REG - Town Centre Secs. - Half-year Results
09/03/2023 07:00
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RNS Number : 3651S Town Centre Securities PLC 09 March 2023
9 March 2023
TOWN CENTRE SECURITIES PLC
('TCS' or the 'Company')
Half year results for the six months ended 31 December 2022
Resilient performance given macro-economic conditions
Town Centre Securities PLC, the Leeds, Manchester, Scotland, and London
property investment, development, hotel and car parking company, today
announces its results for the six months ended 31 December 2022.
Financial performance
· Net assets - resilient performance:
o Like for like portfolio valuation down 7.0% from June 2022:
§ outperformance versus the MSCI/IPD All Property Capital Index which fell by
17.5% over the period
§ reduction primarily due to real estate investor and market sentiment around
the macro-economic outlook
o Statutory net assets of £152.2m or 314p per share (FY22: £179.3m, 341p).
EPRA net tangible assets ('NTA')($) measure at £148.4m or 306p per share
(FY22 equivalent: £174.9.0m, 333p)
· Profit and earnings per share - impacted by valuation reduction:
o Statutory loss before tax of £19.1m (HY22: profit of £10.5m) and
statutory loss per share of 38.4p (HY22: earnings of 19.8p)
o EPRA earnings($) before tax of £1.7m (HY22: £2.6m)
o EPRA earnings per share($) of 3.5p (HY22: 5.0p)
· Loan to Value reduced in the period by 290bps to 43.5% following debt
repayments and despite reduction in portfolio value
· Shareholder returns - enhanced by share buy backs and tender offer:
o Maintained interim dividend of 2.5p (HY22: 2.5p) reflecting the relative
stability in underlying earnings excluding valuation reduction
o Earnings and NAV enhancing tender offer and subsequent share buy back in
HY23 (4,075,000 shares bought back in total) following on from those
undertaken in FY22
Protecting shareholder value whilst continuing to reset and reinvigorate the
business for the future
We have continued to reset the business in the past six months with three
further sales and one strategic acquisition. 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
stabilised at 29% (2016: 60%; 2020: 40%), following the sale of over £100m of
assets since March 2020
· Pure retail now represents only 18% of the total portfolio with the
resilient Merrion Estate representing 70% of this
· 10 new commercial lettings and lease renewals across the portfolio in
the period
· No tenants entered into a CVA during the period reflecting our
resilient tenant portfolio
Maximising available capital
· Three properties sold during the six months (in Glasgow, Uddingston
and part of our Piccadilly Basin development site in Manchester) for a total
of £20.3m
· The release in July 2022 of £18.7m of funds, originally generated
from investment property sales, that had been locked into our debenture
security pool
· Aggregate proceeds generated of £39.0m and crystalising a small loss
on disposal of £0.2m
· Completion of the sale of our investment in YourParkingSpace Limited
in July 2022, generating initial cash proceeds of £11.6m and further receipts
between July 2023 and July 2024
· Loan to value headroom over our bank facilities of £32.7m based on 31
December 2022 borrowings and valuations, rising to £37m following the
inclusion of the Weymouth Street, London property within the banking security
pool
· Loan to value* reduced to 43.5% (FY22 equivalent 46.4%).
· Following the period end, we bought back for cancellation £13.7m of
our £96.1m 2031 5.375% debenture stock for a total cash consideration of
£13.3m including accrued interest:
o Helps to reduce debt and to rebalance the profile of the Group's
borrowings
o Makes a total of £23.6m of the debenture bought back over last three
years
Acquiring and improving investment assets to diversify our portfolio
· Sufficient headroom to progress development and investment across the
entire portfolio having:
o Acquired 45 Weymouth Street, London for £7.1m, a prime mixed-use property
o Disposed of Port Street, Manchester surface car park for £12.95m
o Expected sale in March 2023 of part of Whitehall Road, Leeds for £13.0m.
As at the date of this announcement this sale is not unconditional.
Investing in our development pipeline
· Our development pipeline, with an estimated GDV of over £550m, is a
valuable and strategic point of difference which we continue to progress and
improve
Outlook
· Resilient trading performance has continued into the opening months of
2023:
o Rent collections remain robust with over 99% of amounts invoiced in Q2 now
collected
o Car parks recovery momentum continues other than for those reliant on
office workers
o ibis Styles Leeds City Centre Arena hotel benefitting from recovery,
events and staycations
o One further disposal at Whitehall Road, Leeds expected to complete in
coming weeks
o Now looking at acquisitions and bringing forward sections of our
development pipeline
($) Additional EPRA measures are described in greater detail further on in
these half year results with EPRA earnings and earnings per shares detailed,
defined and reconciled within note 5 of these half year results
* Loan to value is calculated as the amount of financial liabilities less cash
and cash equivalents (including overdrafts) as a percentage of total assets
less cash and cash equivalents
Commenting on the results, Chairman and Chief Executive, Edward Ziff, said:
"It has been another six months where we have further strengthened TCS through
our disposal programme, the resulting repayment and redeployment of
borrowings, and a successful tender offer.
"We continue to see further trading recoveries in both our car park and hotel
operations whilst the property disposals have as expected reduced the scale of
the property rental business; at the same time we continue to navigate our way
through the current challenging macro-economic conditions given its impact on
our tenants, the valuation reduction of our property portfolio and impairments
to our car park portfolio. With low levels of bank debt and reduced loan to
value I am confident that we are in a strong position to face up to the
challenges that may present themselves. "
"The cost of living crisis, rising utility costs, interest rates increases and
the ongoing Russia/Ukraine conflict are affecting all stakeholders and we
remain committed to supporting them, in particular our dedicated employees. We
continue to focus on maintaining good landlord-tenant relationships, with open
dialogue and collaboration cornerstones of this approach."
"Having undertaken such a successful disposal programme, our attention is now
turning to opportunities to selectively acquire assets and invest in our
development programme, ever mindful of adding value whilst retaining robust
finances."
-Ends-
For further information, please contact:
Town Centre Securities PLC www.tcs-plc.co.uk (http://www.tcs-plc.co.uk/) / @TCS PLC
Edward Ziff, Chairman and Chief Executive 0113 222 1234
Stewart MacNeill, Group
Finance Director
MHP Communications 020 3128 8572
Reg Hoare / Matthew Taylor tcs@mhpc.com (mailto:tcs@mhpc.com)
Chairman and Chief Executive's Statement
Resetting and reinvigorating the business for the future
We have continued to see a good recovery across all three operational segments
of the business in the past six months, although the disposal programme of the
last three years has reduced the absolute level of rental income. Our property
and car park portfolio has reduced in value over the six months but at a less
extreme rate than the relevant indices, benefitting from our relatively
resilient portfolio; indeed we believe the reduction reflected worsening real
estate investor and market sentiment around the UK's economic outlook, as
opposed to any real concerns around our portfolio.
Our aim continues to be 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 valuable development pipeline and asset management opportunities
Rent receipts within the property business have remained resilient, with rent
collections as at 1 March 2023:
July 2022 to February 2023* %
£m
Total billed 14.6
Total collected 14.4 98.9%
Agreed to be deferred ** 0.1 0.7%
Agreed total 14.5 99.6%
* English & Scottish quarters and monthly billings (collections from 1
July 2022 to date)
** Agreed to be deferred and still outstanding
The performance above mirrors the experience of the previous twelve months
ended 30 June 2022, where 99.2% of all amounts billed had been received.
We have continued the execution of our detailed strategic and operational plan
which includes:
- Our asset disposal programme and reducing the size of our retail
portfolio. Since the start of the COVID-19 pandemic, we have now sold over
£100m of assets, the majority of which have been retail
- Working closely with all our tenants to support wherever we can and
doing our best to ensure that following the disruption of the last few years
as many of our tenants as possible are able to bounce back strongly
- Supporting our employees and their families who have been impacted
by the ongoing cost of living crisis
Results
The statutory loss for the six months ended 31 December 2022 was £19.1m
(HY22: profit of £10.5m) giving a loss per share of 38.4p (HY22: earnings per
share of 19.8p). The key drivers for this loss were the valuation decreases on
investment properties of £14.2m and the impairment of car parking assets
totalling £2.7m. The like for like portfolio decreased in value by 7.0% over
the six months under review as a result of investor and market sentiment
around the UK's economic outlook.
EPRA earnings for the six months ended 31 December 2022 were £1.7m (HY22:
£2.6m) giving EPRA earnings per share of 3.5p (HY22: 5.0p). The reduction
includes the continued recoveries seen in both our car park and hotel
operations, coupled with the resilience of the rental collections but are
offset by the award and payment of executive directors bonuses of £0.7m in
the period as a result of completion of the YPS Investment sale and a
reduction in other income. Other income typically includes surrender and
dilapidations' payments which can be significant individual sums. In HY22
dilapidations receipts totalled £0.6m, whereas in the current six-month
period only £6,000 have been received.
Statutory Net Assets of £152.2m (30 June 2022: £179.3m) decreased by 15.1%
from the year end. Net assets per share decreased to 314p (30 June 2022:
341p), a reduction of only 8%, highlighting the accretive nature of both the
tender offer and shares bought back in market for cancellation in the six
months and prior financial year.
EPRA Net Tangible Assets (EPRA NTA); which in the case of TCS reduces
statutory net assets by the £3.8m of reported Goodwill (FY22 comparable
£4.4m), for the half year is £148.4m compared to £174.9m at FY22, down
15.1%. EPRA NTA per share is 306p (FY22 comparable 333p). The full breakdown
of the EPRA net asset measures are detailed later.
Borrowings
Net borrowings, which includes lease liabilities, have reduced by 23% over the
six months from £163.8m to £125.8m. Significant receipts in the period from
property disposals, the release of the cash secured within the Company's
debenture security pool and the initial consideration from the sale of our
investment in YPS have all contributed to this reduction.
The decrease in borrowings, although partially offset by the reductions we
have seen in our property portfolio values, have seen our loan to value level
reduced by 290 bps from the June year end to 43.5%.
On 28 January 2023, the Company completed the buyback for cancellation of
£13.7m of its £96.1m 2031 5.375% debenture stock. This will result in an
additional one-off finance gain of £0.3m in the remaining six months of FY23.
Dividends
A maintained interim dividend of 2.5p per share (HY22 2.5p) will be paid on
the 16 June 2023 to shareholders registered on 19 May 2023; a property income
distribution amounting to £1.2m in total. The final dividend for 2022 of 2.5p
was paid on the 6 January 2023. The ex-dividend date for the interim dividend
will be 18 May 2023.
Although EPRA earnings in the current period are lower than the HY22
comparative, the maintenance of the interim dividend at 2.5p reflects the
resilience of our core business and also the strengthening of the balance
sheet following the assets sales completed - this dividend represents 71% of
EPRA earnings.
A further benefit of the tender offer and buy backs is that the total cash
cost of the dividend falls due to the reduced number of shares in issue,
enabling a saving of £101,875 compared to last year.
Portfolio Performance
The value of investment properties, developments, joint ventures and car parks
at the half-year stood at £274.4m (June 2022: £306.9m).
The following table provides an overview of the performance of the portfolio,
including our share of joint venture assets, in the six months ended 31
December 2022 highlighting the balance of the Company's portfolio in light of
our strategy of reducing exposure to retail and leisure and also the
underlying value of our development pipeline.
Passing rent ERV Value % of portfolio Valuation incr/(decr) Initial yield Reversionary yield
£m £m £m
Retail & Leisure 0.9 1.3 14.5 5% -3.9% 6.0% 8.4%
Merrion Centre (ex offices) 4.9 5.2 52.6 19% -10.5% 8.8% 9.3%
Offices 4.6 6.7 88.7 33% -11.1% 4.9% 7.1%
Hotels 0.7 0.7 9.1 3% 0.0% 7.4% 7.4%
Out of town retail 1.1 1.1 13.0 5% -10.4% 7.9% 7.8%
Residential 0.9 1.0 19.2 7% -0.5% 4.7% 4.7%
13.1 16.0 197.1 72% -8.9% 6.3% 7.6%
Development property 31.4 11% 4.7%
Car parks 45.9 17% -7.5%
Portfolio 274.4 100% -7.0%
The following table reconciles the above analysis to that set out in Note 6.
£m
Portfolio - as per note 6 252.1
50% Share in Merrion House 33.3
50% Share in Burlington House 11.7
Goodwill - Car Parks 3.4
Less - Short Term Right-of-Use Car Parks (26.1)
As per the table above 274.4
Note - the IFRS 16 Right-of-Use car parks (£26.1m) are excluded in the
portfolio analysis above as the Directors do not believe it is appropriate to
include these assets where there is less than 50 years remaining on their
lease and the Group does not have full control over them.
On a like for like basis the whole portfolio decreased in value by 7.0% since
June 2022 (FY22: 1.2% increase) accounting for a £19.5m like for like
decrease in value (investment, development, car park and joint venture
assets). This reduction has been driven by investor and market sentiment in
particular within the retail, office and car parking sectors, where we have
seen circa 10% like for like declines in value in the six months.
Our development pipeline value increased by £1.5m or 4.7% in the six months
as we continue to bring this land forward within the planning frameworks.
Maximising available capital
In the past six months we have continued our asset disposal programme. Between
July and December 2022, we sold three properties for a total consideration of
£20.3m.
The properties disposed of are:
- Our Buchanan Street/Gordon Street retail investments in Glasgow;
- A 2-storey office building in Uddingston, Scotland; and
- Port Street surface car park, Manchester (part of our Piccadilly
Basin development site).
The sales, after taking into account selling fees, crystalised a small loss on
disposal in the period of £0.2m.
At 30 June 2022, the Company had £18.7m of funds secured within the debenture
security pool, and as these funds were ring fenced and not immediately
available to the Group they were included within Trade and other receivables.
These funds, which originated from investment property disposals prior to 30
June 2022, were released from the security pool in July 2022 and became free
cash.
In July 2022, the Company also received initial consideration from the sale of
its investment in YourParkingSpace ('YPS') of £11.6m.
The funds generated from the disposals, the release of the debenture cash and
the YPS sale were then used to repay borrowings, fund a tender offer to buy
back shares in the Company and to acquire the new Weymouth Street property in
London.
Net borrowings at 31 December 2022 were lower at £125.8m (30 June 2022:
£163.8m). The Loan to value (LTV) ratio has reduced further and is 43.5% (30
June 2022: 46.4%). LTV is calculated as net borrowings as a percentage of
total assets (less cash). Headroom at 31 December 2022 was £32.7m (FY22:
£18.5m).
The total borrowings comprise of £96.0m (net of £0.1m unamortised lease
incentives) of 5.375% First Mortgage Debenture Stock 2031, £5.8m of bank debt
and £28.4m of lease liabilities. There were a further £79.2m of undrawn
revolving credit facilities at the half-year.
As mentioned above, after the period end we agreed to buyback for cancellation
£13.681m of our debenture stock, reducing the nominal value outstanding to
£82.4m; this compares to its original nominal value of £106.0m, having
bought back a total of £23.6m of stock in recent years. Buying back the
debenture increases our financial flexibility and frees up funds for
investment into our portfolio activities.
Actively managing our assets
We have completed or renewed 10 commercial leases in the period representing
annual rental income of £0.3m in aggregate.
The proportion of retail and leisure assets within the portfolio has further
reduced to 29% (FY22: 31%), down from 60% in June 2016, and of that, pure
retail represents only 18% of the overall portfolio (FY22: 23%). The retail
and leisure element of the Merrion Estate represents 66% of all retail and
leisure.
Acquiring investment assets
45 Weymouth Street, London
We have acquired for £7.1m a recently refurbished, 4,760 sq.ft, Grade II
listed property which currently comprises residential accommodation on the
third floor, with office space to lower ground, ground, first and second
floors. Following the period end we have secured lettings on all floors with
the exception of one floor which will be the London base for TCS following the
sale of its property investment in Duke Street, London in 2021.
The building is located in the centre of the world's most renowned medical
district, moments from London and Harley Street clinics, as well as the
Princess Grace and King Edward VII Hospitals.
This strategic purchase forms part of our ongoing strategy to continue to
diversify our portfolio and generate long term capital growth.
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, following
the sale of the Port Street surface car park in December 2022, has an
estimated gross development value (GDV) of over £550m, 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. Alongside this, the Company has a successful track record in
obtaining planning and delivering strategic developments.
The key components of the development pipeline include:
· Piccadilly Basin, Manchester. Mixed residential, commercial, and
car-parking with a total estimated GDV of circa £170m
· Whitehall Riverside, Leeds. Office, car-parking, and potentially
leisure provision with a total estimated GDV of over £290m
· Merrion Estate, Leeds. Office and residential towers with a total
estimated GDV of over £90m
Piccadilly Basin
We sold our Port Street surface car park, a part of our Piccadilly Basin
development site, to the Select Property Group in December 2022.
Our Dale and Burlington Street surface car parks are key components of the
Piccadilly Basin Strategic Regeneration Framework ('SRF'). Over the coming six
months we will be looking to refresh this SRF to bring it up to date and
relevant to unlock the potential of this truly unique part of the city centre.
Whitehall Riverside
We continue to work with Glenbrook to bring forward a new masterplan which
will provide a mixed-use riverside scheme in one of the city's most strategic
locations just four minutes' walk from Leeds train station.
Glenbrook's plans for up to 500 apartments across two buildings of 15 and 18
stories with ground floor commercial units was approved at the December 2022
planning committee, subject to the agreement and completion of a Section 106
of the Town and County Planning Act 1990 agreement with the local authority.
This agreement was completed in February 2023. In addition Glenbrook are still
to finalise their funding agreement in connection with this purchase. Assuming
all outstanding conditions are met, the sale of part of Whitehall Riverside to
Glenbrook is expected to complete in March 2023.
Separately we are bringing forward an application for a development comprising
up to 235,000 sq ft of Grade A office space across three buildings, a 478
space CitiPark multi-storey car park and travel hub, and a 108 key aparthotel.
New landscaping and public realm will improve connectivity to, and further
complement the existing riverside environment with a series of interlinked
pedestrian and cycling routes to support health and well-being whilst also
attracting new residents and visitors to the scheme.
The new Whitehall Riverside proposals offer a revitalised masterplan relevant
for the demand of today designed with flexibility in mind to adapt to the
changing requirements of workspace, residential, electric vehicles and visitor
economy.
Merrion Estate
The Arena Quarter, where the Merrion Estate is located, has been transformed
with the development of the first direct Arena and substantial investment by
Leeds' two largest universities, the Leeds City Council head office 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, include the tallest building in Leeds (IQ Altus). The momentum
behind development has not stopped with a further 4,000 new residential and
student units in the pipeline in the immediate vicinity of the Merrion Estate.
This now presents the Company with an opportunity to redevelop and reposition
its Wade House property on the back of this continuing demand. Wade House
represents the last of the three main office buildings that form part of the
Merrion Estate, and one that is now most in need of investment, TCS having
already redeveloped Town Centre House and Merrion House. Improving the
environmental credentials of this building will be at the forefront of the
redevelopment.
CitiPark recovering well, capital light growth continuing with a further
acquisition
Car park occupancy levels have continued to recover well with all key sites
now back to pre Covid-19 occupancy levels with the exception of our two Leeds
based multi storey car parks at the Merrion Centre and Leeds dock which are
more reliant on office workers.
Our CitiCharge division continues to grow and now has 68 EV chargers with a
further 20 installs in the pipleline across the Group's car park portfolio.
ESG and business responsibility
Building on the success of previous initiatives, including the interaction
with local communities, the solar farms and the roll-out of EV charging
facilities, the Company continues to look at ways to improve the overall
responsibility of the business. We have maintained our key partnerships with
First Give (helping local schools to inspire young people to make a change in
society) and the Leeds Hospitals Charity both in the form of donations but
also in helping with fundraising events. This summer the Leeds Hospitals
Charity are promoting the Leeds Bear Hunt; a large-scale public art trail
across Leeds, which will include the Merrion Centre.
During the period we rolled out an employee wide electric vehicle salary
sacrifice scheme to further encourage the take up of electric cars
Following its inception in 2022 the Sustainability and Climate Change
committee have been working to develop and implement the sustainability
strategy of the Company. In addition to working with the Carbon Trust the
Committee has been exploring the possibility of sustainable debt funding,
either through green loans or other structured finance products.
Share buy back programmes
We launched a tender offer for the Company's shares in July 2022 which
successfully bought in for cancellation 4m shares in the Company at 185p per
share. The transaction costs in connection with this tender, which was on top
of the 185p per share, amounted to £365,000 or 9.1p per share bought in for
cancellation. This reflected the Board's belief that share buybacks are an
appropriate means of returning value, whilst maximising sustainable long term
growth for shareholders, given the enhancement to NAV and earnings per share
that results from reducing the number of shares in issue. This is particularly
the case given the significant discount that this price was relative to
reported net asset value.
In addition to the tender offer, during the period a total of 75,000 shares
were purchased as part of a separate on-market share buy back programme,
returning a total of £122,000 to shareholders. The transaction costs in
connection with the share buy back programme amounted to £2,000. This share
buy back programme was restricted to 75,000 so as not to impinge on the REIT
status of the Company.
Outlook
The trading performance seen in the six months ended 31 December 2022 is
continuing into the opening months of 2023. Rent collections remain robust
with over 99% of the amounts invoiced at the last quarter date now collected.
Our programme of disposals has slowed, with one further disposal expected to
complete in the coming weeks once the final conditions of sale are met.
Reflecting our much improved financial flexibility, we are now looking at
investment acquisitions and bringing forward sections of our development
pipeline.
The momentum in our car parks recovery has continued through 2022 however for
those car parks that are particularly reliant on office workers, this recovery
remains slow.
The ibis Styles Leeds City Centre Arena hotel has now fully recovered and
continues to benefit from 'staycations', the return of the corporate mid-week
market and the full programme of events at the nearby Leeds Arena.
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
The below table reconciles IFRS net assets to Net Tangible Assets (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.
HY23 FY22
£m HY23 FY22 p per share p per share
IFRS reported NAV 152.2 179.3 314 341
Purchasers Costs (1) 17.0 19.1
EPRA Net Reinstatement Value 169.2 198.4 349 378
Remove Purchasers Costs (17.0) (19.1)
Remove Goodwill (2) (3.8) (4.4)
EPRA Net Tangible Assets 148.4 174.9 306 333
Fair value of fixed interest rate debt (3) 12.2 1.3
EPRA Net Disposal Value 160.6 176.2 331 335
(1)Estimated purchasers' costs including fees and stamp duty and related taxes
(2)Removal of goodwill as per the IFRS Balance Sheet - relates predominantly
to goodwill paid to acquire two long term car park leaseholds in London
(3)Represents the adjustment to fair value (market price) of the 2031 5.375%
debenture
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 (http://www.tcs-plc.co.uk) .
Principal risks and uncertainties
The group set out on page 42 of its annual report and accounts 2022 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.
The key underlying property 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 2022 annual report.
In terms of tax risk, as a UK REIT, a failure to comply with certain UK REIT
conditions resulting in the loss of this status could result in property
income and asset sales being subject to UK corporation tax. This risk is
associated with both the recent programme of asset sales the Company has
embarked on and the requirement of the Company to have at least 35% of it's
share capital held 'beneficially by the public'.
At 31 December 2022 this percentage was 35.19%. New Fortress Capital Limited,
which is assumed to be a close company and not held 'beneficially by the
public' or the Ziff Concert Party would need to acquire a further 92,000
shares in the Company from the public to take the percentage below 35%. This
would cause the Company to automatically lose its status as a REIT with effect
from the beginning of the accounting period in which the 35% threshold was
crossed.
The Board review the 'beneficially by the public' percentage on a monthly
basis as part of the Company's board meetings. In the period since 31 December
2022 to the date of this announcement this percentage has remained at 35.19%.
The Ziff Concert Party are aware of the potential impact any increase in
shareholding would have on the Company's REIT status.
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
Stewart MacNeill
Chairman and Chief Executive Group Finance
Director
8 March 2023
Consolidated condensed income statement
for the six months ended 31 December 2022
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2022 2021 2022
Unaudited Unaudited Audited
Notes £000 £000 £000
Gross revenue (excl. service charge income) 14,282 12,939 25,383
Service charge income 1,404 1,415 2,758
Gross revenue 15,686 14,354 28,141
Provision for impairment of debtors 80 392 49
Service charge expenses (1,924) (2,154) (3,666)
Property expenses (5,911) (4,929) (10,000)
Net revenue 7,931 7,663 14,524
Administrative expenses (3,624) (2,953) (6,531)
Other income 519 1,302 1,612
Impairment of car parking assets 6(b) (2,659) (340) (384)
Impairment of goodwill 7 (624) - -
Reversal of impairment of hotel assets 6(c) - 121 -
Valuation movement on investment properties 6(a) (14,192) 6,433 3,489
(Loss)/profit on disposal of investment properties (182) 1,194 4,563
Loss on disposal of investments (803) - (89)
Share of post tax (losses)/profits from joint ventures 8 (1,927) 924 1,315
Operating (loss)/profit (15,561) 14,344 18,499
Finance costs 3 (3,821) (3,880) (8,063)
Finance income 3 304 - 576
(Loss)/profit before taxation (19,078) 10,464 11,012
Taxation - - -
(Loss)/profit for the period (19,078) 10,464 11,012
All losses for the period are attributable to equity shareholders.
Earnings per share 5
Basic and Diluted (38.4p) 19.8p 20.9p
EPRA (non-GAAP measure) 3.5p 5.0p 6.2p
Consolidated condensed statement of comprehensive income
for the six months ended 31 December 2022
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2022 2021 2022
Unaudited Unaudited Audited
£000 £000 £000
(Loss)/profit for the period (19,078) 10,464 11,012
Items that will not be subsequently reclassified to profit or loss
Revaluation gains on hotel assets 121 400 713
Revaluation gains on other investments 997 213 15,306
Total other comprehensive income 1,118 613 16,019
Total comprehensive (loss)/income for the period (17,960) 11,077 27,031
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 condensed balance sheet
as at 31 December 2022
31 December 31 December 30 June
2022 2021 2022
Unaudited Unaudited Audited
£000 £000 £000
Notes
Non-current assets
Property rental
Investment properties 6 174,361 203,870 201,106
Investments in joint ventures 8 16,225 17,136 18,016
190,586 221,006 219,122
Car park activities
Freehold and right of use properties 6 68,607 73,213 72,226
Goodwill and intangible assets 7 4,165 4,996 4,912
72,772 78,209 77,138
Hotel operations
Freehold properties 6 9,100 9,030 9,100
9,100 9,030 9,100
Fixtures, equipment and motor vehicles 6 1,007 928 976
Investments 9 8,427 9,367 4,506
Total non-current assets 281,892 318,540 310,842
Current assets
Investments 9 5,148 - -
Trade and other receivables 2,190 22,343 21,708
Cash and cash equivalents 15,188 18,157 22,150
22,526 40,500 43,858
Assets held for sale - 11,515 20,368
Total current assets 22,526 52,015 64,226
Total assets 304,418 370,555 375,068
Current liabilities
Trade and other payables (11,197) (11,247) (9,828)
Bank overdrafts (10,801) (18,539) (23,414)
Financial liabilities (5,131) (36,605) (34,655)
10
Total current liabilities (27,129) (66,391) (67,897)
Non-current liabilities
Financial liabilities (125,045) (139,112) (127,867)
10
Total liabilities (152,174) (205,503) (195,764)
Net assets 152,244 165,052 179,304
Equity attributable to owners of the Parent
Called up share capital 11 12,113 13,193 13,132
Share premium account 200 200 200
Capital redemption reserve 1,736 656 717
Revaluation reserve 1,334 500 1,213
Retained earnings 136,861 150,503 164,042
Total equity 152,244 165,052 179,304
Net asset value per share 13 314p 313p 341p
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
Consolidated condensed statement of changes in equity
for the six months ended 31 December 2022
Share Capital
Share premium redemption Revaluation Retained Total
capital account reserve Reserve earnings equity
£000 £000 £000 £000 £000 £000
Balance at 1 July 2021 13,282 200 567 500 140,846 155,395
Comprehensive income/(loss) for the year
Profit for the period - - - - 10,464 10,464
Other comprehensive income - - - - 613 613
Total comprehensive income for the period - - - - 11,077 11,077
Contributions by and distributions to owners
Arising on purchase and cancellation of own shares (89) - 89 - (496) (496)
Dividends relating to the year ended 30 June 2021 - - - - (924) (924)
Balance at 31 December 2021 13,193 200 656 500 150,503 165,052
13,132 200 717 1,213 164,042 179,304
Balance at 1 July 2022
Comprehensive income for the year
Loss for the period - - - - (19,078)) (19,078)
Other comprehensive income - - - 121 997 1,118
Total comprehensive loss for the period - - - 121 (18,081) (17,960)
Contributions by and distributions to owners
Arising on purchase and cancellation of own shares (1,019) - 1,019 - (7,889) (7,889)
Dividends relating to the year ended 30 June 2022 - - - - (1,211) (1,211)
Balance at 31 December 2022 12,113 200 1,736 1,334 136,861 152,244
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
Consolidated condensed cash flow statement
for the six months ended 31 December 2022
Six months ended Six months ended Year ended
31 December 2022 31 December 2021 30 June 2022
Unaudited Unaudited Audited
Notes £000 £000 £000 £000 £000 £000
Cash flows from operating activities
Cash generated from operations 12 7,108 6,551 11,688
Interest paid (3,232) (3,274) (6,839)
Net cash generated from operating activities 3,876 3,277 4,849
Cash flows from investing activities
Purchases and construction of investment properties (7,532) (7,424) (7,433)
Refurbishment of investment properties (295) (590) (1,617)
Purchases of fixtures, equipment and motor vehicles (157) (102) (283)
Proceeds from sale of investment properties 39,016 5,044 20,608
Proceeds from sale of investments incl. loan repayments 11,566 - 68
Payments for business acquisitions - (189) (293)
Investments in joint ventures - - (326)
Net cash generated from/(used in) investing activities 42,598 (3,261) 10,724
Cash flows from financing activities
Proceeds from borrowings 5,000 4,086 6,399
Repayment of borrowings (37,107) (3,721) (18,643)
Arrangement fees paid - - (380)
Principle element of lease payments (828) (824) (1,648)
Re-purchase of own shares (7,888) (496) (885)
Dividends paid to shareholders - - (2,237)
Net cash used in financing activities (40,823) (955) (17,394)
Net increase/(decrease) in cash and cash equivalents 5,651 (939) (1,821)
Cash and cash equivalents at beginning of period (1,264) 557 557
Cash and cash equivalents at end of period 4,387 (382) (1,264)
Cash and cash equivalents at the year-end are comprised of the following:
Cash balances 15,188 18,157 22,150
Overdrawn balances (10,801) (18,539) (23,414)
4,387 (382) (1,264)
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 8 March 2023.
The comparative financial information for the year ended 30 June 2022 in this
half-yearly report does not constitute statutory accounts for that year as
defined in section 434 of the Companies Act 2006. The statutory accounts for
the year ended 30 June 2022 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", in accordance with UK
adopted international accounting standards. 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 2022. The financial information for the six months ended 31
December 2022 and 31 December 2021 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 rental income net of VAT.
Most of the Group's rental income is billed either monthly or quarterly in
advance. A receivable and deferred income is recognised at the date payment is
due
Rent receivables recognised are subject to impairment (refer to the Trade and
Other Related Party receivables policy in the financial statements of the
Company for the year ended 30 June 2022).
Any lease incentives are spread on a straight-line basis across the period of
the lease.
Rental income is recognised as revenue (to the extent it is considered
collectible) as follows:
i) Fixed rental income is recognised on a straight-line basis
over the term of the lease;
ii) turnover rents are based on underlying turnover and are
recognised in the period to which the turnover relates;
iii) rent reviews are recognised in the period to which they
relate providing they have been agreed or otherwise on agreement; and
iv) Where rent concessions have been granted that reduce the
payments due under a lease in future periods the total revised consideration
(plus any prepaid or accrued lease payments) is spread over the remaining
lease term from the date the concession is granted.
Use of estimates and judgements
There have been no changes in the method of applying appropriate accounting
estimates in the period. Any difference between the receivables previously
recognised and the cash subsequently collected has been disclosed in the
income statement. There have been no other estimates of amounts reported in
prior periods which have a material impact on the current half year period.
Going concern
The financial information for the six months ended 31 December 2022 have been
prepared on a going concern basis. In light of the current macro-economic
environment 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 created,
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 risks concern the
impact on the valuation of the property portfolio and our ability to meet bank
loan and debenture 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 valued at £9.5m at 31 December 2022 and seeking lender
consent to an extension of financial covenant waivers to cover extended
periods of disruption.
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
2022 2021 2022
£000 £000 £000
Property rental 212,712 287,980 263,598
Car park activities 69,031 73,545 77,496
Hotel operations 9,100 9,030 9,100
Investments 13,575 - 24,874
Total assets 304,418 370,555 375,068
Segmental results
Six months ended Six months ended
31 December 2022 31 December 2021
Property Car park Hotel Invest- Property Car park Hotel
rental activities operations ments Total rental activities operations Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Gross revenue (excl. service charge income) 5,873 6,748 1,661 14,282 5,763 5,733 1,443 12,939
-
Service charge income 1,404 - - - 1,404 1,415 - - 1,415
Gross revenue 7,277 6,748 1,661 - 15,686 7,178 5,733 1,443 14,354
Provision for impairment of debtors 80 - - - 80 392 - - 392
Service charge expenses (1,924) - - - (1,924) (2,154) - - (2,154)
Property expenses (482) (4,056) (1,373) - (5,911) (454) (3,318) (1,157) (4,929)
Net revenue 4,951 2,692 288 - 7,931 4,962 2,415 286 7,663
Administrative expenses (2,998) (626) - - (3,624) (2,422) (531) - (2,953)
Other income 515 4 - - 519 1,302 - - 1,302
Share of post tax profits from joint ventures 423 - - 423 494 - - 494
-
Operating profit before valuation movements 2,891 2,070 5,249 4,336 1,884 286 6,506
288 -
Valuation movement on investment properties (14,192) - (14,192) 6,433 - - 6,433
- -
Impairment of car parking assets - (2,659) - - (2,557) - (340) - (340)
Impairment of goodwill - (624) - - (624) - - - -
Reversal of impairment of hotel assets - - - - - 121 121
- -
(Loss)/profit on disposal of investment properties (182) - (182) 1,194 - - 1,194
- -
Loss on disposal of investments - - - (803) (803) - - - -
Valuation movement on joint venture properties (2,350) - - (2,350) 430 - - 430
-
Operating (loss)/profit (13,833) (1,213) 288 (803) (15,561) 12,393 1,544 407 14,344
Finance costs (3,821) (3,880)
Finance income 304 -
(Loss)/profit before taxation (19,078) 10,464
Taxation - -
(Loss)/profit for the period (19,078) 10,464
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 six months ended 31 December
2022, arising from car park operations, was £2,436,000. After allowing for an
allocation of administrative expenses, the operating profit at these sites was
£864,000.
Revenue received within the car park and hotel segments, along with service
charge income from the property rental 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.
3. Finance costs
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Interest on debenture loan stock 2,583 2,674 5,303
Interest payable on bank borrowings 649 600 1,265
Amortisation of arrangement fees 115 120 252
Loss on repurchase of debenture stock - - 272
Interest expense on lease liabilities 474 486 971
Total finance costs 3,821 3,880 8,063
Interest receivable on loans to joint ventures (136) - (163)
Other interest receivable (168) - (413)
Total finance income (304) - (576)
Net finance costs 3,517 3,880 7,487
4. Dividends
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
2021 final dividend: 1.75p per 25p share - 924 924
2022 interim dividend: 2.5p per 25p share - - 1,313
2022 final dividend: 2.5p per 25p share 1,211 - -
1,211 924 2,237
A final dividend in respect of the year ended 30 June 2022 of 2.5p per share
was approved at the company's annual general meeting (AGM) on 22 November
2022 and was paid to shareholders on 6 January 2023. The entire dividend was
paid as an ordinary dividend.
An interim dividend in respect of the year ending 30 June 2023 of 2.5p per
share is proposed. This dividend, based on the shares in issue at 8 March
2023, amounts to £1.2m which has not been reflected in these interim accounts
and will be paid on 16 June 2023 to shareholders on the register on 19 May
2023. This dividend will be paid entirely as a Property Income Distribution.
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 weighted average
number of shares in issue during the period was 49,685,860 (2021: 52,945,786).
Six months ended Six months ended Year ended
31 December 2022 31 December 2021 30 June 2022
Earnings Earnings per share Earnings Earnings Earnings Earnings
per share per share
£000 Pence £000 Pence £000 Pence
Basic earnings and earnings per share (19,078) (38.4) 10,464 19.8 11,012 20.9
Valuation movement on investment properties 14,192 28.6 (6,433) (12.1) (3,489) (6.6)
Impairment of car parking assets 2,659 5.4 340 0.6 384 0.7
Reversal of impairment of hotel assets - - (121) (0.2) - -
Impairment of goodwill 624 1.3
Loss/(profit) on disposal of investment properties 182 0.3 (1,194) (2.3) (4,563) (8.7)
Valuation movement on properties held in joint ventures (430) (0.8)
2,350 4.7 (430) (0.8)
Loss on disposal of investments 803 1.6 - - 89 0.2
Loss on repurchase of debenture stock - - - - 272 0.5
EPRA earnings and earnings per share 1,732 3.5 2,626 5.0 3,275 6.2
There is no difference between basic and diluted earnings per share.
There is no difference between basic and diluted EPRA earnings per share.
6. Tangible fixed assets
(a) Investment properties - property rental business
Right of use asset
Freehold Development Total
£000 £000 £000 £000
Valuation at 1 July 2021 174,690 2,768 41,451 218,909
Additions at cost 7,433 - - 7,433
Other capital expenditure 1,053 22 542 1,617
Disposals (29,680) (518) - (30,198)
Valuation movement 2,878 (22) 633 3,489
Movement in tenant lease incentives (144) - - (144)
Valuation at 1 July 2022 156,230 2,250 42,626 201,106
Additions at cost 7,532 - - 7,532
Capital expenditure 205 31 59 295
Disposals (7,645) - (12,750) (20,395)
Valuation movement (15,577) (31) 1,416 (14,192)
Movement in tenant lease incentives 15 - - 15
Valuation at 31 December 2022 140,760 2,250 31,351 174,361
Included within Investment properties (Development) is an asset valued at
£10.0m (2021: £8.5m) that relates to land that is expected to be sold in
March 2023. At 31 December 2022 there was sufficient uncertainty around both
the Section 106 planning agreement with the local authority and the purchasers
funding agreement that the sale was judged to not be highly probable and
accordingly not transferred assets held for sale.
(b) Freehold and right of use properties - car park activities
Right of use
Freehold asset Total
£000 £000 £000
Book Value at 1 July 2021 29,900 44,602 74,502
IFRS16 adjustment - (96) (96)
Depreciation (316) (1,480) (1,796)
Impairment (384) - (384)
Book Value at 1 July 2022 29,200 43,026 72,226
IFRS16 adjustment - (48) (48)
Depreciation (156) (756) (912)
Impairment (1,564) (1,095) (2,659)
Book Value at 31 December 2022 27,480 41,127 68,607
The historical cost of freehold properties and right-of-use assets relating to
car park activities is £30,153,000 (2021: 30,153,000)
(c) Freehold properties - hotel operations
Freehold
£000
Valuation at 30 June 2021 8,630
Depreciation (243)
Valuation movement 713
Valuation at 1 July 2022 9,100
Depreciation (121)
Valuation movement 121
Valuation at 31 December 2022 9,100
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.
Leasehold (right-of-use) car park properties are accounted for using the cost
model including an assessment of the future value of the minimum lease
payments and are amortised on a straight line basis over the remaining term of
the lease or useful economic live if deemed to be shorter.
Property income, values and yields have been set out by category in the table
below.
Initial Reversionary yield
Passing rent ERV Value yield
£'000 £'000 £000 % %
Retail and leisure 914 1,284 14,510 6.0 8.4
Merrion Centre (excluding offices) 4,884 5,194 52,649 8.8 9.3
Offices 2,782 5,017 55,391 4.7 8.6
Hotels 710 710 9,100 7.4 7.4
Out of town retail 1,086 1,070 13,000 7.9 7.8
Residential 429 442 7,460 5.4 5.4
10,805 13,717 152,110 6.7 8.5
Development property 31,351
Car parks 68,607
252,068
Investment properties (freehold and right of use) and hotel operations
The effect on valuation (excluding development property and car parks) of
applying a different yield and a different ERV would be as follows:
Valuation at an initial yield of 7.7% - £132.4m, Valuation at 5.7% - £178.7m
Valuation at a reversionary yield of 9.5% - £136.1m, Valuation at 7.5% -
£172.3m
Investment properties (development properties)
The key unobservable inputs in the valuation of one of the Group's development
properties of £14.8m is the assumed per acre or per unit land value. The
effect on the development property valuation of applying a different assumed
per acre or per unit land value would be as follows:
Valuation in the Consolidated Financial Statements if a 5% increase in the per
acre or per unit value - £15.5m, 5% decrease in the per acre or per unit
value - £14.1m.
The other key development property in the Group is valued on a per acre
development land value basis, the effect on the development property valuation
of applying reasonable sensitivities would not create a material impact.
Freehold car park activities
The effect on the total valuation of the Group's freehold car park properties
of £27.5m in applying a different yield/discount rate would be as follows:
Valuation in the Consolidated Financial Statements based on a 1% decrease in
the yield/discount rate - £32.4m, 1% increase in the yield/discount rate -
£23.9m
Property valuations can be reconciled to the carrying value of the properties
in the balance sheet as follows:
Investment Freehold and Leasehold Hotel operations
Properties Properties
Total
£000 £000 £000 £000
Externally valued by CB Richard Ellis 98,975 22,500 9,100 130,575
Externally valued by Jones Lang LaSalle 75,335 4,980 - 80,315
Investment and development properties valued by the Directors 51 - - 51
Right-of-Use Assets - 41,127 - 41,127
At 31 December 2022 174,361 68,607 9,100 252,068
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 Net book
Cost depreciation value
£000 £000 £000
At 1 July 2021 4,711 3,756 955
Additions 283 - 283
Depreciation - 262 (262)
At 1 July 2022 4,994 4,018 976
Additions 156 - 156
Depreciation - 125 (125)
At 31 December 2022 5,150 4,143 1,007
7. Goodwill and intangible assets
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Goodwill
At start of the period 4,436 4,436 4,436
Impairment (624) - -
3,812 4,436 4,436
Intangible assets
At start of period 476 405 405
On acquisition of subsidiaries - 250 293
Amortisation (123) (95) (222)
353 560 476
Total goodwill and intangible assets 4,165 4,996 4,912
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.
Intangible assets represent short term customer contracts relating to car park
enforcement businesses acquired in the periods.
8. Investments in joint ventures
Six months Six months Year
ended ended Ended
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Interest in joint ventures
At start of period 18,016 16,212 16,212
Investments in joint venture - - 326
Share of profits after tax 423 432 885
Loan interest 136 62 163
Valuation movement (2,350) 430 430
At end of period 16,225 17,136 18,016
Investments in joint ventures are broken down as follows:
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Equity 9,764 11,238 11,691
Loans 6,461 5,898 6,325
16,225 17,136 18,016
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
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Current Assets
Loan notes - Deferred Consideration 4,385 - -
Loan notes - Contingent Consideration 763 - -
5,148 - -
Non-Current Assets
Listed investments 5,063 5,952 4,096
Non-listed investments 410 3,415 410
Loan notes - Deferred Consideration 2,954 - -
8,427 9,367 4,506
13,575 9,367 4,506
Listed investments
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
At start of the period 4,096 5,802 5,802
Disposals (30) (63) (62)
Increase in value of investments 997 213 (1,644)
At the end of the period 5,063 5,952 4,096
Listed investments relate to an equity shareholding in a company listed on the
London Stock Exchange. This is stated at market value in the table above and
has a historic cost of £877,755 (2021: £882,300).
Listed investments are measured at fair value in the consolidated balance
sheet and are categorised as level 1 in the fair value hierarchy as defined in
IFRS 13 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
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
At the start of the year 410 3,415 3,415
Loan interest - - 413
Increase in value of investments - - 16,950
Transferred to assets held for sale - - (20,368)
410 3,415 410
In the prior year, non-listed investments primarily related to an equity
shareholding and loans advanced to YourParkingSpace Limited ('YPS'), a
privately owned company incorporated in the United Kingdom. The investment in
YPS was transferred to assets held for sale in the year ending 30 June 2022.
In July 2022, the Company sold its investment in YPS for day one proceeds of
£11.56m plus deferred and contingent elements of consideration in the form of
loan notes. This day one receipt included £9.61m relating to the Company's
equity interest in YPS and a further £1.95m in full repayment of it's
shareholder loan to YPS.
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
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Current assets
At the start of the year - - -
Loan notes issued to the Company in the period 4,287 - -
Loan interest 98 - -
4,385 - -
Non-current assets
At the start of the year - - -
Loan notes issued to the Company in the period 2,888 - -
Loan interest 66 - -
2,954 - -
The interest earned on the deferred consideration loan notes is 5% per annum.
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
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
At the start of the year - - -
Loan notes issued to the Company in the period 743 - -
Unwind of discount applied to contingent consideration 20 - -
763 - -
The contingent consideration loan notes were initially recognised at fair
value, based on the estimated performance of YPS in the 14 month period ended
October 2023. This is an estimate prepared by the Company. The contingent
consideration loan notes are then accounted for using the fair value through
profit and loss basis. Following completion of the sale of its investment in
YPS, the Company does not have access to any current YPS management
information. With the it's knowledge of the UK Car Parking market, together
with the volume of business the Group is continuing to generate on it's own
car parks through the YPS platform, the Company does not believe the
contingent consideration has suffered any impairment in the period.
These loan note assets are categorised as level 3 in the fair value hierarchy
as defined in IFRS 13 as the inputs to the valuation are based on unobservable
inputs.
10. Financial liabilities
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Current
Bank borrowings 3,466 34,956 32,999
Lease liabilities 1,665 1,649 1,656
5,131 36,605 34,655
Non-Current
Bank borrowings 2,328 12,293 4,792
Lease liabilities 26,717 27,426 27,080
5.375% First mortgage debenture stock 96,000 99,393 95,995
125,045 139,112 127,867
130,176 175,715 162,522
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 2022 31 December 2021 30 June 2022
Book value Fair value Book value Fair value Book value Fair value
£000 £000 £000 £000 £000 £000
Debenture stock 96,000 83,782 99,393 107,311 95,995 94,694
Non-current bank borrowings 2,328 2,328 12,293 12,293 4,792 4,792
11. Called up equity share capital
Authorised
164,879,000 (30 June 2022: 164,879,000) ordinary shares of 25p each.
Issued and fully paid up Number of shares Nominal
value
000 £000
At 1 July 2022 52,531 13,132
Purchase and cancellation of own shares (4,075) (1,019)
At 31 December 2022 48,456 12,113
12. Cash flows from operating activities
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2022 2021 2022
£000 £000 £000
Loss for the period (19,078) 10,464 11,012
Depreciation 1,159 1,151 2,301
Amortisation 123 95 222
Loss/(profit) on disposal of investment properties 171 (1,194) (4,563)
Profit on sale of fixed assets (16) - -
Loss on sale of investments 814 - 89
Finance costs 3,821 3,880 8,063
Finance income (304) - (576)
Share of joint venture losses/(profits) after tax 1,927 (924) (1,315)
Movement in revaluation of investment properties 14,192 (6,433) (3,489)
Movement in lease incentives (15) (27) 144
Impairment of car parking assets 2,659 340 384
Reversal of impairment of hotel assets - (121) -
Impairment of goodwill 624 - -
Decrease in receivables 813 524 1,083
Increase/(decrease) in payables 218 (1,204) (1,667)
Cash generated from operations 7,108 6,551 11,688
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
2022 2021 2022
Net asset value (£'000) 152,244 165,052 179,304
Number of ordinary shares in issue (000) 48,456 52,775 52,531
Net asset value per share (pence) 314p 313p 341p
14. Related party information
There have been no material changes in the related party transactions
described in the 2022 Accounts.
15. Post Balance Sheet Events
On 28 January 2023 the Company completed the buyback for cancellation of
£13.7m of its 5.375% first mortgage debenture stock. As part of this
transaction current bank borrowings increased by £11.0m on that day.
INDEPENDENT REVIEW REPORT TO Town Centre Securities Plc
Conclusion
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 2022 which comprises the consolidated condensed income statement, the
consolidated condensed balance sheet, the consolidated condensed statement of
changes in equity, the consolidated condensed cash flow statement and the
notes to the financial information
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 2022 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). 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.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of 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.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of 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, UK
Date 8 March 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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