REG - Town Centre Secs. - Final Results
18/10/2023 07:00
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RNS Number : 4483Q Town Centre Securities PLC 18 October 2023
18 October 2023
TOWN CENTRE SECURITIES PLC
('TCS' or the 'Company')
Final results for the year ended 30 June 2023
Resilient performance - business further strengthened
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 2023.
Commenting on the results, Chairman and Chief Executive Edward Ziff, said:
"It has been another year where we have further strengthened TCS through our
disposal programme, the resulting repayment and redeployment of borrowings,
and a successful tender offer."
"Our property rental business, car park and hotel operations delivered
resilient underlying revenues and earnings against challenging macro-economic
conditions, which have led to a further valuation reduction of our property
portfolio and impairments to our car park assets. However, with low levels of
variable interest rate bank debt and reduced loan to value I am confident that
we are in a strong position to face up to the challenges that may present
themselves. "
"Rising costs, interest rate increases and the ongoing geopolitical conflicts
are affecting all stakeholders and we remain committed to supporting them, in
particular our dedicated employees. We continue to focus on maintaining good
landlord-tenant relationships, with open dialogue and collaboration the
cornerstones of our approach."
"Having undertaken such a successful disposal programme over the past few
years, our attention is now turning to opportunities to selectively acquire
assets and invest in our development programme, ever mindful of adding value
whilst retaining robust finances."
"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 - resilient relative performance:
o Like for like portfolio valuation down 12.6% from June 2022:
§ outperformance versus the MSCI/IPD All Property Capital Index which fell by
19% over the period
§ reduction primarily due to real estate investor and market sentiment around
the macro-economic outlook adversely impacting valuation yields
o Statutory net assets of £141.1m or 291p per share (FY22: £179.3m, 341p).
EPRA net tangible assets ('NTA')($) measure at £137.7m or 284p per share
(FY22 equivalent: £174.9.0m, 333p)
· Statutory results - loss before tax reported due to valuation
reduction:
o Statutory loss before tax of £29.5m (FY22: profit of £11.0m) and
statutory loss per share of 60.1p (FY22: earnings of 20.9p)
· EPRA results - relative stability in underlying earnings:
o EPRA earnings($) before tax of £3.1m (FY22: £3.3m)
o EPRA earnings per share($) of 6.2p (FY22: 6.2p)
· Loan to Value reduced in the period by 60bps to 45.8% following debt
repayments and despite reduction in portfolio value
· Shareholder returns - enhanced by share buy backs and tender offer:
o Proposed final dividend of 2.5p, bringing the total dividend for the year
to 5.0p (FY22: 5.0p) reflecting the relative stability in underlying earnings
o Earnings and NAV enhancing tender offer and subsequent share buy back in
the first half of the year (4,075,000 shares bought back in total) following
on from those undertaken in FY22
* 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
Protecting shareholder value whilst continuing to reset and reinvigorate the
business for the future
We have continued to reset the business in the past twelve months with four
further sales, above book value, and two strategic acquisitions. Progress
delivered under the four key strategic initiatives is as follows:
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 has
stabilised at 29%, whereas the proportion of residential assets has increased
from 6% to 12% following the acquisition of the remaining half of Burlington
House in the year
· The void rate across our portfolio was 5.5% at 30 June 2023 (5.1% at
30 June 2022)
· Strong rent collection for the year of over 99.1% (FY22: 99.0%)
· 14 new commercial lettings and lease renewals across the portfolio in
the period
· No tenants entered into a CVA during the period reflecting our
resilient tenant portfolio; however, after the year end Wilko, trading from a
6,000 sq ft store on the edge of the Merrion Centre, entered administration
Maximising available capital
A conservative capital structure, with a mix of short and long-term secure
financing, has always underpinned our approach:
· Aggregate net proceeds generated of £51.7m and crystalising a profit
on disposal of £4.1m:
o Four properties sold during the six months (in Glasgow, Uddingston, part
of our Whitehall Road development site in Leeds and part of our Piccadilly
Basin development site in Manchester) for a total gross consideration of
£33.4m
o The release in July 2022 of £18.7m of funds, originally generated from
investment property sales, that had been locked into our debenture security
pool
· Completion of the sale of our investment in YourParkingSpace Limited
in July 2022, generating initial cash proceeds of £11.6m, with a second
receipt in July 2023 of £4.4m and further receipts due between November 2023
and July 2024 of up to £5.6m
· Comfortable loan to value headroom over our bank facilities of £30.0m
based on 30 June 2023 borrowings and valuations
· Loan to value* reduced to 45.8% despite revaluation decreases and
impairments in the year (FY22 equivalent 46.4%)
Investing in our development pipeline
Our development pipeline, with an estimated GDV of over £400m, is a valuable
and strategic point of difference for TCS which we continue to progress and
improve. Notably, in the past year:
· In April 2023 we received planning permission for the Whitehall
Riverside Masterplan in conjunction with Glenbrook. This included:
o detailed planning consent for a 500 unit 'Build to Rent' scheme; a
12-storey office building; a 478-space multi-storey car park; and
o an outline for further hotel/office buildings on the remainder of the site
· Following submission in June 2022 of a pre-application presentation to
Leeds City Council, we are now in the process of designing a 1,074 bed purpose
built student accommodation scheme based on the redevelopment of Wade House
and the adjacent 100MC site.
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:
· Sufficient headroom to conservatively progress development and
investment across the portfolio having:
o Acquired 45 Weymouth Street, London W1 for £7.5m, a prime mixed-use
property comprising office space, including the new TCS London headquarters,
and residential accommodation on the top floor
o Acquired the remaining 50% of Burlington House, Manchester for £11.4m, a
91 unit PRS scheme in the heart of Manchester
Outlook
· Resilient trading performance has continued into the second half of
2023:
o Rent collections remain robust with over 99% of amounts invoiced in the
last quarter of the year now collected
o Car parks recovery momentum continues, other than for those reliant on
office workers such as Merrion MSCP
o Significant headroom of £30m on existing revolving credit facilities
o Only 6% of borrowings at the year end subject to variable interest rates
o Weighted average cost of borrowings at year end 5.1%
o Expansion of our electric vehicle charging network
o ibis Styles Leeds City Centre Arena hotel benefitting from recovery,
events and staycations
o No further disposals expected
o Now looking at selective acquisitions and bringing forward sections of our
development pipeline
-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 tcs@mhpgroup.com (mailto:tcs@mhpgroup.com)
Reg Hoare / Matthew Taylor 020 3128 8572
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
Overview
The performance of the Company during the year has been resilient,
particularly given the backdrop of macroeconomic challenges and an
inflationary environment, and I want to begin by thanking my colleagues for
their contributions to the success of the business.
In line with our strategy, we have almost halved our levels of debt over the
last three years, with our strong balance sheet placing us in a good position
to make selected acquisitions where we identify attractive opportunities. The
interest rate for a significant proportion of our remaining debt is fixed,
cushioning the business from the impact of rising interest rates.
The divestments we have made to bring down gearing have reduced our income,
but, given macroeconomic developments, we are enjoying the Company's secure
financial position.
As I have mentioned previously, it is disappointing that employers,
particularly in the public sector, are taking a nonchalant approach to
encouraging their employees to return to office working, with the proportion
of time spent working from home surely having a negative impact on
productivity and morale. If city centres are to thrive, they need large
numbers of commuters as well as shoppers and tourists. In that sense our
business is still affected by the ongoing repercussions of the Covid pandemic.
Operational performance
• Our statutory loss in the year of £29.5m is due primarily to the
performance from our investment property portfolio, including revaluation
losses of £26.0m partially offset by surpluses generated from strategic
disposals of £4.1m, and impairments to our car park business of £11.5m.
Coupled with other comprehensive income gains of £1.6m, the cost of buying in
shares for cancellation of £7.9m and dividends paid totalling £2.4m, moved
the Company's balance sheet from a net asset value per share of 341p (at 30
June 2022) to 291p.
• Net debt, including lease liabilities, reduced from £163.8m (at 30
June 2022) to £129.9m, with all but £5.8m benefiting from long term fixed
interest rates.
• EPRA earnings per share 1 (#_ftn1) are 6.2p for the year (2022:
6.2p), achieved despite the impact of asset disposals in both the current and
previous year.
• Rent collection was strong, with 99% of all rent and service charge
income invoiced in the year collected.
• £33.4m of disposals during the year, together with the YPS sale
announced previously, contributed to a significant reduction in net debt.
CitiPark and our hotel have performed strongly as the post-Covid recovery
continues. The location of our hotel benefited from an increase in people
taking short city breaks, which has mitigated the effect of changes in the
behaviour of business customers, to deliver a stellar year. Our car parks have
seen high occupancy from shoppers and visitors, although those more reliant on
business parking have performed less strongly. Our vehicle charging and
enforcement businesses are doing well.
Strategy
We have successfully executed our strategy to dispose of retail and leisure
assets and reduce borrowing to give us the headroom for future growth,
accelerated by the disposal of our stake in YPS. The pace of divestments is
slowing as our focus on paying down debt is behind us and we are now back to
exploring opportunities to reestablish our income model. Examples include
mixed-use properties in Central London combining retail, commercial and
residential units. We are also looking to grow our car parks business and are
open to considering attractive assets in any location, as well as in
complementary areas such as vehicle charging. Retail is arguably at the bottom
of the cycle, so we will also evaluate targeted acquisitions in that segment,
identifying assets where we can put our property management expertise to
greatest effect.
Although there is a sense of catching falling knives as valuations decline,
buying property is our business, and we bring experience and expertise from
our long heritage as well as our long-term approach. As we look to re-gear as
appropriate, we were delighted that our tender offer for shares last September
was oversubscribed, and we also bought back some of the debenture in the past
year.
The Board has approved a final dividend of 2.5p, bringing the total for the
full year to 5.0p (compared to a total of 5.0p last year).
People and culture
In a market where competition for talent is fierce, we are delighted to have
such a strong team, without whose expertise and commitment the Company's
positive performance wouldn't be possible.
There have been no changes to the Board, with the exception of promoting Craig
Burrow to the main Board as Group Property Director, a reflection of his
contribution to the Company.
ESG and communities
Philanthropy has always been at the heart of the Company's ethos, and we are
proud to be involved with a number of philanthropic and community-based
programmes including Leeds Hospitals Charity, the Yorkshire Children's Charity
and First Give.
We directed a portion of the proceeds from the sale of YPS to set up a staff
charitable foundation with a view to colleagues suggesting the causes they
want to support.
Sustainability is a priority for the Company in the assets we acquire and
manage, as well as in our car parking business. 33.4% of our investment
property portfolio has an EPC rating of B or above, and environmental
credentials are at the forefront of the design of our developments at
Whitehall Riverside.
Outlook
Looking ahead, we remain focused on optimising the performance of our estate
and car parking business and are looking to capitalise on our secure financial
position to acquire assets that meet our criteria. There is some hesitancy in
the market, but our deep experience, agile approach and strong balance sheet
make us well placed to seize attractive opportunities as they arise.
Edward Ziff OBE DL
Chairman and Chief Executive
Portfolio review
Valuation summary
The like-for-like value of our portfolio decreased by 12.6% (£35.3m) after
capital expenditure of £20.4m in the year. In addition, we recognised a
further surplus of £4.1m arising on the disposal of investment properties in
the year.
Significant valuation losses have been recognised across our retail, leisure,
office and car park portfolios.
The valuation of all of our properties (except one) was carried out by CBRE
and Jones Lang LaSalle.
Portfolio overview
Passing rent ERV Value % of portfolio Valuation incr/(decr) Initial yield Reversionary yield
£m £m £m
Retail & leisure 1.0 1.3 14.5 5% -4.1% 6.4% 8.4%
Merrion Centre (ex offices) 4.6 4.9 51.4 19% -12.8% 8.5% 9.0%
Offices 4.8 6.6 83.7 32% -17.0% 5.5% 7.5%
Hotel 0.8 0.8 9.5 4% 4.4% 8.1% 8.1%
Out of town retail 1.0 1.1 13.0 5% -10.4% 7.3% 7.8%
Residential 1.4 1.5 31.1 12% 0.5% 4.2% 4.6%
13.6 16.2 203.2 77% -11.8% 6.4% 7.6%
Development property 20.8 8% -7.6%
Car parks 40.7 15% -18.0%
Portfolio 264.7 100% -12.6%
Note: includes our share of Merrion House within Offices (£30.7m - see Note 7
of these financial statements) and Car Park Goodwill of £3.0m arising on
individual car park assets, but specifically excluding goodwill arising from
the current year car park operation acquisitions. None of the above is
included in the table set out in Note 6 of these financial statements.
Note: excludes IFRS 16 adjustments that relate to Right-of-Use car park assets
(£23.1m) as the Directors do not believe it is appropriate to include in this
analysis assets where there are fewer 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 6 of these financial statements.
The table below reconciles the above table to that set out in Note 6 of these
financial statements:
FY23 FY22
£m £m
Portfolio as per Note 6 254.1 282.4
50% share in Merrion House 30.7 35.7
50% share in Burlington House - 11.5
Goodwill - Car Parks - Property specific only 3.0 4.0
Less - IFRS 16 right-of-use car parks (23.1) (26.7)
As per the above table 264.7 306.9
Sales and Purchases
During the financial year ended 30 June 2023 we sold four properties above
their 30 June 2022 book value, for gross proceeds of £33.4m.
Our continued commitment to asset recycling is clear. The table details the
£168.2m of disposals since FY17, of which 71% 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%
FY23 33.4 21% 18.8 0%
168.2 71% 56.5 26%
Retail and leisure
Retail has seen a perfect storm over the last few years with the pandemic
accelerating changing shopping habits and the cost of living crisis affecting
consumers' decision-making.
These factors and the wider macroeconomic outlook have negatively affected the
retail sector and resulted in significant valuation reductions across our
portfolio of retail properties. In particular, our Merrion Centre retail and
leisure units have collectively seen a 12.8% valuation reduction in the year.
This reduction is most prominent in our Morrisons supermarket investment,
where the underlying value dropped by 19.4% over the 12 months, a trend that
has been seen nationally across all foodstore investments.
Our leisure investments, particularly those facing the Leeds arena, fell in
value by less than 1%, highlighting the benefits of having not only a
portfolio diversified by sector, but also having diversity across significant
assets.
Regional offices
As with retail, the office market is also facing significant macroeconomic
challenges, and this is coupled with uncertainty around tenant requirements in
terms of both size and location. With ESG requirements evolving, the
environmental credentials of a building developed only five years ago are very
different from those of a new build office. The flight to prime is being felt
especially in the office market and the experience in regional offices is no
different to that in central London.
Our office portfolio, located mainly in Leeds and Manchester, suffered a 17%
reduction in value over the year, all of which related to market sentiment and
the underlying investment yields.
Residential
Residential property values continued to grow, with supply constraints a
factor, particularly in Manchester. Our residential property portfolio,
increased through the acquisition in the year of the remaining half of
Burlington House, performed well, with occupancy levels of 100% now the norm.
This was reflected in a small valuation uplift of 0.5% in the year. As FY24
progresses we are expecting to see further valuation uplifts as the rental
income earned should increase on a unit-by-unit basis.
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.
Car parks
During the year, the Company's freehold and long leasehold car park assets
fell in value from £49.6m to £40.7m, a drop of 18%. Occupancy levels across
the portfolio did not change in the 12 months, however increased operating
costs and rental charges negatively impacted the underlying values.
Other valuation movements
The value of the Company's development sites decreased marginally by £0.5m in
the year, reflecting weakening office sentiment, despite capital investment in
the year of £1.1m.
Divisional review - Property
Overview
In line with our strategy to pay down debt, our work has focused largely on
divestments and refreshing plans for the development pipeline. Having
strengthened the balance sheet and now concluded our strategic disposal
programme, we have begun to make targeted purchases and are cautiously
evaluating further opportunities.
The landscape has been challenging in terms of yields and valuations, and
rising costs that are suppressing rents in some segments. Retail and leisure
occupiers have been hit hard by energy prices, and landlords have felt the
impact, for example tenants looking to rebase rents at lease event dates, or
consolidating the number of stores they have in a city, leading to voids.
Similarly, some business tenants are rethinking whether they need the same
amount of space as previously.
Despite this challenging environment and the various external factors
impacting property, we have continued to invest to put our portfolio and
business in a good position so we can move forward to realise our
redevelopment ambitions, with our diverse portfolio in multiple sectors a
source of resilience.
Disposals and acquisitions
Four disposals completed during the year, generating total proceeds of
£33.4m. We made one office acquisition, 45 Weymouth Street in Marylebone, a
small, Grade 2 listed freehold property that is now the location of the TCS
London head office after the previous office on Duke Street was sold in 2021.
TCS occupies part of the property, and the remainder was let quickly following
the acquisition. In addition to Weymouth Street, we acquired from our JV
partner the remaining 50% of Burlington House, a prime build to rent scheme in
central Manchester.
Our divestments included Buchanan Street in Glasgow and Grove House in
Uddingston, both of which completed in December. We also made some strategic
disposals that had been agreed subject to planning for almost two years: in
December we completed the sale of Port Street, part of the Manchester
Piccadilly Basin scheme, to Select Property Group, who plan to develop 480
apartments on the site. In April 2023 we sold part of the Whitehall Riverside
site in Leeds, with permission for 500 homes, to build-to-rent residential
developers, Glenbrook.
Rent collection
Our rental collection performance has been very strong, with 99% collected or
deferred. This exceeds levels seen before the pandemic, the circumstances of
which contributed to closer relationships with tenants. We have also disposed
of some assets that had been associated with more challenging rent collection.
Development pipeline highlights
The projects we are looking to bring forward demonstrate the diversity of our
portfolio, including an office building, a car park, a residential building
and some student buildings that we are in the process of planning, designing
and moving towards development.
Piccadilly Basin
The sale of Port Street is enabling us to bring forward a refresh of the
strategic regeneration framework (SRF) for Piccadilly Basin. We're looking at
a mixed-use development and have been working with Manchester City Council to
update plans for the rest of the site. We had been at an advanced stage in the
design of a residential building in Manchester but have paused that until the
SRF refresh has been completed, after which the intention would be to bring
forward that application.
Whitehall Riverside
Having divested part of the Whitehall Riverside site, we now have detailed
consent for an energy-efficient office building and multi-storey car park. We
are looking to bring forward those elements of the master plan and we intend
to begin construction of the car park in Q1 2024. The office will be
best-in-class for the city in terms of its ESG credentials, and we will be
seeking a pre-let occupier to develop the building.
Wade House
We are in the process of designing a purpose-built student accommodation
(PBSA) scheme based on the redevelopment of Wade House, a 1960s office
building, and the adjacent 100MC site. Together they would have capacity for
around 1100 PBSA beds, adding to other student accommodation in the immediate
vicinity of the Merrion Centre, which will further enhance the demand for and
vibrancy of the retail and leisure outlets in the Centre.
Performance by segment
During the reporting period we experienced challenging market conditions that
were exacerbated by the mini budget in September 2022, the impact of which is
still being felt in certain sectors. Build cost inflation and rising interest
rates are creating a difficult environment for developers. Some schemes that
were viable when plans were submitted may no longer be so by the time planning
permissions are granted, leading to the need to update development appraisals.
A further consideration is the need to update designs to keep up with the
evolving ESG requirements of tenants.
Office
The office market is seeing values reducing for secondary regional office
buildings, where there is a flight to ESG-compliant buildings. Differing
company policies in relation to working from home are also having an impact on
office occupancy and related trade for surrounding businesses as well as car
park utilisation. Employees of some tenants are working 5 days per week in the
office, others 2 days per month, and employers are seeking to find a balance
between the needs of their organisations and what suits their workforce. TCS's
biggest tenant, Leeds City Council, is an example of an organisation whose
office occupancy levels are very different to those before the pandemic.
Retail and leisure
We continue to evolve our retail and leisure offering, where demand is more
for 'experiences', whether in shopping or in leisure destinations. We welcomed
several new tenants to the Merrion Centre during the year, including Pret a
Manger.
Residential
Our residential assets performed well, with demand outstripping supply in many
cases. In Manchester, Leeds and Glasgow we've seen strong occupancy and rental
growth although at the same time have felt the impact of inflation in energy
prices and more widely, which is a challenge to manage.
Hotel
Our hotel has gone from strength to strength, seeing increasing occupancy
levels throughout the year, and we are looking to invest in a refurbishment of
the rooms, including new televisions and updated décor. The ground floor
restaurant space has now been let to an independent operator and this is now
opening, serving breakfasts as well as evening dining.
Asset management
Leeds
We speculatively refurbished office space at 123 Albion Street in Leeds and
are also in the early stages of refurbishing and repositioning Town Centre
House, the location of our head office. We are working with our tenants to
understand their long-term needs.
Having worked with Leeds City Council for some years to bring forward
development on their George Street site, we are working with them to develop a
new hotel and are close to securing a pre-let of a 143-bedroom hotel with a
national operator.
Manchester
Occupancy levels at Ducie House and Carvers Warehouse have been very high and
included new tenants.
Scotland
Following the sale of Buchanan Street and Grove House, our only remaining
asset in Scotland is 38 Bath Street. We are in the process of bringing forward
a full refurbishment of the site, which comprises 20 apartments above leisure
and retail outlets on the ground floor and basement level. The strength of the
residential market there has given us confidence to invest and hold the asset
for the long term.
London
During the year we acquired a vacant investment property in London. The
Company now occupies one floor of this building as its London headquarters
whilst the remaining space has been fully let.
Divisional review - CitiPark
Overview
With revenues of £13.1m (2022: £11.4m) and operating profit before valuation
movements of £3.4m (2022: £3.5m) generated during the year, the CitiPark
business remains on a path of recovery following the pandemic and is
continuing to adapt to market conditions. The carrying value of the CitiPark
portfolio has been impaired during the year, however this impairment has been
driven by changes to the underlying interest rate environment which has
increased the weighted average cost of capital metric used by the Company in
assessing impairments.
Although this varies by location, the business continues to feel the effects
of the sea change in commuting patterns as the move to working from home
during the Covid lockdowns has become the norm for many people. Rather than
Monday to Friday that was the default until Spring 2020, core days for
commuter traffic are now Tuesday, Wednesday and Thursday.
Performance
Performance has varied depending on the location and associated demographics
of each branch. For example, the largest user group of our Merrion Centre car
park is Leeds City Council workers, most of whom now only work from the office
one day per month, which has had a significant impact on our Monday to Friday
utilisation levels.
In contrast, other car parks are seeing utilisation in excess of pre-pandemic
levels. For example our Whitehall Road location in Leeds, which has been
restricted by a Council-mandated operating model, is seeing high levels of
utilisation, both during the week and also at weekends, helped by the car
park's location adjacent to Leeds train station, the third busiest station
outside of London. We have planning permission to build a 500-space
multi-storey car park on this site, for which we expect construction to begin
in Q1 of 2024.
Our car parks in Manchester have also outperformed pre-Covid levels, helped by
their proximity to Manchester Piccadilly train station as well as the
development of leisure, retail and hotel facilities in the area. We have
explored alternative uses for some of our branches, for example the level of
development in the city has provided an opportunity to lease off areas for use
as construction site compounds. These, along with our more compact portfolio
following the sale of assets such as Port Street, have allowed us to review
tariffs and our offering to drive revenue, profitability and utilisation.
Our locations in London also traded well during the year and in line with
pre-pandemic levels as large employers in those areas wanted their employees
in the office. We have an investment programme planned for our London assets
this year in relation to lighting, sustainability upgrades, CitiCharge's EV
charging and infrastructure improvement to increase capacity.
In line with the rest of the economy, the business has faced inflationary
pressures in utilities and other costs, although these were somewhat mitigated
by one-off support received during the year through the Government's Covid
Action Relief Fund and reduced business rates for car parks.
Technology and innovation
As part of our ongoing work to invest, develop and innovate, we have recently
undertaken an upgrade programme that included the installation of 35 EV
chargers throughout our CitiPark portfolio to improve reliability and customer
experience of our CitiCharge network, as well as enabling us to commercialise
our chargers. An added benefit of the investment has been the greater
utilisation of the car parks by people seeking out these high performance, DC
rapid chargers.
Other innovations during the year included the relaunch of our upgraded
CitiPark app to integrate new payment options including Apple Pay and Google
Pay.
Although we sold our equity stake in YourParkingSpace (YPS) at the beginning
of the financial year for a total net consideration of £18.5m, we retain a
commercial relationship with YPS and they continue to have a presence
throughout our portfolio.
Outlook
We are not standing still; with growth, innovation and our development
pipeline all key priorities for the coming years. We are looking to develop
our own parking management system and hardware to bring operational cost
efficiencies and customer journey improvements. We are also continuing to
explore alternative uses for our larger, longer-term assets to make better use
of our branches and deliver more revenue. Our approach to diversification also
includes evaluating management agreements for new sites as well as acquiring
further assets of our own.
The outlook for the business is positive, and we are confident that our
approach to adapting and innovating positions us well to move with the
changing times.
FINANCIAL REVIEW
"The financial performance of the Company during the year ended 30 June 2023
shows EPRA profits comparable to those of the previous period, however the
statutory profit of the year is dominated by both reductions in investment
property values and impairments to the group car parking portfolio, with these
reductions primarily due to real estate investor and market sentiment around
the macro-economic outlook"
The statutory loss for the year was £29.5m, compared to a profit of £11.0m
in the previous year, with the current year heavily influenced by Investment
Property losses of over £21.9m (£26.0m of revaluation losses, which includes
£5.0m of valuation movements on joint venture properties and £4.1m of
profits recognized on disposal).
EPRA Earnings* were a profit of £3.1m in the year, compared to a profit of
£3.3m in the prior year, highlighting a resilient performance in the
underlying business, despite the macroeconomic outlook. The profit for the
current year included the cost to the Company of extraordinary YPS bonuses
paid to the executive directors amounting to £0.8m, excluding these bonuses,
the EPRA profit of the Company would have been £3.9m.
A final dividend of 2.5p per Ordinary Share has been approved by the Board,
giving a full year dividend of 5.0p, which is the same as in the previous
year.
During the year the Company sold four separate investment property assets
which generated £33.4m of gross proceeds. In July 2022 the Company received
both the initial proceeds from the sale of its investment in YPS, which
generated £11.6m of proceeds, and £18.7m of funds were released from the
debenture security group. In aggregate the Company generated over £63m from
these activities.
The funds generated have been deployed in a number of ways:
· £7.5m acquisition of 45 Weymouth Street, London
· £3.5m to fund the acquisition of the remaining 50% of our Burlington
House joint venture
· £7.8m to fund a tender offer and also a small share buyback programme
in the first five months of the year
· £31.0m was used to part repay Group Borrowings
· £13.3m was used to buy in for cancellation £13.6m of the Company's
debenture stock
Net borrowings has reduced from £135.1m to £101.9m in the year. Net
borrowings represent total financial borrowings of £131.5m less lease
liabilities of £28.0m and net cash of £1.6m.
* Alternative performance measures are detailed, defined and reconciled within
Note 4 of this announcement
Income statement
EPRA Earnings* for the year ended 30 June 2023 were £3.1m.
£000s FY23 FY22 YOY
Gross Revenue 30,363 28,141 7.9%
Impairment of debtors provision movement 0 49 (100.0%)
Property Expenses (15,551) (13,666) 13.8%
Net Revenue 14,812 14,524 2.0%
Other Income / JV Profit 1,764 2,497 (29.4%)
Other Expenses 0 0 -
Administrative Expenses (6,780) (6,531) 3.8%
Operating Profit 9,796 10,490 (6.6%)
Net Finance Costs (6,733) (7,215) (6.7%)
EPRA Earnings 3,063 3,275 (6.5%)
Segmental FY23 FY22 YOY
Property
Net Revenue 9,435 9,188 2.7%
Operating Profit 5,911 6,437 (8.2%)
CitiPark
Net Revenue 4,891 4,843 1.0%
Operating Profit 3,360 3,525 (4.7%)
ibis Styles Hotel
Gross Revenue 486 493 (1.4%)
Operating Profit 486 493 (1.4%)
Investments
Other income and operating profit 39 35 11.4%
Statutory profit
On a statutory basis the reported loss for the year was £29.5m.
The statutory profit reflects the EPRA Earnings* of £3.1m less £36.3m of
non-cash valuation and impairment movements plus the profit on disposal
recognised of £3.3m on the four investment properties and investments sold in
the year plus £0.4m of profit recognized on the repurchase of debenture stock
in the year.
Gross revenue
Gross revenue was up £2.2m or 7.9% year on year, with key drivers being:
· Property revenue during the year had a positive impact of £0.3m on the
total Gross Revenue. The majority of property sales in the year related to
development sites where temporary car park income was generated.
· CitiPark revenues have continued to grow strongly in the year, with gross
revenue across the portfolio increasing by 14% in the year from £11.4m to
£13.1m , with total occupancy now at just under 90% of pre COVD-19 levels.
· Income for the ibis Styles hotel, has also continued to grow with revenue
of £3.1m in the year, up £0.3m from £2.8m last year.
Property expense
Property expenses have increased in the year by 14.0%, reflecting both the
increased trade experienced in both the Hotel and Car Park businesses but also
inflationary pressures on both utility costs and index linked car park leases.
Other / JV income
Total Other / JV income was down 29.4% or £0.7m 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 higher year on year; however in the current year
exceptional bonuses awarded and paid to the executive directors resulting form
the YPS sale cost the Company £0.8m. Excluding these costs, administrative
costs were 9% lower than in the previous period.
Finance costs
Finance costs were 6.7% or £0.5m lower year on year as a result of the
reduction in both the Company's bank borrowings and the buyback of £13.6m of
debenture stock.
* Alternative performance measures are detailed, defined and reconciled within
Notes 4 of this announcement
Balance sheet
The below table shows the year-end balance sheet as reported.
£m FY23 FY22 vs FY22
Freehold and Right to Use Investment Properties 162.9 158.5 2.8%
Development Properties 20.9 42.6 (50.9%)
Car Park related Assets, Goodwill and Investments* 74.4 97.9 (24.0%)
Hotel Operations 9.5 9.1 4.4%
267.7 308.1 (13.1%)
Joint Ventures 7.1 18.0 (60.6%)
Listed Investments 4.1 4.1 0.0%
Other Non-Current Assets 1.3 1.0 30.0%
Total Non-Current Assets incl. Available for Sale 280.2 331.2 (15.4%)
Net Borrowings (129.9) (163.8) (20.7%)
Other Assets/(Liabilities) (9.2) 11.9 (177.3%)
Statutory NAV 141.1 179.3 (21.3%)
Statutory NAV per Share 291p 341p (14.6%)
EPRA Net Tangible Assets (NTA) 137.7 174.9 (21.3%)
EPRA NTA per Share 284p 333p (14.6%)
* includes Assets held for sale in FY22 of £20.4m
Non-current assets:
Our total non-current assets (including investments in JVs) of £280.2m (2022:
£331.2m) have reduced by £51.0m during the year, this movement is made up of
the following:
· Disposals, including YPS receipts of £(39.7m)
· Depreciation charge of £(2.3m)
· Capital expenditure of £26.3m
· Revaluation uplift/reversal of impairments totalling £(36.1m)
· Operating profits generated and retained in JV entities and other
movements of £0.8m
Borrowings:
During the year our Net Borrowings have reduced by £33.9m, from £163.8m as
at 30 June 2022 to £129.9m. This was primarily as a direct consequence of the
disposals made throughout the year. As part of this we bought back £13.6m of
our £96.1m 2031 5.375% debenture stock with the remaining reduction spread
across our bank facilities.
The acquisition of the remaining half of Burlington House, has resulted in the
full consolidation of the Belgravia Living Group. The Company's investment in
the Belgravia Living Group was previously categorized as a joint venture
investment. As part of this consolidation a further 'ring-fenced' facility has
been consolidated into the results and balance sheet of the Group. This
facility expires in January 2029
We had two of our three revolving credit facilities expiring in June 2023. Our
Lloyds Bank facility was refinanced immediately after the year end and is
therefore classed as current liabilities in the balance sheet. . This facility
has been reduced to a £30m revolving credit facility with a further £5m
overdraft facility and expires in June 2026 (with two one-year optional
extensions)
During the year we refinanced our £25m facility with Handelsbanken, for a
further three years albeit at lower facility limit of £15m, this facility
will expire in June 2026.
Loan to value has been reduced to 45.8%, down from 46.4% 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.
FY23 FY22
£m FY23 FY22 p per share p per share
IFRS reported NAV 141.1 179.3 291 341
Purchasers Costs (1) 19.3 19.1
EPRA Net Reinstatement Value 160.4 198.4 331 378
Remove Purchasers Costs (19.3) (19.1)
Remove Goodwill (2) (3.4) (4.4)
EPRA Net Tangible Assets 137.7 174.9 284 333
Fair value of fixed interest rate debt (3) 14.2 1.3
EPRA Net Disposal Value 151.9 176.2 313 335
(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 in the year ended 30
June 2023, 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 office investments 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.
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 2023 was £30.0m (2022:
£18.5m), 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 33.7% in value before this headroom number was breached.
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 3.2% (2022: minus 4.5%) was calculated as
the total of dividends paid during the financial year of 5.0p (2022: 5.0p) and
the movement in the share price between 30 June 2022 (133.5p) and 30 June 2023
(125.0p), assuming reinvestment of dividends. This compares with the FTSE All
Share REIT index at minus 22.1% (2022: minus 5.2%) 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 (3.2%) 0.3% 3.4%
FTSE All Share REIT index (22.1%) 2.4% 1.8%
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 minus
6.0% (2022: 8.7%). This compared to the MSCI/IPD market return of minus 15.3%
(2022: 19.3%).
Consolidated income statement
for the year ended 30 June 2023
2023 2022
Notes £000 £000
Gross revenue (excl service charge income) 27,631 25,383
Service charge income 2,732 2,758
Gross revenue 30,363 28,141
Release of provision for impairment of debtors - 49
Service charge expenses (3,991) (3,666)
Property expenses (11,560) (10,000)
Net revenue 14,812 14,524
Administrative expenses 2 (6,780) (6,531)
Other income 3 880 1,612
Valuation movement on investment properties 6 (21,033) 3,489
Impairment of car parking assets 6 (10,467) (384)
Impairment of goodwill 7 (991) -
Loss on disposal of investments (777) (89)
Valuation movement on investments 1,162 -
Profit on disposal of investment properties 4,123 4,563
Share of post-tax (losses)/profits from joint ventures (4,066) 1,315
Operating (loss)/profit (23,137) 18,499
Finance costs (6,948) (8,063)
Finance income 594 576
(Loss)/profit before taxation (29,491) 11,012
Taxation - -
(Loss)/profit for the year attributable to owners of the Parent (29,491) 11,012
Earnings per share
Basic and diluted 4 (60.1p) 20.9p
EPRA (non-GAAP measure) 4 6.2p 6.2p
Dividends per share
Paid during the year 5 5.0p 4.25p
Proposed 5 2.5p 2.5p
Consolidated statement of comprehensive income
for the year ended 30 June 2023
2023 2022
£000 £000
(Loss)/profit for the year (29,491) 11,012
Items that will not be subsequently reclassified to profit or loss
Revaluation gains on car parking assets 6 929 -
Revaluation gains on hotel assets 6 642 713
Revaluation gains on other investments 16 15,306
Total other comprehensive income 1,587 16,019
Total comprehensive (loss)/income for the year (27,904) 27,031
All profit and total comprehensive income for the year is attributable to
owners of the Parent.
Consolidated balance sheet
as at 30 June 2023
2023 2022
Notes £000 £000
Non-current assets
Property rental
Investment properties 6 183,801 201,106
Investments in joint ventures 7 7,123 18,016
190,924 219,122
Car park activities
Freehold and leasehold properties 6 60,791 72,226
Goodwill and intangible assets 3,674 4,912
64,465 77,138
Hotel operations
Freehold and leasehold properties 6 9,500 9,100
9,500 9,100
Fixtures, equipment and motor vehicles 6 1,269 976
Investments 8 7,503 4,506
Total non-current assets 273,661 310,842
Current assets
Trade and other receivables 3,264 21,708
Cash and cash equivalents 23,320 22,150
Investments 6,436 -
33,020 43,858
Assets held for sale - 20,368
Total current assets 33,020 64,226
Total assets 306,681 375,068
Current liabilities
Trade and other payables (12,387) (9,828)
Bank overdrafts (21,700) (23,414)
Financial liabilities (4,665) (34,655)
Total current liabilities (38,752) (67,897)
Non-current liabilities
Financial liabilities (126,841) (127,867)
Total liabilities (165,593) (195,764)
Net assets 141,088 179,304
Equity attributable to the owners of the Parent
Called up share capital 9 12,113 13,132
Share premium account 200 200
Capital redemption reserve 1,736 717
Revaluation reserve 2,784 1,213
Retained earnings 124,255 164,042
Total equity 141,088 179,304
Net asset value per share 11 291p 341p
Consolidated statement of Changes in Equity
for the year ended 30 June 2023
Called up share capital Share Capital redemption reserve Revaluation reserve Retained earnings Total equity
premium account
£000 £000 £000 £000 £000 £000
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 income 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
Comprehensive income for the year
Loss for the year - - - - (29,491) (29,491)
Other comprehensive income - - - 1,571 16 1,587
Total comprehensive loss for the year - - - 1,571 (29,475) (27,904)
Contributions by and distributions to owners
Arising on purchase and cancellation of own shares (1,019) - 1,019 - (7,888) (7,888)
Final dividend relating to the year ended 30 June 2022 - - - - (1,212) (1,212)
Interim dividend relating to the year ended 30 June 2023 - - - - (1,212) (1,212)
Balance at 30 June 2023 12,113 200 1,736 2,784 124,255 141,088
Consolidated cash flow statement
for the year ended 30 June 2023
2023
2022
Notes £000 £000 £000 £000
Cash flows from operating activities
Cash generated from operations 10 13,769 11,688
Interest received 415 -
Interest paid (6,149) (6,839)
Net cash generated from operating activities 8,035 4,849
Cash flows from investing activities
Purchase and construction of investment properties (7,526) (7,433)
Refurbishment of investment, freehold and leasehold properties (1,145) (1,617)
Purchases of fixtures, equipment and motor vehicles (576) (283)
Proceeds from sale of investment properties 51,723 20,608
Proceeds from sale of investments 11,195 68
Payments for business acquisitions - (293)
Investments in joint ventures (3,500) (326)
Purchase of subsidiary, net of cash acquired 887 -
Net cash generated from investing activities 51,058 10,724
Cash flows from financing activities
Proceeds from non-current borrowings 16,000 6,399
Repayment of non-current borrowings (60,241) (18,643)
Arrangement fees paid - (380)
Principal element of lease payments (1,657) (1,648)
Dividends paid to shareholders (2,423) (2,237)
Purchase of own shares (7,888) (885)
Net cash used in financing activities (56,209) (17,394)
Net increase/(decrease) in cash and cash equivalents 2,884 (1,821)
Cash and cash equivalents at beginning of the year (1,264) 557
Cash and cash equivalents at end of the year 1,620 (1,264)
Cash and cash equivalents at the year end are comprised of the following:
Cash balances 23,320 22,150
Overdrawn balances (21,700) (23,414)
1,620 (1,264)
Audited preliminary results announcements
The financial information for the year ended 30 June 2023 and the year ended
30 June 2022 does not constitute the company's statutory accounts for those
years.
Statutory accounts for the year ended 30 June 2022 have been delivered to the
Registrar of Companies.
The statutory accounts for the year ended 30 June 2023 will be delivered to
the Registrar of Companies following the Company's Annual General Meeting.
The auditors' reports on the accounts for 30 June 2023 and 30 June 2022 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
The chief operating decision-maker has been identified as the Board. The Board
reviews the Group's internal reporting in order to assess performance and
allocate resources. Management has determined the operating segments based on
these reports.
(A) Segmental assets 2023 2022
£000 £000
Property rental 212,249 263,598
Car park activities 64,993 77,496
Hotel operations 9,500 9,100
Investments 19,939 24,874
306,681 375,068
(B) Segmental results
2023 2022
Property Car park Hotel Property Car park Hotel
rental activities operations Investments Total rental activities operations Investments Total
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Gross revenue (excl service charge income) 11,445 13,066 3,120 - 27,631 11,138 11,417 2,828 - 25,383
Service charge income 2,732 - - - 2,732 2,758 - - - 2,758
Gross revenue 14,177 13,066 3,120 - 30,363 13,896 11,417 2,828 - 28,141
Release of provision for impairment of debtors - - - - - 49 - - - 49
Service charge expenses (3,991) - - - (3,991) (3,666) - - - (3,666)
Property expenses (751) (8,175) (2,634) - (11,560) (1,091) (6,574) (2,335) - (10,000)
Net revenue 9,435 4,891 486 - 14,812 9,188 4,843 493 - 14,524
Administrative expenses (5,242) (1,538) - - (6,780) (5,213) (1,318) - - (6,531)
Other income 834 7 - 39 880 1,577 - - 35 1,612
Share of post-tax profits from joint ventures 884 - - - 884 885 - - - 885
Operating profit before valuation movements 5,911 3,360 486 39 9,796 6,437 3,525 493 35 10,490
Valuation movement on investment properties (21,033) - - - (21,033) 3,489 - - - 3,489
Impairment of car parking assets - (10,467) - - (10,467) - (384) - - (384)
Impairment of goodwill - (991) - - (991) - - - - -
Loss on disposal of investments - - - (777) (777) - - - (89) (89)
Valuation movement on investments - - - 1,162 1,162 - - - - -
Profit on disposal of investment properties 4,123 - - - 4,123 4,563 - - - 4,563
Valuation movement on joint venture properties (4,950) - - - (4,950) 430 - - - 430
Operating (loss)/profit (15,949) (8,098) 486 424 (23,137) 14,919 3,141 493 (54) 18,499
Finance costs (6,948) (8,063)
Finance income 594 576
(Loss)/profit before taxation (29,491) 11,012
Taxation - -
(Loss)/profit for the year (29,491) 11,012
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 2023,
arising from car park operations, was £2,014,000. After allowing for an
allocation of administrative expenses, the operating profit at these sites was
£1,386,000.
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
2023 2022
£000 £000
Employee benefits 4,344 4,281
Depreciation 124 129
Charitable donations 60 35
Other 2,252 2,086
6,780 6,531
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
2023 2022
Other income £000 £000
Commission received 154 139
Dividends received 39 35
Management fees receivable 260 235
Dilapidations receipts and income relating to surrender premiums 312 1,145
Other 115 58
880 1,612
4. Earnings per share
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 49,075,785
(2022: 52,755,750).
2023 2022
Earnings Earnings
Earnings per share Earnings per share
£000 p £000 p
(Loss)/profit for the year and earnings per share (29,491) (60.1) 11,012 20.9
Valuation movement on investment properties 21,033 42.9 (3,489) (6.6)
Impairment of car parking assets 10,467 21.3 384 0.7
Impairment of goodwill 991 2.0 - -
Valuation movement on properties held in joint ventures 4,950 10.1 (430) (0.8)
Profit on disposal of investment and development properties (4,123) (8.4) (4,563) (8.7)
Loss on disposal of investments 777 1.6 89 0.2
Valuation movement on investments (1,162) (2.4) - -
(Gain)/loss on repurchase of debenture stock (379) (0.8) 272 0.5
EPRA earnings and earnings per share 3,063 6.2 3,275 6.2
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
2023 2022
£000 £000
2021 final paid: 1.75p per share - 924
2022 interim paid: 2.5p per share - 1,313
2022 final paid: 2.5p per share 1,212 -
2023 interim paid: 2.5p per share 1,212 -
2,424 2,237
An interim dividend in respect of the year ended 30 June 2023 of 2.5p per
share was paid to shareholders on 16 June 2023. This dividend was paid
entirely as a Property Income Distribution (PID).
A final dividend in respect of the year ended 30 June 2023 of 2.5p per share
is proposed. This dividend, based on the shares in issue at xx October 2023,
amounts to £1.2m which has not been reflected in these accounts and will be
paid on 4 January 2024 to shareholders on the register on 15 December 2023.
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 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
Additions at cost 7,526 - - 7,526
Held in subsidiaries acquired 23,400 - 706 24,106
Other capital expenditure 735 31 395 1,161
Disposals (7,645) - (21,250) (28,895)
Valuation movement (19,376) (31) (1,626) (21,033)
Movement in tenant lease incentives (170) - - (170)
Valuation at 30 June 2023 160,700 2,250 20,851 183,801
At 30 June 2023, investment property valued at £181,340,000 (2022:
£198,630,000) was held as security against the Group's borrowings.
During the year the Group acquired an investment property that it had
previously owned 50% of, through the Group's joint venture investment in
Belgravia Living Group Limited ("BLG"). The property acquisition was
facilitated by the acquisition by the Group of the remaining 50% interest in
BLG.
Right of use investment property assets include long leasehold property
interests.
The Company occupies an office suite in part of the Merrion Centre and one
floor of an investment property in London. The Directors do not consider these
elements to be material.
(B) Freehold and leasehold properties - car park activities
Freehold Right of use asset Total
£000 £000 £000
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
Additions 6 - 6
IFRS 16 adjustment - (95) (95)
Depreciation (312) (1,496) (1,808)
Valuation movement 929 - 929
Impairment (4,713) (5,754) (10,467)
Valuation at 30 June 2023 25,110 35,681 60,791
The historical cost of freehold properties and right of use assets relating to
car park activities is £30,153,000 (2022: £30,153,000).
At 30 June 2023, freehold properties and right of use assets relating to car
park activities, held as security against the Group's borrowings are held at
£35,610,000 (2022: £42,170,000).
(C) Freehold and leasehold properties - hotel operations
Freehold
£000
Valuation at 30 June 2022 9,100
Depreciation (242)
Valuation movement 642
Valuation at 30 June 2023 9,500
At 30 June 2023, freehold and leasehold property relating to hotel operations
valued at £9,500,000 (2022: £9,100,000) was held as security against the
Group's borrowings.
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 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
2023 in the table below.
Passing rent ERV Value Initial yield Reversionary yield
£000 £000 £000 % %
Retail and Leisure 984 1,292 14,510 6.4% 8.4%
Merrion Centre (excluding offices) 4,610 4,919 51,414 8.5% 9.0%
Offices 3,040 4,953 52,966 5.4% 8.8%
Hotels 816 816 9,500 8.1% 8.1%
Out of town retail 1,006 1,070 13,000 7.3% 7.8%
Residential 1,392 1,526 31,060 4.2% 4.6%
11,848 14,576 172,450 6.5% 8.0%
Development property 20,851
Car parks 37,644
IFRS 16 Adjustment - Right of use assets held within investment property 23,147
254,092
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
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 £172.5m of applying a different weighted average yield and a
different weighted average ERV would be as follows:
Valuation in the Consolidated Financial Statements at an initial yield of 5.5%
- £203.8m, Valuation at 7.5% - £149.4m.
Valuation in the Consolidated Financial Statements at a reversionary yield of
7.0% - £197.1m, Valuation at 9.0% - £153.3m.
Investment properties (development properties)
The key unobservable inputs in the valuation of one of the Group's development
properties of £14.8m 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 - £15.5m, 5% decrease in the per acre or per unit
value - £14.1m.
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 £25.1m in applying a different yield/discount rate and a different assumed
rental value/net income would be as follows:
Valuation in the Consolidated Financial Statements based on a 1% decrease in
the yield/discount rate - £29.6m, 1% increase in the yield/discount rate -
£21.8m
Valuation in the Consolidated Financial Statements based on a 5% increase in
the assumed rental value/net income - £26.4m, 5% decrease in the assumed
rental value/net income - £23.8m
Right of Use car park activities
The effect on the total valuation of the Group's Right of Use car park
properties of £35.7m in applying a different discount rate and a different
assumed net income would be as follows:
Valuation in the Consolidated Financial Statements based on a discount rate of
8% - £37.2m, Valuation at 9% - £34.2m
Valuation in the Consolidated Financial Statements assuming net revenue 10%
above anticipated - £38.2m, Valuation at 10% below anticipated - £33.1m.
Property valuations can be reconciled to the carrying value of the properties
in the balance sheet as follows:
Freehold and Leasehold Properties
Investment Properties Hotel operations
Total
£000 £000 £000 £000
Externally valued by CBRE 96,740 19,260 9,500 125,500
Externally valued by Jones Lang LaSalle 87,010 5,850 - 92,860
Investment properties valued by the Directors 51 - - 51
Properties held at valuation 183,801 25,110 9,500 218,411
IFRS 16 right of use assets held at depreciated cost - 35,681 - 35,681
183,801 60,791 9,500 254,092
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.
(D) Fixtures, equipment and motor vehicles
Accumulated
Cost Depreciation
£000 £000
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
At 1 July 2022 4,994 4,018
Additions 576 -
Depreciation - 283
At 30 June 2023 5,570 4,301
Net book value at 30 June 2023 1,269
7. Investments in joint ventures
2023 2022
£000 £000
At the start of the year 18,016 16,212
Investments in joint ventures 3,500 326
Loan interest 245 163
Valuation movement on investment properties (4,950) 430
Share of profits after tax 884 885
Amounts eliminated on consolidation of subsidiary (10,572) -
At the end of the year 7,123 18,016
Investments in joint ventures are broken down as follows:
2023 2022
£000 £000
Equity 7,123 11,691
Loans - 6,325
7,123 18,016
Investments in joint ventures as at 30 June 2022 primarily related 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. On 14 April 2023, the Group
acquired the remaining 50% of the share capital of Belgravia Living Group
Limited and therefore no longer accounts for this as a joint venture. This
acquisition did not meet the definition of a business and it is treated as an
asset acquisition. The carrying value of the equity accounted joint venture on
the date of acquisition has formed part of the consideration paid for the
investment property.The consideration for the acquisition was £1, with the
key asset acquired being a £23.4m investment property and an associated bank
loan of £14.4m
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:
2023 2022
£000 £000
Non-current assets 61,450 71,850
Cash and cash equivalents 767 278
Debtors and prepayments - 295
Trade and other payables (700) (616)
Current financial liabilities (1,717) (1,659)
Non-current financial liabilities (45,554) (47,270)
Net assets 14,246 22,878
The (losses)/profits of Merrion House LLP for the current and previous year
are as stated below:
2023 2022
£000 £000
Revenue 3,460 3,328
Expenses (23) (2)
Finance costs (1,669) (1,725)
Valuation movement on investment properties (10,400) 200
Net (loss)/profit (8,632) 1,801
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 (2022: £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 (as at 30 June 2023 and 30 June 2022) 50 Property investment
Belgravia Living Group Limited (as at 30 June 2022 only) 50 Property Investment
Bay Sentry Limited (as at 30 June 2023 and 30 June 2022) 50 Software Development
8. Investments
2023 2022
£000 £000
Current Assets
Loan notes - Deferred Consideration 4,493 -
Loan notes - Contingent Consideration 1,943 -
6,436 -
Non-Current Assets
Listed investments 4,068 4,096
Non-Listed investments 410 410
Loan notes - Deferred Consideration 3,025 -
7,503 4,506
13,939 4,506
Listed investments
2023 2022
£000 £000
At start of the year 4,096 5,802
Disposals (44) (62)
Increase/(decrease) in value of investments 16 (1,644)
At the end of the year 4,068 4,096
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 £875,000 (2022: £882,300).
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
2023 2022
£000 £000
At the start of the year 410 3,415
Loan interest - 413
Increase in value of investments - 16,950
Transferred to assets held for sale - (20,368)
At the end of the year 410 410
In the prior year, non-listed investments primarily related to an equity
shareholding and loans advanced to YourParkingSpace Limited ('YPS'), a
privately owned company incorporated in the United Kingdom. The investment in
YPS was transferred to assets held for sale in the year ending 30 June 2022.
In July 2022, the Company sold its entire equity interest in YPS, in exchange
for upfront cash consideration of £9.6m, plus a deferred and contingent
element of consideration in the form of loan notes. In addition to the equity
consideration the Company also received in July 2022 full repayment of its
loan to YPS which, including rolled-up interest, totalled £1.95m.
The Non-listed investments 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.
Loan Notes - Deferred Consideration
2023 2022
£000 £000
Current assets
At the start of the year - -
Loan notes issued to the Company in the period 4,287 -
Loan interest 206 -
4,493 -
Non-Current assets
At the start of the year - -
Loan notes issued to the Company in the period 2,888 -
Loan interest 137 -
3,025 -
The interest earned on the deferred consideration loan notes is 5% per annum.
The current element of deferred consideration was received by the Company in
July 2023, the non-current element of deferred consideration is due in July
2024.
The deferred consideration loan notes are accounted for using the amortised
cost basis and are assessed for impairment under the IFRS 9 expected credit
loss model.
Loan Notes - Contingent Consideration
2023 2022
Assets held for sale are broken down as follows:
£000 £000
At the start of the year - -
Loan notes issued to the Company in the period 743 -
Unwind of discount applied to contingent consideration 38 -
Valuation movement 1,162 -
1,943 -
The contingent consideration loan notes were initially recognised at fair
value, based on the estimated performance of YPS in the 14 month period ended
October 2023. This is an estimate prepared by the Company. The contingent
consideration loan notes are then accounted for using the fair value through
profit and loss basis. Following completion of the sale of its investment in
YPS, the Company does not have access to regular YPS management information,
however it does receive ad hoc updates. The valuation of the contingent
consideration has been based on the performance of YPS for the period ended 30
June 2023 and assumes no further growth in the remaining four months of the
earnout period. The Directors of the Company believe this to be the most
reasonable approach, based on their knowledge of the car parking market, but
also in relation to the current macroeconomic environment where revenue growth
is being seen, but it is very much geographically specific.
These loan note 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 effect on the value of the contingent consideration at the year end of
£1.9m of applying a different level of revenue for the period to October
2023:
Valuation in the Consolidated Financial Statements assuming net revenue 10%
above anticipated - £2.3m, Valuation at 10% below anticipated - £1.4m. The
maximum amount due to the Company under the terms of the contingent
consideration loan notes is £3.8m.
Non listed investments - Assets held for sale
2023 2022
Assets held for sale are broken down as follows:
£000 £000
Equity investments - 18,420
Loans - 1,948
- 20,368
Assets held for sale at 30 June 2022 relate to an equity shareholding and
loans advanced to YourParkingSpace Limited ('YPS'), a privately owned company
incorporated in the United Kingdom. The company completed the sale of these
assets in July 2022.
9. Called up share capital
Authorised
The authorised share capital of the company is 164,879,000 (2022: 164,879,000)
Ordinary Shares of 25p each. The nominal value of authorised share capital is
£41,219,750 (2022: £41,219,750).
Issued and fully paid up
Number Nominal value
of shares
000 £000
At 30 June 2022 52,531 13,132
Purchase and cancellation of own shares (4,075) (1,019)
At 30 June 2023 48,456 12,113
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 7,279,590 Ordinary Shares.
10. Cash flows from operating activities
2023 2022
£000 £000
(Loss)/profit for the financial year (29,491) 11,012
Adjustments for:
Depreciation 2,333 2,301
Amortisation 247 222
Profit on disposal of fixed assets (48) -
Profit on disposal of investment properties (4,123) (4,563)
Loss on sale of investments 795 89
Movement in valuation of investments (1,162) -
Finance costs 6,948 8,063
Finance income (594) (576)
Share of post tax losses/(profits) from joint ventures 4,066 (1,315)
Movement in valuation of investment properties 21,033 (3,489)
Movement in lease incentives 170 144
Impairment of car parking assets 10,467 384
Impairment of goodwill 991 -
(Increase)/decrease in receivables (218) 1,083
Increase/(decrease) in payables 2,355 (1,667)
Cash generated from operations 13,769 11,688
11. Net asset value per share
The Basic and diluted net asset values are the same, as set out in the table
below.
2023 2022
£000 £000
Net assets at 30 June 141,088 179,304
Shares in issue (000) 48,456 52,531
Basic and diluted net asset value per share 291p 341p
1 (#_ftnref1) Alternative performance measures are detailed and reconciled
within note 4 of this announcement and the financial review
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