REG - Town Centre Secs. - Final Results
16/10/2024 07:00
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RNS Number : 3231I Town Centre Securities PLC 16 October 2024
16 October 2024
TOWN CENTRE SECURITIES PLC
('TCS' or the 'Company')
Final results for the year ended 30 June 2024
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 2024.
Commenting on the results, Chairman and Chief Executive Edward Ziff, said:
"We have benefitted from the last three years' disposal and asset management
programmes and reduction in borrowings, which positioned us well to contend
with the ongoing macro-economic challenges. During the year we were also able
to use our strengthened financial position to launch and complete a successful
NAV per share accretive tender offer."
"Our property rental business, car park and hotel operations continue to
deliver resilient underlying revenues and earnings against challenging
macro-economic conditions. These conditions have led to movements in the
underlying yields and a further valuation reduction of our property portfolio,
in particular with our office investments. In the last four months we have
seen inflation falling closer to the Government's target of 2 percent, and the
Bank of England have reduced interest rates by 25bps, which may lead to an
improvement in liquidity in the property investment markets and result in
valuations stabilising. However, with continued low levels of variable
interest rate bank debt, I am confident that we are in a strong position in
these uncertain times."
"Our attention is now focusing on investing in our development programme over
the coming years. However we remain ever mindful that taking advantage of
potentially accretive opportunities needs to be balanced against retaining
robust finances."
"Overall, the business has now been reset, with a more diverse portfolio of
assets, lower levels of gearing and more importantly historically low levels
of variable rate borrowings - and is now looking predominantly at bringing
forward our development pipeline. We look ahead with confidence."
Financial performance
· Net assets - resilient relative performance:
o Like for like portfolio valuation down 4.7% from June 2023:
§ Comparable with the MSCI/IPD All Property Capital Index which fell by 4.5%
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 £119.6m or 284p per share (FY23: £141.1m, 291p).
EPRA net tangible assets ('NTA')($) measure at £116.7m or 277p per share
(FY23 equivalent: £137.7m, 284p)
· Statutory results - reduced loss before tax :
o Statutory loss before tax of £8.0m (FY23: loss of £29.5m) and statutory
loss per share of 17.9p (FY23: earnings of 60.1p) due to valuation reduction
· EPRA results - improvement in underlying earnings, also benefited
from a tax credit of £1.7m in the year:
o EPRA earnings(*) before tax of £3.8m (FY23: £3.1m)
o EPRA earnings per share before tax(*) of 8.5p (FY23: 6.2p)
· Loan to Value increased in the period by 500bps to 50.8% following
successful tender offer and reduction in portfolio value:
o Total net borrowings of £137.2m (FY23: £129.9m) including £82.4m
debenture
· Shareholder returns - enhanced by tender offer:
o As previously announced, no proposed final dividend, but significant
interim dividends due to REIT requirements paid making the total dividend for
the year of 8.5p (FY23: 5.0p)
o NAV enhancing tender offer in the first half of the year (6,292,920 shares
bought back in total) following on 4,075,000 bought back in FY23, at a total
cost of £9.44m
* 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 safeguarding the business for the future
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:
· We now have a well diversified portfolio comprising: 30% invested in
retail and leisure; 29% offices; 16% car parks; 13% residential; 8%
developments; and 4% hotels
· The portfolio is also very well focused, with 88% located in Leeds
and Manchester
· The void rate across our portfolio increased to 8.1% at 30 June 2024
(5.5% at 30 June 2023)
· Strong rent collection for the period of 99.2% (FY23: 99.1%)
· Eleven new commercial lettings and lease renewals at ERV across the
portfolio in the period totaling £0.7m of rental income per annum
· Wilko (with one store in the Merrion Centre) and the Merrion
nightclub operator entered into CVAs during the period
· Rolling out our own car park management system across our car park
portfolio which will ultimately give us both operational and financial
efficiencies
Maximising available capital
A conservative capital structure, with a mix of short and long-term secure
financing, has always underpinned our approach:
· The first element of deferred consideration arising from the successful
sale of our investment in YourParkingSpace Limited was received in July 2023
(£4.4m) with the contingent consideration received in April 2024 (£2.3m)
· After the year end, in July 2024, the final element of deferred
consideration was received (£3.1m)
· Comfortable loan to value headroom over our bank facilities of
£20.4m based on 30 June 2024 borrowings and valuations
· Loan to value increased to 50.8% following revaluation decreases and
impairments in the period and a slight increase in borrowings (FY23: 45.8%)
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
enhance. Notably, in the past six months:
· In December 2023 a planning application was submitted for student
accommodation as part of the Merrion Centre's evolution. This application
incorporates a 1,110 new bed purpose built student accommodation scheme based
on the redevelopment of Wade House and the adjacent 100MC site
· Following the securing of a planning consent at Whitehall Riverside
in May 2023 (the formal decision notice was then issued in March 2024) we
continue to move forward with both build contractors/professional teams and
potential tenants for all phases of the development
Acquiring and improving investment assets to diversify our portfolio
We continue to improve investment assets, with a stable portfolio of diverse
properties:
· We increased the number of car parks operated under our CitiPark brand
to 20, with three new car park management agreements secured in the year
· Acquired a city centre car park investment property leased to NCP in
Wellington Street, Sheffield for £1.5m
Outlook - strong financial position to pursue attractive opportunities
· Focus on bringing forward our developments
· Continue to explore opportunities to acquire assets in Leeds and
Manchester; appetite to also make acquisitions in London
· Resilient trading performance has continued into the first half of
FY25:
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 £20.4m on existing revolving credit facilities
o Weighted average cost of borrowings at period end 5.3%, 87.5% at fixed
rates
· The Company's share price continues to trade at a significant
discount to its NAV (50.4% as at 14 October 2024)
-Ends-
For further information, please contact:
Town Centre Securities PLC www.tcs-plc.co.uk
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/ @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 +447827662831
Liberum www.liberum.com
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Jamie Richards / Lauren Kettle / Nikhil Varghese 020 3100 2123
Peel Hunt www.peelhunt.com
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Henry Nicholls / Capel Irwin 020 3597 8673 / 8640
Chairman and Chief Executive's Statement
Overview
Following a year of further consolidation, the business remains in a strong
position. We have addressed challenges as they have arisen, and I'd like to
express my gratitude to my colleagues for their continued contributions to our
business's success.
There were no significant changes to our Property portfolio during the year,
with the only acquisition being a car park investment in Sheffield that is
operated by NCP. Our CitiPark business continues to perform well,
notwithstanding the ongoing curtailment of the commuting week since the
pandemic. The addition of two car park management agreements in London and one
in Manchester brings the number of car parks operated under the CitiPark brand
to 20. The hotel business continues to trade very well having just had a
record year.
Having significantly reduced our borrowings and strengthened our balance sheet
through our divestment and asset management activity in the past three years,
we were able to complete a buyback of shares via a tender offer representing
approximately 13% of the issued share capital of the Company. As anticipated,
the tender offer resulted in the Company leaving the REIT regime with effect
from 30 June 2023.
Now we have successfully reset the business, our focus is to bring forward our
development pipeline of over £400m GDV and also seek out new opportunities
for value creation.
In December we submitted a planning application for a significant student
accommodation scheme at the Merrion Centre. For the first time in the centre's
60-year history, TCS is looking to introduce residential accommodation, adding
to the existing retail, leisure and office space. To address burgeoning demand
for student accommodation, TCS's planning application is designed to deliver
1,110 student bedrooms.
Following the grant of detailed planning consent at Whitehall Riverside in May
2023, we continue to make progress with professional teams and prospective
tenants for all phases of the development. Ground enabling works have started
and our readiness to commence construction will be dictated by the letting and
investment market.
Financial performance
• Our statutory loss in the year of £8.0m (2023: £29.5m loss) was
predominantly incurred as a result of valuation losses in our investment
property portfolio, with a like-for-like portfolio valuation down 4.7% from
June 2023. This compares to a decrease of 4.5% in the MSCI/IPD All Property
Capital Index over the same period, influenced by market sentiment concerning
the macro‐economic outlook adversely impacting valuation yields ‐
particularly in the office sector.
• Taking into account other comprehensive income of £0.6m, the cost
of buying in shares for cancellation of £9.4m and £4.6m in dividends paid,
net asset value per share was 284p, compared with 291p at 30 June 2023.
• Net borrowings, excluding lease liabilities, stood at £108.6m at 30
June 2024 (£101.9m at 30 June 2023), with only 12.5% of this exposed to
variable interest rates.
• EPRA earnings per share are 12.3p for the year (2023: 6.2p) - with
the recognition and subsequent movement on deferred tax assets and liabilities
accounting for 3.8p of the increase.
• 99% of all rent and service charge income invoiced in the year was
collected.
• During the year the Company received two further amounts relating to
the sale of its investment in YourParkingSpace, with a further final receipt
in July 2024. Since the July 2022 sale the Company has received total
consideration of over £18m with a further £3m received after the year end,
crystalising a profit of £18.5m in the two-year period.
Market context
We have not seen meaningful rental growth in the commercial sectors in which
we operate for a number of years, and don't anticipate this to change for the
foreseeable future. The constraints this places on income from our property
portfolio provide further validation of our strategy to have a full solution
car parking business.
In the office sector, the work from home trend in the wake of the Covid
pandemic seems to have stabilised with workers gravitating back to the office,
which although slow is to be encouraged.
Across the country, prime space for retail and leisure is generally well
occupied, although non-prime sites continue to struggle. Despite
cost-of-living pressures, consumer demand in the food and beverage sector - a
key part of our leisure portfolio - has remained buoyant. The retail sector
has bottomed out and is where we see the opportunity for value to be found.
TCS does not have any significant on-site development work underway at
present, a consequence of the high inflationary environment of the preceding
18-24 months.
Strategy
Over the last four years the Company has successfully repositioned itself.
Following a successful disposal programme, net borrowings have been reduced
from £184m in June 2020 to £108.6m, with only 12.5% of this current balance
at a variable interest rate. In this time period the percentage of the
portfolio represented by retail and leisure properties has reduced from 40% to
30%.
As a Board we continue to review the Company's strategy and have adapted this
to be more focussed on managing the current investment property portfolio,
progressing the development sites and investing in further accretive property,
technological and other business opportunities.
People and culture
I'm delighted that Jacob Ziff joined TCS in April as Associate Director of
Investment. Previously at investment brokerage Clifton Agency, Jacob brings
valuable experience and contacts, particularly within the M25. He will focus
on creating a strategy for property investment and will also support in
managing the existing TCS property portfolio.
Jeremy Collins retired as a Non-executive Director at the end of the financial
year. On behalf of the Board, I would like to thank Jeremy for his
contributions since joining the TCS Board in 2018, and wish him well for the
future.
Sustainability and communities
TCS has always had a strong commitment to philanthropy, and we are proud to
contribute to charitable and community-based programmes. Through the staff
charitable foundation we established with a portion of the proceeds from the
sale of YPS, colleagues are invited to suggest causes they want to support and
TCS will offer matched funding to selected initiatives.
Environmental sustainability is a key focus for TCS, in both our property
portfolio and our CitiPark business, and we were delighted to be recognised
with the esteemed 'Green World Ambassador Status' in the Green Apple Awards.
39% of our investment property portfolio has an EPC rating of B or higher, and
environmental considerations are central in the design of our developments at
Whitehall Riverside.
Dividend
Although the Company left the REIT regime with effect from 1 July 2023, it is
still required to pay 90% of the tax-exempt profits arising from its property
rental business during the year to 30 June 2023, with this payment to be paid
before 1 July 2024. The interim dividend of 2.5 pence per ordinary share
announced with the half year results was instead paid out as a Property Income
Distribution ('PID') rather than an Ordinary Dividend, on 14 June 2024 to
shareholders on the register on 24 May 2024. To satisfy the 90% profits
requirement, a further special interim dividend of 6 pence per ordinary share
was paid out on the same date. This is in place of a final dividend for the
year ended 30 June 2024. This brings the total dividend paid for the year
ended 30 June 2024 to 8.5p, a 70% increase on the 5p dividend paid for the
year ended 30 June 2023. For the year ending 30 June 2025 and onwards the
Company expects to return to paying regular dividends every six months, with
the next payment expected to be the interim dividend to be announced in March
2025. The Board will continue to review capital allocations to optimise
long‐term returns for shareholders, including exploring options beyond
paying regular Ordinary Dividends for returning cash to shareholders where
appropriate.
Outlook
As we look to the future, we will continue our work to optimise returns from
our property portfolio and car parking operations, and will evaluate
investments that meet our criteria.
Our strong financial footing, deep expertise and flexible approach mean we are
well placed to capitalise on suitable opportunities as they emerge.
Portfolio review
Valuation summary
The like-for-like value of our portfolio decreased by 4.7% (£12.1m) after
capital expenditure of £4.0m in the year.
Significant valuation losses have been recognised across our retail, 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 1.2 1.3 13.8 5% -5.0% 8.1% 8.8%
Merrion Centre (ex offices) 4.5 4.8 50.3 20% -10.0% 8.5% 9.1%
Offices 4.5 6.5 72.9 28% -9.7% 5.9% 8.4%
Hotels 0.9 0.9 9.9 4% 4.2% 8.4% 8.4%
Out of town retail 1.0 1.1 12.5 5% -3.8% 7.9% 8.1%
Residential 1.3 2.1 31.7 12% 1.3% 3.9% 6.3%
13.4 16.7 191.1 74% -6.7% 6.7% 8.2%
Development property 24.45 10% 13.6%
Car parks 40.48 16% -4.1%
Portfolio 256.0 100% -4.7%
Note: includes our share of Merrion House within Offices (£27.5m - see Note 8
of these financial statements) and Car Park Goodwill of £2.5m arising on
individual car park assets, but specifically excluding goodwill arising from
car park operation acquisitions. None of the above is included in the table
set out in Note 7 of this announcement.
Note: excludes IFRS 16 adjustments that relate to Right-of-Use car park assets
(£21.7m) 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 7 of this announcement.
The table below reconciles the above table to that set out in Note 7 of these
financial statements:
FY24 FY23
£m £m
Portfolio as per Note 7 247.7 254.1
50% share in Merrion House 27.5 30.7
Goodwill - Car Parks - Property specific only 2.5 3.0
Less - IFRS 16 right-of-use car parks (21.7) (23.1)
As per the above table 256.0 264.7
Sales and Purchases
During the financial year ended 30 June 2024 we sold two relatively small
properties above their 30 June 2023 book value, for gross proceeds of £0.2m.
Our continued commitment to asset recycling is clear. The table details the
£168.4m of disposals since FY17, of which 71% were retail and leisure assets.
Sales Purchases
£m % retail and leisure £m % retail and leisure
FY17 22.3 88% 4.0 46%
FY18 10.1 95% 9.0 0%
FY19 14 100% 16.0 25%
FY20 2.5 100% 1.7 100%
FY21 48 93% 0.0 0%
FY22 37.9 59% 7.0 100%
FY23 33.4 21% 18.8 0%
FY24 0.2 0% 1.5 0%
168.4 71% 58.0 25%
Retail and leisure
The Retail and Leisure market has continued to decline this year, albeit at a
slower rate than last year. We have seen this with the valuation movements on
the Merrion Centre and our out-of-town retail property.
As the online retail market grows, high street units are having to diversify
their offering to become more than just shops; some are now incorporating
experiences, entertainment and restaurants. A trend that we are looking to
replicate throughout our portfolio.
Regional offices
The office market is continuing to face significant macroeconomic pressures.
Flexible workspaces are increasingly in demand, reflecting the shift to hybrid
working since the pandemic. Co-working spaces, quality buildings and adaptable
offices are more popular, as are those in prime locations. Over the coming
years we will be investing significant capital in our existing office space as
sustainability and flexible space continue to be priorities.
Our 50% stake in Merrion House has also reduced in the year. As a relatively
long-dated and less riskier asset, the valuation of this property is
correlated more to the UK bond market rather than the underlying physical
asset. As the economy improves we expect these revaluation deficits to
partially reverse.
Residential
The residential market has continued to grow, in particular in Manchester,
however our portfolio of residential assets has only grown by 1.3% in the
year. The removal of multiple dwellings relief on stamp duty has effectively
increased the purchasers costs assumed by valuers for multiple-unit buildings
- this has affected all of our residential properties.
Car parks
During the year, the Company's freehold and long leasehold car park assets
fell in value by £1.7m, a drop of 4.1%. Occupancy levels across the portfolio
remain consistent however increased operating costs and rental charges
negatively impacted the underlying values.
Other valuation movements
The value of the Company's development sites increased by £2.8m in the year,
reflecting increases to the alternative use value for our Whitehall Road
development site in Leeds.
Divisional review - Property
Overview
Following a year of economic headwinds, we remain in a strong financial
position and continue to take a long-term approach to our portfolio.
Against a backdrop of high interest rates and uncertain market sentiment
around the economy and the timing and outcomes of the general election, the
property sector faced ongoing challenges. Although utility costs are no longer
making the headlines, for some retail and leisure tenants in particular,
energy prices reducing from peak levels came too late, with some retrenching
and reducing their portfolio and others driven out of business altogether.
This also led to some tenants looking to rebase rents.
Valuations have been suppressed, driven by changes in prime yields and a
dearth of investment transactions resulting in a lack of comparable data. Rent
collection has been excellent, excluding the impact of business failure.
Acquisitions and disposals
The reporting period was quiet in terms of portfolio changes, with our only
activity in this area an opportunistic acquisition of a car parking asset in
Sheffield, which has an incumbent operator.
We do have an appetite to acquire - signalled by Jacob Ziff joining the
business to lead on acquisitions and investment strategy - but are being
considered and cautious about where we invest.
Performance by segment
The office segment has borne the brunt of suppressed valuations, although
take-up of our assets has remained in line with long-term averages as tenants
cater for peak occupancy, even if their staff are tending to work fewer days
in the office. Our office assets in Manchester have seen high occupancy and
swift relets when vacancies have arisen. We divided the vacant space at 123
Albion Street to let to a quality tenant. In the same building, ground floor
space that was previously a retail outlet and latterly used as Job Centre
office space was re-let to two leisure operators, demonstrating the
versatility of the property.
Similarly, at the Merrion Centre, we are seeing greater demand from leisure
operators than retailers, so some outlets have changed usage. In addition to
the cross-sector impacts of inflation and interest rates, retailers have also
had to contend with a material uptick in shoplifting, putting further pressure
on operating costs. The demise of the nightclub operator as part of a wider
trend seen in this sector provides a further opportunity to explore other
options for a sizeable unit in the Merrion Centre.
Although we have a limited portfolio in the residential segment, our assets
have seen high occupancy and increasing rents as demand continues to outstrip
supply. By way of example, we are refurbishing all 20 apartments on Bath
Street, Glasgow. As we have completed floors, we have relet properties at
rates that exceed our target rental levels. Similarly, our build-to-rent site
in Manchester, comprising 91 premium, canal-side apartments is performing
well, with tenants a combination of international students and professionals.
There is an opportunity for TCS to be more active in this segment, by bringing
forward our development pipeline or through targeted acquisitions.
Our hotel operation has performed strongly with continued high occupancy,
resilient income and an increased valuation. We were pleased to let the ground
floor restaurant unit that adjoins the hotel. We are also involved in the
George Street development, applying our expertise by working with Leeds City
Council as the development manager for another hotel. We supported the council
in entering an agreement for lease with Premier Inn earlier in the autumn and
achieving a resolution to grant planning permission in November.
Development pipeline
Having received resolution to grant planning permission in May 2023, we
received the decision notice for Whitehall Riverside in March 2024. We have
been working through the detailed design work on the car park and offices with
a view to bringing these forward at the same time, and are in discussions with
several potential pre-let parties. We have also had interest in another plot
on the development, which is a hotel.
Several factors are making the viability of development appraisals for office
space more challenging currently, including high interest rates, the sentiment
on prime yields, build costs, where rent levels need to be, and concession
packages required by tenants. Over the next couple of years, we expect to see
a high margin between rents in new build and refurbished properties, and it
will be interesting to determine how important the sustainability credentials
of new build properties are to tenants and whether they are prepared to pay a
premium for these. Plans for our Whitehall Riverside development are designed
to offer best-in-class sustainability credentials, despite the additional
costs involved. As we refurbish existing properties we seek to make
environmental upgrades, although the economics and likely rent levels mean
that measures tend to be more incremental, such as adding solar and improving
thermal performance.
Our proactive approach to re-imagining space is exemplified in the proposed
Wade House and 100MC developments at the Merrion Centre, for which we
submitted planning applications in December for the repurposing of these
erstwhile office assets to create purpose-built student accommodation. We are
progressing detailed design work on Wade House, with a view to being onsite
next year, subject to funding.
We reviewed our land holdings in Manchester to assess the need to refresh the
strategic regeneration framework. As a result of the review and other
priorities, we decided to pause the refresh, although we are looking to bring
forward a residential application on Eider House.
Outlook
Our focus for the next year and beyond is to bring forward our developments,
which will also reduce our void levels. These are currently relatively high,
partly on account of the need for vacant possession to facilitate
redevelopment, as is the case for Wade House.
We will continue to explore opportunities to acquire assets in Leeds and
Manchester, and there is appetite to make acquisitions in London, where TCS
currently only has two sites. The Group is in a strong financial position to
pursue attractive opportunities as they arise, and we look ahead with
confidence.
Divisional review - CitiPark
Overview
Our CitiPark business generated revenues of £13.4m during the year (2023:
£13.1m). We have increased our portfolio without the need for significant
capital investment, continued our focus on innovation, and our enforcement
business has performed well.
Performance
Overall revenue generation has remained positive, although there are
location-specific variances. While performance in Manchester has been beyond
pre-pandemic levels, for example, some locations are seeing a more difficult
recovery trajectory. In addition to well documented, sector-wide shifts as a
Tuesday to Thursday commuting week has become standard for many people, our
branches in Watford have been impacted by the increases in rents, rates and
the closure of local businesses.
We have continued to seek capital-light portfolio growth, alternative sources
of income and other ways to strengthen the CitiPark brand and business, both
organically and inorganically. Our parking management agreement platform has
grown well, with three new branches in the last 12 months adding 1,500 spaces
to our portfolio: New Jackson in Manchester, and two in central London, at
Portman Square and the Barbican.
We are also exploring ways to capitalise our underutilised space through
alternative uses for some of our larger locations. For example, we are in
discussion with a leisure operator about using the roof space at the Merrion
Centre, which would generate welcome additional rental income.
Technology and innovation
Our CitiCharge EV charging business remains a core element of our growth
strategy. Our proprietary EV platform has been a source of revenue as well as
enhanced customer experience in terms of charging rates and reliability. As we
have grown organically through investment and upgrade programmes, some assets
have seen a significant uplift in utilisation, for example at the Merrion
Centre and Leeds Dock. Data and insights from our CitiCharge platform on
utilisation and charging rates also allow us to make more informed decisions
on the further roll-out of the technology.
Our rebranded CitiPark app performed so strongly and received such positive
feedback since its launch during the year that we decided to use it as the
basis for creating our own parking management system. In addition to being
more cost-effective than the previous licensed model, it allows us greater
flexibility and control. We are delighted with the functionality of our system
and are well underway with rolling this out across our portfolio. Having
developed constructive relationships with suppliers of cameras and other
hardware, we are now looking to offer our solutions to third parties on a
'white label' basis.
As we have evolved our branches to being barrierless for reasons of customer
experience as well as operational efficiencies and environmental benefits, we
have also seen stronger synergies with our enforcement business.
Outlook
We are confident in the outlook and have a strong team in place to execute our
strategy. We see further opportunities to progress our capital-light model,
with sound growth prospects in both existing and new parking management
partnerships. We also see scope to grow our enforcement business, both
organically and inorganically. There will be challenges, some of which are of
our own making - as we look to develop a new flagship multi-storey car park on
our Whitehall Road site. EV and battery storage will be a focus for us,
particularly with central and local government encouraging more sustainable
methods of transport in city centres. Our EV charging infrastructure, green
season tickets and tariffs are further encouraging the uptake of electric
vehicles.
FINANCIAL REVIEW
"The financial performance of the Company during the year ended 30 June 2024
shows underlying EPRA profits (after adjusting for the effects of taxation and
deferred tax) 25% ahead of the previous period, however the statutory profit
of the year is again affected by both reductions in investment property values
and impairments to the group car parking portfolio, as real estate investor
and market sentiment across these segments remain subdued"
The statutory loss for the year was £8.0m, compared to a loss of £29.5m in
the previous year.
EPRA Earnings* were a profit of £5.5m in the year, compared to a profit of
£3.1m in the prior year. The EPRA profit for the current year included a net
taxation credit of £1.7m; excluding this the EPRA profit of the Company would
have been £3.8m, representing a 25% improvement in the underlying performance
of the Company .
The Board is not recommending the payment of a final dividend for the year,
giving a full year dividend of 8.5p, which is 70% higher than the previous
year.
During the year the Company received both the first element of deferred
consideration and the contingent consideration from the sale of it's
investment in YPS, generating further proceeds of £6.7m. In addition the
Company increased net borrowings during the year by £6.8m.
The funds generated have been deployed in a number of ways:
· £1.5m acquisition of a car park investment property in Sheffield
· £2.5m of investment in existing properties and our development
portfolio
· £9.4m to fund a tender offer in the first five months of the year
· £4.2m as dividends paid to shareholders in the year
Net borrowings has increased from £101.9m to £108.6m in the year. Net
borrowings represent total financial borrowings of £138.6m less lease
liabilities of £28.6m and net cash of £1.4m.
* Alternative performance measures are detailed, defined and reconciled within
Notes 11 and 21 of these financial statements
Income statement
EPRA Earnings* for the year ended 30 June 2024 were £5.7m.
£000s FY24 FY23 YOY
Gross Revenue 31,968 30,363 5.3%
Impairment of debtors provision movement 0 0 -
Property Expenses (15,803) (15,551) 1.6%
Net Revenue 16,165 14,812 9.1%
Other Income / JV Profit 1,990 1,764 12.8%
Other Expenses 0 0 -
Administrative Expenses (7,293) (6,780) 7.6%
Operating Profit 10,862 9,796 10.9%
Net Finance Costs (7,043) (6,733) 4.6%
Taxation 1,685 0 -
EPRA Earnings 5,504 3,063 79.7%
Segmental FY24 FY23 YOY
Property
Net Revenue 9,886 9,435 4.8%
Operating Profit 6,264 5,911 6.0%
CitiPark
Net Revenue 5,641 4,891 15.3%
Operating Profit 3,919 3,360 16.6%
ibis Styles Hotel
Gross Revenue 638 486 31.3%
Operating Profit 638 486 31.3%
Investments
Other income and operating profit 41 39 5.1%
Statutory profit
On a statutory basis the reported loss for the year was £8.0m.
The statutory profit reflects the EPRA Earnings* of £5.5m less £14.2m of
non-cash valuation and impairment movements less the profit on disposal
recognised of £0.2m on the two small investment properties and investments
sold in the year plus £0.9m of deferred taxation on valuation movements in
the year.
Gross revenue
Gross revenue was up £1.6m or 5.3% year-on-year, with key drivers being:
· Property revenue during the year had a positive impact of £1.1m on the
total Gross Revenue. There were no significant disposals during the year with
the Company benefiting from a full year of Burlington House revenue following
the acquisition of the remaining 50% in March 2023.
· CitiPark revenues have continued to grow in the year, with gross revenue
across the portfolio increasing by 2% from £13.1m to £13.4m.
· Income for the ibis Styles hotel, has also continued to grow with revenue
of £3.3m in the year, up £0.2m from £3.1m last year.
Other / JV income
Total Other / JV income was up 12.8% or £0.2m year-on-year, the majority of
the difference relates to development manager fees receivable in the current
year on a contract completed in the year.
Administrative expenses
Administrative costs were £0.5m or 7.6% higher year-on-year, with increased
staff costs and computer expenses the key drivers to this increase.
Finance costs
Finance costs were 4.6% or £0.3m higher year-on-year as a result of the
increase in the Company's bank borrowings which were primarily used to fund
the Company's buyback of shares in November 2023.
* Alternative performance measures are detailed, defined and reconciled within
Note 5 below in this announcement
Balance sheet
The below table shows the year-end balance sheet as reported.
£m FY24 FY23 vs FY23
Freehold and Right to Use Investment Properties 156.5 162.9 (3.9%)
Development Properties 24.5 20.9 17.2%
Car Park related Assets, Goodwill and Investments* 62.9 74.0 (15.0%)
Hotel Operations 9.9 9.5 4.2%
253.8 267.3 (5.1%)
Joint Ventures 4.8 7.1 (32.4%)
Listed Investments 3.3 4.1 (19.5%)
Other Non-Current Assets 1.8 1.7 5.9%
Total Non-Current Assets incl.Available for Sale 263.7 280.2 (5.9%)
Net Borrowings (137.1) (129.9) (5.5%)
Deferred tax 2.4 0.0 -
Other Assets/(Liabilities) (9.4) (9.2) (2.2%)
Statutory NAV 119.6 141.1 (15.2%)
Statutory NAV per Share 284p 291p (2.6%)
EPRA Net Tangible Assets (NTA) 116.7 137.7 (15.3%)
EPRA NTA per Share 277p 284p (2.6%)
Non-current assets:
Our total non-current assets (including investments in JVs) of £263.7m (2023:
£280.2m) have reduced by £16.5m during the year, this movement is made up of
the following:
· Disposals, including YPS receipts of £(7.0m)
· Depreciation charge of £(2.1m)
· Capital expenditure of £6.1m
· Revaluation uplift/reversal of impairments totalling £(14.0m)
· Operating profits generated and retained in JV entities and other
movements of £0.5m
Borrowings:
During the year our Net Borrowings have increased by £8.0m, from £129.9m as
at 30 June 2023 to £137.1m at the year end. This increase was primarily to
fund the tender offer completed by the Company in November 2023.
We have extended our NatWest revolving credit facility by one year, it is now
due to expire in September 2025, although we have the ability to extend this
facility for a further year, subject to bank consent. Our other two revolving
credit facilities were refinanced last year with expiry's of June 2026.
Loan-to-value has been increased to 50.8%, up from 45.8% a year ago, due to
both the increase in borrowings and decrease in property values during the
year. 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.
FY24 FY23
£m FY24 FY23 p per share p per share
IFRS reported NAV 119.6 141.1 284 291
Purchasers Costs (1) 18.4 19.3
EPRA Net Reinstatement Value 138.0 160.4 327 331
Remove Purchasers Costs (18.4) (19.3)
Remove Goodwill (2) (2.9) (3.4)
EPRA Net Tangible Assets 116.7 137.7 277 284
Fair value of fixed interest rate debt (3) 11.9 14.2
EPRA Net Disposal Value 128.6 151.9 305 313
(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 and the single asset facility
Future financial considerations
Future P&L pressure
The wider economy and underlying property values are still struggling, with
uncertainty around office based working and shopping habits. In terms of our
own specific business we have seen recoveries in all segments, although there
is still a risk if these recoveries are stalled.
This has resulted in the earnings of the business growing in the year and we
increased the level of the dividend paid.
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 2024 was £20.4m (20223:
£34.0m), 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 26.0% 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 14.7% (2023: minus 3.2%) was calculated as the
total of dividends paid during the financial year of 8.5p (2023: 5.0p) and the
movement in the share price between 30 June 2023 (125.0p) and 30 June 2024
(133.5p), assuming reinvestment of dividends. This compares with the FTSE All
Share REIT index at 18.2% (2023: minus 22.1%) 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 14.7% (2.3%) 1.2%
FTSE All Share REIT index 18.2% 1.9% 2.6%
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 1.7%
(2023: minus 6.0%). This compared favourably to the MSCI/IPD market return of
0.1%.
Consolidated income statement
for the year ended 30 June 2024
2024 2023
Notes £000 £000
Gross revenue 1 28,983 27,631
Service charge income 1 2,985 2,732
Gross revenue 1 31,968 30,363
Service charge expenses 1 (3,982) (3,991)
Property expenses 1 (11,821) (11,560)
Net revenue 16,165 14,812
Administrative expenses 2 (7,293) (6,780)
Other income 3 965 880
Valuation movement on investment properties 7 (7,625) (21,033)
Impairment of car parking assets 7 (3,259) (10,467)
Impairment of goodwill (577) (991)
Loss on disposal of investments (191) (777)
Valuation movement on investments 9 408 1,162
Profit on disposal of investment properties 27 4,123
Share of post-tax losses from joint ventures 8 (2,175) (4,066)
Operating loss (3,555) (23,137)
Finance costs (7,209) (6,948)
Finance income 166 594
Loss before taxation (10,598) (29,491)
Taxation 4 2,588 -
Loss for the year attributable to owners of the Parent (8,010) (29,491)
Earnings per share
Basic and diluted 5 (17.9p) (60.1p)
EPRA (non-GAAP measure) 5 12.3p 6.2p
Dividends per share
Paid during the year 6 11.0p 5.0p
Proposed 6 - 2.5p
Consolidated statement of comprehensive income
for the year ended 30 June 2024
2024 2023
£000 £000
Loss for the year (8,010) (29,491)
Items that will not be subsequently reclassified to profit or loss
Revaluation gains on car parking assets 7 994 929
Revaluation gains on hotel assets 7 642 642
Revaluation (losses)/gains on other investments 9 (763) 16
Deferred tax on freehold car park valuation gains (236) -
Total other comprehensive income 637 1,587
Total comprehensive loss for the year (7,373) (27,904)
All profit and total comprehensive income for the year is attributable to
owners of the Parent. The Notes following are an integral part of these
Consolidated Financial Statements.
Consolidated balance sheet
as at 30 June 2024
2024 2023
Notes £000 £000
Non-current assets
Property rental
Investment properties 7 180,977 183,801
Investments in joint ventures 8 4,752 7,123
185,729 190,924
Car park activities
Freehold and leasehold properties 7 56,823 60,791
Goodwill and intangible assets 2,892 3,674
59,715 64,465
Hotel operations
Freehold and leasehold properties 7 9,900 9,500
9,900 9,500
Fixtures, equipment and motor vehicles 7 1,446 1,269
Investments 9 3,965 7,503
Deferred tax assets 10 2,352 -
Total non-current assets 263,107 273,661
Current assets
Trade and other receivables 3,996 3,264
Cash and cash equivalents 22,152 23,320
Investments 9 3,177 6,436
Total current assets 29,325 33,020
Total assets 292,432 306,681
Current liabilities
Trade and other payables (13,425) (12,387)
Bank overdrafts (20,760) (21,700)
Financial liabilities (1,768) (4,665)
Total current liabilities (35,953) (38,752)
Non-current liabilities
Financial liabilities (136,842) (126,841)
Total non-current liabilities (136,842) (126,841)
Total liabilities (172,795) (165,593)
Net assets 119,637 141,088
Equity attributable to the owners of the Parent
Called up share capital 11 10,540 12,113
Share premium account 200 200
Capital redemption reserve 3,309 1,736
Revaluation reserve 4,184 2,784
Retained earnings 101,404 124,255
Total equity 119,637 141,088
Net asset value per share 13 284p 291p
Company number: 00623364
The financial statements were approved by the Board of Directors on 15 October
2024 and signed on its behalf by
E M Ziff Chairman and Chief
Executive
Consolidated statement of Changes in Equity
for the year ended 30 June 2024
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 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 income 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
Comprehensive income for the year
Loss for the year - - - - (8,010) (8,010)
Other comprehensive income - - - 1,400 (763) 637
Total comprehensive loss for the year - - - 1,400 (8,773) (7,373)
Contributions by and distributions to owners
Arising on purchase and cancellation of own shares (1,573) - 1,573 - (9,440) (9,440)
Final dividend relating to the year ended 30 June 2023 - - - - (1,054) (1,054)
Interim dividend relating to the year ended 30 June 2024 - - - - (3,584) (3,584)
Balance at 30 June 2024 10,540 200 3,309 4,184 101,404 119,637
Consolidated cash flow statement
for the year ended 30 June 2024
2024
2023
Notes £000 £000 £000 £000
Cash flows from operating activities
Cash generated from operations 12 12,594 13,769
Interest received 8 415
Interest paid (6,001) (6,149)
Net cash generated from operating activities 6,601 8,035
Cash flows from investing activities
Purchase and construction of investment properties (1,544) (7,526)
Refurbishment of investment, freehold and leasehold properties (2,481) (1,145)
Purchases of fixtures, equipment and motor vehicles (525) (576)
Proceeds from sale of investment properties 187 51,723
Proceeds from sale of investments 6,658 11,195
Investments in joint ventures - (3,500)
Distributions received from joint ventures 196 -
Purchase of investments (250) -
Purchase of subsidiary, net of cash acquired - 887
Net cash generated from investing activities 2,241 51,058
Cash flows from financing activities
Proceeds from non-current borrowings 9,750 16,000
Repayment of non-current borrowings (3,087) (60,241)
Arrangement fees paid (419) -
Principal element of lease payments (1,665) (1,657)
Dividends paid to shareholders (4,209) (2,423)
Purchase of own shares (9,440) (7,888)
Net cash used in financing activities (9,070) (56,209)
Net (decrease)/increase in cash and cash equivalents (228) 2,884
Cash and cash equivalents at beginning of the year 1,620 (1,264)
Cash and cash equivalents at end of the year 1,392 1,620
Cash and cash equivalents at the year end are comprised of the following:
Cash balances 22,152 23,320
Overdrawn balances (20,760) (21,700)
1,392 1,620
The Consolidated Cash Flow Statement should be read in conjunction with Note
12.
Audited preliminary results announcements
The financial information for the year ended 30 June 2024 and the year ended
30 June 2023 does not constitute the company's statutory accounts for those
years.
Statutory accounts for the year ended 30 June 2023 have been delivered to the
Registrar of Companies.
The statutory accounts for the year ended 30 June 2024 will be delivered to
the Registrar of Companies following the Company's Annual General Meeting.
The auditors' reports on the accounts for 30 June 2024 and 30 June 2023 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 2024 2023
£000 £000
Property rental 215,062 212,249
Car park activities 60,328 64,993
Hotel operations 9,900 9,500
Investments 7,142 19,939
292,432 306,681
(B) Segmental results
2024 2023
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) 12,314 13,361 3,308 - 28,983 11,445 13,066 3,120 - 27,631
Service charge income 2,985 - - - 2,985 2,732 - - - 2,732
Gross revenue 15,299 13,361 3,308 - 31,968 14,177 13,066 3,120 - 30,363
Service charge expenses (3,982) - - - (3,982) (3,991) - - - (3,991)
Property expenses (1,431) (7,720) (2,670) - (11,821) (751) (8,175) (2,634) - (11,560)
Net revenue 9,886 5,641 638 - 16,165 9,435 4,891 486 - 14,812
Administrative expenses (5,571) (1,722) - - (7,293) (5,242) (1,538) - - (6,780)
Other income 924 - - 41 965 834 7 - 39 880
Share of post-tax profits from joint ventures 1,025 - - - 1,025 884 - - - 884
Operating profit before valuation movements 6,264 3,919 638 41 10,862 5,911 3,360 486 39 9,796
Valuation movement on investment properties (7,625) - - - (7,625) (21,033) - - - (21,033)
Impairment of car parking assets - (3,259) - - (3,259) - (10,467) - - (10,467)
Impairment of goodwill - (577) - - (577) - (991) - - (991)
Loss on disposal of investments - - - (191) (191) - - - (777) (777)
Valuation movement on investments - - - 408 408 - - - 1,162 1,162
Profit on disposal of investment properties 27 - - - 27 4,123 - - - 4,123
Valuation movement on joint venture properties (3,200) - - - (3,200) (4,950) - - - (4,950)
Operating (loss)/profit (4,534) 83 638 258 (3,555) (15,949) (8,098) 486 424 (23,137)
Finance costs (7,209) (6,948)
Finance income 166 594
Loss before taxation (10,598) (29,491)
Taxation 2,588 -
Loss for the year (8,010) (29,491)
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 2024,
arising from car park operations, was £1,854,000. After allowing for an
allocation of administrative expenses, the operating profit at these sites was
£1,221,000.
Revenue received within the car park and hotel segments as well as other
income in the Property segment 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
2024 2023
£000 £000
Employee benefits 4,457 4,344
Depreciation 168 124
Charitable donations 77 60
Other 2,591 2,252
7,293 6,780
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
2024 2023
Other income £000 £000
Commission received 169 154
Dividends received 41 39
Service charge management fees 258 260
Development management fees 158 -
Dilapidations receipts and income relating to surrender premiums 267 312
Other 72 115
965 880
4. Taxation
2024 2023
£000 £000
Current
Current year - -
Adjustments in respect of prior years - -
- -
Deferred tax
Recognition of previously unrecognised trading losses (2,888) -
Utilisation of trading losses 1,203 -
Origination and reversal of timing differences (903) -
Adjustments in respect of prior periods - -
(2,588) -
(2,588) -
Taxation for the year is lower (2023: lower) than the standard rate of
corporation tax in the United Kingdom of 25% (2023: 19%). The differences are
explained below:
2024 2023
£000 £000
Loss before taxation (10,598) (29,491)
Loss on ordinary activities multiplied by rate of corporation tax in the (2,649) (5,603)
United Kingdom of 25% (2023: 19%)
Effects of:
- Valuation movements on which deferred tax is not recognised 2,701 -
- Recognition of carried forward trading losses (2,888) -
- Expenses not deductible for tax purposes 248 -
- United Kingdom REIT tax exemption on net income before revaluations - (582)
- United Kingdom REIT tax exemption on revaluations - 6,185
Total taxation credit (2,588) -
The Company left the REIT regime with effect from 1 July 2023, therefore the
profits of the Company are now subject to corporation tax.
5. 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 44,862,101
(2023: 49,075,785).
2024 2023
Earnings Earnings
Earnings per share Earnings per share
£000 p £000 p
Loss for the year and earnings per share (8,010) (17.9) (29,491) (60.1)
Valuation movement on investment properties 7,625 17.0 21,033 42.9
Deferred tax on valuation movements (903) (2.0) - -
Impairment of car parking assets 3,259 7.3 10,467 21.3
Impairment of goodwill 577 1.3 991 2.0
Valuation movement on properties held in joint ventures 3,200 7.2 4,950 10.1
Profit on disposal of investment and development properties (27) (0.1) (4,123) (8.4)
Loss on disposal of investments 191 0.4 777 1.6
Valuation movement on investments (408) (0.9) (1,162) (2.4)
Gain on repurchase of debenture stock - - (379) (0.8)
EPRA earnings and earnings per share 5,504 12.3 3,063 6.2
EPRA earnings for the year ended 30 June 2024 includes a tax credit
£2,888,000 relating to the initial recognition of a deferred tax asset for
historical trading losses.
There is no difference between basic and diluted earnings per share.
There is no difference between basic and diluted EPRA earnings per share.
6. Dividends
2024 2023
£000 £000
2022 final paid: 2.5p per share - 1,212
2023 interim paid: 2.5p per share - 1,212
2023 final paid: 2.5p per share 1,054 -
2024 interim paid: 8.5p per share 3,584 -
4,638 2,424
An interim dividend in respect of the year ended 30 June 2024 of 8.5p per
share was paid to shareholders on 16 June 2023. This dividend was paid
entirely as a Property Income Distribution (PID).
No final dividend is proposed in respect of the year ended 30 June 2024.
7. Non-current assets
(A) Investment properties
Freehold Right-of-use asset Development Total
£000 £000 £000 £000
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
Additions at cost - 2,860 - 2,860
Other capital expenditure 1,716 - 765 2,481
Disposals (160) - - (160)
Movement in tenant lease incentives (380) - - (380)
Valuation movement (10,466) 6 2,835 (7,625)
Valuation at 30 June 2024 151,410 5,116 24,451 180,977
At 30 June 2024, investment property valued at £175,810,000 (2023:
£181,340,000) was held as security against the Group's borrowings.
During the year the Group acquired an investment property for a cash
consideration of £1,544,000 and recognised an additional IFRS16 right-of-use
asset of £1,316,000.
During the prior 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 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
IFRS 16 adjustment - (95) (95)
Depreciation (272) (1,336) (1,608)
Valuation movement recognised in Other Comprehensive Income 994 - 994
Reversal of impairment/(impairment) 768 (4,027) (3,259)
Valuation at 30 June 2024 26,600 30,223 56,823
The historical cost of freehold properties and Right-of-use assets relating to
car park activities is £30,153,000 (2023: £30,153,000).
At 30 June 2024, freehold properties and Right-of-use assets relating to car
park activities, held as security against the Group's borrowings are held at
£35,450,000 (2023: £35,610,000).
(C) Freehold and leasehold properties - hotel operations
Freehold
£000
Valuation at 30 June 2023 9,500
Depreciation (242)
Valuation movement 642
Valuation at 30 June 2024 9,900
At 30 June 2024, freehold and leasehold property relating to hotel operations
valued at £9,900,000 (2023: £9,500,000) 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
2024 in the table below.
Passing rent ERV Value Initial yield Reversionary yield
£000 £000 £000 % %
Retail and Leisure 1,178 1,282 13,810 8.1% 8.8%
Merrion Centre (excluding offices) 4,514 4,815 50,254 8.5% 9.1%
Offices 2,688 4,845 45,376 5.6% 10.1%
Hotels 875 875 9,900 8.4% 8.4%
Out of town retail 1,041 1,070 12,500 7.9% 8.1%
Residential 1,319 2,108 31,720 3.9% 6.3%
11,615 14,995 163,560 6.7% 8.7%
Development property 24,451
Car parks 38,017
IFRS 16 Adjustment - Right-of-use assets held within car park activities 20,356
IFRS 16 Adjustment - Right-of-use assets held within investment property 1,316
247,700
Car parks above include £1.5m of a car park categorised as an investment
property.
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 car park activities 23,147
254,092
Investment properties (freehold and Right-of-use), freehold properties (PPE)
and hotel operations.
The effect on the total valuation (excluding development property and car
parks) of £163.6m 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 5.7%
- £192.2m, Valuation at 7.7% - £142.4m.
Valuation in the Consolidated Financial Statements at a reversionary yield of
7.7% - £184.9m, Valuation at 9.7% - £146.6m.
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 £26.6m in applying a different yield/discount rate (valuation based on
6.6%) and a different assumed rental value/net income (valuation based on
£1.9m) would be as follows:
Valuation in the Consolidated Financial Statements based on a 1% decrease in
the yield/discount rate - £31.3m, 1% increase in the yield/discount rate -
£23.1m
Valuation in the Consolidated Financial Statements based on a 5% increase in
the assumed rental value/net income - £27.9m, 5% decrease in the assumed
rental value/net income - £25.3m
Right-of-use car park activities
The effect on the total valuation of the Group's Right-of-use car park
properties of £30.2m in applying a different discount rate (valuation based
on 10.7%) and a different assumed net income (valuation based on £3.2m) would
be as follows:
Valuation in the Consolidated Financial Statements based on a discount rate of
9.7% - £32.3m, Valuation at 11.7% - £28.0m
Valuation in the Consolidated Financial Statements assuming net revenue 10%
above anticipated - £32.6m, Valuation at 10% below anticipated - £27.9m.
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 88,940 19,150 9,900 117,990
Externally valued by Jones Lang LaSalle 90,670 7,450 - 98,120
Investment properties valued by the Directors 51 - - 51
Properties held at valuation 179,661 26,600 9,900 216,161
IFRS 16 Right-of-use assets held at depreciated cost 1,316 30,223 - 31,539
180,977 56,823 9,900 247,700
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 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
At 1 July 2023 5,570 4,301
Additions 525 -
Depreciation - 348
At 30 June 2024 6,095 4,649
Net book value at 30 June 2024 1,446
8. Investments in joint ventures
2024 2023
£000 £000
At the start of the year 7,123 18,016
Investments in joint ventures - 3,500
Loan interest - 245
Valuation movement on investment properties (3,200) (4,950)
Share of post-tax profits from joint ventures before valuation movements 1,025 884
Distributions (196) -
Amounts eliminated on consolidation of subsidiary - (10,572)
At the end of the year 4,752 7,123
The full amount of investments in joint ventures relates to equity
investments.
On 14 April 2023, the Group acquired the entire share capital of Belgravia
Living Group Limited and therefore no longer accounts for this as a joint
venture. As a result of this acquisition, Belgravia Living Group Limited
became a wholly owned subsidiary of the Company and the investments made are
eliminated on consolidation. 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:
2024 2023
£000 £000
Non-current assets 55,050 61,450
Cash and cash equivalents 602 767
Debtors and prepayments -
Trade and other payables (594) (700)
Current financial liabilities (1,777) (1,717)
Non-current financial liabilities (43,776) (45,554)
Net assets 9,505 14,246
The losses of Merrion House LLP for the current and previous year are as
stated below:
2024 2023
£000 £000
Revenue 3,674 3,460
Expenses (13) (23)
Finance costs (1,611) (1,669)
Valuation movement on investment properties (6,400) (10,400)
Net loss (4,350) (8,632)
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 (2023: £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
Bay Sentry Limited 50 Software Development
9. Investments
2024 2023
£000 £000
Current Assets
Loan notes - Deferred Consideration 3,177 4,493
Loan notes - Contingent Consideration - 1,943
3,177 6,436
Non-Current Assets
Listed investments 3,305 4,068
Non-Listed investments 660 410
Loan notes - Deferred Consideration - 3,025
3,965 7,503
7,142 13,939
Listed investments
2024 2023
£000 £000
At start of the year 4,068 4,096
Disposals - (44)
(Decrease)/increase in value of investments (763) 16
At the end of the year 3,305 4,068
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 (2023: £875,000).
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
2024 2023
£000 £000
At the start of the year 410 410
Additions 250 -
At the end of the year 660 410
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
2024 2023
£000 £000
Current assets
At the start of the year 4,493 -
Transferred from non- current assets 3,025 -
Loan notes issued to the Company in the period - 4,287
Loan interest 158 206
Expenses (122) -
Amounts received at maturity (4,377) -
3,177 4,493
Non-Current assets
At the start of the year 3,025 -
Loan notes issued to the Company in the period - 2,888
Loan interest - 137
Transferred to current assets (3,025) -
- 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 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
2024 2023
£000 £000
At the start of the year 1,943 -
Loan notes issued to the Company in the period - 743
Unwind of discount applied to contingent consideration 32 38
Valuation movement 408 1,162
Expenses (102) -
Amounts received at maturity (2,281) -
- 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 did not have access to regular YPS management information,
however it does receive ad hoc updates. The valuation of the contingent
consideration at 30 June 2023 was based on the performance of YPS for the
period ended 30 June 2023 and assumed no further growth in the remaining four
months of the earnout period.
At 30 June 2023 these loan note assets were 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.
10. Deferred tax assets and liabilities
2024 2023
£000 £000
Assets
Carried forward losses 1,685 -
IFRS 16 Right-of-use Assets 7,150 -
8,835 -
Liabilities
IFRS 16 lease liabilities 5,418 -
Investment property and freehold car park revaluation gains 1,065 -
6,483 -
Net deferred tax asset 2,352 -
The Company left the REIT regime with effect from 1 July 2023, therefore the
profits of the Company are now subject to corporation tax. This has resulted
in the recognition of a deferred tax asset, primarily relating to trading
losses from previous periods that are available to offset taxation on future
profits. In assessing the recognition of a deferred tax asset with respect to
losses, management has reviewed the type of losses, the period in which they
arose and then the future profitability of the group or, where relevant,
individual corporate entities.
The Group also has various non-trading losses and surplus management expenses
from previous periods, however the associated deferred tax assets have not
been recognised as there is insufficient evidence to show that their future
utilization is probable.. The total value of losses not included within the
deferred tax asset is £1,328,000.
In addition the Group has uncrystallized capital losses of £24,282,000 on
investment property and car park valuation losses that have not been
recognised.
The total net deferred tax balance as at 30 June 2024 includes the credit to
the income statement of £2,588,000 less deferred tax liabilities arising in
the period on revaluation gains recognised in the consolidated statement of
comprehensive income of £236,000 (30 June 2023: £nil).
11. Called up share capital
Authorised
The authorised share capital of the company is 164,879,000 (2023: 164,879,000)
Ordinary Shares of 25p each. The nominal value of authorised share capital is
£41,219,750 (2023: £41,219,750).
Issued and fully paid up
Number Nominal value
of shares
000 £000
At 30 June 2023 48,456 12,113
Purchase and cancellation of own shares (6,293) (1,573)
At 30 June 2024 42,163 10,540
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 6,324,402 Ordinary Shares.
12. Cash flows from operating activities
2024 2023
£000 £000
Loss before tax (10,598) (29,491)
Adjustments for:
Depreciation 2,199 2,333
Amortisation 205 247
Profit on disposal of fixed assets - (48)
Profit on disposal of investment properties (27) (4,123)
Loss on sale of investments 191 795
Movement in valuation of investments (408) (1,162)
Finance costs 7,209 6,948
Finance income (166) (594)
Share of post tax losses from joint ventures 2,175 4,066
Movement in valuation of investment properties 7,625 21,033
Movement in lease incentives 380 170
Impairment of car parking assets 3,259 10,467
Impairment of goodwill 577 991
Increase in receivables (731) (218)
Increase in payables 704 2,355
Cash generated from operations 12,594 13,769
13. Net asset value per share
The Basic and diluted net asset values are the same, as set out in the table
below.
2024 2023
£000 £000
Net assets at 30 June 119,637 141,088
Shares in issue (000) 42,163 48,456
Basic and diluted net asset value per share 284p 291p
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