REG - Town Centre Secs. - Final Results <Origin Href="QuoteRef">TOWNT.L</Origin> - Part 2
13/09/2017 07:06
- Part 2: For the preceding part double click ID:nRSM5561Qa
2017 2016
Notes £000 £000 £000 £000
Cash flows from operating activities
Cash generated from operations 9 18,159 13,559
Interest paid (8,051) (7,903)
Net cash generated from operating activities 10,108 5,656
Cash flows from investing activities
Purchase and construction of investment properties (12,136) (8,833)
Refurbishment of investment properties (10,612) (4,890)
Payments for leasehold property improvements (498) (3,291)
Purchases of fixtures, equipment and motor vehicles (586) (1,496)
Proceeds from sale of investment properties 21,574 16,050
Proceeds from sale of fixed assets 61 54
Payments for acquisition of non-listed investments (1,950) -
Loans to joint ventures (4,250) (4,916)
Distributions received from joint ventures 1,031 567
Net cash used in investing activities (7,366) (6,755)
Cash flows from financing activities
Proceeds from non-current borrowings 7,197 4,247
Dividends paid to shareholders (5,928) (5,550)
Net cash generated from/(used in) financing activities 1,269 (1,303)
Net increase/(decrease) in cash and cash equivalents 4,011 (2,402)
Cash and cash equivalents at beginning of period (887) 1,515
Cash and cash equivalents at end of period 3,124 (887)
Cash and cash equivalents at year end are comprised of the following:
Cash 3,124 -
Bank overdraft - (887)
3,124 (887)
Audited preliminary results announcements
The financial information for the year ended 30 June 2017 and the year ended
30 June 2016 does not constitute the company's statutory accounts for those
years.
Statutory accounts for the year ended 30 June 2016 have been delivered to the
Registrar of Companies. The statutory accounts for the year ended 30 June 2017
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting.
The auditors' reports on the accounts for 30 June 2017 and 30 June 2016 were
unqualified, did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
1. Segmental information Segment assets
2017 2016
£000 £000
Property rental 364,120 360,422
Car park operations 29,773 26,692
393,893 387,114
Segmental results
2017 2016
Property Car park Property Car park
rental operations Total rental operations Total
£000 £000 £000 £000 £000 £000
Gross revenue 16,571 10,969 27,540 16,147 10,118 26,265
Service charge income 2,346 - 2,346 1,676 - 1,676
Service charge expenses (3,284) - (3,284) (2,574) - (2,574)
Property expenses (958) (6,252) (7,210) (920) (5,843) (6,763)
Net revenue 14,675 4,717 19,392 14,329 4,275 18,604
Administrative expenses (5,465) (830) (6,295) (4,690) (803) (5,493)
Other income 707 - 707 594 5 599
Share of post-tax profits from joint ventures 871 - 871 732 - 732
Operating profit before valuation movements 10,788 3,887 14,675 10,965 3,477 14,442
Valuation movement on investment properties (2,085) - (2,085) 3,018 - 3,018
Reversal of impairment of car parking assets - 1,000 1,000 - 500 500
Profit on disposal of investment properties 303 - 303 1,140 - 1,140
Valuation movement on joint venture properties 471 - 471 668 - 668
Operating profit 9,477 4,887 14,364 15,791 3,977 19,768
Finance costs (7,639) (7,847)
Profit before taxation 6,725 11,921
Taxation - -
Profit for the year 6,725 11,921
All results are derived from activities conducted in the United Kingdom.
The results for the car park operations include the car park at the Merrion
Centre. As the value of the car park cannot be separated from the value of the
Merrion Centre as a whole, the full value of the Merrion Centre is included
within the assets of the property rental business.
The car park results also include car park income from sites that are held for
future development. The value of these sites has been determined based on
their development value and therefore the total value of these assets has been
included within the assets of the property rental business.
The net revenue at the Merrion Centre and development sites for the year ended
30 June 2017, arising from car park operations, was £2,361,000. After allowing
for an allocation of administrative expenses, the operating profit at these
sites was £1,946,000.
2. Administrative expenses
2017 2016
£000 £000
Employee benefits 3,844 3,479
Depreciation 318 205
Charitable donations 78 91
Other 2,055 1,718
6,295 5,493
3. Other income
2016 2015
£000 £000
Commission received 169 140
Dividends received 27 26
Management fees receivable 241 242
Dilapidations receipts and income relating to lease premiums 195 24
Other 75 167
707 599
4. Earnings per share (EPS)
The calculation of basic earnings per share has been based on the profit for the period, divided by the weighted average number of shares in issue. The weighted average number of shares in issue during the period was 53,161,950 (2016: 53,161,950).
2017 2016
Earnings Earnings
Earnings per share Earnings per share
£000 p £000 p
Basic and diluted profit/EPS 6,725 12.7 11,921 22.4
Valuation movement on investment properties 2,085 3.9 (3,018) (5.7)
Reversal of impairment of car parking assets (1,000) (1.9) (500) (0.9)
Valuation movement on properties held in joint ventures (471) (0.9) (668) (1.3)
Profit on disposal of investment and development properties (303) (0.6) (1,140) (2.1)
EPRA earnings and earnings per share 7,036 13.2 6,595 12.4
There is no difference between basic and diluted earnings per share and EPRA
earnings per share.
5. Dividends
2017 2016
£000 £000
2015 final paid: 7.34p per 25p share - 3,902
2016 interim paid: 3.10p per 25p share - 1,648
2016 final paid: 7.90p per 25p share 4,200 -
2017 interim paid: 3.25p per 25p share 1,728 -
5,928 5,550
An interim dividend in respect of the year ended 30 June 2017 of 3.25p per
share was paid to shareholders on 23 June 2017. This dividend was paid
entirely as a Property Income Distribution (PID).
A final dividend in respect of the year ended 30 June 2017 of 8.25p per share
is proposed. This dividend, based on the shares in issue at 13 September 2017,
amounts to £4.4m which has not been reflected in these accounts and will be
paid on 4 January 2018 to shareholders on the register on 8 December 2017.
This dividend will comprise a PID of 7.00p per share and an ordinary dividend
of 1.25p.
6. Non-current assets
(a) Investment properties
Freehold Longleasehold Development Total
£000 £000 £000 £000
Valuation at 1 July 2015 274,925 21,776 23,440 320,141
Additions at cost 6,314 - - 6,314
Other capital expenditure 4,647 118 2,643 7,408
Interest capitalised 56 - - 56
Disposals (11,460) - (2,000) (13,460)
(Deficit)/surplus on revaluation (3,308) 807 5,519 3,018
Movement in tenant lease incentives 1,836 - - 1,836
Valuation at 30 June 2016 273,010 22,701 29,602 325,313
Additions at cost 4,074 - - 4,074
Other capital expenditure 12,174 40 8,260 20,474
Interest capitalised 176 - 235 411
Disposals (18,596) - (2,675) (21,271)
(Deficit)/surplus on revaluation (6,444) (132) 4,491 (2,085)
Transfers 12,612 - (12,612) -
Movement in tenant lease incentives (145) - - (145)
Valuation at 30 June 2017 276,861 22,609 27,301 326,771
(b) Freehold and leasehold properties - car park activities
Freehold Longleasehold Total
£000 £000 £000
Valuation at 1 July 2015 2,500 14,341 16,841
Additions - 3,291 3,291
Depreciation - (57) (57)
Surplus on revaluation - 500 500
Reversal of impairment (500) 1,000 500
Valuation at 30 June 2016 2,000 19,075 21,075
Additions - 498 498
Depreciation - (178) (178)
Surplus on revaluation - 100 100
Reversal of impairment - 1,000 1,000
Valuation at 30 June 2017 2,000 20,495 22,495
The historical cost of freehold and leasehold properties relating to car park
activities is £22,245,000.
The Company occupies an office suite in part of the Merrion Centre and also at
6 Duke Street in London. The Directors do not consider this element to be
material.
The fair value of the Group's investment and development properties has been
determined principally by independent, appropriately qualified external
valuers CBRE and Jones Lang LaSalle. The remainder of the portfolio has been
valued by the Property Director.
Valuations are performed bi-annually and are performed consistently across the
Group's whole portfolio of properties. At each reporting date appropriately
qualified employees verify all significant inputs and review computational
outputs. The external valuers submit and present summary reports to the
Property Director and the Board on the outcome of each valuation round.
Valuations take into account tenure, lease terms and structural condition. The
inputs underlying the valuations include market rents or business
profitability, incentives offered to tenants, forecast growth rates, market
yields and discount rates and selling costs including stamp duty.
The development properties principally comprise land in Leeds and Manchester.
These have also been valued by appropriately qualified external valuers Jones
Lang LaSalle, taking into account the income from car parking and an
assessment of their realisable value in their existing state and condition
based on market evidence of comparable transactions.
Property income, values and yields have been set out by category in the table
below.
Passing rent ERV Value Initial yield Reversionary yield
£000 £000 £000 % %
Retail and Leisure 4,898 5,558 93,380 5.0% 5.6%
Merrion Centre (excluding offices) 7,304 8,297 106,883 6.5% 7.3%
Offices 1,739 2,145 25,712 6.4% 7.9%
Out of town retail 3,528 3,694 53,950 6.2% 6.5%
Distribution 376 387 5,595 6.4% 6.5%
Residential 536 616 10,690 4.7% 5.5%
18,381 20,697 296,210 5.9% 6.6%
Development property 27,301
Car parks 21,292
Finance lease adjustments 4,463
349,266
The effect on the valuation of applying a different yield and a different ERV
would be as follows:
Valuation in the Consolidated Financial Statements at an initial yield of 6.9%
- £304.9m, Valuation at 4.9% - £407.8m.
Valuation in the Consolidated Financial Statements at a reversionary yield of
7.6% - £310.6m, Valuation at 5.6% - £402.5m.
Property valuations can be reconciled to the carrying value of the properties
in the balance sheet as follows:
Investment Properties Freehold and Leasehold Properties Total
£000 £000 £000
Externally valued by CBRE 200,970 - 200,970
Externally valued by Jones Lang LaSalle 123,745 15,350 139,095
Investment properties valued by the Property Director 897 - 897
Finance lease obligations capitalised 1,159 3,303 4,462
Leasehold improvements - 3,842 3,842
326,771 22,495 349,266
Leasehold improvements primarily relate to expenditure incurred on the
refurbishment of three car parks in Watford that are held under operating
leases.
All investment properties measured at fair value in the consolidated balance
sheet are categorised as level 3 in the fair value hierarchy as defined in
IFRS13 as one or more inputs to the valuation are partly based on unobservable
market data. In arriving at their valuation for each property (as in prior
years) both the independent valuers and the Property Director have used the
actual rent passing and have also formed an opinion as to the two unobservable
inputs being the market rental for that property and the yield (i.e. the
discount rate) which a potential purchaser would apply in arriving at the
market value. Both these inputs are arrived at using market comparables for
the type, location and condition of the property.
(c) Fixtures, equipment and motor vehicles
Accumulated
Cost depreciation
£000 £000
At 1 July 2015 4,143 2,929
Additions 1,496 -
Disposals (1,266) (1,234)
Depreciation - 527
At 30 June 2016 4,373 2,222
Net book value at 30 June 2016 2,151
At 1 July 2016 4,373 2,222
Additions 586 -
Disposals (140) (103)
Depreciation - 728
At 30 June 2017 4,819 2,847
Net book value at 30 June 2017 1,972
7. Investments in joint ventures
2017 2016
£000 £000
At start period 25,093 19,344
Loans to joint ventures 4,250 4,916
Disposal of joint venture interest (1,800) -
Dividends and other distributions received in the year (1,033) (567)
Share of profits after tax 1,342 1,400
At end period 27,852 25,093
Investments in joint ventures primarily relate to the Group's interest in the
partnership capital of Merrion House LLP. This joint venture owns a long
leasehold interest over a property that is let to the Group's joint venture
partner, Leeds City Council ('LCC'). The property is currently in the process
of a complete refurbishment. Under the arrangement LCC is required to
contribute a fixed amount in cash and the Group is required to contribute the
property and the balance of refurbishment cost. The net commitment from the
Group in relation to this arrangement that has not yet been incurred is £4.9m.
The interest in the joint venture for each partner is an equal 50% share,
regardless of the level of overall contributions from each partner. The
investment property held within this partnership has been externally valued by
CBRE at each reporting date.
The share of profits after tax for the year ended 30 June 2016 of £1.4m
includes an adjustment of £2.5m in respect of the property transferred to
Merrion House LLP in the prior year, less the share of losses in the period of
£1.2m.
The net assets of Merrion House LLP for the current and previous year are as
stated below:
2017 2016
£000 £000
Non-current assets 53,860 35,500
Current assets 431 929
Current liabilities (1,839) (351)
Net assets 52,452 36,078
The profits of Merrion House LLP for the current and previous year are as
stated below:
2017 2016
£000 £000
Income 1,400 1,400
Expenses (109) (78)
1,291 1,322
Valuation movement on investment properties 941 (3,665)
Net profit/(loss) 2,232 (2,343)
The Group's interest in other joint ventures are not considered to be
material.
The joint ventures have no significant contingent liabilities to which the
Group is exposed nor has the Group any significant contingent liabilities in
relation to its interest in the joint ventures.
The Group's joint ventures, which are registered in England and operate in the
United Kingdom, are as follows:
Beneficial Interest Activity
%
Buckley Properties (Leeds) Limited 50 Property Investment
Merrion House LLP 50 Property investment
Belgravia Living Group Limited 50 Property Investment
Bay Sentry Limited 50 Software Development
8. Share capital
Authorised
The authorised share capital of the Company is (2016: 164,879,000) ordinary
shares of 25p each. The nominal value of authorised share capital is
£41,219,750 (2016: £41,219,750).
Issued and fully paid up
Number of shares Nominal value
000 £000
At 30 June 2016 and 30 June 2017 53,162 13,290
The company has only one type of ordinary share class in issue. All shares
have equal entitlement to voting rights and dividend distributions.
The Company has no share option schemes in current operation and there are no
unexercised options outstanding at 30 June 2017.
9. Cash flow from operating activities
2017 2016
£000 £000
Profit for the financial year 6,725 11,921
Adjustments for:
Depreciation 905 585
Profit on disposal of fixed assets (23) (21)
Profit on disposal of investment properties (303) (1,140)
Finance costs 7,639 7,847
Share of post-tax profits from joint ventures (1,342) (1,400)
Movement in valuation of investment properties 2,085 (3,018)
Movement in lease incentives 145 (1,836)
Reversal of impairment of car parking assets (1,000) (500)
Decrease in receivables 4,192 1,483
Decrease in payables (864) (362)
Cash generated from operations 18,159 13,559
10. EPRA net asset value per share
The Basic and EPRA net asset values are the same, as set out in the table
below.
2017 2016
£000 £000
Net assets at 30 June 191,078 189,857
Shares in issue (000) 53,162 53,162
Adjusted net asset value per share 359p 357p
This information is provided by RNS
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