REG - Town Centre Secs. - Half year results
Wednesday 24 February 2021
TOWN CENTRE SECURITIES PLC
('TCS' or the 'Company')
Half year results for the six months ended 31 December 2020
Significant progress made in resetting and reinvigorating the business for the future
Further reduction of retail assets as a proportion of the portfolio
Town Centre Securities PLC, the Leeds, Manchester, Scotland, and London property investment, development and car parking company, today announces its results for the six months ended 31 December 2020.
Financial performance
· Net assets:
o Resilient like for like portfolio valuation down only 0.8% from June 2020
o Statutory net assets of £152.0m or 286p per share down 2.3% (FY20: £155.5m, 292p). EPRA net tangible assets ('NTA') measure introduced at £147.8m or 278p per share (FY20 equivalent: 285p)
· Profits and earnings per share:
o EPRA Earnings before tax of £0.2m (HY20: £4.1m), driven by an estimated £3.2m COVID-19 impact
o EPRA earnings per share of 0.4p (HY20: 7.7p)
o Statutory loss before tax of £3.5m (HY20: loss of £0.2m) and statutory loss per share of 6.6p (HY20: loss of 0.4p), including the unrealised £2.5m portfolio valuation and impairment movement (FY20: £26.4m)
· Capital and financing:
o £41.2m of targeted retail asset sales during the first half has reduced absolute borrowing levels 20% to £147.6m at December 2020 (pre IFRS16 measure) (30 June 2020 £183.6m)
o Loan to value of 48.6% as at 31 December 2020 (FY20: 53.2%)
o Headroom of £12.8m at half-year end based on December 2020 borrowings and valuations (FY20: £14.8m)
· Dividends:
o Interim dividend of 1.75p (HY20: 3.25p)
o Uncovered dividend reflects the anticipated quick recovery of our car parks and hotel once they are able to operate normally and also the strengthening of the balance sheet following the asset sales completed in the half-year
COVID-19 impact and response
Impact
· Estimated £3.2m impact of COVID-19 in the first half of the year driven by:
o £2.3m CitiPark impact due to lost car parking income and fixed costs
o £0.5m impact in the property business, primarily from bad debt
o £0.4m ibis Styles hotel impact driven by reduced bookings
· Rent receipts remain robust; as at 22 February of the £5.5m rent, service charge and VAT billed for the latest English and Scottish quarter £4.3m or 78% has been paid, with a further £0.5m or 9% agreed to be deferred, totalling 87%. This is consistent with the 89% for the previous billings since March 2020
Response and mitigating actions including during current lockdown
· Significant actions taken to mitigate the impact included:
o Closure of two car parks during the current lockdown to minimise costs
o Furloughing CitiPark operational branch staff, and some head office colleagues
o TCS board took a 20% salary and fees reduction for six months from April 2020 to September 2020
· Our long history of engagement with tenants has ensured equitable solutions have been reached in most instances, and we are continuing to support tenants during the latest lockdown
Good progress made on resetting and reinvigorating the business for the future
We have made meaningful progress in resetting and reinvigorating the business in the past six months, in particular in the disposal and debt reduction programme. Progress delivered under the four key strategic initiatives is as follows:
Actively managing our assets
· The proportion of retail and leisure assets in the portfolio has reduced to 39% from 47% in June 2020, and down from 70% in 2016. Pure retail now represents only 26% of the total portfolio and of that, 60% is in the resilient Merrion Estate
· Capital value of Ducie House has increased reflecting the completion of the £2.1m refurbishment scheme
· No exposure to any of the large department store failures, and whilst we saw five tenants either entering administration or CVAs in the first half, the exposure is modest representing circa 2% of income and we remain confident in maintaining occupation in the majority of the space
Maximising available capital
· £41.2m of retail asset sales were completed in the six months, marginally below June 2020 valuations
· Net debt has consequently reduced 20% to £147.6m (excluding IFRS 16 adjustments), with LTV reducing to 48.6% (FY20: 53.2%)
· Net profit after interest will be reduced by £1.3m annually as a result of the loss of related rent
· Following the disposals, we have bought back for cancellation £6.5m of our £106m 2031 5.375% debenture, helping reduce debt and average interest costs
Acquiring and improving investment assets to diversify our portfolio
· Completed the £4m redevelopment of the office space at 123 Albion Street, Leeds and secured a new 12-year lease with StepChange Debt Charity for the remaining 46,000 sq ft of office space
· We now have the opportunity to redevelop and modernise our Wade House office (having been vacated by StepChange Debt Charity), the third of our four Merrion Estate offices, a potentially valuable opportunity given the level of new development in the surrounding area
Investing in our development pipeline
· Our development pipeline, with an estimated GDV of over £600m, is a valuable and strategic point of difference for TCS which we continue to progress and improve
· In January 2021, we completed works to implement and secure the planning consent for our next PRS development, Eider House, in Manchester's Piccadilly Basin
Commenting on the results, Chairman and Chief Executive, Edward Ziff, said:
"The past six months have been critical in the resetting and reinvigorating of the business, and I am particularly pleased with both the progress of our disposal programme, and the resilience of the continuing portfolio. The reduction in absolute borrowing levels gives both additional security and, as the disposal programme continues, the ability to reinvest in the long-term growth opportunities in our development pipeline.
"COVID-19 continues to have a material impact on profitability. Although significant government support has been given to retail and leisure businesses, as a car park operator, we have continued to pay car park rent to our local government landlords, as well as business rates which to us seems extraordinarily one sided. I am confident in the ability of our CitiPark business to bounce back strongly once the current lockdown comes to an end.
"Overall, we remain committed to 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."
-Ends-
For further information, please contact:
Town Centre Securities PLC www.tcs-plc.co.uk / @TCS PLC
Edward Ziff, Chairman and Chief Executive 0113 222 1234
Mark Dilley, Group Finance Director
MHP Communications 020 3128 8572
Reg Hoare / Alistair de Kare-Silver / Florence Mayo tcs@mhpc.com
Chairman and Chief Executive's Statement
Resetting and reinvigorating the business for the future
The past six months have continued to be challenging for the business as a result of the ongoing COVID-19 disruption. However, we remain convinced by our strategic direction, and have continued to take action to reset and reinvigorate the business for the future. Our aim is to create a business that:
- Has lower levels of absolute debt and leverage
- Is diversified with a much-reduced level of retail property
- Is diversified with a capital light, profitable car park business
- Has rebased and has significant growth opportunities as a result of our significant development pipeline and asset management opportunities
The first half of this financial year has seen us particularly focus on the first two of these areas, through both our asset sales activity and redevelopment of 123 Albion Street and Ducie House. In terms of the third and fourth items, we expect the car park business to recover strongly post COVID-19; and our development pipeline has been a long-standing and consistent point of strength and difference for the Company.
We firmly believe that our long-held belief in seeking to work in the best interests of all stakeholders; a key focus of management throughout the pandemic, has been a key reason for our relative resilience during this time.
Impact of COVID-19
We estimate that the ongoing disruption due to COVID-19 has impacted earnings by £3.2m in the six months to 31 December 2020. This is split as follows:
- £2.3m in CitiPark due to a combination of lower levels of demand, especially during the second lockdown in November and the introduction of the tiers limiting commuting and shopping customers. The financial impact is exacerbated by the level of fixed costs, in particular rent and rates
- £0.5m in the property segment, as a result of provisions taken for unreceived rent due as at 31 December 2020, offset by targeted cost savings
- £0.4m in our ibis Styles hotel in Leeds, where the on-going disruption has suppressed demand
Our level of rent receipts within the property business has continued to be resilient. This is an indicator of the diversified strength of our property portfolio, the relative strength of the majority of our tenants, and most importantly, the quality of relationships built with tenants over the long-term. Rent concessions have been agreed on a tenant by tenant basis. The resulting impact is that revenue recognised is £0.8m less than gross billings, being either; amounts not expected to be received or those waived by rent concessions.
Rent Collections as at 22 February:
March - December*
%
Latest Quarter**
%
Cumulative
%
Total billed
£19.4m
£5.5m
£24.9m
Total collected
£16.9m
87%
£4.3m
78%
£21.2m
85%
Agreed to be deferred***
£0.2m
2%
£0.5m
9%
£0.7m
3%
Agreed total
£17.1m
89%
£4.8m
87%
£21.9m
88%
*English & Scottish quarters, and monthly billings (collections from 25 March)
**English quarter (collections due on 29 December and 1 January) and Scottish quarter (collection due on 2 February)
*** Agreed to be deferred and still outstanding
As highlighted as part of our FY20 year end results we have been executing on a detailed strategic and operational plan which includes:
- Accelerating our asset disposal programme rapidly and reducing the size of our retail portfolio. Since the COVID-19 outbreak, we have sold £41.2m of assets, all of which has been retail
- Working closely with all our tenants to support wherever we can, agreeing to share the financial cost of closure where appropriate and doing our best to ensure that following the disruption as many of our tenants as possible are able to bounce back strongly
- Reducing variable costs wherever possible, including making use of government support initiatives, in particular the furlough scheme
- Supporting our community, and in particular key workers wherever possible, especially within our car park and hotel businesses
- Supporting our employees, where home working has been necessary, and where employees and their families have been impacted either directly by the virus or by associated consequences of it
Results
EPRA earnings for the six months ended 31 December 2020 were £0.2m (HY20: £4.1m) giving EPRA earnings per share of 0.4p (HY20: 7.7p). Reflecting the diversified and intensively managed nature of our assets, the like for like portfolio decreased in value by only 0.8%, despite the continued pressure on retail valuations generally in the marketplace. The modest devaluation did give rise to a net revaluation charge in the income statement of £2.5m driving a post IFRS 16 statutory loss of £3.5m (HY20: loss of £0.2m).
The key drivers of the £3.9m reduction in EPRA Earnings are as follows:
· £3.2m impact of COVID-19, as detailed earlier
· £0.4m net impact after interest, because of the £41.2m of property sales agreed in the first half
· £0.3m of other property income, primarily as a result of 123 Albion Street still being redeveloped in the period (prior year saw a one off £0.5m dilapidations payment relating to the property)
Statutory Net Assets of £152.0m (30 June 2020: £155.5m) reduced 2.3% from the year end, principally as a result of the unrealised revaluation deficit of £2.5m. Net assets per share decreased to 286p (30 June 2020: 292p).
The Company is introducing the new EPRA net asset measures and will report primarily on EPRA Net Tangible Assets (EPRA NTA); which in the case of TCS reduces statutory net assets by the £4.1m of reported Goodwill. EPRA NTA for the half year is £147.8m compared to a FY20 comparative of £151.5m, down 2.4%. EPRA NTA per share is 278p (FY20 comparable 285p). The full breakdown of the new EPRA net asset measures is detailed later.
Our property portfolio reduced in value by 0.8% like for like compared to June 2020. Whilst we experienced some continued pressure on retail valuations, this revaluation, similar to the June revaluation, continues to track better than the market. A combination of the diversified nature of our portfolio, the quality of our retail assets with its particular focus on supermarket, discount and convenience, our skill at intensively managing our assets, and our redevelopment programme have all supported our asset valuation. The valuation was particularly supported at the half year by improvements in value of our office portfolio, and improvements in the value of our Manchester development site driven by a strengthening local PRS market.
Borrowings
Our accelerated disposal programme has allowed us to continue to lower our borrowing levels. As at 31 December 2020 net borrowings (excluding IFRS 16 impact and excluding finance leases) stood at £147.6m, £36.0m lower than at the year end.
Our loan to value level reduced 460 bps from the June year end to 48.6%, despite the reduction in asset values (excluding finance leases).
Dividends
An interim dividend of 1.75p per share (HY20 3.25p) will be paid as a property income distribution and will amount to £0.9m. It will be paid on the 25 June 2021 to shareholders registered on 28 May 2021. The final dividend for 2020 of 1.75p was paid on the 5 January 2021.
Whilst this interim distribution is uncovered by the earnings in the half-year, the Board believes it is important for us to continue to pay some level of dividend to shareholders. Although it is not possible to accurately predict the end of the current lockdown measure, 2020's experience of the quick recovery of our car parks and hotel once able to operate normally, and the strengthening of the balance sheet following the recent disposals gives the Board confidence in making this decision. At the same time, we are cognisant to support all other stakeholders, for example, in the form of rent relief for tenants, support for our employees and our desire to support our local communities during these difficult times.
Portfolio Performance
The value of investment properties, developments, joint ventures and car parks at the half-year stood at £306.9m (June 2020: £348.3m including assets held for sale), or £332.6m (June 2020: £374.7 including assets held for sale) when taking account the effect of IFRS 16.
The key driver of the reduction in portfolio value from June 2020 is the £41.2m of asset sales completed since the year end.
On a like for like basis the whole portfolio decreased in value by 0.8% since June (FY20: 6.9% decrease) accounting for a £2.6m like for like reduction in value (investment, development, car park and joint venture assets). On an absolute basis the portfolio declined in value by 1.0% (June 2020: 6.9% decrease). The decrease in the value of our investment property portfolio (including JVs) is 1.8% (June 2020: 8.6% decrease) which reflects a reversionary yield of 7.4% (June 2020: 7.0%). The increase in value of the development properties is 6.1%. (June 2020: 2.6% increase). Car park values remained flat (June 2020: 1.3% increase).
The results of the latest valuation continue to highlight three key factors that differentiate our portfolio:
- The resilience of our portfolio; its diversified regional nature, strong loyal tenants, and the reducing exposure to retail and leisure
- The strength of our asset management and capital investment activities adding value and further growth potential
- The growing potential in our significant development pipeline
The proportion of retail and leisure assets within the portfolio has further reduced to 39%, down from 47% in June 2020, and of that, pure retail represents only 26% of the overall portfolio. The retail and leisure element of the Merrion Estate represents 60% of all retail and leisure, and it was pleasing to see its value reduce by only 3.7% since June; despite the continuing pressure on retail generally and the effect of COVID-19. Our focus on convenience, discount and grocery retailing as well as our heritage of forming long term supportive relationships with our tenants are key attributes to preserving value.
In the past year, we have continued to invest in two key assets: 123 Albion Street, Leeds and Ducie House Manchester. As expected, absolute capital values on these two buildings have risen by £5.7m over the past twelve months reflecting the capital investment made. We expect values to improve further as these redeveloped assets quickly mature and additional new leases are secured.
Our development pipeline value increased by £2.3m or 6.1% driven by a 9.7% increase in the value of our Piccadilly Basin, Manchester holding as a result of rising market value in the land.
Passing rent
£mERV
£m
Value
£m% of portfolio
Valuation incr/(decr)
Initial yield
Reversionary yield
Retail & Leisure
2.3
2.6
30.8
9%
-11.7%
7.2%
7.9%
Merrion Centre (ex offices)
5.6
7.6
82.6
25%
-3.7%
6.4%
8.7%
Offices
5.3
6.2
86.9
26%
3.0%
5.8%
6.7%
Hotels
1.2
1.6
23.1
7%
0.0%
4.8%
6.7%
Out of town retail
1.1
1.2
14.5
4%
-1.8%
7.1%
7.5%
Distribution
0.4
0.4
6.0
2%
0.0%
6.5%
6.7%
Residential
1.1
1.1
20.8
6%
0.4%
4.8%
5.0%
17.0
20.6
264.6
80%
-1.8%
6.1%
7.4%
Development property
1.6
1.6
40.1
12%
6.1%
Other Car parks
0.9
0.9
26.8
8%
0.0%
Let portfolio
19.5
23.1
331.4
100%
-1.0%
Note: This table differs to Non-current assets value of £333.7m. The above includes Merrion House and Burlington House non-current assets held in JVs (£47.0m, rather than the net JV value of £15.5m). In addition, the above excludes the effect of IFRS16 (£25.8m), Investments (£3.4m), Finance Leases (£3.3m) and Fixtures & Fittings (£1.1m)
In conducting the interim valuations, our valuers have now removed their "material valuation uncertainty" clause (as set out in the RICS Valuation Global Standards) from all our sectors with the exception of the valuation for our ibis Styles hotel in Leeds (2.6% of total non-current assets).
Maximising available capital
In the past six months we have, as intended, accelerated our retail disposal programme. Between July and December 2020, we have sold retail assets for a total consideration of £41.2m.
The properties disposed of included:
- Our two properties in Milngavie, Scotland let to Waitrose, Aldi and Home Bargains
- Our Waitrose store in Glasgow
- Five properties in London in Wood Green and Chiswick
- Blackpool Market
The sales were agreed on average 2% below June 2020 values. The proceeds have initially been used to repay debt and complete the redevelopments of 123 Albion Street and Ducie House. The disposals reduce net income by £2.3m, or circa £1.3m annually when allowing for lower interest costs.
We continue to market a number of other retail properties and intend to complete further sales over the coming months. However, in the current market nothing is certain, and we will only sell at commercially sensible values. This activity was already part of our strategic plans, and has been accelerated to speed up the reduction of debt and the reduction in exposure to retail property within the portfolio.
Net borrowings (excluding finance leases) at 31 December 2020 were £147.6m (30 June 2020: £183.6m), plus IFRS 16 financial liabilities and finance leases of £28.6m. The Loan to value (LTV) ratio is 48.6% (30 June 2020: 53.2%). LTV is calculated on a pre-IFRS 16 basis excluding both the IFRS increase in assets and liabilities in order to give a more meaningful result, and to be consistent with covenant reporting. Headroom at 31 December 2020 was £12.8m (FY20: £14.8m).
The total borrowings comprise of £99.3m (net of £0.2m unamortised lease incentives) of 5.375% First Mortgage Debenture Stock 2031, and £50.7m of bank debt. There were a further £57.3m of undrawn revolving credit facilities at the half-year. Previously classed finance leases of £3.3m, the IFRS 16 financial liability of £25.3m and net cash of £1.3m make up the remaining balance.
In the half year period, we took the opportunity to use some of the sales proceeds to buy back for cancellation £6.5m of our debenture. The transaction has the effect of reducing overall interest costs, increasing LTV covenant headroom within the facility and increasing flexibility going forward. The purchase was completed at a cost marginally above par.
Actively managing our assets
Never has it been more important for our dedicated team to work to actively manage our estate, securing income, extending lease terms, and working closely with our tenants to support them through the current challenges. Despite the immediate urgencies created by COVID-19, we also continue to focus on pursuing new opportunities to help create places that attract people and create communities.
We have completed or renewed 14 leases since July 2020. Whilst the retail and leisure industries have been under significant pressure, with many company failures our retail and leisure portfolio has proven more resilient given the emphasis on grocery, convenience and discounter retailing. We have no exposure to any of the large high street retail failures such as Arcadia or Debenhams. Since July 2020, five tenants have entered into CVAs or administration; Deltic Group, Café Nero, STA Travel, Slam Trading, and Select. The billable rent due from these tenants totalled £0.3m for the first six months of the year, representing circa 2% of income billed in the half-year. Deltic is by far the most significant of these, occupying a nightclub in the Merrion Centre and accounting for £0.2m of the £0.3m of rent. As a prime spot, close to the student heart of the city, we have already received good interest in the premises from a number of operators and are confident of our ability to quickly secure a new long-term lease.
The proportion of retail and leisure assets in the portfolio has reduced to 39% from 47% in June 2020, and down from 70% in 2016. Pure retail now represents only 26% of the total portfolio, of which 60% is in the Merrion Estate.
Key highlights of recent activity include:
Ducie House, Manchester
We have now completed our £2.1m refurbishment of Ducie House in Manchester. Ducie House is a 33,000 sq ft multi-tenant office building. The work included essential fabric and M&E repairs post acquisition. This included full roof, façade, and window repairs as well as new boilers and lifts. Air conditioning/heating were also fitted to the newly refurbished offices. We adopted a strategy of restructuring the building's configuration to provide three additional meeting rooms, shower facilities and booth spaces. We have also refurbished the common areas on the upper floors to provide further amenity space including break out booths with balcony space and improved toilet/kitchen facilities. We have restructured the space within the building to provide larger office space to accommodate greater requirements and facilitate organic growth within the building.
Whilst we have supported many of our tenants through the COVID-19 crisis, we have seen a very positive response following our investment and continue to expect the investment to deliver increased net income of circa £0.3m per annum and a post investment return in excess of 8.5%. The value of Ducie House increased by £1.0m to £9.0m reflecting the additional capex spent in the six months to 31 December 2020. It is our expectation that this will continue to improve as the vacant space lets and rental levels continue to improve. In January, we signed the first new lease for one of the larger duplex offices with textile company NB Avenue Limited.
Urban Exchange, Manchester
Urban Exchange is a 120,000 sq ft retail outlet within our Piccadilly Basin ownership in the centre of Manchester. It is let to Aldi, M&S, Pure Gym, and Go Outdoors. As previously reported, Go Outdoors was put into administration by its owners in 2020. Since that point, we have been receiving full rent from the administrator and are in active discussions regarding the future of the store, with indications that there is a desire to keep the store open and trading. However, in order to ensure we keep all options open to us, we have undertaken a project to design a conversion of the Go Outdoors space (61,000 sq ft occupying the whole of the mezzanine floor and atrium entrance) into modern Grade A office space. Whilst at an early stage, the project is feasible and the initial economics look strong, providing important options for the future of this space.
Acquiring investment assets
123 Albion Street, Leeds
Acquired in 2018, we have now completed a net £4m refurbishment of this building. The newly refurbished building comprises 22,000 sq ft of flexible commercial space on the ground floor, with 56,000 sq ft of good quality office space over three upper floors. It is located in central Leeds in close proximity to the Merrion Estate and is part of Leeds's Innovation District. The refurbishment programme has delivered quality Grade A offices, new lifts, feature glazing, a newly modelled feature entrance atrium, private reception and ample parking with cycling storage and CitiCharge EV chargers, showers, lockers and changing facilities.
Over 10,000 sq ft of the office space was subject to a lease renewal with the Secretary of State in 2019, and we have now agreed a new lease for the remaining 46,000 sq ft to StepChange Debt Charity. StepChange is the UK's leading debt charity offering free expert advice to individuals enabling them to tackle and manage their debts. We have agreed a new 12-year lease, which involves the charity moving out of our Wade House office (on the Merrion Estate) into this newly refurbished space. The asset was valued at £12.1m twelve months ago and has increased to £16.3m following the renovation. We expect this to increase again as part of the June 2021 valuation.
StepChange has been a valuable TCS tenant for almost 20 years and had regularly expanded with TCS. The StepChange business has now reached a stage where new Leeds offices with much larger floor plates were required in order to take the business forward efficiently. It is pleasing, both for TCS and for the wider City of Leeds, that we have been able to satisfy StepChange's new office requirement enabling them to continue their important and valuable work.
The Arena Quarter, where the Merrion Estate is located, has been transformed in recent years with the development of the first direct Arena and substantial investment by Leeds' two largest universities, a brand-new Head Office for Leeds City Council and further investment in hotels, leisure units and over 8,000 new residential and student residential units. These new developments, on and adjacent to the Merrion Estate, including the tallest building in Leeds (IQ Altus under construction), have transformed the area. This now presents TCS with an opportunity to redevelop or refurbish Wade House on the back of the new demand. Wade House represents the last of the four main office buildings that form part of the Merrion Estate, and one that is now in need of investment. Having already redeveloped Town Centre House and Merrion House, it is time to improve Wade House. We have received speculative interest in the building and have been working up various plans for some time. We are in detailed discussions with potential partners and are confident in delivering on this new opportunity.
Investing in our development pipeline
TCS owns a significant development pipeline which gives the Company a clear and material opportunity for future growth. The current pipeline has an estimated gross development value (GDV) of over £600m, with the majority of the developments already being part of the relevant local government approved strategic planning frameworks or actually in possession of detailed planning permission.
We take a conservative approach to development to ensure we never over-commit ourselves, which has proven crucial following the COVID-19 crisis. However, TCS does have a successful track record in obtaining planning and delivering strategic developments. In the last four years, TCS has delivered Merrion House office, let to Leeds City Council, two new hotels in Leeds, and the Burlington House PRS scheme in Manchester. In addition, over that time frame, we have secured planning permission for a 17-storey office tower above Merrion and at Eider House, our second PRS scheme in Manchester.
It is expected that Eider House will constitute our next development and we have carried out works in January 2021 to implement the planning consent for the site. We are currently determining appropriate timing and ownership structure for the development.
The key components of the development pipeline include:
· Piccadilly Basin, Manchester. Mixed residential, commercial, and car-parking with a total estimated GDV of circa £300m
· Whitehall Road, Leeds. Office, car-parking, and potentially leisure provision with a total estimated GDV of over £170m
· Merrion, Leeds. Office and residential towers with a total estimated GDV of over £100m
CitiPark heavily impacted but preparing for the bounce back
Of all the parts of the business, the Company's car parking business has been most hard hit by COVID-19. As an operating business dependent on commuter, retail and leisure parking, each lockdown has had a material impact on revenue. The introduction in late 2020 of the tiering system further limited movement and therefore parking demand. In addition, with the fixed costs of rent and business rates accounting for two-thirds of operating expenses, the impact on profitability is significant.
Operating income for the first six months was £3.5m, £2.9m (45%) down on the prior year. Operating profit was £0.4m, £2.3m down year on year.
Consistent with actions taken in the second quarter of 2020, CitiPark continues to implement operational plans aimed at maximising income whilst minimising costs. Actions include:
- Temporarily closing branches where it is economically the right thing to do, and diverting customers to neighbouring and open CitiPark branches
- Making use of the government furlough scheme to minimise wage costs, whilst maintaining employment to be ready to quickly reopen
- Closed floors or sections of branches to allow business rates reduction claims
- Cancelling or suspending non-essential costs and services where possible
During the January / February 2021 lockdown, we have closed two branches and kept 17 open and trading; however, with reduced available spaces to minimise cost. It was reassuring that in the late summer / early autumn of 2020, as lockdown restrictions were eased, CitiPark experienced a rapid and significant increase in demand. We firmly expect this to be the case again as 2021 progresses and, in particular, as the benefit of the vaccination programme kicks in.
Increasingly, the CitiPark business is looking to expand beyond traditional car park ownership. The business already runs three solar energy farms in Manchester and Leeds, and through its creation of CitiCharge, which provides electric vehicle (EV) charging points in all its branches, is continuing to explore how to develop a sustainability focused point of difference. In the first half of the year, we won an order to supply 35 EV chargers to Coventry NHS hospital, a significant contract with a potential opportunity for further collaboration on future NHS projects. In addition, we have also installed CitiCharge EV chargers at 123 Albion Street as part of that redevelopment.
Furthermore, with the aim of driving capital light growth, CitiPark continues to look for new opportunities for revenue generation. In FY20, we reported on securing the management contract for the 978 space Manchester Arena car park. We also previously reported on the formation of BaySentry Solutions Ltd, a British Parking Association approved parking enforcement company. To build on that opportunity, we have recently acquired all 75 parking enforcement contracts from an independent operator for a modest sum. We see great opportunity to develop a sizable, fair and professional enforcement business; utilising our developed technology to deter inconsiderate parking and help owners effectively manage their car parks.
TCS's investment in YourParkingSpace, the online parking marketplace, has continued to strengthen following a £5m investment from Pelican Capital, fuelling the next phase of growth for the business. As part of the transaction, TCS exercised our third and final investment option and now have 19.9% voting share with additional 1.2% non-voting shares, convertible to voting on exit. Our cost of equity investment totals £1.0m, which following an external fair value exercise is valued at £1.5m in the half year balance sheet. We continue to retain a Board position and are looking forward to working closely with the founders and new investors as we rapidly grow this very exciting business.
Outlook
The past six months have been critical in the resetting and reinvigorating of the business, and I am particularly pleased with both the progress of our disposal programme, and the resilience of the continuing portfolio. The reduction in absolute borrowing levels gives both additional security and, as the disposal programme continues, the ability to reinvest in the long-term growth opportunities in our development pipeline.
COVID-19 continues to have a material impact on profitability. Although significant government support has been given to retail and leisure businesses, as a car park operator we have continued to pay car park rent to our local government landlords, as well as business rates which to us seems extraordinarily one sided. I am confident in the ability of our CitiPark business to bounce back strongly once the current lockdown is removed.
Overall, we remain committed to 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.
EPRA Net Asset reporting
Following the introduction of the new EPRA net asset reporting, we will focus primarily on the measure of Net Tangible Assets (NTA). The below table reconciles IFRS net assets to NTA, and the other new EPRA measures.
There are three new 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 new NAV metrics share the same starting point, namely IFRS Equity attributable to shareholders.
HY21
FY20
HY21
FY20
£m
£m
p per share
p per share
IFRS reported NAV
152.0
155.5
286
292
Purchasers Costs1
21.2
24.1
EPRA Net Reinstatement Value
173.2
179.6
326
338
Remove Purchasers Costs
(21.2)
(24.1)
Remove Goodwill2
(4.1)
(4.0)
EPRA Net Tangible Assets
147.8
151.5
278
285
Fair value of fixed interest rate debt3
(15.9)
(17.7)
EPRA Net Disposal Value
131.9
133.8
248
252
1Estimated purchasers' costs including fees and stamp duty and related taxes
2Removal of goodwill as per the IFRS Balance Sheet - relates predominantly to goodwill paid to acquire two long term car park leaseholds in London
3Represents the adjustment to fair value (market price) of the 2031 5.375% debenture
Responsibility statement of the directors
The directors confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union. The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
· an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
· material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last Annual Report and Accounts.
A list of current directors is maintained on the Town Centre Securities PLC Group website: www.tcs-plc.co.uk.
Principal risks and uncertainties
The group set out on page 50 of its annual report and accounts 2020 the principal risks and uncertainties that could impact its performance; these remain largely unchanged since the annual report was published. The group operates a structured risk management process, which identifies and evaluates risks and uncertainties and reviews mitigation activity.
As identified in the 2020 annual report the emergence of COVID-19 has served to increase the risk levels across many aspects of the business. The key underlying risks facing the business continue to relate to tenant strength, particularly in the retail arena, portfolio valuation and the related funding headroom which is driven by portfolio valuation. Systems risk related to the increasing level of cyber security threats and GDPR risk and the need to carefully control the use of personal data continue to demand vigilance from all staff.
TCS continues to operate in a conservative manner with processes and procedures in place to ensure risk management is central to all business planning and decision making. These processes and procedures remain as detailed in the 2020 annual report.
Forward-looking statements
Certain statements in this half year report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
The group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
Edward Ziff OBE DL Mark Dilley
Chairman and Chief Executive Group Finance Director
23 February 2021
Consolidated income statement
for the six months ended 31 December 2020
Six months
Six months
Year
ended
ended
ended
31 December
31 December
30 June
2020
2019
2020
Unaudited
Unaudited
Audited
Notes
£000
£000
£000
Gross revenue
10,436
15,892
27,989
Service charge income
1,301
1,475
2,803
Provision for impairment of debtors
(22)
(77)
(1,478)
Service charge expenses
(1,808)
(2,271)
(4,011)
Property expenses
(3,655)
(4,834)
(9,244)
Net revenue
6,252
10,185
16,059
Administrative expenses
(2,780)
(3,142)
(6,197)
Other income
462
1,097
1,218
Other expenses
-
-
(777)
Reversal of impairment of car parking assets
6
250
250
250
Valuation movement on investment properties
6
(4,096)
(4,639)
(26,324)
(Loss)/profit on disposal of investment properties
(1,100)
55
168
Share of post tax profits from joint ventures
8
1,787
446
450
Operating profit/(loss)
775
4,252
(15,153)
Finance costs
3
(4,293)
(4,493)
(9,009)
Loss before taxation
(3,518)
(241)
(24,162)
Taxation
-
-
-
Loss for the period
(3,518)
(241)
(24,162)
All losses for the period are attributable to equity shareholders.
Earnings per share
5
Basic and Diluted
(6.6p)
(0.5p)
(45.5p)
EPRA (non-GAAP measure)
0.4p
7.7p
3.9p
Consolidated statement of comprehensive income
for the six months ended 31 December 2020
Six months
Six months
Year
ended
ended
ended
31 December
31 December
30 June
2020
2019
2020
Unaudited
Unaudited
Audited
£000
£000
£000
Loss for the period
(3,518)
(241)
(24,162)
Items that will not be subsequently reclassified to profit or loss
Revaluation gains/(losses) on other investments
930
(1,285)
(2,363)
Total other comprehensive income/(loss)
930
(1,285)
(2,363)
Total comprehensive loss for the period
(2,588)
(1,526)
(26,525)
All recognised income for the period is attributable to equity shareholders.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Consolidated balance sheet
as at 31 December 2020
31 December
31 December
30 June
2020
2019
2020
Unaudited
Unaudited
Audited
Notes
£000
£000
£000
Non-current assets
Property rental
Investment properties
6
259,854
319,345
280,914
Investments in joint ventures
8
15,538
13,748
13,751
275,392
333,093
294,665
Car park activities
Freehold and leasehold properties
6
49,695
50,853
50,159
Goodwill
7
4,144
4,024
4,024
Investments
9
3,415
2,655
2,656
57,254
57,532
56,839
Fixtures, equipment and motor vehicles
6
1,058
1,367
1,113
Total non-current assets
333,704
391,992
352,617
Current assets
Investments 9
3,937
4,586
3,508
Assets held for sale
-
1,900
23,199
Trade and other receivables
5,121
4,700
3,468
Cash and cash equivalents
17,842
24,971
12,643
Total current assets
26,900
36,157
42,818
Total assets
360,604
428,149
395,435
Current liabilities
Trade and other payables
(12,995)
(15,493)
(13,100)
Financial liabilities 10
(49,284)
(25,179)
(72,266)
Total current liabilities
(62,279)
(40,672)
(85,366)
Non-current liabilities
Financial liabilities 10
(146,365)
(205,272)
(154,591)
Total liabilities
(208,644)
(245,944)
(239,957)
Net assets
151,960
182,205
155,478
Equity attributable to owners of the Parent
Called up share capital
11
13,290
13,290
13,290
Share premium account
200
200
200
Capital redemption reserve
559
559
559
Revaluation reserve
750
750
750
Retained earnings
137,161
167,406
140,679
Total equity
151,960
182,205
155,478
Net asset value per share
13
286p
343p
292p
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Consolidated statement of changes in equity
for the six months ended 31 December 2020
Share
Capital
Share
premium
redemption
Revaluation
Retained
Total
capital
account
reserve
Reserve
earnings
equity
£000
£000
£000
£000
£000
£000
Balance at 1 July 2019
13,290
200
559
250
173,951
188,250
Comprehensive income/(loss) for the year
Loss for the period
-
-
-
-
(241)
(241)
Other comprehensive loss
-
-
-
-
(1,285)
(1,285)
Transfer
-
-
-
500
(500)
-
Total comprehensive income for the period
-
-
-
500
(2,026)
(1,526)
Contributions by and distributions to owners
Dividends relating to the year ended 30 June 2019
-
-
-
-
(4,519)
(4,519)
Balance at 31 December 2019
13,290
200
559
750
167,406
182,205
Balance at 1 July 2020
13,290
200
559
750
140,679
155,478
Comprehensive income/(loss) for the year
Loss for the period
-
-
-
-
(3,518)
(3,518)
Other comprehensive income
-
-
-
-
930
930
Total comprehensive loss for the period
-
-
-
-
(2,588)
(2,588)
Contributions by and distributions to owners
Dividends relating to the year ended 30 June 2020
-
-
-
-
(930)
(930)
Balance at 31 December 2020
13,290
200
559
750
137,161
151,960
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Consolidated cash flow statement
for the six months ended 31 December 2020
Six months ended
Six months ended
Year ended
31 December 2020
31 December 2019
30 June 2020
Unaudited
Unaudited
Audited
Notes
£000
£000
£000
£000
£000
£000
Cash flows from operating activities
Cash generated from operations
12
2,329
9,957
14,433
Interest paid
(3,523)
(3,985)
(7,648)
Net cash (used in)/generated from operating activities
(1,194)
5,972
6,785
Cash flows from investing activities
Purchases and construction of investment properties
-
-
(1,610)
Refurbishment of investment properties
(2,033)
(1,973)
(5,442)
Payments for leasehold property improvements
-
(24)
(25)
Purchases of fixtures, equipment and motor vehicles
-
(74)
(93)
Purchases of plant and equipment
(126)
-
-
Proceeds from sale of investment properties
40,789
504
2,494
Investments in joint ventures
-
85
86
Acquisition of non-listed investments
(258)
(145)
(146)
Net cash generated from/(used in) investing activities
38,372
(1,627)
(4,736)
Cash flows from financing activities
(Repayment of)/proceeds from non-current borrowings
(36,174)
(2,305)
8,000
Movement in lease liabilities
(820)
(825)
(1,650)
Dividends paid to shareholders
-
-
(6,247)
Net cash (used in)/generated from financing activities
(36,994)
(3,130)
103
Net increase in cash and cash equivalents
184
1,215
2,152
Cash and cash equivalents at beginning of period
2,361
209
209
Cash and cash equivalents at end of period
2,545
1,424
2,361
Cash and cash equivalents at the year-end are comprised of the following:
Cash balances
17,841
24,971
12,643
Overdrawn balances
(15,296)
(23,547)
(10,282)
2,545
1,424
2,361
The Consolidated Cash Flow Statement should be read in conjunction with Note 12.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Notes to the consolidated interim financial information
1. Financial information
General information
Town Centre Securities PLC (the "Company") is a public limited company domiciled in the United Kingdom. Its shares are listed on the main market of the London Stock Exchange. The address of its registered office is Town Centre House, The Merrion Centre, Leeds LS2 8LY. The principal activities of the group during the period remained those of property investment, development and trading and the provision of car parking.
This interim financial information was approved by the board on 23 February 2021.
The comparative financial information for the year ended 30 June 2020 in this half-yearly report does not constitute statutory accounts for that year. The statutory accounts for the year ended 30 June 2020 have been delivered to the Registrar of Companies. The auditors' report on those accounts was 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.
Basis of preparation
These condensed consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting", as adopted by the European Union. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the accounts for the year ended 30 June 2020. The financial information for the six months ended 31 December 2020 and 31 December 2019 is unaudited.
Significant accounting policies
The accounting policies adopted are consistent with those of the previous financial year.
The group's financial performance is not seasonal.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
In the current environment, the directors consider the revenue to be of particular importance and therefore we set out below our revenue policy in respect of rental income:
Rental income
Revenue includes the fair value of rental income management charges from properties (net of Value Added Tax).
Deferred income is only recognised to the extent it is expected to be recovered from tenants.
This income is recognised as it falls due, in accordance with the lease to which it relates. Any lease incentives are spread evenly across the period of the lease.
This income is recognised (to the extend it is expected to be recovered from tenants) as follows:
i) rental income is recognise on an accrual basis on a straight-line based over the term of the lease;
ii) turnover rents are based on underlying turnover and are recognised in the period to which turnover relates;
iii) rent reviews are recognised with effect from the review date; and
iv) rent concessions are spread evenly over the life of the leaseThe directors have also reassessed the classification of the service charge income which has previously been net off against service charge costs within property expenses. This service charge income and service charge costs have now been split out on the face of the income statement, and the prior period has also been adjusted to reflect the income and cost recognised in previous accounting periods. There is no change to net revenue disclosed in the prior periods.
Use of estimates and judgements
There have been no changes in estimates of amounts reported in prior periods which have a material impact on the current half year period.
Going concern
The accounts for the six months ended 31 December 2020 have been prepared on a going concern basis. In light of the on-going COVID-19 pandemic the Directors have considered various downside scenarios to the Group's financial forecasts in assessing its ability to continue as a going concern. Despite the negative economic impacts and the uncertainty in respect of the timeline for recovery, the scenarios reviewed confirm the appropriateness of preparing these financial statements on a going concern basis. The Group is currently in compliance with all of its covenants. The most material risk concerns the impact of the COVID-19 pandemic on the valuation of the property portfolio and our ability to meet gearing covenants, although the Group does have potential mitigants at its disposal to address these uncertainties which include, but are not limited to, further disposals of assets, pledging as additional security ungeared properties currently valued at £3.6m million at 31 December 2020 and seeking lender consent to an extension of financial covenant waivers to cover extended periods of disruption. However, in light of the uncertainty in respect of the on-going adverse impacts and duration of COVID-19, a material uncertainty exists which may cast doubts on the Group's ability to continue as a going concern and therefore its ability to realise its assets and settle its liabilities in the ordinary course of business. These financial statements do not include the adjustments that would be necessary should the going concern basis of preparation no longer be appropriate.
2. 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. The board has determined the operating segments based on these reports.
Segmental assets
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
Property rental
299,777
363,262
333,307
Car park activities
52,645
54,187
53,498
Hotel operations
8,630
10,700
8,630
Total assets
361,052
428,149
395,435
Segmental results
Six months ended
31 December 2020
Six months ended
31 December 2019
Property
Car park
Hotel
Property
Car park
Hotel
rental
activities
operations
Total
rental
activities
operations
Total
£000
£000
£000
£000
£000
£000
£000
£000
Gross revenue
6,573
3,504
359
10,436
8,067
6,416
1,409
15,892
Service charge income
1,301
-
-
1,301
1,475
-
-
1,475
Provision for impairment of debtors
(22)
-
-
(22)
(77)
-
-
(77)
Service charge expenses
(1,808)
-
-
(1,808)
(2,271)
-
-
(2,271)
Property expenses
(607)
(2,585)
(463)
(3,655)
(542)
(3,168)
(1,124)
(4,834)
Net revenue
5,437
919
(104)
6,252
6,652
3,248
285
10,185
Administrative expenses
(2,229)
(551)
-
(2,780)
(2,587)
(555)
-
(3,142)
Other income
462
-
-
462
1,097
-
-
1,097
Share of post tax profits from joint ventures
477
-
-
477
446
-
-
446
Operating profit before valuation movements
4,147
368
(104)
4,411
5,608
2,693
285
8,586
Valuation movement on investment properties
(4,096)
-
-
(4,096)
(4,639)
-
-
(4,639)
Reversal of impairment of car parking assets
-
250
-
250
-
250
-
250
(Loss)/profit on disposal of investment properties
(1,100)
-
-
(1,100)
55
-
-
55
Valuation movement on joint venture properties
1,310
-
-
1,310
-
-
-
-
Operating profit/(loss)
261
618
(104)
775
1,024
2,943
285
4,252
Finance costs
(4,293)
(4,493)
Loss before taxation
(3,518)
(241)
Taxation
-
-
Loss for the period
(3,518)
(241)
All results are derived from activities conducted in the United Kingdom.
The results for the car park operations include the car park at the Merrion Centre. As the value of the car park cannot be separated from the value of the Merrion Centre as a whole, the full value of the Merrion Centre is included within the assets of the property rental business.
The car park results also include car park income from sites that are held for future development. The value of these sites has been determined based on their development value and therefore the total value of these assets has been included within the assets of the property rental business.
The total net revenue at the Merrion Centre and development sites for the six months ended 31 December 2020, all arising from car park operations, was £795,000 (2019: £2,164,000). After allowing for an allocation of administrative expenses, the operating profit at these sites was £374,000 (2019: £1,740,000).
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.
3. Finance costs
Six months
Six months
Year
ended
ended
ended
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
Interest on debenture loan stock
2,787
2,849
5,698
Interest payable on bank borrowings
735
970
1,950
Amortisation of arrangement fees
160
166
327
Loss on repurchase of debenture stock
114
-
-
Interest expense on lease liabilities
497
508
1,034
4,293
4,493
9,009
In November 2020, the Company repurchased £6,500,000 of its own debenture stock. The premium associated with this purchase of £114,000 has been recognised within Finance Costs.
4. Dividends
Six months
Six months
Year
ended
ended
ended
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
2019 final dividend: 8.50p per 25p share
-
4,519
4,519
2020 interim dividend: 3.25p per 25p share
-
-
1,728
2020 final dividend: 1.75p per 25p share
930
-
-
930
4,519
6,247
A final dividend in respect of the year ended 30 June 2020 of 1.75p per share was approved at the company's annual general meeting (AGM) on 17 November 2020 and was paid to shareholders on 5 January 2021. The entire dividend was paid as an ordinary dividend.
An interim dividend in respect of the year ending 30 June 2021 of 1.75p per share is proposed. This dividend, based on the shares in issue at 24 February 2021, amounts to £0.9m which has not been reflected in these interim accounts and will be paid on 25 June 2021 to shareholders on the register on 28 May 2021. This dividend will be paid entirely as a PID.
5. Earnings per share
The calculation of basic earnings per share has been based on the profit for the period, divided by the number of shares in issue. The number of shares in issue during the period was 53,161,950 (2019: 53,161,950).
Six months ended
31 December 2020
Six months ended
31 December 2019
Year ended
30 June 2020
Earnings
Earnings per share
Earnings
Earnings
per share
Earnings
Earnings
per share
£000
Pence
£000
Pence
£000
Pence
Basic earnings and earnings per share
(3,518)
(6.6)
(241)
(0.4)
(24,162)
(45.5)
Valuation movement on investment properties
4,096
7.7
4,639
8.7
26,324
49.5
Reversal of impairment of car parking assets
(250)
(0.5)
(250)
(0.5)
(250)
(0.5)
Valuation movement on properties held in joint ventures
(1,310)
(2.5)
-
-
350
0.7
Loss/(profit) on disposal of investment properties
1,100
2.1
(55)
(0.1)
(168)
(0.3)
Loss on repurchase of debenture stock
114
0.2
EPRA earnings and earnings per share
232
0.4
4,093
7.7
2,094
3.9
The calculation of EPRA earnings per share has been based on the profit for the period, divided by the number of shares in issue throughout the period. It has been disclosed to demonstrate the effects of property disposal profits and losses, revaluation and impairment movements and other non-recurring items on earnings.
6. Tangible fixed assets
(a) Investment properties - property rental business
Right to use assets
Freehold
Long leasehold
Other
Development
Total
£000
£000
£000
£000
£000
Valuation at 1 July 2019
266,765
21,284
-
36,451
324,500
Additions at cost
1,610
-
-
-
1,610
IFRS 16 adjustments
-
-
518
518
518
Other capital expenditure
5,630
-
-
348
5,978
Purchase of freehold
14,129
(13,594)
-
-
535
Disposals
(2,425)
-
-
-
(2,425)
Transfer to assets held for sale
(23,199)
-
-
-
(23,199)
Deficit on revaluation
(25,206)
(2,070)
-
952
(26,324)
Movement in tenant lease incentives
(279)
-
-
-
(279)
Valuation at 1 July 2020
237,025
5,620
518
518
280,914
Capital expenditure
2,018
-
-
15
2,033
Disposals
(18,899)
-
-
-
(18,899)
Transfer to assets held for sale
-
-
-
-
-
Valuation movement
(6,411)
30
-
2,285
(4,096)
Movement in tenant lease incentives
(98)
-
-
-
(98)
Valuation at 31 December 2020
213,635
5,650
518
40,051
259,854
(b) Freehold and leasehold properties - car park activities
Right to use assets
Freehold
Leasehold
Other
Total
£000
£000
£000
£000
Valuation at 1 July 2019
3,750
20,444
-
24,194
Additions
-
25
-
25
IFRS16 adjustment
-
(3,301)
30,322
27,021
Depreciation
-
(187)
(1,144)
(1,331)
Reversal of impairment
-
250
-
250
Valuation at 1 July 2020
3,750
17,231
29,178
50,159
IFRS16 adjustment
-
-
(48)
(48)
Additions
-
-
-
-
Depreciation
-
(94)
(572)
(666)
Reversal of impairment
-
250
-
250
Valuation at 31 December 2020
3,750
17,387
28,558
49,695
The fair value of the group's investment and development properties has been determined principally by independent, appropriately qualified external valuers CBRE and Jones Lang LaSalle. The CBRE valuation report has explicitly mentioned material valuation uncertainty in relation to the ibis Styles Hotel at the Merrion Centre, due to Novel Coronvirus (COVID-19). 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 assets have been valued by appropriately qualified external valuers Jones Lang LaSalle, taking into account the income from car parking and an assessment of their realisable value in their existing state and condition based on market evidence of comparable transactions.
Property income, values and yields have been set out by category in the table below.
Passing rent
ERV
Value
Initial
yield
Reversionary yield
£'000
£'000
£000
%
%
Retail and leisure
2,339
2,561
30,770
7.2%
7.9%
Merrion Centre (excluding offices)
5,593
7,566
82,604
6.4%
8.7%
Offices
3,664
4,524
51,031
6.8%
8.4%
Hotels
1,180
1,630
23,080
4.8%
6.7%
Out of town retail
1,081
1,155
14,500
7.1%
7.5%
Distribution
411
427
6,010
6.5%
6.7%
Residential
553
580
9,640
5.4%
5.7%
14,821
18,443
217,635
6.4%
8.0%
Development property
40,051
Car parks
22,787
Right-of-use assets
29,076
309,549
The effect on valuation of applying a different yield and a different ERV would be as follows:
Valuation at an initial yield of 7.4% - £280.3m, Valuation at 5.4% - £349.6m
Valuation at a reversionary yield of 9.0% - £285.4m, Valuation at 7.0% - £340.6m
Property valuations can be reconciled to the carrying value of the properties in the balance sheet as follows:
Investment
Properties
Freehold and Leasehold
Properties
Total
£000
£000
£000
Externally valued by CB Richard Ellis
141,745
-
141,745
Externally valued by Jones Lang LaSalle
117,440
17,500
134,940
Investment and development properties valued by the Directors
151
-
151
Right-of-Use Assets
518
28,558
29,076
Leasehold improvements
-
3,637
3,637
At 31 December 2020
259,854
49,695
309,549
All investment properties measured at fair value in the consolidated balance sheet are categorised as level 3 in the fair value hierarchy as defined in IFRS13 as one or more inputs to the valuation are partly based on unobservable market data. In arriving at their valuation for each property (as in prior periods) both the independent valuers and the property director have used the actual rent passing and have also formed an opinion as to the two key unobservable inputs being the market rental for that property and the yield (i.e. the discount rate) which a potential purchaser would apply in arriving at the market value. Both these inputs are arrived at using market comparables for the type, location and condition of the property.
(c) Fixtures, equipment and motor vehicles
Accumulated
Net book
Cost
depreciation
value
£000
£000
£000
At 1 July 2019
4,390
2,781
1,609
Additions
93
-
93
Depreciation
-
589
(589)
At 1 July 2020
4,483
3,370
1,113
Additions
126
-
126
Depreciation
-
181
(181)
At 31 December 2020
4,609
3,551
1,058
7. Goodwill
Six months
Six months
Year
ended
ended
ended
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
At start of period
4,024
4,024
4,024
Additions at cost
120
-
-
At end of period
4,144
4,024
4,024
Goodwill represents the difference between the fair value of the consideration paid on the acquisitions of car park businesses and the fair value of the assets and liabilities acquired as part of these business combinations.
8. Investments in joint ventures
Six months
Six months
Year
ended
ended
Ended
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
Interest in joint ventures
At start of period
13,751
13,387
13,387
Repayment of loans to joint ventures
-
(85)
(86)
Share of profits after tax
1,787
446
450
At end of period
15,538
13,748
13,751
Investments in joint ventures are broken down as follows:
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
Equity
9,961
8,075
8,452
Loans
5,577
5,673
5,299
15,538
13,748
13,751
Investments in joint ventures primarily relates to the Group's interest in the partnership capital of Merrion House LLP and loan to Belgravia Living Group Limited. The investment property held within these joint ventures has been externally valued at each reporting date.
9. Investments
Current asset investments
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
At start of the period
3,508
5,871
5,871
Increase/(decrease) in value of investments
429
(1,285)
(2,363)
At the end of the period
3,937
4,586
3,508
Current asset 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 £889,130 (2019: £889,130).
Current asset 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 current asset investments.
Non-current asset investments
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
Equity investments
1,880
1,120
1,121
Loans
1,535
1,535
1,535
3,415
2,655
2,656
Non-current asset investments primarily relate to an equity shareholding and loans advanced to YourParkingSpace Limited, a privately owned company incorporated in the United Kingdom.
The asset is 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. Financial liabilities
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
Current
Bank overdraft
15,296
23,547
10,282
Bank borrowings
32,330
-
60,326
Lease liabilities
1,658
1,632
1,658
49,284
25,179
72,266
Non-Current
Bank borrowings
18,387
69,542
19,796
Lease liabilities
28,596
29,859
28,919
5.375% First mortgage debenture stock
99,382
105,871
105,876
146,365
205,272
154,591
195,649
230,451
226,857
One of the bank facilities has been extended during the period and is now due to expire in 2022. This has therefore been transferred to non-current liabilities.
In November 2020, the Company repurchased £6,500,000 of its own debenture stock. The premium associated with this purchase of £114,000 has been recognised within Finance Costs.
Bank overdrafts have previously been recognised within Trade and Other Payables. Due to the nature of these liabilities the presentation of overdrawn bank balances has been reviewed and it is considered presentation within Financial Liabilities is more appropriate. The presentation has been amended for each period as set out in the table above.
Fair value of current borrowings
The fair value of bank borrowings and overdrafts approximates to their carrying value.
Fair value of non-current borrowings
31 December 2020
31 December 2019
30 June 2020
Book value
Fair value
Book value
Fair value
Book value
Fair value
£000
£000
£000
£000
£000
£000
Debenture stock
99,382
115,159
105,871
117,343
105,876
123,578
Non-current bank borrowings
50,717
50,717
69,542
69,542
80,122
80,122
11. Called up equity share capital
Authorised
164,879,000 (30 June 2020: 164,879,000) ordinary shares of 25p each.
Issued and fully paid
Number of shares
Nominal
value
000
£000
At 1 July and 31 December 2020
53,162
13,290
12. Cash flows from operating activities
Six months
Six months
Year
ended
ended
ended
31 December
31 December
30 June
2020
2019
2020
£000
£000
£000
Loss for the period
(3,518)
(241)
(24,162)
Adjustments for:
Depreciation
847
983
1,920
(Profit)/loss on disposal of investment properties
1,100
(55)
(168)
Finance costs
4,293
4,493
9,009
Share of joint venture profits after tax
(1,787)
(446)
(450)
Movement in revaluation of investment properties
4,096
4,639
26,324
Movement in lease incentives
98
64
279
Reversal of impairment of car parking assets
(250)
(250)
(250)
(Increase)/decrease in receivables
(1,576)
729
1,097
(Decrease)/increase in payables
(974)
41
834
Cash generated from operations
2,329
9,957
14,433
13. Net asset value per share
Net asset value per share is calculated as the net assets of the Group attributable to shareholders at each balance sheet date, divided by the number of shares in issue at that date.
Six months
Six months
Year
ended
ended
ended
31 December
31 December
30 June
2020
2019
2020
Net asset value (£'000)
151,960
182,205
155,478
Number of ordinary shares in issue
53,161,950
53,161,950
53,161,950
Net asset value per share (pence)
286p
343p
292p
14. Related party information
There have been no material changes in the related party transactions described in the 2020 Accounts.
INDEPENDENT REVIEW REPORT TO TOWN CENTRE SECURITIES PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2020 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and related notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Material uncertainty related to going concern
We draw attention to note 1 of the interim financial statements, which indicates the directors' consideration over going concern, including the potential impact of the current COVID19 outbreak on the Group and its future compliance with debt facility covenants. As stated in note 1, these events or conditions, along with other matters as set out in note 1 indicate that a material uncertainty exists that may cast significant doubt on the Group and Parent Company's ability to continue as a going concern. Our report is not modified in respect of this matter.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, United Kingdom
23 February 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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