicorn House, Station Close, Potters Bar, Herts., EN6
1TL at 10.00 am.
Whilst the meeting will be an open meeting and by Zoom, the open meeting will
be subject to any restrictions on physical meetings that prevail at the time
of the meeting.
The Zoom meeting will be capped at a maximum of 100 people. Shareholders
wanting to have the login details will need to download the ZOOM application
and email info@pantherplc.com with subject “Shareholder meeting” at least
3 days before the meeting. Requests for admission will be dealt with on a
first come, first served basis.
In view of the COVID-19 pandemic, it is the Board’s strong preference for
people not to attend in person this year.
Any member who still wishes to attend must email info@pantherplc.com by 15
June 2021 so that we can ensure the premises are ‘COVID-safe’. Please note
that we may have to refuse based on numbers and safety measures.
Proxy Voting is encouraged this year and no one apart from the Chairman will
be allowed to be a Proxy.
If you have any questions prior to the Annual General Meeting please email the
address above.
Panther Securities PLC +44 (0) 1707 667 300
Andrew Perloff, Chairman
Simon Peters, Finance Director
Allenby Capital Limited (Nominated Adviser)
+44 (0) 20 3328 5656
David Worlidge
Alex Brearley
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