REG - Panther Securities - Final results for the year ended 31 December 2021
25/04/2022 07:01
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RNS Number : 1164J Panther Securities PLC 25 April 2022
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 2021
CHAIRMAN'S STATEMENT
I am pleased to present the results for the year ended 31 December 2021 which
shows a profit of £15,922,000 before tax compared to a profit of £2,573,000
before tax for the previous year ended 31 December 2020.
Of course, once again the figures are substantially affected by the movement
in our swap liabilities amounting to a reduction of £16,754,000. A large
part of the improvement being due to the market expectation of future higher
interest rates at 31 December 2021, compared to those anticipated at 31
December 2020.
Even if the balance sheet benefit of interest rate rises are excluded, our
underlying business improved, with our operating profit for the year under
review amounting to £7,701,000 compared to £6,704,000 for the previous year
ended 31 December 2020 when we had the bulk of the problems of Covid related
reliefs and tenant failures which we had to deal with and absorb.
Additionally, this year our property management costs increased by
£1,169,000. Just under half were extra holding and repair costs of the
vacant properties we received back following the Beales business failure, some
of which properties have now been let or sold. Legal costs were over
£300,000 higher, substantially due to the costs imposed on the Group by our
lenders to confirm the charging arrangements for the refinancing of properties
already charged to our lenders.
Our bad debt charge was much reduced to £286,000 from the £1,629,000 charged
last year when the tenants' problems relating to the pandemic were unknown and
financially not easily quantifiable.
Rents Receivable
Rents receivable for the year ended 31 December 2021 were £13,172,000
compared to the previous year's £13,051,000. This was despite loss of rent
of £133,000 due to the disposal of factories at Wembley and our largest
tenant vacating Maldon warehouse during the last two months of the year.
Disposals
There were a number of significant disposals during the year which produced a
total profit of £701,000 on sales of £15,841,000, seemingly a low profit
margin but the properties had been independently re-valued for the lenders in
December 2020 and July 2021.
Fourth Way, Wembley
Four older style freehold factories producing £254,000 p.a. sold for
£8,700,000. The remaining part of our estate in Fourth Way, Wembley was
retained, producing £249,750 p.a. and comprises seven more modern single
storey factories totalling 15,783 sq. ft. and held on a ground lease where the
rental payable to our freeholders is 25% of rental value, reviewed every five
years.
37/39 Market Place, Great Yarmouth
An ex-Beales store (previously Palmers)
The vacant freehold was sold to Great Yarmouth Borough Council for £1,325,000
which showed a profit on book value. We have retained the freehold of the 70
space adjoining car park which is managed by Great Yarmouth Borough Council,
on our behalf, which in pre-pandemic years had produced over £65,000 p.a.
West Molesey
This freehold 36,000 sq. ft. older style factory situated on a one acre site
was sold for £3,900,000 (at book value). It was let at £267,000 p.a. but
with the tenant expected to vacate at the end of their lease in June 2022.
Mansfield
This former Beales store, now vacant, with approximately 150,000 sq. ft. of
multi storey department store space in need of complete redevelopment or
refurbishment, was sold to Mansfield District Council. This is to be a major
part of their town centre rejuvenation project.
We received £1,500,000 against its book value of £1,650,000. We retained
the part of the former Beales store that is part of the Four Seasons Shopping
Centre, the main shopping centre for the town. This a modern centre and our
building contains 27,000 sq. ft. This adjacent scheme will in due course
improve our property as the town centre rejuvenation takes place. Our
interest is a virtual freehold at a nominal ground rent.
The Quadrangle, Glasgow
We have contracted to sell our site/building at The Quadrangle, Glasgow, which
sits on a corner site of 94,000 sq. ft. on the canal and is ideal for a social
housing development. The price agreed is £1,250,000, subject to planning
which should be received this year. We received a £100,000 deposit with
£65,000 released to us on exchange as non-refundable.
60 High Street, Sittingbourne
This shop property was sold in May to the tenant for £450,000. We provided
a loan of £350,000 secured on the property to assist the tenant's purchase.
We charged a high rate of interest and shortly before the year end the tenant
paid off £150,000 thus leaving £200,000 outstanding due for repayment in May
2023 (post balance sheet date a further £75,000 paid).
Acquisitions
In January 2021 we exchanged contracts to purchase a substantial freehold
factory and warehouse in Trowbridge, Wiltshire, of approximately 96,000 sq.
ft. of usable space situated in approximately six acres of industrial land.
This property is situated on one of the best industrial estates in Trowbridge
where demand should be good. The contract price agreed is £3,300,000 with a
delayed completion of between 15 and 30 months depending upon timing of the
completion of the vendors' new building. Should it be necessary for a
further delay, the vendors have agreed to pay a rent of £340,000 p.a. until
they vacate.
This purchase will further diversify our portfolio by adding this industrial
investment. The spread and variety of rental streams within our portfolio
helped us to pass through the pandemic with relatively few issues.
Completion is now expected in June 2022 and we have already received
approaches for the property, some to purchase, but we would prefer to let the
property and retain as an investment as with a 9 metre eaves height and good
circulation and loading facilities, it should have a premium rental value.
Developments
Broadstairs
At long last this development is finished, with Tesco trading successfully in
the shop unit since June 2021 and all twelve flats will shortly be fully let
on assured shorthold tenancies and producing a combined total rent of
£185,000 p.a. This is a quality addition to our portfolio.
Swindon
The problems with regard to the council's requirements for this scheme have
nearly been resolved allowing us to move forward shortly with the planning
permission. The redevelopment of this site in the centre of Swindon will
soon proceed to the next stage.
Barry Parade, Peckham Rye
This potentially attractive scheme is still delayed by the council's ever
changing and increasing costly requirements. We are still working on our
appeal to take it out of the intransigent council's hands.
Peterborough
The former Beales store in Peterborough, currently partly occupied by New
Start 2020 Limited, trading as Beales, is in the final stages of preparation
prior to submitting a planning application for a large mixed-use development
of shops/offices and 125 residential units whilst retaining a substantial part
of the existing attractive Edwardian brick building façade. The current
older style department store contains approximately 145,000 sq. ft. of space
unsuitable for current retail markets.
Tenant Activity
During the year we also let or renewed circa 110 tenancies - the overall
movement in the annual rent roll (letting and losses) resulted in a reduction
of approximately £664,000. This decrease was primary due to the loss of our
tenant in Maldon in November 2021 which had a negative effect on the rent of
£600,000 p.a. but was offset by two new factory lettings at Tenbury Wells at
rents totalling £170,000 p.a. The Tenbury Wells letting was particularly
pleasing as these factories had been vacant for a number of years.
In addition to the above reduction in annual letting income, we provided
approximately 30 tenants concessions to assist where possible at a total cost
of £230,000 for the year (however these are one off short term concessions
and not permanent adjustments to our rental income).
Fortuitously in March 2022 about four months after vacating, our former
tenants at Maldon had their trading situation pick up sufficiently to re-rent
the Maldon warehouse at £800,000 p.a., £150,000 p.a. higher than their
previous rent. These additional rent benefits will be shown in our 2022
accounts.
As such if one adds back the Maldon annual rent lost in 2021 (as it was relet
at a higher rent in early 2022), the headline annual rent roll was effectively
pretty flat for the year, which is a good result given that the letting market
in 2021 was again overshadowed by COVID-19.
Beales Stores
I have already mentioned the planning exercise for Peterborough, the sale of
Great Yarmouth and Mansfield, and the lettings of part of the stores at
Keighley and Beccles, plus fully letting Skegness in 2020. There are
also a number of negotiations on parts of other former Beales stores, some of
which may come to fruition soon.
Post Balance Sheet Events
Since the year end, as mentioned above, we re-let the Maldon factory at
£800,000 p.a. (mentioned above) and we have exchanged a conditional contract
for the sale of the vacant freehold shop and upper part in Clayton Street,
Newcastle Upon Tyne for £940,000 which is above book value.
Staff
I have to give special thanks to all our staff who had to work another year
with much more complicated arrangements due to Covid restrictions which caused
problems for many of our tenants and consequently extra management time on our
portfolio.
Loans
On 16 July 2021 we finally completed our refinance which consisted of a
£66,000,000 loan for a three year period as a club facility jointly lent by
HSBC and Santander. The loan has a term element of £55,000,000 and a more
flexible revolving element of £11,000,000 which gives us the ability to pay
down and redraw over the three year term.
The £66,000,000 was fully drawn but with the net proceeds from disposals we
repaid our revolving facility.
The new loan is a more conservative facility agreement than we are used to
with a headline loan-to-value covenant of 55%, when historically it had been
around 65% (which used to be considered conservative!). The extra cautious
nature shown by the lenders is also reflected by the smaller loan facility
arranged (previously we borrowed £75,000,000 which is now £66,000,000).
The Banks also increased the margin from 1.95% to 2.70%. However, on 1
December 2021 we had a prearranged reduction in our fixed rates on £25
million of our loan, the saving in lower fixed rates being a bigger offset
than the increase in costs from the higher loan margins now current.
Even though this was a much tougher and less generous refinancing, we
appreciated our lenders' position and do not take their continuing support for
granted. We have had a very amicable banking relationship with HSBC for
nearly 40 years and Santander for over 10 years. This refinancing was the
third iteration of this joint club loan.
Swap restructuring
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 16.5
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 p.a. in cash
flow until the end-point of the instrument.
Charitable Donations
In March 2022, the Group donated £20,000 to the Daily Mail Ukrainian appeal.
We also made our other regular donations in the year including £10,000 to
Land Aid and other smaller contributions being mainly adverts within charity
programs or diaries.
Dividends
We paid a 6p share interim dividend for the year ended 31 December 2020 on 2
July 2021, and a further 6p per share final dividend for that year on 14
October 2021. We paid an interim dividend of 6p per share on 9 February 2022
for the year ended 31 December 2021.
Subject to shareholder approval at our Annual General Meeting on 15 June 2022,
the final dividend of 6p per share will be payable on 20 July 2022 to
shareholders on the register at close of business on 1 July 2022 (ex-dividend
on 30 June 2022).
Prospects
It is now 50 years since I, my brother and Malcolm Bloch, took over the tiny,
publicly quoted Levers Optical Co Ltd in 1972, which we turned into Panther
Securities PLC, a successful property company that has continuously paid
dividends (and where appropriate special dividends) for the last 40 years, so
much so that I personally have not had the necessity to take a salary or
receive a pension contribution for over 16 years and 25 years respectively.
In last year's accounts I announced that Simon Peters would be taking over as
Chief Executive Officer, but I would continue as Chairman. This will allow
me to extend my weekend to include Fridays, which will give me more time for
my personal interests.
We have a loyal and experienced team that continue to perform successfully.
It is worth repetition that our widespread portfolio of different types of
properties, mostly producing rental income and many with development
potential, provide a safe cover for all our interest payments and management
costs.
We also have excellent relationships with our bankers, accountants,
solicitors, agents and all other professionals needed to operate a widespread
property business.
Thus, as always, I look forward to the Group's continuing success.
Finally, I repeat my thanks to our small but dedicated team of staff, growing
team of financial advisers, legal advisers, agents and accountants for all
their hard work during the past year. Special thanks and good wishes to our
tenants and I hope they are able to overcome the present troubled environment
and make a full and profitable recovery.
Andrew S Perloff
CHAIRMAN
22 April 2022
CHAIRMAN'S RAMBLINGS
We often buy properties or enter into transactions with people we have dealt
with before, many of them friends who we know and trust. On one occasion a
few years ago, I was buying a property from a friend. When he provided me
with the information required, I began checking all the details and relevant
matters. He was a little put out and asked "Don't you trust me? Do you
think I would lie to you?". I replied, "Of course I trust you but let me
tell you a story", which I recount now.
When I was young and fancy free, I had a small group of close friends, one of
whom, like me, had more flexibility with his holiday arrangements.
In 1967, when we were both 23, we decided to take a holiday in Southern Spain
and to make it more exciting would drive there in my Triumph Herald
convertible, both taking turns to drive. My friend somehow had found and
booked a tiny one-bedroom bungalow right on the beach at Torremolinos. The
journey took 3 days, overnighting at Biarritz and Madrid before continuing
down the centre of Spain.
This was before most motorways and other than the towns, we encountered little
traffic and thus it was a great drive on long straight tree lined roads in
France. In Spain, I seem to recall the roads were good for some miles out of
major towns but then, without notice, suddenly they were without a tarmac
surface. However, the journey is not the story!
We had a wonderful time being on a hot, clean beach with the all-day sun and
warm sea and many, many other young holidaymakers, also out for a good time.
Surprisingly the cottage, although furnished but dated, was perfect with
working cooking facilities even we were capable of using! The sun shone
every day, and so it should in Southern Spain in early September.
My friend would always come up with ideas and suggested a day trip whereby we
could drive to Malaga and catch a ferry to Tangier which was about a four hour
crossing. This sounded exciting so one day we drove to Malaga very early and
parked for free in the harbour car park. When we walked up to buy ferry
tickets I began to have doubts when I saw the age and small size of the ferry
boat. Expressing my fears, my friend reassured me with his expert knowledge
of the sea and weather (as he was a keen fishing enthusiast). "Look how
sunny and calm the water is, it's only about 35 miles away and because the
Mediterranean is an enclosed sea with land all round, it won't ever get
rough". With this logical explanation, my fears gone and feeling reassured,
we bought our tickets and boarded the ferry with about 100 other travellers.
My friend was correct. It was a beautifully smooth crossing and we stood on
the deck and watched flying fish and a pod of dolphins follow alongside the
boat for half the journey. We arrived safely on time at the port in Tangier
where a guide waiting for tourists convinced us that for a few dirhams he
would show us round the Kasbah and the modern town for most of the 6 hours we
were there.
About 5.00 pm we caught the ferry for our return journey. As we boarded we
noticed there was some light rain. There were also fewer people on the
return journey but we were relaxed and happy to sit on one of the on deck
deckchairs. As soon as we were out of the harbour the seas became more
choppy but not enough to worry me.
An hour or so out and already dark, the water became much rougher with
torrential downpours of rain and lightning in the distance gradually getting
closer. Most of the passengers on deck went downstairs whilst crewmembers
collected deckchairs and put them in secure trunks chained to the deck. The
sea grew rougher with 25 ft waves and the boat rose high up and down with the
swell. I was petrified but stayed on deck thinking if the boat sank I could
at least float on a deck chair! My friend turned green and went
downstairs! I faced my expected demise, with thoughts of all I would miss
out on but after another two hours of rocky seas and bad weather, drenched to
the skin (the rain was warm), I could see the lights of Malaga and was
overcome with relief when we made it into the much calmer harbour. Shortly
afterwards, we disembarked with many of the passengers making the sign of the
cross as they stepped off the boat onto land. I nearly converted and joined
them in their thanksgiving prayer but instead I wobbled unsteadily on my feet
until I reached my car. That night we slept better than ever before, and
probably since!
The holiday was fast ending so after a whole day on the beach with clear blue
skies and sunshine, followed by a late night out at a crowded dancing and
drinking club, we drove back to our beach cottage and parked on a small side
road, about two hundred yards away. I suggested we could put the hood up but
as it took a while to erect and we were tired, I asked my friend if we should
leave it open as the sky was clear, without a cloud in sight, the weather hot
and I asked him if he thought it might rain. He said it was very rare for it
to rain in Torremolinos in September and as there had been a storm and heavy
rain the previous week it was unlikely to rain again. With his sage advice
we went home to bed.
About 6.30am I woke up to rattling on the roof. We realised it was rainfall,
looked out of the door and it was bucketing down. We had no rainwear so
hoped it would stop soon and as the car was probably already very wet, there
was little we could do. We went back to sleep until after 10am. When we
arose we were correct in our assumption as the sun was shining and it was
beautiful outside.
We walked to the car and found the passenger section contained over 1 foot of
water and looking like a small garden pool, we opened the doors and the top
nine inches of water flooded out. We then went back to the cottage to fetch
saucepans and frying pans which we used to bail out the rest of the water.
We pulled out all the floor carpeting and left it on the wall for the sun to
dry it out. Once we had done all we could to remedy the situation, I tried
to start the car. It started immediately which was a great relief as we were
due to leave 2 days later.
The sun stayed bright and hot for the rest of our holiday and the carpets
dried out but the car stank of damp carpet which we had to put up with for the
three day drive home, and it smelt for many months afterwards.
The moral to these stories was that my friend had never and would never have
deliberately lied to me but his knowledge and information was wrong and over
the years I began to realise that you should always check information given to
you which you need to rely on, even if given by an absolutely trustworthy and
honest friend.
Of course, there was a further related story to crystallise and embed my
thoughts on careful investigation.
About twelve years after my Spanish holiday, my business was still recovering
from the property crash of the mid-seventies and therefore we were trading
properties for quicker profits rather than buying for long-term investment.
One of our most trusted agents approached us with an attractive deal. One of
his other clients had contracted to buy a portfolio of 29 freehold, very
secondary separate shops spread out amongst many Northern towns. The total
contractual price was £125,000 and produced a good rental. The client was a
one-man operator and felt it was too much work for him to deal with the entire
portfolio so the contract was offered to us for £5,000.
Speed was essential so we signed up within days even though we did not have
time to physically view any of the properties, but we had the individual
photos and tenancy details which had been checked by his solicitors.
We took on the project with gusto for selling on the individual properties to
friends and clients.
A close friend purchased two separate shops, one in a small town called Ossett
let to a local baker, thus giving us a £2,500 profit, he too taking our
details and photos as correct and with a view to putting one of the properties
up for sale by auction after an imminent rent review had been agreed.
Prior to the auction, his surveyor viewed the property to negotiate the rent
review. To his surprise, and ours, the photos of the property, which showed
a nice small shop with a van outside with the baker tenant's livery clearly
shown on its side, were not outside the correct property.
Our property was round the corner in a lesser quality position. It became
obvious that the photographer had taken the photo and was fooled by the firm's
van being parked on the main road as it could not easily park outside the
actual property because of a one-way system. The surveyor was most disturbed
by the error as the shop tenant was a butcher who was so indignant that he
chased him out waving a butcher's cleaver!
The property went to auction with correct photos, the other details unchanged,
and I was pleased to see my friend made a reasonable profit. Therefore,
everyone concerned was happy. So properly checking facts became well
embedded in my thoughts, even when dealing with honest and trustworthy
friends.
In previous ramblings I have mentioned over my many years in business that I
have come across numerous M.P.s and, of course, my conversations usually turn
to business and its problems, caused by ill thought out legislation and
excessive or illogical taxes.
They have invariably all seemed sympathetic and promised to look into the
problems to try and help.
The one common conclusion I came to was that none had any intimate
understanding of how businesses worked or fully understood the ramifications
or unintended consequences of their legislation, and this seemed to be due to
their lack of working outside of the bureaucratic government bubble.
It was obvious that they relied on civil servants to produce the information
they required to guide reformative legislation.
It is generally known that government taxation has destroyed the department
store sector. This sector has been so beneficial to our country for over a
hundred and fifty years and was one of the backbones of the free enterprise
and capitalist system. This sector of retailing provided the anchor to the
high street, and thus the surrounding community, providing easy accessible and
flexible employment for the many hundreds of thousands of youngsters who are
not wanting a full-time working and lifetime career, mainly young women, many
who do not want to have full-time education for a further 3 years and be
loaded with student loan debt.
For a number of years I have argued the absurdity of the current business
rates system failing to change with the retail markets' technological advances
which gave terrific financial advantage to new business that could operate
without a large property presence and much reduced staff levels.
The existing system, built on rental values, had a substantial safety valve
built in by having values revalued every five years. However, constant
gerrymandering of the system has substantially killed off the department store
sector and debilitated the high street. The mistakes began to accentuate
when they deferred the revaluation in 2015 by two years, "an obviously stupid
mistake". This caused the already out of kilter values to become more
lopsided for another two years so they then brought in a phasing system which
only a moron could have devised.
This made those traders who desperately needed and were entitled to very large
reductions by virtue of the lower trading and rental values of their premises
to only receive a 5% annual reduction (even if the calculations showed a 50%
reduction was the appropriate figure) whilst those who were doing very well
only paid a token increase, with this paltry reduction as reduced by an
inflation linked upward adjustment every year.
Many retailers did not receive the correct full reduction before the next
revaluation was due. The department store sector, with many previously
successful retail businesses collapsed into Receivership etc., helped along by
forced closures because of the COVID-19 pandemic. To top it all, the
government then deferred the revaluation a further two years.
I believe it was Einstein who said "To repeat an experiment or action and
expect a different result is the first sign of madness".
I have just read that the government have announced that they will introduce
new laws to allow local authorities to compulsorily/force landlords of shops
vacant for over 6 months to rent out to the highest bidder chosen by them.
There will be monumental hurdles to overcome, i.e., who pays for repairs, who
is responsible if rent or rates are not paid? How long will lease lengths be
forced upon reluctant landlords and what if a property is being held for
development, will there be compensation for landlords loss of value? Will
banks be precluded from calling in loans secured upon the property if the
values falls?
This is gesture politics to shift blame for government incompetence to
blameless landlords.
As government policies are sometimes so shortsighted, I can't help feeling
that some of the anonymous civil servants have a deliberate agenda to
undermine the free enterprise and capitalist system. Thus their long salami
style regulations and taxation attacks, and now proposed extra compulsory
costs put upon Landlords and the business community, is deliberate by people
either in the pay of communist governments or supporters of Marxist regimes.
At my grammar school, I was not an attentive pupil and there was much I
regret. I did not put much effort into lessons, but for some teachers it
paid to pay more attention and keep alert. One such teacher was Mr Blake,
the geography teacher, who had a tendency to throw the blackboard rubber at
pupils who were not paying attention. This wooden backed sausage shaped
cloth was often used as a well-aimed missile, which often hit its mark.
In one lesson, which I recall was about our country's mineral resources, I was
not concentrating, thus the well-aimed missile suddenly flew towards me, I
ducked and it hit the boy behind me causing much class amusement. I was then
forced to listen to his repeat of what he was trying to instil in us all, that
the UK would never be short of energy because most of our country sat on vast
beds of coal which triggered the Industrial Revolution and made Great Britain
an industrial powerhouse.
So now some sixty years later, I am wondering was he wrong, what happened to
all these vast energy resources which had been augmented by the discovery of
vast reserves of North Sea oil and gas and in recent times with new technology
giving us the ability to release huge gas reserves still trapped in rock
strata beneath our soil?
Currently, our household energy costs are colloquially going through the roof
as well as literally. It is all down to central government mistakes. Their
legislation, i.e., MPs on information provided by their largely anonymous
advisors that most fuels create carbon emissions and should be eliminated to
protect our world from dying because of global warming caused by man using
these fossil fuels. Our world has been evolving for billions of years, and
even if our government were correct in their assumptions, with the UK only
producing 1% of these global emissions, whatever measures they take will make
no noticeable difference.
If we need 1,000,000 tons of special type of coal for specialist production,
if we have to import it from a third world country because we are
legislatively prevented from digging up our own coal, surely that creates
additional carbon emissions for the long distance transport involved.
This will be the same for oil and gas so why do we impoverish our nation by
shutting down our own production?
The reason once again is Gesture Politics. It sounds good to protect the
environment for our great grandchildren's future - IS THE PRESENT FINANCIAL
PAIN WORTH IT? Will further generations be financially able or allowed to
have families?
The result of our country's carbon reduction initiative is extremely painful
for most people, especially families at the lower end of the income scale.
Those in the middle will manage but will find their existing living style
needs to be lowered.
The price of energy was already rising disproportionately because of our
present governments green taxes and carbon reduction policies.
This was probably one of the main reasons the Russian dictatorship felt it
could get away with invading Ukraine, which besides creating misery for
millions of people, and a huge refugee crisis, caused a further increase in
world energy costs, whilst they knew they were self-sufficient, and how large
parts of Europe depended upon having Russia export oil/gas to them.
Russia has always been a rogue state and this outcome was definitely
foreseeable, and the risks could have been considerably reduced if we had
continued and expanded our self-generated, under our feet energy capabilities,
and especially fracking which could produce quicker returns than other
alternatives with little environmental problems. Certainly fewer problems
than an extra 4,000,000 refugees flooding Europe would cause, or being forced
into a ground war with Russia. Russia would inevitably be the eventual loser
of a war of which everyone would be losers.
The people of this country are paying a heavy financial price for our
government's incompetence and unfortunately listening to the noisiest
protestors who are a small minority, usually financially protected from the
worst of the financial pain befalling upon the majority of the hard working,
family orientated population.
Yours
Andrew S Perloff
CHAIRMAN
22 April 2022
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 currently owns and
manages over 900 individual property units within over 120 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
2021 2020 2019 2018
Gross profit margin (gross profit/ turnover) 65% 73% 76% 71%
Gearing (debt*/(debt* + equity)) 36% 42% 41% 39%
Interest cover** 1.72 times 1.34 times 2.14 times 4.17 times
Finance cost rate (finance costs excluding lease portion/ average borrowings
for the year)
7.5% 7.0% 7.1% 6.6%
Yield (rents investment properties/ average market value investment
properties)
7.9% 7.8% 8.8% 7.7%
Net assets value per share 553p 488p 480p 532p
Earnings/ (loss) per share - continuing 76.4p 14.9p (23.1)p 39.9p
Dividend per share*** 12.0p 12.0p 12.0p 27.0p
Investment property acquisitions £0.5m £5.5m £8.1m £3.9m
Investment property disposal proceeds £15.8m £0.7m £1.1m £40.8m
* 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 per share special dividend
Business review
The Group's underlying performance bounced back following the negative effects
of COVID-19 pandemic with the operating profits being £1m stronger, this was
despite more holding costs on vacant properties resulting in a lower gross
profit margin. This was mainly due to a much lower bad debt charge being
required in 2021 compared to that required for the year ended 31 December 2020
during the COVID-19 pandemic.
The property values improved slightly following an independent valuation at
the half year and a directors' valuation at the year-end.
The most significant impact on the income statement was the sizeable
improvement of the swap liability (derivative financial liabilities) by £16.8
million. The reduction in the liability is approximately half due to our
actions of paying a premium to exit the swap and re-enter a new more
beneficial arrangement for a £5m premium at an estimated discount of £3.3m
(this is explained in more detail under Financing below). The remainder of
the improvement in our swap liability position is mainly in relation to the
change in market expectations of higher future interest rates (leading to a
lower liability).
The other main feature of 2021 was the large disposals undertaken, this does
not affect the profits significantly in the income statement as the increase
in values were recognised in the 2020 accounts (following the independent
valuation at 31 December 2020), but now have been realised. It does however
have a large impact on cash flow generation. Therefore, even though the
Group showed £0.7m of profit it produced a significant £15.8m of cash.
There was a good mixture within the disposals, some a result of the Group
taking advantage of the booming market in industrial properties but other
disposals being vacant department stores, with no income being lost.
The consolidated statement of cash flows, shows the cash generated in the
operating activities had improved to £2.98m (2020 - £2.61m). The operating
activities or underlying business shows an even stronger improvement if the
tax effect is stripped out as we had to pay tax in 2021 but had a repayment in
2020.
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 553p (2020 - 488p
per share).
Through the many downward economic cycles and in particular, the COVID-19
pandemic, the most important plank within the Groups business plan is the
balance within the portfolio between different asset classes and its resulting
diverse, resilient, income streams these investments provide. Over the last
couple of years, the industrial properties and the secondary "local" retail
investments have performed the best in terms of growth in values and/ or
importantly in terms of income collection. We also benefit from having
properties with residential elements or planning potential, mainly in the
southeast. As explained in the 2020 annual report (and worth repeating), we
have seen that the secondary local shopping parades hold up well in the
pandemic. The traders in these properties have managed to survive and some
even flourish. As even though lockdowns meant closures, many were considered
essential and most benefited from additional local footfall whilst people were
not commuting into major towns or city centres. We also saw our smaller
tenants adapt 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 - over half of our value)
will be less affected by the seismic change to shoppers' 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 service providers, restaurants or take away use, or convenience
offerings, which are by their very nature less affected than pure destination
retail, or 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 more traditional high street or pure
retail positions are mainly large blocks in the centre of towns - which we
believe will benefit from longer-term regeneration plans from the Government
and local councils for town centres. As such, if and when some retail
locations become less viable, we believe we can create value from these sites
with planning permission to eventually give them other uses or purposes. In
the meantime, they continue in the most part to be strong cash contributors
providing high returns on initial investment.
Going forward
We highlighted two issues that would impact 2020 in the 2019 report and
accounts being COVID-19 (which has accelerated structural changes in how
businesses operate) and demise of Beales. These two issues were the large
factors in 2021 and will continue to impact 2022 but less so. We are working
our way repurposing the former Beales properties, we have let some and sold
two vacant properties - the management team believe there is still a lot of
potential upside in the remaining properties. The down side in the remaining
vacant department store properties is already reflected in their valuations,
so we believe we can do well on this low base, adding further long-term
income, and making some capital profits on disposal. We believe the external
valuations are prudent but time will be the true judge.
Following the disposals and repayment of a large part of facility, we are
de-geared and have significant cash for a Group of our size. We are in a
strong position to take advantage of opportunities to buy in new investments
but over the next couple of years, we see proportionally more future benefit
coming from within the existing portfolio. The Group is aiming 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.
The economy may be entering a higher interest and high inflation
environment. We have fixed interest swaps which will protect us from any
interest increases. On the inflation, the make-up of property companies
naturally protects the business as property investments should go up in line
with inflation whilst the loans real value effectively decreases.
COVID-19
We believe as a board that we are through the worst of this now, but even if
there are more hurdles any resulting negative situations will be less
uncertain, we have a lower level of borrowing, and strong cash reserves.
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.
Financing
The Group refinanced its facilities in the year and agreed a £66 million
facility for a three-year term from July 2021.
At the Statement of Financial Position date, the Group had £13.4m of cash
funds, £11m available within the loan facility.
Financial derivative
We have seen a fair value gain (of a non-cash nature) in our long term
liability on derivative financial instruments of £16.754m (2020: £5.498m
fair value loss). Following this gain the total derivative financial
liability on our Consolidated Statement of Financial Position is £15.3m
(2020: £32.0m). The Group's swap (financial derivatives) position is at its
lowest liability since December 2013.
In November 2021 a £25m swap finished which was at a fixed interest rate of
4.63% and has been replaced by one at 2.01% which will show a saving in
interest costs of circa £654,000 per annum compared to the historic
position.
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 £581,000 p.a. in cash flow until the
end point of the instrument.
These financial instruments (shown in note 5) 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.
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). We also use
financial derivatives (swaps) were appropriate to manage interest rate risk.
The Directors revisit the appropriateness of this policy annually.
Principal risks and uncertainties of the Group
The successful management of risk is something the Board takes very seriously
as it is essential for the Group to achieve long-term growth in rental income,
profitability and value. The Group invests in long term assets and seeks a
suitable balance between minimising or avoiding risk and gaining from
strategic opportunities. The Group's principal risks and uncertainties are
all very much connected as market strength will affect property values, as
well as rental terms and the Group's finance, or term loan, whose security is
derived primarily from the property assets of the business. The financial
health of the Group is checked against covenants that measure the value of the
property, as a proportion of the loan, as well as income tests. The two
measures of the Group's finances are to check if the Group can support the
interest costs (income tests) and also the ability to repay (valuation
covenants).
The Group has a successful strategy to deal with these risks, primarily its
long lasting business model and strong management. This meant the 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 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 and 2021.
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 900 individual units and over 120 buildings/
locations. Secondary property also, very importantly, is much higher
yielding which generally means the investment generates better interest cover
and its value is less sensitive to market changes in rent or loss of tenants.
Property risk
As mentioned above we invest in most sectors in the market to assist with
diversification. Many commentators consider the retail sector to be in
period of severe flux, considerably affected by changing consumer habits such
as internet shopping as well as a preference for experiences over products.
Of the Group's investment portfolio, retail makes up the largest sector being
circa 60 to 65% by income generation. However, the retail sector is affected
to lesser degrees in what we would describe as neighbourhood parades, as
opposed to traditional shopping high streets. The large part of our retail
portfolio is in these neighbourhood parades, meaning we are less affected by
consumer habits and even benefit from some of the changes. Neighbourhood
parades provide more leisure, services and convenience retail.
For example we have undertaken a few lettings to local or smaller store
formats, to big supermarket chains, which would not have taken place many
years ago. Block policy is another key mitigating force within our property
risks. Block policy means we tend to buy a block rather than one off
properties, giving us more scope to change or get substantial planning 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. In 2021 the Finance Director was
promoted to Chief Executive. The Group undertakes team building activities
to encourage cohesion and working together.
(c) the need to foster the company's business relationships with suppliers,
customers and others;
Being in the 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 in 2019 replaced with
a new system this has been refined over the next few 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 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 shown earlier in these accounts and was approved and
authorised for issue by the Board and signed on its behalf by:
S. J. Peters
Company Secretary
Unicorn House
Station Close
Potters Bar
Hertfordshire EN6 1TL
22 April 2022
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2021
Notes 31 December 2021 31 December 2020
£'000 £'000
Revenue 13,172 13,051
Cost of sales (4,651) (3,482)
Gross profit 8,521 9,569
Other income 958 467
Administrative expenses (1,492) (1,703)
Bad debt expense (286) (1,629)
Operating profit 7,701 6,704
Profit on disposal of investment properties 701 150
Movement in fair value of investment properties 4 961 6,146
9,363 13,000
Finance costs - interest (2,322) (2,283)
Finance costs - swap interest (2,806) (2,726)
Finance costs - swap variation (5,000) -
Investment income 29 41
Profit on disposal of fixed assets - 1
(Loss)/profit (realised) on the disposal of investments (96) 38
Fair value gain/(loss) on derivative financial liabilities 5 16,754 (5,498)
Profit before income tax 15,922 2,573
Income tax (expense)/credit (2,411) 71
Profit for the year 13,511 2,644
Continuing operations attributable to:
Equity holders of the parent 13,511 2,644
Profit for the year 13,511 2,644
Earnings per share
Basic and diluted - continuing operations 3 76.4p 14.9p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
Notes 31 December 2021 31 December 2020
£'000 £'000
Profit for the year 13,511 2,644
Items that will not be reclassified subsequently to profit or loss
Movement in fair value of investments taken to equity 18 55 (354)
Deferred tax relating to movement in fair value of
investments taken to equity 25 (14) 67
Realised fair value on disposal of investments previously taken to equity
18 148 -
Realised deferred tax relating to disposal of investments previously taken to
equity
25 (37) -
Other comprehensive income/ (loss) for the year, net of tax
152 (287)
Total comprehensive income for the year 13,663 2,357
Attributable to:
Equity holders of the parent 13,663 2,357
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Company number 00293147
As at 31 December 2021
Notes 31 December 2021 31 December 2020
ASSETS £'000 £'000
Non-current assets
Investment properties 4 167,384 180,975
Deferred tax asset 2,252 3,810
Right of use asset 298 335
Investments 292 614
170,226 185,734
Current assets
Stock properties 350 350
Investments 29 29
Trade and other receivables 2,996 3,925
Cash and cash equivalents (restricted) 5,009 1,052
Cash and cash equivalents 8,343 8,166
16,727 13,522
Total assets 186,953 199,256
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 87,464 75,923
Total equity 97,783 86,242
Non-current liabilities
Long-term borrowings 6 55,513 51
Derivative financial liability 5 15,255 32,009
Leases 8,353 8,339
79,121 40,399
Current liabilities
Trade and other payables 9,018 9,361
Short-term borrowings 6 560 63,066
Current tax payable 471 188
10,049 72,615
Total liabilities 89,170 113,014
Total equity and liabilities 186,953 199,256
The accounts were approved by the Board of Directors and authorised for issue
on 22 April 2022. They were signed on its behalf by:
A.S. Perloff
Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share Share Treasury Capital Retained Total
capital premium shares redemption earnings
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2020 4,437 5,491 604 74,627 84,946
(213)
Total comprehensive loss - - - 2,357 2,357
-
Other movement - - - - - -
Dividends - - - - (1,061) (1,061)
Balance at 1 January 2021 4,437 5,491 604 75,923 86,242
(213)
Total comprehensive income - - - 13,663 13,663
-
Dividends - - - - (2,122) (2,122)
Balance at 31 December 2021 4,437 5,491 604
(213) 87,464 97,783
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
31 December 2021 31 December 2020
£'000 £'000
Cash flows from operating activities
Operating profit 7,701 6,704
Loss on current asset investments - 87
Rent paid treated as interest (687) (687)
Profit before working capital change 7,014 6,104
Decrease/(increase) in receivables 929 (536)
(Decrease)/ increase in payables (48) 783
Cash generated from operations 7,895 6,351
Interest paid (4,295) (4,160)
Income tax (paid)/ refunded (620) 420
Net cash generated from operating activities 2,980 2,611
Cash flows from investing activities
Purchase of investment properties (832) (5,538)
Purchase of investments** (6) (633)
Purchase of current asset investments*** - (2,804)
Proceeds of current asset investments*** - 2,855
Proceeds from sale of fixed assets - 1
Proceeds from sale of investment property 15,841 700
Proceeds from sale of investments** 435 631
Dividend income received 21 32
Interest income received 8 9
Net cash generated / (used) in from investing activities
(4,747)
15,467
Cash flows from financing activities
Draw down of loan 6,000 4,000
Repayments of loans (12,057) (1,070)
Loan amortisation repayments (250) -
Swap variation (5,000) -
Loan arrangement fees and associated set up costs (884) -
Dividends paid (2,122) (1,061)
Net cash (used in)/generated from financing activities (14,313) 1,869
Net increase/(decrease) in cash and cash equivalents 4,134 (267)
Cash and cash equivalents at the beginning of year* 9,218 9,485
Cash and cash equivalents at the end of year* 13,352 9,218
* Of this balance £5,009,000 (2020: £1,052,000) 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 2021
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 2021 or 2020.
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 2021 is derived from
the audited statutory accounts for the year ended 31 December 2021 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 COVID-19 pandemic has provided a much harder set of circumstances for all
businesses which the Group to date has navigated successfully. The Directors
have prepared detailed financial forecasts to December 2024 assuming a
significant downward trend in its income base, increasing costs and higher
interest rates. The forecasted worst-case scenario demonstrated the Group is
a going concern even if the business was subjected to a long downward spiral
in its business activities. In summary, the Group has enough financial
resources to survive to beyond June 2023.
The Group is strongly capitalised, has high liquidity together with a number
of long-term contracts with its customers many of which are household names.
The Group has a diverse spread of tenants across most industries and owns
investment properties based in many locations across the country.
The Group's main loans were renewed in July 2021 for a new three year term.
The Group has a strong track record of obtaining long term finance and expects
this to continue in the future as it has supportive lenders. The Group
always maintains excellent relations with its lenders. The Lenders Covenants
as at 31 December 2021 have been reviewed and significant movements would be
required before a covenant was breached such as a 35% decrease in the secured
portfolio valuation (circa £50m reduction) or 47% decrease in its actual
income cover being circa £5.44m reduction in income. The Group's also
currently has extensive cash reserves (and available facility) and other
uncharged assets (including circa £10m of investment property).
The Directors believe the Group is very well placed to manage its business
risks successfully and have a good expectation that both the Company and the
Group have adequate resources to continue their operations for the foreseeable
future. For these reasons, they continue to adopt the going concern basis
in preparing the financial statements.
2. Dividends
Amounts recognised as distributions to equity holders in the period:
2021 2020
£'000 £'000
Final dividend for the year ended 31 December 2020 of 6p per share (2019: 6p
per share)
1,061 1,061
Interim dividend for the year ended 31 December 2020 of 6p per share
1,061 -
2,122 1,061
The Directors recommend a payment of a final dividend for the year ended 31
December 2021 of 6p per share (2020 - 6p), following the interim dividend
which was paid on 9 February 2022 of 6p per share (2020 - 6p). The final
dividend of 6p per share will be payable on 20 July 2022 to shareholders on
the register at the close of business on 1 July 2022 (Ex dividend on 30 June
2022).
The full ordinary dividend for the year ended 31 December 2021 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.
3. Earnings per ordinary share (basic and diluted)
The calculation of profit per ordinary share is based on the profit, being a
profit of £13,511,000 (2020 - £2,644,000) and on 17,683,469 ordinary shares
being the weighted average number of ordinary shares in issue during the year
excluding treasury shares (2020 - 17,683,469). There are no potential
ordinary shares in existence. The Company holds 63,460 (2020 - 63,460)
ordinary shares in treasury.
4. Investment properties
Investment properties
£'000
Fair value
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 1 January 2021 180,975
Additions 537
Disposals (15,140)
Fair value adjustment on investment properties held on leases 51
Revaluation increase 961
At 31 December 2021 167,384
Carrying amount
At 31 December 2021 167,384
At 31 December 2020 180,975
5. 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.
2021 2020
Bank loans £'000 £'000
Interest is charged as to: Rate Rate
Fixed/ Hedged
HSBC Bank plc* 35,000 7.76% 35,000 7.01%
HSBC Bank plc** 25,000 4.71% 25,000 6.58%
Unamortised loan arrangement fees (737) -
Floating element
HSBC Bank plc (3,250) 3,000
Shawbrook Bank Ltd 60 117
56,073 63,117
Bank loans totalling £60,000,000 (2020 - £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 2021 2020
Fair value Fair value
£'000 'years' £'000 £'000
Derivative Financial Liability
Interest rate swap 35,000 5.06% 16.69 (12,833) (26,577)
Interest rate swap 25,000 4.63% - - (1,100)
Interest rate swap 25,000 2.01% 9.92 (2,422) (4,332)
(15,255) (32,009)
Net fair value gain/(loss) on derivative financial assets 16,754 (5,498)
* Fixed rate came into effect in September 2008, following a variation in
September 2023 the rate drops to 3.4% for the remaining term.
** This arrangement came into effect in December 2021. The rates shown
includes a 2.7% margin (2020 - 1.95%). Neither contracts include break options
in the term but are repayable on a cessation of lending.
6. Bank loans
2021 2020
£'000 £'000
Bank loans due within one year 560 63,066
(within current liabilities)
Bank loans due after more than one year 55,513 51
(within non-current liabilities)
Total bank loans 56,073 63,117
2021 2021 2021 2020
Analysis of debt maturity £'000 £'000 £'000 £'000
Interest* Capital Total Total
Trade and other payables** - 4,889 4,889 5,995
Bank loans repayable
On demand or within one year 1,759 560 2,319 63,383
In the second year 1,741 500 2,241 52
In the third year to the fifth year 864 55,013 55,877 -
4,364 60,962 65,326 69,430
*based on the year end 3 month SONIA floating rate - 0.45%, and bank rate of
0.50%.
** Trade creditors, other creditors and accruals
On 16 July 2021 the Group last renewed its loan facility by entering into a 3
year term loan with HSBC and Santander for £66,000,000.
A Shawbrook bank loan of £60,000 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
On 4 January 2022, a further £2m was repaid off the revolving facility
leaving £11m available to be redrawn for the purchase of approved properties.
We have agreed a new lease 5 year lease for a 200,000 square foot industrial
building, Bentalls Complex, Maldon, for £800,000 pa with effect from 1 March
2022. The previous lease ended in November 2021 and produced £650,000 pa.
8. 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 (http://www.pantherplc.com) .
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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