REG - Wynnstay Properties - Final Results and notice of AGM
14/06/2023 07:00
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RNS Number : 6046C Wynnstay Properties PLC 14 June 2023
The information communicated within this announcement is deemed to constitute
inside information for the purposes of the Market Abuse Regulation (EU) No.
596/2014 as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement, this
information is considered to be in the public domain.
WYNNSTAY PROPERTIES PLC
("Wynnstay" or the "Company")
AUDITED RESULTS FOR YEAR ENDED 25 MARCH 2023 AND NOTICE OF AGM
14 June 2023
Wynnstay Properties PLC is pleased to announce the publication of its audited
results for the year ended 25 March 2023.
The Annual Report and Financial Statements is available on the Company's
website www.wynnstayproperties.co.uk and will shortly be posted to those
shareholders who have elected to receive documents by post, when a further
announcement will be made.
This announcement contains three sections from the Annual Report and Financial
Statements: Introduction to Wynnstay, Chairman's Statement and Managing
Director's Review. It also contains the four Financial Statements contained in
the Annual Report and Financial Statements together with the notes to those
statements.
As stated in the note at the end of this announcement, the financial
information set out in the announcement does not constitute statutory accounts
as defined in section 435 of the Companies Act 2006.
The Company's Annual General Meeting ("AGM") will be held on Tuesday 18 July
2023. Details of the arrangements for the meeting are set out in the notice of
meeting in the Annual Report and Financial Statements.
This announcement was approved by the Board on 13 June 2023
For further information please contact:
Wynnstay Properties plc
Philip Collins (Chairman)
020 7554 8766
WH Ireland Limited (Nominated Adviser and Broker):
Chris Hardie, Hugh Morgan, Sarah Mather
020 7220 1666
LEI number is 2138006MASI24JYW5076.
For more information on Wynnstay visit: www.wynnstayproperties.co.uk
WYNNSTAY PROPERTIES PLC
INTRODUCTION TO WYNNSTAY
A distinctive approach to commercial property investment primarily for private
investors
Wynnstay is an AIM listed property investment and development business. Its
principal shareholders are private investors wishing to invest in a portfolio
of good quality secondary commercial properties for medium to long-term
capital and income growth. The portfolio is currently focused on industrial,
including trade counter, units.
Strategy
Wynnstay aims to achieve capital appreciation and generate rising dividend
income for shareholders from a diversified and resilient commercial property
portfolio in Central and Southern England, with diversity and resilience being
reflected in the location, number and nature of the properties, and the mix of
lease terms, tenants and uses.
For location, the focus is on areas where there is strong occupational demand.
While many tenants have been in occupation for a considerable time, where a
tenant leaves, voids can be managed and re-lettings can be achieved.
The majority of properties are multi-let, resulting in a number of individual
tenancies in most locations, reducing exposure to any single tenant and risk
of loss of rental income in the case of defaults and voids.
Leases are mainly for terms of five years or more with relatively few
short-term agreements (two years or less), and usually with upward only rent
reviews based on market rates. Flexibility in addressing tenant needs and
requirements generally mean that the terms agreed result in a mutually
beneficial outcome for both parties.
Tenants comprise a broad spread of occupiers, also reducing risk exposure:
national and local government, international businesses, national trading
chains and regional and local businesses. Uses include manufacturing and
services; storage and distribution; and trade counter and out-of-town retail.
Active direct management and close engagement and constructive business
relationships with tenants, together with refurbishment and selective
development over time, underpin capital value and increase income.
Managed for shareholders
The portfolio is directly, rather than externally, managed. Finance and
administrative operations are largely outsourced to external providers to meet
specific needs. All report to the Board, the majority of whom are
non-executive directors.
Management remuneration comprises salary and, where appropriate, a cash bonus.
Wynnstay does not offer incentive schemes, such as share plans, share options
or share bonuses.
As a result, both management and the Board are focused on Wynnstay's
performance for the benefit of shareholders, operational costs are closely
controlled and dilution of shareholders' investment and potential conflicts of
interest are minimised.
Incremental growth
The portfolio has been built incrementally, with opportunities being taken to
dispose of assets as and when the time is appropriate and to reinvest in
assets that offer better long-term returns.
This is achieved gradually over time, without the need for deal-driven
activity in pursuit of corporate or portfolio expansion.
Funding
Wynnstay adopts a prudent, pragmatic approach to funding. Investments are
funded in part by retained profits and recycling capital receipts from
disposals and in part from borrowings, the majority at a fixed rate and held
at a modest loan-to-value level, from an experienced and supportive property
lender. This provides security at times of uncertainty in debt markets.
Valuation
Properties are valued on a cautious basis, based upon professional advice from
expert external valuers, recognising that commercial property is a cyclical
market that can exhibit significant upward and downward movements over time
and that steadiness and progression are most likely to be in shareholders'
interests.
Wynnstay on AIM
Wynnstay's shares were quoted on its AIM introduction in 1995 at a mid-market
price of 150p. On the day prior to the approval of this report, the mid-market
price was 675p, an increase of 350%. The dividend paid in 1995 was 4p per
share. The dividend paid and proposed for the current year will be 24p per
share, an increase of 500%.
Performance
Wynnstay's distinctive approach has delivered on its strategy over both the
medium and long term. Shareholders have benefitted from substantial increases
in net asset value per share and dividends as the portfolio and its management
have delivered strong results.
Corporate Performance over 5 years
Year Ended 25 March 2023 2022 2021 2020 2019
pence pence pence pence pence
Net Asset Value per share 1,110p 1,090p 911p 792p 807p
Five Year Net Asset Value Growth 37.5%
Dividends per share, paid and proposed 24.0p 22.5p 21.0p 15.0p 19.0p
Five Year Dividend Growth 26.3%
Portfolio Performance
Year ended 25 March 2023 2022 2021 2020 2019
£'000 £'000 £'000 £'000 £'000
Property Income 2,312* 2,308 2,438 2,271 2,216
Rental Income 2,304 2,252 2,140 2,271 2,216
Underlying(†) 5 Year Rental Income Growth 25.5% 2,179 1,730
Portfolio Value 39,320 38,975 34,005 34,260 35,095
Underlying(†) 5 Year Portfolio Value Growth 31.2% 37,220 28,365
% % % % %
Loan-to-value ratio 25.3% 25.5% 29.4% 36.5% 35.6%
Gearing ratio 22.3% 21.8% 32.4% 52.2% 52.7%
Occupancy at year-end 100% 100% 99% 94% 100%
Rent Collection for year 100%(♦) 100% 99%(►) 100% 100%
Operating Costs/Income 31.1%(♠) 32.0% 34.8% 30.3% 28.2%
Operating Costs/Portfolio Value 1.8%(♠) 1.9% 2.5% 2.0% 1.8%
years years years years years
Weighted average unexpired lease term:
- to lease break 3.1 3.0 2.8 3.6 2.8
- to lease expiry 4.4 4.4 4.5 4.8 4.2
* Includes £8,000 of Other Property Income. See note 2 of the
Financial Statements.
(†)( ) Underlying Rental Income and Portfolio Value are for properties
that have been held in the portfolio throughout the five year period. As a
result, a property purchased in September 2019 with Rental Income of £111,000
and valuation of £1,840,000 and properties sold in the period with an
aggregate Rental Income of £351,000 and an aggregate valuation of £5,920,000
have been excluded.
(►) Excludes rent concessions of £29,000 granted to tenants as a result
of the Covid-19 pandemic.
(♦) After rounding for £8,000 bad debt (0.3%).
(♠) Excludes £81,000 of non-recurring costs incurred in 2023 relating
to new Board appointments.
Share Price Performance
Although Wynnstay is quoted on AIM, and therefore is not a constituent of the
FTSE 350 Real Estate Investment Trusts Index, the index contains a good
cross-section of quoted property companies of various forms, all much larger
than Wynnstay. Wynnstay's share price relative to the FTSE 350 Real Estate
Investment Trusts Index is shown in the chart below. Wynnstay's share price
has substantially outperformed the index over the ten-year period.
WYNNSTAY PROPERTIES PLC
CHAIRMAN'S STATEMENT
Against the background of considerable economic and political uncertainty,
which has affected the financial and property markets as well as the personal
finances of all of us, I am pleased to report on another successful year for
Wynnstay and its shareholders.
Last year's report introduced a new section, entitled Introduction to
Wynnstay. This described Wynnstay's distinctive approach to commercial
property investment primarily for private shareholders and provided
information both on the Company's performance and its share price performance
over time. The section has been retained and updated in this report and
continues to highlight Wynnstay's continued strength over time across a range
of measures. I encourage all shareholders to read it.
The past year has also been significant for Wynnstay as we have planned and
been preparing for succession on the Board, including the appointment of two
new Non-executive Directors and the appointment of a new Managing Director to
succeed Paul Williams. I will report further on these appointments later in
this statement.
Returning to the past year, Wynnstay's financial performance is summarised in
the following overview table.
Overview of financial performance
Change 2023 2022
• Rental Income
Annual* 2.3% £2,304,000 £2,252,000
Underlying* 10.4% £2,304,000 £2,087,000
• Net Property Income ** (4.6)% £1,497,000 £1,569,000
• Operating Income (75.7)% £1,842,000 £7,581,000
• Income before Taxation (80.1)% £1,430,000 £7,202,000
• Earnings per share (weighted average) (78.9)% 42.2p 199.8p
• Dividends per share, paid and proposed 6.7% 24.0p 22.5p
• Net asset value per share 2.0% 1,110p 1,090p
• Loan to value ratio 25.3% 25.5%
• Gearing ratio 22.3% 21.8%
* Annual Rental Income is shown in note 2 of the Financial Statements
and Underlying Rental Income is the like-for-like income from properties held
in the portfolio throughout both years and thus excludes rental income in 2022
of £165,000 from the Surbiton property sold in February 2022.
** Excludes £81,000 of non-recurring costs incurred in 2023 relating to new
Board appointments.
An innovation in this Annual Report is that our Managing Director, Paul
Williams, has prepared a separate review of the management activity within the
portfolio during the year, including some market context for this activity,
the revaluation and the financial results. His review, which follows this
statement, also gives a retrospective review of the evolution of the portfolio
over his time at Wynnstay. He also comments on the important focus given over
the past two years to improving the energy efficiency of our properties.
Portfolio and Valuation
There were no changes in the portfolio in the year. We continued actively to
identify and pursue suitable additions to the portfolio. Opportunities at
acceptable prices proved difficult for most of the year and we considered that
it was prudent to retain cash until conditions for acquisitions improved. Late
in the year negotiations commenced for the £2.5m acquisition of Riverdale
Industrial Estate, Tonbridge and the transaction was eventually completed
after the year-end. Further details are contained in the Managing Director's
Review.
Whilst annual rental income increased by 2.3% to £2,304,000 compared to the
prior year (2022: £2,252,000), the underlying rental income on a
like-for-like basis, excluding the Surbiton property sold late in the prior
year, increased by 10.4% to £2,304,000 (2022: £2,087,000). This significant
increase in income reflects the benefits of the active management of the
portfolio described in the Managing Director's Review.
Our Independent Valuers, BNP Paribas Real Estate, undertook the annual
revaluation as at 25 March 2023 valuing the Company's portfolio at
£39,320,000. This represents a 0.9% increase of £345,000 on the valuation as
at 25 March 2022 and again reflects the benefits of the active management of
the portfolio.
Although the increase in the valuation this year (0.9%) is modest compared to
last year (2022: 23.7%), it should be recalled that last year's impressive
increase reflected conditions in late 2021 and early 2022 and it was self
evident that the market was likely to turn - as was indeed the case in the
third and fourth quarters of 2022. This reversal resulted in significant
valuation reductions in the commercial property sector, including for other
quoted property companies with industrial portfolios. The reductions
followed changes in the market after March 2022 as successive significant rate
increases, rising inflation and economic uncertainty impacted yields. So it is
worth reflecting on some reasons why the Wynnstay portfolio has performed well
compared to some others.
Wynnstay's portfolio stands apart from other quoted property companies with
industrial portfolios in that our assets are located in areas where there is
robust occupational demand and limited supply, where modest rents generally
provide opportunity for further rental growth over time as rent reviews arise
and new lettings are achieved. The relatively small lot sizes of our assets
also appeal, when marketed for sale, to a wide range of private investors.
The nature of the property valuation process means that there will always be a
range within which the valuers work to reach a final valuation figure.
Wynnstay has always valued its portfolio on a cautious basis based on
professional advice from expert external valuers, recognising that commercial
property is a cyclical market that can exhibit significant upward and downward
movements over time and that steadiness and progression are most likely to be
in shareholders' interests.
While this year the yields used by our valuers in determining the investment
value of the assets generally moved out by between 0.25% and 0.5%, and in one
case by 1%, the valuation benefitted overall from the management activity
described in the Managing Director's Review which delivered increases in
rental income and these increases, together with other market data,
underpinned the estimated rental values used in the valuation.
The annual valuation is undertaken under accounting standards for use in our
financial statements in accordance with RICS Global Standards and values each
property as a separate asset on the basis of a sale of that property in the
open market. Therefore, the valuation does not take account of any additional
value that might be realised if the portfolio were to be offered on the open
market or any other special factors that may be relevant in the case of
individual potential purchasers, such as sales to other property investors,
existing tenants or adjoining owners.
Income (Profit) and Costs
Income (Profit) for the year is shown in the Statement of Comprehensive
Income.
Net Property Income, before the fair value adjustment of investment
properties, property sales and taxation, for the year was £1,497,000 (2022:
£1,569,000).
Operating Income after the fair value adjustment and property sales before
taxation fell to £1,842,000 (2022: £7,581,000) principally as a result of
the fact that no assets were sold in the year to generate profits on disposal
and the valuation surplus for the year of £345,000 was much lower that the
exceptional increase in the prior year (2022: £5,887,000).
The combined result is Income before Taxation for the year of £1,430,000
(2022: £7,202,000).
We continue our policy of exercising tight control over administrative costs.
Non-recurring costs of £81,000 were incurred on succession matters, described
further below. Property costs were lower than in the prior year at £96,000
(2022: £125,000) as no significant void or refurbishment costs were incurred.
Finance, Borrowings and Gearing
Wynnstay remains in a strong financial position.
At the year-end, we held cash of £3.3 million (2022: £3.5 million), our core
borrowing was unchanged at £10.0 million (2022: £10.0 million) and our
interest rate is fixed at 3.61% until December 2026. Net gearing was 22.3%
(2022: 21.8%). In addition to our available cash balance and positive cash
flow from our property activities, our £5m revolving credit facility remained
undrawn.
As already mentioned above, since the year-end we have invested £2.5m of our
year-end cash resources on the acquisition in Tonbridge described in the
Managing Director's Review.
Dividend
Over recent years we have sought to pursue a progressive dividend policy that
aims to provide shareholders with a rising income commensurate with Wynnstay's
underlying growth and finances.
In the light of the satisfactory results for the year, the Board recommends a
final dividend of 15.0p per share (2022: 14.0p). An interim dividend of 9.0p
per share (2022: 8.5p) was paid in December 2022. Hence, the total dividend
for this year of 24.0p per share (2022: 22.5p) represents an increase of 6.7%
on the prior year.
Over the past five years, dividends have increased by 26.3% from 19.0p to
24.0p.
Subject to shareholder approval, the final dividend will be paid on 26 July
2023 to shareholders on the register at the close of business on 30 June 2023.
Board Succession
In the course of reviewing the composition of the Board and succession
planning, Charles Delevingne expressed his wish to retire from the Board.
Accordingly, we appointed a firm specialising in non-executive appointments to
identify suitable candidates. Our external recruitment process attracted keen
interest from a good range of qualified candidates and, in March 2023, we
announced the appointment of two new Non-executive Directors, Hugh Ford and
Ross Owen.
Hugh is a solicitor who has practiced in a major city firm and in industry,
latterly in a major listed property company. Ross is a chartered surveyor with
extensive commercial property investment management experience both as a
partner in private practice and as a consultant and adviser. Further
information on their careers is provided in the biographies at the end of this
report. Their complementary backgrounds, experience and skills in business and
commercial property will bring fresh insight and perspective to our Board
deliberations on the evolution of Wynnstay's portfolio and the Company's
future direction.
I am sure that I speak on behalf of all shareholders in thanking Charles
Delevingne for his contribution to Wynnstay's success over the past twenty
years during which his wisdom and guidance have been invaluable in
implementing the major changes we have made to the portfolio which have
underpinned delivery of our successful results for shareholders.
Management Succession
Paul Williams was appointed as Managing Director in 2006 and, having reached
normal retirement age late last year, he indicated his wish to stand down when
a suitable successor had been identified. Accordingly, we appointed a firm
specialising in senior recruitment in the commercial property sector to carry
out a search and announced a few weeks ago the appointment of Christopher
Betts as Paul's successor. He will join Wynnstay next month as Managing
Director designate and will join the Board, following a short handover period,
later this summer.
During Paul's tenure as Managing Director the Company's portfolio has been
transformed, as he reflects in his review below. When he was appointed, the
portfolio comprised, in the main, small single-tenanted assets with a mix of
industrial, office and retail uses. Under his leadership, Wynnstay has
concentrated its investments into larger, multi-let, assets predominantly in
the industrial, including trade-counter, sector. He has focused acquisitions
on higher quality assets let to tenants with better covenants as well as
identifying sites suitable for development adjacent to existing assets and
planning small-scale developments that enhance the value of those assets.
In managing the portfolio to bring about this transformation, Paul has
displayed the benefit of his wide experience in commercial property and his
personal skills in dealing with people and the issues and challenges that
arise, some in the ordinary course and others in unusual circumstances. He has
built strong relationships with many of our tenants that has been invaluable
in understanding their needs and maintaining them as longstanding occupiers
and ensuring that they respect their lease obligations to us.
These strong relationships combined with Paul's patience and tenacity have
resulted in few bad debts and few voids in the portfolio over his seventeen
years at Wynnstay. Where tenants have faced difficulties, he has been
sympathetic in dealing with them unless, of course, he was dealing with those
who might wish to avoid their obligations through their own business failings.
Wynnstay's scale and structure in which the Managing Director is the only
full-time employee mean that Paul has had to turn his hand to many different
tasks and challenges, including several office moves and technological changes
as the Company adapted to new ways of operating, including the sudden change
to virtual working as a result of Covid-19.
On behalf of shareholders, I thank Paul for his significant contribution to
the Company's evolution over this period and wish him a long and happy
retirement.
Our Managing Director designate, Christopher Betts, has been a Chartered
Surveyor for over 30 years. After graduating from Oxford Brookes University
with a BSc in Estate Management, he joined Cluttons as a graduate trainee
where he spent his first ten years in professional practice.
Subsequently, he has worked for various commercial property businesses
including British Land, Frogmore and Romulus. Latterly he has been advising on
and implementing a strategy and management programme at Peabody Trust for
their London and South-East corporate office portfolio following significant
recent mergers with other social housing providers.
Shareholder Matters
In my statement last year, I reported on the Board's review of the liquidity
and marketability of Wynnstay shares and on the actions being taken as a
result.
You will recall that Wynnstay has a small, and rather unusual, share register
on which there are under 250 accounts, a significant number of which are
connected through family relationships, with private investors rather than
funds or institutions as shareholders. In the main, they are long-term
investors with some holdings having passed from generation to generation since
the company was founded in 1886. These long-term investors provide stability
and continuity within the shareholder base. As a result of this base the
volume and proportion of Wynnstay shares traded in the market is less than for
many quoted companies with larger share registers and more dispersed holdings.
Fewer Wynnstay shares tend to be available to trade and then only usually in
modest quantities and with a sizeable "spread" between the bid and offer
price. Shares are typically traded at a significant discount to the net asset
value per share. However, both these features are also seen in other, much
larger, quoted property companies.
Among the actions we decided to take was the provision of further succinct
information on Wynnstay, its business and performance and to demonstrate
Wynnstay has performed well for its investors, both against its objectives and
relative to other quoted property companies, in the medium to long-term. The
information provided last year has been updated and is contained in the
Introduction to Wynnstay section above. The Company specific information
demonstrates, in the Board's view, the benefits of Wynnstay's distinctive
approach and the share price comparison shows that Wynnstay's share price has
continued substantially to outperform the comparative real estate sector.
Share prices in the sector were buoyant during the first half of the last
calendar year, but then declined substantially as concerns about the economy,
inflation and interest rates affected both valuations and market sentiment
towards the sector. While Wynnstay's share price has not been immune from this
decline, the impact on Wynnstay has been significantly less than on the sector
as a whole. The chart in the Introduction to Wynnstay section above shows that
over the past ten years, while Wynnstay's share price has more than doubled,
the performance of the comparative real estate sector has remained flat.
We also decided to ask shareholders to give Wynnstay authority to purchase its
own shares so that the Company can act as a purchaser in the market where it
is appropriate, and in the interests of shareholders generally, to do so.
Other quoted property and investment companies, as well as other quoted
companies, use share buybacks on a routine basis to enhance earnings and net
asset value per share. Where shares are bought back dividends cease to be
payable, thus conserving cash in the business and benefitting continuing
shareholders and with the present intention being to hold any shares bought
back in treasury so that they are available for reissue where there is market
demand for shares or to facilitate individual property acquisitions.
Shareholders granted this authority at the Annual General Meeting in July
2022. The volume of shares traded since then has been relatively small and the
market has generally been able to absorb most of the shares offered. However,
the authority was used to acquire 15,000 Ordinary Shares at 710p in September
2022. The Board keeps the position under review and may exercise the authority
when shares are available in the market and it is in the interests of
shareholders generally to do so.
We also considered that Wynnstay's future development would be assisted if
authority continued to be granted by shareholders, as has been the case for
many years, to issue a limited number of shares without first offering them to
existing shareholders. This gives Wynnstay flexibility, for instance, to issue
shares for small fundraisings which might support a larger acquisition and
allow the issue of shares as part consideration on individual property
acquisitions to vendors, where the vendors wish to retain in interest in a
broader portfolio of assets in a quoted company. Bringing in new investors
with an interest in commercial property and in Wynnstay's distinctive approach
to the share register would broaden the shareholder base and support its
future development.
Outlook
At this time last year, I noted that the UK had entered a further period of
uncertainty, following Brexit and the Covid pandemic, as a result of the
effects of the Russian invasion of Ukraine and of rising inflation imposing
real pressure on business costs and household incomes with consequent
potential impacts on the economy.
This uncertainty continued throughout the year, not least as a result of the
several changes of administration in government. Inflation reached levels not
seen for forty years, with a major contributor being huge increases in energy
prices which have affected both businesses and consumers although government
measures have provided some relief. However, recent economic news has been
more positive than might have been expected last autumn, when a long economic
recession was forecast and inflation was continuing to rise.
Despite these conditions, Wynnstay remains in a very healthy position. We have
a focused, stable and well-let portfolio which has been enhanced through
acquisitions and disposals over the years. It is delivering, and is capable of
continuing to deliver, growth of capital and income for shareholders in the
medium and long-term. The main risks to continued growth are economic and
political, such as significant disruption caused by events beyond our control
or the UK economy suffering a significant downturn which affects the ability
or willingness of businesses to invest or of consumers to spend.
The commercial property market is cyclical. Asset values can move up and down
over time as a result, as we have seen over the past several years. Wynnstay
has always adopted a cautious and realistic approach in valuing our assets and
to the management and development of the business. As noted above, our annual
revaluation is undertaken for accounting purposes and values our individual
assets, not the portfolio as a whole.
Within the Wynnstay portfolio, the first few months of this financial year
have been encouraging in terms of rental growth as the update in the Managing
Director's Review describes. Accordingly, despite the broader uncertainties in
the economy and elsewhere, the Board is optimistic about the current outlook
for Wynnstay's business.
Colleagues and Advisers
Our Managing Director, Paul Williams, and our finance and company secretarial
colleagues have continued to work effectively to deliver for shareholders. I
would like to thank them, as well as my colleagues on the Board and our
professional advisers, for their support over the year.
This support has been especially evident over the past year in addressing
Board succession, and also in the prior year when we changed both our auditors
and our nominated advisers and corporate brokers.
Shareholding Enquiries
From time to time we receive enquiries from shareholders with questions about
their shareholdings or about buying or selling Wynnstay shares or transferring
them, typically to relatives.
All enquiries about shareholdings, including changes of address and bank
details and about such transfers of shares, should be directed to our
Registrars, Link Group.
As regards buying or selling shares, this can be carried out by registering
the holding online with our Registrars, Link Group, via their secure share
portal www.signalshares.com (http://www.signalshares.com) , which also enables
shareholdings to be managed quickly and easily. Shares can, of course, also be
bought and sold in the usual way through a stockbroker or an online platform.
Annual General Meeting
The AGM provides an important and valued opportunity for the Board to engage
with shareholders.
Our AGM this year will be held at 2.30pm on Tuesday 18 July 2023 at the Royal
Automobile Club, 89 Pall Mall, London SW1Y 5HS. The Notice of Meeting is to be
found at the end of this Annual Report.
I urge all shareholders to complete and return their proxy forms so that their
votes on the resolutions being put to the meeting can be counted.
Shareholders who have registered for Link services online can also benefit
from the ability to cast their proxy votes electronically, rather than by
post. Shareholders not already registered for Link services online will need
their investor code, which can be found on their share certificate or dividend
tax voucher, in order to register.
To maximise shareholder engagement, shareholders who are unable to attend the
AGM are encouraged to submit in writing those questions that they might have
wished to ask in person at the meeting. Questions should be emailed to
company.secretary@wynnstayproperties.co.uk at least 48 hours in advance of the
AGM. You will receive a written response and, if there are common themes
raised by a number of shareholders, we aim to provide a summary for all
shareholders, grouping themes and topics together where appropriate, on the
Company's website following the AGM.
Finally, on behalf of the Board, I would like to thank all shareholders,
whether they have held shares for many years or have recently acquired shares,
for their interest in and support for Wynnstay.
Philip Collins
Chairman
13 June 2023
WYNNSTAY PROPERTIES PLC
MANAGING DIRECTOR'S REVIEW
In my final full year at Wynnstay I am pleased to have the opportunity to
report on the management activity within the portfolio during the year and to
reflect on the evolution of the Wynnstay portfolio over the last seventeen
years while I have been Managing Director.
The Portfolio during 2022-23
I will focus primarily on the portfolio which, as at the year-end, comprised
83 units and a development site in 15 locations.
Due to the number of leases, in most years there is inevitably a reasonable
level of lease negotiation activity. However, the year just ended has been one
of the most active that I can remember with ten lease renewals, five rent
reviews, two leases being varied and one new letting. In addition, there were
extended negotiations on one acquisition completed following the year-end to
which I refer below.
Of the lease renewals that completed during the year, four were at Aylesford,
two at Lichfield, two at Hailsham and one each at Ipswich and Uckfield. It is
always pleasing to retain tenants on renewal and as a consequence of the ten
renewed leases the rents receivable under these leases have increased by over
16% which will be reflected in future rental income. We completed five rent
reviews, three at Petersfield and two at Aylesford and as a result of these
five reviews the rents receivable under these leases have increased by over
17%.
With the good level of tenant retention through lease renewals, there are
fortunately fewer vacant properties arising and hence less expenditure on
empty property rates and refurbishment costs and inevitably less new letting
activity. However, at Liphook one tenant did vacate early in the year and the
unit was very quickly relet at a rent which is over 33% higher than previously
received. This new letting creates excellent evidence to support rental
increases elsewhere on the estate where further reviews are due in the next
year or two.
During the year we completed two variations of existing leases. The first was
at Cosham where we removed a tenant break clause thus securing annual rental
income from the tenant for a further five years. The second was at Lichfield
where a tenant break option that would have been due in 2026 was removed such
that the rent will now continue until at least 2031 and will remain subject to
an upward only rent review in 2026.
Portfolio in the current year
Compared with the active year I have described above, in the current year
there will be a smaller number of lease negotiation transactions overall.
However, there are some significant leases where renewals or reviews are due
and where useful evidence for the level of market rents has been established
in transactions completed in the prior year described above or in the early
months of current year. Hence, I am optimistic about the outlook for the
current year.
Portfolio Valuation
The lease activity described above has had a significant positive effect on
the March valuation. As already noted in the Chairman's Statement, our
Independent Valuers, BNP Paribas Real Estate, undertook the annual revaluation
as at 25 March 2023 valuing the Company's portfolio at £39,320,000. This
represents a 0.9% increase of £345,000 on the valuation as at 25 March
2022.
The Chairman has pointed out in his statement that while this percentage
increase is modest compared to last year (2022: 23.7%), it should be
considered against the background of significant valuation reductions in the
commercial property sector and he has commented on some of the reasons for
this. I hope that the lease negotiation activity of the past year and in the
current year to date, together with the further activity over the course of
the rest of the year to which I have referred above will assist in
underpinning the valuation in March 2024.
Post year-end acquisition
As announced on 28 April 2023, we exchanged contracts for the purchase of
Riverdale Industrial Estate, Tonbridge and completion took place in May 2023.
We had agreed terms for this acquisition in mid-December 2022, but for various
reasons the legal due diligence took several months. The total acquisition
cost of approximately £2.5 million was funded entirely from the Company's
existing cash resources.
This freehold property comprises of five industrial units arranged as two
terraces with a central service yard. The estate is fully let to four tenants
with a range of lease expiry dates. The current rent from the estate is
£140,350 per annum and is subject to three outstanding upward only rent
reviews effective from 29 September 2022 and a pending lease expiry effective
from 30 November 2023. The net initial yield is 5.6%, which is anticipated to
rise to around 6.9% when the outstanding rent reviews and lease renewal have
been concluded.
The acquisition provides a good strategic fit with the existing portfolio in
the south-east of England, including Quarry Wood Industrial Estate at
Aylesford.
Energy efficiency in the portfolio
Over the past two years we have focused on improving the energy efficiency of
all the properties in the portfolio. To achieve net-zero carbon by 2050 the UK
government is setting and reviewing targets and regulations for the continual
improvement of properties' Energy Performance Certificate (EPC) ratings as key
to achieving this goal. Current EPC ratings for commercial properties run from
A to G, with buildings that are rated A considered the most, and those rated G
the least, energy-efficient. The latest government target is that, from 1
April 2023, all new lettings of non-domestic private rented property must have
an EPC rating of E or above.
During the year there has been considerable activity, working with our tenants
at various individual properties generally at modest cost and often undertaken
where tenants wish to make other changes to suit their business needs, to
achieve or improve upon existing EPC ratings to ensure we meet the
Government's target.
I am pleased to report that the target of having all properties in the
portfolio with EPC ratings of E and above by 1 April 2023 was exceeded, with
many of the properties achieving an EPC rating of C and above. The
Government's latest proposal is that all new lettings of commercial buildings
should achieve an EPC rating of C or above by April 2025 and Wynnstay
continues to work towards achieving this goal across its portfolio in advance
of this deadline.
Reflections on the evolution of the portfolio
I have been Managing Director of Wynnstay for over seventeen years, having
been appointed in February 2006. On my appointment, the portfolio comprised,
in the main, small single-tenanted assets with a mix of industrial, office and
retail uses. Since then, Wynnstay has concentrated its investment principally
into larger, multi-let, assets predominantly in the industrial, including
trade-counter, sector. I am pleased to have been able to take the lead in
bringing about this transformation, upgrading the quality of the assets and
the tenant covenants. I am particularly proud of delivering our successful
development at Petersfield last year which had to be undertaken against the
challenges of Covid-19 and its effects on the construction industry. It has
proved to be an excellent addition to the portfolio.
At the time of my appointment the portfolio comprised 55 units in 20 locations
with a value of just over £20 million producing a rental income of just over
£1.5 million per annum. The current portfolio, following the recent
acquisition at Tonbridge, comprises 88 units and a development site in 16
locations with a value of close to £42 million and a rental income of about
£2.5 million per annum. In total, the portfolio now comprises over 250,000
square feet of lettable space.
Looking back over the past seventeen years, I have sold 16 of the 23 assets
that I inherited in 2006 and have added 11 assets to the portfolio. Of the
original 23 assets only 7 remain in the portfolio, with the offices in
Surbiton having been bought and sold during my tenure.
The assets sold comprised mainly small, single-tenanted, properties including
retail shops and small offices divided into suites, often with individuals as
tenants and single industrial units. Where there have been redevelopment
opportunities, typically for residential use, the assets have been sold at
prices that reflected the higher value use or the greater value for
development to a neighbour.
The funds realised from these disposals have been redeployed into larger,
better quality, assets including several multi-let industrial estates such as
those at Aylesford, our largest asset, Ipswich, Lichfield, Liphook and
Petersfield. The tenants now include well-known national brands, often owned
by quoted companies, with stronger covenants than those of our historic small
business tenants. Some assets offered opportunities for development, such as
at Aylesford, Liphook and Petersfield.
During the same period Wynnstay's net asset value and dividends have increased
from 418p and 8.3p per share to 1,110p and 24.0p per share respectively.
Wynnstay's share price has substantially outperformed the FTSE 350 Real Estate
Investment Trusts Index over the last ten years as shown in the Introduction
to Wynnstay section above. I am pleased to have played my part in delivering
these results to shareholders.
This performance has been achieved despite various major hurdles ranging from
the global financial crisis of 2008-9 to the Covid-19 crisis of 2020-22 and
now to the gloomy world economic outlook that has developed since Covid-19
notably as a result of the Russian invasion of Ukraine and several other
regional conflicts and geopolitical tensions. Over the period, the commercial
property market in the UK has been through several cycles of upturns and
downturns, the latest arising from the impact of rising inflation and interest
rates over the past year.
I have certainly enjoyed my time at Wynnstay dealing with the many and varied
tenants and their businesses, meeting and trying to work with them, on a
principal-to-principal basis, to achieve the optimum result for them and their
businesses as well as, of course, for Wynnstay shareholders. Maintaining
positive and constructive relations with tenants is essential in a commercial
property business and especially so in difficult times whether due to general
economic conditions or to specific trading difficulties in a tenant's business
and even when I have not been the giver of good news to a tenant.
As with all commercial property portfolios, tenants sometimes produce
unexpected challenges. For instance, in Wynnstay's case, I recall the meat
pie-making tenant who went into liquidation just before Christmas, leaving
freezers full of ingredients at our unit. The electricity supplier had
disconnected the power supply and the staff had vacated the unit. I was faced
on repossession of the unit in January with arranging the disposal of
considerable volumes of rotting meat which was a most unpleasant experience.
On a more positive note, another tenant on liquidation left the premises full
of racking and a large volume of motor spare parts which I was able to sell by
auction over time, realising not only sufficient funds to cover the
outstanding rent, but also the refurbishment of the premises for reletting at
an increased rent.
In the coming weeks, I will be familiarising my successor, Chris Betts, with
the Wynnstay portfolio and our tenants in order to ensure a smooth transition
as well as discussing with him some of the opportunities that may arise
depending on the direction that he and the Board may wish to take the
portfolio. I am confident that Wynnstay can continue to grow successfully for
the benefit of all shareholders, of which I plan to continue to be one, and I
will follow the Company's future development with great interest.
Finally, I would like to thank the Board, our professional advisers, our
service providers and suppliers for their support over many years and to thank
all the Wynnstay shareholders over the past seventeen years for their loyalty
and commitment.
Paul Williams
Managing Director
13 June 2023
WYNNSTAY PROPERTIES PLC
STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED 25 MARCH 2023
Notes 2023 2022
£'000 £'000
Property Income 2 2,312 2,308
Property Costs 3 (96) (125)
Administrative Costs 4 (719) (614)
Net Property Income 1,497 1,569
Movement in Fair Value of 345 5,887
Investment Properties 10
Profit on Sale of Investment Property - 125
Operating Income 1,842 7,581
Investment Income 6 27 --
Finance Costs 6 (439) (379)
Income before Taxation 1,430 7,202
Taxation 7 (288) (1,784)
Income after Taxation and Total Comprehensive Income 1,142 5,418
Basic and diluted earnings per share 9 42.2p 199.8p
The Company has no items of other comprehensive income.
WYNNSTAY PROPERTIES PLC
STATEMENT OF FINANCIAL POSITION 25 MARCH 2023
2023 2022
Notes £'000 £'000
Non-Current Assets
Investment Properties 10 39,320 38,975
Investments 12 3 3
39,323 38,978
Current Assets
Trade and other receivables 14 482 301
Cash and Cash Equivalents 3,268 3,491
3,750 3,792
Current Liabilities
Trade and other payables 15 (844) (1,048)
Income Taxes Payable (308) (284)
(1,152) (1,332)
Net Current Assets 2,598 2,460
Total Assets Less Current Liabilities 41,921 41,438
Non-Current Liabilities
Bank Loans Payable 16 (9,951) (9,938)
Deferred Tax Payable 17 (2,034) (1,953)
(11,985) (11,891)
Net Assets 29,936 29,547
Capital and Reserves
Share Capital 18 789 789
Capital Redemption Reserve 205 205
Share Premium Account 1,135 1,135
Treasury Shares (1,734) (1,570)
Retained Earnings 29,541 28,988
29,936 29,547
Net Asset Value pence per share 1,110p 1,090p
Approved by the Board and authorised for issue on 13 June 2023
P.G.H.
Collins
C.P. Williams
Director
Director
Registered number: 00022473
WYNNSTAY PROPERTIES PLC
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 25 MARCH 2023
2023 2022
£'000 £'000
Cash flows from operating activities
Income before taxation 1,430 7,202
Adjusted for:
Increase in fair value of investment properties (345) (5,887)
Interest receivable (27) -
Interest and finance costs payable 439 379
Profit on sale of investment property - (125)
Amortised loan fees 13 -
Revaluation movement 33 -
Changes in:
(Increase)/decrease in trade and other receivables (181) 41
(Decrease)/increase in trade and other payables (181) 153
Cash generated from operations 1,181 1,763
Income taxes paid (206) (284)
Net cash generated from operating activities 975 1,479
Cash flows from investing activities
Interest and other income received 27 -
Purchase of investment properties - (1,583)
Sale of investment properties - 2,618
Net cash generated from investing activities 27 1,035
Cash flows from financing activities
Interest paid (439) (379)
Dividends paid (622) (583)
Drawdown of bank loans net of fees - 9,938
Repurchase of shares into treasury (164) -
Repayment of bank loans - (10,000)
Net cash used in financing activities (1,225) (1,024)
(Decrease)/increase in cash and cash equivalents (223) 1,490
Cash and cash equivalents at beginning of period 3,491 2,001
Cash and cash equivalents at end of period 3,268 3,491
WYNNSTAY PROPERTIES PLC
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 25 MARCH 2023
YEAR ENDED 25 MARCH 2023
Capital Share
Share Redemption Reserve Premium Treasury Retained
Capital Account Shares Earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 26 March 2022 789 205 1,135 (1,570) 28,988 29,547
Total comprehensive - - - - 1,142 1,142
income for the year
Treasury Share repurchases - - - (164) - (164)
Revaluation movement - - - - 33 33
Dividends - note 8 - - - - (622) (622)
Balance at 25 March 2023 789 205 1,135 (1,734) 29,541 29,936
YEAR ENDED 25 MARCH 2022
Capital Share
Share Redemption Reserve Premium Treasury Retained Total
Capital Account Shares Earnings
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 26 March 2021 789 205 1,135 (1,570) 24,153 24,712
Total comprehensive - - - - 5,418 5,418
income for the year
Dividends - note 8 - - - - (583) (583)
Balance at 25 March 2022 789 205 1,135 (1,570) 28,988 29,547
FUNDS AVAILABLE FOR DISTRIBUTION
2023 2022
£'000 £'000
Retained Earnings 29,541 28,988
Less: Cumulative Unrealised Fair Value (13,376) (12,996)
Adjustment of Property Investments net of tax
Treasury Shares (1,734) (1,570)
Distributable Reserves 14,431 14,422
WYNNSTAY PROPERTIES PLC
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 25 MARCH 2023
Explanation of Capital and Reserves:
· Share Capital: This represents the subscription, at par value, of the
Ordinary Shares of the Company.
· Capital Redemption Reserve: This represents money that the Company
must retain when it has bought back shares, and which it cannot pay to
shareholders as dividends: It is a non-distributable reserve and represents
paid up share capital.
· Share Premium Account: This represents the subscription monies paid
for Ordinary Shares of the Company in excess of their par value.
· Treasury Shares: This represents the total consideration and costs
paid by the Company when purchasing the 458,650 shares as referred to in Note
18.
· Retained Earnings: This represents the profits after tax that can be
used to pay dividends. However, dividends can only be paid from distributable
deserves as detailed in the preceding table.
WYNNSTAY PROPERTIES PLC
NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED 25 MARCH 2023
1. BASIS OF PREPARATION, ACCOUNTING POLICIES AND ESTIMATES
Wynnstay Properties PLC is a public limited company incorporated and domiciled
in England and Wales. The principal activity of the Company is property
investment, development and management. The Company's ordinary shares are
traded on the AIM, part of The London Stock Exchange. The Company's registered
number is 00022473.
1.1 Basis of Preparation
The financial statements have been prepared in accordance with UK adopted
International Accounting Standards ("IAS"). The financial statements have been
presented in Pounds Sterling being the functional currency of the Company and
rounded to the nearest thousand. The financial statements have been prepared
under the historical cost basis modified for the revaluation of investment
properties and financial assets measured at fair value through Operating
Income.
The financial information set out in this announcement does not constitute
statutory accounts as defined in section 435 of the Companies Act 2006.
Accordingly pursuant to section 435(2), this announcement does not include
the auditor's report on the statutory accounts.
(a) New Interpretations and Revised Standards Effective for the year ended 25
March 2023
The Directors have adopted all new and revised standards and interpretations
issued by the International Accounting Standards Board ("IASB") and the
International Financial Reporting Interpretations Committee ("IFRIC") of the
IASB and adopted by applicable law that are relevant to the operations and
effective for accounting periods beginning on or after 26 March 2022:
· Amendment to IFRS 16: Leases Covid 19-Related Rent Concessions
(#AmendIFRS16) . (#IAS16IAS37IFRS3)
· (#IAS16IAS37IFRS3) (#IAS16IAS37IFRS3) IAS 37: Provisions,
Contingent Liabilities and Contingent Assets (#IAS16IAS37IFRS3) .
The adoption of these interpretations and revised standards had no material
impact on the disclosures and presentation of the financial statements.
(b) Standards and Interpretations in Issue but not yet Effective
The International Accounting Standards Board ("IASB") and International
Financial Reporting Interpretations Committee ("IFRIC") have issued the below
revisions to existing standards or new interpretations or new standards with
an effective date of implementation after the period of these financial
statements.
The following new amendment applicable in future periods has not been early
adopted as it is not expected to have a significant impact on the financial
statements of the Company:
· Amendments to IAS 1: Classification of Liabilities as Current or
Non-current (effective for accounting
periods beginning on or after 1 January 2023).
· Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of
Accounting Policies.
· Amendments to IAS 8 Definition of Accounting Estimates.
· Amendments to IAS 12 Deferred Tax related to Assets and Liabilities
arising from a Single Transaction.
(c) Going concern
The financial statements have been prepared on a going concern basis. This
requires the Directors to consider, as at the date of approving the financial
statements, that there is reasonable expectation that the Company has adequate
financial resources to continue to operate, and to meet its liabilities as
they fall due for payment, for at least twelve months following the approval
of the financial statements.
The Directors have reviewed cash balances and borrowing facilities to cover at
least twelve months of operations, including financing costs and continuation
of employment and advisory costs as currently contracted without any reduction
for cost saving initiatives. The results of the review show that the Company
has cash and borrowing facilities to cover at least twelve months of
operations, and that the Company will satisfy the financial covenant ratios in
the borrowing facilities as described in Note 16. In addition, the Statement
of Financial Position as at 25 March 2023 shows that the Company held a cash
balance of £3.3m and net assets of £29.9m and had a low gearing ratio of
22.3%. In the light of the foregoing considerations, the Directors consider
that the adoption of the going concern basis is reasonable and appropriate.
1.2 Accounting Policies
Investment Properties
All the Company's investment properties are independently revalued annually
and stated at fair value as at 25 March. The aggregate of any resulting
increases or decreases are taken to operating income within the Statement of
Comprehensive Income. The basis of independent valuation is described in Note
10.
Investment properties are recognised as acquisitions or disposals based on the
date of contract completion.
Depreciation
In accordance with IAS 40, freehold investment properties are included in the
Statement of Financial Position at fair value and are not depreciated.
The Company has no other property, plant and equipment.
Disposal of Investments
The gains and losses on the disposal of investment properties and other
investments are included in Operating Income in the year of disposal. Gains
and losses are calculated on the net difference between the carrying value of
the properties and the net proceeds from their disposal.
Property Income
Property income is recognised on a straight-line basis over the period of the
lease and is measured at the fair value of the consideration receivable. Lease
deposits are held in separate designated deposit accounts and are thus not
treated as assets of the Company in the financial statements. All income is
derived in the United Kingdom. When there are changes to a tenancy agreement
it is considered whether any lease incentives were given. Lease incentives are
amortised over the period of the earliest of the lease termination date or the
tenant lease break option date.
Deferred Income
Deferred Income arises from rents received in advance of the period to which
they relate and are treated as Trade and Other Payables in the Statement of
Financial Position. See note 15.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax. Current tax is the expected tax payable on the taxable income for the
year based on the tax rate enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of prior years. Taxable
profit differs from income before taxation because it excludes items of income
or expense that are deductible in other years, and it further excludes items
that are never taxable or deductible.
Deferred taxation is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation
of taxable profits and is accounted for using the statement of financial
position liability method. Deferred tax liabilities are recognised for all
taxable temporary differences (including unrealised gains on revaluation of
investment properties) and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
The Company provides for deferred tax on investment properties by reference to
the tax that would be due on the sale of the investment properties. Deferred
tax is calculated at the rates that are expected to apply in the period when
the liability is settled, or the asset is realised. Deferred tax is charged or
credited to Income after Taxation and Total Comprehensive Income, including
deferred tax on the revaluation of investment property.
Trade and Other Accounts Receivable
Trade and other receivables are initially measured at the operating lease
measurement value and subsequently measured at amortised cost as reduced by
appropriate allowances for expected credit losses. All receivables do not
carry any interest and are short term in nature.
Cash and Cash Equivalents
Cash comprises cash at bank and on demand deposits. Cash equivalents are short
term (less than three months from inception), repayable on demand and are
subject to an insignificant risk of change in value.
Trade and Other Accounts Payable
Trade and other payables are initially measured at fair value and subsequently
measured at amortised cost. All trade and other accounts payable are
non-interest bearing.
Pensions
Pension contributions towards the employee's pension plan are charged to the
statement of comprehensive income as incurred. The pension scheme is a defined
contribution scheme.
Borrowings
Interest rate borrowings are initially recognised at fair value, being
proceeds received less any directly attributable transaction costs. Borrowings
are subsequently stated at amortised cost. Any difference between the proceeds
(net of transaction costs) and the redemption value is recognised in profit or
loss over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Company has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting date.
Dilapidations
Dilapidations receipts are recognised in the Statement of Comprehensive Income
when the right to receive them arises. They are recorded in revenue as other
property income unless a property has been agreed to be sold whereby the
receipt is treated as part of the proceeds of sale of the property. See Note
2.
1.3 Key Sources of Estimation Uncertainty and Judgements
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that may affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period. The key sources
of estimation uncertainty that have a significant risk of causing material
adjustment to the carrying amounts of assets and liabilities within the next
financial year are those relating to the fair value of investment properties
which are revalued annually by the Directors having taken advice from the
Company's independent external valuers, on the basis described in Note 10. A
key judgement taken by the Directors is as to whether a property is being held
for sale.
There are no other judgemental areas identified by management that could have
a material effect on the financial statements at the reporting date.
2. PROPERTY INCOME 2023 2022
£'000 £'000
Rental income 2,304 2,252
Other property income 8 56
2,312 2,308
Rental income comprises rents earned and apportioned over the lease period
taking into account rent free periods and rents received during the period.
Other property income comprises unexpended dilapidations and miscellaneous
income arising from the letting of properties.
3. PROPERTY COSTS 2023 2022
£'000 £'000
Empty rates 2 3
Property management 33 65
35 68
Legal fees 40 34
Agent fees 21 23
96 125
4. ADMINISTRATIVE COSTS 2023 2022
£'000 £'000
Rents payable - short term lease 6 32
General administration, including staff costs 582 548
Auditors' remuneration - audit fees CLA Evelyn Partners Limited 41 31
Tax services - Saffrey Champness 9 3
Non-Recurring costs - costs relating to new Board appointments 81 -
719 614
5. STAFF COSTS 2023 2022
£'000 £'000
Staff costs, including Directors' fees, during the year were as follows:
Wages and salaries 270 289
Social security costs 36 34
Other pension costs 49 13
355 336
Further details of Directors' emoluments, totalling £319,000 (2022:
£302,000), are shown under Directors' Emoluments in the Directors' Report and
form part of these Financial Statements. There are no other key management
personnel.
2023 2022
No. No.
The average number of employees, including Non-Executive Directors, engaged
wholly in management and administration was:
5 5
The number of Directors for whom the Company paid pension benefits
during the year was: 1 1
6. FINANCE COSTS (NET) 2023 2022
£'000 £'000
Interest payable and finance costs on bank loans 439 379
Less: Bank interest receivable 27 -
412 379
7. TAXATION 2023 2022
£'000 £'000
(a) Analysis of the tax charge for the year:
UK Corporation tax at 19% (2022: 19%)
Total current tax charge 206 293
Deferred tax - temporary differences 82 1,491
Tax charge for the year 288 1,784
(b) Factors affecting the tax charge for the year:
Net Income before taxation 1,430 7,202
Current Year:
Corporation tax thereon at 19% (2022: 19%) 272 1,368
Corporation tax adjustment for unrealised property value gains (65) -
Capital gains net tax movement on disposals - 106
Deferred tax adjustment for change to 25% tax rate (2022: 25%) - 467
Deferred tax net adjustments arising from revaluation of properties properties 81 (157)
Total tax charge for the year 288 1,784
In the Spring Budget 2021 the UK Government announced that from 1 April 2023
the corporation tax rate would rise from 19% to 25% on all profits in excess
of £250,000. This new law was substantively enacted on 24 May 2021.
8. DIVIDENDS 2023 2022
£'000 £'000
Final dividend paid in year of 14.0p per share
(2022: Final dividend 13.0p per share) 378 352
Interim dividend paid in year of 9.0p per share
(2022: Interim dividend 8.5p per share) 244 231
622 583
On 13 June 2023 the Board resolved to pay a final dividend of 15p per share
which will be recorded in the Financial Statements for the year ending 25
March 2024.
9. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing Income after Taxation and
Total Comprehensive Income attributable to Ordinary Shareholders of
£1,142,000 (2022: £5,418,000) by the weighted average number of 2,703,357
(2022: 2,711,617) ordinary shares in issue during the period excluding shares
held as treasury. There are no instruments in issue that would have the effect
of diluting earnings per share.
10. INVESTMENT PROPERTIES 2023 2022
£'000 £'000
Properties
Balance at beginning of financial year 38,975 34,005
Additions - 1,583
Disposals - (2,500)
Revaluation Surplus 345 5,887
Balance at end of financial year 39,320 38,975
The Company's freehold properties were valued as at 25 March 2023 by BNP
Paribas Real Estate, Chartered Surveyors, acting in the capacity of external
valuers, and adopted by the Directors. The valuations were undertaken in
accordance with the requirements of IFRS 13 and the RICS Valuation - Global
Standards 2020.
The valuation of each property was on the basis of Fair Value. The valuers
reported that the total aggregate Fair Value of the properties held by the
Company was £39,320,000.
The valuer's opinions were primarily derived from comparable recent market
transactions on arms-length terms.
In the financial year ending 25 March 2023, the total fees earned by the
valuer from Wynnstay Properties PLC and connected parties were less than 5% of
the valuer's Company turnover.
The valuation complies with International Financial Reporting Standards. The
definition adopted by the International Accounting Standards Board (IASB) in
IFRS 13 is Fair Value, defined as: 'The price that would be received to sell
an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date.'
These recurring fair value measurements for non-financial assets use inputs
that are not based on observable market data, and therefore fall within level
3 of the fair value hierarchy.
The most pertinent market data observed reflected net initial yields which
ranged from broadly 4.15% to 6.50%, with equivalent yields estimated to range
between broadly 5.50% and 6.75%. The portfolio exhibits a net initial yield of
5.73% (2022: 5.19%) and a nominal equivalent yield of 6.02% (2022: 5.71%).
There have been no transfers between levels of the fair value hierarchy.
Movements in the fair value are recognised in profit or loss.
A 0.5% decrease in the weighted equivalent yield would result in a
corresponding increase of £3.67 million in the fair value movement through
profit or loss. A 0.5% increase in the same yield would result in a
corresponding decrease of £3.09 million in the fair value movement through
profit or loss.
11. OPERATING LEASES RECEIVABLE 2023 2022
The following are the future minimum lease payments receivable under £'000 £'000
non-cancellable operating leases which expire:
Not later than one year 324 354
Between 1 and 5 years 4,368 4,753
Over 5 years 2,752 622
7,444 5,729
Rental income under operating leases recognised through profit or loss
amounted to £2,304,000 (2022: £2,252,000).
Typically, the properties were let for a term of between 5 and 10 years at a
market rent with rent reviews every 5 years. The above maturity analysis
reflects future minimum lease payments receivable to the next break clause in
the operating lease. The properties are generally leased on terms where the
tenant has the responsibility for repairs and running costs for each
individual unit with a service charge payable to cover common services
provided by the landlord on certain properties. The Company manages the
services provided for a management fee and the service charges are not
recognised as income in the accounts of the Company as any receipts are netted
off against the associated expenditures with any residual balance being shown
as a liability.
If the tenant does not carry out its responsibility for repairs and the
Company receives a dilapidations payment, the resulting cash is recorded in
revenue as other property income unless a property has been agreed to be sold
where the receipt is treated as part of the proceeds of sale of the property.
See Note 2.
12. INVESTMENTS 2023 2022
£'000 £'000
Quoted investments 3 3
13. SUBSIDIARY COMPANY
The Company has the following dormant subsidiary which the Directors consider
immaterial to, and thus has not been consolidated into, the financial
statements. The subsidiary holds the legal title to an access road to an
investment property, the use of which is shared between the Company, its
tenants at the property and neighbouring premises.
Scanreach Limited 80% owned Dormant
Net Assets: £4,447 (2022: £4,447)
14. ACCOUNTS RECEIVABLE 2023 2022
£'000 £'000
Trade receivables 296 215
Other receivables 186 86
482 301
Trade receivables include an adjustment for credit losses of £8,000 (2022:
£nil). Trade receivables of £nil (2022: nil) are considered past due, but
not impaired. A provision for impairment of trade receivables is established
using an expected loss model.
Trade receivables, which are the only financial assets at amortised cost, are
non-interest bearing and generally have a 15 day term. Due to their short
maturities, the carrying amount of trade and other receivables is a reasonable
approximation of their fair value.
Of the trade receivables balance at the end of the year, £180,560 (2022:
£188,816) is due from the Company's largest customer. There are two other
customers who represent more than 5% of the total balance of trade
receivables.
15. ACCOUNTS PAYABLE 2023 2022
£'000 £'000
Trade payables 39 7
Other creditors 80 84
Deferred income 585 535
Accruals 140 422
844 1,048
The average credit period taken for trade purchases is 17 days (2022: 4 days).
No interest is charged on the outstanding balances. The Directors consider
that the carrying amounts of trade and other payables is a reasonable
approximation of their fair value.
16. BANK LOANS PAYABLE 2023 2022
£'000 £'000
Non-current loan 9,951 9,938
In December 2021, a five-year Fixed Rate Facility of £10 million and a
Revolving Credit Facility of £5.0 million were entered into providing a total
committed credit facility of £15.0 million. Interest on loan amounts drawn
down under the Fixed Rate Facility of £10 million (2022: £10 million) is
charged at 3.61% per annum (2022: 3.61%) for the year ended 25 March 2023.
Loan arrangement fees amortised over the loan period amounted to £13,000
(2022; £3,250). No loan amounts have been drawn down under the Revolving
Credit Facility during the year and the balance drawn as at 25 March 2023 is
£nil (2022: £nil).
Both facilities are repayable in one instalment on 17 December 2026. The
facilities include the following financial covenants which were complied with
during the year:
• Rental income shall not be less than 2.25 times the interest costs
• The drawn balance shall at no time exceed 50% of the market value of
the properties secured.
The facilities are secured by fixed charges over freehold land and buildings
owned by the Company, which at the year-end had a combined value of
£35,885,000 (2022: £35,330,000). The undrawn element of the facilities
available at 25 March 2023 was £5,000,000 (2022: £5,000,000).
Interest charged under the Revolving Credit Facility is linked to Bank of
England Base Rate as the reference rate.
17. DEFERRED TAX 2023 2022
£'000 £'000
Deferred Tax brought forward 1,953 461
Charge for the year 81 1,492
Deferred Tax carried forward 2,034 1,953
A deferred tax liability of £2,024,000 (2022: £1,953,000) is recognised in
respect of the investment properties and has been calculated at a tax rate of
25% (2021: 25%).
18. SHARE CAPITAL 2023 2022
£'000 £'000
Authorised
8,000,000 Ordinary Shares of 25p each: 2,000 2,000
Allotted, Called Up and Fully Paid
3,155,267 Ordinary shares of 25p each: 789 789
All shares rank equally in respect of shareholder rights.
In March 2010, the Company acquired 443,650 Ordinary Shares of Wynnstay
Properties PLC from Channel Hotels and Properties Ltd at a price of £3.50 per
share. In September 2022, the Company acquired 15,000 Ordinary Shares of
Wynnstay Properties PLC in the market at a price of £7.10 per share,
representing less than 0.005 % of the issued share capital, with the aggregate
consideration paid for the shares being £106,500. The total cost of
establishing the share buyback authority which lasts for five years, together
with this purchase in the market was £164,000. The total of 458,650 shares
acquired, representing 14.5% of the total shares in issue, are held in
treasury. As a result, the total number of shares with voting rights is
2,696,617.
19. FINANCIAL INSTRUMENTS
The objective of the Company's policies is to manage the Company's financial
risk, secure cost-effective funding for the Company's operations and minimise
the adverse effects of fluctuations in the financial markets on the value of
the Company's financial assets and liabilities, on reported profitability and
on the cash flows of the Company.
At 25 March 2023 the Company's financial instruments comprised borrowings,
cash and cash equivalents, short term receivables and short-term payables. The
main purpose of these financial instruments was to raise finance for the
Company's operations. Throughout the period under review, the Company has not
traded in any other financial instruments. The Board reviews and agrees
policies for managing each of the associated risks and they are summarised
below:
Credit Risk
The risk of financial loss due to a counterparty's failure to honour its
obligations arises principally in connection with property leases and the
investment of surplus cash.
Tenant rent payments are monitored regularly, and appropriate action is taken
to recover monies owed or, if necessary, to terminate the lease. The Company
carefully vets prospective new tenants from a credit risk perspective. Bad
debts are mitigated by close engagement with tenant businesses within a
well-diversified mix of some 83 units across the portfolio and close
monitoring of rental income receipts. The Company has regularly reviewed the
portfolio, including feedback from engagement with tenants, in order to assess
the risk of tenant failures.
The Company has no significant concentration of credit risk associated with
trading counterparties (considered to be over 5% of net assets) with exposure
spread over a large number of tenancies. In terms of concentration of
individual tenant's rents versus total gross annual passing rents the Company
has 3 tenants whose rent, on an individual basis, is between 5.1% and 7.6% of
total gross annual passing rents.
Funds are invested and loan transactions contracted only with banks and
financial institutions with a high credit rating. Concentration of credit risk
exists to the extent that as at 25 March 2023 and 2022 current account and
short-term deposits were held with two financial institutions, Handelsbanken
PLC and C Hoare & Co. The combined exposure to credit risk on cash and
cash equivalents at 25 March 2023 was £3,268,000 (2022: £3,491,000).
Currency Risk
As all of the Company's assets and liabilities are denominated in Pounds
Sterling, there is no exposure to currency risk.
Interest Rate Risk
The Company is exposed to interest rate risk that could affect cash flow as it
currently borrows at both floating and fixed interest rates. The Company
monitors and manages its interest rate exposure on a periodic basis but does
not take out financial instruments to mitigate the risk. The Company finances
its operations through a combination of retained profits and bank borrowings.
Liquidity Risk
The Company seeks to manage liquidity risk to ensure sufficient funds are
available to meet the requirements of the business and to invest cash assets
safely and profitably. The Board regularly reviews available cash balances and
cash forecasts to ensure there are sufficient resources for working capital
requirements and to maintain an adequate cash margin.
Interest Rate Sensitivity
Financial instruments affected by interest rate risk include loan borrowings
and cash deposits. The analysis below shows the sensitivity of the statement
of comprehensive income and equity to a 0.5% change in interest rates:
0.5% decrease 0.5% increase
in interest rates in interest rates
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Impact on interest payable - gain/(loss) - - - -
Impact on interest receivable - (loss)/gain (16) (17) 16 17
Total impact on pre-tax profit and equity (16) (17) 16 17
The calculation of the net exposure to interest rate fluctuations was based on
the following as at 25 March:
2023 2022
£'000 £'000
Floating rate borrowings (bank loans) - -
Less: cash and cash equivalents 3,268 3,491
3,268 3,491
Fair Value of Financial Instruments
Except as detailed in the following table, management consider the carrying
amounts of financial assets and financial liabilities recognised at amortised
cost approximate to their fair value.
2023 2023 2022 2022
Book Value Fair Value Book Value Fair Value
£'000 £'000 £'000 £'000
Interest bearing borrowings (note 16) (9,951) (9,951) (9,938) (9,938)
Total (9,951) (9,951) (9,938) (9,938)
2023 2022
Categories of Financial Instruments £'000 £'000
Financial assets:
Quoted investments measured at fair value 3 3
Loans and receivables measured at amortised cost 307 215
Cash and cash equivalents measured at amortised cost 3,268 3,491
Total financial assets 3,578 3,709
Financial liabilities at amortised cost 9,951 10,451
Total liabilities 10,795 10,986
The only financial instruments measured subsequent to initial recognition at
fair value as at 25 March are quoted investments. These are included in level
1 in the IFRS 13 fair value hierarchy as they are based on quoted prices in
active markets.
Capital Management
The primary objectives of the Company's capital management are:
· to safeguard the Company's ability to continue as a going concern, so
that it can continue to provide returns for shareholders: and
· to enable the Company to respond quickly to changes in market
conditions and to take advantage of opportunities.
Capital comprises shareholders' equity plus net borrowings. The Company
monitors capital using loan to value and gearing ratios. The former is
calculated by reference to total debt as a percentage of the year end
valuation of the investment property portfolio. Gearing ratio is the
percentage of net borrowings divided by shareholders' equity. Net borrowings
comprise total borrowings less cash and cash equivalents. The Company's policy
is that the net loan to value ratio should not exceed 50% and the gearing
ratio should not exceed 100%.
2023 2022
£'000 £'000
Loans and overdraft 9,951 9,938
Cash and cash equivalents (3,268) (3,491)
Net borrowings 6,683 6,447
Shareholders' equity 29,936 29,547
Investment properties 39,320 38,975
Loan to value ratio 25.3% 25.5%
Net borrowings to value ratio 17.0% 16.5%
Gearing ratio 22.3% 21.8%
20. RELATED PARTY TRANSACTIONS
Related Party Transactions with the Directors have been disclosed under
Directors' Emoluments in the Directors' Report. There were no other Related
Party Transactions during the year (2022: £nil).
21. SEGMENTAL REPORTING
The Chief Operating Decision Maker ('CODM'), who is responsible for the
allocation of resources and assessing performance of the operating segments,
has been identified as the Board. IFRS 8 requires operating segments to be
identified on the basis of internal reports that are regularly reviewed by the
Board. The Board have reviewed segmental information and concluded that there
are three operating segments.
Industrial Retail Office Total
2023 2022 2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Rental Income 2,095 1,884 73 68 136 300 2,304 2,252
Other Property Income 8 56 - - - - 8 56
Profit /(Loss) on investment property at fair value 200 5,872 (105) 40 250 (25) 345 5,887
Total income and gain 2,303 7,812 (32) 108 386 275 2,657 8,195
Property expenses (95) (125) - - - - (95) (125)
Segment profit/(loss) 2,208 7,687 (32) 108 386 275 2,562 8,070
Unallocated corporate expenses (720) (614)
Profit on sale of - 125
investment property
Operating income 1,842 7,581
Interest expense (all relating to property loans) (439) (379)
Interest income and 27 -
other income
Income before taxation 1,430 7,202
Other information Industrial Retail Office Total
2023 2022 2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Segment assets 36,855 36,655 905 1,010 1,560 1,310 39,320 38,975
Segment assets held 33,420 33,010 905 1,010 1,560 1,310 35,885 35,330
as security
22. CAPITAL COMMITMENTS
Significant capital expenditure contracted for at the end of the financial
year, but not recognised as liabilities in the financial
statements is: £nil (2022: £nil).
23. SUBSEQUENT EVENTS
On 9 May 2023 the Company acquired Riverdale Industrial Estate, Tonbridge for
£2.35m before costs. The Property is freehold and comprises five industrial
units arranged as two terraces with a central service yard. The estate is
fully let to four tenants with a range of lease expiry dates. The current
passing rent totals £140,350 per annum and is subject to three outstanding
upward only rent reviews effective from 29 September 2022 and a pending lease
expiry on 30 November 2023. The total acquisition cost of approximately £2.5
million, which includes stamp duty and other acquisition costs, was funded
entirely from the Company's existing cash resources.
NOTE
The financial information set out in this announcement does not constitute
statutory accounts as defined in section 435 of the Companies Act 2006.
Accordingly pursuant to section 435(2), this announcement does not include
the auditor's report on the statutory accounts.
However, the financial information for the year ended 25 March 2023 contained
in the announcement is taken directly from the statutory accounts for that
year. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under either Section 498 (2) or Section 498
(3) of the Companies Act 2006 and did not include references to any matters to
which the auditor drew attention by way of emphasis.
The statutory accounts for the year ended 25 March 2023 have not yet been
delivered to the Registrar of Companies. The 2023 accounts will be delivered
to the Registrar of Companies following the Company's Annual General Meeting.
The statutory accounts for the year ended 25 March 2022 and for the prior
years referred to in this announcement have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their reports were
unqualified and did not contain a statement under either Section 498 (2) or
Section 498 (3) of the Companies Act 2006 and did not include references to
any matters to which the auditor drew attention by way of emphasis.
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