Conygar Inv Regulatory News (CIC)

23 November 2021

THE CONYGAR INVESTMENT COMPANY PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2021

SUMMARY

· Net asset value increased by £25.3 million (28.5%) to £114.1 million (217.4p per share).

· Total cash deposits of £13.7 million (26.0p per share).

· No debt and no borrowings.

· £29.2 million surplus on valuation of the Group's investment properties, comprising a £28.7 million uplift at The Island Quarter, Nottingham, and £0.5 million uplift at Cross Hands, Carmarthenshire. The combined surplus amounts to an increase of 55.6p per share before other net operational and administrative costs. At The Island Quarter, the resulting £70.5 million valuation equates to approximately £2 million per acre.

· Development progressing for the first phase of the mixed-use development at The Island Quarter and resolution passed to grant planning permission for a 700-bed student accommodation scheme. 

· Detailed planning application submitted in January 2021 for the next phase of The Island Quarter development which includes a hotel, to be managed by Intercontinental Hotels Group, residential rental apartments and co-working space.

· A further planning application was submitted in October 2021 for the proposed waterfront development in Holyhead, Anglesey, supplementing the outline consent previously granted in 2014, which includes a 250-berth marina, 259 townhouses and apartments and associated retail and public realm.

· Bought back 1.09 million shares (2.0% of ordinary share capital) at an average price of 111.5p per share.

Group net assets summary

30 September 2021 30 September 2020

Robert Ware, Chief Executive commented:

"The speed and effectiveness of the UK's vaccination programme has enabled a quicker and stronger economic recovery than many commentators predicted. This success has been mirrored in the real estate sector with commercial property values increasing in the last year, on average by approximately 7%, driven by higher transaction volumes and the hardening of yields across much of the market. Our results have benefited from this economic bounce and reflect a significant improvement to those reported in the previous year.

Although we are acutely aware that a sustained economic recovery remains far from assured, and that the expectations within the real estate industry have changed markedly over recent years, we are increasingly confident that our property portfolio is well positioned to benefit both from the renewed market optimism and significant post COVID-19 social changes."

Enquiries:

The Conygar Investment Company PLC

Liberum Capital Limited (nominated adviser and broker)

Temple Bar Advisory (public relations)

Chairman's & chief executive's statement

Results summary

We present the Group's results for the year ended 30 September 2021.

The Group's net asset value per share has increased by 51.6p (31%) in the year to 217.4p as at 30 September 2021 (2020: 165.8p). The profit before tax, which includes a £29.2 million unrealised surplus from the revaluation of our investment properties, was £28.2 million (2020: loss of £8.2 million).

As at 30 September 2020, the Group's investment in The Island Quarter, Nottingham, was reported at cost as the fair value at that date was not readily determinable. However, the substantial progress made during the year to corroborate the project's design, market comparables and development cash flows, as well as the significant progress made on planning and the commencement of development, has enabled this 36-acre site to be more reliably valued by Knight Frank LLP as at 30 September 2021.

The resulting valuation of £70.5 million, which represents a £28.7 million (69%) surplus over cost, provides support and justification for the direction of travel taken to date as we start to unlock, for the benefit of all stakeholders, the full potential of a project which will, in due course, provide an exciting new destination as well as substantial investment and employment opportunities for the city of Nottingham. Further details of the basis and valuation sensitivities are set out in note 12.

Since acquiring The Island Quarter in 2016, we have made significant headway in developing the concept and strategy and over the last year have submitted three detailed planning applications for the early phase developments. Two of these have subsequently been granted with the third, which includes two hotels, residential apartments and co-working space, expected to be considered by the planning committee at the end of 2021. The detailed applications granted to date have enabled us to commence the construction of the first phase, which includes a 21,500 square foot food and beverage-led building, planned for completion by Easter 2022, and initiate the on-site preliminary groundworks for a 700-bed student accommodation scheme which we hope to have operational for the September 2023 university intake.

In addition, the valuation of our retail park at Cross Hands, Carmarthenshire, has increased in the year by 7.6% from £16.5 million at 30 September 2020 to £17.8 million at 30 September 2021, in line with the increase in capital values reported across the retail warehousing sector.

Retailers with a predominantly out-of-town presence have been much better protected from the rise of online retailing than those with a more traditional high street focus where click-and-collect, larger car parking provisions and the drive-to convenience have proved more desirable, as highlighted by their higher footfall throughout the pandemic and quicker recovery post-lockdowns.

At our retail park in Cross Hands, from which over 70% of the Group's rental income is currently derived, we have collected 97% of the rents receivable in the year which reduces to 92% for the Group as a whole. Of the remainder, 2% are expected to be received in full by the end of the calendar year, 1% are on deferred payment terms to be settled in full by March 2022 and 5% have been provided for in these financial statements.

This is a pleasing result, particularly given the volatility in the retail sector throughout the pandemic, which confirms the strength and adaptability for the vast majority of the Group's tenants.

During the year we have also made good progress on the rest of the portfolio, the brief highlights of which are set out below.

At Holyhead Waterfront in Anglesey we have submitted a further application, to supplement the outline consent granted in 2014, for a waterfront development to include both residential apartments and a 250-berth marina, which we are very hopeful will provide a catalyst for the regeneration of Holyhead.

Interest continues, from the renewables sector, in our 203-acre site at Rhosgoch, Anglesey. However, growing concerns about the capacity for the UK's existing nuclear capability to phase out gas power and meet the government's net zero targets have reopened the possibility for at least one more large scale nuclear project this parliament. Whilst exploratory talks continue between the UK government and various operators, for a possible nuclear capability on the Isle of Anglesey, we have not progressed the renewables option for our sites at Rhosgoch and Parc Cybi as they, in addition to Holyhead, would be ideally located to support the infrastructure required for such a project.

As previously reported, we exchanged a conditional contract in 2019 to sell our industrial property in Selly Oak, Birmingham, to a specialist provider of student accommodation. The conditionality within the agreement requires, in addition to other matters, the granting of a permission on the site for a student accommodation scheme which was duly obtained, subject to agreeing the section 106, in September 2021. This we hope will be the catalyst for the completion of the property's sale in the coming months.

Elsewhere, we are completing the construction of a spine road and associated drainage at Haverfordwest in Pembrokeshire to open up the site for future development and have sold two of our smaller development sites at King's Lynn, Norfolk and Fishguard Lorry Stop in Pembrokeshire.

Cash flow

The net cash outflow in the year was £18.5 million, including £16.9 million incurred to progress our property developments. As at 30 September 2021, the Group has available cash deposits of £13.7 million, much of which is allocated to the implementation of essential infrastructure and completion of the first phase development at Nottingham. However, in order to further progress our pipeline of development projects, in particular The Island Quarter, we will need to raise substantial amounts either as debt, through asset sales or from joint ventures and we are in advanced discussions on a number of fronts in that regard.

Dividend

The Board recommends that no dividend is declared in respect of the year ended 30 September 2021. More information on the Group's dividend policy can be found within the strategic report.

Share buy back

During the year, the Group acquired 1,092,000 ordinary shares, representing 2.0% of its ordinary share capital, at a cost of £1.22 million which equates to an average price of 111.5p per share. As a result of the buy backs, net asset value per share has been enhanced by 1.1p per share. The Group will seek to renew the buy back authority of 14.99% of the issued share capital of the Company at the forthcoming AGM. We consider the buy back authority to be a useful capital management tool and will continue to use it when we believe the stock market value differs too widely from our view of the intrinsic value of the Company.

Board change

We are pleased to welcome David Baldwin to the Board. David was appointed as Finance Director on 10 May 2021 having been with the Company for five years as Financial Controller and also, since 6 April 2020, as Company Secretary.

Outlook

The speed and effectiveness of the UK's vaccination programme has enabled a quicker and stronger economic recovery than many commentators predicted. This success has been mirrored in the real estate sector with commercial property values increasing in the last year, on average by approximately 7%, driven by higher transaction volumes and the hardening of yields across much of the market. Our results have benefited from this economic bounce and reflect a significant improvement to those reported in the previous year.

Although we are acutely aware that a sustained economic recovery remains far from assured, and that the expectations within the real estate industry have changed markedly over recent years, we are increasingly confident that our property portfolio is well positioned to benefit both from the renewed market optimism and significant post COVID-19 social changes.

N J Hamway R T E Ware

Chairman Chief Executive

Strategic report

The Group's strategic report provides a review of the business for the financial year, discusses the Group's financial position at the year end and explains the principal risks and uncertainties facing the business and how we manage those risks. We also outline the Group's strategy and business model.

Strategy and business model

The Conygar Investment Company PLC ("Conygar") is an AIM quoted property investment and development group dealing primarily in UK property. Our aim is to invest in property assets and companies where we can add significant value using our property management, development and transaction structuring skills.

The business operates three major strands, being property investment, property development and investment in companies which trade or invest in property or hold substantial property assets and we are prepared to use modest levels of gearing to enhance returns. Assets are recycled to release capital as opportunities present themselves and we will continue to buy back shares where appropriate. The Group is content to hold cash and adopt a patient strategy unless there is a compelling reason to invest.

Position of the Group at the year end

The Group net assets as at 30 September 2021 may be summarised as follows:

Good progress has been made on our investment properties and development projects since we last reported, the details of which are set out below. The Group's balance sheet remains both liquid and robust with cash deposits at 30 September 2021 of £13.7 million and no borrowings. We have utilised part of the Group's cash deposits to commence the infrastructure works and construction of the first phase of the Island Quarter development in Nottingham. However, the continuation of future phases requires us to seek either debt funding, joint venture partners or to sell assets to take best advantage of the opportunities presented by this significant development and discussions are ongoing in this regard.

Key performance indicators

The key measures considered when monitoring progress towards the Board's objective of providing attractive shareholder returns include the headway made during the year on its development and investment property portfolio, the movements in net asset value per share and levels of uncommitted cash, each of which are considered below.

Investment properties and development projects

Nottingham, Nottinghamshire

The Group acquired the 36-acre Island Quarter site in Nottingham city centre in December 2016 for £13.5 million. The Island Quarter is an exciting mixed-use development comprising new homes, grade A office space, hotels and student accommodation.

During 2021, construction began on the first phase, comprising a 21,500 square foot food and beverage-led building with a canal-side setting surrounded by new high quality public realm. This is scheduled to open at Easter 2022 and will, we believe, open up this previously underused canal-side part of the city and bring local residents back to The Island Quarter.

In January 2021, a detailed planning application was submitted for the first major phase of the site, which includes two hotels to be managed by The Intercontinental Hotels Group, 247 residential rental apartments, 32,000 square feet of co-working space, as well as food and beverage areas. Amendments were made to the original application, such that it is now hoped the permission will be granted by the end of the year.

In May 2021, a detailed planning application was submitted for a 700-bed student accommodation scheme which was granted in September 2021, subject to agreeing the section 106.

We are progressing the designs for subsequent phases of The Island Quarter and are in discussions with a variety of commercial occupiers and potential investors and hope to make announcements on that front later in the year.

Cross Hands, Carmarthenshire

Following the completion of the lettings in the year to Burger King, Snap Fitness and One Below the retail park at Cross Hands is now fully occupied, producing an annual rent roll of £1.38 million, which given the economic and social backdrop over the last 12 months is a very pleasing result. The strength and diversity of the tenant base was emphasised during the pandemic with the park, which comprises a number of leading brands including Lidl, B&M Retail, Costa Coffee, Iceland Foods, Dominos Pizza and Pets At Home, continuing to trade well.

Holyhead Waterfront, Anglesey

After a period of successful stakeholder and community engagement, we submitted a further detailed application in October 2021 for the proposed waterfront development, which supplements the outline consent granted in 2014. The application includes a 250-berth marina, 259 townhouses and apartments, marine commercial and additional A1/A3 retail units together with substantial areas of improved public realm.

A further £0.7 million of costs in connection with the detailed design and reserved matters application were expensed in the year to retain the carrying value of the property, in line with the prior year, at its estimated net realisable value of £5.0 million.

Selly Oak, Birmingham

Selly Oak comprises two industrial units, let to University Hospitals Birmingham NHS Foundation Trust and Revolution Gymnastics Limited. Contracts were exchanged in 2019 for the sale of the property, on a subject to planning basis, to a specialist provider of student accommodation.

The purchaser submitted an application at the start of the year for a 523 student accommodation scheme for which a resolution to grant planning permission, subject to agreeing the section 106, was confirmed by the local authority in September 2021. A further update on the sale is expected in the coming months once the terms of the section 106 have been finalised.

Haverfordwest, Pembrokeshire

At Haverfordwest in Pembrokeshire, where we have outline consent for 729 residential units and 90,000 square feet of implemented A1 retail, we are constructing a 300 metre spine road and associated infrastructure, to be completed by the end of the year, which will enable either the sale or development of the site on a plot by plot basis.

In addition, an application has been submitted to Pembrokeshire County Council, with a planning officer's recommendation for approval, to reduce the costs payable under the existing section 106 agreement. We are hopeful of a positive outcome, but await confirmation of the hearing date from the planning committee.

Parc Cybi business park, Anglesey and Rhosgoch, Anglesey

We hold substantial plots of land at Parc Cybi business park and Rhosgoch in Anglesey for which there has been continued interest during the year from operators in the renewables sector. However, whilst discussions are ongoing between the UK government and various operators, for the possible reopening of a nuclear capability in Anglesey, we have not pursued the renewables option.

King's Lynn, Norfolk and Fishguard Lorry Stop, Pembrokeshire

During the year the Group's development sites at King's Lynn and Fishguard Lorry Stop were sold for total net proceeds of £1.0 million, resulting in a combined net profit of £0.4 million.

Summary of investment properties

(1) The Group's investment in Nottingham was valued by Knight Frank LLP in their capacity as external valuers as at 30 September 2021. In accordance with IAS 40, as this project was not sufficiently advanced, such that the fair value could be readily determined at 30 September 2020, the investment in Nottingham was reported at cost in the prior year.

(2) The Group's investment in Cross Hands was independently valued by Knight Frank LLP in both the current and prior years.

Summary of development projects

We remain confident that there is significant upside in these projects, but this will only become evident over the medium term.

(1) As set out in the strategic report, the Group's development sites at King's Lynn and Fishguard Lorry Stop were sold in the year.

Financial review

Net asset value

The net asset value increased by £25.3 million (51.6p per share) to £114.1 million at 30 September 2021. The primary movements in the year were revaluation surpluses for the investment properties at Nottingham and Cross Hands of £28.7 million and £0.5 million respectively, net rental income of £1.3 million plus £0.4 million from the sale of our development sites at King's Lynn and Fishguard Lorry Stop. This has been offset by £0.7 million of development costs written off, £2.1 million of administrative costs, a £1.7m provision for deferred tax on unrealised chargeable gains and £1.2 million spent purchasing our own shares.

Cash flow and financing

At 30 September 2021, the Group had cash deposits of £13.7 million and no debt (2020: cash of £32.1 million and no debt).

During the year, the Group used £1.8 million of cash in its operating activities (2020: used £6.3 million).

The primary cash outflows in the year were capital costs of £16.9 million and £1.2 million to buy back shares. Capital expenditure includes the construction costs and associated professional fees for the ongoing infrastructure works, first phase development and student block preliminary works at The Island Quarter, completion of the Burger King unit at Cross Hands, construction of a spine road on the residential site at Haverfordwest and statutory fees to advance the proposed development at Holyhead Waterfront.

The cash outflows were partly offset by cash proceeds of £1.0 million from the sales of King's Lynn and Fishguard Lorry Stop, resulting in a net cash outflow in the year of £18.5 million (2020: cash outflow of £7.8 million).

Net income from property activities

Administrative expenses

The administrative expenses for the year ended 30 September 2021 were £2.1 million (2020: £2.6 million). The major items were salary costs of £1.4 million (2020: £1.9 million), head office running costs and various costs arising as a result of the Group being listed on AIM.

Taxation

Current tax is payable, at a rate of 19% on net rental income and profits from the sale of development properties after deduction of finance costs and administrative expenses.

Deferred tax is calculated at a rate of 25%, being the rate that has been enacted or substantively enacted by the balance sheet date and which is expected to apply when the tax liability, resulting from unrealised chargeable gains arising on revaluation of the Group's investment properties, is projected to be settled.

Capital management

Capital risk management

The Board's primary objective when managing capital is to preserve the Group's ability to continue as a going concern, in order to safeguard its equity and provide returns for shareholders and benefits for other stakeholders whilst maintaining an optimal capital structure to reduce the cost of capital.

The Group does not currently have any borrowings, but may utilise borrowing in the future to fund development projects. When doing so the Group will seek to ensure that it can stay within agreed covenants with its lenders.

Treasury policies

The objective of the Group's treasury policies is to manage the Group's financial risk, secure cost effective funding for the Group's operations and to minimise the adverse effects of fluctuations in the financial markets on the value of the Group's financial assets and liabilities, reported profitability and cash flows.

The Group finances its activities with a combination of cash and short term deposits. Other financial assets and liabilities, such as trade receivables and trade payables, arise directly from the Group's operations. The Group may also finance its activities with bank loans and enter into derivative transactions to manage the interest rate risk arising from its operations and sources of finance. Throughout the year, and as at the balance sheet date, no group undertakings were party to any bank loans or derivative instruments.

The management of cash is monitored weekly with summary cash statements produced on a monthly basis and discussed regularly in management and board meetings. The approach is to provide sufficient liquidity to meet the requirements of the business in terms of funding developments and potential acquisitions. Surplus funds are invested with a broad range of institutions. At any point in time, at least half of the Group's cash is held on instant access or short term deposit of less than 30 days.

Dividend policy

The Board recommends that no dividend is paid in respect of the year ended 30 September 2021 (2020: £nil).

Our dividend policy is consistent with the overall strategy of the business: namely to invest in property assets and companies where we can add significant value using our property management, development and transaction structuring skills.

In previous years we have used the surplus cash flow from the then much larger investment property portfolio to enhance these properties by refurbishment, re-letting and extending tenancies, fund the operations of the business, create a medium term pipeline of development opportunities, pay a modest dividend and buy back shares where appropriate.

The Board will continue to review the dividend policy each year. Our focus is, and will primarily continue to be, growth in net asset value per share.

Share buy backs

During the year, the Group acquired 1,092,000 ordinary shares at an average price of 111.5p, costing £1.2 million, which represented 2.04% of its ordinary share capital. As a result of the share buy backs, the net asset value per share has been enhanced by approximately 1.1p per share. The Group will seek to renew the buy back authority of 14.99% of the issued share capital of the Company at the forthcoming AGM. We consider it to be a vital capital management tool and believe it is prudent to have maximum flexibility given the level of uncertainty we see in the wider economy.

Principal risks and uncertainties

Managing risk is an integral element of the Group's management activities and a considerable amount of time is spent assessing and managing risks to the business. Responsibility for risk management rests with the Board, with external advisers used where necessary.

Strategic risks

Strategic risks are risks arising from an inappropriate strategy or through flawed execution of a strategy. By definition, strategic risks tend to be longer term than most other risks and, as has been amply demonstrated in the last few years, the economic and wider environment can alter quickly and significantly. Strategic risks identified include global or national events, regulatory and legal changes, market or sector changes and key staff retention.

The Board continually monitors and discusses the potential impact that changes to the environment in which we operate can have upon the Group. We are confident we have sufficiently high calibre Directors and managers to manage strategic risks.

We are content that the Group has the right approach toward strategy and our strong balance sheet is good evidence of that.

Operational risks

Operational risks are essentially those risks that might arise from inadequate internal systems, processes, resources or incorrect decision making. Clearly, it is not possible to eliminate operational risk. However, by ensuring we have the right calibre of staff and external support in place we look to minimise such risks, as most operational risks arise from people-related issues. Our Executive Directors are very closely involved in the day-to-day running of the business to ensure sound management judgement is applied.

Market risks

Market risks primarily arise from the possibility that the Group is exposed to fluctuations in the values of, or income from, its cash deposits, investment properties and development projects. This is a key risk to the principal activities of the Group and the exposures are continuously monitored through timely financial and management reporting and analysis of available market intelligence.

Where necessary, management takes appropriate action to mitigate any adverse impact arising from identified risks and market risks continue to be monitored closely.

Continuing low interest rates have historically made our liquidity position a drag on income, but it is likely to be helpful as we take on debt in the coming years to finance our developments. However, the Group is currently not party to any debt facilities and the management team have adapted admirably during the COVID-19 pandemic to advance the development portfolio.

Estimation and judgement risks

To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and assumptions that affect the asset and liability items and revenue and expense amounts recorded in the accounts. These estimates are based on historical experience and various other assumptions that management and the Board believe are reasonable under the circumstances. The results of these considerations form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other sources.

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 the following:

Investment properties

The fair values of investment properties are based upon open market value and calculated, where applicable, using a third party valuation provided by an external valuer. Where it is not possible to reliably measure fair value, cost is used instead.

Development properties

The net realisable value of properties held for development requires an assessment of fair value of the underlying assets using property appraisal techniques and other valuation methods. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

Financial assets

The interest rate profile of the Group's cash at the balance sheet date was as follows:

Fixed and floating rate financial assets comprise cash and short term deposits held with banks whose credit ratings are acceptable to the Board.

Credit risk

Credit risk is the risk of financial loss to the Group if a counterparty fails to meet its contractual obligations. The Group's principal financial assets include its financial interest in property assets, cash deposits and trade and other receivables. The carrying amount of financial assets recorded in the financial statements represents the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained.

In the event of default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs. The Directors continually monitor tenant arrears in order to anticipate, and minimise the impact of, defaults by occupational tenants and if necessary, where circumstances allow, will apply rigorous credit control procedures to facilitate the recovery of trade receivables.

Under IFRS 9, the Group is required to provide for any expected credit losses arising from trade receivables. For all assured shorthold tenancies, credit checks are performed prior to acceptance of the tenant. Regulated tenants are incentivised through the benefit of their tenancy agreement to avoid default on their rent and rent deposits are held in respect of two leases. Taking these factors into account, the risk to the Group of individual tenant default and the credit risk of trade receivables are considered low, albeit the risk has increased as a result of the impact of COVID-19, as is borne out by the level of trade receivables written off in the current and prior years.

The Directors have provided for rental and other arrears due from various tenants impacted by, amongst other factors, the COVID-19 pandemic which amount to £118,000 at 30 September 2021 and which remain outstanding at the date of signing these financial statements. The table below sets out the movement in the bad debt provision during the year. The impaired receivables are based on a review of expected credit losses. Impaired receivables and receivables not considered to be impaired are not material to the financial statements and, therefore, no further analysis is provided.

The credit risk on cash deposits is managed through the Company's policies of monitoring counterparty exposure and the use of counterparties of good financial standing. At 30 September 2021, the credit exposure from cash held with banks was £13.7 million which represents 12.0% of the Group's net assets. All cash deposits at the balance sheet date are placed with banks, whose credit ratings are acceptable to the Board, on instant access accounts. Should the credit quality or the financial position of the banks currently utilised significantly deteriorate, cash deposits would be moved to alternative banks.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group seeks to manage its liquidity risk by ensuring that sufficient cash is available to meet its foreseeable needs. The Group has cash deposits at the balance sheet date of £13.7 million. However, we will need to raise substantial amounts either as debt, or through joint ventures or asset sales, in order to significantly progress The Island Quarter development in Nottingham.

Section 172 statement

Directors' duty to promote the success of the Company under Section 172 Companies Act 2006

The strategic report is required to include a statement that describes how the Directors have had regard to the matters set out in section 172(1) (a) to (f) of the Companies Act 2006 when performing their duty under section 172. Some of the matters identified in Section 172(1) are already covered by similar provisions in the QCA Code and have thus been previously reported by the Company in the corporate governance statement, the corporate governance report and the QCA statement of compliance on our website. In order to avoid unnecessary duplication, the relevant parts of those documents are identified below and are to be treated as expressly incorporated by reference into this strategic report. Under section 172 (1) of the Companies Act 2006, each individual Director must act in the way he considers, in good faith, would be the most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to six matters detailed in the section. In discharging their duties, the Directors seek to promote the success of Conygar for the benefit of members as a whole and have regard to all the matters set out in Section 172(1), where applicable and relevant to the business, taking account of its size and structure and the nature and scale of its activities in the commercial property market. The following paragraphs address each of the six matters in Section 172(1) (a) to (f).

(a) The likely consequences of any decision in the long term: The commercial property market is cyclical by nature. Investing in commercial property is a long term business. The decisions taken must have regard to long term consequences in terms of success or failure and managing risks and uncertainties. The Directors cannot expect that every decision they take will prove, with the benefit of hindsight, to be the best one - external factors may affect the market and thus change conditions in the future, after a decision has been taken. However, the Group's investment decisions are undertaken by a Board with a wide range of experience, over many years, in both the property and finance sectors.

(b) The interests of the Company's employees: The Company has five full time employees, including the Chief Executive, two Property Directors and the Finance Director. These Executive Directors sit on the Board with the Non-Executive Directors.

(c) The need to foster the Company's business relationships with suppliers, customers and others: The Directors have regularly reported in the Company's annual reports on the constructive relationships that Conygar seeks to build with its tenants and the mutual benefits that this brings to both parties; and this reporting has been extended over the past two years following Principle 3 of the QCA Code to include suppliers and others. This is therefore addressed under Principle 3 in the QCA compliance statement. In recent years, it has been vital to foster our business relationships with tenants given external factors affecting business and the economy, such as political uncertainty and the continuing impact of the COVID-19 pandemic.

(d) The impact of the Company's operations on the community and the environment: This is also addressed under Principle 3 of the QCA Code in the QCA compliance statement. Due to its size and structure and the nature and scale of its activities, the Board considers that the impact of Conygar's operations as a landlord on the community and the environment is low. Conygar's assets are used by its tenants for their own operations rather than by Conygar itself. In the past year, the Company has not been made aware of any tenant operations that have had a significant impact on the community or the environment. In relation to planned developments, Conygar seeks to ensure that designs and construction comply with all relevant environmental standards and with local planning requirements and building regulations so as not to adversely affect the community or the environment.

(e) The desirability of the Company maintaining a reputation for high standards of business conduct: This is addressed under Principle 8 of the QCA Code in the corporate governance statement and in the QCA compliance statement. The Board considers that maintaining Conygar's reputation for high standards of business conduct is not just desirable - it is a valuable asset in the competitive commercial property market.

(f) The need to act fairly as between members of the Company: The Company has only one class of shares, thus all shareholders have equal rights and, regardless of the size of their holding, every shareholder is, and always has been, treated equally and fairly. Relations with shareholders are further addressed under Principles 2, 3 and 10 of the QCA Code in the corporate governance report and the QCA compliance statement. We have been reviewing how we communicate with shareholders and are in the process of encouraging shareholders to adopt electronic communications and proxy voting in place of paper documents where this suits them, as well as to raise questions in writing if they are unable to attend AGMs.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 September 2021

All of the activities of the Group are classed as continuing.

CONSOLIDATED Statement of Changes in Equity

for the year ended 30 September 2021

Attributable to the equity holders of the Company

CONSOLIDATED BALANCE SHEET

at 30 September 2021

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 30 September 2021

NOTES TO THE ACCOUNTS

for the year ended 30 September 2021

1. The financial information set out in this announcement is abridged and does not constitute statutory accounts for the year ended 30 September 2021 but is derived from the financial statements. The auditors have reported on the statutory accounts for the year ended 30 September 2021, their report was unqualified and did not contain statements under sections 498(2) or (3) of the Companies Act 2006, and these will be delivered to the registrar of companies following the Company's Annual General Meeting. The financial information has been prepared using the recognition and measurement principle of IFRS.

2. The comparative financial information for the year ended 30 September 2020 was derived from information extracted from the annual report and accounts for that period, which was prepared under IFRS and which has been filed with the UK registrar of companies. The auditors have reported on those accounts, their report was unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

3. Operating PROFIT / (Loss)

Operating profit / (loss) is stated after charging:

4. PARTICULARS OF EMPLOYEES

The average monthly number of persons, including Executive Directors, employed by the Company during the year was seven (2020: seven).

5. DIRECTORS' EMOLUMENTS

The Board, being the key management personnel, comprises the only persons having authority and responsibility for planning, directing and controlling the activities of the Group.  

6. FINANCE INCOME AND COST

7. LEASES

Group as lessor:

The Group receives income from investment properties and existing tenants located at several development sites. At 30 September 2021, the minimum lease payments receivable under non-cancellable operating leases were as follows:

The amounts above represent total rental income up to the next tenant only break date for each lease.

Group as lessee:

The Group is party to a lease which terminates on 28 April 2022.

IFRS 16 requires lessees to record all leases on the balance sheet as liabilities along with an asset reflecting the right of use of the asset over the lease term.

At the start of the prior year, the lease liability was calculated as the present value of the remaining lease payments, discounted at an incremental borrowing rate of 2.7%. The right of use asset was measured at the amount equal to the lease liability adjusted for rent prepaid on the date of implementation. Depreciation of the right of use asset is on a straight line basis over the lease term.

The modified retrospective approach was adopted for transition purposes such that comparatives were not restated and the difference between the right of use asset and lease liability at the start of the prior year was recognised within the Group's opening retained earnings.

8. TAX

9. DIVIDENDS

No dividend will be paid in respect of the year ended 30 September 2021 (2020: nil).

10. PROFIT / (LOSS) PER SHARE

Profit per share is calculated as the profit attributable to ordinary shareholders of the Company for the year of £26,525,000 (2020: loss of £7,955,000) divided by the weighted average number of shares in issue throughout the year of 53,064,275 (2020: 54,007,994). There are no diluting amounts in either the current or prior years.

11. INVESTMENT PROPERTIES

Freehold investment properties

As at 30 September 2021, Cross Hands was valued by Knight Frank LLP in their capacity as external valuers. The valuation was prepared on a fixed fee basis, independent of the property value and undertaken in accordance with RICS Valuation - Global Standards on the basis of fair value, supported by reference to market evidence of transaction prices for similar properties. It assumes a willing buyer and a willing seller in an arm's length transaction and reflects usual deductions in respect of purchaser's costs and SDLT as applicable at the valuation date. The independent valuer makes various assumptions including future rental income, anticipated void costs and the appropriate discount rate or yield.

The fair value of Cross Hands has been determined using an income capitalisation technique whereby contracted rent and market rental values are capitalised with a market capitalisation rate. This technique is consistent with the principles in IFRS 13 and uses significant unobservable inputs, such that the fair value has been classified in all periods as Level 3 in the fair value hierarchy as defined in IFRS 13. For Cross Hands, the key unobservable inputs are the net initial yields and expiry void periods. Net initial yields have been estimated for the individual units at between 5.0% and 9.5% and expiry void periods are projected at between 6 and 12 months. The principal sensitivity of measurement to variations in the significant unobservable outputs is that decreases in net initial yields and void periods will increase the fair value.

The historical cost of the Group's investment properties as at 30 September 2021 was £14,242,000 (2020: £13,451,000).

The Group's revenue for the year includes £1,552,000 derived from properties leased out under operating leases (2020: £1,635,000).

12. INVESTMENT PROPERTIES UNDER CONSTRUCTION

Freehold land and buildings

Investment properties under construction comprise the freehold land and buildings at The Island Quarter in Nottingham which are held for current or future development as investment properties and reported in the balance sheet at fair value as at 30 September 2021 and cost as at 30 September 2020.

The fair value of this property rests in the ongoing and planned developments which, as at 30 September 2020, was difficult to estimate pending confirmation of designs and planning permissions, and hence, in accordance with IAS 40, was measured at cost until either the fair value became readily determinable or construction was complete.

However, the substantial progress made during the year to corroborate the design, market comparables and projected cash flows as well as the significant progress made on planning and the commencement of the development has enabled The Island Quarter to be valued as at 30 September 2021 by Knight Frank LLP in their capacity as external valuers.

The valuations of the Group's investment properties are inherently subjective as they are based on the valuers' assumptions which may not prove to be accurate and which, as a result, are subject to material uncertainty. This is particularly true for The Island Quarter given its scale, lack of comparable evidence and the early stage position of this substantial development where relatively small changes to the underlying assumptions of key parameters, such as rental levels, net initial yields, construction costs, finance costs and void periods can have a significant impact both positively and negatively on the resulting valuation.

In preparing their valuation, Knight Frank have utilised market and site specific data, their own extensive knowledge of the real estate sector, professional judgement and other market observations as well as information provided by the Company's Executive Directors. The resulting models and assumptions therein have also been reviewed for overall reasonableness by the Conygar Board. Inevitably in a complex model like this, and as noted above, variations in assumptions can lead to widely differing values. The Board have considered the valuation in the context of their experience and believe the value of approximately £2 million per acre is justifiable.

The valuation was prepared on a fixed fee basis, independent of the property value and undertaken in accordance with RICS Valuation - Global Standards on the basis of fair value, supported by reference to market evidence of transaction prices for similar properties. It assumes a willing buyer and a willing seller in an arm's length transaction and reflects usual deductions in respect of purchaser's costs and SDLT as applicable at the valuation date. The independent valuer makes various assumptions including future rental income, anticipated void costs and the appropriate discount rate or yield.

The fair value of Nottingham has been determined using an income capitalisation technique whereby contracted rent and market rental values are capitalised with a market capitalisation rate. This technique is consistent with the principles in IFRS 13 and uses significant unobservable inputs, such that the fair value has been classified in all periods as Level 3 in the fair value hierarchy as defined in IFRS 13. For Nottingham, the key unobservable inputs are the net initial yields, construction costs, rental income rates and expiry void periods. Net initial yields have been estimated for the individual units at between 4.35% and 7.0%. The principal sensitivity of measurement to variations in the significant unobservable outputs is that decreases in net initial yields, construction costs and void periods will increase the fair value whereas reductions to rental income rates would decrease the fair value.

The historical cost of the Group's investment properties under construction as at 30 September 2021 was £36,168,000 (2020: £19,761,000).

13. INVESTMENT IN SUBSIDIARY UNDERTAKINGS

The companies listed below are the subsidiary undertakings of the Group at 30 September 2021, all of which are wholly owned.

14. DEVELOPMENT AND TRADING PROPERTIES

Development and trading properties are reported in the balance sheet at the lower of cost and net realisable value. The net realisable value of properties held for development requires an assessment of the underlying assets using property appraisal techniques and other valuation methods. Such estimates are inherently subjective as they are made on assumptions which may not prove to be accurate and which can only be determined in a sales transaction.

15. TRADE AND OTHER RECEIVABLES

Trade and other receivables are measured on initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method, less any impairment. Impairment is calculated using an expected credit loss model.

16. TRADE AND OTHER PAYABLES

Trade and other payables are recognised initially at fair value, and are subsequently measured at amortised cost using the effective interest rate method.

17. PROVISION FOR LIABILITIES AND CHARGES

The Group is party to a services agreement and introduction fee agreement in connection with its investment property at Nottingham. The fee payable, under the terms of each agreement, in connection with introductory and other services, is to be calculated on the earlier of the date of sale of the property or 22 December 2021 with settlement to follow, subject to agreement between each party, 31 business days after the fee calculation has been finalised. The provision as at 30 September 2021 has been calculated by reference to the open market value of the property at the balance sheet date after allowing for a priority return and applicable costs.

18. SHARE CAPITAL

In December 2010, the Group began a share buyback programme and during the year ended 30 September 2021 purchased 1,092,000 (2020: 2,930,845) shares on the open market at a cost of £1,217,000 (2020: £3,965,000). On 16 September 2021, 1,092,000 ordinary shares of 5p each were transferred out of treasury and cancelled (2020: 2,930,845 ordinary shares of 5p each).

19. CAPITAL COMMITMENTS

As at 30 September 2021, the Group had contracted capital commitments, not provided for in the financial statements, of £12,800,000 (2020: £326,000) relating to the construction, development or enhancement of the Group's investment and trading properties.

20. FINANCIAL INSTRUMENTS

The following tables set out the Group's financial assets and liabilities, all of which are due within one year. The tables have been drawn up based on the undiscounted cash flows of financial liabilities, based on the earliest date on which the Group can be required to pay.

Financial assets:

Financial liabilities:

23. EVENTS AFTER THE BALANCE SHEET DATE

There are no significant events since the balance sheet date that require disclosure in the financial statements.

The report and accounts for the year ended 30 September 2021 will be posted to shareholders shortly and copies may be obtained free of charge for at least one month following their posting by writing to the Company Secretary, The Conygar Investment Company PLC, 1 Duchess Street, London W1W 6AN. They are also available on the website www.conygar.com.

 The Company's Annual General Meeting (the "AGM") will be held at 4:00pm on Monday, 20 December 2021 at the offices of Gowling WLG (UK) LLP, 4 More London Riverside, London, SE1 2AU.

The Directors of Conygar accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Directors of Conygar (who have taken all reasonable care to ensure that such is the case) the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

This announcement is being made on behalf of the Company by David Baldwin, Finance Director.