REG - Town Centre Secs. - Final Results
14/10/2022 07:00
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RNS Number : 8710C Town Centre Securities PLC 14 October 2022
14 October 2022
TOWN CENTRE SECURITIES PLC
('TCS' or the 'Company')
Final results for the year ended 30 June 2022
Further progress in resetting and reinvigorating the business
Town Centre Securities PLC, the Leeds, Manchester, Scotland, and London
property investment, development, hotel and car parking company, today
announces its audited final results for the year ended 30 June 2022.
Commenting on the results, Chairman and Chief Executive Edward Ziff, said:
"It has been another year of recovery for the business, with robust rent
collection and significant improvements in both our car park and hotel
operations. Further successes after the year end, including the significantly
accretive sale of our investment in YourParkingSpace (YPS), have helped to
further reset TCS's financial position and enabled shareholders to benefit
from this uplift, with the completion of a tender offer for 4 million of the
Company's own shares. Further development site sales, will enable us to
continue to strengthen the balance sheet through lowering our level of
absolute debt and leverage, whilst also investing in our exciting development
pipeline."
"Looking forward, the Russia‐Ukraine conflict and the unpredictability
resulting from the situation has led to inflationary and other economic
pressures on our business and those of our tenants including changes to
consumer spending, increased property and other expenses, interest rate rises,
a weakening sterling exchange rate, increased construction costs and rent
affordability."
"Against this background, we remain focused on enhancing value for our
shareholders and continue to consider further opportunistic disposals, the
proceeds of which will be used to reduce debt. Unless there are acquisitions
offering significant opportunities to increase value we are not envisaging any
further property investments until there is stability in the real estate
sector and wider economy."
"Overall, we remain committed to continuing to reset and reinvigorate TCS by
delivering on our accelerated four pillar strategy of: actively managing our
assets, maximising available capital, investing in our development pipeline
and acquiring and improving investment assets to diversify our portfolio."
Financial performance
· Net assets:
o Statutory net assets of £179.3m or 341p per share up 15.3% on prior year
(2021: £155.4m, 292p), including a significant revaluation of the YPS
investment ahead of its sale in July 2022
o EPRA net tangible assets* measure at £174.9m or 333p per share (2021:
£151.0m or 284p)
o Revaluation increase and reversal of impairment uplifts on property
portfolio, hotel, car parks and TCS share of properties held in Joint Ventures
in the year of £4.2m (2021: Increase of £1.4m)
o Revaluation gain on other investments (principally YPS) during the year of
£15.3m (2021: £2.8m)
· Profits and earnings per share:
o Statutory profit before tax of £11.0m (2021: loss of £0.6m) and statutory
earnings per share of 20.9p (2021: loss of 1.1p)
o EPRA earnings*, profit of £3.3m (2021: £0.3m)
o EPRA earnings per share* of 6.2p (2021: 0.6p)
· Financing strengthened:
o Headroom of £18.5m at the year-end based on June 2022 borrowings and
valuations (2021: £12.1m). This now stands at £24.7m as at 12 October 2022
following the sale of the investment in YPS and a tender offer
o Seven properties were sold during the year, generating aggregate proceeds of
£37.9m
o Net debt (excluding finance leases liabilities) reduced by 6.7% to £135.1m
(FY21: £145.6m), with LTV** reducing to 46.4% (FY21: 51.3%) Net debt now
stands at under £120m as at 12 October 2022 following the sale of the
investment in YPS and a tender offer
· Dividends increased and partially restored to pre-covid levels:
o Final dividend of 2.5p proposed, following interim dividend of 2.5p
o Total dividend for the year of 5.0p, fully covered by earnings (2021: 3.5p)
* Alternative performance measures are detailed, defined and reconciled within
Note 4 and the financial review section of this announcement
** LTV Calculation includes finance lease assets and liabilities
Resetting and reinvigorating the business for the future
It has been a year of recovery with a continued focus on resetting and
reinvigorating the business, in particular with the disposal and debt
reduction programme. Progress against the strategy is detailed below:
Actively managing our
assets
Our long-standing strategy of active management and redevelopment, to drive
income and capital growth, has continued:
· The proportion of retail and leisure assets in the portfolio remains
low at 31%, down from 40% in June 2020, and from 60% in 2016. Pure retail now
represents only 23% of the total portfolio and of that, 55% is in the
resilient Merrion Estate
· We disposed of seven assets in the year, following completed asset
management initiatives.
· The exposure to tenants either entering administration or CVAs
represented less than 1% of income (two tenants; no exposure to any
high-profile retail failures)
· 39 new lettings were completed in the year, key highlights being
significant individual lettings in Glasgow and Hampstead, and the near full
occupancy of Ducie House in Manchester following its refurbishment during the
pandemic
Maximising available capital
A conservative capital structure, with a mix of short and long-term secure
financing, has always underpinned our approach:
· £10.7m of disposal proceeds from the sale of investment properties
in the year were used to part repay Group borrowings
· Bought back for cancellation £3.4m of our £99.5m 2031 5.375%
debenture
· We are in the process of renewing our existing Lloyds and
Handelsbanken bank facilities. These both expire at the end of June 2023. Our
existing NatWest bank facility expires in September 2024, but with the option
of two further one-year extensions
· During the year we sold, subject to planning, our Port Street,
Manchester surface car parks. Completion of the sale is expected to occur in
December 2022, with the proceeds of £13.0m being applied to further reduce
Group borrowings
Investing in our development pipeline
Our development pipeline, with an estimated GDV of over £740m, is a valuable
and strategic point of difference for TCS which we continue to progress and
improve. Notably, in the past year:
· In April 2022 we submitted the Whitehall Riverside Masterplan in
conjunction with Glenbrook. This includes detailed planning applications for a
500 unit 'Build to Rent' scheme; a 12-storey office building; a 478-space
multi-storey car park and an outline for further hotel/office buildings on the
remainder of the site
· In June 2022 we submitted a pre-application presentation to Leeds
City Council in relation to the existing consented 100MC office building and a
three-storey vertical extension to Wade House, both at the Merrion Centre,
with a view to delivering a further 1,078 student accommodation units
Acquiring and improving investment assets to diversify our portfolio
We continue to improve investment assets, and will consider new acquisition
opportunities that offer the opportunity for both diversification and growth:
· Completed the £7.1m acquisition of a mixed use prime retail site in
Hampstead
Post year end events
The resetting and reinvigoration of the business for the future has continued:
· In July 2022, we announced the significant disposal of the Company's
investment in YourParkingSpace for total cash consideration of up to £20.7m
· In August 2022, we completed a Tender Offer of 4 million shares at a
price of 185p per share for a total cost of £7.4m, representing approximately
7.61% of the issued share capital, delivering a positive impact on net asset
value per share and earnings per share for the benefit of continuing
shareholders
-Ends-
For further information, please contact:
Town Centre Securities PLC
www.tcs-plc.co.uk (http://www.tcs-plc.co.uk/) / @TCS PLC
Edward Ziff, Chairman and Chief Executive
0113 222 1234
Stewart MacNeill, Group Finance Director
MHP
Communications
tcs@mhpc.com
(mailto:tcs@mhpc.com)
Reg Hoare / Matthew Taylor / Pauline Guenot
020 3128
8567
Liberum
www.liberum.com (http://www.liberum.com)
Jamie Richards / Lauren Kettle / Nikhil Varghese
020
3100 2123
Peel
Hunt
www.peelhunt.com
(http://www.peelhunt.com)
Carl Gough / Henry Nicholls / Capel Irwin
020 3597
8673 / 8640
Chairman & Chief Executive's Statement
It has been another year of recovery and investment, with further successes as
we have sought to reset and reinvigorate our business for the future.
Overview
After two years of work to significantly de-risk and de-gear the business, we
are in a very strong position. In spite of presenting many challenges, the
pandemic has offered a chance for us to reset and reinvigorate the business. I
am pleased with what we have been able to achieve; disposing of less well
performing assets and lowering our levels of absolute debt and leverage. This
process has continued following the year end, with further significant
transactions underway.
I have spoken before about my belief that our city centres need people and
footfall in order to be vibrant and thriving spaces for our communities
following the damage from the pandemic.. Though people are travelling abroad
again and have returned to towns for shopping and socialising, flexible
working means many office workers have remained at home. There seems to be an
apathetic attitude from workers and businesses towards their role in the
recovery of city centres.
Government, local authorities, local employers and large organisations have
been weak in their efforts to get people back in the office, and I would urge
them to do more. Employees undoubtedly perform best when interacting and
collaborating closely, so getting them back in the office would be beneficial
for all.
Performance
Our statutory profit in the year of £11.0m includes strong performances from
our investment property portfolio, revaluation gains of £3.5m and surpluses
generated from strategic disposals of £4.6m. Coupled with other comprehensive
income gains of £16.0m, the Company's balance sheet has strengthened
significantly from a net asset value per share of 292p (at 30 June 2021) to
341p.
EPRA earnings per share* are 6.2p for the year (2021: 0.6p) and although not
back to pre Covid-19 levels, this is an encouraging performance and is despite
the impact the significant disposal programme undertaken has had on the core
business.
Rent collection has continued to improve with over 99% of all rent and service
charge income invoiced in the year collected.
As mentioned above, the Company has benefited from other comprehensive income
gains in the year, which primarily relate to the significant disposal after
the year end of the Company's investment in YourParkingSpace (YPS) for total
cash consideration of up to £20.7m.
£37.9m of disposals during the year, together with the YPS sale and further
sales in the pipeline, are enabling us to continue to strengthen the balance
sheet of the Company through lowering our level of absolute debt and leverage.
* Alternative performance measures are detailed, defined and reconciled within
Note 4 and the financial review section of this announcement
Key achievements
Maximising available capital by divesting ex-growth assets
Our proactive programme of disposals was accelerated again this year, with a
strong market for us to sell into. We have disposed of seven assets during the
year and believe we can reinvest further capital raised into our development
pipeline and future acquisitions.
Acquiring investment assets
We acquired for £7.1m a 12,600 sq.ft mixed‐use property, located in a prime
retail pitch adjacent to Hampstead tube station, which currently comprises
four multi‐level units. The asset management opportunities and valuable
parking spaces makes this a solid investment for TCS and aligns with our core
strategy of acquisitions where long-term value can be added.
Citipark
The car park business has performed strongly as car park occupancy levels
recovered well across the period, but more office workers need to return for
our car parks to perform to their full potential.
Hotel
The hotel business also performed very strongly. Staycations continued to have
a positive impact this year, and corporate activity also recovered, returning
to pre-pandemic levels for the first time in Summer 2021. We are hugely
encouraged by the signs of recovery within the hotel segment.
Stakeholder engagement
Tenants
Following a torrid time during the pandemic, unfortunately, a number of our
tenants are now being hit hard with rising costs. We appreciate our tenants
continuing to choose to work collaboratively with us, and I can guarantee we
will work hard to do what we can to support and help along the way. A good
landlord-tenant relationship is key to satisfactory outcomes for both parties,
and we remain focused on prioritising our mutually beneficial tenant
relationships.
Employees
In our property team, one of our long-standing property directors, Helen
Green, retired this year. Helen has given many years of hard work and support
to myself and the business, and I would like to thank her for her service to
TCS and wish her and her family well for the future. Helen leaves a talented
property team behind, who are well-equipped to face the important challenges
ahead.
Our employees have demonstrated ongoing flexibility and dedication throughout
the year again, many returning to the office full time, which has been
pleasing to see.
Shareholder returns
Shareholder support remains important as we continue to recover from the past
two years.
On 6 January 2022 we commenced another share buy-back programme and we
acquired for cancellation 244,378 shares in the capital of the Company, at an
average price of 158p per 0rdinary Share for a total consideration (incl SDRT
and costs) of £389,060.
Following the year end, in August 2022, we completed a Tender Offer of
4,000,000 Ordinary Shares which were acquired for cancellation at a price of
185p per Ordinary Share for a total cost of £7.4m. This represented
approximately 7.61 per cent of the issued share capital of the Company.
These buy-backs, conducted at a significant discount to the Company's net
asset value, have a positive impact on net asset value per share and earnings
per share for the benefit of continuing shareholders.
The Board has approved a final dividend of 2.5p, totaling 5.0p for the full
year (compared to a total of 3.5p last year), continuing the 'steps in the
right direction' approach from last year.
ESG and business responsibility
ESG is at the heart of our business with the Company continually looking at
ways to improve the responsibility of the business. Our proposed development
at Whitehall Riverside is a great example of how we are looking to deliver
environmentally friendly buildings that meet the needs of potential occupiers,
are sympathetic to their surroundings and make a positive contribution to both
the users and visitors.
On a smaller scale we have phased out traditional business cards in favour of
a QR card approach and I am particularly pleased with the recent roll out of
our electric car scheme (under the Government's salary sacrifice scheme) that
has been made available to all members of staff.
Giving back to communities has always been an essential part of the way we
operate. In addition to the Marjorie and Arnold Ziff Charitable Foundation ,
our head office staff donated over 100 hours of their time in December 2021 to
work shifts at the Leeds Hospitals Charity Shop.
Outlook
Following the good work of the last two years, I am excited by our diversified
portfolio and the potential of our strong development pipeline. I believe
these show we have a sound business that is well placed for the future and can
only benefit as more and more people return to normal city life.
We have already been boosted in the new financial year by the sale (announced
in July 2022) of the Company's investment in YourParkingSpace for up to
£20.7m and the sale, subject to planning, of our two Port Street, Manchester
surface car parks, for £13.0m. These sales provide further financial
flexibility to continue to reduce debt and leverage, invest in accretive
developments and to buy back shares as appropriate.
However, it is hard to be completely optimistic. We have been through a
tough time during the pandemic, and it is a shame to be faced with more
turmoil in our world. The Russia‐Ukraine conflict and the unpredictability
resulting from the situation has led to inflationary and other economic
pressures on our business and those of our tenants including changes to
consumer spending, increased property and other expenses, interest rate rises,
a weakening sterling exchange rate, increased construction costs and rent
affordability for tenants.
We remain focused on enhancing value for our shareholders and continue to look
at further opportunistic disposals, the proceeds of which will be used to
reduce debt. Unless there are acquisitions offering significant opportunities
to increase value we are not envisaging any further property investments until
there is stability in the real estate sector and wider economy.
Considering the balance of the underlying progress we are making in resetting
and reinvigorating our business and these macro‐economic and geopolitical
challenges, I remain encouraged about the many opportunities for TCS and
committed to delivering on our accelerated four-pillar strategy and continuing
to deliver value for all our stakeholders.
Portfolio review
Valuation summary
TCS saw the like-for-like value of its portfolio increase by 1.2% (£3.5m)
after capital expenditure of £9.0m in the year. In addition the Company has
recognised a further surplus of £4.6m arising on the disposal of investment
properties in the year.
£2.8m of the revaluation gain in the year is from the Company's retail and
leisure portfolio, of which 62% is our key Merrion Centre investment,
signaling a slight rebound in what has been a sector in decline over the last
five years.
The valuation of all of our properties (except one) are carried out by CBRE
and Jones Lang LaSalle.
Portfolio overview
Passing rent ERV Value % of portfolio Valuation incr/(decr) Initial yield Reversionary yield
Retail & Leisure 1.1 1.7 22.1 7% 10.3% 4.8% 7.3%
Merrion Centre (ex offices) 4.9 5.2 58.8 19% 2.6% 7.8% 8.4%
Offices 4.5 6.5 91.0 30% -0.5% 4.7% 6.7%
Hotels 0.5 1.0 9.1 3% 5.4% 5.2% 9.9%
Out of town retail 1.0 1.2 14.5 5% 0.0% 6.6% 7.5%
Residential 0.9 0.9 19.2 6% 2.2% 4.6% 4.6%
12.9 16.5 214.7 70% 1.6% 5.7% 7.2%
Development property 42.6 14% 1.5%
Car parks 49.6 16% -1.8%
Portfolio 306.9 100% 1.2%
Note: includes our share of Merrion House within Offices (£35.7m - see Note 7
of this announcement), our share of Burlington House within Residential
(£11.5m - see Note 7 of this announcement) and Car Park Goodwill of £4.0m
arising on individual car park assets, but specifically excluding goodwill
arising from the current year car park operation acquisitions. All of the
above are not included in the table set out in Note 5 of this announcement.
Note: excludes IFRS 16 adjustments that relate to Right-of-Use car park assets
(£26.7m) as the Directors do not believe it is appropriate to include in this
analysis assets where there is less than 50 years remaining on their lease and
the Group does not have full control over these assets - These assets are
included in the table set out in Note 5 of this announcement.
The table below reconciles the above table to that set out in Note 5 of this
announcement:
FY22 FY21
£m £m
Portfolio as per Note 5 282.4 305.9
50% share in Merrion House 35.7 35.8
50% share in Burlington House 11.5 11.3
Goodwill - Car Parks - Property specific only 4.0 4.0
Less - IFRS 16 right-of-use car parks (26.7) (27.8)
As per the above table 306.9 329.2
Sales and Purchases
During the financial year ended 30 June 2022 we have sold seven properties,
above their 30 June 2021 book value, for gross proceeds of £37.9m.
Our continued commitment to asset recycling is clear. The table details the
£135.4m of disposals since FY17 of which 83% were retail and leisure assets.
£m Sales Purchases
% Retail & Leisure % Retail & Leisure
FY17 22.3 88% 4.0 46%
FY18 10.1 95% 9.0 0%
FY19 14.0 100% 16.0 25%
FY20 2.5 100% 1.7 100%
FY21 48.0 93% -
FY22 37.9 59% 7.0 100%
134.8 83% 37.7 39%
Retail and leisure
The past 12 months has seen a shift in spend with consumers turning away from
durable goods to social activities as coronavirus restrictions came to an end.
New leases signed continued to show a slight rental improvement. On a rolling
four quarter basis, net effective rents in Q2 2022 were up +13.9% year on
year, while headline rents reported an +8.1% growth over the same period
illustrating some leasing confidence creeping back into certain parts of the
market. Compared to 2019 equivalent levels, both net effective and headline
rents continue to fall, albeit more marginally than experienced throughout
2020-21. Net effective rents were down just -4.9% compared to pre covid
equivalents, whilst reporting quarter on quarter improvements, continuing to
suggest that we have already reached the bottom of the cycle. 1 (#_ftn1)
Although food store sales volumes remain slightly above pre coronavirus levels
they dipped during the financial year with ONS reporting sales down -5.8%
year-on-year in June 2022 as households seek more value in their grocery
shopping or are indeed forced to reduce volume of goods bought whilst grocery
inflation nears double digits. 1 (#_ftn2)
The number of transactions across the shopping centre investment market
improved slightly however yields continue to come under increasing pressure as
the cost of borrowing rises and there is greater economic concern. However
TCS, as a proactive landlord, continues to build flexibility into its retail
portfolio through active asset management creating the ability to diversify
and unlock potential repositioning opportunities.
Overall the market has shown signs of stabilising however the outlook remains
uncertain as the cost of living crisis continues to squeeze disposable income
for many households.
Regional offices
Our office portfolio decreased in value by £0.5m or -0.5% over the year. This
does not necessarily tell the whole story, with valuation decreases of over
£2.0m over the Company's Leeds office estate, offset by gains made in
Manchester of £1.5m.
Office take-up nationally totalled 3.83 million sq ft in the second quarter of
2022, indicating a rise of 23% on the previous quarter's level and 44% above
the same period in 2021. Leasing activity is now 15% above the five-year Q2
average of 3.33 million sq ft and 6% above the overall five-year quarterly
average of 3.62 million sq ft. These five-yearly averages need to be
considered against the backdrop of the pandemic.
There is strengthening demand, particularly from large tenants looking at
pre-let deals. This has been particularly noticeable in Central London, where
the four largest deals to complete in Q2 were all pre-lets in excess of
100,000 sq ft.
On the supply side after peaking in Q4 2021, with 31.82 million sq ft
available across the UK, supply levels in both the UK Regions and Central
London have fallen in each of the subsequent quarters. By the end of Q2, there
was 30.92 million sq ft available across the UK, with Central London
accounting for 75% of this. In the UK Regions, the vacancy rate declined to
8.6%, while 8.1% was recorded across Central London.
Despite uncertainties around future levels of office occupation, there has
been no reduction in prime rental levels with most city centres seeing prime
rents continue to climb and are above their pre-pandemic levels.
The resilience of prime rents reflects the increasing focus of occupier demand
towards top quality space, driven by the desire to create a vibrant and
attractive work environment to encourage employees back to the office and
assist with recruitment, retention and productivity strategies, as well as
staff health & wellbeing issues. In addition, there is a greater focus on
buildings that are sustainable and energy-efficient, as occupiers try to meet
increasingly ambitious ESG aspirations.
The dearth of new development coming through will mean that upward pressure on
prime rents will continue, and the gap with rents for poorer quality grade B
stock is likely to widen.
Looking regionally at the Leeds office market, 201,000 sq ft was transacted in
Q2 2022, bringing the H1 total to 430,000 sq ft, which is in line with average
levels of this time of the year. The public services and professional services
sectors were responsible for 80% of take up in Q2.
Availability saw its fifth consecutive quarterly increase, reaching 1.2m sq ft
in Q2. However, this was from a historically low base during 2019 and early
2020 and, overall, availability remains 7.2% below the ten-year average
levels. There has been a notable increase in sublet space - now standing at
110,000 sq ft, double the ten-year pre-Covid average.
Prime rents remained at £34.00 per sq ft for the fourth quarter in a row,
supported mainly by a lack of grade A availability. Typical rent-free periods
remained at 24 months on a 10-year term, higher than the Big Nine average by
four months.
Investment volumes reached £92m in Q2 2022, higher than long-term average
levels (£60m). Although untested by a true prime grade A transaction, prime
yields remain stable at 5.25%.
Across the Pennines in Manchester Q2 take-up continued the year's steady
trajectory at 512,112 sq ft, bringing H1 total take up to just 2% under the
10-year average.
Availability across the city centre fell by 6% this quarter, although remained
15% above the 10-year average. Rent-frees remained at 24 months on 10-year
deals, and 9-12 months on 5-year deals. Plug-and-play spaces continue to prove
popular, achieving £5 per sq ft premiums on 5,000+ sq ft suites.
In Q2 prime rents rose to £39.50 per sq ft, and are widely expected to reach
at least £40 per sq ft this year, reflecting strong demand for high-quality
spaces with excellent ESG credentials.
On the investment side there were £191m of investment deals transacted in Q2,
15% above the 10-year average.
Residential
Residential property values have continued to grow, with supply constraints
particularly key in Manchester. Our residential property portfolio, with over
half in our successful Belgravia Living joint venture, has performed well,
with occupancy levels of almost 100% now the norm. This has been reflected in
a valuation uplift in the year of £0.4m or 2.2%. As 2023 progresses we are
expecting to see further valuation uplifts as the rental income earned should
increase on a unit by unit basis.
Nationwide has reported that annual UK house price growth has been
consecutively in double digits in 2022, but the rate of growth is now slowing.
Supply of homes for sale remains low, with competition still strong for
quality properties. This will sustain value growth in the short term, even if
the speed of growth is gradually slowing. First time buyers are making up a
growing share of the mortgaged market.
The numbers of buyers looking for a residential property have more than
doubled, and Buy-to-Let landlords continue to capitalise on the strength of
the rental market, with rental growth now almost six times the pre-pandemic
average. (Source: Zoopla).
Build-to-Rent schemes continue to perform well as an asset class with high
occupancy, however consumer expectations are at an all-time high with levels
of on-site amenity being a key deciding factor.
Other significant valuation movements
The value of the Company's development sites has increased marginally by
£0.6m in the year as the next phases of both Whitehall Riverside, Leeds and
Piccadilly Basin, Manchester are getting closer to having implementable
planning permissions.
During the year, the value of the Company's freehold car parks has declined by
£0.9m, with the majority of the decline relating to the Merrion MSCP, due to
reduced occupancy levels during the work day.
As mentioned previously, our hotel has seen increased booking volumes since
the end of the lockdowns, the success of the 'staycation' remains whilst
business travel has also increased. Both of these have led to an increase in
value of £0.5m in our Merrion hotel.
Location Value %
Leeds 200.7 65%
Manchester 74.0 24%
Scotland 11.5 4%
London 20.7 7%
306.9 100%
Sector Value %
Retail/leisure 95.4 31%
Hotels 9.1 3%
Office 91.0 30%
Car parking 49.6 16%
Residential 19.2 6%
Development 42.6 14%
306.9 100%
Lease Expiries Value %
0-5 years 7.4 56.9%
5-10 years 2.0 15.4%
Over 10 years 3.6 27.7%
13.0 100%
Divisional review - Property
Overview
It has been another busy year for our dedicated property team, which manages
acquisitions, disposals and planning for our increasingly diverse mixed-use
portfolio and our development pipeline.
Whilst TCS has been successfully delivering business as usual with our
existing portfolio, we have also been going through a shift in our focus. As
we have continued to dispose of a number of assets, instead of simply
replacing those with new acquisitions, we have been working to reimagine many
of our existing assets and revisiting our development pipeline.
With an inevitable lull in delivery, COVID-19 afforded us the opportunity to
look at our development pipeline again and determine where we need to bring
forward new applications and new designs to replace our original proposals.
In line with this work, our relatively new property team is keen to bring new
ideas to the table and relook at its systems and processes.
Disposals and acquisitions
We completed seven strategic disposals in the year, for proceeds of £37.9
million, as we sought to rebalance and diversify our portfolio. We have also
disposed of assets to facilitate bringing forward further development, such as
the Premier Inn on Whitehall Riverside.
We also agreed, subject to planning, with developers Select Property Group for
the sale of Port Street, a part of the Manchester Piccadilly Basin scheme.
Select have submitted plans to develop 485 apartments on the site, and we are
positive about how this will complement our own strategic regeneration plans
for the Basin.
We completed one acquisition in the year, 58-62 Heath Street in Hampstead. The
12,600 sq ft mixed-used property is located in a prime retail location
adjacent to Hampstead tube station in one of the capital's most desirable
suburbs. As of May, the property was fully let.
Rent collection
The strength of our relationships with our tenants has been demonstrated
again, as our rent collection for the year was over 99% collected or agreed to
be deferred, better than pre-pandemic levels. This is a very positive result,
showing our ability to work with tenants to find solutions.
Asset management/letting progress in Manchester and Leeds
Ducie House
Across the last six months there have been a number of significant lettings at
Ducie House. As we approach full occupancy, it has been pleasing to see the
market respond so positively to the space we renovated in late 2020.
Merrion
We have seen shoppers consistently return to Leeds city centre for a number of
months now, demonstrated by footfall within the Merrion Centre continuing to
increase, although still not at pre-pandemic levels.
We have completed a number of positive lettings in the period, welcoming some
interesting businesses in both retail and leisure.
Vicar Lane
Another success story during the year was at Vicar Lane. Having had a
significant proportion of its units vacant for some time, it has been pleasing
to see a number of new operators take space at Vicar Lane as it also nears
full occupancy.
Residential
The residential portfolio, although smaller than it once was, has performed
particularly well this year. We are seeing high levels of occupancy and rental
growth, which is giving us the confidence to seek further acquisitions and
bring forward development of further residential projects.
Development pipeline highlights
Wade House
Wade House is a 1960s office building, which became predominantly vacant
around June time last year. Since then, we have been exploring options for
redevelopment of that building and repurposing it for an alternative use.
We are currently in a pre application planning process to redevelop Wade
House, as well as the adjacent 100MC site, as a comprehensive purpose-built
student accommodation scheme. Work is ongoing around how those sites are
redeveloped while maintaining occupancy and footfall in the vibrant area
around the Merrion Centre. This area has seen significant development of
student accommodation in recent years and a good proportion of our retail and
leisure customers in Merrion are students. This has allowed us to rethink the
next evolution of the Merrion estate, as a truly mixed-use site.
We have arranged some temporary lettings to local charities, like the Tutor
Trust and the Children's Hospital to make best use of the available space in
the meantime.
Piccadilly Basin
We are revisiting our own designs for Eider House, which was previously
consented for 128 apartments. Since that joint venture scheme with the
Belgravia Living Group entity was conceived and planning consent granted in
2018, a lot has changed in the world of build-to-rent accommodation. The
knowledge we have gained from three years of operating Burlington House, our
first build-to-rent development, has prompted us to submit a new application
as part of the new phase of developing our campus of build-to-rent residential
in Piccadilly Basin.
As part of our rethinking of Eider House, we are also looking at how we can
reposition some future development opportunities in the vicinity of Eider
House, Ducie House and Tariff Street, working with the local authority to
review and update the strategic regeneration framework.
Whitehall Riverside planning case study
In April 2022, we submitted a new planning application for the development of
Whitehall Riverside in Leeds city centre as part of a £280 million commercial
partnership with build-to-rent residential developers Glenbrook.
Recognising the opportunity to deliver a unique neighbourhood in the West End
of Leeds, our proposal comprises 500 build to rent apartments, a smart enabled
and energy efficient office building and a state of the art multi-storey car
park and travel hub for CitiPark. Building on the truly mixed-use nature of
the masterplan, a significant focus will be on creating a sustainable and
modern environment, with landscaping, cycling and pedestrian-friendly
infrastructure.
TCS has owned the site for many years, having already delivered No.1 Whitehall
Riverside (offices), Whitehall Waterfront (residential) and most recently the
Premier Inn (hotel), completed in 2017.
George Street redevelopment
In our 2020 annual report, we discussed not proceeding with plans for a 50/50
joint venture with Leeds City Council to develop a 136-room aparthotel on
George Street in Leeds. Work to find a solution for that project has been
continuing ever since and we are still working to help the council deliver
regeneration for a key part of the city.
Divisional review - Citipark
It has been a much improved year for Citipark, with its recovery ongoing.
While many customers have returned, many workers are staying at home and we
must continue to innovate to drive revenue and profitability.
Overview
Gross revenue for FY22 was £11.4m, a 70% increase on the prior year.
Operating profit has also increased significantly to £3.1m from a breakeven
position.
We remain cautiously optimistic about the recovery. Car park occupancy levels
recovered well across the period, although this recovery was temporarily
stalled with the emergence of the Omicron variant and government advice to
work from home at the end of 2021. Despite that, performance has been in line
with our expectations.
We've seen some geographical variation in performance but generally we are
pleased to see customers returning as the public regain their confidence in
the wake of the pandemic.
However, we are seeing that, due to changing working patterns and the
prevalence of flexible working, our Monday to Friday, nine to five customer
group is not returning to pre-pandemic levels. Throughout the pandemic, we've
had to make some difficult decisions in order to streamline our operations,
and we will continue to evolve and think differently, considering innovative
new ways of using our car parks and spaces. We also have a development
pipeline for many of our car parks, and these provide opportunities for us to
consider other options depending on the pace of recovery.
Technology and innovation
We continue to focus on using technology as a key differentiator and a way to
expand our revenue generation. Considering stakeholders and collaborating with
our partners is a key focus as we seek to grow each of our platforms.
EV charging/CitiCharge
Our CitiCharge division is growing, with ongoing work to add more charging
points across our portfolio.
A highlight of this year was the installation of 34 EV charging bays
(including an option to increase to 82) with the Warwickshire NHS Trust.
We are very committed to expanding our offering, increasing the number of
spaces and diversifying our offering via disabled charging bays and more. We
are also looking to work with our enforcement business to expand the EV
network with third party landowners and clients.
CitiPark app
We've seen some strong investment in the CitiPark app this year, including the
change of payment flow to accommodate frictionless pay on entry as well as on
exit and the inclusion of corporate billing allowing larger organisations to
have one main account and just add and remove vehicles themselves and be
billed accordingly.
We have a development pipeline to ensure ongoing investment in our app, with
plans to add new products to ensure the customer journey improves year on
year.
BaySentry Solutions
We continued the expansion of parking management company, BaySentry Solutions
Ltd, this year with a further acquisition, which concluded in October. Having
successfully onboarded a number of acquisitions and enjoyed steady revenue
growth in this part of the business, we are in dialogue over further
opportunities to grow in the coming year.
Alternative forms of income
Having first hosted a number of rooftop events last year, we continue to
explore and welcome opportunities to use our locations for the hospitality
industry.
YourParkingSpace
After the year end the Company completed the unconditional sale of its equity
investment in YourParkingSpace Limited ("YPS") to Flowbird SAS for total cash
consideration (net of fees and associated deal costs) of up to £20.7m;
representing a significant uplift in value of the Group's investment.
The consideration from this sale helps to further strengthen the TCS balance
sheet whilst providing the funds to invest in our development pipeline and
make strategic technology investments.
Outlook
The potential impact of the current financial pressure on some sections of the
UK economy is difficult to forecast, but we remain cautiously optimistic.
We have demonstrated our ability to be responsive and adaptive to challenges
across the last two years. Our products and tariffs can be tailored to
customer needs, and we will seek to help our customers while also trying to
operate a successful and profitable business.
We have invested in our existing facilities and have a strong development
pipeline for the future, including our new 478-space CitiPark multi‐storey
car park in Leeds. We will also continue to grow our management agreement
platform and invest in further acquisitions in our subsidiary companies.
Our app and our EV charging network provide exciting opportunities to help
improve our customer experience while also improving our environmental impact.
FINANCIAL REVIEW
"The financial performance of the Company during the year ended 30 June 2022
shows a recovery from the prior years, which were significantly impacted by
COVID-19. We saw consistently improving rent receipts throughout the year and
strong recoveries in both our Car Park and Hotel businesses, however the
acceleration of our disposal programme impacted the overall profitability of
the business."
The statutory profit for the year was £11.0m, compared to a loss of £0.6m in
the previous year, with the current year heavily influenced by Investment
Property gains of over £8m (£3.5m of revaluation gain and £4.6m of profits
recognized on disposal).
EPRA Earnings* were a profit of £3.3m in the year, compared to a profit of
£0.3m in the prior year, highlighting the recovery seen in the underlying
business
A final dividend of 2.5p per Ordinary Share has been approved by the Board,
giving a full year dividend of 5.0p, up from 3.5p in the previous year.
During the year the Company sold seven separate investment property assets
which generated £37.9m of proceeds. £10.7m of the proceeds were used to part
repay Group Borrowings, £17.5m was temporarily held as collateral against the
Company's Debenture Stock with the balance increasing the Company's cash
resources. Net borrowings has reduced from £145.6m to £135.1m in the year.
Net borrowings represent total financial borrowings of £165.5m less lease
liabilities of £28.7m and net overdrafts of £1.3m. These disposals,
partially offset by the property acquired during the year and the further post
year end purchase will lead to a longer period of reduced earnings which will
inevitably lead to a lower level of dividend payment than in recent years.
* Alternative performance measures are detailed, defined and reconciled within
Note 4 and the financial review in this announcement
Income statement
EPRA Earnings* for the year ended 30 June 2022 were £3.3m.
£000s FY22 FY21 YOY
Gross Revenue 28,141 21,429 31.3%
Impairment of debtors provision movement 49 788 (93.8%)
Property Expenses (13,666) (11,145) 22.6%
Net Revenue 14,524 11,072 31.2%
Other Income / JV Profit 2,497 2,962 (15.7%)
Other Expenses 0 0 -
Administrative Expenses (6,531) (5,585) 16.9%
Operating Profit 10,490 8,449 24.2%
Finance Costs (7,215) (8,145) (11.4%)
EPRA Earnings 3,275 304 977.3%
Segmental FY22 FY21 YOY
Property
Net Revenue 9,188 10,196 (9.9%)
Operating Profit 6,437 8,471 (24.0%)
CitiPark
Net Revenue 4,843 1,053 359.9%
Operating Profit 3,525 155 2174.2%
ibis Styles Hotel
Net Revenue 493 (177) (378.5%)
Operating Profit 493 (177) (378.5%)
Statutory profit
On a statutory basis the reported profit for the year was £11.0m.
The statutory profit reflects the EPRA Earnings* of £3.3m plus £3.5m of
non-cash valuation and impairment movements plus the profit on disposal
recognised of £4.5m on the seven investment properties and investments sold
in the year less £0.3m of loss recognized on the repurchase of debenture
stock in the year.
Gross revenue
Gross revenue was up £6.7m or 31.3% year on year, with key drivers being:
· Property sales during the year had a negative impact of £0.2m on the total
Gross Revenue.
· CitiPark revenues have recovered strongly across the portfolio in the year,
with gross revenue across the portfolio increasing by 70% in the year from
£6.7m to £11.4m , with total occupancy now at just under 90% of pre COVD-19
levels.
· Income for the ibis Styles hotel, which was heavily impacted by COVID-19
has also recovered strongly increasing by £2.2m in the year, from £0.6m to
£2.8m.
Property expense
Property expenses have increased in the year by 22.6%, primarily reflecting
the increased trading experienced in both the Hotel and Car Park businesses.
Other / JV income
Total Other / JV income was down 16% or £0.5m year-on-year, the majority of
the difference relates to substantial dilapidation payments received by the
Company in the previous year.
Administrative expenses
Administrative costs were £0.4m higher year on year reflecting the increased
activity across all segments within the buisnesss.
Finance costs
Finance costs were 11.4% or £0.9m lower year on year as a result of the
reduction in both the Company's bank borrowings and the buyback of £3.4m of
debenture stock.
* Alternative performance measures are detailed, defined and reconciled within
Note 4 and the financial review in this announcement
Balance sheet
The below table shows the year-end balance sheet as reported.
£m FY22 FY21 vs FY21
Freehold and Right to Use Investment properties* 158.5 181.3 (12.6%)
Development properties 42.6 41.5 2.7%
Car Park related Assets, Goodwill and Investments** 97.9 82.7 18.4%
Hotel operations 9.1 8.6 n/a
308.1 314.1 (1.9%)
Joint ventures 18.0 16.2 11.1%
Listed Investments 4.1 5.8 (29.3%)
Other non-current assets 1.0 1.0 0.0%
Total non-current assets inc available for sale 331.2 337.1 (1.8%)
Net borrowings (163.8) (174.6) (6.2%)
Other assets/(liabilities) 11.9 (7.1) (268.6%)
Statutory NAV 179.3 155.4 15.3%
Statutory NAV per share 341p 292p 16.8%
EPRA Net Tangible Assets (NTA) 174.9 151.0 15.8%
EPRA NTA per share 333p 284p 17.3%
* includes Assets held for sale in FY21 of £3.9m
** includes Assets held for sale in FY22 of £20.4m
Non-current assets:
Our total non-current assets (including investments in JVs) of £331.2m (2021:
£337.1) include £201.1 of investment properties (2021: £222.8m), £97.9m of
non-current car parking assets (2021: £82.7m) and £9.1m of Operational Hotel
assets (2021: £8.6). The car parking assets include £4.9m (2021: £4.8m) of
goodwill and intangible assets arising on business combinations.
The reduction in non-current assets of £7.0m during the year comprises:
· Disposals of £(34.3m)
· Depreciation charge of £(2.5m)
· Capital expenditure of £9.9m
· Revaluation uplift/reversal of impairments totalling £19.5m
· Operating profits generated and retained in JV entities £1.5m
Borrowings:
During the year our Net Borrowings have reduced by £10.8m, from £174.6m as
at 30 June 2021 to £163.8m. This was primarily as a direct consequence of the
disposals made throughout the year. As part of this we bought back £3.4m of
our £99.5m 2031 5.375% debenture stock with the remaining reduction spread
across our bank facilities.
Two of the three bank facilities expire within twelve months of the year end
and are therefore classed as current liabilities in the balance sheet. During
the year end we refinanced our £33m facility with NatWest, for a further
three years on the same terms and margin albeit at lower facility limit of
£25m, this facility will expire in September 2024, with an option for two
further one-year extensions.
Our Lloyds Bank facility's was extended in the year and now expires in June
2023. The Lloyds facility is a £35m revolving credit facility with a further
£5m overdraft facility and we are in the process of renewing this facility
effective on expiry with a new three year facility (again with two one-year
extensions)
Finally, our £35m Handelsbanken facility was reduced in the year to a £25m
facility and expires in June 2023. As with our Lloyds facility we are in the
process of renewing this facility effective on expiry with a new three year
facility (again with two one-year extensions)
Loan to value has been reduced to 46.4%, down from 51.3% a year ago. Note the
calculation of loan to value includes both the finance lease assets and
liabilities.
EPRA net asset reporting
We focus primarily on the measure of Net Tangible Assets (NTA). The below
table reconciles IFRS net assets to NTA, and the other EPRA measures.
There are three EPRA Net Asset Valuation metrics, namely EPRA Net
Reinstatement Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net
Disposal Value (NDV). The EPRA NRV scenario, aims to represent the value
required to rebuild the entity and assumes that no selling of assets takes
place. The EPRA NTA is focused on reflecting a company's tangible assets. EPRA
NDV aims to represent the shareholders' value under an orderly sale of
business, where, for example, financial instruments are calculated to the full
extent of their liability. All three NAV metrics share the same starting
point, namely IFRS Equity attributable to shareholders.
FY22 FY21
£m FY22 FY21 p per share p per share
IFRS reported NAV 179.3 155.4 341 292
Purchasers Costs (1) 19.1 21.1
EPRA Net Reinstatement Value 198.4 176.5 378 332
Remove Purchasers Costs (19.1) (21.1)
Remove Goodwill (2) (4.4) (4.4)
EPRA Net Tangible Assets 174.9 151.0 333 284
Fair value of fixed interest rate debt (3) 1.3 (10.2)
EPRA Net Disposal Value 176.2 140.8 335 265
(1) Estimated purchasers' costs including fees and stamp duty and related
taxes
(2) Removal of goodwill as per the IFRS Balance Sheet - relates predominantly
to goodwill paid to acquire two long term car park leaseholds in London
(3) Represents the adjustment to fair value (market price) of the 2031 5.375%
debenture
Future financial considerations
Future P&L pressure
As highlighted elsewhere in this report, our recent disposal programme and the
wider economy has had a material impact on profitability/financial recovery in
the year ended 30 June 2022, in particular the changing ways people work and
their shopping habits. Both of which have had an effect on our retail and
leisure tenants but also in the revenue derived from our car park operation.
We have seen recoveries in all segments of our business, although there is
still a risk if these recoveries are stalled.
As has been seen, the acceleration of our retail disposal programme has
enabled us to reduce Company borrowings and gearing, although the disposal of
income producing assets has had an impact on the earnings of the business. The
Board is continuing to review options for how the proceeds of any further
sales could be utilised including debt repayment, asset purchases and share
buybacks.
Although we have started to increase the level of the dividend, the gradual
recovery of our car park business and the loss of income due to disposals are
likely to lead to continued pressure on our ability to pay a higher covered
dividend.
Future balance sheet
As identified in the Risk Report, we have highlighted the continued pressure
on retail and leisure assets to be a significant risk to the business. As part
of the going concern and viability statement review process the Company has
prepared consolidated forecasts and identified a number of mitigating factors
to ensure that the ongoing viability of the business was not threatened.
Our expectation is that continued asset sales and debt repayments, will
strengthen this further.
Going concern and headroom
One of the most critical judgements for the Board is the headroom in the
Group's debt facilities. This is calculated as the maximum amount that could
be borrowed, taking into account the properties secured to the funders and the
facilities in place. The total headroom at 30 June 2022 was £18.5m (2021:
£12.1m), which was considered to be sufficient to support our going concern
conclusion. The properties secured under the Group's debt facilities would
need to fall 24.4% in value before this headroom number was breached.
There have been a number of post balance sheet events that have impacted both
the headroom but the percentage properties can fall by - taken in aggregation,
these events have improved the headroom to £24.7m and percentage properties
can fall by to 28.3%.
In assessing both the viability and going concern status of the Company, the
Board reviewed detailed projections including various different scenarios. A
summary of the approach and the findings is set out in the Risk Report,
forming part of the Strategic Report of these financial statements.
Total shareholder return and total property return
Total shareholder return of minus 4.5% (2021: 55.8%) was calculated as the
total of dividends paid during the financial year of 4.25p (2021: 3.5p) and
the movement in the share price between 30 June 2021 (144p) and 30 June 2022
(133.5p), assuming reinvestment of dividends. This compares with the FTSE All
Share REIT index at minus 5.2% (2021: 23.1%) for the same period.
The Company's share price continues to trade at a significant discount to its
NAV, impacting total shareholder return.
Total shareholder returns % (CAGR)
Total shareholder returns 1 Year 10 Years 20 Years
Town Centre Securities (4.5%) 2.3% 4.1%
FTSE All Share REIT index (5.2%) 6.9% 3.1%
Total Property Return is calculated as the net operating profit and gains /
losses from property sales and valuations as a percentage of the opening
investment properties.
Total Property Return for the business for the reported 12 months was 8.7%
(2021: 4.3%). This compared to the MSCI/IPD market return of 19.3% (2021:
6.4%).
The key drivers of the All Property index being higher than TCS is due to
strong market performances of both industrial properties and retail warehouses
of which TCS only has a small amount.
Consolidated income statement
for the year ended 30 June 2022
2022 2021
Notes £000 £000
Gross revenue (excl service charge income) 25,383 18,703
Service charge income 2,758 2,726
Gross revenue 28,141 21,429
Release of provision for impairment of debtors 49 788
Service charge expenses (3,666) (3,656)
Property expenses (10,000) (7,489)
Net revenue 14,524 11,072
Administrative expenses 2 (6,531) (5,585)
Other income 3 1,612 1,989
Valuation movement on investment properties 3,489 63
Impairment of car parking assets (384) (111)
Loss on disposal of investments (89) -
Profit/(loss) on disposal of investment properties 4,563 (2,320)
Share of post-tax profits from joint ventures 1,315 2,461
Operating profit 18,499 7,569
Finance costs (8,063) (8,145)
Finance income 576 -
Profit/(loss) before taxation 11,012 (576)
Taxation - -
Profit/(loss) for the year attributable to owners of the Parent 11,012 (576)
Earnings per share
Basic and diluted 4 20.9p (1.1)p
EPRA (non-GAAP measure) 4 6.2p 0.6p
Dividends per share
Paid during the year 5 4.25p 3.5p
Proposed 5 2.5p 1.75p
Consolidated statement of comprehensive income
for the year ended 30 June 2021
2022 2021
£000 £000
Profit/(loss) for the year 11,012 (576)
Items that will not be subsequently reclassified to profit or loss
Revaluation gains on hotel assets 713 -
Revaluation gains on other investments 15,306 2,795
Total other comprehensive income 16,019 2,795
Total comprehensive income for the year 27,031 2,219
All profit and total comprehensive income for the year is attributable to
owners of the Parent.
Consolidated balance sheet
as at 30 June 2022
2022 2021
Notes £000 £000
Non-current assets
Property rental
Investment properties 6 201,106 218,909
Investments in joint ventures 7 18,016 16,212
219,122 235,121
Car park activities
Freehold and leasehold properties 6 72,226 74,502
Goodwill and intangible assets 4,912 4,841
77,138 79,343
Hotel operations
Freehold and leasehold properties 6 9,100 8,630
9,100 8,630
Fixtures, equipment and motor vehicles 6 976 955
Investments 8 4,506 9,217
Total non-current assets 310,842 333,266
Current assets
Trade and other receivables 21,708 5,311
Cash and cash equivalents 22,150 21,670
43,858 26,981
Assets held for sale 8 20,368 3,850
Total current assets 64,226 30,831
Total assets 375,068 364,097
Current liabilities
Trade and other payables (9,828) (11,499)
Bank overdrafts (23,414) (21,113)
Financial liabilities (34,655) (42,260)
Total current liabilities (67,897) (74,872)
Non-current liabilities
Financial liabilities (127,867) (133,830)
Total liabilities (195,764) (208,702)
Net assets 179,304 155,395
Equity attributable to the owners of the Parent
Called up share capital 9 13,132 13,282
Share premium account 200 200
Capital redemption reserve 717 567
Revaluation reserve 1,213 500
Retained earnings 164,042 140,846
Total equity 179,304 155,395
Net asset value per share 11 341p 292p
Consolidated statement of Changes in Equity
as at 30 June 2022
Share capital Share Capital redemption reserve Revaluation reserve Retained earnings Total equity
premium account
£000 £000 £000 £000 £000 £000
Balance at 30 June 2020 13,290 200 559 500 140,529 155,078
Comprehensive income for the year
Loss for the year - - - - (576) (576)
Other comprehensive income - - - - 2,795 2,795
Total comprehensive income for the year - - - - 2,219 2,219
Contributions by and distributions to owners
Arising on purchase and cancellation of own shares (8) - 8 - (42) (42)
Final dividend relating to the year ended 30 June 2020 - - - - (930) (930)
Interim dividend relating to the year ended 30 June 2021 - - - - (930) (930)
Balance at 30 June 2021 13,282 200 567 500 140,846 155,395
Comprehensive income for the year
Profit for the year - - - - 11,012 11,012
Other comprehensive income - - - 713 15,306 16,019
Total comprehensive loss for the year - - - 713 26,318 27,031
Contributions by and distributions to owners
Arising on purchase and cancellation of own shares (150) - 150 - (885) (885)
Final dividend relating to the year ended 30 June 2021 - - - - (924) (924)
Interim dividend relating to the year ended 30 June 2022 - - - - (1,313) (1,313)
Balance at 30 June 2022 13,132 200 717 1,213 164,042 179,304
Consolidated cash flow statement
for the year ended 30 June 2022
2022
2021
Notes £000 £000 £000 £000
Cash flows from operating activities
Cash generated from operations 10 11,688 4,644
Interest paid (6,839) (6,920)
Net cash generated from/(absorbed by) operating activities 4,849 (2,276)
Cash flows from investing activities
Purchase and construction of investment properties (7,433) -
Refurbishment of investment properties (1,617) (2,637)
Purchases of fixtures, equipment and motor vehicles (283) (198)
Proceeds from sale of investment properties 20,608 48,049
Proceeds from sale of investments 68 -
Payments for business acquisitions (293) (874)
Payments for acquisition of non-listed investments - (258)
Investments in joint ventures (326) -
Net cash generated from investing activities 10,724 44,082
Cash flows from financing activities
Proceeds from non-current borrowings 6,399 4,000
Repayment of non-current borrowings (18,643) (44,091)
Arrangement fees paid (380) -
Principal element of lease payments (1,648) (1,659)
Dividends paid to shareholders (2,237) (1,860)
Purchase of own shares (885) -
Net cash used in financing activities (17,394) (43,610)
Net decrease in cash and cash equivalents (1,821) (1,804)
Cash and cash equivalents at beginning of the year 557 2,361
Cash and cash equivalents at end of the year (1,264) 557
Cash and cash equivalents at the year end are comprised of the following:
Cash balances 22,150 21,670
Overdrawn balance (23,414) (21,113)
(1,264) 557
Audited preliminary results announcements
The financial information for the year ended 30 June 2022 and the year ended
30 June 2021 does not constitute the company's statutory accounts for those
years.
Statutory accounts for the year ended 30 June 2021 have been delivered to the
Registrar of Companies. The statutory accounts for the year ended 30 June 2022
will be delivered to the Registrar of Companies following the Company's Annual
General Meeting.
The auditors' reports on the accounts for 30 June 2022 and 30 June 2021 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
Segmental assets 2022 2021
£000 £000
Property rental 263,598 266,444
Car park activities 77,496 79,658
Hotel operations 9,100 8,778
Investments 24,874 9,217
375,068 364,097
Segmental results 2022
Property Car park Hotel Property Car park Hotel
rental activities operations Invest-ments Total rental activities operations Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Gross revenue (excl service charge income) 11,138 11,417 2,828 - 25,383 11,358 6,719 626 18,703
Service charge income 2,758 - - - 2,758 2,726 - - 2,726
Gross revenue 13,896 11,417 2,828 - 28,141 14,084 6,719 626 21,429
Release of provision for impairment of debtors 49 - - - 49 788 - - 788
Service charge expenses (3,666) - - - (3,666) (3,656) - - (3,656)
Property expenses (1,091) (6,574) (2,335) - (10,000) (1,020) (5,666) (803) (7,489)
Net revenue 9,188 4,843 493 - 14,524 10,196 1,053 (177) 11,072
Administrative expenses (5,213) (1,318) - - (6,531) (4,687) (898) - (5,585)
Other income 1,577 - - 35 1,612 1,989 - - 1,989
Share of post-tax profits from joint ventures 885 - - - 885 973 - - 973
Operating profit/(loss) before valuation movements 6,437 3,525 493 35 10,490 8,471 155 (177) 8,449
Valuation movement on investment properties 3,489 - - - 3,489 63 - - 63
Impairment of car parking assets - (384) - - (384) - (111) - (111)
Loss on disposal of investments - - - (89) (89) - - - -
Profit/(loss) on disposal of investment properties 4,563 - - - 4,563 (2,320) - - (2,320)
Valuation movement on joint venture properties 430 - - - 430 1,488 - - 1,488
Operating profit/(loss) 14,919 3,141 493 (54) 18,499 7,702 44 (177) 7,569
Finance costs (8,063) (8,145)
Finance income 576
Profit/(loss) before taxation 11,012 (576)
Taxation - -
Profit/(loss) for the year 11,012 (576)
All results are derived from activities conducted in the United Kingdom.
The car park results 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 development sites for the year ended 30 June 2022,
arising from car park operations, was £2,125,000. After allowing for an
allocation of administrative expenses, the operating profit at these sites was
£1,563,000.
Revenue received within the car park and hotel segments is the only revenue
recognised on a contract basis under IFRS 15. All other revenue within the
Property segment comes from rental lease agreements.
2. Administrative expenses
2022 2021
£000 £000
Employee benefits 4,281 3,444
Depreciation 129 163
Charitable donations 35 7
Other 2,086 1,971
6,531 5,585
Depreciation charged to the Consolidated Income Statement as an administrative
expense relates to depreciation on central office equipment, including
fixtures and fittings, computer equipment and motor vehicles. Depreciation on
operational equipment and right of use assets within both the car park and
hotel businesses are charged as direct property expenses within the
Consolidated Income Statement.
3. Other income and expenses
2022 2021
£000 £000
Commission received 139 166
Dividends received 35 34
Management fees receivable 235 245
Dilapidations receipts and income relating to surrender premiums 1,145 1,103
Other 58 441
1,612 1,989
4. Earnings per share (EPS)
The calculation of basic earnings per share has been based on the profit for
the year, divided by the weighted average number of shares in issue. The
weighted average number of shares in issue during the year was 52,755,750
(2021: 53,161,220).
2022 2021
Earnings Earnings
Earnings per share Earnings per share
£000 p £000 p
Profit/(loss) for the year and earnings per share 11,012 20.9 (576) (1.1)
Valuation movement on investment properties (3,489) (6.6) (63) (0.1)
Impairment of car parking assets 384 0.7 111 0.2
Valuation movement on properties held in joint ventures (430) (0.8) (1,488) (2.8)
Profit/(loss) on disposal of investment and development properties (4,563) (8.7) 2,320 4.4
Loss on disposal of investments 89 0.2 - -
Loss on repurchase of debenture stock 272 0.5 - -
EPRA earnings and earnings per share 3,275 6.2 304 0.6
There is no difference between basic and diluted earnings per share.
There is no difference between basic and diluted EPRA earnings per share.
5. Dividends
2022 2021
£000 £000
2020 final paid: 1.75p per share - 930
2021 interim paid: 1.75p per share - 930
2021 final paid: 1.75p per share 924 -
2022 interim paid: 2.5p per share 1,313 -
2,237 1,860
An interim dividend in respect of the year ended 30 June 2022 of 2.5p per
share was paid to shareholders on 24 June 2022. This dividend was paid
entirely as a Property Income Distribution (PID).
A final dividend in respect of the year ended 30 June 2022 of 2.5p per share
is proposed. This dividend, based on the shares in issue at 12 October 2022,
amounts to £1.2m which has not been reflected in these accounts and will be
paid on 6 January 2023 to shareholders on the register on 9 December 2022. The
entire dividend will be paid as an ordinary dividend.
6. Non-current assets
(a) Investment properties
Freehold Right of use asset Development Total
£000 £000 £000 £000
Valuation at 30 June 2020 210,125 6,138 37,751 254,014
Capital expenditure 2,146 - 22 2,168
Disposals (26,319) - - (26,319)
Transfer to hotel operations (8,630) - - (8,630)
Transfer to assets held for sale - (3,850) - (3,850)
Valuation movement (4,095) 480 3,678 63
Movement in tenant lease incentives 1,463 - - 1,463
Valuation at 30 June 2021 174,690 2,768 41,451 218,909
Additions at cost 7,433 - - 7,433
Other capital expenditure 1,053 22 542 1,617
Disposals (29,680) (518) - (30,198)
Valuation movement 2,878 (22) 633 3,489
Movement in tenant lease incentives (144) - - (144)
Valuation at 30 June 2022 156,230 2,250 42,626 201,106
At 30 June 2022, investment property valued at £198,630,000 (2021:
£213,720,000) was held as security against the Group's borrowings.
Right of use investment property assets include long leasehold property
interests.
(b) Freehold and leasehold properties - car park activities
Freehold Right to use asset Total
£000 £000 £000
Valuation at 30 June 2020 30,650 45,863 76,513
IFRS 16 adjustment - (95) (95)
Depreciation (329) (1,476) (1,805)
(Impairment)/reversal of impairment (421) 310 (111)
Valuation at 30 June 2021 29,900 44,602 74,502
IFRS 16 adjustment - (96) (96)
Depreciation (316) (1,480) (1,796)
(Impairment)/reversal of impairment (384) - (384)
Valuation at 30 June 2022 29,200 43,026 72,226
The historical cost of freehold properties and right of use assets relating to
car park activities is £30,153,000 (2021: £30,153,000).
At 30 June 2022, freehold properties and right of use assets relating to car
park activities, held as security against the Group's borrowings are held at
£42,170,000 (2021: £43,650,000).
The Company occupies an office suite in part of the Merrion Centre. The
Directors do not consider this element to be material.
(c) Freehold and leasehold properties - hotel operations
Freehold
£000
Valuation at 30 June 2021 8,630
Depreciation (243)
Valuation movement 713
Valuation at 30 June 2022 9,100
At 30 June 2022, freehold and leasehold property relating to hotel operations
valued at £9,100,000 (2021: £8,630,000) was held as security against the
Group's borrowings.
The Group owns and operates a hotel that has previously accounted for within
Investment Property, on the basis that it was marketing the property for a
letting to a hotel operator. The hotel was closed between January and April
2021 due to the Covid pandemic. Since re-opening, trading at the hotel has
been strong and given there was no firm interest for a third party letting the
directors have decided to continue to operate the hotel, therefore this
property has been transferred to freehold and leasehold properties with effect
from 30 June 2021.
The fair value of the Group's investment and development properties, freehold
car parks, hotel operations and assets held for sale have been determined
principally by independent, appropriately qualified external valuers CBRE and
Jones Lang LaSalle. The external valuation reports for June 2020 explicitly
mentioned material valuation uncertainty due to Novel Coronavirus (COVID- 19)
in their portfolio valuation reports to management for certain properties
within the TCS portfolios. This reference has not been considered necessary in
the valuation reports for June 2022 and June 2021. 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 an assessment of their realisable value in
their existing state and condition based on market evidence of comparable
transactions and residual value calculations.
Property income, values and yields have been set out by category as at 30 June
2022 in the table below.
Passing rent ERV Value Initial yield Reversionary yield
£000 £000 £000 % %
Retail and Leisure 1,122 1,709 22,125 4.3% 6.8%
Merrion Centre (excluding offices) 4,874 5,234 58,818 7.8% 8.4%
Offices 2,862 4,801 55,262 4.9% 8.2%
Hotels 500 950 9,100 5.2% 9.9%
Out of town retail 1,006 1,155 14,500 6.6% 7.5%
Residential 428 428 7,775 5.1% 5.1%
10,792 14,277 167,580 6.0% 8.0%
Development property 42,626
Car parks 45,527
IFRS 16 Adjustment - Right of use assets held within investment property 26,699
282,432
Property income, values and yields have been set out by category as at 30 June
2021 in the table below.
Passing rent ERV Value Initial yield Reversionary yield
£000 £000 £000 % %
Retail and Leisure 1,589 1,947 23,445 6.4% 7.9%
Merrion Centre (excluding offices) 4,630 4,857 56,654 7.7% 8.1%
Offices 2,872 4,568 55,546 4.9% 7.8%
Hotels 1,180 1,630 23,630 4.7% 6.5%
Out of town retail 1,205 1,155 14,500 7.9% 7.5%
Distribution 411 463 6,470 6.0% 6.8%
Residential 504 492 9,175 5.2% 5.1%
12,391 15,112 189,420 6.2% 7.5%
Development property 41,451
Car parks 74,502
IFRS 16 Adjustment - Right of use assets held within investment property 518
305,891
Investment properties (freehold and right of use), freehold properties (PPE),
hotel operations and assets held for sale
The effect on the total valuation (excluding development property and car
parks) of £167.6m of applying a different yield and a different ERV would be
as follows:
Valuation in the Consolidated Financial Statements at an initial yield of 7.0%
- £143.7m, Valuation at 5.0% - £201.0m.
Valuation in the Consolidated Financial Statements at a reversionary yield of
9.0% - £148.9m, Valuation at 7.0% - £191.6m.
Investment properties (development properties)
The key unobservable inputs in the valuation of one of the Group's development
properties of £27.6m is the assumed per acre or per unit land value. The
effect on the development property valuation of applying a different assumed
per acre or per unit land value would be as follows:
Valuation in the Consolidated Financial Statements if a 5% increase in the per
acre or per unit value - £29.0m, 5% decrease in the per acre or per unit
value - £26.2m.
The other key development property in the Group is valued on a per acre
development land value basis, the effect on the development property valuation
of applying reasonable sensitivities would not create a material impact.
Freehold car park activities
The effect on the total valuation of the Group's freehold car park properties
of £29.2m in applying a different yield/discount rate would be as follows:
Valuation in the Consolidated Financial Statements based on a 1% decrease in
the yield/discount rate - £34.4m, 1% increase in the yield/discount rate -
£25.4m
Property valuations can be reconciled to the carrying value of the properties
in the balance sheet as follows:
Investment Properties Freehold and Leasehold Properties
Hotel operations Total
£000 £000 £000 £000
Externally valued by CBRE 104,250 23,800 9,100 137,150
Externally valued by Jones Lang LaSalle 96,805 5,400 - 102,205
Investment properties valued by the Directors 51 - - 51
Properties held at valuation 201,106 29,200 9,100 239,406
IFRS 16 right of use assets held at depreciated cost - 43,026 - 43,026
201,106 72,226 9,100 282,432
Valuation of investment properties (freehold and right of use), freehold
properties (PPE), hotel operations and assets held for sale at fair value
All investment properties, freehold properties held in property plant and
equipment, hotel operations and assets held for sale are measured at fair
value in the consolidated balance sheet and 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 external
valuers and the Directors have used the actual rent passing and have also
formed an opinion as to the two significant 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.
Assets held for sale
As at 30 June 2021, one property with a value of £3,850,000 was in the
process of being sold and was therefore classified within current assets as
Assets held for sale. The valuation surplus recognised through the Income
Statement in relation to this property for the year ended 30 June 2021 was
£230,000.
(d) Fixtures, equipment and motor vehicles
Accumulated
Cost depreciation
£000 £000
At 1 July 2020 4,483 3,370
Additions 198 -
On acquisition of subsidiaries 30 -
Depreciation - 386
At 30 June 2021 4,711 3,756
Net book value at 30 June 2021 955
At 1 July 2021 4,711 3,756
Additions 283 -
Depreciation - 262
At 30 June 2022 4,994 4,018
Net book value at 30 June 2022 976
7. Investments in joint ventures
2022 2021
£000 £000
At the start of the year 16,212 13,751
Investments in joint ventures 326 -
Loan interest 163 110
Valuation movement on investment properties 430 1,488
Share of profits after tax 885 863
At the end of the year 18,016 16,212
Investments in joint ventures are broken down as follows:
2022 2021
£000 £000
Equity 11,691 10,376
Loans 6,325 5,836
18,016 16,212
Investments in joint ventures primarily relate to the Group's interest in the
partnership capital of Merrion House LLP and share capital of Belgravia Living
Group Limited.
Also within Investments in Joint Ventures exist loan balances due from joint
ventures as they are considered to form part of the net investment in the JV.
Repayment of the loans is neither planned nor likely to occur in the
foreseeable future. These loan balances are held at amortised cost and are
assessed for impairment on an annual basis using an expected credit loss
model, in accordance with IFRS 9. Where a joint venture is loss making and the
losses exceed the equity investment in the joint venture, any excess losses
are allocated to the loan balance which reduces the loan receivable's carrying
amount. If the joint venture becomes profitable the profits are allocated
first to the loan to reverse previous losses allocated and are subsequently
allocated to the equity investment.
Merrion House LLP owns a long leasehold interest over a property that is let
to the Group's joint venture partner, Leeds City Council ('LCC'). 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 assets and liabilities of Merrion House LLP for the current and previous
year are as stated below:
2022 2021
£000 £000
Non-current assets 71,850 71,650
Cash and cash equivalents 278 263
Debtors and prepayments 295 401
Trade and other payables (616) (704)
Current financial liabilities (1,659) (1,603)
Non-current financial liabilities (47,270) (48,929)
Net assets 22,878 21,078
A reconciliation of the net assets to carrying value is set out as follows:
2022 2021
£000 £000
Proportional interest in net assets 11,439 10,539
Unutilised provisions - (192)
Carrying value 11,439 10,347
The profits of Merrion House LLP for the current and previous year are as
stated below:
2022 2021
£000 £000
Revenue 3,328 3,328
Expenses (2) (8)
Finance costs (1,725) (1,780)
Valuation movement on investment properties 200 2,250
Net profit 1,801 3,790
Belgravia Living Group Limited completed construction of a block of
residential apartments in Manchester in 2019. These apartments have been let
to residential tenants during the year. The Group's financial interest in this
joint venture is primarily in the form of a loan with a value as at 30 June
2022 of £6.3m (2021: £5.7m).
The net assets of Belgravia Living Group for the current and previous year are
as stated below:
2022 2021
£000 £000
Non-current assets 24,586 22,783
Cash and cash equivalents 2,048 1,998
Debtors and prepayments 664 1,170
Trade and other payables (434) (140)
Current financial liabilities (11,453) (11,146)
Non-current financial liabilities (14,541) (14,634)
Net assets 870 31
A reconciliation of the net assets to carrying value is set out as follows:
2022 2021
£000 £000
Proportional interest in net assets 435 16
Valuation adjustment (183) 13
Carrying value 252 29
The income and expenses of Belgravia Living Group Limited for the current and
previous year are as stated below:
2022 2021
£000 £000
Revenue 1,339 1,262
Expenses (420) (364)
Depreciation (151) (150)
Finance costs (603) (571)
Valuation movement on investment properties 714 726
Corporation tax (175) -
Net profit 704 903
The Group's interest in other joint ventures are not considered to be
material. The book value of the Group's investment in Bay Sentry Limited is
£nil (2021: £nil).
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.
A full list of the Group's joint ventures, which are all registered in England
and operate in the United Kingdom, is set out as follows:
Beneficial Interest Activity
%
Merrion House LLP 50 Property investment
Belgravia Living Group Limited 50 Property Investment
Bay Sentry Limited 50 Software Development
8. Investments
2022 2021
£000 £000
Listed investments 4,096 5,802
Non-listed investments 410 3,415
4,506 9,217
Listed investments
2022 2021
£000 £000
At the start of the year 5,802 3,508
Disposals (62) -
(Decrease)/increase in value of investments (1,644) 2,294
At the end of the year 4,096 5,802
Listed investments relate to an equity shareholding in a company listed on the
London Stock Exchange. This is stated at market value in the table above and
has a historic cost of £882,300 (2021: £889,130).
Listed investments are measured at fair value in the consolidated balance
sheet and are categorised as level 1 in the fair value hierarchy as defined in
IFRS13 as the inputs to the valuation are based on quoted market prices.
The maximum risk exposure at the reporting date is the fair value of the other
investments.
Non-listed investments
2022 2021
£000 £000
At the start of the year 3,415 2,656
Additions - 258
Loan interest 413 -
Increase in value of investments 16,950 501
Transferred to assets held for sale (20,368) -
At the end of the year 410 3,415
Non-listed investments are broken down as follows:
2022 2021
£000 £000
Equity investments 410 1,880
Loans - 1,535
410 3,415
Non listed investments - Assets held for sale
2022 2021
Assets held for sale are broken down as follows:
£000 £000
Equity investments 18,420 -
Loans 1,948 -
20,368 -
Assets held for sale relate to an equity shareholding and loans advanced to
YourParkingSpace Limited ('YPS'), a privately owned company incorporated in
the United Kingdom. The company has completed the sale of these assets in July
2022 as set out in note 26.
As at 30 June 2022, the loans are held at amortised cost and are assessed for
impairment under the IFRS9 expected credit loss model.
The assets are categorised as level 3 in the fair value hierarchy as defined
in IFRS 13 as the inputs to the valuation are based on unobservable inputs.
The key unobservable inputs in the valuation of the Group's asset held for
sale at 30 June 2022 of £20.4m is the estimated performance of YPS in the 14
month period following completion of the sale and the effect it has on the
earn out element of consideration. The effect on the valuation of applying a
different assumed net revenue figure is as follows:
Valuation in the Consolidated Financial Statements if a 10% increase in the
net revenue - £20.7m, 10% decrease in the net revenue - £20.1m.
9. Share capital
Authorised
The authorised share capital of the company is 164,879,000 (2021: 164,879,000)
Ordinary Shares of 25p each. The nominal value of authorised share capital is
£41,219,750 (2021: £41,219,750).
Issued and fully paid up
Number Nominal value
of shares
000 £000
At 30 June 2021 53,131 13,282
Purchase and cancellation of own shares (600) (150)
At 30 June 2022 52,531 13,132
The Company has only one type of Ordinary Share class in issue. All shares
have equal entitlement to voting rights and dividend distributions.
At the year end the Company had authority to buy back for cancellation a
further 7,943,377 Ordinary Shares.
10. Cash flow from operating activities
2022 2021
£000 £000
Profit/(loss) for the financial year 11,012 (576)
Adjustments for:
Depreciation 2,301 2,191
Amortisation 222 37
(Profit)/loss on disposal of investment properties (4,563) 2,320
Loss on sale of investments 89 -
Finance costs 8,063 8,145
Finance income (576) -
Share of post tax profits from joint ventures (1,315) (2,461)
Movement in valuation of investment properties (3,489) (63)
Movement in lease incentives 144 (1,463)
Impairment of car parking assets 384 111
Decrease/(increase) in receivables 1,083 (2,675)
Decrease in payables (1,667) (922)
Cash generated from operations 11,688 4,644
11. Net asset value per share
The Basic and diluted net asset values are the same, as set out in the table
below.
2022 2021
£000 £000
Net assets at 30 June 179,304 155,395
Shares in issue (000) 52,531 53,131
Basic and diluted net asset value per share 341p 292p
1 Savills Research - Shopping Centre and High Street Spotlight Q2 2022
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